[Federal Register Volume 66, Number 127 (Monday, July 2, 2001)]
[Notices]
[Pages 34962-34963]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16480]
[[Page 34962]]
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OFFICE OF MANAGEMENT AND BUDGET
Performance of Commercial Activities
AGENCY: Office of Management and Budget, Executive Office of the
President.
ACTION: Proposed change to the OMB circular A-76 revised supplemental
handbook.
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SUMMARY: . The Office of Management and Budget (OMB) publishes a
request for agency and public comments on proposed changes to the OMB
Circular A-76, Performance of Commercial Activities, Revised
Supplemental Handbook. The proposed changes eliminate the ``grandfather
clauses'' at Part 1, Chapter 2, paragraph A.5 and paragraph 5.a., of
the Handbook. The Handbook would then be changed to expand public-
private competition for all Inter-Service Support Agreements (ISSAs),
by requiring competitions on a recurring 3-5 year review cycle, similar
to the competitions required for the renewal of service contracts with
the private sector. These changes are an important first step in OMB's
efforts to expand competition, improve service quality, and enhance
agency accountability by integrating budgeting and performance.
OMB is requesting public and agency comment on these revisions. OMB
expects that the expanded competition requirements of the Circular will
encourage the service requesting or customer agencies to take full
account of their support agreements, the alternative levels of service
available, and the most efficient and cost effective private sector or
other public offeror.
DATES: Agency and public comments on the proposed changes are due to
OMB not later than August 16, 2001.
ADDRESSES: Address all comments to the Office of Federal Procurement
Policy, NEOB Room 9013, Office of Management and Budget, 725 17th
Street, NW, Washington, DC 20503, FAX Number (202) 395-5105.
Availability: Copies of the OMB Circular A-76, its Revised
Supplemental Handbook, currently applicable Transmittal Memoranda and
additional information regarding the Federal Activities Inventory
Reform Act (FAIR Act) and its implementation may be obtained at the OMB
home page. The online address (URL) http://www.whitehouse.gov/OMB/procurement/fair-index.html. Paper copies of this information can also
be obtained by contacting the Office of Federal Procurement Policy,
NEOB, Room 9013, Office of Management and Budget, 725 17th Street, NW,
Washington, DC 20503, Telephone No. (202) 395-7579.
FOR FURTHER INFORMATION CONTACT: Mr. David C. Childs, Office of Federal
Procurement Policy, NEOB Room 9013, Office of Management and Budget,
725 17th Street, NW, Washington, DC 20503, Telephone No. (202) 395-
6104.
SUPPLEMENTARY INFORMATION:
Background
The activities of most Federal agencies can be divided into two
categories, program activities, which provide goods and services
directly to the agency mission recipients, e.g., Federal transfers of
funds, grants, services and credit to the public and support
activities, which provide administrative, professional and logistical
support to an agency itself in meeting its mission requirements.
The number and amount of support activities are wide-ranging. They
include personnel services; safety and health services; security; legal
services; financial management services; information technology,
automated data processing, and communications services; mail and
messenger services; public affairs; publications, reproduction,
graphics, and video services; library services; scientific facilities;
research and analytical services; office and commissary supplies;
office and grounds maintenance; procurement and contracting services;
services to acquire, maintain, rent, and operate plant and equipment;
and more.
Many support activities are financed by their own direct
appropriations and provided to the programs, without charge, in their
own agency and even to other agencies. Others are provided for a price
by agency franchise, working capital, or other revolving funds on a
reimbursable basis. Even when a reimbursable rate or price is charged
by a providing agency, it may not cover the full cost of the goods and
services provided to programs--in part because the support activity
agencies themselves are not charged for the full cost of the resources
they use or get some financing from direct appropriations, and in part
because their prices may include cross-subsidies and other pricing
strategies to expand their volume of business.
It is for this reason that the March 1996 A-76 Supplemental
Handbook introduced, for the first time, the requirement to compete for
new or expanded reimbursable work on the basis of an A-76 cost
comparison. A-76 competitions can be a key driver to encourage agencies
to understand the real cost of their programs. They also serve to
invite private sector and other public offerors into the mix of
possible offerors, by competing on a level playing field.
However, the March 1996 A-76 Supplemental Handbook did not require
reimbursable support service providers or their customers to undergo
competition for this work on a recurring basis. In effect, while
competitions for work that is performed by contract are on a recurring
3-5 year review cycle, work performed by a reimbursable support
activity provider (ISSA) has not been required to undergo recurring
competition once that agency is awarded the work. In addition, a policy
decision was made that the March 1996 A-76 Supplemental Handbook would
not require recurring competitions for existing reimbursable support
activity work--work that was already performed under an ISSA before
October 1, 1997. As a result, a large and increasing amount of
commercial work is being performed under reimbursable service
agreements without the benefits of recurring competition. These
reimbursable service agreements are not competing with the private
sector or with other public offerors who might be able to provide
higher levels of service at less cost.
As a result, OMB hereby proposes to revise the A-76 Supplemental
Handbook at Part 1, Chapter 2 paragraph 5 and paragraph 5.a, to delete
the ``grandfathering clauses'' that permit reimbursable agreements for
commercial services to continue indefinitely and without competition
and to replace them with a requirement that all ISSA's be recompeted
every 3-5 years or as otherwise permitted by related procurement
regulations for comparable types of commercial work (see Competition-
in-Contracting Act (CICA) and the Federal Acquisition Regulations). OMB
recognizes that the burden of this requirement falls to the customer or
consuming agency to conduct these competitions. It also falls to the
prospective reimbursable service provider to submit an A-76 comparable
offer, in accordance with Part 1, Chapter 2 paragraph B, for the
renewal of existing service agreements or for the award of new or
expanded work.
The proposed recurring ISSA competition requirement would not
apply--at this time--to reimbursable support agreements within a single
agency. The head of the agency must maintain flexibility to manage
mission resources. The proposed competition requirement would only
apply to reimbursable agreements between one department or executive
agency and
[[Page 34963]]
another non-mission agency, e.g., between the Environmental Protection
Agency and the Department of Commerce, between the Agriculture
Department's National Finance Center and the Department of Justice or
between the Office of Personnel Management and the Department of
Housing and Urban Development for the provision of background
investigation services. It would not apply to services provided within
the reimbursable service providers host agency or any such agreement
within the Department of Defense.
OMB also recognizes that the proposed requirement to conduct
competitions on a level playing field and on the basis of the full cost
of performance to the taxpayer poses other budgetary challenges. The
President's FY 2002 Budget includes a proposal to integrate performance
and budget data. Three major changes are presently envisioned. They
include: (1) identifying high quality outcome measures, accurately
monitoring the performance of programs, and integrating this
presentation with associated cost, (2) changes to create a market based
government, of which this initiative is a part, to open the
government's activities to more competition, and to require agencies to
budget for costs in a way that will simplify cost comparison for A-76
competition, and (3) full integration of financial (finance, budget,
and cost), program, and oversight information, and processes. The
government's chief financial officers have endorsed as a long-term goal
that program and financial officers work in partnership, to achieve the
full integration of financial (finance, budget, and cost), program, and
oversight information and processes. The Administration will soon
transmit legislative proposals to support changes in the way costs are
charged in the budget to permit the consideration of full budget costs
in a cost comparison. However, in the interim, while competitions and
the decisions to award shall be based upon comparisons conducted in
accordance with the A-76 Revised Supplemental Handbook, the
reimbursable costs charged to a customer agency, if a public
reimbursable service provider wins such a competition, will rely on
budget based reimbursable rates, prepared under current law.
OMB requests comment on the proposed revisions.
Sean O'Keefe,
Deputy Director.
Executive Office of the President
Office of Management and Budget
[Circular No. A-76 (Revised) Proposed Transmittal Memorandum No. 24]
June 26, 2001.
To the Heads of Executive Departments and Agencies
From: Sean O'Keefe, Deputy Director
Subject: Performance of Commercial Activities
This Transmittal Memorandum implements changes to the OMB Circular
A-76 Revised Supplemental Handbook in furtherance of the President's FY
2002 Budget Blueprint commitment to expand the level of competition for
the acquisition of commercial support work required by the Federal
Government and to establish a competitive baseline in preparation for
the integration of other budgeting, performance and accountability
initiatives. The March 1996 Revised Supplemental Handbook was issued
through Transmittal Memorandum No. 15 (61 FR 14338). The March 1996
Revised Supplemental Handbook was further revised to implement the
requirements of the Federal Activities Inventory Reform Act through
Transmittal Memorandum No. 20 (64 FR 33927) and Transmittal Memorandum
No. 22 (65 FR 54568). Transmittal Memorandum No. 23 (66 FR 14943)
provided updated labor and non-labor related escalation factors for use
in A-76 cost comparisons.
OMB is making two changes to the A-76 Revised Supplemental
Handbook. First, Part 1, Chapter 2, paragraph 5 and paragraph 5.a. are
deleted. Paragraph 5 has permitted agencies to consolidate
administrative, logistical and other commercial support activities
through the transfer of work to Inter-Service Support Agreements
(ISSAs), within and between agencies, without cost comparison if the
consolidation was accomplished prior to October 1, 1997, and if the
consolidation did not involve the conversion of work to or from in-
house or contract performance. Paragraph 5.a., has exempted existing
reimbursable support work and the renewal of related ISSAs from the
cost comparison requirements of the Circular. However, paragraph 5.a.
also established a government-wide requirement that all new and
expanded ISSAs shall be justified on the basis of a cost comparison,
conducted in accordance with the requirements of the Circular and
Supplemental Handbook, unless as otherwise provided by the Supplemental
Handbook or by law.
In order to emphasize the need to expand the level of competition
required and to establish a consistent baseline for the acquisition of
commercial support, OMB is revising Part 1, Chapter 2, paragraph 5, to
read as follows:
``5. Reimbursable support service providers within the Federal
Government are providing a large and an increasing amount of
commercial work to Federal program activities (customers) under
reimbursable service agreements and without the benefits of
recurring competitions. These ISSAs are not competing with the
private sector or with other public offerors who might be able to
provide higher levels of service at less cost. Therefore, not later
than October 1, 2001, each customer agency shall establish a
recurring schedule for all work performed for it on a reimbursable
basis by another agency for competition. ISSAs shall be recompeted
every 3-5 years or as otherwise permitted by related procurement
regulations for comparable types of commercial work (see
Competition-in-Contracting Act (CICA) and the Federal Acquisition
Regulations). These competitions shall permit offers from the
private sector, the current reimbursable service provider and other
public offerors, as appropriate. In addition, all new or expanded
work required by a customer agency shall be submitted to
competition, as provided in this Chapter.''
A conforming change is also hereby made to Part 1, Chapter 2,
paragraph B.1, as follows: ``1. The prospective providing agency
will furnish the requesting agency a firm price or reimbursable rate
for the existing, new or expanded workload * * *.''
This change is effective immediately. Current A-76 and FAIR Act
implementation guidance can be accessed at OMB's home page at:
http://www.whitehouse.gov/OMB/procurement/fair-index.html.
[FR Doc. 01-16480 Filed 6-29-01; 8:45 am]
BILLING CODE 3110-01-P