[Federal Register Volume 65, Number 241 (Thursday, December 14, 2000)]
[Notices]
[Pages 78217-78219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31881]
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OFFICE OF MANAGEMENT AND BUDGET
Proposed Revision to OMB Guidance on Implementation of FAIR Act
AGENCY: Office of Management and Budget, Executive Office of the
President.
ACTION: Proposed Revision to OMB Guidance on the Implementation of the
FAIR Act.
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SUMMARY: The Office of Management and Budget (OMB) publishes a request
for agency and public comments on a proposed technical change to the
OMB Circular A-76 Revised Supplemental Handbook to clarify the scope of
the challenge-and-appeals process that is available under the Federal
Activities Inventory Reform Act of 1998 (Pub. L. 105-270) (the ``FAIR
Act''). The FAIR Act requires each Federal agency to submit to OMB,
annually, a ``list'' (inventory) of all its activities that ``are not
inherently governmental functions'' (i.e., activities that are
``commercial'' in nature) and that are performed by Federal employees.
Under the FAIR Act, OMB reviews each agency's list and consults with
the agency regarding its content. Upon the completion of this review
and consultation, the agency transmits a copy of the inventory to
Congress and makes the inventory available to the public. An
``interested party,'' as defined by the FAIR Act, may then submit to
the agency a challenge (and, if that is denied, an appeal) ``of an
omission of a particular activity from, or an inclusion of a particular
activity on,'' the agency's inventory. The agency must respond to the
challenge (and appeal), and the agency must notify Congress of any
changes to the inventory and must make them publicly available.
In June 1999, OMB issued guidance on the FAIR Act, through
revisions to OMB's Circular A-76 and its Revised Supplemental Handbook.
64 FR 33927 (June 24, 1999). This guidance addressed, among other
things, the scope of the FAIR Act's challenge-and-appeal process.
Recently, OMB issued a revision to its FAIR Act guidance, regarding the
timetable for the FAIR Act's challenge-and-appeal process. 65 FR 54568
(September 8, 2000).
OMB is requesting public and agency comment on a further revision
to OMB's guidance on the FAIR Act. The purpose of the proposed revision
is to provide additional clarification regarding the scope of the
statutory challenge-and-appeal process. Although Congress in the FAIR
Act clearly defined the scope of that process, and OMB provided
guidance on this point in June 1999, the General Accounting Office in a
recent report found that a significant number of ``interested parties''
submitted challenges and appeals (regarding the 1999 FAIR Act
inventories) on matters for which Congress had not authorized
challenges and appeals. OMB hopes, by providing additional
clarification, to eliminate any confusion that may still exist about
the scope of the challenge-and-appeal process that Congress established
in the FAIR Act.
DATES: Agency and public comments on the proposed change are due to OMB
not later than January 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.
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.
Availability: Copies of the OMB Circular A-76, its Revised
Supplemental Handbook, currently applicable Transmittal Memoranda and
additional information regarding the 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.
[[Page 78218]]
SUPPLEMENTARY INFORMATION:
1. Background--The FAIR Act and OMB's Implementation Guidance
The Federal Activities Inventory Reform Act of 1998 (Pub. L. 105-
270) (the ``FAIR Act'') was enacted into law in October 1998. Section 2
of the FAIR Act requires each Federal agency to submit to OMB,
annually, a ``list'' (inventory) of all its activities that ``are not
inherently governmental functions'' (i.e., activities that are
``commercial'' in nature) and that are performed by Federal employees.
Under the FAIR Act, OMB reviews each agency's inventory of commercial
activities and consults with the agency regarding its content. Upon the
completion of this review and consultation, each agency transmits a
copy of its FAIR Act inventory to Congress and also makes the inventory
available to the public. Section 3 of the FAIR Act establishes a
challenge-and-appeal process under which an ``interested party'' may
submit to the respective agency a challenge to ``an omission of a
particular activity from, or an inclusion of a particular activity
on,'' the agency's FAIR Act inventory of commercial activities. Under
the FAIR Act, challenges to an agency's FAIR Act list may be submitted
by ``interested parties,'' which the Act defines to be, basically,
federal employees (and their representatives) and existing and
prospective federal contractors (and their representatives). The agency
must respond to the challenge. If the agency provides an ``adverse''
response, the interested party may file an appeal, to which the agency
must also respond. At the end of the process, the agency must notify
Congress of any changes that it has made to its FAIR Act inventory and
must make the changes available to the public.
In March 1999, OMB requested public and agency comment on proposed
guidance for implementing the FAIR Act. 64 FR 10031 (March 1, 1999).
The proposed guidance consisted of revisions to OMB Circular A-76
(``Performance of Commercial Activities'') and the Circular's Revised
Supplemental Handbook, and it addressed a number of issues involving
the FAIR Act, including the statute's challenge-and-appeal process. In
June 1999, OMB issued final guidance for implementing the FAIR Act. 64
FR 33927 (June 24, 1999). Among other things, the final guidance
addressed the scope of the FAIR Act's challenge-and-appeals process.
The OMB guidance was based on the FAIR Act itself, which as noted above
provides that a challenge may be submitted regarding ``an omission of a
particular activity from, or an inclusion of a particular activity
on,'' the agency's FAIR Act inventory. In its June 1999 guidance (64 FR
33930), OMB stated in Paragraph G.2 (``Challenges and Appeals'') of
Appendix 2 that:
``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.' ''
In the June 1999 guidance, OMB also went on to provide additional
explanation, in Paragraph G.3, regarding the scope of the challenge-
and-appeal process (64 FR 33930):
``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).''
Earlier this year, OMB requested public and agency comment on
revisions to the June 1999 OMB guidance, focusing on the timetable for
the FAIR Act challenge-and-appeal process. 65 FR 25966 (May 4, 2000).
In response to concerns that the timetable for the 1999 challenge-and-
appeal process had not provided sufficient time for interested parties
to submit challenges and for agencies to respond to them, OMB proposed
to revise the 30-day and 28-day time periods (for submitting and
responding to challenges) by converting them from calendar days to
working days. OMB recently finalized this revision to the guidance. 65
FR 54568 (September 8, 2000).
2. GAO's Report on the FAIR Act Challenge-and-Appeal Process
Most recently, on September 29, 2000, the General Accounting Office
(GAO) issued a report that evaluated the history of the challenges and
appeals that ``interested parties'' submitted for the Federal
Government's FAIR Act inventories for 1999. GAO Report No. GGD/NSIAD-
00-244, B-283779, ``Competitive Contracting: Agencies Upheld Few
Challenges and Appeals Under the FAIR Act'' (September 2000), available
at www.gao.gov. As explained above, the FAIR Act allows challenges and
appeals to be filed by federal employees (and their representatives)
and by existing and prospective federal contractors (and their
representatives), who challenge ``an omission of a particular activity
from, or an inclusion of a particular activity on,'' the agency's FAIR
Act inventory of commercial activities. In its report, GAO analyzed the
challenges and appeals that were filed in connection with the 1999 FAIR
Act inventories of the 24 agencies that are subject to the Chief
Financial Officers Act (the 14 Cabinet Departments and 11 other major
agencies).
In its analysis, GAO distinguished between ``employee challenges''
and ``industry challenges.'' According to GAO (p. 3), ``almost all of
the employees'' challenges and appeals were within the provisions of
the act, because they concerned the inclusion of activities that the
employees contended should have been omitted because they were
inherently governmental.'' The industry challenges presented a
different picture. According to GAO (pp. 2-3), ``Many of the issues
that industry raised in their challenges and appeals went beyond the
provisions of the FAIR Act, because they concerned issues other than
the inclusion or omission of an activity from an agency's inventory.''
As GAO later explained (p. 9), ``About one-third of industry's
challenges cited the omission of activities from agencies' inventories,
with many of the remainder citing issues that went beyond the
provisions of the FAIR Act because they did not involve either the
inclusion of an activity on or its omission from an inventory.'' GAO
outlined the issues that industry raised, which ``did not meet the
challenge provisions of the FAIR Act'' (p. 11):
``The remaining issues raised by industry did not meet the
challenge provisions of the FAIR Act. As shown in table 4, these
issues included (1) the agency's use of OMB's reason codes for
categorizing commercial activities; (2) the format of the agency's
inventory; (3) the agency's use of OMB's function codes; and (4) a
general dissatisfaction with OMB guidance or the act, or agency
compliance with either.''
Since such challenges were outside the scope of the challenge-and-
appeal process that Congress had established, these challenges were
unsuccessful. As GAO noted (p. 14), ``Because most of industry's
challenges and appeals did not involve either the inclusion, or
omission of, an activity from an agency's inventory, agencies dismissed
them.''
[[Page 78219]]
3. The Proposed Revision to OMB's FAIR Act Guidance
As GAO noted in its report, most of the ``employee challenges'' to
the 1999 FAIR Act inventories were within the scope of the statutory
challenge-and-appeal process, but only one-third of the ``industry
challenges'' fell within the scope of the statute. In light of the
experience gained during the 1999 challenge-and-appeal process,
including the agencies' denials of those challenges that ``did not meet
the challenge provisions of the FAIR Act'' (GAO Report, p. 11), it
would be reasonable to expect that ``interested parties'' have now
developed a better understanding of what matters may, and may not, be
raised during the challenge-and-appeal process that Congress
established in the FAIR Act.
As was noted above, and in GAO's report, the FAIR Act itself
provides the operative test: Section 3 of the FAIR Act states an
interested party may submit challenges and appeals to ``an omission of
a particular activity from, or an inclusion of a particular activity
on,'' the agency's FAIR Act inventory of commercial activities. In
accordance with this test, OMB in its June 1999 guidance stated that
``an agency's decision to include or exclude a particular activity from
the Commercial Activity Inventory is subject to administrative
challenge and, then possible appeal by an `interested party,' '' and
OMB further stated that 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).'' (Paragraphs G.2 and G.3 of Appendix 2 of the Revised
Supplemental Handbook for Circular A-76.)
OMB believes that it is in the interest of all affected parties--
namely, the interested parties that may file challenges and appeals,
and the agencies that must respond to them--to eliminate any remaining
confusion that may still exist about the scope of the challenge-and-
appeal process that Congress established in the FAIR Act. Accordingly,
OMB proposes to revise its implementation guidance for the FAIR Act to
provide additional clarification regarding what matters are, and are
not, subject to challenge and appeal. Specifically, OMB proposes to
revise the introductory paragraph of Paragraph G.2 of Appendix 2 to the
Revised Supplemental Handbook for Circular A-76 so that it reads as
follows (the proposed new language is in italics):
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 Activity Inventory is subject to administrative challenge
and, then, possible appeal by an ``interested party.'' In other words,
if an agency has not included an activity on its Inventory, then an
``interested party'' may submit a challenge and appeal contending that
the activity is commercial and, therefore, should be added to the
Inventory. Conversely, if an agency has included an activity on its
Inventory, then an ``interested party'' may submit a challenge and
appeal contending that the particular activity is inherently
governmental and, therefore, should be deleted from the Inventory. The
FAIR Act does not authorize any other types of challenges and appeals.
Thus, for example, in the case of an activity that an agency has
included in its Inventory, an ``interested party'' may not submit a
challenge and appeal that agrees with the agency's decision that the
activity is commercial but disagrees with how the agency has described
the activity (with respect to, for example, the Function Codes and
Reason Codes that the agency used in describing the activity). Section
3(b) of the FAIR Act defines ``interested party as . . .''
OMB requests comment on the proposed revisions.
Jacob J. Lew,
Director.
Circular No. A-76 (Revised); Proposed Transmittal Memorandum No. 23
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES
SUBJECT: Performance of Commercial Activities
This Transmittal Memorandum implements changes to the OMB
Circular A-76 Revised Supplemental Handbook, in furtherance of the
requirements of the Federal Activities Inventory Reform Act (``The
FAIR Act''), Public Law 105-270. 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 FAIR Act through
Transmittal Memorandum No. 20 (64 FR 33927) and Transmittal
Memorandum No. 22 (65 FR 54568).
To clarify that the FAIR Act's administrative challenge and
appeal process is limited to the inclusion or the omission of an
activity on or off the list, the following change at Appendix 2,
paragraph G. 2, of the OMB Circular A-76 Supplemental Handbook is
proposed (see italics):
``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 Activity Inventory is subject to administrative
challenge and, then possible appeal by an ``interested party.'' An
agency's decision with regard to the application of appropriate
Function Codes, Reason Codes and agency decisions regarding the
aggregation or dis-aggregation of FTE for purposes of reporting
commercial activities on the inventory are not subject to
administrative challenge or appeal by an ``interested party.''
Section 3(b) of the FAIR Act defines ``interested party as...''
This change is effective immediately. Current A-76 and FAIR Act
implementation guidance can be accessed at OMB's homepage at http://www.whitehouse.gov/OMB/procurement/fair-index.html.
Jacob J. Lew,
Director.
[FR Doc. 00-31881 Filed 12-13-00; 8:45 am]
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