Office of Management and Budget Circular A-76: Selected Issues

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

Office of Management and Budget (OMB) Circular A-76 provides guidance for federal agencies
on how to conduct public-private competitions. The outcome of a competition determines who—
government agency or private business—will perform commercial activities. (A commercial
activity is a service that could be performed by the private sector.) OMB Circular A-76 was
issued initially in 1966; the Circular No. A-76 Revised Supplemental Handbook was first issued
in 1979. The handbook provided guidance for implementing Circular A-76 policy and included
procedures for conducting A-76 cost comparisons. In 1999, the Federal Activities Inventory
Reform (FAIR) Act of 1998 (P.L. 105-270) was incorporated into the circular and the handbook.
The most recent A-76 revision, which was issued in 2003, is arguably the most significant change
to the circular and its supplement in the document’s history. The revision is one of several steps
the Bush Administration has taken to further its competitive sourcing initiative, which is one of
the components of the President’s Management Agenda (PMA). Other activities include the
requirement that agencies submit lists of their inherently governmental activities to OMB. (An
inherently governmental activity is a function that is so intimately related to the public interest
that it must be performed by federal government employees, according to OMB’s Circular No. A-
76 (Revised), May 29, 2003, p. A-2.) Combining the circular and the Circular No. A-76 Revised
Supplemental Handbook into one document, OMB modified the definition of “inherently
governmental,” established the concept of an agency tender (which is the government’s response
to a solicitation), and eliminated the direct conversion option. Under this option, and as long as
certain conditions were met, agencies were allowed to convert a function from in-house
performance to private-sector performance without conducting a cost comparison.
Several of the changes to Circular A-76 have generated a significant amount of interest.
Requirements for the preparation of commercial activities and inherently governmental
inventories have changed, and the latter inventories now are subject to challenge and appeal
processes. The deadline for what are now called standard competitions has been shortened, with
the expectation that agencies will complete a host of planning activities prior to beginning a
competition. These and other changes have raised questions about the ability of agencies to
comply with the revised circular and other competitive sourcing requirements. Possible
implications for the civil service system and federal employees is another area that has garnered
attention. This report will be updated if there are further changes to the circular or information
about implementation of the circular becomes available.

Introduc tion ..................................................................................................................................... 1
Backgr ound ..................................................................................................................................... 4
Selected Issues.................................................................................................................................5
Agency Inventories...................................................................................................................5
Backgr ound ......................................................................................................................... 5
OMB Guidance on Inherently Governmental Activities Inventories..................................6
Rationale for Inherently Governmental Inventories...........................................................8
Challenge and Appeal Processes.........................................................................................9
OMB Guidance on the Use of Reason Code A..................................................................11
Implementation ..................................................................................................................11
Deadline for Completing Standard Competitions...................................................................13
Agency Compliance................................................................................................................17
Burden on Agency Resources...........................................................................................17
Resources Needed to Prepare Competitive Offers............................................................19
Possible Implications for the Civil Service System................................................................22
Disposition of Federal Employees and Positions..............................................................22
Performance Standards.....................................................................................................24
Civil Service as an Institution...........................................................................................25
Dive rsit y............................................................................................................................ 26
Conclusion ..................................................................................................................................... 27
Selected Glossary of Circular A-76 Terms....................................................................................27
Table 1. Comparison of Inventory Challenge and Appeal Processes..............................................9
Author Contact Information..........................................................................................................28

Office of Management and Budget (OMB) Circular A-76,¹ which was first issued in 1966,
provides guidance for federal agencies to use in determining who—government agency or private ²
business—will perform commercial activities. Circular A-76 and the Circular No. A-76 Revised
Supplemental Handbook have been modified over the years. The handbook expanded upon
Circular A-76 policy and provided guidance for conducting cost comparisons. Key changes
include the initial publication of the handbook in 1979; the incorporation of the language of
government reinvention in 1996; and the implementation of the Federal Activities Inventory ³
Reform Act (FAIR) of 1998 in 1999.
In spring 2001, the Comptroller General convened a panel of experts, identified as the
Commercial Activities Panel (CAP), to examine Circular A-76 and FAIR. The panel was ⁴
established at the direction of Section 832 of P.L. 106-398. Having noted the concerns of federal
employee unions and private industry about Circular A-76, Senator John Warner proposed the
amendment that became Section 832. After a year-long study, CAP released its report, Improving
the Sourcing Decisions of the Government, on April 30, 2002. The panel recommended that
government adopt a set of 10 sourcing principles, promote the development of high-performing
organizations (HPOs), make limited changes to Circular A-76, and create an integrated ⁵
competition process that would draw from both the Federal Acquisition Regulation (FAR) and ⁶
Circular A-76.
OMB released a proposed revision of Circular A-76 and the Revised Supplemental Handbook on ⁷
November 14, 2002, which was followed by a notice in the Federal Register on November 19, ⁸

2002. The Federal Register notice marked the beginning of a 30-day public comment period. ⁹

The agency received, by e-mail and facsimile, 694 comments about the proposed revision.
However, any comments that were submitted via the U.S. Postal Service were not listed on the

¹^Se^e^C^R^S^R^e^por^{t R}^L³¹⁰²⁴^,^T^h^e^Fe^de^{ral Ac}^tiv^itie^{s I}ⁿ^v^eⁿ^tory^Re^fo^{rm Ac}^{t an}^{d Circ}^ul^{ar A-}⁷⁶^,^by^L^.^Elaⁱ^ne^H^a^lc^hin;
^{CRS Rep}^o^r^t^RS2¹⁴⁸⁹^,^OMB^Ci^rcu^l^a^r^A^-⁷⁶^:^E^x^p^l^aⁿ^a^tⁱ^oⁿ^aⁿ^d^Di^sc^u^ssi^oⁿ^o^f^t^h^{e R}^ecen^t^l^y^R^evi^sed^F^e^d^e^ra^l^Ou^t^s^o^u^r^ci^ng
^Polic^y^{, by}^J^ohn^{R. L}^u^c^k^e^y^.
²^A^co^mm^er^ci^al^actⁱ^vⁱ^t^yⁱ^s^{“a r}^ecu^rriⁿ^g^servi^{ce t}^h^at^co^u^l^{d b}^e^p^e^rf^o^r^med^b^y^t^h^{e p}^rⁱ^v^at^{e sect}^o^r^.^”^Aⁿⁱⁿ^h^e^ren^t^l^y
^g^o^v^e^rn^m^e^nta^l^a^c^tiv^it^y^“ⁱ^{s a}ⁿ^a^c^tivity^tha^t^{is so int}ⁱ^m^a^te^l^y^r^e^la^te^{d to}^the^p^ublic^inte^re^{st a}^s^to^m^a^nda^te^pe^rf^or^m^a^nc^e^b^y
^g^o^v^e^rⁿ^m^e^{nt pe}^r^s^on^ne^l.”⁽^U^{.S. O}^f^fⁱ^c^e^of^Ma^na^g^e^m^e^{nt a}^{nd B}^udg^e^t^,^Cⁱ^r^c^ular^N^o^{. A-}^{76 (}^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 20}^03,
^a^v^a^ila^ble^a^t^http://w^w^w^.^w^hite^hou^s^e^.g^ov^/^o^m^b^/c^irc^u^la^rs^/a⁰⁷⁶^/^a^76_in^c^l_te^c^h_c^orre^c^tio^n.^pdf^{, p}^p^{. D}^-^2,^A^-^2.)
³^P^.^L^.¹⁰^5-²⁷⁰^;¹¹²^Sta^t^.²³⁸²^{; 3}¹^U^.^S.C^.⁵⁰^{1 n}^o^te^{. C}ⁱ^r^c^ula^r^A^-^{76 a}^l^s^o^w^a^s^r^e^vⁱ^s^e^{d in 1}⁹⁶⁷^,¹⁹^79,^aⁿ^d¹⁹^83.^A^dditi^ona^l
^r^e^vⁱ^sⁱ^ons^{to t}^h^e^Re^vⁱ^s^e^{d S}^u^p^p^le^m^e^ntal^H^aⁿ^d^b^ook^w^e^r^e^mad^eⁱⁿ¹⁹⁸³^an^{d 19}⁹⁶^.
⁴^Floy^{d D}^.^S^p^eⁿ^c^e^N^a^tiona^{l D}^e^f^e^ns^e^A^u^thor^iz^a^{tion A}^c^{t f}^o^r^Fis^c^a^l^Y^e^a^r²⁰⁰^1;¹¹^{4 Sta}^t^.¹⁶⁵⁴^A^-^{1, a}^t¹^654A^-²²¹^.
⁵^Th^e^Fe^de^r^a^{l Ac}^q^u^is^iti^{on Re}^gul^at^ion^inc^l^u^d^e^s^r^e^g^u^la^tio^ns^c^onc^e^rⁿⁱ^ng^g^o^v^e^rⁿ^m^e^{nt pr}^oc^ur^e^m^eⁿ^{t. T}^h^e^FA^R^is^P^a^r^t^s¹
^thro^ug^{h 5}³^of^T^itle^{48 of}^the^C^o^{de o}^f^F^e^d^e^ra^{l R}^e^gu^l^a^ti^on^s^.
⁶^Com^m^e^r^cⁱ^a^l^Ac^tiv^itie^{s P}^a^ne^l,^I^m^pr^ovⁱⁿ^{g t}^h^e^S^our^cⁱⁿ^g^D^e^cⁱ^sⁱ^ons^o^f^the^G^o^v^e^r^nm^eⁿ^t⁽^W^a^s^hing^{ton: U}^.^{S. G}^e^ne^r^a^l
^A^c^c^ountiⁿ^g^O^f^fⁱ^c^e^,²⁰⁰²⁾^{, p}^p^.^46-^53.
⁷^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^,^No^v.¹⁴^,²⁰⁰²^,^avai^l^a^b^l^{e at}
^http:^//w^w^w^.^w^hite^hous^e^.^g^o^v^/^om^b/cⁱ^r^c^ula^r^s^/inde^x^.^htm^l^.
⁸^{U.S. Of}^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^Budg^e^t^{, “}^P^e^r^f^o^rm^aⁿ^c^e^of^Com^m^e^rc^ia^{l A}^c^ti^v^itie^s,”^Fe^de^{ral Re}^giste^r^{, N}^o^v^.¹⁹^,²⁰⁰²^,
^v^o^{l. 6}⁷^,^no.²^23,^p.⁶⁹⁷^69.
⁹^T^h^e^f^a^x^e^s^a^{nd e}^-^m^a^il^m^e^s^s^a^g^e^s^are^lis^te^{d o}ⁿ^O^M^B’s^w^e^bs^ite^a^t^htt^p^://w^w^w^.^w^hite^hous^e^.^g^o^v^/^om^b/cⁱ^rc^ula^r^s^/inde^x^.^htm^l^.

OMB website. For example, a letter submitted by the Comptroller General to the Director of ¹⁰
OMB concerning the proposed revision was not listed on the OMB website.
The final revised version of the circular¹¹ was released on May 29, 2003, the same date that OMB ¹²
published a notice in the Federal Register. In addition to replacing the 1999 circular, the 2003
version
^s^u^pers^edes^aⁿ^{d res}^cⁱⁿ^ds^{... O}^M^{B C}ⁱ^rcu^l^{ar No.}^A-^{76 R}^e^vⁱ^s^e^{d S}^u^ppl^e^m^en^t^a^l^Haⁿ^dbook
^(R^evⁱ^s^{ed 2000}^{), March}¹⁹^96;^OMB^Cⁱ^rcu^l^{ar No. A-}^{76 T}^r^an^s^m^{ittal Me}^m^o^ran^d^{a Nos}^.^1-^25;
^an^{d O}^f^fⁱ^{ce of}^F^e^deral^Proc^u^r^e^m^eⁿ^t^Polⁱ^c^y^(O^F^PP)^Polⁱ^c^y^L^e^t^t^{er 92-}^1,^In^her^e^nt^l^y¹³
^Go^vern^m^en^ta^{l Fu}ⁿ^c^tioⁿ^s^{, S}^e^pt^e^m^{ber 23, 1}^992.
The three-page circular, which addresses, among other things, the purpose, authority, and scope of
Circular A-76, includes four attachments on the following topics: the inventory process, public-
private competition, calculating public-private competition costs, and acronyms and definitions.
Effective May 29, 2003, the circular applies to competitions initiated, and inventories required,
after the effective date. Transition procedures for direct conversions and cost comparisons in
progress, but not completed, on May 29 are included in the circular. As with the proposed
revision, an individual may obtain the 2003 circular from OMB’s website or by telephoning the
Office of Federal Procurement Policy (OFPP) (the Federal Register notice includes contact
information).
The 2003 revision accompanies other competitive sourcing initiatives implemented by the Bush
Administration. In 2001, OMB notified agencies and departments that they were required to ¹⁴
compete (that is, public-private competition) or directly convert a minimum of 5% of the full-¹⁵
time equivalents (FTEs) listed on their FAIR inventories by the end of FY2002 and compete or ¹⁶
convert an additional 10% by the end of FY2003. The combined goal of 15% equated to ¹⁷

127,500 FTEs. Subsequently, in spring 2003, the target date for 15% was shifted to July 1, 2004,

the 15% target was presented as a governmentwide goal, and agencies learned they would receive

¹⁰^L^e^tte^r^f^r^om^D^a^vⁱ^{d M. W}^a^lk^e^r^{, C}^o^m^p^trolle^{r G}^e^ne^ra^{l, to Mitc}^he^{ll E}^.^Da^nie^l^{s, Jr., Dire}^c^t^{or, U.S}^.^Of^fⁱ^c^e^of^Ma^na^g^e^m^e^nt
^a^{nd B}^u^dg^e^t^{, G}^A^O^-^03-³⁹^1R^{, J}^aⁿ^.^16,²⁰⁰³^.
¹¹^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^.
¹²^{U.S. Of}^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^Budg^e^t^{, “}^P^e^r^f^o^rm^aⁿ^c^e^of^Com^m^e^rc^ia^{l A}^c^ti^v^itie^s,”^Fe^de^{ral Re}^giste^r^{, v}^o^l.^68,ⁿ^o^.
¹⁰³^{, Ma}^y^29,²⁰^03,^p^p^.³²¹³^4-³²¹⁴²^.
¹³^I^b^id^{., p. 32}¹³^4.
¹⁴^A^c^o^s^t^c^o^m^p^a^r^is^{on s}^t^udy^is^not^p^e^r^f^or^m^e^{d be}^f^o^r^e^aⁿ^a^g^eⁿ^cy^f^unc^{tion is}^c^onv^e^r^te^{d f}^r^om^one^s^e^c^t^or^t^o^aⁿ^o^t^he^r^.^T^h^e
^c^ondi^tio^ns^u^nde^r^w^h^ic^{h a}^dir^e^c^t^c^onv^e^r^sⁱ^{on w}^a^s^pe^r^m^is^sⁱ^ble^a^r^e^des^c^rⁱ^be^{d in}^U^.^{S. O}^f^fⁱ^c^e^of^Ma^na^gem^e^{nt B}^udg^e^t^,
^Circ^{ular No}^{. A-}^{76 Re}^vⁱ^se^d^Su^pple^m^eⁿ^{tal Ha}^nd^bo^ok^{, Pe}^rform^anc^e^o^f^Comme^rc^{ial Ac}^tiv^itie^s^,^Ma^r^c^{h 1}⁹⁹⁶⁽^u^pda^te^d^J^une
¹⁹⁹⁹⁾^,^p^p^{. 3}^-^4.^T^h^e^dir^e^c^t^c^onv^e^r^sⁱ^on^op^tio^{n is}^not^inc^l^ude^dⁱⁿ^the²⁰⁰³^cⁱ^r^c^ula^r^.
¹⁵^A^f^u^ll-tim^e^e^quiv^a^le^{nt (FT}^E^{) is}^“^[^t^]^he^s^t^a^f^fⁱ^ng^of^Fe^de^ra^{l c}ⁱ^v^ilia^{n e}^m^plo^y^e^e^pos^itions^,^e^x^pre^s^s^e^{d in t}^e^r^m^s^of^a^nnua^l
^pr^o^duc^tiv^e^w^o^r^k^hour^s⁽¹^,7⁷⁶^[^h^o^u^r^s^]⁾^r^a^the^r^t^h^aⁿ^aⁿ^nua^{l a}^v^a^ila^ble^hou^r^s^tha^t^inc^l^u^d^e^sⁿ^on-^pr^o^duc^tiv^e^hour^s⁽²^,⁰⁸⁰
^hou^r^s⁾^.^”⁽^U^{.S. O}^f^fⁱ^c^e^of^Ma^na^gem^e^{nt a}^{nd B}^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^{. A-}^{76 (}^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. D}^-^5.)
¹⁶^T^h^e^5%^ta^r^g^e^t^w^a^s^a^nnounc^e^dⁱⁿ^aⁿ^O^M^B^m^e^m^o^r^a^ndum^{: “}^P^e^r^f^o^r^m^aⁿ^c^e^G^o^a^l^s^a^{nd Ma}^na^g^e^m^e^{nt I}ⁿ^iti^a^tiv^e^s^f^o^r^the
^FY²⁰⁰²^B^u^dg^e^t^,”^m^e^m^o^r^a^ndum^M-^01-¹⁵^{, Ma}^r^c^h^9,²⁰⁰¹^{. T}^h^e¹⁰^%^ta^r^g^e^t^w^a^s^c^o^m^m^unic^a^t^e^d^{to a}^g^eⁿ^cⁱ^e^s^{, by}^O^M^B
^c^o^r^r^e^s^pon^de^nc^e^,ⁱⁿ^J^u^ne²⁰⁰¹^{. (}^Iⁿ^f^or^m^a^{tion pr}^ovⁱ^d^e^d^e^l^e^c^t^r^o^nic^a^lly^by^the^O^f^fⁱ^c^e^o^f^Fe^de^r^a^{l P}^r^oc^ur^e^m^eⁿ^t^P^o^lic^y^,^J^a^n.
^{14, 20}⁰³^.)
¹⁷^U^.^{S. C}^ong^re^s^s^,^H^ous^e^Com^m^ittee^{on G}^o^v^e^rnm^e^{nt Ref}^o^r^m^{, Subc}^o^m^m^itte^e^{on T}^e^c^hnolog^y^a^nd^P^r^oc^ure^m^eⁿ^{t P}^o^lⁱ^c^y^,
^Ov^e^{rsight He}^aring^to^Re^vⁱ^e^w^the^Findi^ngs^of^the^C^o^mme^rc^{ial Ac}^tiv^itie^{s Pane}^l^,^h^eariⁿ^g,¹⁰⁷^th^Cong^.,²^nd^s^e^s^s^{., Se}^{pt. 2}⁷^,
²⁰⁰^{2 (}^W^a^s^hing^to^{n: G}^P^O^,²⁰⁰³⁾^,^{p. 4}³^.

credit not only for studies they had completed, but also for studies they had initiated.¹⁸ A report
released by OMB on July 24, 2003, Competitive Sourcing: Conducting Public-Private
Competition in a Reasoned and Responsible Manner, stated that OMB “recognized its initial
numerically-based directions were inadequate.” OMB also determined that customized
competitive sourcing plans, which are based on agencies’ research and analyses, would be more ¹⁹
appropriate. In congressional testimony provided the same day that the OMB report was issued,
the OFPP Administrator emphasized that
^O^M^B^ha^s^m^o^ve^d^a^w^a^y^fr^o^m^ma^nd^a^t^e^dⁿ^u^m^e^rⁱ^c^a^l^go^a^l^{s a}ⁿ^d^uni^fo^r^m^b^a^se^lⁱ^ne^{s t}^h^a^t^w^e^r^e
ⁱⁿ^tr^o^d^u^ced^{at t}^h^{e b}^e^gⁱⁿⁿⁱⁿ^g^o^f^t^h^{e [}^c^o^m^p^e^ti^tiv^e^so^u^r^cin^g^]ⁱⁿ^itiati^v^e^to^en^su^r^e^a^le^v^e^{l o}^f
^com^mⁱ^t^m^eⁿ^{t t}^h^at^w^o^u^l^{d ins}^tit^ution^a^{lize us}^{e of}^th^{e tool}^wⁱ^thⁱⁿ^each^ag^eⁿ^c^y^{. Ins}^t^ead,^w^e^h^a^v^e²⁰
ⁿ^e^g^o^tiated^tailo^r^e^d^b^a^selin^{es b}^a^sed^oⁿ^mⁱ^ss^ioⁿⁿ^eed^{s an}^d^coⁿ^d^itioⁿ^s^uⁿ^iq^u^e^to^th^{e ag}^eⁿ^c^y^.
A second report issued by OMB, in fall 2003, Competitive Sourcing: Reasoned and Responsible
Public-Private Competition, Agency Activities, described agency competitive sourcing efforts,
explained how agency progress is measured, outlined benefits associated with the 2003 revision
to the circular, and explained additional initiatives necessary for achieving success in competitive
sourcing. Also included in this report was information about the 24 agencies and departments that ²¹
OMB tracks. (OMB issues reports annually on competitive sourcing results. The agency
compiles information agencies are required to provide to Congress under Section 647(b) of P.L.

108-199. The reports are available at http://www.whitehouse.gov/omb/procurement/

index_comp_sourci ng.html .)
Following OMB’s disavowal of externally imposed targets, it issued guidance for agencies
seeking to achieve a rating of green for competitive sourcing on the PMA scorecard that requires ²²
the development and implementation of a long-range competition plan. An essential component
of such a plan is identifying, by fiscal year, through FY2008, which commercial activities the
agency plans to announce for competition. (Only those commercial activities already identified as
eligible for competition are to be included in long-range competition plans.) Agencies are ²³
required to update their competition plans by August 1 each year.

¹⁸^“^O^{MB ‘}^P^ro^ud^{to Be}^{’ A}^sse^ss^m^e^{nt f}^o^{r Com}^p^e^titiv^e^Sourcⁱ^ng^,”^Go^ve^rn^men^t^E^xecu^tⁱ^v^e^{, D}^a^ily^B^r^iefⁱ^ng^{, Ma}^y^{22, 20}⁰³^,
^a^v^a^ila^ble^a^t^http://w^ww^.g^ove^x^e^c^.^c^o^m^/^da^ily^f^e^d/⁰⁵⁰³^/⁰⁵⁰^3p^1a^.htm^.
¹⁹^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Com^p^e^titiv^e^S^ourcⁱⁿ^g^[^I^nitiativ^e^Re^p^o^rt^]^:^Co^nd^uc^tin^{g P}^ubl^ic^-Priv^a^te
^Com^p^e^titi^{on in a}^Re^as^one^d^a^{nd R}^e^s^pons^ib^le^M^aⁿⁿ^e^r^{, J}^u^ly²⁰⁰^3,^pp^{. 1,}^4-^{5, a}^v^a^ila^ble^a^t^ht^tp://w^w^w^.^w^hite^hous^e^.^g^o^v^/
^om^b/pr^oc^ur^e^m^eⁿ^t/c^om^p_s^our^cⁱ^ng^_07²⁴⁰³^.p^df^.
²⁰^{U.S. C}^ong^re^{ss, Se}^na^te^Com^m^itte^e^{on G}^o^v^e^rnm^e^nta^l^Aff^a^{irs, Subc}^om^m^itte^e^{on Ov}^e^r^sig^h^{t of}^G^o^v^e^rn^m^e^nt
^Ma^na^g^e^m^e^{nt, the}^Fe^de^ra^{l W}^o^rk^f^o^rc^e^a^{nd the}^Distric^t^of^Colum^b^ia^,^sta^t^e^m^eⁿ^{t of}^Aⁿ^g^e^la^{B. Sty}^l^e^s^{, A}^d^mⁱ^nistra^tor,^th^st
^O^f^fⁱ^ce^of^Fe^de^r^a^{l P}^r^oc^ur^e^m^eⁿ^{t Po}^lic^y^,^unpu^blis^he^d^he^a^r^ing^,¹⁰⁸^Cong^.,¹^s^e^s^s^{., J}^u^ly^24,²⁰^03,^a^v^a^ila^ble^a^t
^http:^//w^w^w^.^w^hite^hous^e^.^g^o^v^/^om^b/le^gⁱ^s^l^a^tiv^e^/^te^s^tim^on^y^/^s^t^y^l^es^/072⁴^03s^ty^le^s^-^1.pdf^{l, p}^.⁵^.
²¹^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Com^p^e^titiv^e^S^ourcⁱⁿ^g^{: R}^e^asone^d^an^{d Re}^sp^onsi^b^le^P^ublic^-^P^riv^a^te
^Compe^titi^on,^Ageⁿ^c^y^Ac^tiv^itie^s^{, S}^e^{pt. 2}⁰⁰³^{, a}^v^a^ila^ble^a^t^http^://www.w^h^ite^house^.^g^o^v^/^om^b/^proc^ure^m^eⁿ^t/
^c^o^m^p_sourc^_^a^d^de^nd^um^.pdf^{. (In t}^h^e^{list f}^o^u^nd^on^{this w}^e^{b pa}^g^e^{, th}^e^title^of^the^re^p^o^{rt is}^C^o^mpe^titiv^e^So^urcⁱ^ng^,
^Addeⁿ^dum^a^nd^the^da^te^of^the^r^e^p^o^r^t^is^O^c^t.²⁰⁰³^.)
²²^C^l^a^y^J^ohns^{on I}^I^I^{, D}^e^puty^Dⁱ^r^e^c^t^or^f^o^r^Ma^na^g^e^m^e^{nt, U}^.^{S. O}^f^fⁱ^ce^of^Ma^na^g^e^m^e^{nt a}^{nd B}^u^dg^e^t^{, “}^D^e^v^e^l^opm^eⁿ^{t of}
^‘G^reeⁿ^{’ Pla}ⁿ^s^f^o^{r Com}^p^e^titiv^e^So^urcⁱ^ng^,”^m^e^m^o^ra^ndum^{, D}^e^c^.^22,²⁰⁰^{3, a}^v^a^ila^ble^a^t^http^://w^w^w^.^w^hi^te^hous^e^.^g^o^v^/^om^b/
^pr^oc^ur^e^m^eⁿ^t/c^om^p_s^our^c^-^g^r^e^e^n_plaⁿ^s¹²²²⁰^3.p^d^f^.
²³^{For a}^m^o^re^-de^t^a^ile^d^disc^ussion^of^c^o^m^p^e^titiv^e^sourcⁱ^ng^ta^rg^e^t^{s, se}^e^{CRS Re}^port^RL³²⁰^79,^Fe^de^r^a^l^C^ontr^a^c^tⁱⁿ^g^of
^Com^m^e^r^c^{ial Ac}^tiv^itie^s^:^Com^p^e^tⁱ^tⁱ^v^e^Sour^cⁱⁿ^g^T^a^r^g^e^t^s^,^by^L^.^Elaⁱ^ne^H^a^lc^hin.

The Bush Administration also established a requirement, effective in 2001, that agencies and
departments compile lists of their inherently governmental functions and submit them to OMB ²⁴
together with annual inventories of their commercial activities each year. See below for
additional information on this subject.
After a brief review of several key features of the revised circular, this report examines the
guidance for agency inventories, the 12-month deadline for standard competitions, agency
compliance issues, and possible implications for the civil service system and federal employees.

The 2003 revision of A-76 is, arguably, the most significant change to the circular and its
supplement in the document’s history. Previously, the circular stated that it was the policy of the ²⁵
federal government to rely on the private sector for the provision of commercial activities. With
the publication of the 2003 circular, this policy has been replaced by one that focuses on ²⁶
subjecting commercial activities performed by the government to competition. Under the 2003
revision:
• Agencies designate an assistant secretary, or equivalent level official, as the
competitive sourcing official (CSO).
• The government’s response to a solicitation is identified as an agency tender,
which is the equivalent of a bid or a proposal submitted by a contractor.
• Two types of competition, standard and streamlined, are still allowed, but some
features have changed. A standard competition may be used for a work center of
any size, but a most efficient organization (MEO) is required, and a conversion ²⁷
differential is used. A streamlined competition may be used only for functions
that have 65 or fewer FTEs, an MEO is optional, and a conversion differential is
not used.
• Contracting officers use the same source selection criteria or procedure to
evaluate both the agency tender and private businesses’ bids or proposals. An
agency may use sealed bidding, lowest price technically acceptable, phased
evaluation, or tradeoff criteria to evaluate tenders and proposals.
• Where the performance decision²⁸ favors the agency tender, the agency issues a
letter of obligation to the MEO.

²⁴^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^Budg^e^t^{, “}^Y^e^a^r²⁰^{01 I}ⁿ^v^e^ntory^of^Com^m^e^rc^ia^l^A^c^tiv^itie^s^,^”^m^e^m^o^randum^M-0¹^-1^6,
^A^p^r^.^{3, 2}⁰⁰¹^{, a}^v^a^ila^ble^a^t^http:^//w^w^w^.^w^hite^hous^e^.^g^o^v^/^om^b/m^e^m^o^r^a^nda^/^m^01-^16.p^d^f^,^p.^1.
²⁵^{U.S. Of}^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^Budg^e^t^{, “}^I^m^p^le^m^e^nta^{tion of}^the^F^e^de^ra^{l A}^c^ti^v^itie^{s Inv}^e^ntory^Re^f^o^rm^Ac^{t of}¹⁹⁹⁸
^(P.L^{. 1}⁰⁵^-²⁷⁰⁾^(‘FA^I^{R Act’),”}^Fe^de^{ral Re}^giste^r^,^vol^.⁶⁴^,^no^.¹²¹^,^J^uⁿ^e²⁴^,¹⁹⁹⁹^,^p.³³⁹³^1.
²⁶^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^p.^1.
²⁷^T^h^e^{MEO is the}^sta^f^fⁱ^ng^plaⁿ^of^the^a^g^eⁿ^c^y^te^nde^{r. It is}^t^h^e^eⁿ^tity^tha^t^w^ould^pe^rf^orm^the^w^o^rk^w^h^e^r^e^the^g^o^v^e^rnm^e^nt
^wⁱ^{ns the}^c^o^m^p^e^{tition. T}^h^e^c^o^nv^e^r^sion^dif^f^e^r^e^ntia^{l is e}^ithe^r^10%^of^lⁱ^ne^{1 (}^p^e^r^sonⁿ^e^l^c^o^sts)^on^the^staⁿ^da^{rd c}^o^m^p^e^titioⁿ
^f^o^r^m^{or $1}^{0 m}^illion^ov^e^r^a^{ll pe}^rf^o^r^m^a^nc^e^pe^{riods, w}^h^ic^he^v^e^{r is}^le^{ss. It is a}^d^de^{d t}^o^t^h^eⁿ^on-^inc^u^m^b^eⁿ^t^’^{s pric}^e^{or c}^o^st^of
^pe^r^f^or^m^a^nc^e^.⁽^U^{.S. O}^f^fⁱ^c^e^of^Maⁿ^a^g^e^m^e^{nt a}^{nd B}^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^{. A-}⁷⁶⁽^R^e^vⁱ^s^e^d)^,^M^a^y²⁹^,²⁰⁰³^,^p.^C^-²^.⁾^F^o^r
^e^x^a^m^ple^,^{in a}^c^o^m^p^e^{tition w}^h^e^r^e^a^f^e^de^ra^{l a}^g^eⁿ^c^y^{is the}^c^u^rre^{nt pr}^o^vⁱ^de^{r, the}^dⁱ^f^f^e^r^eⁿ^tia^{l w}^{ould be}^a^d^de^{d t}^o^t^h^e
^coⁿ^t^ract^o^{r’s co}^st^s.
²⁸^T^h^{e p}^e^rf^o^r^m^aⁿ^{ce d}^ecisioⁿ^,^w^h^ich^{is acco}^m^p^lish^e^d^b^y^co^m^p^letin^g^t^h^{e stan}^d^a^rd^co^m^p^etitioⁿ^f^o^rm^o^r^strea^m^lin^ed
⁽^c^onti^nue^d.^..)

• The definition of “inherently governmental” is more concise. Among other
changes, the word “substantial” was inserted in this sentence: Inherently
governmental “activities require the exercise of substantial discretion in applying ²⁹
government authority and/or in making decisions for the government.”
• All businesses and federal agencies³⁰ are treated as offerors.³¹
• There is no guarantee that the agency tender will still be under consideration
when the performance decision is made.
• Agencies establish performance standards for agency officials who have been
designated to implement and comply with Circular A-76. Apparently, the
standards would concern performance on Circular A-76 activities.
• The direct conversion option no longer exists. This alternative allowed agencies
to convert a function from government performance to contractor performance
without having to conduct a cost comparison. Direct conversions were allowed
only under certain circumstances.
• References to inter-service support agreements (ISSAs) have been eliminated.
Unlike the proposed revision, the 2003 circular does not address the competition
or re-competition of ISSAs.
The 2003 circular could have a significant impact on public-private competitions, federal
agencies, and the allocation of government work between government agencies and private sector
sources.

The compilation of commercial activities inventories by federal agencies has been required by ³²
Circular A-76, or the accompanying Revised Supplemental Handbook, since at least 1979. With

^(...c^on^tin^ue^d)
^c^o^m^p^e^{tition f}^o^rm^{, de}^te^r^m^ine^s^w^hⁱ^c^{h prov}ⁱ^d^e^r^{, a}^g^o^v^e^rnm^e^{nt a}^g^eⁿ^c^y^{or a}^pr^iv^a^t^e^busine^{ss, w}^{ill pe}^rf^or^m^the^w^o^rk^{. T}^h^e
^f^o^r^m^s^m^a^y^be^f^ound^on^pp^{. C}^-⁵^a^{nd C}^-^{6, r}^e^s^p^e^c^tiv^e^l^y^,^of^the²⁰⁰³^cⁱ^r^c^ula^r^.
²⁹^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. A}^-^{2. I}ⁿ^J^uⁿ^e²⁰⁰^3,^the
^Na^tiona^{l T}^r^e^a^s^ur^y^Em^plo^y^e^e^{s Union (NT}^E^{U) f}^ile^{d a}^la^w^s^{uit, in}^t^h^e^{U.S. Distric}^t^C^our^{t f}^o^{r the}^Distri^c^t^of^Colum^b^ia^,
^a^g^aⁱ^ns^{t O}^M^B^,^a^lle^gⁱ^ng^{, a}^m^ong^othe^r^thiⁿ^g^s^{, tha}^t^the^de^fⁱ^niti^on^of^“ⁱ^nhe^r^e^ntly^g^o^v^e^rⁿ^m^e^nta^l^”^f^{ound in}^Cⁱ^r^c^ula^r^A^-^{76 is}
^c^ontr^a^r^y^{to the}^de^fⁱ^niti^on^inc^l^ude^{d in}^FA^I^R^{. Se}^e^J^a^s^on^P^e^c^k^e^npa^ug^{h, “}^Uⁿⁱ^on^Sue^s^B^u^s^h^A^d^mⁱ^nis^t^r^a^tion^ov^e^r^J^ob
^Com^p^e^{tition R}^u^le^s,”^Go^vern^m^en^t^E^xecu^tⁱ^v^e^{, Da}^ily^Brie^fⁱ^ng^{, June}¹⁹^{, 2}⁰⁰³^{, a}^v^a^ila^ble^a^t^http^://w^ww^.^gov^e^x^e^c^.^c^o^m^/
^da^ily^f^e^d/⁰⁶⁰³^/⁰⁶¹⁹⁰^3p^1.htm^.
³⁰^T^h^e^f^e^de^ra^{l a}^g^eⁿ^c^y^tha^t^{is c}^ond^u^c^ting^a^c^o^m^p^e^{tition m}^a^y^{not be}^t^h^e^only^a^g^eⁿ^c^y^c^o^m^p^e^ting^f^o^{r the}^w^o^rk^{. Othe}^r
^agen^ci^es,^re^f^e^rred^t^o^{as p}^u^b^lⁱ^c^rei^m^b^u^r^sab^l^{e so}^u^r^{ces i}ⁿ^t^h^{e ci}^rcu^l^ar,^al^so^can^sub^mⁱ^t^agen^c^y^t^eⁿ^d^e^rs.
³¹^“^O^ff^e^r^or”^{is a}^nothe^{r te}^rm^f^o^{r a}^c^ontra^c^t^or^tha^t^ha^{s subm}^itte^{d a}^bⁱ^d^{or a}^pr^op^osa^l^.
³²^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^{, “}^A^c^quirⁱ^ng^of^C^o^m^m^e^r^cⁱ^a^l^of^[^s^ic^]^Iⁿ^dus^tr^ia^l^P^r^o^duc^ts^a^nd^Se^r^v^ic^e^s^N^e^e^d^e^d
^by^the^G^ove^rⁿ^m^e^nt;^P^o^lic^y^R^e^vⁱ^sⁱ^on,”^Fe^de^{ral Re}^gⁱ^ste^r^{, v}^o^l.^44,ⁿ^o^.⁶⁷^{, A}^p^r^{il 5}^,¹⁹⁷⁹^,^p.²⁰⁵⁶^{0. C}^oⁿ^f^ir^m^a^{tion tha}^t^t^h^is
^req^uⁱ^rem^eⁿ^t^ex^isted^p^r^io^{r t}^o¹⁹⁷⁹^,^o^r^coⁿ^tⁱⁿ^u^o^u^s^ly^th^ereaf^t^e^{r, is n}^o^t^p^o^ssib^l^e,^b^ecau^{se early}^ed^itioⁿ^s^o^f^th^{e s}^upple^m^eⁿ^ta^l
⁽^c^onti^nue^d.^..)

the enactment of FAIR in 1998, the responsibility to compile commercial activities inventories
annually, and submit them to OMB, became a statutory requirement. The first set of inventories
prepared under FAIR was submitted to OMB in 1999.
Each commercial activity listed on a FAIR inventory is assigned a reason code. The reason code
identifies the status of that activity with regard to competitive sourcing. The reason codes for
inventories are:
^A—T^h^{e co}^m^m^ercia^l^acti^v^it^y^isⁿ^o^{t appropriate f}^o^{r priv}^{ate s}^{ector perf}^orm^aⁿ^{ce pu}^rs^u^aⁿ^t^{to a}
^w^r^itteⁿ^d^e^ter^mⁱⁿ^atioⁿ^b^y^t^h^{e C}^S^{O [}^c^o^m^p^e^titi^v^e^so^u^r^ciⁿ^g^o^f^fⁱ^cial]^.
^B^—^T^h^{e co}^m^m^e^r^c^{ial activ}^it^yⁱ^s^su^itab^l^{e f}^o^r^{a str}^e^a^m^lⁱⁿ^e^d^o^r^stan^d^a^r^d^co^m^p^etitioⁿ^.
^C^—^T^h^{e co}^m^m^e^{rcial act}^ivⁱ^t^y^is^t^h^{e s}^u^bj^{ect of}^aⁿⁱⁿ^-^p^rogres^s^s^t^rea^m^liⁿ^e^{d or s}^t^aⁿ^dard
^com^p^eti^tion^.
^D^—^T^h^{e co}^m^m^e^rci^a^l^actⁱ^vⁱ^t^yⁱ^s^perf^or^m^e^{d b}^y^g^o^v^e^rⁿ^m^eⁿ^t^pers^onⁿ^e^l^a^s^t^h^{e re}^s^u^l^t^{of a}
^stan^d^a^r^d^o^r^str^e^a^m^liⁿ^e^d^co^m^p^e^titioⁿ⁽^o^r^a^co^{st co}^m^p^arⁱ^s^oⁿ^,^str^e^a^m^liⁿ^e^d^co^st^co^m^p^ar^isoⁿ^,^o^r
^{direct con}^v^e^rs^ion⁾^wⁱ^t^hⁱⁿ^th^{e p}^a^s^t^fⁱ^v^e^y^ear^s^.
^E—T^h^{e com}^m^e^rcial^activit^yⁱ^s^pen^d^ing^aⁿ^a^g^en^c^y^approv^e^d^res^t^ru^ctu^rⁱⁿ^g^decisⁱ^oⁿ^(e.g^.,
^clos^u^r^{e, realignm}^en^t).
^F^—^T^h^{e co}^m^m^e^rci^a^l^actⁱ^vⁱ^t^yⁱ^s^perf^or^m^e^{d b}^y^g^o^v^e^rnm^e^nt^pers^onⁿ^e^l^d^u^{e t}^o^{a s}^t^a^t^u^t^or^y³³
^p^r^o^h^ib^itioⁿ^ag^aiⁿ^s^{t p}^r^iv^a^t^{e sec}^t^o^r^p^e^r^f^o^r^m^aⁿ^ce.
In April 2001, OMB established a requirement for agencies to prepare and submit inventories of
their inherently governmental activities along with lists of their commercial functions. It is, and
has been, federal policy under Circular A-76 that inherently governmental activities are to be ³⁴
performed by federal government employees. Commercial functions may be performed by
government employees or contractor employees.
Since the inception of the requirement to submit lists of inherently governmental activities, OMB
has changed its approach to these inventories. Initially, inherently governmental inventories were
not made available to the public, and agency justifications, written or otherwise, were not
required for activities bearing this designation. Two years after the initial directive was issued,
language in Circular A-76 states that inherently governmental inventories are to be made
available to the public; interested parties are allowed to challenge activities that are included on,
or omitted from, an inherently governmental inventory; and written justifications must be
provided, upon request, by agencies.
The following chronology demonstrates how OMB has changed its treatment of inherently
governmental inventories. Its initial guidance of April 3, 2001, stated:

^(...c^on^tin^ue^d)
^ha^nd^bo^ok^a^r^e^not^a^v^a^ila^ble^.
³³^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. A}^-^3.
³⁴^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^p.^1.

^[^A^]^g^eⁿ^cie^s^ar^{e r}^e^q^u^e^s^ted^to^s^u^b^m^it,^wⁱ^th^th^eⁱ^r^F^A^I^R^A^c^tⁱⁿ^v^eⁿ^t^o^r^{ies, a}^sep^a^r^a^{te r}^e^p^o^r^{t th}^at
^lists^t^h^{e a}^g^en^c^y^’^s^civ^iliaⁿⁱⁿ^h^e^r^eⁿ^t^l^y^g^o^v^e^rⁿ^m^eⁿ^t^{al p}^o^sⁱ^tioⁿ^s^.^Militar^y^p^o^s^itioⁿ^s^aⁿ^d^o^t^h^e^r
^civ^iliaⁿ^e^m^p^l^o^y^ees^th^{at ar}^{e e}^x^e^m^p^t^{, as a cla}^{ss o}^f^e^m^p^l^o^y^ee,^f^r^o^m^th^e^F^A^I^R^A^c^{t in}^v^eⁿ^t^o^r^y^o^f
^co^m^m^e^r^c^ial^f^uⁿ^c^tioⁿ^s^s^h^o^u^l^dⁿ^o^{t b}^e^r^e^p^o^r^t^ed^.^T^h^{is r}^e^p^o^r^{t sh}^o^u^ld^b^eⁱⁿ^th^{e sa}^m^e^f^o^r^m^a^t^an^d
^l^e^v^e^l^o^f^det^aⁱ^l^us^ed^f^o^{r t}^h^e^{2001 F}^A^IR^A^c^tⁱⁿ^v^eⁿ^t^or^y^{of co}^m^m^e^rci^a^l^fuⁿ^c^tⁱ^on^s^.^T^h^e
ⁱⁿ^f^o^r^m^atioⁿ^w^{ill b}^e^u^s^ed^{as a p}^a^r^t^o^f^OMB^’^{s stat}^u^t^o^r^y^r^e^vⁱ^e^w^an^d^coⁿ^s^u^ltatioⁿ^p^r^o^{cess, b}^u^t
^wⁱ^l^lⁿ^o^{t be releas}^{ed as}^{a part of}^t^h^{e F}^A^IR^{Act inv}^eⁿ^t^or^yⁿ^o^{r w}ⁱ^l^l^{it be s}^u^bj^{ect to th}^{e F}^A^IR³⁵
^A^c^t^’^s^ad^mⁱⁿⁱ^s^t^rati^v^e^c^h^alleⁿ^g^e^an^{d appeal pr}^oces^s^.
Guidance for the 2002 inventories alerted agencies to the possibility that inventories of inherently
governmental activities could be released to the public.
^Fo^r²⁰⁰²^,^ag^en^cies^w^{ill p}^r^o^v^id^{e to}^OMB^{a sin}^g^l^{e in}^v^eⁿ^t^o^r^y^s^u^b^m^is^sioⁿ^t^h^{at r}^e^f^l^ect^{s b}^o^t^h^th^e
^ag^en^c^y^’^s^civⁱ^lianⁱⁿ^h^e^r^eⁿ^t^l^y^g^o^v^e^rⁿ^m^eⁿ^t^al^FT^E[^s]^an^d^civ^ilian^co^m^m^er^{cial FT}^E[^s]^{, b}^y
^lo^catioⁿ^an^d^f^uⁿ^c^tioⁿ^.^Up^oⁿ^co^m^p^letioⁿ^o^f^OMB^’^{s r}^e^vⁱ^e^w^an^d^coⁿ^s^u^lta^tioⁿ^wⁱ^th^th^{e a}^g^eⁿ^c^y
^reg^a^rdin^g^t^h^{e con}^t^eⁿ^{t of}^this^s^ubm^is^sⁱ^on^{, each}^a^g^en^c^y^s^h^{all prov}^{ide a s}^e^{parate rep}^o^{rt lis}^tin^g
^oⁿ^l^y^t^h^{e ag}^en^c^y^{’s co}^m^m^e^rcial^civ^iliaⁿ^FT^{E[s] to}^th^{e Co}ⁿ^g^r^e^s^{s an}^d^th^{e p}^u^b^{lic in}^acco^rd^an^ce
^wⁱ^t^h^t^h^{e r}^e^q^u^ir^e^m^eⁿ^{ts o}^f^th^{e F}^A^I^R^A^c^{t. Ag}^eⁿ^{cies s}^h^o^u^ld^an^ti^cip^a^{te th}^{e p}^o^ssib^ilit^y^t^h^{at a}^f^ter
^r^e^vi^e^w^aⁿ^d^c^o^ns^ul^t^a^tⁱ^oⁿ^,^O^M^B^m^a^{y r}^e^q^u^e^s^t^t^h^e^r^e^l^e^a^s^e^o^fⁱ^nhe^r^e^nt^l^y^go^ve^rⁿ^me^nt^a^l
ⁱⁿ^v^eⁿ^t^ories^....^As^{a res}^u^lt^of^thⁱ^s^[^m^e^m^oran^d^u^m^]^{, O}^M^{B ex}^pec^t^s^{to con}^d^u^c^{t a}^m^o^{re t}^h^orou^gh
^revⁱ^e^w^o^f^a^g^en^c^y^inv^eⁿ^t^or^y^s^u^b^mⁱ^s^sⁱ^oⁿ^s^an^d^wⁱ^ll^s^{eek i}^m^p^r^ov^{ed con}^sⁱ^s^ten^c^y^wⁱ^t^h^{in an}^d³⁶
^a^m^oⁿ^g^a^g^eⁿ^cⁱ^e^sⁱⁿ^t^h^e^d^e^t^e^r^mⁱⁿ^a^tⁱ^o^{n o}^f^w^h^a^tⁱ^s^c^o^mme^r^cⁱ^a^l^o^rⁱ^nhe^r^e^nt^l^y^go^ve^rⁿ^me^nt^a^l^.
Shortly after the release of this memorandum, the Administrator of the OFPP, testifying before the
Senate Committee on Governmental Affairs, stated that the FAIR challenge process would not
apply to inherently governmental activities.
^Ag^aiⁿ^th^is^y^ear^{, ag}^eⁿ^cies^wⁱ^ll^b^e^r^e^q^u^ested^to^su^b^mⁱ^t^{a sep}^a^r^a^{te r}^e^p^o^r^{t th}^{at lists t}^h^{e a}^g^en^c^y^’^s
^civ^iliaⁿⁱⁿ^h^e^r^eⁿ^t^l^y^g^o^v^e^rⁿ^m^eⁿ^t^{al p}^o^s^itioⁿ^s^{. OMB}^w^{ill a}ⁿ^al^y^z^{e th}^{is d}^a^{ta a}^s^p^a^r^t^o^f^{its o}^v^er^all
^m^aⁿ^a^g^e^m^eⁿ^t^r^e^sp^oⁿ^sib^ilit^ies,^b^u^{t it}^wⁱ^{ll n}^o^{t b}^e^su^b^j^{ect to}^t^h^{e F}^A^I^R^A^c^t^’^{s ad}^mⁱⁿⁱ^str^a^ti^v^e³⁷
^ch^alleⁿ^g^e^aⁿ^{d appeal proces}^s^.
OMB guidance for the 2003 inventories was provided initially by a memorandum dated March ³⁸
14, 2003. The document stated that it provided guidance for the preparation and submission of
FAIR inventories and inherently governmental activities inventories. No explicit statement was
made about the disposition of inherently governmental activities inventories, such as whether
they would be made available to the public or subjected to the FAIR challenge and appeal
process.
The requirement for agencies to submit inventories of their inherently governmental activities
was incorporated into the 2003 circular. OMB’s role did not change: it reviews the inventories
and consults with agencies. Then, agencies are required to make their commercial and inherently

³⁵^{U.S. Of}^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^Budg^e^t^{, “}^Y^e^a^r²⁰^{01 I}ⁿ^v^e^ntory^of^Com^m^e^rc^ia^l^A^c^tiv^itie^s,”^{p. 1.}
³⁶^Aⁿ^g^e^la^St^y^l^e^s^,^A^d^mⁱ^nis^t^r^a^tor^,^O^f^fⁱ^c^e^o^f^Fe^de^r^a^{l P}^r^oc^ur^e^m^eⁿ^{t Polic}^y^,^“^Y^e^a^r^{2002 I}ⁿ^v^e^ntor^y^of^C^o^m^m^e^r^c^ia^l
^A^c^ti^v^itie^s^,^”^m^e^m^o^ra^ndum^M-02-^{04, Fe}^{b. 27}^,²⁰⁰²^{, p. 2.}
³⁷^{U.S. C}^ong^re^{ss, Se}^na^te^Com^m^itte^e^{on G}^o^v^e^rnm^e^nta^l^Aff^a^ir^{s, “}^W^{ho’s Doing}^W^o^rk^f^o^{r the}^G^o^v^e^rn^m^e^nt?^:^M^onit^o^ri^ng^,
^A^c^c^ounta^b^il^ity^a^{nd Com}^p^e^titionⁱⁿ^the^Fe^de^ra^{l a}ⁿ^d^Se^rv^ic^e^Contra^c^t^W^o^rk^f^o^rc^e^,^”^he^a^r^ing^,¹⁰⁷^th^Con^g^{., 2}^nd^sess.^,^M^a^rch
⁶^,²⁰⁰²⁽^W^ashⁱⁿ^g^t^oⁿ^:^G^P^{O, 20}⁰²⁾^,^p^.⁵⁵^.
³⁸^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,”^Y^e^a^r²⁰⁰^{3 I}ⁿ^v^e^ntor^ie^s^of^C^o^m^m^e^r^cⁱ^a^l^a^{nd I}ⁿ^he^r^e^ntly^G^ove^rⁿ^m^e^nta^l
^A^c^ti^v^itie^s.”

governmental inventories available to Congress and the public, except information that is ³⁹
classified or “otherwise protected for national security reasons.”
Two major changes in the treatment of inherently governmental inventories were effected by the
circular. Agencies must prepare written justifications for activities classified as inherently
governmental.
^T^h^{e CSO [}^t^h^e^ag^eⁿ^c^y^’^s^co^m^p^e^titi^v^e^so^u^r^ciⁿ^g^o^f^fⁱ^cer^]^sh^{all j}^u^s^tⁱ^f^y^,ⁱⁿ^w^rⁱ^tin^g^,^an^y
^d^e^sigⁿ^atioⁿ^o^f^g^o^v^e^rⁿ^m^eⁿ^t^p^e^r^s^oⁿⁿ^e^l^p^e^r^f^o^r^mⁱⁿ^gⁱⁿ^h^e^r^eⁿ^t^l^y^g^o^v^e^rⁿ^m^eⁿ^t^al^acti^v^itie^{s. T}^h^e
^j^u^stif^ica^tioⁿ^s^h^{all b}^e^m^a^d^e^av^a^ilab^l^{e to}^OMB^an^d^th^{e p}^u^b^{lic u}^p^oⁿ^r^e^q^u^est.^Aⁿ^a^g^eⁿ^c^y^s^h^all
^b^a^{se in}^h^e^r^eⁿ^t^l^y^g^o^v^e^rⁿ^m^eⁿ^t^{al j}^u^stif^icatioⁿ^s^oⁿ^th^{e [}^c^ir^cu^lar^’^{s r}^e^vⁱ^sed^d^e^fⁱⁿ^itioⁿ^o^f⁴⁰
^“i^nhe^r^e^nt^l^y^go^ve^rⁿ^me^nt^a^l^.^”^]
Similar to the challenge and appeal processes under FAIR that apply to commercial activities
inventories, the circular allows interested parties to challenge the contents of inherently
governmental inventories.
It appears that additional guidance may be necessary to address questions concerning detailed
instructions for preparing justifications, how agency-OMB disputes might be resolved, and the
frequency of justification submissions.
The 2001 memorandum that initially established a requirement for agencies to compile
inventories of inherently governmental activities noted that the information would be “used as a ⁴¹
part of OMB’s statutory review and consultation process ....” While OMB’s 2002 inventory ⁴²
guidance did not provide a rationale for requesting inherently governmental inventories, the
Administrator of OFPP, testifying at a congressional hearing on March 6, 2002, stated that OMB ⁴³
would analyze this information “as part of its overall management responsibilities.” OMB’s
guidance for the 2003 inventories did not state why information about inherently governmental
activities needs to be collected. However, in testimony presented on March 25, 2003, the OFPP
Administrator indicated why OMB wants agencies to compile and submit inherently
governmental activities inventories:
^[In^h^e^ren^t^l^y^g^o^v^e^rnm^eⁿ^t^al^{] f}^unctⁱ^oⁿ^s^m^u^s^t^be^perf^or^m^e^d^by^pu^blⁱ^c^e^m^pl^o^y^ee^s^an^{d w}^e^wⁱ^l^l
^con^tinu^e^{to depen}^d^{on ou}^{r ab}^le^w^o^r^k^f^o^rce^{to ex}^ec^u^t^e^t^h^es^eⁱ^m^por^{tant res}^pons^ibilitie^s^on
^b^e^h^a^lf^o^f^o^u^r^citizeⁿ^r^y^{. T}^h^{is n}^o^t^wⁱ^t^h^s^t^an^dⁱⁿ^g^,^w^e^w^{ill st}^{ill r}^e^q^u^ir^{e ag}^en^cie^s^to^id^en^tif^y^th^eir
ⁱⁿ^h^e^r^eⁿ^t^l^y^g^o^v^e^rⁿ^m^eⁿ^t^a^l^f^uⁿ^c^tⁱ^oⁿ^s^to^en^su^r^e^acti^v^itie^{s ar}^{e p}^r^o^p^e^r^l^y^ch^ar^acter^ized^{. B}^y^d^oⁱⁿ^g
^s^o^,^c^o^m^m^e^r^cⁱ^a^l^f^uⁿ^c^tⁱ^oⁿ^s^t^h^a^t^s^h^o^u^l^d^b^e^c^oⁿ^sⁱ^d^e^r^e^d^f^o^r^c^o^m^p^etitioⁿ^w^{ill n}^o^t^r^e^m^aⁱⁿⁱⁿ^s^u^lated⁴⁴
^f^r^o^m^t^h^{e sa}^vⁱⁿ^g^s^th^{at a}^f^a^ir^co^m^p^e^titioⁿ^caⁿ^yⁱ^eld^.

³⁹^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. A}^-^1.
⁴⁰^Ibid^.,^{p. A}^-^2.
⁴¹^{U.S. Of}^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^Budg^e^t^{, “}^Y^e^a^r²⁰^{01 I}ⁿ^v^e^ntory^of^Com^m^e^rc^ia^l^A^c^tiv^itie^s,”^{p. 1.}
⁴²^{U.S. Of}^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^Budg^e^t^{, “}^Y^e^a^r²⁰^{02 I}ⁿ^v^e^ntory^of^Com^m^e^rc^ia^l^A^c^tiv^itie^s.”
⁴³^{U.S. C}^ong^re^{ss, Se}^na^te^Com^m^itte^e^{on G}^o^v^e^rnm^e^nta^l^Aff^a^ir^{s, “}^W^{ho’s Doing}^W^o^rk^f^o^{r the}^G^o^v^e^rn^m^e^nt?^:^M^onit^o^ri^ng^,
^A^c^c^ounta^b^il^ity^a^{nd Com}^p^e^titionⁱⁿ^the^Fe^de^ra^{l a}ⁿ^d^Se^rv^ic^e^Contra^c^t^W^o^rk^f^o^rc^e^,^”^{p. 55.}
⁴⁴^{U.S. C}^ong^re^{ss, House}^Com^m^itte^e^{on t}^h^e^A^r^m^e^{d Se}^rv^ic^e^s^{, Subc}^om^m^itte^e^{on Re}^a^d^ine^{ss, sta}^t^e^m^eⁿ^{t of}^Aⁿ^g^e^la^B.
^Sty^l^e^s^,^A^d^mⁱ^nis^t^r^a^tor^,^O^f^fⁱ^ce^of^Fe^de^r^a^{l P}^r^oc^ur^e^m^eⁿ^{t Polic}^y^,^unp^ub^lis^he^d^he^a^r^ing^,¹⁰⁸^th^Cong^.,¹^st^s^e^s^s^{., Ma}^rc^{h 2}⁵^,^th
²⁰⁰^{3, a}^v^a^ila^ble^a^t^http^://a^rm^e^d^s^e^r^v^ic^e^s^.hous^e^.^g^o^v^/^c^o^m^doc^s^/^opeⁿⁱⁿ^g^s^ta^tem^e^nts^a^ndpre^s^s^r^e^l^e^a^s^e^s^/¹⁰⁸^c^ong^r^e^s^s^/^03-⁰³^-
⁽^c^onti^nue^d.^..)

The May 29, 2003 Federal Register notice stated that the circular would “increase visibility into
government management by requiring agencies to develop lists of their commercial and ⁴⁵
inherently governmental activities.” Another excerpt from the Federal Register notice stated:
^An^accu^{rate i}ⁿ^v^e^ntor^y^iden^ti^fy^ing^aⁿ^ag^eⁿ^c^y^’s^co^m^m^e^rcial^an^{d inh}^e^ren^t^l^y^g^o^v^e^rnm^eⁿ^t^al
^a^c^tivitie^{s is v}^ita^{l to}^a^fe^d^e^r^a^{l ma}^na^ge^r^’^{s a}^b^ilit^y^to^id^eⁿ^tif^{y opport}^uⁿ^itie^{s f}^o^r^w^h^ic^h^ap^p^licatioⁿ
^o^f^p^u^b^lic-^p^rⁱ^v^a^{te co}^m^p^etitioⁿⁱ^s^lik^el^y^to^yⁱ^eld^th^{e b}^e^{st r}^e^tu^rⁿ^f^o^r^th^{e ag}^eⁿ^c^y^{. Fo}^r^thⁱ^s^r^e^a^s^oⁿ^,
^t^h^e^r^e^vi^s^e^d^Ci^r^c^ul^a^r^r^e^fi^ne^s^aⁿ^d^e^x^p^a^nd^s^guⁱ^d^aⁿ^c^e^oⁿ^t^h^e^e^s^ta^blis^hm^eⁿ^t^of^inv^eⁿ^t^ories^....^T^h^e
^revⁱ^s^e^{d C}ⁱ^rc^u^l^{ar bu}^ilds^on^e^xⁱ^s^ting^s^t^at^u^t^or^y^oblig^a^tion^s^s^e^t^forthⁱⁿ^{... F}^A^IR^{... th}^{at requ}^ire
^a^g^eⁿ^cⁱ^e^s^to^p^r^e^p^a^r^e^a^nnua^{l i}ⁿ^ve^nto^r^ie^{s o}^f^t^h^e^c^o^mme^r^c^ia^{l a}^c^tivitie^{s p}^e^r^f^o^r^m^e^d^b^y^t^h^eⁱ^r
^e^m^plo^y^ees^{. T}^h^es^e^enh^aⁿ^c^e^m^eⁿ^ts^{... i}ⁿ^cl^u^d^{e a}^m^o^r^e^accur^a^t^e^pi^ct^ur^{e of}^agenci^e^s^’^over^al^l
^a^c^tivities.^T^h^{e re}^vⁱ^s^e^d^Cⁱ^rcula^r^requ^ires^a^g^en^cⁱ^es^{to cate}^g^{orize all act}^iv^it^ies^perf^or^m^e^{d b}^y⁴⁶
^go^ve^rⁿ^me^nt^p^e^r^s^oⁿⁿ^e^l^a^s^eⁱ^t^h^e^r^c^o^mme^r^cⁱ^a^l^o^rⁱⁿ^he^r^e^nt^l^y^go^ve^rⁿ^me^nt^a^l^.
In effect, the 2003 circular modified the challenge and appeal process that was established by
FAIR. In addition to altering time frames from “days” to “working days,” and providing direction
on who should serve as agency challenge authorities and appeal authorities, the circular allows
for challenges to reason codes and the classification of activities as inherently governmental.
Table 1. Comparison of Inventory Challenge and Appeal Processes
^{FAIR (P.L. 105-}²⁷⁰⁾^C^ircular^{A-76 Attachment A}
^{Sec. 2.(c)(2)(A)}^{Para. D.6.}
^{Any cha}^{nges made to a}ⁿ^inve^ntor^{y as a res}^{ult of a}^{A copy of the}^cha^{nge shall also b}^e^{provided to OMB.}
^{challenge shall be made available}^{to the p}^{ublic. A copy of}
^{the cha}^{nges s}^{hall be se}^{nt to Cong}^{ress, and a notice s}^hall
^{be p}^{ublished in t}^he^{Federal Registe}^r^.
^{Sec. 3.(a)}^{Para. D.2.}
^{An interested}^party^{may c}^{hallenge the inclusion of a}ⁿ^{An interested}^party^{may c}^{hallenge the ap}^{plication of}
^{activity on, or the omission of an}^{activity from, a}^{reason codes and t}^{he reclassificat}^{ion of an activity as}
^{commercial activity inventory.}^inheren^{tly governme}^{ntal or commercial.}
^{Sec. 3.(c)}^{Para. D.2.}
^{A challenge mus}^{t be}^su^{bmitted, i}ⁿ^{writing, to an agenc}^y^{A challenge mus}^{t be}^su^{bmitted within 30 worki}^{ng days.}
^{within 30 day}^{s after}^{notice has}^be^{en p}^{ublished in t}^he
^{Federal Register}^{that an age}^{ncy’s in}^{ventory is available.}
^{Sec. 3.(d)}^{Para. D.1.a.}
^{An agency}^{head s}^{hall designate an}^{official to handle}^Inventor^{y challenge a}^{uthorities sh}^{all be at the same level,}
^challenges.^{or higher, tha}^{n the}^{individual who prepar}^{ed the inve}^ntory.
^{Sec. 3.(d)}^{Para. D.3.}
^{The designated official shall make a determination and}^Inventor^{y challenge a}^{uthorities m}^{ust make a}
^{respond within}²⁸^{days after}^rece^{iving the challenge.}^{determination and res}^{pond within 2}⁸^{working days.}

^(...c^on^tin^ue^d)
^25s^ty^le^s^.^htm^l^.
⁴⁵^{U.S. Of}^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^Budg^e^t^{, “}^P^e^r^f^o^rm^aⁿ^c^e^of^Com^m^e^rc^ia^{l A}^c^ti^v^itie^s,”^Ma^y^{29, 2}⁰⁰³^,^p^.³²¹³^4.
⁴⁶^I^b^id^.,^pp.³²¹^37-³²¹³^{8. (}^ita^lⁱ^c^s^{in or}^igⁱⁿ^a^l⁾

^{FAIR (P.L. 105-}²⁷⁰⁾^C^ircular^{A-76 Attachment A}
^{Sec. 3.(e)}^{Para. D.1.b.}
^{The head of an}^agency^{shall handl}^{e appeals.}^{Agency h}^{eads shall appoint in}^vent^{ory appeal aut}^horities.
^{They shall be inde}^penden^{t and at}^{a higher level in t}^he
^{agency t}^{han inve}^{ntory c}^{hallenge a}^uthorities.
^{Sec. 3.(e)(1)}^{Para. D.4.}
^{An interested}^party^{shall have}¹⁰^{days after re}^{ceipt of an}^An^{interested party shall}^{have 10 working}^days.
^{adverse decision to file a written appeal.}
^{Sec. 3.(e)(2)}^{Para. D.5.}
^{The agency}^{head s}^{hall decide the appeal and r}^{espond, in}^{An inventory}^ap^{peal authority s}^h^{all respond within 1}⁰
^{writing, within 10 days a}^{fter r}^{eceipt of the a}^p^p^eal.^{working days.}
Only individuals or entities that qualify as an interested party may submit challenges and appeals.
The circular and FAIR share the same definition of “interested party”:
^{For pu}^rpos^es^of^ch^alleng^ing^t^h^{e con}^t^ents^of^an^a^g^en^c^y^’s^comm^{ercial activ}ⁱ^tiesⁱⁿ^v^eⁿ^t^or^y
^p^u^r^s^u^aⁿ^t^to^t^h^{e Fed}^e^r^a^l^A^c^tiv^it^{ies I}ⁿ^v^eⁿ^t^o^r^y^Re^f^o^r^m^{Act, a}ⁿⁱⁿ^ter^e^sted^p^a^r^t^y^is⁽¹⁾^{a p}^r^iv^ate
^s^{ector s}^o^u^r^{ce th}^{at is}^an^act^u^a^{l or pr}^os^pectiv^{e of}^f^e^{ror f}^o^{r a con}^t^r^a^c^t^o^r^o^t^h^e^r^f^o^r^m^o^f^ag^r^e^em^en^t
^to^p^e^r^f^o^r^m^th^{e acti}^v^it^y^aⁿ^d^h^a^{s a d}ⁱ^r^{ect ec}^oⁿ^o^m^{ic in}^ter^e^s^tⁱⁿ^p^e^r^f^o^r^mⁱⁿ^g^th^{e acti}^v^it^y^th^at
^w^o^u^l^{d be adv}^e^rs^ely^a^f^f^ected^by^{a deter}^mⁱⁿ^ationⁿ^o^{t to pr}^ocu^r^{e th}^{e perf}^orm^aⁿ^ce^o^f^th^e
^activ^it^y^f^r^o^m^{a priv}^ate^s^ector^s^o^u^r^{ce; (2) a repres}^en^tatⁱ^v^e^{of any}^busⁱⁿ^es^s^{or prof}^es^sⁱ^on^al
^as^s^o^{ciation t}^h^{at i}ⁿ^cl^u^d^es^wⁱ^thinⁱ^t^s^m^e^m^b^ers^hⁱ^p^pri^v^at^e^s^e^c^t^{or s}^o^u^r^ces^re^f^e^{rred t}^oⁱⁿ⁽¹⁾
^abov^{e; (3) an}^of^fⁱ^{cer or e}^m^ploy^{ee of}^aⁿ^org^aⁿⁱ^zat^ion^s^w^ithin^an^ex^ec^u^tⁱ^v^{e ag}^eⁿ^c^y^th^a^t^is^aⁿ
^act^u^a^l^{or pros}^pectⁱ^v^{e of}^f^e^{ror t}^o^perf^orm^t^h^{e act}ⁱ^vⁱ^t^y^;^{(4) t}^h^{e h}^{ead of}^any^l^a^{bor org}^aⁿⁱ^zatⁱ^on
^ref^e^{rred to in}^s^ectioⁿ^7103(a)^{(4) of}^{title 5, Un}^ited^States^C^{ode, th}^{at i}ⁿ^cl^u^d^es^wⁱ^t^hⁱⁿ^it^s⁴⁷
^m^e^m^b^ershⁱ^p^offⁱ^cers^{or e}^m^pl^o^y^ees^of^aⁿ^org^aⁿⁱ^zatⁱ^oⁿ^re^f^e^{rred t}^oⁱⁿ^parag^r^aph^(3).
Several questions or issues may arise with the revised challenge and appeal process.
• The text at the beginning of the circular’s definition of “interested party”
indicates that the purpose of the definition is to identify who may challenge the
contents of commercial activities inventories. However, Paragraph D.2 of
Attachment A of the circular suggests that interested parties may challenge the
classification of inherently governmental activities. Has this apparent
discrepancy been resolved? If so, how?
• Assuming that individuals and organizations are allowed to file challenges on the
classification of inherently governmental activities, how many have been filed?
What kind of burden will they place on agencies? Do agencies have the
capability to respond, within the circular’s timelines, to challenges and appeals?
• Does the new approach toward inherently governmental activities affect how
agency personnel classify activities?
• Are there any implications of using an executive directive (Circular A-76) to ⁴⁸
broaden the application of FAIR to inherently governmental activities?

⁴⁷^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. D}^-^6.
⁴⁸^{CRS Rep}^o^r^t^RS2¹⁴⁸⁹^,^OMB^Ci^rcu^l^a^r^A^-⁷⁶^:^E^x^p^l^aⁿ^a^tⁱ^oⁿ^aⁿ^d^Di^sc^u^ssi^oⁿ^o^f^t^h^{e R}^ecen^t^l^y^R^evi^sed^F^e^d^e^ra^l
^Outsourcⁱⁿ^g^P^o^lic^y^,^by^J^{ohn R}^.^L^u^c^k^ey^{, p. 2.}

Since the release of the 2003 revision to Circular A-76, OMB has modified its guidance on the
use of reason code A. Under the circular, agencies are required to prepare written justifications for
commercial activities that are assigned reason code A, and these justifications are to be available ⁴⁹
to OMB and the public, upon request. OMB’s 2004 guidance for agencies on the preparation of
their commercial and inherently governmental activities inventories essentially repeated the ⁵⁰
instructions found in the circular. Beginning in 2005, agencies are required to submit to OMB ⁵¹
their reason code A justifications with their inventories. OMB’s 2006 inventory guidance noted
that OMB personnel “may also request that agencies refine previously submitted justifications for ⁵²
other reason code A functions if there are questions.”
Agency implementation of this portion of the circular (attachment A, inventory process) might
create additional work for agencies. In addition to preparing written justifications for activities
designated as inherently governmental or designated as commercial and assigned reason code A,
agency personnel might be called upon to respond to challenges and appeals concerning reason
codes or the contents of inherently governmental activities inventories.
In light of OMB’s emphasis on competitive sourcing, one possible outcome of changing, and
expanding the applicability of, the inventory procedures could be the establishment of an
environment conducive to erroneous classification of activities. Activities that are arguably
inherently governmental, or that are commercial but should be exempt from competition (reason
code A), might be misclassified as commercial and eligible for competition (reason code B). Less
work is required for placing activities on the FAIR inventory and assigning reason code B.
Written justifications are not required for these activities, but they are required for inherently
governmental activities and commercial activities assigned reason code A.
This potential problem may be mitigated by the visibility of agency inventories and the
accountability mechanisms established by FAIR and enhanced by Circular A-76. Requiring
commercial activities inventories and inherently governmental inventories to be made available to
the public allows for scrutiny of both types of activities. Union and private sector reviews of
inventories could be particularly useful in guarding against potential misclassification of activities
as commercial when they are not, or vice versa. Additionally, the release of inherently
governmental inventories could aid in examining the belief, held by some commenters, that some
commercial activities are placed on inherently governmental inventories in order to shield them
from competition. One issue that might arise is how to balance an agency’s determinations, based

⁴⁹^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. A}^-^3.
⁵⁰^C^l^a^y^J^ohns^{on I}^I^I^{, D}^e^puty^Dⁱ^r^e^c^t^or^f^o^r^Ma^na^g^e^m^e^{nt, U}^.^{S. O}^f^fⁱ^ce^of^Ma^na^g^e^m^e^{nt a}^{nd B}^u^dg^e^t^{, “}²⁰^{04 I}ⁿ^v^e^ntor^ie^s^of
^Com^m^e^rc^ia^{l a}^{nd Inhe}^reⁿ^tly^G^o^v^e^rnm^e^nta^l^A^c^tiv^itie^s,”^m^e^m^o^r^a^ndu^m^M-04-09,^A^p^{r. 6,}²⁰⁰⁴^{, a}^v^a^ila^b^l^e^a^t
^http:^//w^w^w^.^w^hite^hous^e^.^g^o^v^/^om^b/m^e^m^o^r^a^nda^/f^y^04/m^04-^09.p^d^f^.
⁵¹^D^a^vⁱ^{d H}^.^Sa^f^a^vⁱ^aⁿ^,^A^d^mⁱ^nis^t^r^a^tor^,^O^f^fⁱ^c^e^of^Fe^de^r^a^{l P}^r^oc^ur^e^m^eⁿ^{t Polic}^y^,^“²⁰⁰^{5 I}ⁿ^v^e^nt^or^ie^s^of^C^o^m^m^e^r^c^ia^{l a}^nd
^Inhe^re^ntly^G^o^v^e^rn^m^e^nta^l^A^c^tiv^iti^e^s^,”^m^e^m^o^ra^ndum^M-05-1²^,^Ma^y^23,²⁰⁰⁵^{, a}^v^a^ila^ble^a^t^h^ttp:^//www.w^h^ite^house^.^g^o^v^/
^om^b/m^e^m^o^r^a^nda^/f^y^2005/^m^05-^12.^pdf^{. T}^h^is^m^e^m^o^r^a^ndum^inc^l^ude^s^aⁿ^a^tta^c^h^m^e^{nt tha}^t^pr^ovⁱ^d^e^s^g^u^idaⁿ^c^e^{on r}^e^a^s^oⁿ^c^o^de
^A^justif^ic^a^tions.
⁵²^C^l^a^y^J^ohns^{on I}^I^I^{, D}^e^puty^Dⁱ^r^e^c^t^or^f^o^r^Ma^na^g^e^m^e^{nt, U}^.^{S. O}^f^fⁱ^ce^of^Ma^na^g^e^m^e^{nt a}^{nd B}^u^dg^e^t^{, “}²⁰^{06 I}ⁿ^v^e^ntor^ie^s^of
^Com^m^e^rc^ia^{l a}^{nd Inhe}^reⁿ^tly^G^o^v^e^rnm^e^nta^l^A^c^tiv^itie^s,”^m^e^m^o^r^a^ndu^m^M-06-08,^Ma^r.^8,²⁰⁰⁶^{, a}^v^a^ila^ble^a^t
^http:^//w^w^w^.^w^hite^hous^e^.^g^o^v^/^om^b/m^e^m^o^r^a^nda^/f^y^2006/^m^-^06-⁰⁸^.p^df^.

upon familiarity with its own work, and, for example, its exercise of discretionary authority in
applying reason code A, against the assessments of outside organizations concerning the proper
classification of agency activities. In the absence of a disclosure process akin to the one used for
inventories of commercial and inherently governmental activities, it is difficult to gauge whether,
and how, outside organizations use the opportunities available to them under the revised
challenge and appeal process.
Useful information can be gleaned from inherently governmental and commercial inventories,
such as the variety of functions performed by an agency and the number of FTEs associated with
each activity. However, the utility of this information is somewhat limited. The inventories are
based on a dichotomy between commercial and inherently governmental, which makes them
useful for competitive sourcing, but they appear not to capture the complexities and
interdependence of government work and government organizations.
Changes to the definition of “inherently governmental” might not end with the revised definition
that appears in the 2003 circular. Various factors, such as the production and publication of lists of
inherently governmental and commercial activities, the increasing number of competitions, or the
revised definition itself, could act as a catalyst for an open, informed, and thoughtful discussion
on the concept of inherently governmental and its validity.
Some policy issues and questions that might arise as agencies attempt to comply with the circular
and OMB inventory guidance include the following:
• The circular states that agency personnel shall use the circular’s definition of
“inherently governmental” in preparing their justifications for inherently
governmental activities. No other guidance is provided to indicate what type and
scope of information constitutes sufficient justification.
• What happens if OMB disagrees with an agency’s justifications for inherently
governmental activities? Who—the agency, OMB, a third party—has final
authority over the agency’s list of inherently governmental activities and
accompanying justification?
• Does an initial justification remain valid until, for example, an agency elects to
change its inherently governmental activity inventory and/or justifications? If
not, how frequently does OMB require agencies to prepare justification
statements for their inherently governmental activities?
• How has OMB encouraged compliance? What happens if an agency does not
comply with OMB’s directives?
• There is no statutory requirement for agencies to submit lists of inherently
governmental activities. Do all agencies that submit FAIR inventories also submit
inventories of inherently governmental activities?
• Have OMB-agency consultations resulted in shifting activities from an inherently
governmental list to a commercial inventory and vice versa? If so, how many
functions and FTEs have been shifted, for each agency and each year, from one
list to another? What has been the net result governmentwide?

Under the 1999 circular, agencies were allowed 18 months to complete a standard cost
comparison for a single function and 36 months for a multifunction study. The cost comparison
start date was the date a study team had been identified and the public or the union had been ⁵³
notified of the study.
The 2003 revision imposes a shorter timeframe for study completion and does not make a
distinction between single function and multifunction studies. The 2003 circular requires an
agency to complete a competition (that is, reach a performance decision) within 12 months of the ⁵⁴
public announcement of the competition. The Federal Register notice that announced the
release of the 2003 circular stated OMB’s rationale for the 12-month deadline:
^Ti^m^e^f^r^am^{e s}^t^an^d^a^r^d^s^h^a^v^e^b^e^enⁱⁿ^c^o^r^p^o^r^a^t^e^dⁱⁿ^t^o^th^e^r^e^vⁱ^sed^Cir^c^u^l^ar^to^m^o^ti^v^a^te^ag^eⁿ^cies
^to^co^m^p^{lete co}^m^p^et^itioⁿ^s^aⁿ^d^t^oⁱⁿ^s^till^g^r^eater^coⁿ^f^id^eⁿ^{ce t}^h^at^ag^eⁿ^cies^w^ill^f^o^llo^w^t^h^r^o^u^g^h
^oⁿ^th^eir^p^l^an^{s. C}^u^r^r^eⁿ^t^p^r^o^cess^e^{s h}^a^v^e^b^een^cr^iticized^f^o^r^all^o^wⁱⁿ^g^a^g^en^cⁱ^e^s^t^o^e^x^t^eⁿ^d^p^u^b^lⁱ^c^-
^priv^{ate co}^m^p^{etitions in}^definⁱ^te^l^y^{.... In}^addition^{to in}^stilliⁿ^g^c^oⁿ^f^ideⁿ^{ce in}^th^{e process, ti}^m^e⁵⁵
^li^mⁱ^t^s^en^su^r^e^t^h^{at t}^h^{e b}^eⁿ^e^f^its^o^f^co^m^p^etitioⁿ^ar^{e r}^ealized^.
A time limit waiver of up to six months may be granted by the agency competitive sourcing
official (CSO). A waiver applies only to a competition that is particularly complex and must be
signed by the CSO before the public announcement of the competition. The CSO is to provide a
copy of the waiver to the Deputy Director for Management, OMB. If an agency exceeds the time ⁵⁶
limit (whether 12 or 18 months) for a study, the CSO is to notify OMB in writing. The 2003
circular does not indicate whether there will be any consequences for an agency that fails to meet
the deadline.
In practice, agencies have more than 12 (or 18) months to complete competitions. In establishing
a timeframe, what OMB did was identify a set of activities an agency must accomplish between a
study’s start date and the end date. All other necessary tasks can occur before or after the 12- or
18-month timeframe. At a minimum, agencies are expected to perform these tasks within the
allotted time:
• Issue a public announcement.
• Appoint agency personnel to the performance work statement (PWS) team, the
most efficient organization (MEO) team, and the source selection evaluation
board (SSEB).
• Prepare the PWS.
• Develop and issue a solicitation.
• Create a plan for establishing an MEO.

⁵³^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶^Re^vⁱ^s^e^{d S}^u^p^p^le^m^e^ntal^H^a^nd^bo^ok^{, Pe}^r^f^o^r^m^anc^e^of
^Comme^rc^{ial Ac}^tiv^itie^s^{, p}^.¹⁰^.
⁵⁴^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d⁾^,^Ma^y^{29, 2}⁰⁰³^,^{p. B}^-^6.
⁵⁵^{U.S. Of}^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^Budg^e^t^{, “}^P^e^r^f^o^rm^aⁿ^c^e^of^Com^m^e^rc^ia^{l A}^c^ti^v^itie^s,”^Ma^y^{29, 2}⁰⁰³^,^p^.³²¹³^6.
⁵⁶^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. B}^-^6.

• Develop a quality assurance surveillance plan (QASP).⁵⁷
• Prepare an agency tender, which includes, in addition to an MEO, a certified
agency cost estimate, the MEO’s quality control plan, the MEO’s phase-in plan,
and copies of any existing, awarded MEO subcontracts.
• Receive and evaluate all tenders and offers.
• Perform price analysis and cost realism on all private sector cost proposals and ⁵⁸
agency cost estimates.
• Make the performance decision.⁵⁹
The imposition of a 12-month deadline, when combined with a list of tasks that need to be
accomplished prior to the start date, alerts agencies to the importance of planning for a
competition. In the May 29, 2003 Federal Register notice, OMB stated that many commenters on
the proposed revision noted that agency personnel “lack experience planning for and conducting
public-private competitions.” OMB agreed with these commenters, responding that it had refined ⁶⁰
and bolstered its coverage of this area in the 2003 circular. Prior to the start date of a
competition, agencies are to:
• Determine what function(s) are to be competed and identify the associated FTEs.
• Carry out preliminary research to determine how to group activities as business
units.
• Review workload data, quantifiable outputs of activities or processes, and other
similar data. If necessary, establish workload data collection systems.
• Determine the activity’s baseline costs.
• Determine whether to conduct a streamlined or a standard competition.
• Develop schedules for completing the study.
• Determine the roles and responsibilities of agency participants in the
competition.
• Appoint competition officials: agency tender official, contracting officer, PWS
team leader, human resource advisor (HRA), and source selection authority
(SSA).
• Notify incumbent service providers when the public announcement will be ⁶¹
made.

⁵⁷^A^Q^A^SP^“ⁱ^deⁿ^tif^ie^s^the^m^e^thods^the^g^o^v^e^rnm^e^nt^w^{ill us}^e^to^m^e^a^s^ure^the^pe^rf^orm^a^nc^e^o^f^the^s^e^rv^ic^e^prov^ide^r^a^g^aⁱ^ns^t
^the^r^e^qu^ir^e^m^eⁿ^ts^of^the^P^W^S.”⁽^U^{.S. O}^f^fⁱ^ce^of^Ma^na^g^e^m^e^{nt a}^{nd B}^u^dg^e^t^,^Cⁱ^r^c^ular^N^o^{. A-}⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^p.
^B^-^10.)
⁵⁸^P^rⁱ^{ce an}^al^y^sⁱ^sⁱ^s^u^s^ed^t^o^d^e^t^e^rmⁱⁿ^{e t}^h^at^“t^h^e^p^r^op^o^s^ed^p^rⁱ^{ce i}^s^reason^ab^l^eⁱⁿ^co^m^p^ari^s^oⁿ^wⁱ^t^h^cu^rrent^o^r^recen^t^p^rⁱ^ces
^f^o^{r the}^s^a^m^e^{or s}ⁱ^m^ila^{r item}^s^{, a}^d^jus^t^e^d^t^o^re^f^l^e^c^t^c^h^aⁿ^g^e^s^{in m}^a^r^k^e^t^c^ond^itio^ns^{, e}^c^o^nom^ic^c^onditⁱ^oⁿ^s^,^quaⁿ^titie^s^,^or
^te^rm^{s a}ⁿ^d^c^oⁿ^d^iti^oⁿ^s^uⁿ^d^e^{r c}^oⁿ^t^ra^c^t^{s th}^a^t^re^su^lte^d^f^r^o^m^a^d^e^q^u^a^te^p^r^ic^e^c^o^m^p^e^titioⁿ^.^”⁽⁴⁸^CFR¹⁵^.4⁰³^-1^(c⁾⁽¹^)(B)(III).)
^Co^st^realⁱ^s^mⁱ^s^{a p}^r^o^{cess u}^s^ed^t^o^en^su^{re t}^h^at^t^h^{e co}^st^{s i}ⁿ^an^o^f^f^e^ro^r^’^{s p}^r^op^o^s^al^{are real}ⁱ^s^tⁱ^c^,^ref^l^ect^{a t}^h^o^r^o^u^g^h
^unde^r^s^taⁿ^dⁱⁿ^g^of^the^r^e^qu^ir^e^m^eⁿ^t^s^{, a}^{nd a}^r^e^c^o^ns^is^te^{nt w}^{ith t}^h^e^te^c^h^nic^a^l^pr^opos^a^l^.⁽⁴^{8 C}^F^R^2.^1.)
⁵⁹^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^pp^{. B}^-^6-^B^-¹⁶^.
⁶⁰^{U.S. Of}^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^Budg^e^t^{, “}^P^e^r^f^o^rm^aⁿ^c^e^of^Com^m^e^rc^ia^{l A}^c^ti^v^itie^s,”^Ma^y^{29, 2}⁰⁰³^,^p^.³²¹³^8.
⁶¹^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^pp^{. B}^-^1-^B^-^3.

While this list might aid agency personnel who are trying to determine what resources and skills
are needed to conduct rigorous planning for competitions, neither the circular nor the Federal
Register notice addressed the matter of training personnel to plan and conduct competitions.
Training for agency personnel was addressed in OMB’s May 2004 report on competitive
sourcing, which identified the Federal Acquisition Council, senior managers governmentwide, the
Defense Acquisition University, and the Federal Acquisition Institute as key participants in the
effort to plan for, develop, and offer training tailored to meet the needs of agency personnel
conducting public-private competitions.
^Su^cces^s^f^u^l^ap^p^licatioⁿ^o^f^co^m^p^etitiv^{e so}^u^r^ciⁿ^g^r^e^q^u^ir^{es th}^at^o^u^r^w^o^r^k^f^o^r^{ce b}^e^th^{e b}^e^{st it ca}ⁿ
^b^eⁱⁿ^id^en^tif^yⁱⁿ^g^acti^v^itie^{s t}^h^{at ar}^{e su}^itab^l^e^f^o^r^co^m^p^etitioⁿ^,^ap^p^l^yⁱⁿ^g^str^e^a^m^liⁿ^e^d^an^d
^stan^d^a^r^d^co^m^p^etitioⁿ^tec^hⁿⁱ^q^u^{es i}ⁿ^{a str}^a^te^gⁱ^c^m^aⁿⁿ^er^{, r}^uⁿⁿⁱⁿ^g^{a f}^a^ir^an^d^tr^an^sp^ar^eⁿ^t
^selectioⁿ^p^r^o^{cess, an}^d^p^r^o^p^e^r^l^y^m^aⁿ^a^gⁱⁿ^g^t^h^{e r}^e^su^ltⁱⁿ^g^coⁿ^t^r^{act o}^r^letter^o^f^o^b^lig^atioⁿ
^estab^lis^h^e^d^wⁱ^t^h^a^wⁱⁿⁿⁱⁿ^g^g^o^v^e^rⁿ^m^eⁿ^t^p^r^o^v^id^er^.^T^h^{e Fed}^e^r^a^l^A^c^q^u^isit^ioⁿ^Co^uⁿ^cil^h^a^{s b}^een
ⁱⁿ^v^eⁿ^t^o^r^yⁱⁿ^g^ag^eⁿ^c^y^r^e^so^u^r^ces^{, sk}^{ill set}^s^an^d^tr^ainⁱⁿ^gⁿ^e^e^d^s^.^O^M^{B w}^ill^w^o^r^k^clo^s^el^y^wⁱ^t^h^th^e
^Co^uⁿ^cⁱ^l^aⁿ^d^a^s^{k se}ⁿⁱ^o^r^a^g^eⁿ^c^y^ma^na^ge^me^nt^t^o^gi^ve^p^rⁱ^o^rⁱ^t^y^a^t^t^e^ntⁱ^o^{n t}^o^d^e^ve^l^o^pⁱ^ng^p^l^aⁿ^s
^th^{at ad}^d^r^ess^id^en^ti^fⁱ^ed^skⁱ^lls^g^a^p^s^{. T}^h^{e De}^f^eⁿ^s^e^A^c^q^u^isⁱ^tioⁿ^Uⁿⁱ^v^er^sit^y^aⁿ^d^Fed^e^r^a^l
^A^c^q^u^isit^ioⁿ^Iⁿ^stit^u^t^e^wⁱ^l^l^b^e^ask^e^d^to^p^l^ay^{a lead}^r^o^{le in}^p^r^o^vⁱ^dⁱⁿ^g^tr^aiⁿⁱⁿ^g^m^a^terⁱ^al^{s g}^ear^ed⁶²
^{to s}^k^ill^s^s^u^ch^a^s^m^a^r^k^{et an}^al^y^s^is^{, cos}^t^an^al^y^sⁱ^s^{, an}^{d con}^t^ract^admⁱⁿⁱ^s^t^ration^.
Whereas OMB has imposed requirements on agencies regarding, for example, the inclusion of
inherently governmental activities in their inventories, it remains to be seen whether OMB issues
any directives or requirements regarding training.
A shorter timeframe was incorporated into the 2003 circular in an effort to alleviate problems
caused, or aggravated, by time-consuming studies. Studies that take a long time to complete,
some argue, create problems for federal agencies, government employees, and businesses.
Michael Wynne, Deputy Undersecretary of Defense for Acquisition, Technology, and Logistics,
summarized this perspective:
^T^h^{e en}^{tire proces}^s^is^f^r^u^s^tratiⁿ^g^f^o^{r all con}^cern^e^d:^g^o^v^e^rⁿ^m^eⁿ^t^e^m^p^l^o^y^ees^w^h^{o are i}ⁿ^li^m^bo
^a^b^o^u^t^t^h^eⁱ^r^j^o^b^s^,^co^nt^r^a^c^t^o^r^s^w^h^o^ha^ve^tⁱ^e^d^up^c^o^nsi^d^e^r^a^b^l^e^bi^d^an^d^pr^opos^alⁱⁿ^v^e^s^t^m^e^nt^s^and
^th^{e g}^o^v^e^rⁿ^m^eⁿ^t^activ^it^y^t^h^{at is}^m^aⁿ^a^gⁱⁿ^g^th^{e p}^r^o^cess^w^h^ile^si^m^u^ltan^e^o^u^sl^y^p^e^r^f^o^r^mⁱⁿ^g^th^eir⁶³
^d^a^y^-^to^-^d^a^y^mⁱ^s^s^ioⁿ^.
Additionally, it is possible that the emphasis on rigorous planning prior to the public
announcement will decrease the likelihood that an agency announces, then cancels, a competition.
Implementation of the new deadline might not alter the amount of time agencies take to plan and
conduct competitions, however. A-76 studies for which figures are available have taken
considerably longer than 12 or 18 months. Information from, for example, the Department of
Defense (DOD), shows that the average time for completing studies has varied. For the period
October 1, 1978, through December 31, 1986, the average time was 24 months. Between 1987 ⁶⁴
and 1990, the average was 51 months. In FY1990, the average was 56 months for 53 studies. In

⁶²^Ex^e^c^u^tiv^e^O^f^fⁱ^c^e^of^the^P^r^e^s^ideⁿ^t^,^{U.S. Of}^fⁱ^c^e^of^Ma^na^ge^m^e^{nt a}^{nd Budg}^e^t^{, “}^C^om^pe^titiv^e^Sourcⁱ^ng^:^Re^port^on
^Com^p^e^titiv^e^Sourcⁱ^ng^Re^s^u^lts^,^Fi^s^c^a^l^Y^e^a^r^2003,”^Ma^y^2004,^a^v^a^ila^ble^a^t^htt^p^://w^w^w^.^w^hite^hous^e^.^gov/^o^m^b^/^p^u^b^p^r^ess/
^f^y^2004/^c^s^_om^b_647^_r^e^p^or^t.p^d^f^,^pp.¹⁸^-¹^9.
⁶³^Ri^ch^ard^W^.^W^a^l^k^er,^“Reb^uⁱ^l^dⁱⁿ^g^,^”^Go^vern^m^en^t^Co^m^p^u^t^{er News}^{, J}^u^ly^{22, 2}⁰⁰²^a^v^a^ila^ble^a^t^ht^tp:/^/www^.^g^cⁿ^.c^om^/
^21_²⁰^/^m^gm^t_e^d^ition/¹⁹³^25-^1.^ht^m^l^.
⁶⁴^U^.^{S. G}^e^ne^r^a^{l A}^c^c^ountiⁿ^g^O^f^fⁱ^c^e^,^OM^{B Circ}^{ular A-}^76:^Le^gisla^tioⁿ^{Has Curbe}^d^M^any^C^o^{st St}^ud^ie^{s in}^the^M^ilit^ary
⁽^c^onti^nue^d.^..)

correspondence dated January 16, 2003, the Comptroller General reported that, over the past five ⁶⁵
years, the average time to complete cost studies in DOD was 25 months. Presumably, these
figures include the time necessary for planning the studies. If so, and if OMB does not impose a
deadline for the planning phase, then it is unclear how the 12-month deadline will result in shorter
studies.
Furthermore, the requirement to establish a workload data collection system (which an agency ⁶⁶
apparently must do during the planning phase if a system is not already in place) might impede
an agency’s efforts to complete a study quickly. The circular does not address the issue of the
amount of time for data collection. Apparently, agencies will determine how many weeks or
months of data they will need to collect prior to starting a competition.
Documentation that shows why studies take as long as they do, or that indicates what amount of ⁶⁷
time is reasonable for producing quality competitions, is lacking. In the Federal Register notice
for the 2002 proposed revision to the circular, OMB suggested that agencies have a great deal of
control over the duration of competitions and that “managers often ... unnecessarily draw out ⁶⁸
competitions without consequence.” If reluctance on the part of agencies is a primary reason
why A-76 studies take as long to complete as they do, then the tightened deadlines may be
realistic. However, other factors might play a role, too. GAO has found that, in addition to the
failure of agencies to place “a sufficiently high priority” on cost studies, “the absence of ... skills
needed to prepare the statement of work, and ... work load data needed to define work ⁶⁹
requirements in the function being studied” contributed to delays in completing cost studies.
In its initial report on competitive sourcing results, dated May 2004, OMB stated:
^T^h^{e ti}^m^e^f^r^a^m^esⁱⁿ^t^h^{e n}^e^w^Cⁱ^r^c^u^l^{ar are}^m^o^tiv^a^ting^a^g^en^cie^s^t^o^carry^ou^{t t}^h^{eir co}^m^mⁱ^t^m^ents
ⁱⁿ^{a ti}^m^e^l^y^m^aⁿⁿ^{er. For ex}^a^m^{ple, th}^{e Depart}^m^eⁿ^t^{of Healt}^h^an^{d Hum}^aⁿ^Ser^v^ices^(HH^S⁾
^r^e^p^o^r^{ts th}^{at it co}^m^p^leted^str^e^a^m^liⁿ^e^d^co^m^p^etitioⁿ^s^wⁱ^thⁱⁿ^th^r^ee-^m^oⁿ^t^h^ti^m^e^f^r^a^m^{es a}ⁿ^d
^stan^{dard co}^m^p^etitions^wⁱ^t^hⁱⁿ^a^y^{ear.... Equ}^a^ll^yⁱ^m^portan^t^{, t}^h^e^s^{e ti}^m^e^f^r^a^m^{es are}ⁿ^o^{t cau}^sⁱ^ng
^ag^en^cie^s^{to s}^{acrifice qu}^alit^y^decisⁱ^on^m^a^king^{. C}^o^m^p^et^iti^v^e^s^o^u^r^cing^eff^o^rts^b^y^HH^{S h}^a^v^e⁷⁰
^ge^ne^r^a^t^e^d^sa^vi^ng^{s o}^r^c^o^st^a^v^oⁱ^d^a^nc^e^s^.

^(...c^on^tin^ue^d)
^S^e^rvi^ces^,^G^A^O^/^G^G^D^-^91-^{10 (}^W^a^s^hing^to^{n: G}^A^O^{, 1991)}^,^p.^3.
⁶⁵^L^e^tte^r^f^r^om^D^a^vⁱ^{d M. W}^a^lk^e^r^{, C}^o^m^p^trolle^{r G}^e^ne^ra^{l, to Mitc}^he^{ll E}^.^Da^nie^l^{s, Jr., Dire}^c^t^{or, U.S}^.^Of^fⁱ^c^e^of^Ma^na^g^e^m^e^nt
^a^{nd B}^u^dg^e^t^{, G}^A^O^-^03-³⁹^1R^{, J}^aⁿ^.^16,²⁰⁰³^{, p}^.³^.
⁶⁶^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. B}^-^1.
⁶⁷^A^pr^ov^is^{ion i}ⁿ^t^h^e¹⁹⁹⁹^cⁱ^r^c^ula^r^r^e^quir^e^{d a}^g^eⁿ^cⁱ^e^s^“^t^o^pr^ov^ide^aⁿ^a^nnua^l^r^e^por^{t to}^O^M^B^{on a}^l^l^c^o^s^t^c^o^m^p^a^r^is^ons^tha^t
^e^x^c^e^e^d^[^t^he¹⁸^-m^{onth t}ⁱ^m^e^f^r^a^m^e^f^o^{r sing}^le^f^unc^{tion st}^udie^s^aⁿ^{d t}^h^e^36-m^ont^{h tim}^e^f^r^a^m^e^f^o^r^m^u^ltif^unc^{tion st}^udie^s^]^,
^inc^l^u^d^ing^a^de^s^c^rⁱ^pt^io^{n of}^the^pr^o^b^le^m^s^eⁿ^c^ounte^r^e^d^{, r}^e^m^e^dia^l^a^c^tions^{, s}^t^a^t^us^aⁿ^d^e^x^pe^c^t^e^d^c^o^m^p^le^tion^da^te^.”⁽^U^.S.
^O^f^fⁱ^ce^of^Ma^na^g^e^m^e^{nt a}^{nd B}^udg^e^t^,^Cⁱ^r^c^ular^N^o^{. A-}⁷⁶^Re^vⁱ^s^e^{d S}^u^p^p^le^m^e^{ntal H}^aⁿ^d^b^ook^,^Pe^r^f^or^m^anc^e^{of C}^o^m^m^e^r^c^ial
^Ac^tiv^itie^s^{, p.}¹⁰^{.) It}^{is n}^o^{t k}^nowⁿ^w^h^e^t^he^r^a^g^eⁿ^cⁱ^e^s^subm^itte^{d re}^por^{ts to OMB.}
⁶⁸^{U.S. Of}^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^Budg^e^t^{, “}^P^e^r^f^o^rm^aⁿ^c^e^of^Com^m^e^rc^ia^{l A}^c^ti^v^itie^s,”^Nov^.^19,²⁰⁰²^{, p}^.⁶⁹⁷⁷^1.
⁶⁹^U^.^{S. G}^e^ne^r^a^{l A}^c^c^ountiⁿ^g^O^f^fⁱ^c^e^,^OM^{B Circ}^{ular A-}^76:^Le^gisla^tioⁿ^{Has Curbe}^d^M^any^C^o^{st St}^ud^ie^{s in}^the^M^ilit^ary
^S^e^rvi^ces^{, p. 4.}
⁷⁰^Ex^e^c^u^tiv^e^O^f^fⁱ^c^e^of^the^P^r^e^s^ideⁿ^t^,^{U.S. Of}^fⁱ^c^e^of^Ma^na^ge^m^e^{nt a}^{nd Budg}^e^t^{, “}^C^om^pe^titiv^e^Sourcⁱ^ng^:^Re^port^on
^Com^p^e^titiv^e^Sourcⁱ^ng^Re^s^u^lts^,^Fi^s^c^a^l^Y^e^a^r^2003,”^pp^{. 8-}^9.

HHS completed 44 streamlined and 8 standard competitions in FY2003.⁷¹ The duration of
competitions in other departments, such as Agriculture (398 streamlined and 2 standard
completed in FY2003) and Defense (7 streamlined and 71 standard), is not known. Turning
briefly to OMB’s comment that HHS decision making was not impaired by meeting the
respective deadlines, only one criterion—cost—is presented as evidence of the quality of decision
making. Focusing on a single factor excludes other dimensions or criteria that also might
contribute to a quality decision making process. For example, the accuracy and thoroughness of a
performance work statement, or the performance of the organization that won the competition,
might be viewed by some as an indicator of a quality competition.
The 2003 circular levies a series of new requirements on agencies and expands or alters some
existing competitive sourcing requirements. These requirements include the following:
• Complete standard competitions within 12 months (18 months, if a time limit ⁷²
waiver has been issued).
• Complete streamlined competitions within 90 calendar days (135 days, if a time ⁷³
limit waiver has been issued).
• Using the circular, subject all work that is being performed by the agency as a
result of a performance decision to follow-on competition at the end of the last
performance period. For a performance decision that resulted in contractor
performance, apply the Federal Acquisition Regulation for any follow-on ⁷⁴
competition.
• Prepare written justifications for activities designated as inherently ⁷⁵
governmental.
• Prepare written justifications for commercial activities that have been assigned ⁷⁶
reason code A.
• Respond to challenges and appeals on the classification of activities as inherently ⁷⁷
governmental.
• Respond to challenges and appeals on the application of reason codes to ⁷⁸
commercial activities.
• Post best practices and lessons learned to the DOD website SHARE A-76.⁷⁹

⁷¹^Ibid^.,^{p. A}^-^1.
⁷²^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. B}^-^6.
⁷³^Ibid^.,^{p. B-}^5.
⁷⁴^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. B}^-^19-^B^-²⁰^.
⁷⁵^Ibid^.,^{p. A}^-^2.
⁷⁶^Ibid^.,^{p. A}^-^3.
⁷⁷^Ibid^.,^{p. A}^-^4.
⁷⁸^Ibid^.

• Maintain a database for tracking streamlined and standard competitions.⁸⁰
• Prepare and submit a competitive sourcing quarterly report to OMB.⁸¹
• Monitor the performance of all service providers (MEOs and contractors).⁸²
The resulting increase in the number of competitions and the pace at which they are to be
completed presumably will increase the number of contracts agencies must monitor. The issuance
of letters of obligation where the government wins the competition will likely add to an agency’s ⁸³
contract monitoring workload.
Whether agencies have sufficient resources to fulfill competitive sourcing and Circular A-76
requirements in a timely manner is unknown. Two senior government officials have expressed
their concerns on this issue. At the Department of Justice, Paul Corts, Assistant Attorney General
for Administration, reportedly said: “We do not have the resources to prepare the justifications ⁸⁴
and particularly for the number of criticisms this process would invite from contractors.”
According to the Washington Post, the Director of the National Park Service (NPS) stated, in a
memorandum dated April 4, 2003: “‘[W]e do not have a fund source to cover the cost of
completing these [A-76] studies .... The costs are too significant to be covered by the affected
parts, as some in the [Interior] Department have suggested.’” NPS anticipated that the cost of
consultants needed to conduct studies would reach $2.5 to $3 million, and that, as a result, there ⁸⁵
would be “serious consequences for visitor services and seasonal operations.”
The list of needed resources could include agency employees who have Circular A-76 experience
or experience preparing bids and proposals, funding to hire contractors to conduct A-76 studies,
and sufficient numbers of agency personnel qualified to monitor contracts. Also unknown is
whether additional resources will be provided to agencies to help them meet these requirements.
A lack of sufficient resources could affect the quality of A-76 studies and the effectiveness of
contract monitoring efforts. A possible implication of insufficient resources could be a preference
on the part of agencies for streamlined competitions, under which MEOs are not required, over
standard competitions. If an agency elected to handle the increased competitive sourcing
workload by diverting greater numbers of employees to A-76 studies, the normal work these
employees perform might have to be deferred. Robert Kugelman, head of the Commerce
Department’s Office of Executive Budgeting and Management, in a comment in Federal Times,
acknowledged this problem: “The bottom line is really about finding ways to do things more ⁸⁶
effectively, but doing that while still performing your job can be daunting.” Finally, there is no
indication of how OMB might respond to agencies that are unable, because of inadequate
resources, to meet all of the competitive sourcing requirements.

^(...c^on^tin^ue^d)
⁷⁹^Ibid^{, p}^.^B-1⁹^.
⁸⁰^Ibid^.
⁸¹^Ibid^.
⁸²^Ibid^.
⁸³^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. B-}¹⁸^.
⁸⁴^Ch^et^Dem^b^ec^k,^“M^an^{agers P}^aⁿ^A^d^mⁱⁿⁱ^st^ratⁱ^oⁿ^’^{s Ou}^t^s^o^u^r^ciⁿ^g^P^u^sh^,^”^Fe^de^{ral Time}^s^{, J}^a^n.^13,²⁰⁰³^,^p.^4.
⁸⁵^Ch^ri^st^op^h^e^{r L}^ee,^“P^{ark S}^e^rvi^ce^P^l^an^{s Ou}^t^s^ou^rciⁿ^g,^”^W^a^s^hⁱ^ngt^on^P^o^s^t^{, A}^p^{ril 1}⁹^,²⁰⁰³^{, p}^.^A⁴^.
⁸⁶^Da^vⁱ^{d Phi}^nne^y^,^“^O^ff^ic^ia^{ls Strug}^g^le^a^t^the^Sta^r^ti^ng^Lⁱ^ne^{in O}^u^tso^u^rc^ing^Ef^f^o^rts,”^Fe^de^{ral Time}^s^{, Fe}^b.^10,²⁰⁰³^{, p}^.⁴^.

Designing an MEO is one of the steps in the public-private competition process.⁸⁷ Designing an ⁸⁸
MEO that is competitive might help to ensure that competition between a government agency
and private sector sources is carried out on a level playing field. In its recommendation for
developing an integrated competition process, a process that would combine elements of Circular
A-76 and the Federal Acquisition Regulation, the Commercial Activities Panel noted:
^As^wⁱ^t^h^“m^os^{t eff}ⁱ^cieⁿ^{t org}^a^nization^s^”^uⁿ^d^er^A-^{76, f}^e^{deral e}^m^plo^y^ees^s^h^o^u^{ld be able to}
^prop^os^{e proces}^sⁱ^m^prov^e^m^ent^s^an^{d e}^f^fⁱ^ci^eⁿ^ci^es^aⁿ^{d be su}^pport^e^{d i}ⁿ^t^h^at^e^f^f^o^rt^{. F}^e^deral
^e^m^plo^y^eesⁱⁿ^v^o^lv^{ed in}^s^u^b^mⁱ^s^sⁱ^on^of^aⁿ^in-h^ou^s^e^o^f^f^e^{r als}^o^s^h^ou^{ld receiv}^e^as^sⁱ^s^t^aⁿ^{ce in}
^pl^anⁿⁱ^ng^f^o^{r a co}^m^p^etⁱ^tⁱ^oⁿ^,^prepariⁿ^g^{a propos}^al^{, con}^d^u^c^tⁱⁿ^g^di^s^c^u^s^sⁱ^ons^{, at}^t^eⁿ^dⁱⁿ^g^a
^debri^e^fⁱⁿ^g^,^aⁿ^{d f}ⁱ^lⁱ^ng^{a prot}^es^t^.
^In^-h^ous^{e tea}^m^s^[s^h^o^u^l^{d] receive reas}^on^{able con}^s^ideration^an^d^s^u^{pport f}^r^o^m^m^aⁿ^a^g^e^m^eⁿ^tⁱⁿ
^th^eir^e^f^f^o^r^t^s^to^p^a^r^ticip^{ate in}^c^o^m^p^eti^tioⁿ^s^{: W}^h^{ere t}^h^{ere is}^{an in-}^h^o^u^s^e^w^o^r^k^f^o^{rce c}^u^rren^t^l^y
^p^e^r^f^o^r^mⁱⁿ^g^{, it}^w^o^u^l^d^b^e^ex^p^ected^th^at^m^aⁿ^a^g^e^m^eⁿ^t^g^eⁿ^e^r^a^ll^y^w^{ill a}^u^th^o^r^{ize i}ⁿ^-^h^o^u^s^e
^s^u^b^mⁱ^s^sⁱ^{on of}^a^propos^al^,^w^hⁱ^c^hⁱⁿ^cl^u^d^es^co^mmⁱ^t^m^e^nt^{of re}^s^o^u^r^ces^f^o^{r a propos}^al^wⁱ^t^h^a
^reas^on^{able pros}^{pect of}^aw^ar^{d (w}^hⁱ^c^h^m^a^yⁱⁿ^c^l^u^d^{e in}^cre^a^sⁱ^ng^s^t^a^f^f^{or m}^a^kⁱⁿ^g^capita^l⁸⁹
ⁱ^nve^st^me^nt^s)^.
In addition to the knowledge necessary to perform their jobs, employees may need the assistance
of management experts to redesign the workspace, reengineer processes, and identify capital
improvements. The 2003 circular acknowledges the types of studies and analyses which can be
used to develop an MEO:
^T^h^{e MEO is}^{an a}^g^en^c^y^’s^s^t^a^f^fin^g^{plan as}^iden^tⁱ^{fied i}ⁿ^t^h^{e a}^g^en^c^y^teⁿ^d^{er. T}^h^{e MEO i}^sⁿ^o^t
^us^ua^l^l^{y a}^r^e^p^r^e^s^eⁿ^t^a^tⁱ^o^{n o}^f^t^h^eⁱⁿ^c^u^m^b^eⁿ^t^o^r^gaⁿⁱ^z^a^tⁱ^o^n,^b^u^tⁱ^s^t^h^e^p^r^o^d^u^c^t^o^f^ma^na^ge^m^e^nt
^an^al^y^s^es^th^atⁱⁿ^cl^u^d^{e, bu}^{t are}ⁿ^o^{t li}^m^{ited to, activit}^y^ba^s^e^{d cos}^ting^,^bu^sⁱⁿ^e^s^s^ca^s^e^an^al^y^s^is^,
^c^o^nso^lⁱ^d^a^tⁱ^o^n,^f^u^nc^tⁱ^o^na^lⁱ^t^y^a^s^ses^s^m^eⁿ^t^{, i}ⁿ^d^u^s^t^ri^al^engⁱⁿ^eeriⁿ^g^,^m^a^rk^e^t^res^earch^{, produ}^ctⁱ^vⁱ^t^y⁹⁰
^a^sse^s^s^m^eⁿ^t^,^r^e^eⁿ^gi^ne^e^rⁱⁿ^g,^r^eⁱ^nve^ntⁱ^o^n,^utⁱ^lⁱ^z^a^tⁱ^oⁿ^st^udⁱ^e^s,^aⁿ^d^va^l^u^e^eⁿ^gi^ne^e^rⁱⁿ^g.
The Federal Register notice acknowledged the need for technical assistance to be provided to the
agency tender official, but it does not require the agency to provide the necessary support,
through either agency personnel or outside sources.
^T^h^{e rev}ⁱ^s^e^{d C}ⁱ^rcu^l^{ar, li}^k^e^t^h^{e prop}^os^{ed C}ⁱ^rcu^l^{ar, recog}ⁿⁱ^zes^th^{e tale}ⁿ^t^s^of^t^h^e^f^e^deral
^w^o^rkf^o^{rce, t}^h^{e con}^dⁱ^tⁱ^ons^{under w}^hⁱ^c^hⁱ^t^operat^e^s^,^an^{d t}^h^{e i}^m^port^aⁿ^{ce of}^provⁱ^dⁱⁿ^g^t^h^e
^w^o^rkf^o^rce^wⁱ^t^h^adequ^a^t^e^t^r^aiⁿⁱⁿ^g^aⁿ^{d t}^echnⁱ^cal^su^pport^du^riⁿ^g^t^h^{e co}^m^p^etⁱ^tⁱ^oⁿ^proces^s^t^o
^en^s^u^{re it is}^{able to co}^m^p^{ete effectiv}^el^y^.^In^t^h^is^re^g^a^{rd, t}^h^{e revi}^s^e^{d C}ⁱ^rcu^l^{ar requ}ⁱ^r^e^s^t^h^at^t^h^e
^A^T^{O [ag}^eⁿ^c^y^teⁿ^d^{er of}^fⁱ^cⁱ^{al] h}^a^v^e^acce^s^s^{to av}^a^{ilable res}^ources^(e.g^{., s}^k^il^led^m^aⁿ^p^o^w^er,⁹¹
^f^uⁿ^dⁱⁿ^g⁾ⁿ^eces^s^a^r^y^{to dev}^e^{lop a com}^p^etit^iv^{e a}^g^en^c^y^teⁿ^d^er.

⁸⁷^Unde^{r a}^staⁿ^da^{rd c}^o^m^p^e^titio^{n, a}ⁿ^{MEO is re}^q^u^ire^d^.^{It is}^opt^io^na^{l in}^a^stre^a^m^line^d^c^o^m^p^e^tition^.^(U.S.^Offⁱ^c^e^of
^Ma^na^g^e^m^e^{nt a}^{nd B}^u^dg^e^t^,^Cⁱ^r^c^ula^r^N^o^{. A-}^{76 (}^R^e^vⁱ^s^e^d)^{, Ma}^y^29,²⁰^03,^pp^{. B}^-⁴^,^B^-⁷^.⁾
⁸⁸^A^c^o^m^p^e^titiv^e^{MEO (or a}^g^eⁿ^c^y^te^nde^{r) is o}ⁿ^e^t^h^a^t^ha^{s a}^re^a^s^ona^bl^e^c^h^aⁿ^c^e^of^be^ing^se^le^c^t^e^d^to^pe^rform^the^w^o^rk^.
⁸⁹^Com^m^e^r^cⁱ^a^l^Ac^tiv^itie^{s P}^a^ne^l,^I^m^pr^ovⁱⁿ^{g t}^h^e^S^our^cⁱⁿ^g^D^e^cⁱ^sⁱ^ons^o^f^the^G^o^v^e^r^nm^eⁿ^t^{, p}^.⁵¹^.
⁹⁰^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. B-}¹⁰^.
⁹¹^{U.S. Of}^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^Budg^e^t^{, “}^P^e^r^f^o^rm^aⁿ^c^e^of^Com^m^e^rc^ia^{l A}^c^ti^v^itie^s,”^Ma^y^{29, 2}⁰⁰³^,^p^.³²¹³^9.

In his or her role as the agency tender official (ATO), this individual shall, among other things, ⁹²
“provide the necessary resources and training to prepare a competitive agency tender.” Most
likely, resources and training are necessary to prepare, and aid, agency personnel responsible for
developing an agency tender (including an MEO). Immediately following the list of ATO
responsibilities, the circular states: “An agency shall ensure that the ATO has access to available ⁹³
resources (e.g., skilled manpower, funding) necessary to develop a competitive agency tender.”
The circular does not identify who within the agency, whether a particular office or official,
should be responsible for ensuring that the ATO receives needed resources. In Appendix B of the
revision, under the heading “Competition Officials,” no one is identified as having this ⁹⁴
responsibility. What kind of, or how much, authority an ATO might have in order to obtain the
resources necessary to develop a competitive agency tender is unknown. The lack of specificity
and the absence of a requirement for agencies to provide sufficient resources as determined by the
ATO could affect implementation. Some questions that might arise include:
• Given that an agency’s competitive sourcing official is responsible for
implementing the circular, why was this official not identified as the responsible
party for providing resources to the ATO?
• What might happen if an ATO believes the agency is not providing sufficient
resources? What recourse, if any, might the ATO have? Who in the agency would
be held responsible?
• Could a claim that the circular levels the playing field be sustained if preparation
for, and development of, agency tenders were underfunded?
• How might a dispute over the type, quality, or quantity of agency resources
provided to the agency tender effort affect the legitimacy of a competition?
• What costs might an agency incur for preparing inventories, conducting
competitions, and establishing MEOs (where the government has won the
competition)?
In its May 2004 report on competitive sourcing results, OMB stated that the success of most
efficient organizations in winning public-private competitions in FY2003 suggests that “agencies
are taking steps envisioned by the revised Circular to ensure government providers have a fair ⁹⁵
opportunity to demonstrate their capability to serve the taxpayer.” “Requir[ing] agencies to
ensure that their in-house providers have access to available resources (e.g., skilled, manpower,
funding) necessary to develop competitive agency tenders” is one of the steps credited to the
2003 circular. Other steps, or factors, cited by OMB, and included in the 2003 circular, were
eliminating direct conversions, encouraging federal agencies to develop MEOs for streamlined
competitions, and allowing agencies to use a source selection method that involves a trade-off

⁹²^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. B}^-^2.
⁹³^Ibid^.
⁹⁴^I^b^id^.,^pp.^B^-^1-^B^-^3.
⁹⁵^Ex^e^c^u^tiv^e^O^f^fⁱ^c^e^of^the^P^r^e^s^ideⁿ^t^,^{U.S. Of}^fⁱ^c^e^of^Ma^na^ge^m^e^{nt a}^{nd Budg}^e^t^{, “}^C^om^pe^titiv^e^Sourcⁱ^ng^:^Re^port^on
^Com^p^e^titiv^e^Sourcⁱ^ng^Re^s^u^lts^,^Fi^s^c^a^l^Y^e^a^r^2003,”^p.^{9. T}^h^e^pe^rc^eⁿ^ta^g^e^of^c^o^m^p^e^titions^w^{on by}^in-h^ous^e^pr^ov^ide^r^sⁱⁿ
^FY20^{03 f}^o^{r a}^g^eⁿ^cⁱ^e^s^tha^t^c^o^nd^uc^t^e^{d a}^t^le^a^s^{t f}ⁱ^v^e^c^o^m^p^e^titi^{ons or}^c^o^m^p^e^{titions tha}^t^c^u^m^u^la^tiv^e^l^y^inv^o^lv^e^d⁵⁰^{or m}^o^re
^FT^Es^w^a^s^:^D^e^{pt. of}^A^g^rⁱ^c^u^ltur^e^{, 1}^00%^{; D}^e^pt.^of^D^e^f^e^ns^e^,^81%^{; D}^e^pt.^of^Ene^r^gy^{, 96%}^{; D}^e^pt.^of^H^e^a^{lth a}ⁿ^{d H}^u^m^aⁿ
^Se^r^v^ic^e^s^{, 99%}^{; D}^e^pt.^of^the^Iⁿ^te^rⁱ^or^,^99%^{; D}^e^pt.^of^J^u^s^tic^e^,¹^00%^;^D^e^{pt. of}^T^r^aⁿ^s^por^ta^tio^n,¹⁰^0%^{; D}^e^{pt. of}^the
^T^r^e^a^s^u^r^y^{, 91%}^{; D}^e^pt.^of^Ve^te^r^a^ns^A^f^f^a^ir^s^,^0%^{; G}^e^ne^r^a^{l Se}^r^v^ic^e^s^A^d^mⁱ^nis^t^r^a^tion,¹⁰^0%^{; O}^f^fⁱ^ce^of^P^e^r^s^onne^l
^Ma^na^g^e^m^e^{nt, 100%}^{; a}^nd^Sm^a^{ll B}^u^sⁱ^ne^s^s^A^d^mⁱ^nis^t^r^a^{tion, 5}⁸^%⁽ⁱ^bi^d.,^p.¹⁰⁾^.

between cost and other, non-cost factors.⁹⁶ Attributing the success of in-house efforts to, in part,
the provision of resources by agencies might not accurately reflect the extent of in-house support
for MEOs. Other, possibly more accurate measures of agency support might include the amount
of funds expended on training, the number of agency personnel who have been trained,
documentation of services (for example, reorganization, workload analysis, or reengineering)
provided to the MEO, or the type and extent of support requested by the ATO compared to what
was provided by the agency. Generally, unless a cost-technical tradeoff (a tradeoff between cost
and non-cost factors) source selection method has been used, the prospective provider (that is, a
government agency or a contractor) whose offer promises to yield greater savings will be
awarded a contract (private business) or a letter of obligation (MEO). OMB has noted “that
savings were largely attributable to reductions in federal labor costs,” but they also “may be
derived in other ways.” One interpretation of this statement is that savings resulted mostly from a ⁹⁷
reduction in the number of an agency’s FTEs as a result of an A-76 competition. If this is an
accurate statement, then it might be helpful to ask how an agency determined that a smaller
number of FTEs could perform the work. A related issue is the question of whether fewer FTEs
are required by the MEO because the scope of work, as documented in the performance work
statement (PWS), has been decreased. In short, it is not clear that OMB’s suggestion that agency-
provided resources are a factor in successful competitions accurately portrays what has occurred,
or is occurring. Other factors may need to be taken into account, and it appears there are other,
possibly more accurate ways, to measure the amount of agency support provided to MEOs.
A “lessons learned” document prepared by two employees of the Justice Department who
participated in an A-76 competition addressed, among other things, an MEO’s need for resources.
They wrote:
^Estab^lis^h^{a b}^u^d^g^{et th}^{at co}^v^e^r^s^{MEO ex}^p^eⁿ^s^{es t}^h^r^o^u^g^h^o^u^t^th^{e co}^m^p^etitioⁿ^an^d^see^k
ⁱⁿ^depen^d^en^{t a}^u^t^h^orit^y^f^o^{r th}^e^A^T^{O to ex}^pen^d^th^os^{e fun}^d^s^.^In^th^{e earl}^y^plannⁱⁿ^g^s^t^ag^e^,
^es^tablis^hⁱ^ng^an^accu^{rate bu}^d^g^{et m}^a^y^{be dif}^fⁱ^c^u^lt^f^o^{r an}^{MEO T}^eam^becau^s^e^of^s^o^m^a^ny
^uⁿ^kⁿ^o^wⁿ^f^acto^r^{s. W}^ith^thⁱ^sⁱⁿ^mⁱⁿ^d^{, cr}^{eate a b}^u^d^g^{et th}^{at p}^r^o^v^id^{es f}^l^ex^ib^ilit^y^aⁿ^d^a^l^l^o^w^s^f^o^r^a
^m^a^xi^m^u^m^a^m^o^u^nt^of^ou^t^sⁱ^d^{e su}^pport^,ⁱⁿ^t^h^{e ev}^en^tⁱ^tⁱ^sⁿ^{eeded. In}^cl^u^d^{e f}^uⁿ^dⁱⁿ^g^f^o^{r s}^e^parat^e
^s^p^{ace to h}^ous^{e t}^h^{e MEO}^T^eam^.^Als^oⁱⁿ^cl^u^d^{e fun}^d^s^f^o^{r g}^eⁿ^e^ral^of^{fice a}ⁿ^{d oth}^e^{r s}^u^pplies^th^at⁹⁸
^mⁱ^g^h^t^{be part}ⁱ^c^u^l^arl^y^u^s^e^f^u^lⁱⁿ^dev^e^l^opiⁿ^g^propos^al^s^(e.g^{., f}^lⁱ^p^ch^art^s^{, ov}^erh^e^a^d^p^r^o^j^e^c^t^o^r^s⁾^.
The co-authors also advise that the MEO team may face challenges in obtaining needed
resources:
^Keep^th^e^lin^es^of^co^m^m^unicati^oⁿ^wⁱ^t^h^m^aⁿ^a^g^e^m^e^nt^open^aⁿ^d^r^e^mⁱⁿ^d^th^em^th^e^M^E^O^Te^a^mⁱ^s
ⁿ^o^{t th}^{eir oppon}^en^{t. T}^h^{e co}^m^p^e^tition^m^a^y^{create a t}^u^g^of^w^a^r^{for res}^o^u^r^cesⁿ^{eeded to s}^u^pport
^b^o^t^h^MEO^T^eam^acti^v^itie^{s an}^d^oⁿ^g^oⁱⁿ^g^o^p^e^r^a^tioⁿ^s^{. T}^h^{is str}^u^g^g^{le f}^o^r^r^e^so^u^r^{ces, co}^m^bⁱⁿ^ed
^wⁱ^t^h^t^h^{e p}^h^y^sⁱ^cal^s^e^paratⁱ^{on of}^t^h^{e MEO}^T^e^a^m^,^m^a^yⁱ^m^{pede co}^mm^unⁱ^catⁱ^oⁿ^s^wⁱ^t^h
^ma^na^ge^me^nt^aⁿ^d^r^e^sul^tⁱⁿ^aⁿ^“^u^{s ve}^r^s^u^s^t^h^e^m^”^m^e^nt^a^lⁱ^t^y^.^St^aⁿ^dⁱⁿ^g^up^for^MEO^T^eam^ri^gh^t^s^,

⁹⁶^I^b^id^.,^pp.^9-^10.
⁹⁷^W^h^eⁿ^a^c^ontra^c^t^or^wⁱ^{ns a}^c^o^m^p^e^titio^{n, t}^h^e^FT^{Es a}^ssocⁱ^a^t^e^d^w^{ith a}^g^o^v^e^rn^m^e^{nt f}^unc^tion^{or a}^c^tiv^ity^a^r^e^e^lim^ina^t^e^d^.
^W^h^eⁿ^a^g^o^v^e^rn^m^e^{nt a}^g^eⁿ^c^y^wⁱ^{ns a}^c^o^m^p^e^{tition, t}^h^eⁿ^u^m^b^e^r^of^FT^E^s^a^ssocⁱ^a^t^e^d^w^{ith a}^pa^rtic^ula^r^f^unc^tion^{or a}^c^tiv^ity
^mⁱ^gh^t^b^e^d^ecreased^.^A^d^ecrease^wo^u^l^d^o^ccu^rⁱ^f^t^h^{e M}^E^{O’s st}^af^fⁱⁿ^g^p^l^anⁱⁿ^cl^ud^{es f}^e^w^e^{r F}^T^E^s^t^h^an^t^h^{e n}^u^m^b^e^r
^e^m^ploy^e^d^{prior t}^o^the^im^ple^m^eⁿ^ta^tion^of^the^MEO^.
⁹⁸^Bob^Mille^{r a}ⁿ^{d Na}^nc^y^Cha^m^be^rl^{in, “}^M^{ost Ef}^fⁱ^cⁱ^eⁿ^{t Org}^a^niz^a^{tion T}^e^a^m^{’s Le}^{ssons L}^e^a^r^ne^d^a^{nd Be}^st^P^r^a^c^tic^e^s^,”^n.d.^,
^a^v^a^ila^ble^a^t^http://w^ww^.g^ove^x^e^c^.^c^o^m^/^pdf^{s/DOJ_ L}^e^ssons_L^e^a^r^ne^d^.^doc^{, p. 2.}

^esp^eciall^y^w^h^er^e^little^g^u^id^an^{ce to}^clar^if^y^t^h^ese^rⁱ^g^h^t^s^e^x^ist^s^,^m^a^y^b^e^p^e^r^cei^v^e^d^{as b}^eⁱⁿ^g⁹⁹
^uⁿ^c^ooperatⁱ^v^e.
Throughout the competition process, and even after a performance decision has been made, there
are various milestones where circumstances or decisions could affect federal employees and/or
their positions.
For instance, when an agency cannot complete a streamlined or a standard competition within the
allotted time (a maximum of 135 days and 18 months, respectively, if the CSO has granted a time
limit waiver), the circular provides guidance on what the agency should do. In the former case,
the agency has the option of converting the streamlined competition to a standard competition or ¹⁰⁰
requesting an additional extension from OMB using the circular’s deviation procedure. If an
agency exceeds the time limit for a standard competition, the CSO is to notify OMB’s Deputy ¹⁰¹
Director for Management in writing. The circular mentions no possible consequences for the
failure to meet the 12- or 18-month time limit. However, the OFPP Administrator reportedly
suggested that
^Ag^eⁿ^{cies t}^h^{at f}^a^l^l^b^e^hⁱⁿ^dⁱⁿ^th^eir^co^m^p^etitioⁿ^s^wⁱ^l^l^uⁿ^d^e^r^g^o^sh^ar^p^scr^u^tiⁿ^y^b^y^OMB^,^an^d^if
ⁱⁿ^-^h^o^u^s^e^e^m^pl^o^y^ees^f^aⁱ^l^t^o^s^u^b^mⁱ^t^{a propos}^al^on^tⁱ^m^{e, t}^h^eⁱ^{r j}^o^bs^cou^l^{d be}^di^r^e^c^t^l^y^o^u^t^s^o^u^r^c^e^d¹⁰²
^{to th}^{e priv}^{ate s}^{ector ....}
If this sequence of events were to occur, it is unclear what would happen to the employees who
otherwise would have staffed the MEO included in the agency tender.
One of the changes effected by the 2003 revision is the establishment of an evaluation process
that applies the same criteria to contractor offers and agency tenders and generally treats sources
from both sectors the same. Coupled with this change is a move to use, in addition to sealed
bidding, source selection processes that allow offerors, under certain conditions, to correct ¹⁰³
deficiencies in, and resubmit, their offers. Because of this package of changes, an agency
tender could be dropped from further consideration before a performance decision is made.
Previously, under the 1999 circular, an agency’s in-house cost estimate was included in the
performance decision calculation. As for private sector contractors, there has been no change in
how their offers are treated. Their offers have been, and continue to be, susceptible to elimination
for failure to correct deficiencies. The applicable provision of the 2003 circular states:

⁹⁹^Ibid^{., p. 5.}
¹⁰⁰^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. B}^-^5.
¹⁰¹^Ibid^.,^{p. B-}^6.
¹⁰²^J^a^s^on^P^e^c^k^e^npa^ug^{h, “}^O^MB^O^u^tli^ne^s^N^e^w^Fe^de^r^a^{l O}^u^ts^our^cⁱ^ng^R^u^l^e^s^,^”^Go^vern^m^en^t^E^xecu^tⁱ^v^e^,^N^o^v^.^{14, 20}⁰²^,
^a^v^a^ila^ble^a^t^http://w^ww^.g^ove^x^e^c^.^c^o^m^/^da^ily^f^e^d/¹¹⁰²^/¹¹¹⁴⁰^2p^2.htm^.
¹⁰³^T^h^e^s^our^c^e^s^e^le^c^tion^pr^oc^e^s^s^e^sⁱⁿ^c^l^ude^low^e^s^t^pr^ic^e^te^c^hnic^a^lly^a^c^c^e^p^ta^ble^,^tr^a^d^e^o^f^f^,^a^{nd v}^a^rⁱ^a^tions^o^f^the^s^e^m^e^thods
^de^v^e^lope^d^by^{OMB f}^o^{r use}^{in A}^-^{76 c}^o^m^p^e^titio^ns^{. (U.}^S^{. Of}^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^{nd Bu}^dg^e^t^,^Cⁱ^r^c^ula^r^N^o^{. A-}⁷⁶
⁽^R^evi^s^e^d⁾^{, Ma}^y^{29, 2}⁰⁰³^,^pp.^B^-¹³^-^B^-¹^5.)

^If^t^h^e^C^O^[coⁿ^{tracting off}ⁱ^cer^{] perceiv}^e^s^t^h^at^{a priv}^a^t^e^s^ect^{or of}^f^e^{r, pu}^blic^rei^m^b^u^rs^able
^ten^d^{er, or ag}^en^c^y^ten^d^{er i}^s^m^a^teriall^y^de^fⁱ^{cient, th}^e^C^O^s^h^al^l^en^s^u^{re th}^a^t^t^h^e^A^T^{O, priv}^ate
^s^{ector of}^f^e^{r, or th}^{e pu}^{blic reim}^bu^rs^{able ten}^d^er^of^fⁱ^{cial receives}^{a def}ⁱ^cien^c^yⁿ^o^{tice. T}^h^{e C}^O
^s^h^{all a}^f^f^o^{rd th}^{e A}^T^{O, th}^{e priv}^{ate s}^{ector of}^f^e^ror,^or^th^{e pu}^{blic rei}^m^bu^rs^{able ten}^d^{er off}ⁱ^{cial a}
^s^p^ecifⁱ^cⁿ^u^m^b^{er of}^da^y^s^{to addres}^s^th^e^m^a^{terial def}ⁱ^cⁱ^en^c^y^aⁿ^{d, if}ⁿ^eces^s^a^r^y^{, to rev}ⁱ^s^e^aⁿ^d
^recertify^t^h^{e ten}^d^{er or of}^f^e^{r. If}^th^{e A}^T^{O is}^un^ab^{le to correct th}^e^m^a^{terial def}ⁱ^cieⁿ^c^y^{, t}^h^{e C}^S^O
^sh^{all d}^e^ter^mⁱⁿ^{e if}^{a co}^m^m^it^m^eⁿ^t^o^f^ad^d^itioⁿ^a^{l r}^e^so^u^r^ces^wⁱ^l^l^en^ab^{le th}^e^A^T^{O to}^co^r^r^{ect th}^e
^m^a^{terial def}ⁱ^cieⁿ^c^y^wⁱ^thin^t^h^{e s}^p^ecifⁱ^{ed num}^{ber of}^da^y^s^.^I^f^th^e^C^S^O^d^e^t^e^rmⁱⁿ^e^s^t^h^at^t^h^e^A^T^O
^c^aⁿⁿ^o^t^c^o^r^r^e^c^t^t^h^e^m^a^t^e^rⁱ^a^l^d^e^fⁱ^cⁱ^eⁿ^c^y^wi^t^h^{a r}^easoⁿ^ab^{le co}^m^mⁱ^t^m^eⁿ^{t o}^f^ad^d^itioⁿ^a^{l r}^e^so^u^r^ce^s,
^th^{e C}^S^O^m^a^y^ad^vⁱ^s^e^t^h^{e SS}^A^t^o^ex^clu^d^{e th}^{e ag}^eⁿ^c^y^teⁿ^d^{er f}^r^om^th^{e s}^t^an^{dard com}^p^eti^tion^.^If
^th^{e C}^O^deter^mⁱⁿ^es^t^h^{at a priv}^at^{e s}^{ector of}^f^e^ror^o^r^p^u^b^{lic r}^e^im^b^u^r^s^ab^{le ten}^d^er^o^f^fⁱ^cⁱ^{al h}^a^sⁿ^o^t
^{corrected a}^m^a^{terial de}^fⁱ^cieⁿ^c^y^{, t}^h^e^SS^A^m^a^y^ex^cl^u^d^{e t}^h^e^priv^{ate s}^{ector o}^f^f^e^{r or pu}^blic¹⁰⁴
^r^eⁱ^m^b^u^r^s^ab^{le te}ⁿ^d^er^f^r^o^m^t^h^{e s}^t^an^d^a^r^d^co^m^p^etitioⁿ^.
In cases where a performance decision results in the awarding of a contract to a private sector
offeror, federal employees have a right of first refusal for positions with the successful offeror.
The following clause must be inserted in solicitations that might result in the conversion of work
from the government to a contractor and must be inserted in contracts that result from
solicitations, whether or not a cost comparison was conducted. According to 48 CFR 52.207-3:
⁽^a⁾^T^h^{e Co}ⁿ^t^r^acto^r^sh^{all g}ⁱ^v^e^Go^v^e^rⁿ^m^eⁿ^t^e^m^p^l^o^y^ees^w^h^o^h^a^v^e^b^een^o^r^w^{ill b}^e^ad^v^e^r^s^el^y
^af^f^e^c^t^{ed or s}^e^parated^as^{a re}^s^u^{lt of}^a^w^{ard of}^thⁱ^s^con^t^ract^th^{e rig}^h^{t of}^fⁱ^rs^{t re}^f^u^s^a^{l f}^o^r
^e^m^p^l^o^y^m^eⁿ^t^o^p^eⁿⁱⁿ^g^s^uⁿ^d^e^r^t^h^{e co}ⁿ^t^r^{act i}ⁿ^p^o^s^itioⁿ^s^f^o^r^wh^ich^t^h^e^y^ar^{e q}^u^a^lif^ied^,^if^t^h^at
^e^m^p^l^o^y^m^eⁿ^t^{is co}ⁿ^s^isteⁿ^t^wⁱ^t^h^p^o^s^t-^Go^v^e^rⁿ^m^eⁿ^t^e^m^p^l^o^y^m^eⁿ^t^coⁿ^f^{lict o}^fⁱⁿ^ter^e^s^t^staⁿ^d^a^r^d^s.
⁽^b⁾^W^ithⁱⁿ¹⁰^d^a^y^s^af^ter^coⁿ^t^r^{act a}^w^ar^d^,^th^{e Co}ⁿ^t^r^actiⁿ^g^Of^fⁱ^cer^w^{ill p}^r^o^v^id^{e to}^th^e
^C^oⁿ^t^{ractor a li}^s^t^o^f^all^Gov^e^rnm^e^{nt e}^m^p^l^o^y^ees^w^h^o^h^a^v^e^beeⁿ^or^w^ill^{be adv}^e^rs^el^y^a^f^f^ected
^{or s}^e^{parated as}^{a res}^u^lt^{of a}^w^{ard of}^t^h^is^con^t^{ract. (c) T}^h^e^C^oⁿ^t^{ractor s}^h^all^{report to th}^e
^C^oⁿ^t^ractiⁿ^g^Offⁱ^{cer t}^h^{e n}^a^m^e^s^ofⁱⁿ^di^vⁱ^du^al^s^iden^ti^fⁱ^{ed on}^t^h^{e lis}^t^w^h^{o are hired}^wⁱ^t^hⁱⁿ⁹⁰
^day^s^af^t^e^{r con}^t^ract^perf^or^m^aⁿ^c^{e beg}ⁱⁿ^s^{. T}^hⁱ^s^report^s^h^al^l^{be f}^o^r^w^arded^wⁱ^t^hⁱⁿ^{120 day}^s^a^f^t^e^r
^con^t^ract^perf^or^m^aⁿ^{ce begi}^ns^.
As with the 1999 circular, the contractor determines who is qualified.¹⁰⁵ It is possible, then, that
an individual who is qualified as far as the agency is concerned might not meet a contractor’s
qualifications, and thus would not be offered a job. Under the 2002 proposed revision, the
government would have been allowed to tell a contractor whom to hire. The agency’s human
resource adviser would have determined which government employees were qualified, and the
contractor would have been required to offer these individuals employment before hiring new ¹⁰⁶
employees or transferring existing employees. In effect, the right of first refusal clause is a
limited safeguard in that it does not guarantee that all federal employees will be offered jobs with
the contractor. On the other hand, it is unclear under what authority (aside from the 2002
proposed revision to the circular) the government would be able to dictate to contractors whom
they should hire.
Consider, for example, a competition that the government wins. The MEO is established and
begins performing the work as described in the PWS. The prospect of recompetition at the end of
the letter of obligation’s performance period could affect employees’ decisions to leave or remain
with their agencies. The question is whether attrition would occur less frequently, more

¹⁰⁴^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^pp^{. B-1}⁵^-B-1^6.
¹⁰⁵^{U.S. Of}^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^Budg^e^t^{, “}^P^e^r^f^o^rm^aⁿ^c^e^of^Com^m^e^rc^ia^{l A}^c^ti^v^itie^s,”^Ma^y^{29, 2}⁰⁰³^,^p^.³²¹⁴^0.
¹⁰⁶^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, N}^o^v^.^14,²⁰⁰²^,^{p. B}^-^19.

frequently, or remain the same. Regardless of the pace of attrition, as it occurs, the agency would
need to hire new employees to staff the MEO. Also, as implementation of the circular proceeds,
and more competitions are conducted, agencies have to decide whether, how, and when to inform
prospective employees that they are being recruited for an office or a work center that is an MEO.
Prospective employees might want to know about the MEO, the letter of obligation, and the
recompetition requirement. How might these individuals respond to this information? The
Assistant Secretary for Administration at the Department of Transportation comments, from the
agency’s perspective:
^B^y^m^aⁿ^d^atin^g^co^m^p^et^itioⁿ^s^ev^er^y^th^r^{ee to}^fⁱ^v^e^y^ear^{s r}^e^g^a^r^d^{less o}^f^w^h^o^wⁱⁿ^s^{a co}^m^p^etitioⁿ^,
^th^{e d}^r^af^t^cir^c^u^l^ar^w^ill^hⁱⁿ^d^er^an^a^g^en^c^y^’^s^ab^il^it^y^to^d^e^v^e^lo^p^a^loⁿ^g^-^t^er^m^w^o^r^k^f^o^r^ce^str^a^teg^y¹⁰⁷
^f^o^r^r^ecr^u^itin^g^an^d^r^e^taiⁿⁱⁿ^g^to^p^-ⁿ^o^tc^h^p^e^o^p^l^{e f}^o^r^g^o^v^e^rⁿ^m^eⁿ^t^ser^v^ice.
Under another scenario where the agency tender is selected and the MEO is established, it is ¹⁰⁸
possible the MEO could be terminated for failure to perform. The circular states:
^Upon^ter^mⁱⁿ^atiⁿ^g^aⁿ^{MEO le}^tt^{er of}^oblig^atioⁿ^,^{an ag}^eⁿ^c^y^s^h^al^{l ch}^aⁿ^g^e^t^h^{e i}ⁿ^v^eⁿ^t^or^y^codiⁿ^g
^{to ref}^l^{ect th}^{at th}^{e acti}^v^it^y^is^{no lon}^g^e^{r perf}^orm^e^{d b}^y^an^ME^{O an}^{d s}^h^{all perf}^or^m^eit^h^{er a}¹⁰⁹
^str^e^a^m^liⁿ^e^d^co^m^p^etitioⁿ^o^r^stan^d^a^r^d^co^m^p^etitioⁿ^.
Under the “temporary remedies” for failure to perform, the circular states:
^If^t^h^e^C^O^ter^mⁱⁿ^ates^{a co}ⁿ^t^{ract, f}^e^e^-^f^o^r-^s^e^r^v^{ice a}^g^ree^m^eⁿ^{t, o}^r^{MEO letter o}^f^oblig^a^{tion f}^o^r
^th^{e ser}^v^{ice p}^r^o^v^id^er^’^s^f^a^il^u^r^e^to^p^e^r^f^o^r^m^,^aⁿ^a^g^en^c^y^m^a^y^u^s^{e i}ⁿ^teri^m^con^t^ract^s^,^pu^blic
^rei^m^bu^rs^{able s}^o^u^r^ce^s^,^{or g}^o^v^e^rnm^eⁿ^t^pers^onn^{el on}^an^e^m^erg^eⁿ^c^y^basⁱ^s^.^An^ag^eⁿ^c^y^s^h^al^{l n}^o^t
^allo^w^th^e^s^{e te}^m^porar^y^re^m^e^dⁱ^es^{to be}^u^s^ed^f^o^{r long}^{er t}^h^aⁿ^on^e^y^ear^f^r^o^m^t^h^{e date of}¹¹⁰
^ter^mⁱⁿ^atioⁿ^.
In the event that the agency opts for a temporary remedy or terminates a letter of obligation, it is
unclear what might happen to the employees in the MEO.
Publicly, when the issue of compliance with the competitive sourcing initiative is broached, it is
presented as an agency, or institutional, responsibility. Agencies are held accountable for meeting
competitive sourcing targets and producing inventories. Under the 2003 circular, certain agency
personnel—individuals—also bear responsibility for competitive sourcing. The circular states that
agencies shall
^Req^u^ir^{e f}^u^{ll acco}^uⁿ^tab^ilit^y^o^f^a^g^en^c^y^o^f^fⁱ^cial^{s d}^e^sigⁿ^ated^t^oⁱ^m^p^l^em^en^t^an^d^c^o^m^p^ly^wⁱ^th^t^h^is¹¹¹
^circu^l^{ar b}^y^es^tablis^hⁱ^ng^perf^orm^aⁿ^ce^s^t^aⁿ^dardsⁱⁿ^annu^{al perf}^or^m^aⁿ^{ce ev}^al^u^a^tioⁿ^s^.
Presumably, the performance standards will concern compliance with Circular A-76. The circular
is not clear about the breadth of this mandate. Possibly, the requirement could apply to everyone

¹⁰⁷^Ste^v^e^W^a^t^k^{ins, “}^P^la^{ns f}^o^{r Job}^Co^m^p^e^{titions Ill-A}^d^vⁱ^se^{d, Ma}^na^g^e^{rs W}^a^rn,”^Fe^de^{ral Time}^s^,^D^e^c^.³⁰^{, 200}^{2, p. 1.}
¹⁰⁸^T^h^e^s^a^m^e^c^ons^e^que^nc^e^s^w^{ould a}^pply^{to c}^o^ntr^a^c^t^or^s^aⁿ^{d p}^ubl^ic^r^e^im^bur^s^a^ble^te^nde^r^s^{, to}^o.
¹⁰⁹^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^{p. B-}²⁰^.
¹¹⁰^Ibid^.,^{p. B-}^20.
¹¹¹^U^.^{S. O}^f^fⁱ^c^e^o^f^Ma^na^g^e^m^e^{nt a}^nd^B^udg^e^t^,^Cⁱ^r^c^ul^ar^N^o^.^A-⁷⁶⁽^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 2}⁰⁰³^,^p.^1.

who works on a competition and any other officials who are charged with complying with the
circular. Or, the circular might apply only to individuals who serve in positions identified in the
circular as having to comply with A-76. The list of these positions includes:
• Competitive sourcing official,
• Agency tender official,
• Contracting officer,
• PWS team leader,
• Human resource advisor,
• Source selection authority,
• PWS team,
• MEO team, and
• Source selection evaluation board.¹¹²
Other questions concern the contents of the performance standards and the precedent, if any
exists, for developing standards for management programs.
Apparently, separate and distinct from the circular’s requirement, the National Institutes of Health
(NIH) developed and issued, in mid-2003, an addendum to employee performance standards. The
top portion of the one-page form lists five department-wide program objectives, all of which
relate to health care or science and medical research. The second section consists of 10
department-wide management objectives, one of which is: “Complete the FY2003 Competitive ¹¹³
Sourcing Program.”
Since the inception of the competitive sourcing initiative in early 2001, the Administration has
remained focused on public-private competition and the anticipated benefits of competition. This
commitment is accompanied by a recognition that, in the words of the Administrator of the Office
of Federal Procurement Policy, “[f]ederal employees are some of the Nation’s most highly trained ¹¹⁴
and dedicated employees.” The Administrator also acknowledged that:
^Co^m^p^etiti^v^e^so^u^r^ciⁿ^g^ask^s^ag^eⁿ^{cies to}^m^a^k^e^so^m^e^dⁱ^f^fⁱ^c^u^l^t^ch^oⁱ^c^e^s^.^Th^e^s^e^c^h^oⁱ^c^e^s^a^f^f^e^c^t^r^e^a^l
^j^o^b^s^,^h^e^l^d^b^y^d^e^dⁱ^c^a^t^e^d^aⁿ^d^l^o^y^a^l^c^a^r^e^e^r^cⁱ^vⁱ^l^s^e^r^v^aⁿ^t^s^.^Iⁿ^m^aⁿ^y^r^e^sp^ect^s,^thⁱ^sⁱⁿ^itia^tiv^e^co^m^e^s
^do^wⁿ^{to on}^{e s}ⁱ^m^p^{le realit}^y^:^v^e^ry^f^e^w^people,^w^h^eth^e^{r t}^h^e^y^ar^e^w^o^rkⁱⁿ^gⁱⁿ^t^h^{e priv}^{ate s}^ector
^{or th}^{e pu}^blic^s^{ector, li}^k^e^to^w^o^r^k^uⁿ^d^{er t}^h^{e pres}^s^u^{re o}^f^kn^o^w^ing^t^h^at^th^eir^w^o^r^kⁱ^s^{on t}^h^{e li}ⁿ^e
^if^th^e^y^d^oⁿ^o^{t f}ⁱ^g^u^r^e^o^u^{t h}^o^w^to^p^e^r^f^o^r^m^it^m^o^r^e^ef^fⁱ^cieⁿ^tl^y^an^d^ef^f^ecti^v^el^y^.^B^u^{t, th}^{e f}^{act t}^h^at
^th^{is i}ⁿ^itiatⁱ^v^e^r^e^q^u^ir^{es h}^a^r^d^ch^oⁱ^{ces an}^d^{a lo}^t^o^f^h^a^r^d^w^o^r^k^m^a^k^e^{s it an}ⁱⁿⁱ^tiati^v^e^th^{at can}

¹¹²^I^b^id^.,^pp.^1,^B^-^2-^B^-^{3, B}^-^6-^B^-^7.
¹¹³^Iⁿ^f^o^r^m^a^{tion pr}^ov^ide^d^e^l^e^c^t^r^onic^a^lly^b^y^the^O^f^fⁱ^ce^of^C^o^m^m^unic^a^tⁱ^ons^aⁿ^d^Publ^ic^Lⁱ^aⁱ^s^{on, O}^f^fⁱ^c^e^o^f^the^Dⁱ^r^e^c^t^or^,
^Na^tiona^{l Inst}^itute^s^of^He^a^{lth, Jun}^e^18,²⁰⁰³^.
¹¹⁴^U^.^{S. C}^ong^re^s^s^,^H^ous^e^Com^m^ittee^{on G}^o^v^e^rnm^e^{nt Ref}^o^r^m^{, Subc}^o^m^m^itte^e^{on T}^e^c^hnolog^y^a^nd^P^r^oc^ure^m^eⁿ^{t P}^o^lⁱ^c^y^,
^Ov^e^{rsight He}^aring^to^Re^vⁱ^e^w^the^Findi^ngs^of^the^C^o^mme^rc^{ial Ac}^tiv^itie^{s Pane}^l^{, p}^.⁴⁶^.

^b^rⁱⁿ^g^ab^o^u^t^f^uⁿ^d^a^m^eⁿ^{tal a}ⁿ^d^lastiⁿ^gⁱ^m^p^r^o^v^e^m^en^{ts to}^th^e^w^a^y^t^h^{e f}^e^d^e^r^a^{l g}^o^v^e^rⁿ^m^eⁿ^tⁱ^s¹¹⁵
^ma^na^ge^d^.
Some commentators have a different perspective on competitive sourcing and the civil service,
noting that it might have significant implications for the civil service as an institution. Donald
Kettl, a professor of public affairs and political science at the University of Wisconsin-Madison,
said:
^T^h^{e bedr}^ock^of^th^{e ci}^v^il^s^e^rvⁱ^{ce h}^a^s^loⁿ^g^beenⁿ^e^u^t^{ral co}^m^p^eten^{ce an}^{d s}^t^rong^e^x^pertis^e,
^g^r^ouⁿ^d^{ed i}ⁿ^{a career s}^e^r^v^ice^{.... Stag}ⁱⁿ^{g regu}^{lar co}^m^p^etit^ion^s^...^w^{ould un}^der^mⁱⁿ^{e t}^h^e
^com^mⁱ^t^m^eⁿ^t^{to a career s}^e^r^vⁱ^{ce, es}^peciall^yⁱ^f^t^h^e^s^c^{ope of}^s^e^rv^ices^an^d^th^e^s^t^aⁿ^dards^f^o^r¹¹⁶
^co^m^p^eti^tioⁿ^s^hⁱ^f^{t o}^v^er^ti^m^e^an^d^,ⁱⁿ^th^{e p}^r^o^{cess, p}^u^t^m^o^r^e^f^e^d^e^r^a^l^w^o^r^k^er^{s at r}ⁱ^s^k^.
As more competitions are carried out, which, presumably could result in more government work
going to contractors, it is unclear how the “neutral competence and strong expertise” of the civil
service might be affected. Yet another scholar, Dan Guttman, who is a fellow with the National
Academy of Public Administration, raises a different issue:
^B^o^t^h^t^h^e^C^lⁱⁿ^t^oⁿ^/^G^o^r^e^r^eⁱⁿ^v^eⁿ^tⁱⁿ^g^g^o^v^e^rⁿ^m^eⁿ^t^[ⁱⁿ^itiati^v^e^]^an^d^th^e^B^u^sh^m^aⁿ^a^g^e^m^eⁿ^t^a^g^en^d^a
^ai^m^to^r^eⁿ^d^er^civ^{il ser}^v^aⁿ^ts^m^o^r^e^‘^c^oⁿ^tr^acto^r^lik^e,’^b^u^{t d}^o^so^w^ith^{little o}^rⁿ^o^r^e^f^l^e^c^tⁱ^oⁿ^oⁿ^th^e
^f^act^t^h^at^ou^{r l}^oⁿ^g^s^t^aⁿ^di^ng^l^a^w^s^{do n}^o^tⁿ^o^w^provⁱ^d^e^f^o^{r t}^h^{e bl}^u^rriⁿ^g^o^f^t^h^{e boun}^dari^es¹¹⁷
^bet^w^eeⁿ^offⁱ^{cial a}ⁿ^{d con}^t^{ractor s}^t^atu^s^.
Another unanswered question about the Administration’s competitive sourcing program is how
the implementation of the 2003 circular, coupled with agencies’ efforts to meet their targets,
might affect the diversity of the federal workforce. Some agency managers reportedly have
voiced concerns about this issue. The Assistant Secretary of Planning and Evaluation for the
Department of Veterans Affairs (VA) reportedly stated that, within the VA, “there are numerous
occupations such as maintenance, laundry [and] food service that could be competitively bid ....
However, these occupations have the highest proportions of women and minorities and any ¹¹⁸
significant effort to outsource these jobs will have huge diversity implications.” A news article
reported that the National Park Service Director, in an April 4, 2003 memorandum, said that job ¹¹⁹
competitions in Washington and San Francisco “may affect the diversity of our workforce.” It
is difficult to know how competitive sourcing policy has, or might, affect the diversity of the
federal workforce since it appears that historical information on this issue is not available.

¹¹⁵^I^b^id^{., p. 42.}
¹¹⁶^Ja^son^P^e^c^k^e^npa^ug^{h, “}^N^e^w^Rule^{s Sh}^oul^{d Ma}^k^e^Com^p^e^tition^Ro^utiⁿ^e^{in G}^o^v^e^rnm^e^{nt, Sa}^y^s^OMB,”^Go^vern^m^en^t
^E^xecu^tⁱ^v^e^{, Da}^il^y^Brie^fⁱ^ng^{, Ma}^y²⁹^{, 2}⁰⁰³^{, a}^v^a^ila^ble^a^t^http^://w^ww^.^gov^e^x^e^c^.^c^o^m^/^da^ily^f^e^d/⁰⁵^03/⁰⁵²⁹⁰^3p1^.htm^.
¹¹⁷^Ibid^.
¹¹⁸^Ch^et^Dem^b^ec^k,^“M^an^{agers P}^aⁿ^A^d^mⁱⁿⁱ^st^ratⁱ^oⁿ^’^{s Ou}^t^s^o^u^r^ciⁿ^g^P^u^sh^,^”^Fe^de^{ral Time}^s^{, J}^a^n.^13,²⁰⁰³^,^p.^1.
¹¹⁹^Ja^son^P^e^c^k^e^npa^ug^{h, “}^D^e^m^oc^ra^ts^Sa^y^{Job Com}^p^e^titio^{ns Co}^uld^Hurt^Div^e^rsit^y^a^t^P^a^rk^Se^rv^ic^e^,^”^Go^ve^rn^men^t
^E^xecu^tⁱ^v^e^{, Da}^il^y^Brie^fⁱ^ng^{, June}^6,²⁰^03,^a^v^a^ila^ble^a^t^htt^p^://w^ww^.^g^ov^e^x^e^c^.^c^o^m^/^da^ily^f^e^d/060^3/⁰⁶⁰⁶⁰³^p1.^htm^.

The 2003 revision to Circular A-76 is the latest effort to improve public-private competitions. The
circular makes major changes to some of the procedures and underlying concepts of the circular
and the accompanying handbook. These changes could have significant implications. Ongoing
monitoring of the implementation of the revised circular could be helpful in gauging the utility of
the changes.

^{Agency tender}^{The agency}^manageme^nt^{plan su}^b^{mitted in response to a}^solicitati^oⁿ^{for a sta}^ndard
^{competition. The agency te}^{nder includes an}^ME^{O, agency}^{cost estimate, MEO}^{quality control}
^{plan, MEO}^p^{hase-in plan, a}^{nd cop}^{ies of any M}^{EO s}^ubcon^{tracts (wit}^{h the}^{private se}^ctor
^{providers’ proprietary}^{information redacted).}
^{Agency tender}^{An inhe}^{rently gover}^{nmental age}ⁿ^{cy official with decision-making a}^{uthority who is re}^sponsible
^{official (}^ATO)^{for the age}^{ncy te}^{nder and}^rep^res^{ents the}^agency^tender^{during so}^{urce selection.}
^Commercial^{A recur}^{ring ser}^{vice that could b}^e^performed^{by t}^{he p}^{rivate sector.}^{This recu}^{rring se}^{rvice is}
^activity^{an agency}^re^quireme^{nt that}^{is fu}ⁿ^{ded and controlled through a co}^{ntract, fee-for-service}
^{agreement, or p}^erforma^nce^{by g}^overnment^per^{sonnel. Commercial activities may be found}
^{within, or througho}^{ut, organizati}^{ons that}^{perform i}^nhere^{ntly gove}^rnme^{ntal activities or}
^{classified work.}
^Competition^{A formal evaluation of sources to}^{provide a commercial activity th}^{at uses}^pre-esta^blished
^{rules (e.g., the FAR [}^{Federal Acqui}^{sition Regulation}^{], [Circular A-76])}^{. Competitions between}
^{private sector sou}^{rces a}^{re pe}^rfor^{med in accordance with}^{the FAR. Competitions between}
^{agency, private s}^{ector, and p}^{ublic reimbu}^{rsable sou}^{rces are}^per^for^{mance in ac}^{cordance with}
^{the FAR and [Circular A-7}^6].
^Competitiv^e^{An inhe}^{rently gover}^{nmental age}ⁿ^{cy official responsible for th}^{e imp}^{lementation of Circular A-}
^sour^{cing o}^fficial^{76 within a}ⁿ^age^ncy.
^(CSO)
^Contra^{cting of}^ficer^{An inhe}^{rently gover}^{nmental age}ⁿ^{cy official who participates on t}^h^e^{PWS team, and is}
^(CO)^{responsible for t}^{he iss}^{uance of t}^h^e^solicitat^{ion and the sour}^{ce sele}^{ction evaluation}
^methodology.^{The CO awards th}^{e contract a}^{nd issues t}^{he M}^{EO le}^{tter of obligation or fee-}
^{for-service agreeme}^{nt res}^{ulting fr}^{om a streamlined or standard co}^{mpetition. The CO and}
^{the SSA [source selection aut}^{hority] may be}^{the sa}^{me individual.}
^{Directly int}^erest^ed^{The agency t}^{ender official who su}^{bmitted the age}^{ncy te}^{nder; a sing}^{le individual appointed by}
^party^{a majority of directly affected employees as their age}^{nt; a p}^{rivate s}^{ector offeror; or the}
^{official who certifies the pu}^{blic re}^imbursa^{ble tender.}
^{Fee-for-service}^{A formal agreement}^betwee^{n age}^{ncies, in which one}^agency^{provides a service (a}
^agreement^{commercial activity) for a fee paid by anothe}^{r agen}^{cy. The agen}^cy^{providing the service is}
^{referred to in [t}^{he] circ}^{ular as a}^{public reim}^bursa^{ble source.}
^Inherently^{An activity that is so intimately re}^{lated to the pu}^{blic interest as to}^{mandate pe}^rforman^{ce by}
^governmental^government^per^sonnel.
^activity
^{MEO letter of}^{A formal agreement}^{that a}ⁿ^agen^{cy implements w}^hen^{a standa}^{rd or streamlined competition}
^obligation^{results in age}^ncy^performa^{nce (e.}^{g., MEO).}

¹²⁰^Q^uote^d^dir^e^c^tly^f^r^o^m^U^.^{S. O}^f^fⁱ^c^e^of^Ma^na^g^e^m^e^{nt a}^{nd B}^u^dg^e^t^,^Cⁱ^r^c^ular^N^o^{. A-}^{76 (}^R^e^vⁱ^s^e^d)^{, Ma}^y^{29, 20}⁰³^{, p}^p^{. D}^-^2-
^D-9^.

^{MEO team}^{A group of individuals, comprised of [}^sic^{] tec}^{hnical and f}^{unctional e}^xpert^{s, formed to assist}
^{the ATO in developing th}^{e agenc}^{y tender.}
^{Most efficient}^{The staffing}^{plan of t}^{he agenc}^{y te}^{nder, developed to represe}^{nt t}^h^e^{agency’s most ef}^ficient
^orga^nization^{and cost-effective organization. An M}^{EO is re}^{quired for a}^standard^{competition and may}
^(MEO)^{include a mix of govern}^ment^pers^{onnel and M}^{EO s}^ubco^ntracts.
^Offer^{A private sector so}^{urce’s formal}^response^{to a req}^{uest for}^propos^{als or invitation for bid.}
^{The term “offe}^{ror” refe}^{rs to the}^{specific source}^rathe^{r tha}^{n th}^{e re}^sponse.
^Performa^{nce w}^ork^{A statement in}^{the solicitation that identifies the tech}^{nical, functional, and performa}^nce
^{statement (PWS)}^{characteristics of t}^{he age}^{ncy’s re}^quireme^{nts. The PWS is perform}^{ance-based a}^{nd describes}
^{the agenc}^{y’s ne}^{eds (th}^{e “what”),}^{not specific met}^{hods for meeting}^{those needs (th}^{e “how”).}
^{The PWS identifies essential outcomes to be achieved, spe}^{cifies th}^{e agency’s re}^quired
^performa^{nce sta}^{ndards, and sp}^{ecifies the location, units, quality an}^{d timeliness of the work.}
^Public^{A service p}^{rovider from a federal}^{agency t}^{hat could per}^{form a co}^{mmercial activity for}
^reimbursable^{another fede}^{ral agency on}^{a fee-f}^{or-service or reimbu}^rsable^basis^{by using}^{either civilian}
^sour^ce^{employees or federal contract}^{s w}^{ith the p}^{rivate sector.}
^Public^{A federal agency’s formal re}^spon^{se to another}^{federal agency’s sol}^icitati^{on for offers or}
^reimbursable^{tenders. The}^pu^{blic reimbursa}^ble^{tender ... includes a cost estimate ...}^.
^tender
^{Source selection}^{A competition official with decisi}^{on-making authority w}^{ho is resp}^{onsible for source s}^election
^{authority (SSA)}^{as req}^{uired by t}^{he FAR and [Circ}^{ular A-}^{76]. The SSA and CO}^may^{be the}^{same individual.}
^{Source selection}^{The team or board a}^{ppointed b}^y^{the SSA to assist in a negotiated acquisition.}
^{evaluation board}
^(SSEB)
^L.^E^l^aⁱ^ne^H^a^l^c^hiⁿ
^An^al^y^s^{t i}ⁿ^Am^erican^Natⁱ^on^al^Gov^e^rnm^e^nt
^eh^al^chiⁿ^@^c^rs^.l^oc.g^o^v^{, 7-}⁰⁶⁴⁶