[Federal Register Volume 65, Number 175 (Friday, September 8, 2000)]
[Notices]
[Pages 54568-54570]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-23018]


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OFFICE OF MANAGEMENT AND BUDGET


Issuance of OMB Circular A-76 Transmittal Memorandum No. 22

AGENCY: Office of Management and Budget, Executive Office of the 
President.

SUMMARY: The Office of Management and Budget (OMB) publishes technical 
changes to the OMB Circular A-76 Revised Supplemental Handbook.

DATES: The OMB Circular A-76 Transmittal Memorandum No. 22 is effective 
with publication in the Federal Register and shall apply to all cost 
comparisons where the in-house offer remains sealed as of the date of 
this publication. Inventories produced in accordance with the Federal 
Activities Inventory Reform Act shall also comply with these changes.

FOR FURTHER INFORMATION CONTACT: Mr. David C. Childs, Office of Federal 
Procurement Policy, NEOB Room 9013, Office of Management and Budget, 
725 17th Street, NW, Washington, DC 20503, Telephone No. (202) 395-
6104.
    Availability: Copies of the OMB Circular A-76, its Revised 
Supplemental Handbook and currently applicable Transmittal Memoranda 
may be obtained at the OMB home page. The online address (URL) is 
http://www.whitehouse.gov/OMB/circulars/index.html#numerical. Paper 
copies of the Circular and Supplemental Handbook can be obtained by 
contacting the Office of Federal Procurement Policy, NEOB, Room 9013, 
Office of Management and Budget, 725 17th Street, NW., Washington, DC 
20503, Telephone No. (202) 395-7579.
    Interested parties are reminded that OMB Circular No. A-76, 
Transmittal Memoranda 1 through 14 have been canceled. Transmittal 
Memorandum No. 15 provided the Revised Supplemental Handbook dated 
March 27, 1996 (Federal Register, April 1, 1996, pages 14338-14346). 
Transmittal Memoranda 16, 17, and 18, which provided A-76 related 
Federal pay raise and material escalation cost factors are canceled. 
Transmittal Memorandum No. 19, to the extent that it provided A-76 
related Federal pay raise and material escalation cost factors, has 
been canceled. The standard retirement cost factors for the weighted 
average CSRS/FERS pension and Federal retiree health cost estimates and 
the post-retirement health costs also provided by Transmittal 
Memorandum No. 19, remain in effect. Transmittal Memorandum No. 20, 
which implemented the Federal Activities Inventory Reform (FAIR) Act, 
remains in effect. Transmittal Memorandum No. 21, which provides the 
current A-76 related Federal pay raise and material escalation cost 
factors also remains in effect.

SUPPLEMENTARY INFORMATION:  
    On May 4, 2000 (65 FR 25966), the Office of Management and Budget 
(OMB) requested agency and public comments on proposed changes to the 
OMB Circular A-76 Revised Supplemental Handbook. The proposed changes 
would:
    (1) Amend the Federal Activities Inventory Reform Act (FAIR) 
implementation guidance provided by OMB Circular A-76 Transmittal 
Memorandum No. 20, by changing the A-76 Revised Supplemental Handbook 
at Appendix 2, paragraph g.3., to provide for 30 working days rather 
than 30-calendar days as the period during which an interested party 
may submit its initial challenge to an agency's FAIR Act inventory . It 
was also proposed that Appendix 2, paragraph g.4., be changed to 
provide for 28 working days rather than 28 calendar days as the period 
during which the agency should issue its decision on the initial 
challenge;
    (2) Delete Part 1, Chapter 3, paragraph K.1.e., of the Revised 
Supplemental Handbook, which requires A-76 cost comparison appellants 
to ``demonstrate that the items appealed (in an A-76 cost comparison) 
individually or in aggregate, would reverse the tentative decision.'' 
The proposed change was intended to avoid any conflict in requiring a 
single A-76 cost comparison administrative appeal period, as provided 
at Part 1, Chapter 3, paragraph K.7.
    (3) Strengthen OMB's longstanding policy of limiting the 
participation of directly affected employees on an A-76 cost comparison 
Source Selection Board or its evaluation teams by revising Part 1, 
Chapter 3, paragraph H. 3.b. of the Revised Supplemental Handbook.
    OMB received 13 responses to its request for comments (65 FR 
25966); 6 Federal agencies, 5 industry or trade groups, 1 employee 
organization and one individual. A discussion of the

[[Page 54569]]

significant comments, and OMB's responses to those comments follows. 
After considering all comments received on the proposed changes to the 
Revised Supplemental Handbook, OMB is issuing final guidance to the 
agencies.

Summary of Comments Received

    1. The proposed revision to expand the FAIR Act's inventory 
challenge and agency response periods from calendar days to working 
days.
    Four commentors supported the proposed change. All other commentors 
were silent on this issue, except one who asked that the FAIR Act 
administrative appeal period be extended ``from 30 to 180 days.'' The 
change from 30 days to 180 days would require a change in the statutory 
language of the FAIR Act itself, which provides for a 30-day 
administrative appeal period and a 28-day period for the agency to 
issue its decision on the initial challenge. The proposed revision from 
calendar days to working days is adopted as a final revision to the 
Supplemental Handbook.
    2. The proposal to delete Part 1, Chapter 3, paragraph K.1.e., of 
the Revised Supplemental Handbook to avoid any conflict with the 
provision at Part 1, Chapter 3, paragraph K.7 that there is a single 
cost comparison appeal period.
    a. Comment: One commentor asked for changes that would revise the 
language to clarify that an appeal must continue to demonstrate that 
the items appealed individually or in aggregate, would reverse the 
tentative decision. There was concern that unless this requirement was 
firmly re-established the Administrative Appeal Authority could be 
burdened by appeals that would not affect the outcome of the tentative 
decision. Similarly, one commentor objected to the deletion of Part 1, 
Chapter 3, paragraph K.1.e., based on the perception that its 
deletion--alone--eliminated any threshold for reversing a decision.
    Response: OMB agrees with the commentors' concerns. The 
Supplemental Handbook has for years provided that an administrative 
appeal needs to raise outcome-determinative issues. See 1983 
Supplemental Handbook, Part I, Chapter 2, Paragraph I.6.c (an appeal 
must ``Demonstrate that the result of the appeal may change the cost 
comparison decision''); 1996 Supplemental Handbook, Part I, Chapter 3, 
Paragraph K.1.e (an appeal must ``Demonstrate that the items appealed, 
individually or in aggregate, would reverse the tentative decision'').
    The requirement that an administrative appeal raise only outcome-
determinative issues had been intended to streamline the appeal 
process. However, in recent years, this requirement has had the 
unintended opposite effect in a number of cases. While the process 
permitted appeals of individual items or items that would in aggregate 
reverse a tentative cost comparison decision, neither the 1983 
Supplement or the 1996 Revision anticipated sequential appeals or even 
the appeal--by the party that had originally prevailed in the tentative 
decision--of an Administrative Appeal Board's initial decision to 
reverse the tentative decision. In the latter situation, the party that 
originally prevailed could not ask the Administrative Appeal Board at 
the start of the appeals process to review and correct alleged errors 
in the cost comparison, because the correction of such errors would not 
be outcome-determinative. However, in those cases where the 
Administrative Appeal Board issues an initial decision that would 
reverse the cost comparison, the originally-prevailing parties have 
responded by filing a sequential appeal that raises the errors in the 
original cost comparison. As a result, contrary to its intent, the 
requirement to raise only outcome-determinative issues in the initial 
appeal has resulted in a longer and more burdensome appeal process.
    To eliminate these concerns, to reduce the administrative burden of 
potential sequential appeals, to ensure equal access by all parties to 
the administrative appeal process and, to emphasize that the Government 
seeks the best overall decision, OMB is implementing the proposed 
change published in the Federal Register (65 FR 25966).
    By deleting Part I, Chapter 3, paragraph K.1.e., of the 
Supplemental Handbook, OMB eliminates sequential appeals and their 
related delays. All interested parties need to review the tentative A-
76 cost comparison decision and all supporting documentation and 
immediately identify and bring to the attention of the Administrative 
Appeals Board any potential errors that, if corrected, would provide 
for a more accurate determination. Additional language has been added 
at Part I, Chapter 3, Paragraph K.1.a., to emphasize that all appeals 
must be filed within the initial A-76 administrative appeal period, 
including any concerns identified by the apparent winner of the 
tentative decision.
    We expect that the revision will streamline the administrative 
appeal process. The vast majority of cost comparisons are appealed 
already, and we do not anticipate that the revision will result in many 
new issues being raised to the Administrative Appeals Board. Instead, 
our expectation is that, by having the parties immediately bring before 
the Administrative Appeals Board all the issues that they have with the 
tentative decision, the revision will ultimately result in a shorter 
appeals process. If this expectation is not borne out by future 
experience, then OMB can revisit the matter.
    b. Comment: One commentor, while concurring with the deletion of 
Part 1, Chapter 3, paragraph K.1.e. suggested that the Appeal Authority 
be required to make its proposed finding available for public and 
agency comment prior to issuing a final decision.
    Response: The suggestion that the Appeal Authority be required to 
submit its proposed findings to agency or public comment prior to 
issuance of the final A-76 cost comparison decision constitutes a 
substantial change to the current process and such a requirement could 
potentially result in significant additional delays to the appeals 
process. Such a change is, therefore, beyond the scope of this current 
revision process. We have accordingly not made the proposed change.
    c. Comment: One commentor suggested that OMB take this opportunity 
to establish that the 20-30 day A-76 cost comparison administrative 
appeal period be converted to working days from calendar days at Part 
1, Chapter 3, paragraph K.1.b., consistent with the changes made above 
at Appendix 2, paragraph g.3., and paragraph g.4., regarding the FAIR 
Act inventory appeal process.
    Response: The March 1996 A-76 Revision increased the period for 
which an interested party could file an administrative appeal from 15 
days to 20 days with the possibility of extending it to 30 days, at the 
agency's discretion. The submission of an A-76 cost comparison 
administrative appeal is a very focused submission, directed at the 
costs entered on the cost comparison form and compliance with the 
Circular and its Supplemental Handbook. The challenge and appeal of 
agency FAIR Act inventories is significantly different in scope. The 
Government's experience since the 1996 revision has been that the 20-30 
day A-76 appeal period appears to be sufficient for challengers to file 
their appeals, furthers the public interest in reaching an expeditious 
resolution and avoids placing employees or contractors in a position of 
uncertainty for any longer than necessary. We have accordingly not made 
the proposed change.
    3. Strengthen OMB's longstanding policy of limiting the 
participation of

[[Page 54570]]

directly affected individuals on an A-76 cost comparison Source 
Selection Team.
    a. Comment: All commentors agreed that additional guidance is 
needed. Where they differed was in the use of the term ``individual'' 
as proposed by OMB, and the application of the term to military service 
members whose work is included in the competition. In the view of 
several commentors, directly affected military service personnel should 
continue to be eligible to serve on the Source Selection Board (SSB) 
and its evaluation teams, because the military member's job will 
continue--either at another location or another function at the same 
location, even if the ultimate decision was that the work would be 
contracted-out. In accordance with this view, military members could 
continue to be eligible to serve on the SSB and evaluation teams unless 
they have a financial interest in one of the competing offerors to the 
solicitation.
    Response: OMB believes that it is good business practice to exclude 
individuals who are directly affected by an A-76 cost comparison from 
participating in a Source Selection Board (SSB) for the resulting 
contract. The source selection process is most effective when decision-
makers are chosen independent of the function under review. OMB readily 
acknowledges that the employment of military service personnel will not 
be adversely affected by the decision to retain or convert work to or 
from in-house, contract or Inter-Service Support Agreement performance. 
However, we do not believe that including military personnel, whose 
current jobs, local responsibilities, assignments and even supervisory 
relationships could be affected, is a good business practice in the 
context of an A-76 cost comparison. Indeed, in many cases, these are 
the management and other support personnel who have likely had input to 
the local scope and performance criteria of the PWS and the in-house 
MEO. The special skills that are afforded by local military personnel 
and the workforce investments that have been made in these kinds of 
support staff can be acquired from other sites, installations and made 
readily available through modern technology or contract support. The 
proposal would permit the inclusion of individuals whose work is 
included in the scope of the competition in only compelling 
circumstances and with a full understanding of these business 
practices.

Jacob J. Lew,
Director.

Circular No. A-76 (Revised); Transmittal Memorandum No. 22

August 31, 2000.

To the Heads of Executive Departments and Agencies

From: Jacob J. Lew, Director.
Subject: Performance of Commercial Activities.

    This Transmittal Memorandum implements changes to the OMB 
Circular A-76 Revised Supplemental Handbook, in furtherance of the 
requirements of the Federal Activities Inventory Reform Act (``The 
FAIR Act''), Public Law 105-270 and to clarify other issues of 
concern. The March 1996 Revised Supplemental Handbook was issued 
through Transmittal Memorandum 15, published in the April 1, 1996, 
Federal Register at pages 14338-14346. The March 1996 Revised 
Supplemental Handbook was further revised to implement the 
requirements of the FAIR Act on June 14, 1999, Federal Register at 
pages 33927-33935.
    After having requested and considered agency and public 
comments, OMB is making three changes to the OMB Circular A-76 and 
its Revised Supplemental Handbook. The Federal Activities Inventory 
Reform Act (FAIR) provides that there shall be a 30-day 
administrative challenge period available to interested parties who 
might wish to challenge an agency's decision to include or omit an 
activity from the list of commercial activities. As a part of OMB 
Circular A-76 Transmittal Memorandum No. 20, dated June 14, 1999, 
OMB stated that the statutory 30-day and 28-day challenge and 
challenge response periods would be calendar days, while the 10-day 
appeal period would be working days. OMB is aware that the 30-
calendar day deadline for filing challenges posed certain 
difficulties in 1999. Appendix 2, paragraph g.3., of the Revised 
Supplemental Handbook is, therefore, revised to provide for 30-
working days for the filing of challenges. Appendix 2, paragraph 
g.4., is also changed to provide 28-working days for the agency's 
issuance of its decision on the initial challenge.
    Concern has been expressed that Part 1, Chapter 3, paragraph 
K.1.e., of the OMB Circular A-76 Revised Supplemental Handbook may 
be in conflict with the statement at Part 1, Chapter 3, paragraph 
K.7., that provides that sequential administrative cost comparison 
appeals are not authorized. It is OMB's view that all concerns 
regarding the conduct of a cost comparison should be brought forward 
to the designated administrative appeal authority within the single 
appeal period. Therefore, to ensure that all relevant concerns with 
the conduct of a cost comparison are brought forward, and to 
eliminate sequential appeals and their related delays, OMB is 
rescinding Part 1, Chapter 3, paragraph K.1.e. of the Supplement. In 
order to emphasize that all interested parties need to review the 
tentative A-76 cost comparison decision and all supporting 
documentation and immediately identify and to bring to the attention 
of the Administrative Appeals Board any potential errors that, if 
corrected, would provide for a more accurate determination, OMB is 
revising Part I, Chapter 3, Paragraph K.1.a., to read as follows:
    ``a. Be submitted by all interested parties, including the 
tentative winner of a cost comparison decision, within the initial 
administrative appeal period.''
    And finally, OMB has been concerned that the use of Federal 
employees on Source Selection Teams, when those employees are 
subject to losing their jobs or otherwise being adversely affected 
by the award of the contract being reviewed by that Source Selection 
Team, is a poor business practice. OMB is also concerned that such a 
practice puts certain important skills that are developed by 
participating on a Source Selection Team at risk. Therefore, OMB 
revises Part 1, Chapter 3 paragraph H. 3.b. of the Revised 
Supplemental Handbook as follows:
    b. ``The Government should establish a source selection 
evaluation or advisory team. Individuals who hold positions in the 
function under study should not be members of the team, unless an 
exception is authorized by the head of the contracting activity. 
Exceptions will be authorized only in compelling circumstances and, 
in such cases, the head of the contracting activity shall provide a 
written statement of the reasons for the action. As a result, OMB 
has decided to strengthen its longstanding policy limiting such 
participation, as a better business practice. Individuals who hold 
positions in an A-76 study should not be members of the Source 
Selection Team, unless an exception is authorized by the head of the 
contracting activity. Exceptions may be authorized only in 
compelling circumstances and, in such cases, the head of the 
contracting activity will provide a written statement of the reasons 
for the action.''
    All changes in this Transmittal Memorandum are effective with 
publication in the Federal Register and shall apply to all cost 
comparisons where the in-house offer remains sealed as of the date 
of this publication. Copies of the OMB Circular A-76, its Revised 
Supplemental Handbook and currently applicable Transmittal Memoranda 
may be obtained at the OMB home page. The online address (URL) is 
http://www.whitehouse.gov/OMB/circulars/index.html#numerical. Paper 
copies of the Circular and Supplemental Handbook can be obtained by 
contacting the Office of Federal Procurement Policy, NEOB, Room 
9013, Office of Management and Budget, 725 17th Street, NW, 
Washington, DC 20503, Telephone No. (202) 395-7579.

[FR Doc. 00-23018 Filed 9-7-00; 8:45 am]
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