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X.X  OFFICEOFMANAGEMENTANDBUDGET    ?+ ` hp x (#X?0 `  Subject :0` ` (#` (#ImplementationoftheFederalActivitiesInventoryReformActof1998(Public  Law105270)( FAIRAct) ` (#` (# E.` hp x (#` XE?+ ` hp x (#X?0 `  Agency : ` OfficeofManagementandBudgetP ` (#` (# E.` hp x (#` XE0  0` (#(#ExecutiveOfficeofthePresident ` (#` (# ?+ ` hp x (#X?0 `  Action : ` OMBissuesfinalguidanceontheImplementationoftheFAIRAct. p ` (#` (# E.` hp x (#` XE0  0` (#(#   Summary : ` TheOfficeofManagementandBudget(OMB)herebyissuesguidanceto P  implementthe FederalActivitiesInventoryReformActof1998". ` (#` (# Tofacilitateandensureagencyimplementationofthe FederalActivitiesInventoryReformActof1998(PublicLaw105270)( FAIRAct),OMBisrevisingitsexistingguidanceonthemanagementofcommercialactivitiesthroughrevisionstoOMBCircularA76, PerformanceofCommercialActivities,andtoitsSupplementalHandbook.TheserevisionsinformagenciesoftheFAIRAct'srequirements;implementthestatutoryrequirementsoftheFAIRAct;avoidduplicationandconfusionbyconformingguidancetotheFAIRAct,andplacetheFAIRActsrequirementsinthecontextoftheFederalGovernmentslarger_reinvention_,competitionandprivatizationefforts.0   Dates :  ThisguidanceiseffectiveuponpublicationintheFederalRegister.@(#(#  ForFurtherInformationContact :Mr.David_Childs_,OfficeofManagementandBudget,  p _NEOB_ԀRoom6002,72517thStreet,_N.W._,Washington,D.C.20503,telephone:(202)3956104,FAX:(202)3957230 Availability : ` CopiesoftheupdatedversionsofOMBCircularA76,itsRevisedSupplemental 0 HandbookandthisTransmittalMemorandum20areavailablefromOMBontheInternetat:4    5  http://www.whitehouse.gov/OMB/circulars/index-procure.html6     7  Ԁ ! Ѐ SupplementaryInformation : #!  I.TheFederalActivitiesInventoryReformAct.  % # Ѐ  p&!$   OnOctober12,1998,PresidentClintonsignedintolawthe FederalActivitiesInventory `'"% ReformActof1998( FAIRActor Act).TheFAIRActdirectsFederalagenciestosubmiteachyearaninventoryofalltheiractivitiesthatareperformedbyFederalemployeesbutarenotinherentlyGovernmental(i.e.,arecommercial).OMBistorevieweachagencysCommercialActivitiesInventoryandconsultwiththeagencyregardingitscontent.Uponthecompletionofthisreviewandconsultation,theagencymusttransmitacopyoftheinventorytoCongressandmakeitavailabletothepublic.TheFAIRActestablishesanadministrativeappealsprocessunderwhichaninterestedpartymaychallengetheomissionortheinclusionofaparticularactivityontheinventory.Finally,theFAIRActrequiresagenciestoreviewtheactivitiesonthe .0*- inventory.Eachtimethattheheadofanexecutiveagencyconsiderscontractingwithaprivatesectorsourcefortheperformanceofsuchanactivity,theheadoftheexecutiveagencyshalluseacompetitiveprocess.Whenconductingcostcomparisons,agenciesmustensurethatallcostsareconsidered.  InenactingtheFAIRAct,CongressdidnotdisplacelongstandingExecutiveBranchpolicyregardingtheperformanceofcommercialactivities.TheFederalGovernmentseekstoachieveeconomyandenhanceproductivityandqualitythroughcompetitiontoobtainthebestserviceatleastcosttotheAmericantaxpayer.ThisFederalpolicyregardingtheperformanceofcommercialactivitieshasbeenprovidedbyOMBCircularA76, PerformanceofCommercialActivities.SpecificguidanceregardingtheimplementationofthispolicyisprovidedbytheMarch1996RevisedSupplementalHandbooktoOMBCircularA76andbyagencyconsultationwithOMB.  TheActcodifiedsomeofthisguidanceinlaw.Inparticular,theFAIRActcodifiedthepreexistingrequirementforagenciestoinventorytheircommercialactivities,aswellasthepreexistingdefinitionof inherentlygovernmentalfunction.  EachtimeanagencyconsiderschangingfromGovernmentemployeeperformanceofacommercialactivityontheinventory,theFAIRActrequiresthatacompetitiveprocessbeusedandthatcostcomparisons shallensurethatallcosts...areconsideredandthatthecostsconsideredarerealisticandfair.Here,too,theActcodifiesordeferstopreexistingExecutiveBranchpolicy.& 0 II.ImplementationoftheFAIRAct . 0   OMBCircularsareawellestablishedvehiclefordirectingagenciesonthemanagementoftheiractivities.Together,CircularA76anditsSupplementalHandbookhaveestablishedthebroadprinciples,individualdefinitionsandspecificdirectivesonthemanagementofcommercialactivities,includingtheinventoryandotheritemscodifiedbytheFAIRAct.OMBwantedtoprovidetheagencieswithpromptandclearguidanceonhowtoimplementtheActwithintheshorttimeframeavailable.OMBconcludedthatthebestwaytoprovideagencieswithclearandpromptguidanceonhowtoimplementtheFAIRActwastorevisethecurrentcircularandhandbooksothattheyconformtotheFAIRAct.OMBsgoalindraftingtheserevisionswastoensurethattheagenciesfullyimplementtheFAIRActsrequirements,andthattheagenciesdosowithoutconfusion,wastedeffortordelayscausedbyuncertaintyabouttheapplicabilityofcurrentguidance.'0 0q  Accordingly,onMarch1,1999,OMBrequestedagencyandpubliccommentsonproposedrevisionstotheHandbooktoimplementtheFAIRAct(64FR10031).TheproposedrevisionswouldinformagenciesoftheFAIRActrequirementsand,toavoidconfusion,conformtheHandbooksprovisionssothattheycrossreferenceandparallelrelevantFAIRActprovisions.  ToimplementtheFAIRActsinventoryrequirement,OMBproposedtomakeconformingchangestotheHandbookspreexistinginventoryrequirement.Thechanges .0*- incorporatedthestatutoryduedateofJune30thforagencysubmissionstoOMBandadded,tothe  inventorysdescriptionofeachactivity,twonewdataelementsrequiredbytheFAIRAct.  Inaddition,OMBproposedprovisionstotheHandbooktoaddresstheFAIRActsotherrequirements.Theseprovisions:  (1)reiteratedtherequirementsforOMBtoreviewthecommercialactivityinventoriesandtoconsultwiththeagenciesregardingthem;fortheagencies,afterOMBsreviewandconsultationiscompleted,tosendtheinventoriestoCongressandtomakethemavailabletothepublic;andfortheagenciestohearanddecideadministrative challengesinwhichinterestedpartieschallengeanagencysdecisiontoincludeanactivityin(orexcludeanactivityfrom)theinventory;and  (2)incorporatedtheFAIRActsrequirementthatagencies reviewtheactivitiesontheinventory;thatanagency,eachtimeitconsiderscontractingwithaprivatesectorsourcefortheperformanceofanactivitylistedontheinventory,useacompetitiveprocesstoselectthesource(unlessotherwiseprovided inalawotherthanthisAct,anExecutiveorder,regulations,oranyExecutiveBranchcircular);andthat,whencomparingcosts, allcosts...areconsideredand...arerealisticandfair.  OMBproposedthatagenciesrelyonandimplementtheexistingguidancewithrespecttothecostcomparisoncompetitionrequirementsoftheFAIRAct.Theseproceduresarewellestablishedanddirectagenciestocreateacompetitiveprocessthatcomparescostscompletely,accurately,andfairly.  OMBreceived82responsestoitsrequestforcomments:10Federalagencies,61industryortradegroups,and8employeeorganizationsresponded,inadditionto4lettersfrommembersofCongress.Adiscussionofthesignificantcomments,andOMBsresponsestothosecomments,isprovidedintheAppendixtothisnotice.  Afterconsideringallcommentsreceivedontheproposedguidance,OMBisissuingfinalguidancetotheagenciesforimplementingtheFAIRAct.TheguidanceconsistsofchangestotheA76Circular,itself,aswellasitsSupplementalHandbook.  InordertoimplementtheFAIRAct,OMBismakingseveralchangestotheguidanceasproposedonMarch1:C  $3CH4r` hp x (#XH0   OMBhasrevisedCircularA76,itself,inadditiontotheSupplementalHandbook,toconformtotherequirementsoftheFAIRAct; u (#(# 0   0(#(#  ToensurethatagenciescomplywiththeFAIRActsrequirementforreviewonaninventorywithinareasonabletime,OMBwillnowrequireannualreportsthatwill,amongotherthings,discusstheimplementation,status,andresultsoftheFAIRActprocess; (#(# 0   OMBhasclarified thatagenciesshould,asappropriate,permitemployeeinvolvementinthe ,J(, developmentoftheinventory;-:)-(#(# 0   OMBisrevisingagencyreportingrequirementssothatreportingiscleareronactivitiesthathavebeenconvertedfromcontractperformancetoinhouseperformanceorretainedinhouseasaresultofacostcomparison. u (#(# C  $$CK.` hp x (#` XK0  0` (#(#    ` (#` (#   Withtheissuanceoftheserevisions,agencieshavebeenprovidedguidanceforimplementingtheFAIRAct.OMBwillcontinue,asithasinthepast,toconsultwithindividualagenciesandprovideinformalguidanceasnecessary. III.ExecutiveBranchManagementofCommercialActivitiesGenerally  0    ImplementingtheFAIRActisonlyapartoftheGovernments_reinvention_Ԁandmanagementresponsibilities.Improvingthequality,andreducingthecost,ofcommercialactivitiesisanintegralpartofmanagingtheNationsresources.TheagenciesandOMBhaveanongoingresponsibilitytoensurethattheseactivitiesareperformedinamannerthatiscosteffectiveandinthebestinterestofthetaxpayer.Developinganinventoryofeachagencyscommercialactivitiesisanecessaryfirststepinpursuingthisobjective,onethathasnowbeencodifiedbytheFAIRAct.Oncetheseinventoriesaredeveloped,theywillthenbereviewed,bytheagenciesandOMB,toidentifywaystoimprovetheperformanceoftheFederalGovernmentscommercialactivities.  Equallyimportant,however,ishowtheagenciesmanagetheseactivitiesaftertheyare p identified.Inorderbettertomanagecommercialactivities,OMBrevisedtheSupplementalHandbookin1996.TheRevisedSupplementalHandbookseeksthemostcost-effectivemeansofobtainingcommercialsupportservicesandprovidednewadministrativeflexibilityintheGovernment's makeorbuydecisionprocess.Therevisionmodifiedand,insomecases,eliminatedcostcomparisonrequirementsforrecurringcommercialactivitiesandtheestablishmentofneworexpanded_interservice_Ԁsupportagreements;reducedreportingandotheradministrativeburdens;providedforenhancedemployeeparticipation;easedtransitionrequirementstofacilitateemployeeplacement;maintainedalevelplayingfieldforcostcomparisonsbetweenFederal,_interservice_Ԁsupportagreementandprivatesectoroffers,andimprovedaccountabilityandoversighttoensurethatthemostcosteffectivedecisionisimplemented.  Aspartofthisguidance,OMBisnowtakingtheadditionalstepofrequiringagenciestosubmitannualreportsthatwilldiscusstheimplementation,status,andresultsoftheFAIRActprocess.AswedevelopexperiencewiththeFAIRActandtheseprocedures,wewillconsiderwhetheradditionalguidanceisneeded,eitherforimplementationoftheFAIRActinparticularoronmanagementofcommercialactivitiesingeneral.0  0` (#(#0 ` (#` (#0 (# (#0h(#(#0h(#h(# h  `      `     h   ___________________________ (#(# 0  0` (#(#0 ` (#` (#0 (# (#0h(#(#0h(#h(# h  `      `     h   JacobJ.Lew (#(# 0  0` (#(#0 ` (#` (#0 (# (#0h(#(#0h(#h(# h  `      `     h   Director -P(+(#(#    `     h      p CircularNo.A76(Revised)   `     h      p TransmittalMemorandumNo.20   `     h      p June14,1999TOTHEHEADSOFEXECUTIVEDEPARTMENTSANDAGENCIES0  0` (#(#   SUBJECT: ` ImplementingtheFederalActivitiesInventoryReformActThroughConforming P  ChangestoOMBCircularNo.A76anditsMarch1996RevisedSupplementalHandbook ` (#` (#   ThisTransmittalMemorandumimplementsthestatutoryrequirementsoftheFederalActivitiesInventoryReformAct( TheFAIRAct),PublicLaw105270.Aspartofitslongstandingroleinthereviewandoversightofagencymanagementandtheallocationofresources,OMBhasestablishedpoliciesregardingtheperformanceofcommercialactivitiesbyFederalagencies.ThesepoliciesareoutlinedinOMBCircularNo.A76anditsRevisedSupplementalHandbook.TheFAIRActreinforcedthesepoliciesandprocedures;codifiedcertainrequirementswithrespecttothedevelopmentbyagenciesofanannualcommercialactivitiesinventory,andaddedanopportunityforinterestedpartiestochallengethecontentsoftheannualinventory.  ThechangestotheCircularsRevisedSupplementalHandbook(Attachment1)informagenciesoftheFAIRAct'srequirements;implementthestatutoryrequirementsoftheFAIRAct;avoidduplicationandconfusionbyconformingtheSupplementalHandbooktotheprovisionsoftheFAIRAct;andplacetheFAIRActsrequirementsinthecontextoftheFederalGovernmentslarger_reinvention_,competitionandprivatizationefforts.Asaresultofthesechanges,theCircularisalsobeingupdatedwithconformingchangesnecessarytoreflecttherequirementsoftheFAIRAct(Attachment2).ThepreviousOMBCircularA76waspublishedintheAugust16,1983,FederalRegisteratpages3711037116.TheMarch1996Revised P SupplementalHandbookwasissuedthroughTransmittalMemorandum15,publishedintheApril1,1996,FederalRegisteratpages1433814346. 0   UndertheFAIRAct,agenciesarerequiredtosubmittheircommercialactivityinventoriestoOMBbyJune30thofeachyear,startingthisyear. THEFIRSTFAIRACT "  INVENTORIESARE,THEREFORE,DUEINTWOWEEKS. OMBlooksforwardto #! workingwiththeagenciesduringourreviewoftheseinventories,andstandsreadytoassisttheagenciesastheExecutiveBranchmovesforwardinitsimplementationoftheFAIRAct.  QuestionsregardingtheFAIRActorthisguidancemaybeaddressedtoMr.David_Childs_Ԁ(phone:(202)3956104,Fax:(202)3957230).0  0` (#(#0 ` (#` (#0 (# (#0h(#(#0h(#h(# h  `      `     h   ___________________________ (#(# 0  0` (#(#0 ` (#` (#0 (# (#0h(#(#0h(#h(# h  `      `     h   JacobJ.Lew (#(# 0  0` (#(#0 ` (#` (#0 (# (#0h(#(#0h(#h(# h  `      `     h   Director (#(# Attachments  .0*-    Attachment1     &    RevisionstotheOMBCircularA76March1996RevisedSupplementalHandbook 'K    1.   TheIntroductiontotheSupplementalHandbook(p.iii)isrevisedtoreflectthefactthat   challengestotheactivitieslistedintheCommercialActivitiesInventoryarepermittedundertheFAIRAct,byaddingtotheendofthelastsentenceonpageiiithefollowing:  ...andassetforthinAppendix2,ParagraphG,consistentwithSection3oftheFederalActivitiesInventoryReformActof1998(FAIRAct,_P.L._Ԁ105270). 2.   PartI,Chapter1,paragraphsA,B.1andF,oftheSupplementalHandbook(pp.3,5)are `  revisedtoreflecttherequirementsoftheFAIRAct.Asrevised,paragraphsA,B.1andFreadasfollows:  A.0  General  (#(#   ThisPartsetsforththeprinciplesandproceduresformanagingtheGovernment'sacquisitionofrecurringcommercialsupportactivities,implementingthe FederalActivitiesInventoryReformActof1998( TheFAIRAct),_P.L._Ԁ105270,andCircularA76.Exhibit1summarizestheconditionsthatpermitconversiontoorfrominhouse,contractorInterServiceSupportAgreement(ISSA)performance.TherequirementsoftheFAIRActapplytothefollowingexecutiveagencies:(1)anexecutivedepartmentnamedin5_USC_Ԁ101,(2)amilitarydepartmentnamedin5_USC_Ԁ102,and(3)anindependentestablishmentasdefinedin5_USC_Ԁ104.TherequirementsoftheFAIRActdonotapplyto:(1)theGeneralAccountingOffice,(2)aGovernmentcorporationoraGovernmentcontrolledcorporationasdefinedin5_USC_Ԁ103,(3)anonappropriatedfundsinstrumentalityifallofitsemployeesarereferredtoin5_USC_Ԁ2105(c),or(4)DepotlevelmaintenanceandrepairoftheDepartmentofDefenseasdefinedin10_USC_2460.  B.  InherentlyGovernmentalActivities  "0    1. ` InherentlyGovernmentalactivitiesarenotsubjecttotheFAIRAct,CircularA76 $ " orthisSupplementalHandbook.Asamatterofpolicy,aninherentlyGovernmentalactivityisonethatissointimatelyrelatedtotheexerciseofthepublicinterestastomandateperformancebyFederalemployees.TheOfficeofFederalProcurementPolicy(_OFPP_)PolicyLetter921,datedSeptember23,1992(FederalRegister,September30,1992,page45096),provides (#& guidanceontheidentificationofinherentlyGovernmentalactivities(seeAppendix5).ThisguidanceconformstothedefinitionprovidedatSection5,paragraph2,oftheFAIRAct.  F.  CommercialActivitiesInventory  @,'*   AsrequiredbytheFAIRAct,CircularA76andthisSupplementalHandbook,eachagencywillmaintainadetailedinventoryofallinhousecommercialactivitiesperformedbyits /`*- Governmentemployees.Thisinventory,asdescribedatAppendix2ofthisSupplement,andanysupplementalinformationrequestedbyOMB,willbesubmittednotlaterthanJune30ofeachyear.Agenciesshould,asappropriate,permitemployeeinvolvementinthedevelopmentofthisCommercialActivitiesInventory. 3 .  PartII,Chapter1,ParagraphA.1oftheSupplementalHandbook(p.17)isrevisedby `  addingareferencetotheFAIRAct.Asrevised,ParagraphA.1readsasfollows:  1. ` PartIIprovidesgenericandstreamlinedcostcomparisonguidancetocomplywith 0  theprovisionsoftheFAIRActandCircularA76.ThisincludesguidancefordevelopinginhousecostsbasedupontheGovernment'sMostEfficientOrganization(_MEO_)andotheradjustmentstothecontractandinterservicesupportagreement(ISSA)price.Italsosetsouttheprinciplesfordevelopmentofcostbasedperformancestandardsorothermeasuresthatarecomparabletothoseusedbycommercialsources.Appendices6and7providesectorspecificcostcomparisonguidance. 4 .  ThetitleofAppendix2oftheSupplementalHandbook(p.38)andthecorresponding  entryintheTableofContentsarerevisedfrom OMBCircularNo.A76Inventoryto CommercialActivitiesInventory.PortionsofthisinventoryarenowrequiredbytheFAIRAct,asamatterorlaw. 5.   ParagraphAofAppendix2oftheSupplementalHandbook(p.38)isrevisedinseveral ` ways.TheintroductorysentencesnowrefertotheFAIRAct'srequirementsforaCommercialActivitiesInventoryandincorporateitsduedate(June30th)forsubmissiontoOMBofeachagency'sinventory.Twodataelementsareaddedtotheinventory'sdescriptionofanactivity.Theseadditionaldataelements(gandh,below)correspondtothenewdataelementsrequiredunderSection2(a)(1)and(3)oftheFAIRAct.Inaddition,theexistingdataelementfor Location/organizationunitisbeingseparatedintotwoelements( Locationand OrganizationUnit).Finally,aconcludingsentenceisaddedtoclarifythatagencieshavetheflexibilitytoautomateandstructuretheinventorysolongasallthelisteddataelementsareincluded.Asrevised,ParagraphAreadsasfollows:  A.  AnnualInventorySubmission "    InaccordancewiththeFAIRAct,CircularA76andthisHandbook,eachagencymust $" submittoOMB,byJune30ofeachyear,adetailedCommercialActivitiesInventoryofallcommercialactivitiesperformedbyinhouseemployees,including,ataminimum,thefollowing:0   ` a. Organizationunit.P(#&(#(# 0   ` b. State(s).@)$'(#(# 0   ` c. Location(s).0*%((#(# 0   ` d. _FTE_. +p&)(#(# 0   ` e. Activityfunctioncode.,`'*(#(# 0   ` f. Reasoncode. -P(+(#(# 0  0` (#(#0 ` (#` (# `   ` g. YeartheactivityfirstappearedonFAIRActCommercialActivities -@), Inventory(initialvaluewillbe1999)..0*- (# (# 0  0` (#(#0 ` (#` (# ` h. NameofaFederalemployeeresponsiblefortheactivityorcontactperson  fromwhomadditionalinformationabouttheactivitymaybeobtained.  (# (# 0   ` _i_. Yearofcostcomparisonorconversion(ifapplicable).(#(# 0   ` j. _CIV_/_FTE_Ԁsavings(ifapplicable).(#(# 0   ` k. EstimatedannualizedCostComparisondollarsavings(ifapplicable).p(#(# 0   ` l. DateofcompletedPost_MEO_ԀPerformanceReview(ifapplicable).` (#(# 0   (#(#   Agencieshavethediscretiontoautomateandtostructuretheinitialsubmissionofthedetailedinventoryastheybelievemostappropriate,solongastheinventoryincludeseachofthesedataelements.AgenciesmusttransmitanelectronicversionoftheinventorytoOMBaswellastwopapercopies.Theelectronicversionshouldbeinacommonlyusedsoftwareformat(commercialofftheshelfspreadsheet,databaseorwordprocessingformat).OMBanticipatesissuingadditionalguidanceonthestructureandformatoffutureinventorysubmissions,basedontheexperiencegainedfromthefirstannualreviewandconsultationprocess.̀ 6 .  ToreflecttheFAIRActsrequirementthatinformationonfulltimeemployees(orits  equivalent)beincluded,paragraphCofAppendix2oftheSupplementalHandbook(p.38)hasbeenrevisedasfollows:  C.  _FTE_Ԁ     Enterthenumberofauthorizedfulltimeemployeesor_FTE_Ԁ(asapplicable)inthecommercialactivityfunctionorfunctionsasofthedateoftheinventory.EmployeesperforminginherentlyGovernmentalactivitiesarenotreportedintheCommercialActivitiesInventory. 7 .  ParagraphE A76ReasonCodesofAppendix2oftheSupplementalHandbook(p.38)  p is_retitled_Ԁ ReasonCodes.Thephrase agencyA76inventoriesischangedto CommercialActivitiesInventoryand ReasoncodeEisrevisedandanewreasoncode Iisaddedasfollows:0  0` (#(#     E ` Indicatesthatthefunctionisretainedinhouseasaresultofacostcomparison. ` (#` (# 0  0` (#(#    ` (#` (# 0  0` (#(#     I ` Indicatesthefunctionisbeingperformedinhouseasaresultofacostcomparison "  resultingfromadecisiontoconvertfromcontracttoinhouseperformance. ` (#` (#  8.   Appendix2oftheSupplementalHandbook(p.38)isfurtherrevisedbyaddingthreenew % # paragraphs.Newparagraph GdescribesthereviewandpublicationofthedetailedagencyCommercialActivitiesInventoryandthechallengeandappealsprocesspertainingtoitscontent,asrequiredbytheFAIRAct.Thenewparagraph HincludestheFAIRActsrequirementsthatagenciesreviewthecommercialactivitiesintheirinventoriesanduseacompetitiveprocessorestablishedcostcomparisonprocedureseachtimeanagencyconsiderscontractingwithaprivatesectorsourcefortheperformanceofanactivityontheinventory.Newparagraph IalertsagenciestotherequirementforanannualReportonAgencyManagementofCommercialActivities.Thenewparagraphsreadasfollows:  -@),   G.  InventoryReviewandPublication;ChallengesandAppeals.     1.ReviewandPublication:InaccordancewithSection2oftheFAIRAct,OMBwillreviewtheagency'sCommercialActivitiesInventoryandconsultwiththeagencyregardingitscontent.Afterthisreviewiscompleted,OMBwillpublishanoticeintheFederalRegister p statingthattheinventoryisareavailabletothepublic.Oncethenoticeispublished,theagencywilltransmitacopyofthedetailedCommercialActivitiesInventorytoCongressandmakethematerialsavailabletothepublicthroughitsWashington,D.C.orheadquartersoffices.  2.ChallengesandAppeals:UnderSection3oftheFAIRAct,anagency'sdecisiontoincludeorexcludeaparticularactivityfromtheCommercialActivitiesInventoryissubjecttoadministrativechallengeand,then,possibleappealbyan interestedparty.Section3(b)oftheFAIRActdefines interestedpartyas:0   ` a. Aprivatesectorsourcethat(A)isanactualorprospective_offeror_Ԁforany   contractorotherformofagreementtoperformtheactivity;and(B)hasadirecteconomicinterestinperformingtheactivitythatwouldbeadverselyaffectedbyadeterminationnottoprocuretheperformanceoftheactivityfromaprivatesectorsource. (#(# 0   ` b. Arepresentativeofanybusinessorprofessionalassociationthatincludes  withinitsmembershipprivatesectorsourcesreferredtoina.above. (#(# 0   ` c. Anofficeroremployeeofanorganizationwithinanexecutiveagencythat p isanactualorprospective_offeror_Ԁtoperformtheactivity. (#(# 0   ` d. Theheadofanylabororganizationreferredtoinsection7103(a)(4)of P title5,UnitedStatesCodethatincludeswithinitsmembershipofficersoremployeesofanorganizationreferredtoinc.above. (#(#   3.Aninterestedpartymaysubmittoanexecutiveagencyaninitialchallengetotheinclusionorexclusionofanactivitywithin30calendardaysafterpublicationofOMBsFederal P Registernoticestatingthattheinventoryisavailable.Thechallengemustsetforththeactivity @ beingchallengedwithasmuchspecificityaspossible,andthereasonsfortheinterestedparty'sbeliefthattheparticularactivityshouldbereclassifiedasinherentlyGovernmental(andthereforebedeletedfromtheinventory)orascommercial(andthereforebeaddedtotheinventory)inaccordancewith_OFPP_ԀPolicyLetter921oninherentlyGovernmentalfunctions(seeAppendix5)orasestablishedbyprecedent(suchaswhenotheragencieshavecontractedfortheactivityorundergonecompetitionsforthisorsimilaractivities).  4.XcXXX.Theagencyheadmaydelegatetheresponsibilitytodesignatetheappropriate p&!$ official(s)toreceiveanddecidetheinitialchallenges.X.XXXcԀAsmandatedbytheFAIRAct,the `'"% decidingofficialmustdecidetheinitialchallengeandtransmittotheinterestedpartyawrittennotificationofthedecisionwithin28calendardaysofreceivingthechallenge.Thenotificationmustincludeadiscussionoftherationaleforthedecisionand,ifthedecisionisadverse,anexplanationoftheparty'srighttofileanappeal.  5.Aninterestedpartymayappealanadversedecisiontoaninitialchallengewithin10workingdaysafterreceivingthewrittennotificationofthedecision.XcXXX.Theagencyheadmay -@), delegatetheresponsibilitytoreceiveanddecideappealstotheofficialidentifiedinparagraph9.a .0*- oftheCircular(oranequivalentseniorpolicyofficial),withoutfurtherdelegation.WithinX.XXXcԀ10  workingdaysofreceiptoftheappeal,theofficialmustdecidetheappealandtransmittotheinterestedpartyawrittennotificationofthedecisiontogetherwithadiscussionoftherationaleforthedecision.TheagencymustalsotransmittoOMBandtheCongressacopyofanychangestotheinventorythatresultfromthisprocess,makethechangesavailabletothepublicandpublishanoticeofpublicavailabilityintheFederalRegister.   `  0    H.  AgencyReviewandUseofInventory. @ (#(#   Section2(d)oftheFAIRActrequiresthateachagency,withinareasonabletimeafterthepublicationofthenoticethatitsinventoriesarepubliclyavailable,reviewtheactivitiesonthedetailedcommercialactivitiesinventory.AgencieswillreporttoOMBonthisprocessaspartoftheReportonAgencyManagementofCommercialActivitiesrequiredunderParagraphI,below.Inaddition,Section2(d)(e)oftheFAIRActprovidesthat,eachtimetheheadoftheexecutiveagencyconsiderscontractingwithaprivatesectorsourcefortheperformanceofanactivityincludedontheinventory,theagencymustuseacompetitiveprocesstoselectthesourceandmustensurethat,whenacostcomparisonisusedorotherwiserequiredforthecomparisonofcosts,allcostsareconsideredandthecostsconsideredarerealisticandfair.Incarryingouttheserequirements,agenciesmustrelyontheguidancecontainedinCircularA76andthisSupplementalHandbooktodetermineifcostcomparisonsarerequiredandwhatcompetitivemethodisappropriate.Allcompetitivecostsofinhouseandcontractperformanceareincludedinthecostcomparison,whensuchcomparisonisrequired,includingthecostsofqualityassurance,technicalmonitoring,liabilityinsurance,retirementbenefits,disabilitybenefitsandoverheadthatmaybeallocatedtothefunctionunderstudyormayotherwisebeexpectedtochangeasaresultofchangingthemethodofperformance.  I.  AnnualReportonAgencyManagementofCommercialActivities.  ` AspartofongoingagencyresponsibilitytomanagetheirperformanceofcommercialactivitiesandongoingOMBoversight,OMBwillrequireagenciestoreportannuallyonsuchmanagement.ThecontentofthereportsislikelytovarydependingupontheprogressmadebyeachagencyinreviewingtheirinventoryandontheexperienceOMBgainsfromthefirstroundofinventorysubmissions,review,challengesandappealsmandatedbytheFAIRAct.OMBanticipatesissuingsubsequentguidanceifitdeterminesthatsupplementalreportsorotherinformationisneededforfutureinventorysubmissionstoassurethatagencieshavecorrectlyimplementedalloftheprovisionsoftheFAIRActandtakenadvantageofthemanagementinformationinherentinthedetailedCommercialActivitiesInventory.XX.  p&!$      `     h      p        Attachment2     B.` hp x (#XB  X.X   EXECUTIVEOFFICEOFTHEPRESIDENTOFFICEOFMANAGEMENTANDBUDGETWASHINGTON.D.C.20503  August4,1983(REVISED1999):(#CIRCULARNO.A-76 x  ?+ ` hp x (#X?  B.` hp x (# XBTOTHEHEADSOFEXECUTIVEDEPARTMENTSANDESTABLISHMENTSSUBJECT:PerformanceofCommercialActivities1.    Purpose.ThisCircularestablishesFederalpolicyregardingtheperformanceofcommercial h  activitiesandimplementsthestatutoryrequirementsoftheFederalActivitiesInventoryReformActof1998,PublicLaw105-270.TheSupplementtothisCircularsetsforththeproceduresfordeterminingwhethercommercialactivitiesshouldbeperformedundercontractwithcommercialsourcesorinhouseusingGovernmentfacilitiesandpersonnel.2.  Rescission.OMBCircularNo.A76(Revised),datedMarch29,1979;and  TransmittalMemoranda1through14and16through18.B.` hp x (#XB3.  Authority.TheBudgetandAccountingActof1921(31U.S.C.1etseq.),TheOfficeof  FederalProcurementPolicyActAmendmentsof1979.(41U.S.C.401etseq.),andTheFederal x ActivitiesInventoryReformActof1998.(P.L.105-270).4.  Background. H   a. ` Intheprocessofgoverning,theGovernmentshouldnotcompetewithitscitizens. (x ?+` ` hp x (#X? PThecompetitiveenterprisesystem,characterizedbyindividualfreedomandinitiative,istheprimarysourceofnationaleconomicstrength.Inrecognitionofthisprinciple,ithasbeenandcontinuestobethegeneralpolicyoftheGovernmenttorelyoncommercialsourcestosupplytheproductsandservicestheGovernmentneeds. PB.` hp x (#` XB  b. ` ThisnationalpolicywaspromulgatedthroughBureauoftheBudgetBulletins #! issuedin1955,1957and1960.OMBCircularNo.A76wasissuedin1966.TheCircularwaspreviouslyrevisedin1967,1979,and1983.TheSupplement(RevisedSupplementalHandbook)waspreviouslyrevisedinMarch1996(TransmittalMemorandum15).B.` hp x (#XB5.  Policy.ItisthepolicyoftheUnitedStatesGovernmentto: x(#& ?+ ` hp x (#X?  h)$'  B.` hp x (#XB  a. ` AchieveEconomyandEnhanceProductivity.Competitionenhancesquality, X*%( ?+` ` hp x (#X? Peconomy,andproductivity.WhenevercommercialsectorperformanceofaGovernmentoperatedcommercialactivityispermissible,inaccordancewiththisCircularandits Supplement,comparison 8,'* ofthecostofcontractingandthecostofinhouseperformanceshallbeperformedtodeterminewhowilldothework.Whenconductingcostcomparisons,agenciesmustensurethatallcostsareconsideredandthatthesecostsarerealisticandfair. B.` hp x (#` XB /X*- Ї P  b. ` RetainGovernmentalFunctionsInHouse.Certainfunctionsareinherently  Governmentalinnature,beingsointimatelyrelatedtothepublicinterestastomandateperformanceonlybyFederalemployees.Thesefunctionsarenotincompetitionwiththecommercialsector.Therefore,thesefunctionsshallbeperformedbyGovernmentemployees.B.` hp x (#XB  c. ` RelyontheCommercialSector.TheFederalGovernmentshallrelyoncommercially `  availablesourcestoprovidecommercialproductsandservices.InaccordancewiththeprovisionsofthisCircularanditsSupplement,theGovernmentshallnotstartorcarryonanyactivitytoprovideacommercialproductorserviceiftheproductorservicecanbeprocuredmoreeconomicallyfromacommercialsource.   p  B.` hp x (#XB6.  Definitions.ForpurposesofthisCircular: P  ?+ ` hp x (#X?  @   B.` hp x (#XB  a. ` AcommercialactivityisonewhichisoperatedbyaFederalexecutiveagencyand 0  whichprovidesaproductorservicethatcouldbeobtainedfromacommercialsource.ActivitiesthatmeetthedefinitionofaninherentlyGovernmentalfunctionprovidedbelowarenotcommercialactivities.ArepresentativelistofcommercialactivitiesisprovidedinAttachmentA.Acommercialactivityalsomaybepartofanorganizationoratypeofworkthatisseparablefromotherfunctionsoractivitiesandissuitableforperformancebycontract.  b. ` AconversiontocontractisthechangeoverofanactivityfromGovernment p performancetoperformanceundercontractbyacommercialsource.  ` B.` hp x (#XB  c. ` Aconversiontoinhouseisthechangeoverofanactivityfromperformanceunder @ contracttoGovernmentperformance.B.` hp x (#XB  d. ` AcommercialsourceisabusinessorothernonFederalactivitylocatedintheUnited ` States,itsterritoriesandpossessions,theDistrictofColumbiaortheCommonwealthofPuertoRico,whichprovidesacommercialproductorservice.  @ B.` hp x (#XB  e. ` AnXcXX X.inherentlyGovernmentalfunctionisafunctionwhichissointimatelyrelatedto   thepublicinterestastomandateperformancebyGovernmentemployees.ConsistentwiththedefinitionsprovidedintheFederalActivitiesInventoryReformActof1998and_OFPP_ԀPolicyLetter92-1,thesefunctionsincludethoseactivitieswhichrequireeithertheexerciseofdiscretioninapplyingGovernmentauthorityortheuseofvaluejudgmentinmakingdecisionsfortheGovernment.ServicesorproductsinsupportofinherentlyGovernmentalfunctions,suchasthoselistedinAttachmentA,arecommercialactivitiesandarenormallysubjecttothisCircular.InherentlyGovernmentalfunctionsnormallyfallintotwocategories:B.` hp x (#XB0   ` (1) Theactofgoverning;i.e.,thediscretionaryexerciseofGovernmentauthority. @)$' Examplesincludecriminalinvestigations,prosecutionsandotherjudicialfunctions;managementofGovernmentprogramsrequiringvaluejudgments,asindirectionofthenationaldefense;managementanddirectionoftheArmedServices;activitiesperformedexclusivelybymilitarypersonnelwhoaresubjecttodeploymentinacombat,combatsupportorcombatservicesupportrole;conductofforeignrelations;selectionofprogrampriorities;directionofFederalemployees;regulationoftheuseofspace,oceans,navigable .0*- riversandothernaturalresources;directionofintelligenceandcounterintelligenceoperations;andregulationofindustryandcommerce,includingfoodanddrugs. (#(# ?+ ` hp x (#X? 0   ` (2) Monetarytransactionsandentitlements,suchastaxcollectionandrevenue  disbursements;controloftheTreasuryaccountsandmoneysupply;andtheadministrationofpublictrusts. (#(# C %&'()*+,  $C X.XXXc?+` ` hp x (# X? P PB.` hp x (#` XB  f. ` Acostcomparisonistheprocessofdevelopinganestimateofthecostof @  Governmentperformanceofacommercialactivityandcomparingit,inaccordancewiththerequirementsoftheSupplement,tothecosttotheGovernmentforcontractperformanceoftheactivity.  `     g. ` DirectlyaffectedpartiesareFederalemployeesandtheirrepresentativeorganizations @  andbiddersor_offerors_Ԁontheinstantsolicitation.?+` ` hp x (#X?B.` hp x (#` XB  h. ` InterestedpartiesforpurposesofchallengingthecontentsofanagencysCommercial  ActivitiesInventoryundertheFederalActivitiesInventoryReformActof1998are:?+` ` hp x (#X? P0   ` (1) Aprivatesectorsourcethat(A)isanactualorprospective_offeror_Ԁforany  contractorotherformofagreementtoperformtheactivity;and(B)hasadirecteconomicinterestinperformingtheactivitythatwouldbeadverselyaffectedbyadeterminationnottoprocuretheperformanceoftheactivityfromaprivatesectorsource. (#(# 0   ` (2) Arepresentativeofanybusinessorprofessionalassociationthatincludes @ withinitsmembershipprivatesectorsourcesreferredtoin(1)above. (#(# 0   ` (3) Anofficeroremployeeofanorganizationwithinanexecutiveagencythatis ` anactualorprospective_offeror_Ԁtoperformtheactivity. (#(# 0   ` (4) Theheadofanylabororganizationreferredtoinsection7103(a)(4)of 0 Title5,UnitedStatesCodethatincludeswithinitsmembershipofficersoremployeesofanorganizationreferredtoin(3)above. (#(# B.` hp x (#` XB7.  Scope. #! ?+ ` hp x (#X? P $"  B.` hp x (#XB  a. ` Unlessotherwiseprovidedbylaw,thisCircularanditsSupplementshallapplytoall % # executiveagenciesandshallprovideadministrativedirectiontoheadsofagencies.  p&!$   b. ` ThisCircularanditsSupplementapplytoprintingandbindingonlyinthoseagencies P(#& ordepartmentswhichareexemptedbylawfromtheprovisionsofTitle44oftheU.S.Code.  @)$'   c. ` ThisCircularanditsSupplementshallnot:  +p&) ?+` ` hp x (#X? P PB.` hp x (#` XB0   ` (1) Beapplicablewhencontrarytolaw,ExecutiveOrders,oranytreatyor -P(+ internationalagreement; (#(# ?+ ` hp x (#X?  .0*-  B.` hp x (# XB0   ` (2) ApplytoinherentlyGovernmentalfunctionsasdefinedinparagraph6._e._;(#(# ?+ ` hp x (#X?  B.` hp x (# XB0   ` (3) ApplytotheDepartmentofDefenseintimesofadeclaredwarormilitary  mobilization; (#(# ?+ ` hp x (#X?  B.` hp x (# XB0   ` (4) Provideauthoritytoenterintocontracts;` (#(# ?+ ` hp x (#X?  B.` hp x (# XB0   ` (5) Authorizecontractswhichestablishanemployeremployeerelationship @  betweentheGovernmentandcontractoremployees.Anemployeremployeerelationshipinvolvesclose,continualsupervisionofindividualcontractoremployeesbyGovernmentemployees,asdistinguishedfromgeneraloversightofcontractoroperations.However,limitedandnecessaryinteractionbetweenGovernmentemployeesandcontractoremployees,particularlyduringthetransitionperiodofconversiontocontract,doesnotestablishanemployeremployeerelationship. (#(# ЀB.` hp x (#XB0  X.XX X. ` (6) Beusedtojustifyconversiontocontractsolelytoavoidpersonnelceilings  orsalarylimitations; (#(# ?+ ` hp x (#X?  B.` hp x (# XB0   ` (7) Applytotheconductofresearchanddevelopment.However,severablein  housecommercialactivitiesinsupportofresearchanddevelopment,suchasthoselistedinAttachmentA,arenormallysubjecttothisCircularanditsSupplement;or (#(# ?+ ` hp x (#X?  B.` hp x (# XB0   ` (8) Establishandshallnotbeconstruedtocreateanysubstantiveorprocedural P basisforanyonetochallengeanyagencyactionorinactiononthebasisthatsuchactionorinactionwasnotinaccordancewiththisCircular,exceptasspecificallysetforthinPart1,Chapter3,paragraphKoftheSupplement, AppealsofCostComparisonDecisionsandassetforthinAppendix2,ParagraphG,consistentwithSection3oftheFederalActivitiesInventoryReformActof1998. X.XXX.P(#(#   d. ` TherequirementsoftheFederalActivitiesInventoryReformActX.XX X.Ԁof1998applyto 0 thefollowingexecutiveagencies:   ` (1) anexecutivedepartmentnamedin5_USC_Ԁ101, "       ` (2) amilitarydepartmentnamedin5_USC_Ԁ102,and $"      ` (3) anindependentestablishmentasdefinedin5_USC_Ԁ104. p&!$  X.XXX.B.` hp x (#XB  e.TherequirementsoftheFederalActivitiesInventoryReformActof1998donotapplytothefollowingentitiesoractivities:X.XX X.   ` (1) theGeneralAccountingOffice,  +p&) 0   (#(# 0      ` (2) aGovernmentcorporationoraGovernmentcontrolledcorporationasdefined -P(+ in5_USC_Ԁ103, (#(# 0  .0*-(#(# 0      ` (3) anon-appropriatedfundsinstrumentalityifallofitsemployeesarereferred  toin5_USC_Ԁ2105(c),or (#(# 0   ` (4) Depot-levelmaintenanceandrepairoftheDepartmentofDefenseasdefined  in10_USC_Ԁ2460. (#(#  X.XXX.B.` hp x (#XB8.  GovernmentPerformanceofaCommercialActivity.Governmentperformanceof P  acommercialactivityisauthorizedunderanyofthefollowingconditions:  @  B.` hp x (#XB  a. ` NoSatisfactoryCommercialSourceAvailable.Eithernocommercialsourceis  p  capableofprovidingtheneededproductorservice,oruseofsuchasourcewouldcauseunacceptabledelayordisruptionofanessentialprogram.Findingsshallbesupportedasfollows:B.` hp x (#XB0   ` (1) Ifthefindingisthatnocommercialsourceiscapableofprovidingtheneeded 0  productorservice,theeffortsmadetofindcommercialsourcesmustbedocumentedandmadeavailabletothepublicuponrequest.Theseeffortsshallinclude,inadditiontoconsiderationofpreferentialprocurementprograms(seePartI,Chapter1,paragraphCoftheSupplement)atleastthreenoticesdescribingtherequirementintheCommerceBusiness  Dailyovera90dayperiodor,incasesofbonafideurgency,twonoticesovera30day  period.SpecificationsandrequirementsinthesolicitationshallnotbeundulyrestrictiveandshallnotexceedthoserequiredofinhouseGovernmentpersonneloroperations. ?+ ` hp x (#X?p(#(#   B.` hp x (# XB0   ` (2) Ifthefindingisthatacommercialsourcewouldcauseunacceptabledelayor P disruptionofanagencyprogram,awrittenexplanation,approvedbytheassistantsecretaryordesigneeinparagraph9.a.oftheCircular,mustshowthespecificimpactonanagencymissionintermsofcostandperformance.Urgencyaloneisnotadequatereasontocontinueinhouseoperationofacommercialactivity.Temporarydisruptionresultingfromconversiontocontractisnotsufficientsupportforsuchafinding,noristhepossibilityofastrikebycontractemployees.Ifthecommercialactivityhaseverbeenperformedbycontract,anexplanationofhowtheinstantcircumstancesdiffermustbedocumented.Thesedecisionsmustbemadeavailabletothepublicuponrequest. (#(# ?+ ` hp x (#X? 0   ` (3) Activitiesmaynotbejustifiedforinhouseperformancesolelyonthebasis "  thattheactivityinvolvesorsupportsaclassifiedprogramortheactivityisrequiredtoperformanagency'sbasicmission. (#(#  B.` hp x (# XB  b. ` NationalDefense. p&!$ ?+` ` hp x (#X? P PB.` hp x (#` XB0   ` (1) TheSecretaryofDefenseshallestablishcriteriafordeterminingwhen P(#& Governmentperformanceofacommercialactivityisrequiredfornationaldefensereasons.SuchcriteriashallbefurnishedtoOMB,uponrequest. (#(# ?+ ` hp x (#X?  B.` hp x (# XB0   ` (2) OnlytheSecretaryofDefenseorhisdesigneehastheauthoritytoexempt ,`'* commercialactivitiesfornationaldefensereasons. (#(# ?+ ` hp x (#X?  B.` hp x (# XB  .0*-   c. ` PatientCare.Commercialactivitiesperformedathospitalsoperatedbythe  Governmentshallberetainedinhouseiftheagencyhead,inconsultationwiththeagency'schiefmedicaldirector,determinesthatinhouseperformancewouldbeinthebestinterestsofdirectpatientcare.B.` hp x (#XB  d. ` Lowercost.Governmentperformanceofacommercialactivityisauthorizedifa `  costcomparisonpreparedinaccordancewiththeSupplementdemonstratesthattheGovernmentisoperatingorcanoperatetheactivityonanongoingbasisatanestimatedlowercostthanaqualifiedcommercialsource.  0  B.` hp x (#XB9.  ActionRequirements.ToensurethattheprovisionsofthisCircularanditsSupplementare `  followed,eachagencyheadshall:?+ ` hp x (#X?  @   B.` hp x (#XB  a. ` Designateanofficialattheassistantsecretaryorequivalentlevelandofficialsata?+` ` hp x (#X? 0   Pcomparablelevelinmajorcomponentorganizationstohaveresponsibilityforimplementationof PB.` hp x (#` XBthisCircularanditsSupplementwithintheagency.  b. ` Establishoneormoreofficesascentralpointsofcontacttocarryoutimplementation.  TheseofficesshallhaveaccesstoalldocumentsanddatapertinenttoactionstakenundertheCircularanditsSupplementandwillrespondinatimelymannertoallrequestsconcerninginventories,schedules,reviews,resultsofcostcomparisonsandcostcomparisondata.B.` hp x (#XB  c. ` BeguidedbyFederalAcquisitionRegulation(FAR)Subpart24.2(Freedomof P InformationAct)inconsideringrequestsforinformation.?+` ` hp x (#X? P PB.` hp x (#` XB  d. ` ImplementthisCircularanditsSupplement withaminimumofinternalinstructions.  p Costcomparisonsshallnotbedelayedpendingissuanceofsuchinstructions.  `  B.` hp x (#XB  e. ` Ensurethereviewsofallexistinginhousecommercialactivitiesarecompleted @ withinareasonabletimeinaccordancewiththeFederalActivitiesInventoryReformActof1998andtheSupplement.B.` hp x (#XB10.  AnnualReportingRequirement.AsrequiredbytheFederalActivitiesInventoryReform "  Actof1998andAppendix2oftheSupplement,nolaterthanJune30ofeachyear,agenciesshallsubmittoOMBaCommercialActivitiesInventoryandanysupplementalinformationrequestedbyOMB.AfterreviewandconsultationbyOMB,agencieswilltransmitacopyoftheCommercialActivitiesInventorytoCongressandmakethecontentsoftheInventoryavailabletothepublic.AgencieswillfollowtheprocessprovidedintheSupplementforinterestedpartiestochallenge(andappeal)thecontentsoftheinventory.B.` hp x (#XB11.  OMBResponsibilityandContactPoint.Allquestionsorinquiriesshouldbesubmittedto 0*%( theOfficeofManagementandBudget,Room6002_NEOB_,Washington,DC20503.Telephonenumber(202)3956104,FAX(202)395-7230.B.` hp x (#XB12.  EffectiveDate.ThisCircularandthechangestoitsSupplementareeffectiveimmediately. -@), B.` hp x (#XB  .0*- X ^- _X X. ^- _ _ ^-  AttachmentA  OMBCircularNo.A-76  EXAMPLESOFCOMMERCIALACTIVITIES  (<X<T$T$( ,q , _ ^-AudiovisualProductsandServices 8 ̀Photography(still,movie,aerial,etc.)̀Photographicprocessing(developing,printing,enlarging,etc.)̀Filmandvideotapeproduction(scriptwriting,direction,animation,editing,acting,etc.)̀Microfilmingandothermicroforms̀Artandgraphicsservices̀Distributionofaudiovisualmaterials̀Reproductionandduplicationofaudiovisualproducts̀AudiovisualfacilitymanagementandoperatioǹMaintenanceofaudiovisualequipmentAutomaticDataProcessing̀ADPservices-batchprocessing,time-sharing,facilitymanagement,etc.̀Programmingandsystemsanalysis,design,development,andsimulatioǹKeypunching,dataentry,transmission,andteleprocessingservices̀SystemsengineeringandinstallatioǹEquipmentinstallation,operation,andmaintenanceFoodServices̀Operationofcafeterias,messhalls,kitchens,bakeries,dairies,andcommissaries̀Vendingmachines̀IceandwaterHealthServices̀Surgical,medical,dental,andpsychiatriccarèHospitalization,outpatient,andnursingcarèPhysicalexaminations̀Eyeandhearingexaminationsandmanufacturingandfittingglassesandhearingaids̀Medicalanddentallaboratories̀Dispensaries̀PreventivemedicinèDietaryservices̀VeterinaryservicesIndustrialShopsandServices̀Machine,carpentry,electrical,plumbing,painting,andothershops̀Industrialgasproductionandrecharging̀Equipmentandinstrumentfabrication,repairandcalibratioǹPlumbing,heating,electrical,andairconditioningservices,includingrepair̀Fireprotectionandpreventionservices̀Custodialandjanitorialservices̀RefusecollectionandprocessingMaintenance,Overhaul,Repair,andTesting̀Aircraftandaircraftcomponents̀Ships,boats,andcomponents̀Motorvehicles̀Combatvehicles̀Railwaysystems̀Electronicequipmentandsystems̀Weaponsandweaponsystems̀Medicalanddentalequipment̀Officefurnitureandequipment̀Industrialplantequipment̀Photographicequipment̀SpacesystemsManagementSupportServices̀Advertisingandpublicrelationsservices̀Financialandpayrollservices̀DebtcollectionManufacturing,Fabrication,Processing,Testing,andPackaging̀Ordnanceequipment̀Clothingandfabricproducts̀Liquid,gaseous,andchemicalproducts̀Lumberproducts̀Communicationsandelectronicsequipment̀Rubberandplasticproducts̀Opticalandrelatedproducts̀Sheetmetalandfoundryproducts̀Machinedproducts̀Constructionmaterials̀TestandinstrumentationequipmentOfficeandAdministrativeServices̀Libraryoperations̀Stenographicrecordingandtranscribing̀Wordprocessing/dataentry/typingservices̀Mail/messenger̀TranslatioǹManagementinformationsystems,productsanddistributioǹFinancialauditingandservices d0,_ ЀComplianceauditing̀Courtreporting̀Materialmanagement̀SupplyservicesOtherServices̀Laundryanddrycleaning̀Mappingandcharting̀Architectandengineerservices̀Geologicalsurveys̀Cataloging̀Training--academic,technical,vocational,andspecializedOperationofutilitysystems̀(power,gas,watersteam,andsewage)̀LaboratorytestingservicesPrintingandReproductioǹFacilitymanagementandoperatioǹPrintingandbinding--wheretheagencyordepartmentisexemptedfromtheprovisionsof̀Title44oftheU.S.CodèReproduction,copying,andduplicatioǹBlueprintingRealPropertỳDesign,engineering,construction,modification,repair,andmaintenanceofbuildingsand̀structures;buildingmechanicalandelectricalequipmentandsystems;elevators;escalators;̀movingwalks̀Construction,alteration,repair,andmaintenanceofroadsandothersurfacedareas̀Landscaping,drainage,mowingandcareofgrounds̀DredgingofwaterwaysSecuritỳGuardandprotectiveservices̀Systemsengineering,installation,andmaintenanceofsecuritysystemsandindividual̀privacysystems̀ForensiclaboratoriesSpecialStudiesandAnalyses̀Costbenefitanalyses̀Statisticalanalyses̀Scientificdatastudies̀Regulatorystudies̀Defense,education,energystudies̀Legal/litigationstudies̀ManagementstudiesSystemsEngineering,Installation,Operation,Maintenance,andTesting̀Communicationssystems-voice,message,data,radio,wire,microwave,andsatellitèMissileranges̀SatellitetrackinganddataacquisitioǹRadardetectionandtracking̀Televisionsystems-studioandtransmissionequipment,distributionsystems,receivers,0 p 0pT$pT$0 T$T$0x T$ T$0 xT$xT$0(# T$ T$ x   p  antennas,etc. (#T$(#T$ ЀRecreationalareas̀BulkstoragefacilitiesTransportatioǹOperationofmotorpools̀BusservicèVehicleoperationandmaintenancèAir,water,andlandtransportationofpeopleandthings̀Truckingandhauling  &#     (<X<(&     X.X , ,q X.XX X. x Appendix     .& A   B.` hp x (#XB                   SummaryofCommentsReceived    _.!andl l                 XX'1  l l  _ D OMBreceived82responsestoitsMarch1,1999,FederalRegisterrequestfor  x comments:10Federalagencies;61industryortradegroups,and8employeeorganizationsresponded,inadditionto4lettersfrommembersofCongress.Adiscussionofthesignificantcomments,andOMBsresponses(includingresultingchangesthathavebeenmadetoCircularA76anditsSupplementalHandbook),isprovidedbelow.&  0 D 0 D"D" D  1. D TheDevelopmentandSubmissionoftheCommercialActivitiesInventory   " "  D OMBreceivedanumberofcommentsregardingtheproposedrevisionstoAppendix2oftheSupplementalHandbookthataddresstherequirementinSection2(a)oftheFAIRActthatagenciesdevelopandsubmittoOMB,byJune30thofeachyear, alistofactivities \ performedbyFederalGovernmentsourcesfortheexecutiveagencythat,inthejudgmentoftheheadoftheexecutiveagency,arenotinherentlyGovernmentalfunctions.'  D a.Comment:Oneagency_commenter_Ԁstatedthatitwouldbeburdensomeforthe  agencytoincludeintheagencysinventorythenameofaFederalemployeewithrespecttoeachlistedcommercialactivity. D Response:ThisdataelementisspecificallyrequiredbySection2(a)(3)oftheFAIR X Actitself.0 D  D"D"  D b.Comment:Several_commenters_Ԁaskedforchangestothedataelementstoprevent ( anyimplicationthatagencysavingscouldonlybeachievedby outsourcing(convertingworkfrominhousetocontractperformance)butnotby _insourcing_(convertingworkfromcontracttoinhouseperformance).Specifically,the_commenters_ԀaskedthatOMBdeletethecommercialactivitydataelementfor _CIV_/_FTE_ԀSavings(itemg,oftheSupplementalHandbooksAppendix2).The_commenters_Ԁalsoaskedforsavingsinformationtobecollectedwhenaconversionisfromcontracttoinhouseperformance.Finally,the_commenters_Ԁaskedthatagenciesprovide,aspartofthedatathatiscollectedpursuanttoparagraph FinAppendix2oftheHandbook,aggregatedataonthenumbersofcontractoremployeesperformingworkfortheagency. D Response:ThecostcomparisonprocessunderCircularA76providesalevel 'x$& playingfieldforagenciestodeterminewhethersavingswouldresultfromaconversionofwork,whetherthatconversionisfrominhousetocontractperformanceorfromcontracttoinhouseperformance.Moreover,thecostcomparisonprocesscanresultinsavingsevenifnoconversionoccurs.Thecommercialactivitydataelementfor _CIV_/_FTE_ԀSavingsreflectsthenumberofcivilian_FTE_Ԁsavedasaresultofconductingacostcomparison,whetherthefunctionisretainedinhouseorconvertedtocontract.Thisdataelement,therefore,isnotmeanttosuggestthatsavingscanonlyoccurthroughoutsourcing. |/+.  D Withrespecttotherequestforadditionalinformationonsavingsthatresultfromconversionsfromcontracttoinhouseperformance,theinventorieswillincludeanadditionaldataelement(a reasoncode)toidentifythosecommercialactivitiesthatare beingperformedinhouseasaresultofacostcomparisonresultinginadecisiontoconvertfromcontracttoinhouseperformance(newreasoncode I).Acorrespondingchangehasbeenmadetolimitreasoncode Etofunctionsretainedinhouseasaresultofacostcomparison.TherequestforinformationontheaggregatenumberofagencycontractoremployeesisbeyondthescopeoftheFAIRAct,whichislimitedtoperformanceofcommercialactivitiesbyFederalemployees.0 D  D"D" Ѐ D c.Comment:Severalcommenterssuggestedthatadditional reasoncodesbe  p  includedthatwouldidentifycommercialfunctionsthat,intheagencysview,shouldnotbesubjecttoconversiontocontractbecauseofitsneedforacadreofhighlyskilledemployees,inaspecializedtechnicalorscientificdevelopmentarea,toensurethataminimuminhousecapability( corecapability)intheareaismaintained. D Response:Theinclusionofafunctionontheagencysinventoryofcommercial  activitiesdoesnotmeanthattheagencyisrequiredtocompetethefunctionforoutsourcing.Rather,theFAIRActinSection2(d)requireseachagencytoreviewitsinventoryofcommercialactivities.Presumably,thisreviewwouldincludeconsiderationofoutsourcing,consolidation,privatization,otherreinventionalternativesormaintainingthestatusquo.Not T allcommercialactivitiesperformedbyFederalemployeesshouldbeperformedbytheprivatesector,thoughallsuchactivitiesshouldbeinventoriedundertheprovisionsoftheFAIRActandCircularA76.Thedecisionastowhichcommercialfunctionsrepresent corecapabilities,andthusshouldberetainedinhouse,remainswiththeagencyhead.Accordingly,aspecificreasoncodefor corecapabilitywasnotaddedtotheinventory. D d.Comment:Anumberofcommentersrequestedthattheinventorybeexpandedto ` includeinherentlyGovernmentalpositions,alongthelinesoftheinformationrequestedoftheagenciesonMay12,1998(MemorandumM9810, InventoryofCommercialActivities). D Response:TheFAIRActrequiresagenciestodevelopaninventoryoftheagency   activitiesthat arenotinherentlyGovernmentalfunctions.TheFAIRActdoesnotrequestanyinformationoninherentlyGovernmentalactivities;itsfocusislimitedtocommercialactivities. D AspartofitspreFAIRActoversightfunctiontoevaluatehowagenciesdeterminewhatfunctionsperformedbyFederalemployeesareclassifiedascommercial,OMBrequestedsummaryinformationfromagenciesthatalsoincludedfunctionstheyclassifiedasnotcommercial(i.e.,inherentlyGovernmentalfunctions).WhenOMBconductsitsFAIRActreviewandconsultationontheCommercialActivitiesInventorysubmissions,itwilldosoinlightoftheinformationgainedfromitsreviewoftheagenciesresponsestoOMBsMemorandumM9810.̀ D e.Comment:Severalcommentersexpressedtheirviewsastowhichpositionsinthe *`'* DepartmentofDefenseshouldbedesignatedasinherentlyGovernmentaland,therefore,excludedfromtheCommercialActivitiesInventory. D Response:UndertheFAIRAct,theagencyheadmakesthedeterminationofwhich . +. activitiesaretobeexcludedfromtheCommercialActivitiesInventorybecausetheyare /,/  inherentlyGovernmental,asdefinedbytheActandexistingguidance.PartofOMBsreviewoftheagenciessubmissionswillbetoreviewthesejudgments,andtoconsultwiththeagenciesonthem. D f.Comment:OnecommenterinterpretedtheActsuseoftheterm fulltime D employees(oritsequivalent)tomeanthattheActappliedonlytocivilianemployeesand,thus,toexcludemilitarypositionsfromtheActsCommercialActivitiesInventoryrequirement. D Response:AllactivitiesoftheFederalGovernmentthat arenotinherently  p  GovernmentalaretobeinventoriedundertheFAIRAct.Thisrequirementisnotlimitedtocivilianemployees.Accordingly,militarypersonnelperformingcommercialactivitiesaresubjecttotheFAIRActandmustbeinventoried.Forclarity,thedataelementFTEdescribedinAppendix2,paragraph Chasbeenclarifiedtoinclude authorizedfulltimeemployeesorFTE(asapplicable). D g.Commentc:cd:d񀀀Severalcommentersstatedthatagenciesshould,inaccordancewiththe  principlesofExecutiveOrder12871( LaborManagementPartnerships),permitemployeeinvolvementinthedevelopmentoftheagenciesinventoriesofcommercialactivities. D Response:ExecutiveOrder12871doesapply.Agenciesshouldseekemployeeinput D inthedevelopmentoftheCommercialActivitiesInventory,asappropriate,andtheguidancehasbeenrevisedtosayso.ItremainsuptotheagencyheadtomakethedeterminationwhetherafunctioniscommercialorinherentlyGovernmentalinnature.TheFAIRActalsoprovidesthatFederalemployeesandtheirrepresentativesare interestedpartieswhomaychallengethecontentsoftheinventory.& ` 0 D  2. D OMBsReviewoftheCommercialActivitiesInventoryandtheAvailabilityofthe P InventoriestothePublic @D"D"  D a.Commente:ef:f񀀀UnderSection2(b)oftheFAIRAct,OMB shallreviewtheexecutive   agencyslistforafiscalyearandconsultwiththeheadoftheexecutiveagencyregardingthecontentsofthefinallistforthatfiscalyear.Whenthatreviewandconsultationiscompleted,theinventoryisthenmadeavailabletothepublicunderSection2(c),withanoticeofavailabilitypublishedbyOMBintheFederalRegister.Severalcommentersexpressedconcern d#" thattheFAIRActdidnotestablishatimetableforOMBsreviewofagencyinventoriesortheiravailabilityforpublicreview.'` &8 D Response:OMBintendstocompleteitsreviewandconsultationinatimely $'#& manner.Sincethisisanewprocess,OMBcannotsetafirmtimetableatthistime.However,itisanticipatedthatthereviewandconsultationshouldtakeabout60daysafterOMBreceivestheagencyinventoryandanyrequestedsupplementalinformation.Thenoticeoftheinventoryspublicavailabilitywouldbepublishedwithinafewdaysthereafter.  *`'*  D b.Commentg:gh:h񀀀Severalcommentersstatedthat,ifanemployeesactivitiesare ,@), consideredcommercialandarethereforeincludedontheagencyslist,theHandbookshouldrequiretimelynotificationtothoseemployees. /,/  D Response:InaccordancewithSection2(c)oftheFAIRAct,OMBwillpublisha  noticeintheFederalRegisterwhentheinventoriesareavailabletothepublic(afterthe t completionofOMBsreviewandconsultation).TheFAIRActandtherevisedHandbookrequireeachagencytomakeitsinventoryavailabletothepublic,which,ofcourse,includesitsemployeesandtheirrepresentatives.  D & p 3. D Competitionand CostComparisonProvisions  $   D a.Comment:Section2(d)oftheFAIRActprovidesthat, [w]ithinareasonabletime   afteranagencysinventoryhasbeenmadeavailabletothepublic,theheadoftheagency shallreviewtheactivitiesonthelist.SeveralcommentersrecommendedthatOMBdefinewhatconstitutesa reasonabletimefortheagencytoreviewitsinventoryofcommercialactivities.Onecommentersuggestedatimeframeof1to2years,dependingonthenumberofcommercialactivitiesonanagencysinventory.Onecommenteralsosuggestedthatagenciesshouldberequiredtopublishforpubliccommenttheirtimetableforreviewingtheinventory.'p$ @ D Responsek:kl:l񀀀TheFAIRActdoesnotprovideadefinitionofthephrase reasonable  time.OMBbelievesthatagenciesshouldconductsuchreviewinconjunctionwiththeirlargerongoingreviewofallfunctionsforpossiblereengineering,privatization,consolidationorotherreinventionundertheNPRandtheGovernmentPerformanceandResultsAct.Aspartofitsongoingoversightofagencymanagementofcommercialactivitiesperformance,OMBwillnowrequireagenciestoprovideannualreportstoOMBontheFAIRActprocess,includingtheirreviewanduseoftheCommercialActivitiesInventory. D b.Commentm:mn:n񀀀Severalcommenterstookissuewiththestatementinthepreambletothe  proposalthat theFAIRActrequiresagencies...toreviewtheactivitiesonthelistforpossibleperformancebytheprivatesector.(64FR10031)TheypointedoutthatSection2(d)oftheFAIRActdoesnotspecifyaparticularpurposeforthereview. D Responseo:op:pTheFAIRActinventoryprovidesinformationthatcanassisttheagency 0 inconsideringawidevarietyofoptionsforhowtosatisfyitscommercialactivityneedsthatareperformedbyFederalemployees.Theseoptionsincludeboththepossibilityoftheprivatesectorfulfillingtheneed(throughsuchactionsasdirectconversion,competition,andprivatization),aswellascontinuedagencyrelianceonFederalemployees(with,perhaps,improvementsthatcanflowfromprocesschangessuggestedinthecompetition). D c.Commentq:qr:r񀀀SeveralcommentersinterpretedSection2(d)oftheFAIRActas D%!$ permittingthedirectconversion,withoutacostcomparison, ofanycommercialactivityonthe 4&"% list(ofanysizeortype)toperformancebytheprivatesector.Intheirview,FAIRdoesnotprecludeanagencyfromutilizinganyoftheprocessesallowedbylaw,includingprivateprivatecompetitionasprescribedinFARPart8,15and36.OthercommentersexpressedconcernthattheproposedrevisionstotheSupplementalHandbookrequiredpublicprivatecostcomparisonsinsituationswheresuchcostcomparisonsarenotpresentlyrequired. D Responses:st:tTheFAIRActenvisionstheuseofcompetitiontoselectasourcewhenan ,@), agencyconsiderscontractingwithaprivatesectorsourceforperformanceofanactivityonthelist,butthelawdidnotmodifyexistingpoliciesregardingtheconductofcompetitions.Existingguidanceprovidesguidelinesfordeterminingwhencostcomparisonsarerequiredand, /,/ ifrequired,howtheyareconducted. D d.Commentu:uv:v񀀀SeveralcommentersviewedtheFAIRActasprohibitinganagencyfrom d convertingcommercialworkfromcontracttoinhouseperformanceunderanycondition. D Response:TheFAIRActaddressesonlyinventoriesofcommercialactivitiesthat 4 areperformedbyFederalemployees.Itdoesnotaddresscommercialactivitiesthatareperformedthroughcontractand,therefore,doesnotaddresstheconversionofcontractworktoinhouseperformance. D e.Comment:SeveralcommentersstatedtheirviewthattheFAIRActrequires  `  substantialchangestotheCircularA76costingrulessothattheyincorporate allcosts,andinparticularthecostslistedintheparentheticalinSection2(e)(i.e.,thecostsofqualityassurance,technicalmonitoringoftheperformanceofsuchfunction,liabilityinsurance,employeeretirementanddisabilitybenefits,andallotheroverheadcosts). D Response:Existingguidancealreadyrequiresagencies,inconductingcost  comparisons,toconsiderallthefairandreasonablecostsaddressedinSection2(e)oftheFAIRAct.(See64FR10032).TheSupplementalHandbookrequiresconsiderationofallcoststothetaxpayerthatcouldbeexpectedtochangeasaresultofaconversiontoorfromperformancebyinhouseorcontractemployees. D f.Commentw:wx:x񀀀Severalcommenterssuggestedthatpublicprivatecompetitionsmustbe $ basedon bestvalueprinciples.TheywereconcernedthatOMB'sproposedguidancerelieson costonlycompetitions,thusignoringthepotentialuseofthebestvalueapproachinthecostcomparisonprocess. D Response:Existingguidanceisnotlimitedto costonlycompetitions.Italso P allowsforbestvaluetradeoffsbetweencostandotherfactors.ThecompetitivesourceselectionprocessoutlinedatPart1,Chapter3,paragraphHoftheSupplementalHandbookpermitsuseofthebestvaluesourceselectionapproachinthecontextofpublicprivatecompetition.& @ 4. D TheFAIRAct ChallengeProcess  t"!  D a.Commenty:yz:z񀀀Section3oftheFAIRActprovidesforanadministrative challenge T$ # processunderwhich interestedpartiesmaychallengetheagencysomission,orinclusion,ofanactivityonitsFAIRActinventory.Underthisprocess,an initialdecisionisrenderedbyanagencyofficialdesignatedbytheagencyhead.Theinterestedpartymaythenfileanappealofanadversedecisiontotheagencyhead.Severalcommenterssuggestedthat,inthecaseofanappeal,theagencyshouldpublishitsinitialdecisionandtheappealintheFederalRegisterand )%( requestcommentsofotherinterestedpartiessothattheymaybeconsideredbytheagencyhead.ItwasfurthersuggestedthatthefinalappealshouldbereviewedbyOMB,theSmallBusinessAdministration,theGeneralAccountingOffice,andrelevantcongressionalappropriationsandauthorizationcommitteestaff.'@ t"X D Response:TherequestedprocedureswouldgofarbeyondtheFAIRAct.In . +. addition,sinceSection3providestheagencyheadwith10daystodecideanappeal,thereis /,/ notsufficienttimefortheagencytosolicit,receive,andconsiderpubliccomments.&  0 D 0 D"D" D  5. D ImplementingtheFAIRActViaRevisionstoA76&theSupplementalHandbook d " "  D Comment{:{|:|񀀀AnumberofcommenterssuggestedthatOMBuseanalternativevehicleto D implementtheFAIRActguidance,suchasissuingregulationsoraseparatecircular,ratherthanmakingchangestotheexistingguidanceontheperformanceofcommercialactivitiescontainedinOMBCircularA76anditsSupplementalHandbook.'d]0 D 0 D"D"0 " " D    " "  D Response:рCircularsareawellestablishedvehiclefordirectingagencieson  p  managementoftheiractivities.CircularA76alreadyestablishesthebroadprinciplesandtheRevisedSupplementalHandbookprovidesthespecificdefinitionsanddirectiononmanagementofcommercialactivities,includingtheinventoryandotheractivitiesthatarecodifiedbytheFAIRAct.Forthisreason,itmakesmuchmoresensetorevisetheexistingguidancethantodevelopanewcircular.Moreimportantly,however,OMBwantedtoprovidetheagencieswithpromptandclearguidanceonhowtoimplementtheActwithintheshorttimeframeavailableandwithoutconfusionorwastedeffortonthepartoftheagencies.WithoutrevisingtheHandbooktoconformtotheFAIRAct,repetitiveandcompetingguidancewouldexistinanumberofareas.Forexample,theHandbookalreadyrequiresagenciestodevelopanannualinventoryoftheircommercialactivitiesandspecifieswhatinformation(dataelements)istobeincluded.Italsocontainsguidanceforwhenandhowagenciesaretoconductcostcomparisonsandwhatcostsshouldbeincluded.TheseareallspecificareasaddressedbytheFAIRAct.Ironically,theconfusionthatcouldresultfromissuinganewcircularmightslowagenciesdownratherthanspeedingthemup. D RevisingtheCircularandSupplementalHandbooksothattheyconformtotheFAIRActisthebestwaytoprovideagencieswithclearandpromptguidanceonhowtoimplementtheAct.   ,q ,X X. ,q , , ,q