TREASURY DIRECTIVE 22-01
Date: November 15, 2001
Sunset Review: November 15, 2005
SUBJECT: Performance of Commercial Activities
1. PURPOSE. This Directive sets policy and assigns responsibilities for implementing Office of Management and Budget (OMB) Circular A-76, "Performance of Commercial Activities," dated August 4, 1983, (hereafter referred to as Circular A-76) and the Revised Supplemental Handbook, "Performance of Commercial Activities," dated March 1996. This Directive also sets forth policy for implementing the "Federal Activities Inventory Reform Act of 1998" ("FAIR Act"), Public Law 105-270.
2. BACKGROUND. Circular A-76 and the Revised Supplemental Handbook establish government-wide policy for determining whether recurring commercial activities should be performed under contract with commercial sources, in-house using government facilities and personnel, or through Interservice Support Agreements (ISSAs). (Within Treasury, ISSAs are called Interagency Agreements.) Additional information required to implement Circular A-76 is contained in the Revised Supplemental Handbook. The FAIR Act requires the development of an annual inventory of government commercial activities, OMB review of this inventory, agency publication of this inventory, and a challenge and appeals process whereby interested parties may dispute a designation of an activity as commercial or inherently governmental.
3. POLICY.
a. It is the policy of the Department of the Treasury that:
(1) the policies and procedures of Circular A-76 and its supplements are implemented:
(a) to determine the feasibility of reducing costs and increasing productivity;
(b) to encourage competition and choice in management and ensure that the Department of the Treasury does not unduly or unfairly compete with the private sector; and
(c) to preserve the right of Federal employees to duly and fairly compete with the private sector to continue to perform commercial activities in-house.
(2) inherently governmental activities are not subject to Circular A-76 and will continue to be performed by Department employees. A determination should be made annually, as part of the development of the FAIR Act inventory process, which activity, or parts thereof, is inherently governmental.
(3) the purpose of the FAIR Act commercial activities review is to identify Department of the Treasury commercial activities being performed in-house.
b. Treasury employees involved in the performance of commercial activities will receive training related to the requirements of OMB Circular A-76. At a minimum, training will be provided to Human Resources, Procurement, and Legal Counsel representatives.
c. OMB Circular A-76 processes, such as cost comparison studies and direct conversions to contract performance, are employed to determine the most cost efficient and effective method of performing the required activity while fulfilling bureau missions. Unlike inherently governmental functions, commercial activities have private sector or other governmental agency counterparts who may serve as benchmarks or may be capable of performing the activities at a lower cost or with a higher level of quality.
d. Upon completion of the bureau commercial activities inventory, heads of bureaus, or their designated representatives, shall prepare an action plan for conducting direct conversions or cost comparison reviews of commercial activities against private sector counterparts for activities that are subject to the direct conversion or cost comparison requirements of OMB Circular A-76 and its Revised Supplemental Handbook. Action plans shall include the number of FTE by function and location being competed, training requirements, and planned contract support to achieve competition or conversion. The action plans shall be provided with the FAIR Act inventory submissions required by section 9(a) of this Directive.
e. Government employees may perform commercial activities for reasons identified in Circular A-76. When a decision is made to compete a commercial activity between private sector and government employees, the procedures set forth in Circular A-76 will be followed. As provided by Circular A-76 and this Directive, the heads of bureaus, or their designated representatives, shall select an official to certify the Most Effective Organization (MEO) for the commercial activity. The selected official shall be either organizationally independent of the function under study or at least two organizational levels above the position of the most senior official who may be affected by the in-house estimate.
f. Employees of the activity under review will be notified as soon as possible of an impending cost comparison, kept informed of its progress at major milestones of the process, and encouraged to participate in the management study to determine the MEO. The heads of the bureaus or their designated representatives shall select an official to notify the employees’ of the activity under review, as well as their exclusive representatives, and to keep them informed of major milestones and the results of the review. The pertinent human resources office shall provide a representative for meetings with employees that are related to activity review notifications.
g. Cost principles and competition procedures established by the Revised Supplemental Handbook shall be used to determine when services should be performed by in-house, contract, or ISSAs. If the cost comparison decision is that it is more cost effective to retain the services in-house, implementation of the MEO should be initiated in accordance with Circular A-76 and its Revised Supplemental Handbook, and completed in accordance with a transition plan outlined in the management plan.
h. Federal government employees adversely affected by a decision to convert to contract or ISSA performance have the Right-of-First-Refusal for employment with the contractor for jobs for which they are qualified. A standard clause will be included in direct conversion and Circular A-76 cost comparison solicitations notifying potential contractors of this requirement.
i. Bureaus should make maximum efforts to find available positions for employees adversely affected by conversion decisions, including compliance with applicable regulations in Title 5, Code of Federal Regulations, Part 330, Subparts B, F and G, and Treasury Personnel Policy Manual, Chapter 330 as they pertain to employees adversely affected by conversion decisions.
j. Contracting with small business concerns, especially small businesses certified under section 8(a) of the Small Business Act, women-owned concerns and other small disadvantaged business concerns, such as HUBZone business concerns, should be used when appropriate to meet bureau or other goals under the Small Business Act.
4. DEFINITIONS. For the purpose of this Directive:
a. Inherently governmental activity is defined in the Revised Supplemental Handbook as one that is so intimately related to the public interest as to mandate performance by Federal employees. These functions include those activities that require either the exercise of authority in applying Government authority or the making of value judgements in making decisions for the government. Activities that meet these criteria are not in competition with commercial sources, are not generally available from commercial sources and are, therefore, not subject to Circular A-76 or the Revised Supplemental Handbook.
b. Commercial activity is defined as the process resulting in a product or service that is or could be obtained from a private sector source. Agency missions may be accomplished through commercial facilities and resources, or mixes thereof, depending upon the product, services, type of mission and the equipment required.
c. Interservice Support Agreements (ISSA) are defined in Appendix 1 of the Revised Supplemental Handbook.
d. Most Efficient Organization (MEO) refers to the Government’s in-house organization to perform a commercial activity. It may include a mix of Federal employees and contract support.
5. INTERSERVICE SUPPORT AGREEMENTS.
a. ISSAs within Treasury. Per Circular A-76, the cost comparison requirements of the Revised Supplemental Handbook will not apply to existing or renewed ISSAs or to the consolidation of commercial or other services within the Department, unless that consolidation includes the conversion of work to or from in-house or contract performance.
b. ISSAs between Treasury and Other Government Agencies. Existing ISSAs will not be affected. However, new, renewed, or expanded relationships and conversion of work to or from in-house or contract performance are subject to A-76 unless otherwise exempt.
6. RESPONSIBILITIES.
a. The Assistant Secretary for Management and Chief Financial Officer is responsible for:
(1) implementing Circular A-76 and the FAIR Act in the Department;
(2) responding to appeals on challenges to the annual inventory;
(3) hearing appeals in cost comparison decisions in which the head of a bureau was the deciding official, except for the Inspector General and Inspector General for Tax Administration; and
(4) granting cost comparison waivers to Circular A-76.
b. The Inspector General ("IG") and the Treasury Inspector General for Tax Administration ("TIGTA") shall perform the functions of the Assistant Secretary for Management and Chief Financial Officer enumerated in paragraphs 6.a. and 7 and 9.c. for their respective organizations.
c. The Treasury Chief Management and Administrative Programs Officer, the Treasury Inspector General, the Treasury Inspector General for Tax Administration, and Heads of Bureaus or their designees, as it relates to their respective bureaus and offices, shall:
(1) implement Circular A-76, the FAIR Act and this Directive in their respective organizations;
(2) establish a team for Circular A-76 and FAIR Act implementation;
(3) review challenges to the annual inventory;
(4) establish an internal administrative appeals procedure;
(5) select an official to certify the MEO for the in-house activity in a cost comparison; and
(6) ensure that reports on the implementation of Circular A-76 and the FAIR Act are submitted in accordance with the schedule set by OMB. The bureaus shall also submit a concurrent annual report to the Deputy Chief Financial Officer, on all inventories of commercial activities, commercial activities exempted from cost comparison requirements in accordance with Circular A-76 and the status of activities that are subject to cost comparison; and ensure that all labor relations responsibilities are fulfilled.
d. The Director, Treasury Office of Procurement, shall:
(1) provide analytical support on issues and proposals requiring review under this directive;
(2) serve as the central point of contact and provide technical assistance for the implementation of this Directive;
(3) serve as the point of contact for OMB concerning issues regarding Department-wide implementation of the Circular A-76 program and the FAIR Act;
(4) provide to OMB by the end of the third quarter of the Fiscal Year an updated inventory;
(5) provide to the Congress a copy of the annual inventory;
(6) direct Circular A-76 and FAIR Act reviews requiring Departmental coordination;
(7) establish procedures and controls to ensure that the requirements of Circular A-76 are followed in preparing requests for proposals or bids, awarding contracts and monitoring contract costs for commercial activities; and
(8) provide copies of the Circular A-76, the Revised Supplemental Handbook, and all revisions and updates to DO and bureau officials.
e. The Deputy Assistant Secretary (Information Systems) and Chief Information Officer shall establish controls and procedures to ensure that information technology activities are subject to a cost comparison study in accordance with this Directive, Circular A-76 and its Revised Supplemental Handbook.
f. The Deputy Assistant Secretary (Human Resources) shall provide direction and oversight pertaining to the use of human resources programs, systems, and personnel used to support the initiation, the conduct, and the effects of commercial activities studies.
g. The Director, Treasury Office of Budget, shall establish controls to ensure that funding requests for expansions and new starts of in-house commercial activities and ISSAs are received and approved in accordance with requirements prescribed by the Treasury Budget Office.
a. The Assistant Secretary for Management and Chief Financial Officer (ASM/CFO) may authorize cost comparison waivers and direct conversion to or from in-house, contract, or ISSA performance, for all offices and bureaus except the Inspector General and Inspector General for Tax Administration.
b. Bureaus shall submit proposed cost comparison waivers to the ASM/CFO that meet the criteria outlined in the Revised Supplemental Handbook.
8. APPEALS OF COST COMPARISON DECISIONS.
a. Departmental Offices (DO), bureaus, the Inspector General, and the Treasury Inspector General for Tax Administration shall establish an internal administrative appeal procedure to resolve appeals from directly affected parties (Federal employees, their representative organizations and bidders/ offerors on the solicitation). In the case of a tentative cost comparison decision, the appeal will be decided by an impartial official who is at least two organizational levels higher than the official who approved the management plan which describes the government's MEO.
b. If a decision by a bureau head (other than the Treasury Inspector General or the TIGTA) is appealed, the ASM/CFO shall be the appeal authority.
c. In order to be eligible for review, an appeal must meet the criteria outlined in the Revised Supplemental Handbook in Part I, Chapter 3, Paragraph K.
9. MANAGEMENT OF IN-HOUSE COMMERCIAL ACTIVITY INVENTORIES
a. The FAIR Act requires agencies to provide OMB an annual inventory of in-house commercial activities performed by its government employees. Each bureau shall provide its inventory to the Director of the Treasury Office of Procurement (OP) annually by March 31. The inventory report shall contain the data elements from Appendix 2 to the Circular A-76 Revised Supplemental Handbook, or as otherwise required by Treasury’s OP, to implement OMB guidance.
b. Within 30 working days after publication of notice of availability in the Federal Register, any interested party (as defined by the FAIR Act) may challenge the inclusion or exclusion of an activity from the annual inventory.
(1) Each bureau shall designate an official who will receive, review and decide such challenges. The name of this Challenge Official will be forwarded to OP with the annual inventory submission.
(2) The Challenge Official must transmit the decision to the interested party within 28 working days of receiving the challenge.
(3) The notification to the interested party will describe the basis for the decision and an explanation of the party’s right to appeal if it is an adverse decision. A copy of the challenge decision must be transmitted to OP.
c. Within 10 working days after receiving a written notification of an adverse decision, the interested party may appeal the decision to the ASM/CFO. Within 10 working days of receiving the appeal, the ASM/CFO will transmit to the interested party a written notification of the final decision, along with a discussion of the rationale for the decision. Bureaus will provide for any additional information required by the ASM/CFO to render a decision on an appeal.
10. AUTHORITIES
a. OMB Circular A-76, "Performance of Commercial Activities," dated August 4, 1983;
b. OMB Circular A-76, Revised Supplemental Handbook, "Performance of Commercial Activities," dated March 1996;
c. OFPP Policy Letter 92-1, "Inherently Governmental Functions," dated September 23, 1992;
d. Amendments to the Small Business Act of 1958 (Pub. L. 95-507); and
e. Federal Activities Inventory Reform Act of 1998 (Pub. L. 105-270).
11. CANCELLATION: Treasury Directive 22-01, "Performance of Commercial Activity", dated March 2, 1998, is superseded.
12. OFFICE OF PRIMARY INTEREST. Office of Procurement, Office of the Deputy Chief Financial Officer, Office of the Assistant Secretary for Management and Chief Financial Officer.
/S/
James J. Flyzik
Acting Assistant Secretary for Management
and Chief Information Officer