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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: September 8, 2000

FROM: Barry McVay, CPCM

SUBJECT: Office of Management and Budget Circular No. A-76, Performance of Commercial Activities, Transmittal Memorandum Number 22, Technical Changes to the Revised Supplemental Handbook

SOURCE: Federal Register, September 8, 2000, Vol. 65, No. 87, page 54568

AGENCIES: Office of Management and Budget (OMB), Executive Office of the President

ACTION: Notice

SYNOPSIS: OMB is making three technical changes to the OMB Circular A-76 Revised Supplemental Handbook.

EDITOR'S NOTE: Current A-76 guidance is available OMB's Homepage at http://www.whitehouse.gov/OMB/circulars/index.html#numerical.

For more on the proposed changes to the OMB Circular A-76 Supplemental Handbook, see the May 4, 2000, FEDERAL CONTRACTS DISPATCH "Technical Changes to Office of Management and Budget Circular No. A-76, Performance of Commercial Activities, Revised Supplemental Handbook."

Regarding the status of the previous 21 transmittal memoranda: memoranda 1 through 14 have been canceled; memorandum 15, dated March 27, 1996, provided the Revised Supplemental Handbook; memoranda 16, 17, and 18, which provided A-76 related federal pay raise and material escalation cost factors, have been superseded by memorandum 21 (see the May 4, 2000, FEDERAL CONTRACTS DISPATCH "Transmittal Memorandum No. 21 Amending Office of Management and Budget Circular No. A-76, Performance of Commercial Activities"); the part of memorandum 19, dated March 30, 1998, that provided A-76 related federal pay raise and material escalation cost factors, has been superseded by memorandum 21, but the standard retirement cost factors for the weighted average Civil Service Retirement System (CSRS) and Federal Employee Retirement System (FERS) pension and federal retiree health cost estimates and the post-retirement health costs remain in effect; and memorandum 20, dated June 14, 1999, which implemented the Federal Activities Inventory Reform (FAIR) Act (Public Law 105-270), remains in effect.

DATES: Transmittal Memorandum No. 22 is effective September 8, 2000, and it applies to all cost comparisons conducted after that date, including those where the in-house offer is sealed on that date. Inventories produced in accordance with the FAIR Act must also comply with these changes.

FOR FURTHER INFORMATION CONTACT: Mr. David C. Childs, Office of Federal Procurement Policy, New Executive Office Building Room 9013, Office of Management and Budget, 725 17th Street, NW, Washington, DC 20503, 202-395-6104.

SUPPLEMENTAL INFORMATION: On May 4, 2000, OMB published three proposed changes to the A-76 Revised Supplemental Handbook to address "working days" versus "calendar days" with regard to challenges to FAIR Act inventories; to eliminate language that appeared to contradict OMB's policy against sequential appeals; and to 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. Responses were received from six federal agencies, five industry or trade groups, one employee organization, and one individual. While some of the comments were outside the scope of the proposed changes (for instance, implementation of the comment would require Congressional action), and OMB agreed with the concerns expressed in other comments (for instance, that the elimination of the proposed language could burden the Administrative Appeal Authority with appeals that would not affect the outcome of the tentative decision), OMB has decided to make the revisions as proposed with one clarification.

The following are the three changes being made to the A-76 Revised Supplemental Handbook:

  1. The FAIR Act gives an interested party 30 days to challenge an agency's compiled list of the activities its employees conduct which are not inherently governmental, gives the agency 28 days to respond, gives the interested party 10 days to appeal an adverse decision, then gives the agency 10 days to decide the appeal. However, the statute does not specify whether the days are "calendar" or "working" days.

    OMB Circular A-76 Transmittal Memorandum No. 20 stated that the statutory 30-day and 28-day challenge and challenge response periods would be "calendar" days, while the 10-day appeal and appeal decision periods would be "working" days. Several parties told OMB that the 30 calendar day deadline for filing challenges was very difficult to meet. Therefore, OMB is revising paragraph G.3 of Revised Supplemental Handbook Appendix 2, Commercial Activities Inventory, to provide for 30 working days for a challenge, and is revising paragraph G.4 to provide for 28 working days for a challenge response.

  2. Part 1, Policy Implementation, Chapter 3, Cost Comparisons, paragraph K.1.e., requires appellants to "demonstrate that the items appealed (in an A-76 cost comparison) individually or in aggregate, would reverse the tentative decision." However, this statement appears to conflict with the statement at Part 1, Chapter 3, paragraph K.7., that "the procedure...does not authorize sequential appeals." Since all concerns regarding the conduct of a cost comparison should be brought forward to the appeal authority within the single appeal period, OMB is deleting the language in paragraph K.1.e. However, to emphasize that all interested parties need to review the tentative A-76 cost comparison decision and immediately bring to the attention of the Administrative Appeals Board any potential errors that would provide for a more accurate determination, OMB is revising Part I, Chapter 3, Paragraph K.1.a., to require that appeals "be submitted by all interested parties, including the tentative winner of a cost comparison decision, within the initial administrative appeal period." (EDITOR'S NOTE: The revision to paragraph K.1.a. is in addition to the May 4, 2000, proposed revisions.)

  3. The General Accounting Office (GAO) has expressed concern about the propriety of including on an A-76 source selection team employees whose jobs are among those being considered for contracting out. In GAO protest decision B-281224, DZS/Baker LLC, issued January 12, 1999, the GAO ruled against the Air Force because the positions of 14 of the 16 Air Force employees on the source selection team would have been contracted out if a commercial firm had been selected. OMB agrees that this is a "poor business practice." Therefore, to strengthen OMB's longstanding policy limiting such participation, Part 1, Chapter 3, paragraph H.3.b, is amended to read as follows:
    "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. 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."

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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