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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: December 14, 2000

FROM: Barry McVay, CPCM

SUBJECT: Office of Management and Budget; Proposed Revision to Guidance on Implementation of the Federal Activities Inventory Reform Act of 1998

SOURCE: Federal Register, December 14, 2000, Vol. 65, No. 241, page 78217

AGENCIES: Office of Management and Budget (OMB)

ACTION: Proposed Revision

SYNOPSIS: A recent General Accounting Office (GAO) report stated that approximately two-thirds of all challenges and appeals by industry to an agency's omission or inclusion of a particular activity on its Federal Activities Inventory Report (FAIR) Act inventory of commercial activities "went beyond the provisions of the FAIR Act, because they concerned issues other than the inclusion or omission of an activity from an agency's inventory." Therefore, OMB is inviting comments on a proposed revision to its implementation guidance in the Revised Supplemental Handbook to OMB Circular A-76, Performance of Commercial Activities. The proposed revision is intended to clarify what matters are subject to challenge and appeal and what are not.

EDITOR'S NOTE: For more on a recent change to the amount of time available for challenges and appeals, see the September 8, 2000, FEDERAL CONTRACTS DISPATCH "Office of Management and Budget Circular No. A-76, Performance of Commercial Activities, Transmittal Memorandum Number 22, Technical Changes to the Revised Supplemental Handbook."

Today, OMB released its second set of Year 2000 Commercial Activities Inventories -- see today's FEDERAL CONTRACTS DISPATCH "Office of Management and Budget; Availability of Year 2000 Agency Inventories Under the Federal Activities Inventory Reform Act of 1998."

For more on the first set of Year 2000 Commercial Activities Inventories, see the October 3, 2000, FEDERAL CONTRACTS DISPATCH "Office of Management and Budget; Availability of Year 2000 Agency Inventories Under the Federal Activities Inventory Reform Act of 1998."

DATES: Comments on the proposed change are due not later than January 16, 2001.

ADDRESSES: Send comments to the Office of Federal Procurement Policy, New Executive Office Building, Room 9013, Office of Management and Budget, 725 17th Street, NW, Washington, DC 20503; fax: 202-395-5105.

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, 202-395-6104.

Copies of OMB Circular A-76, its Revised Supplemental Handbook, currently applicable Transmittal Memoranda, and additional information on the FAIR Act and its implementation may be obtained at the OMB web site: http://www.whitehouse.gov/OMB/procurement/fair-index.html. Paper copies of this information may 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; 202-395-7579.

SUPPLEMENTAL INFORMATION: The FAIR Act requires each federal agency to submit to OMB, by June 30 of each year, a "list" of all its activities that "are not inherently governmental functions" (that is, are "commercial" activities) and that are performed by federal employees. OMB reviews each agency's "commercial activities inventory" and consults with the agency regarding its content. Upon the completion of the review and consultation, the agency transmits a copy of the inventory to Congress and makes the inventory available to the public. An "interested party" may then submit to the agency a challenge "of an omission of a particular activity from, or an inclusion of a particular activity on," the inventory. The agency must respond to the challenge, and the agency must notify Congress of any changes to the inventory and must make them publicly available. The interested party may appeal adverse agency decisions.

The first FAIR Act commercial activities inventories were compiled for 1999. OMB provided guidance on compliance with the FAIR Act on June 24, 1999, with the issuance of OMB Circular A-76 Transmittal Memorandum No. 20, which revised the OMB Circular A-76 Revised Supplemental Handbook. However, since the guidance was provided only one week before the first inventories were due, there were many complaints about the quality of the inventories. In response, GAO analyzed the inventories of five agencies and concluded that "the clarity and understandability of the five FAIR Act inventories...was limited" (see the April 24, 2000, FEDERAL CONTRACTS DISPATCH "General Accounting Office; Limited Understandability of FAIR Act Inventories"). In reply, OMB issued revised guidance on compiling Year 2000 inventories (see the May 5, 2000, FEDERAL CONTRACTS DISPATCH "Office of Management and Budget; Year 2000 Inventory of Commercial Activities").

On September 29, 2000, GAO issued a report that evaluated the history of the challenges and appeals that "interested parties" submitted against the FAIR Act commercial activities inventories for 1999 (Report No. GGD/NSIAD-00-244, Competitive Contracting: Agencies Upheld Few Challenges and Appeals Under the FAIR Act). While almost all the "employee challenges" were within the provisions of the act, about two-thirds of the "industry challenges" were not because they concerned issues other than the inclusion or omission of an activity from an agency's inventory: "(1) the agency's use of OMB's reason codes for categorizing commercial activities; (2) the format of the agency's inventory; (3) the agency's use of OMB's function codes; and (4) a general dissatisfaction with OMB guidance or the act, or agency compliance with either."

OMB believes that it is in the interest of all affected parties (the interested parties and the agencies) to eliminate any remaining confusion that may exist about the scope of the challenge-and-appeal process that Congress established in the FAIR Act. Currently, the introduction to paragraph G.2 of Appendix 2 to the OMB Circular A-76 Revised Supplemental Handbook states, "Under Section 3 of the FAIR Act, an agency's decision to include or exclude a particular activity from the Commercial Activities Inventory is subject to administrative challenge and, then, possible appeal by an 'interested party.' Section 3(b) of the FAIR Act defines 'interested party' as..." OMB is proposing to revise this introduction by adding the language in italics: "Under Section 3 of the FAIR Act, an agency's decision to include or exclude a particular activity from the Commercial Activity Inventory is subject to administrative challenge and, then possible appeal by an 'interested party.' An agency's decision with regard to the application of appropriate Function Codes, Reason Codes and agency decisions regarding the aggregation or disaggregation of FTE for purposes of reporting commercial activities on the inventory are not subject to administrative challenge or appeal by an 'interested party.' Section 3(b) of the FAIR Act defines 'interested party' as..." (EDITOR'S NOTE: "FTE" stands for "full-time equivalent". One person working eight hours a day is one FTE; four people working four hours a day are two FTE.)

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

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