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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: July 2, 2001

SUBJECT: Office of Management and Budget Circular No. A-76, Performance of Commercial Activities

SOURCE: Federal Register, July 2, 2001, Vol. 66, No. 127, page 35962

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

ACTION: Proposed change to the OMB Circular A-76 Supplemental Handbook.

SYNOPSIS: OMB is proposing to revise the OMB Circular A-76 Supplemental Handbook to expand public-private competition for all Interservice Support Agreements (ISSAs) by requiring competitions on a recurring 3-5 year review cycle, similar to the competitions required for the renewal of service contracts with the private sector.

EDITOR'S NOTE: OMB Circular A-76, its Revised Supplemental Handbook, and currently applicable Transmittal Memoranda are available at http://www.whitehouse.gov/omb/circulars/index.html.

DATES: Comments on the proposed changes to the Supplemental Handbook must be submitted no later than August 16, 2001.

ADDRESSES: Address comments to the Office of Federal Procurement Policy, NEOB 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, New Executive Office Building Room 9013, Office of Management and Budget, 725 17th Street, NW, Washington, DC 20503, 202-395-6104.

SUPPLEMENTAL INFORMATION: The activities of most federal agencies can be divided into two categories: program activities, which provide goods and services directly to the agency mission recipients (for example, federal transfers of funds, grants, services, and credit to the public); and support activities, which provide administrative, professional, and logistical support to help the agency meet its mission requirements.

The number and amount of support activities are wide-ranging. They include personnel services; safety and health services; security; legal services; financial management services; information technology, automated data processing, and communications services; mail and messenger services; public affairs; publications, reproduction, graphics, and video services; library services; scientific facilities; research and analytical services; office and commissary supplies; office and grounds maintenance; procurement and contracting services; services to acquire, maintain, rent, and operate plant and equipment; and more.

Many support activities are financed by their own direct appropriations and provided to the programs, without charge, in their own agency and even to other agencies. Others are provided for a price by agency franchise, working capital, or other revolving funds on a reimbursable basis. These services are provided under agreements between the providing agency and the customer agency called ISSAs.

Even when a reimbursable rate is charged by a providing agency, it may not cover the full cost of the goods and services provided to programs -- in part because the support activity agencies themselves are not charged for the full cost of the resources they use or get some financing from direct appropriations, and in part because their prices may include cross-subsidies and other pricing strategies to expand their volume of business.

The OMB Circular A-76 Supplemental Handbook does not require reimbursable support service providers or their customers to undergo competition for this work on a recurring basis. In effect, while competitions for work that is performed by contract are on a recurring 3- to 5-year review cycle, work performed by a reimbursable support activity provider under an ISSA is not required to undergo recurring competition once that agency is awarded the work. In addition, the Supplemental Handbook does not require recurring competitions for existing reimbursable support activity work that was already performed under an ISSA before October 1, 1997 (when the Supplemental Handbook went into effect). As a result, a large and increasing amount of commercial work is being performed under ISSAs without the benefits of recurring competition.

Therefore, OMB is proposing to make two changes to the A-76 Supplemental Handbook at Part 1, Policy Implementation, Chapter 2, Interservice Support Agreements (ISSA), Section A, General:

EDITOR'S NOTE: OMB states in the introduction to these proposed changes that "the proposed recurring ISSA competition requirement would not apply -- at this time -- to reimbursable support agreements within a single agency. The head of the agency must maintain flexibility to manage mission resources. The proposed competition requirement would only apply to reimbursable agreements between one department or executive agency and another non-mission agency, e.g., between the Environmental Protection Agency and the Department of Commerce, between the Agriculture Department's National Finance Center and the Department of Justice, or between the Office of Personnel Management and the Department of Housing and Urban Development for the provision of background investigation services. It would not apply to services provided within the reimbursable service providers host agency or any such agreement within the Department of Defense."

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2001 by Panoptic Enterprises. All Rights Reserved.

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