# Presentation: 240222

## 2002 Administrative Issues ConferenceCompetitive Sourcing: The FAIR Act/OMB Circular A-76

**Tom Luedtke, Assistant Administrator for Procurement**

## President’s Management Agenda

- Competitive Sourcing
- Strategic Management of Human Capital
- Improved Financial Performance
- Expanded Electronic Government
- Budget and Performance Integration

## Federal Activities Inventory Reform Act (FAIR Act) Requirements

- Agencies must inventory commercial activities
- Annual inventory must be submitted to OMB by June 30
- Inventories are made available to the public
- Interested parties may challenge the inclusion or exclusion of activities in the inventory
- Annual progress report required regarding actions taken on the inventory
- OMB has also required a listing of inherently governmental activities

## Inventory

- Review/classify all activities as inherently governmental or commercial
- All activities are commercial unless unequivocally inherently governmental

## Examples of Inherently Governmental Activities

- Criminal investigations
- Obligating funds
- Establishing procurement requirements
- Approving specification waivers/deviations
- Provides advice of a nature so extensive and so far advanced toward completion as to limit the decision-makers’ discretion and to restrict the agency’s ability to develop and advance options other than those provided.

## FAIR Act Inventory

- Commercial Activities must be given a reason code
- Nine reason codes (A-I)
**A - Specifically exempt by the agency**
**B - Subject to the cost comparison or direct conversion**
**C - Specifically exempt by Congress, Executive Order or OMB**
- D - In process of being cost compared of converted directly
- E - Retained in-house as a result of a cost comparison
- F - Review is pending force restructuring decisions
- G - Function is prohibited from conversion because of legislation
- H - Waiver issued
- I - Being performed in-house as a result of a cost comparison resulting from a decision to convert from contract to in-house performance

## Category A 

*    *This Reason Code is designed to permit the _Agency Head _to identify specific commercial activities as those that he/she does not believe should be subjected to privatization, outsourcing, reinvention or competition.  Certainly, these are core mission activities that are commercial in nature.  Many core activities may however, be achieved through contract support and may also be found in either Reason Code “B” or “C.”  **Functions assigned Reason Code “A” are commercial functions that the Agency Head has determined must remain in-house.**  A justification of each use of Reason Code “A”, by function code will accompany the Inventory as a part of the Annual Management Report.

## Category B

*   *This Reason Code should be applied to any Function or Activity where the decision as to who should perform the work is **a quality and cost based decision** and the agency would expect that this decision would be based upon the results of a direct conversion competition (when authorized), or a cost comparison, conducted in accordance with OMB Circular A-76 and its Supplemental Handbook.

## Category C

-    This Reason Code should be applied to any Function/Activity where the decision as to who should perform the work **is generally not a cost-based decision** and a cost comparison would be inappropriate.  This code applies to the Supplemental Handbook’s exemption from the cost comparison requirements of the Circular for national defense related activities, direct patient care, core and research and development activities.  **Here the decision to convert to or from in-house or contract performance is not a cost-based decision.**  The problem is to get the right people, the right skills, the right knowledge at the right place and at the right time.  These activities are currently performed by Federal employees, but, they do not enjoy the cost comparison protections afforded by the Circular; cost is a secondary consideration.

## Commercial Activities

- The sum of FTE in all commercial activities codes (A-I) is the the base for Competitive Sourcing plan goals
- Develop Competitive Sourcing goals:
- 15% FY 2003 (Base is Year 2000 Inventory)
- 50% FY TBD (Base is-currently- Year 2000)

## Competitive Sourcing Options 

- 	OMB recognizes:
- direct conversions,
- full and streamlined cost comparisons under the guidelines of OMB Circular    A-76, and
- privatizations (OMB Memorandum dated 4/3/01) as counting toward the competitive sourcing goals.

- OMB Circular A-76Cost Comparisons

- The cost comparison process consists of six major components
- Development of the Performance Work Statement (PWS and the Quality Assurance Surveillance Plan (QASP)
- Performance of a management study to determine the Government’s Most Efficient Organization (MEO)
- Development of an in-house Government cost estimate
- Issuance of the Request for Proposal (RFP) or Invitation for Bid (IFB)
- Comparison of the in-house bid against a proposed contract or Inter Service Support Agreement (ISSA) price
- The Administrative Appeal Process, which is designated to assure that all costs entered on the Cost Comparison Form (CCF) are fair, accurate and calculated in accordance with the Supplemental Handbook

## A-76 Five Possible Processes

**1.  ****Activities with 10 or Fewer FTE** – may be performed by in-house, contract or Inter Service Support Agreement (ISSA) performance, **without cost comparison**, if the contracting officer determines that offerors will provide required levels of service quality at fair and reasonable prices.
**Activities of 11 or More FTE** – may be converted to contract or ISSA, **without cost comparison**, if–
- a. fair and reasonable prices can be obtained through competitive award, and
- b. all directly affected Federal employees serving on permanent appointments are reassigned to other comparable Federal positions for which they are qualified.

## A-76 Five Possible Processes

**3.  Activities of 11-65 FTE** **and any** **Federal employees adversely affected:**
-  	*Streamlined Cost Comparison: *
- 	No solicitation is issued.  The in house estimate is based on the existing organization.  Compare the in-house estimate with four comparable service contracts.
**4.  Activities 65+ FTE** **and any Federal employees adversely affected:**
- 		*Full A-76 Cost Comparison Required*

- A-76 Five Possible Processes

**5.  ****Preferential Procurement Programs** – A commercial activity of any size may be converted to contract performance, **without cost comparison—even if it results in adverse employee actions**, if the contract is awarded to a preferential procurement source at a fair market price. At the agency’s discretion, a cost comparison may be conducted.
**Definition: *****“Preferential Procurement Program**** – These are special “commercial” source programs, such as Federal Prison Industries and the workshops administered by the Committee for the Purchase from the Blind and Other Severely Handicapped under the Javits-Wagner-O’Day Act.”*

## Competitive Sourcing: Status Mid-Term

- Issue Inventory Call			February 27
- Issue OMB Update 			March 15
- ViTS for Centers: A-76		April 17
- Center inventories and Competitive
- 	Sourcing Plans (CSP) to HQ 		May 1
- HQ review/adjustment/approval 	June 1
- Agency CSP 				June 14
- Begin Executive Review of CSP	June 17
- OMB submission due			June 30

## Competitive Sourcing: Facts of Life

- Center Directors are the key players
- We all must promote competition
- Very little of what NASA does is inherently governmental
- R&D and Engineering, per se, are not inherently governmental
- Competitive Sourcing expends resources
- Workforce resistance

## Center Points of Contact

| Center | Name | Telephone |
| --- | --- | --- |
| ARC | Nancy Bingham | 650-604-6544 |
| DFRC | Monique Sullivan | 661-276-2593 |
| GRC | Brad Baker | 216-433-2800 |
| GSFC | Mike Ladomirak | 301-286-7522 |
| JSC | Gregory Hayes | 281-483-2316 |
| KSC | Jim Hattaway | 321-867-7212 |
| LaRC | Lana Couch | 757-864-6114 |
| MSFC | Steve Beale | 256-544-0257 |
| SSC | Rebecca Dubuisson | 228-688-1636 |

## More Information

- WEB Sites
- _[http://www.](http://www.whitehouse.gov/omb/procurement/fair-index.html)__[whitehouse](http://www.whitehouse.gov/omb/procurement/fair-index.html)__[.](http://www.whitehouse.gov/omb/procurement/fair-index.html)__[gov](http://www.whitehouse.gov/omb/procurement/fair-index.html)__[/](http://www.whitehouse.gov/omb/procurement/fair-index.html)__[omb](http://www.whitehouse.gov/omb/procurement/fair-index.html)__[/procurement/fair-index.html](http://www.whitehouse.gov/omb/procurement/fair-index.html)_
- _[http://www.](http://www.govexec.com/outsourcing)__[govexec](http://www.govexec.com/outsourcing)__[.com/outsourcing/](http://www.govexec.com/outsourcing)_
- _[http://www.](http://www.whitehouse.gov/omb/circulars)__[whitehouse](http://www.whitehouse.gov/omb/circulars)__[.](http://www.whitehouse.gov/omb/circulars)__[gov](http://www.whitehouse.gov/omb/circulars)__[/](http://www.whitehouse.gov/omb/circulars)__[omb](http://www.whitehouse.gov/omb/circulars)__[/circulars/](http://www.whitehouse.gov/omb/circulars)_
- _[http://emissary.](file:///C:/Documents%20and%20Settings/smarucci/My%20Documents/emissary.acq.osd.mil/inst/share.nsf)__[acq](file:///C:/Documents%20and%20Settings/smarucci/My%20Documents/emissary.acq.osd.mil/inst/share.nsf)__[.](file:///C:/Documents%20and%20Settings/smarucci/My%20Documents/emissary.acq.osd.mil/inst/share.nsf)__[osd](file:///C:/Documents%20and%20Settings/smarucci/My%20Documents/emissary.acq.osd.mil/inst/share.nsf)__[.mil/inst/share.](file:///C:/Documents%20and%20Settings/smarucci/My%20Documents/emissary.acq.osd.mil/inst/share.nsf)__[nsf](file:///C:/Documents%20and%20Settings/smarucci/My%20Documents/emissary.acq.osd.mil/inst/share.nsf)_** **
**Agency Competitive Sourcing Team:**
- Joe LeCren, 202-358-0431, _[jlecren](mailto:jlecren@hq.nasa.gov)__[@hq.](mailto:jlecren@hq.nasa.gov)__[nasa](mailto:jlecren@hq.nasa.gov)__[.](mailto:jlecren@hq.nasa.gov)__[gov](mailto:jlecren@hq.nasa.gov)_
- Ron Lentz, 202-358-1064, _[rlentz](mailto:rlentz@hq.nasa.gov)__[@hq.](mailto:rlentz@hq.nasa.gov)__[nasa](mailto:rlentz@hq.nasa.gov)__[.](mailto:rlentz@hq.nasa.gov)__[gov](mailto:rlentz@hq.nasa.gov)_
- Deborah O’Neill, 202-358-1534, _[doneill](mailto:doneill@hq.nasa.gov)__[@hq.](mailto:doneill@hq.nasa.gov)__[nasa](mailto:doneill@hq.nasa.gov)__[.](mailto:doneill@hq.nasa.gov)__[gov](mailto:doneill@hq.nasa.gov)_
- Ken Sateriale, 202-358-0491, _[ksateria](mailto:ksateria@hq.nasa.gov)__[@hq.](mailto:ksateria@hq.nasa.gov)__[nasa](mailto:ksateria@hq.nasa.gov)__[.](mailto:ksateria@hq.nasa.gov)__[gov](mailto:ksateria@hq.nasa.gov)_