EXECUTIVE OFFICE OF THE PRESIDENT

OFFICE OF MANAGEMENT AND BUDGET

WASHINGTON. D.C. 20503

August 4, 1983 (REVISED 1999) CIRCULAR NO. A-76

TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS 

SUBJECT: Performance of Commercial Activities 

1. Purpose. This Circular establishes Federal policy regarding the performance of commercial

activities and implements the statutory requirements of the Federal Activities Inventory Reform Act

of 1998, Public Law 105-270. The Supplement to this Circular sets forth the procedures for

determining whether commercial activities should be performed under contract with commercial

sources or in-house using Government facilities and personnel.

2. Rescission. OMB Circular No. A-76 (Revised), dated March 29, 1979; and

Transmittal Memoranda 1 through 14 and 16 through 18.

3. Authority. The Budget and Accounting Act of 1921 (31 U.S.C. 1 et seq.), The Office of

Federal Procurement Policy Act Amendments of 1979. (41 U.S.C. 401 et seq.), and The Federal

Activities Inventory Reform Act of 1998. (P. L. 105-270). 

4. Background.

a. In the process of governing, the Government should not compete with its citizens.

The competitive enterprise system, characterized by individual freedom and initiative, is the primary

source of national economic strength. In recognition of this principle, it has been and continues to

be the general policy of the Government to rely on commercial sources to supply the products and

services the Government needs. 

b. This national policy was promulgated through Bureau of the Budget Bulletins

issued in 1955, 1957 and 1960. OMB Circular No. A-76 was issued in 1966. The Circular was

previously revised in 1967, 1979, and 1983. The Supplement (Revised Supplemental Handbook) was

previously revised in March 1996 (Transmittal Memorandum 15). 

5. Policy. It is the policy of the United States Government to: 

a. Achieve Economy and Enhance Productivity. Competition enhances quality,

economy, and productivity. Whenever commercial sector performance of a Government operated

commercial activity is permissible, in accordance with this Circular and its Supplement, comparison

of the cost of contracting and the cost of in-house performance shall be performed to determine who

will do the work. When conducting cost comparisons, agencies must ensure that all costs are

considered and that these costs are realistic and fair.

b. Retain Governmental Functions In-House. Certain functions are inherently 

Governmental in nature, being so intimately related to the public interest as to mandate performance
only by Federal employees. These functions are not in competition with the commercial sector.

Therefore, these functions shall be performed by Government employees. 

c. Rely on the Commercial Sector. The Federal Government shall rely on commercially

available sources to provide commercial products and services. In accordance with the provisions

of this Circular and its Supplement, the Government shall not start or carry on any activity to provide

a commercial product or service if the product or service can be procured more economically from

a commercial source.

6. Definitions. For purposes of this Circular: 

a. A commercial activity is one which is operated by a Federal executive agency and

which provides a product or service that could be obtained from a commercial source. Activities that

meet the definition of an inherently Governmental function provided below are not commercial

activities. A representative list of commercial activities is provided in Attachment A. A commercial

activity also may be part of an organization or a type of work that is separable from other functions

or activities and is suitable for performance by contract. 

b. A conversion to contract is the changeover of an activity from Government 

performance to performance under contract by a commercial source.

c. A conversion to in-house is the changeover of an activity from performance 

 under contract to Government performance.

d. A commercial source is a business or other non-Federal activity located in the 

United States, its territories and possessions, the District of Columbia or the Commonwealth of

Puerto Rico, which provides a commercial product or service.

e. An inherently Governmental function is a function which is so intimately related

to the public interest as to mandate performance by Government employees. Consistent with the

definitions provided in the Federal Activities Inventory Reform Act of 1998 and OFPP Policy Letter

92-1, these functions include those activities which require either the exercise of discretion in applying

Government authority or the use of value judgment in making decisions for the Government.

Services or products in support of inherently Governmental functions, such as those listed in

Attachment A, are commercial activities and are normally subject to this Circular. Inherently

Governmental functions normally fall into two categories: 

(1) The act of governing; i.e., the discretionary exercise of Government authority.

Examples include criminal investigations, prosecutions and other judicial functions;

management of Government programs requiring value judgments, as in direction of the

national defense; management and direction of the Armed Services; activities performed

exclusively by military personnel who are subject to deployment in a combat, combat support

or combat service support role; conduct of foreign relations; selection of program priorities;

direction of Federal employees; regulation of the use of space, oceans, navigable rivers and

other natural resources; direction of intelligence and counter-intelligence operations; and

regulation of industry and commerce, including food and drugs. 
(2) Monetary transactions and entitlements, such as tax collection and revenue

disbursements; control of the Treasury accounts and money supply; and the administration

of public trusts. 

f. A cost comparison is the process of developing an estimate of the cost of

 Government performance of a commercial activity and comparing it, in accordance with the

requirements of the Supplement, to the cost to the Government for contract performance of the

activity.

g. Directly affected parties are Federal employees and their representative organizations

and bidders or offerors on the instant solicitation.

h. Interested parties for purposes of challenging the contents of an agency’s Commercial

Activities Inventory under the Federal Activities Inventory Reform Act of 1998 are:

(1) A private sector source that (A) is an actual or prospective offeror for any 

contract or other form of agreement to perform the activity; and (B) has a direct economic

interest in performing the activity that would be adversely affected by a determination not to

procure the performance of the activity from a private sector source.

(2) A representative of any business or professional association that includes

within its membership private sector sources referred to in (1) above.

(3) An officer or employee of an organization within an executive agency that is

an actual or prospective offeror to perform the activity.

(4) The head of any labor organization referred to in section 7103(a) (4) of Title

5, United States Code that includes within its membership officers or employees of an

organization referred to in (3) above.

7. Scope. 

a. Unless otherwise provided by law, this Circular and its Supplement shall apply to all

executive agencies and shall provide administrative direction to heads of agencies.

b. This Circular and its Supplement apply to printing and binding only in those agencies

or departments which are exempted by law from the provisions of Title 44 of the U.S. Code.

c. This Circular and its Supplement shall not: 

(1) Be applicable when contrary to law, Executive Orders, or any treaty or

international agreement; 

(2) Apply to inherently Governmental functions as defined in paragraph 6.e.; 

(3) Apply to the Department of Defense in times of a declared war or military

mobilization; 
(4) Provide authority to enter into contracts; 

(5) Authorize contracts which establish an employer-employee relationship

between the Government and contractor employees. An employer-employee relationship

involves close, continual supervision of individual contractor employees by Government

employees, as distinguished from general oversight of contractor operations. However,

limited and necessary interaction between Government employees and contractor employees,

particularly during the transition period of conversion to contract, does not establish an

employer-employee relationship. 

(6) Be used to justify conversion to contract solely to avoid personnel ceilings or

salary limitations; 

(7) Apply to the conduct of research and development. However, severable inhouse commercial activities in support of research and development, such as those listed in

Attachment A, are normally subject to this Circular and its Supplement; or 

(8) Establish and shall not be construed to create any substantive or procedural

basis for anyone to challenge any agency action or inaction on the basis that such action or

inaction was not in accordance with this Circular, except as specifically set forth in Part 1,

Chapter 3, paragraph K of the Supplement, “Appeals of Cost Comparison Decisions” and as

set forth in Appendix 2, Paragraph G, consistent with Section 3 of the Federal Activities

Inventory Reform Act of 1998.

d. The requirements of the Federal Activities Inventory Reform Act of 1998 apply to the

following executive agencies: 

(1) an executive department named in 5 USC 101, 

(2) a military department named in 5 USC 102, and 

(3) an independent establishment as defined in 5 USC 104.

e. The requirements of the Federal Activities Inventory Reform Act of 1998 do not apply to

the following entities or activities:

(1) the General Accounting Office, 

(2) a Government corporation or a Government controlled corporation as defined

in 5 USC 103, 

(3) a non-appropriated funds instrumentality if all of its employees are referred to

in 5 USC 2105(c), or 

(4) Depot-level maintenance and repair of the Department of Defense as defined

in 10 USC 2460.
8. Government Performance of a Commercial Activity. Government performance of

a commercial activity is authorized under any of the following conditions:

a. No Satisfactory Commercial Source Available. Either no commercial source is 

capable of providing the needed product or service, or use of such a source would cause unacceptable

delay or disruption of an essential program. Findings shall be supported as follows: 

 (1) If the finding is that no commercial source is capable of providing the needed

product or service, the efforts made to find commercial sources must be documented and

made available to the public upon request. These efforts shall include, in addition to

consideration of preferential procurement programs (see Part I, Chapter 1, paragraph C of

the Supplement) at least three notices describing the requirement in the Commerce Business

Daily over a 90-day period or, in cases of bona fide urgency, two notices over a 30-day

period. Specifications and requirements in the solicitation shall not be unduly restrictive and

shall not exceed those required of in-house Government personnel or operations.

 (2) If the finding is that a commercial source would cause unacceptable delay or

disruption of an agency program, a written explanation, approved by the assistant secretary

or designee in paragraph 9.a. of the Circular, must show the specific impact on an agency

mission in terms of cost and performance. Urgency alone is not adequate reason to continue

in-house operation of a commercial activity. Temporary disruption resulting from conversion

to contract is not sufficient support for such a finding, nor is the possibility of a strike by

contract employees. If the commercial activity has ever been performed by contract, an

explanation of how the instant circumstances differ must be documented. These decisions

must be made available to the public upon request. 

(3) Activities may not be justified for in-house performance solely on the basis that

the activity involves or supports a classified program or the activity is required to perform an

agency's basic mission.

b. National Defense. 

 (1) The Secretary of Defense shall establish criteria for determining when

Government performance of a commercial activity is required for national defense reasons.

Such criteria shall be furnished to OMB, upon request. 

 (2) Only the Secretary of Defense or his designee has the authority to exempt

commercial activities for national defense reasons. 

c. Patient Care. Commercial activities performed at hospitals operated by the 

Government shall be retained in-house if the agency head, in consultation with the agency's chief

medical director, determines that in-house performance would be in the best interests of direct patient

care. 

d. Lower cost. Government performance of a commercial activity is authorized if a 

cost comparison prepared in accordance with the Supplement demonstrates that the Government is
operating or can operate the activity on an ongoing basis at an estimated lower cost than a qualified

commercial source. 

9. Action Requirements. To ensure that the provisions of this Circular and its Supplement are

followed, each agency head shall: 

a. Designate an official at the assistant secretary or equivalent level and officials at a

comparable level in major component organizations to have responsibility for implementation of

this Circular and its Supplement within the agency. 

b. Establish one or more offices as central points of contact to carry out

implementation. These offices shall have access to all documents and data pertinent to actions taken

under the Circular and its Supplement and will respond in a timely manner to all requests concerning

inventories, schedules, reviews, results of cost comparisons and cost comparison data. 

c. Be guided by Federal Acquisition Regulation (FAR) Subpart 24.2 (Freedom of

Information Act) in considering requests for information. 

d. Implement this Circular and its Supplement with a minimum of internal instructions.

Cost comparisons shall not be delayed pending issuance of such instructions.

e. Ensure the reviews of all existing in-house commercial activities are 

completed within a reasonable time in accordance with the Federal Activities Inventory Reform Act

of 1998 and the Supplement.

10. Annual Reporting Requirement. As required by the Federal Activities Inventory Reform 

Act of 1998 and Appendix 2 of the Supplement, no later than June 30 of each year, agencies shall

submit to OMB a Commercial Activities Inventory and any supplemental information requested by

OMB. After review and consultation by OMB, agencies will transmit a copy of the Commercial

Activities Inventory to Congress and make the contents of the Inventory available to the public.

Agencies will follow the process provided in the Supplement for interested parties to challenge (and

appeal) the contents of the inventory.

11. OMB Responsibility and Contact Point. All questions or inquiries should be submitted to

the Office of Management and Budget, Room 6002 NEOB, Washington, DC 20503. Telephone

number (202) 395-6104, FAX (202) 395-7230. 

12. Effective Date. This Circular and the changes to its Supplement are effective immediately.
Attachment A

OMB Circular No. A-76

EXAMPLES OF COMMERCIAL ACTIVITIES

Audiovisual Products and Services 

 Photography (still, movie, aerial, etc.)

 Photographic processing (developing, printing,

enlarging, etc.)

 Film and videotape production (script writing,

direction, animation, editing, acting, etc.)

 Microfilming and other microforms

 Art and graphics services

 Distribution of audiovisual materials

 Reproduction and duplication of audiovisual products

 Audiovisual facility management and operation

 Maintenance of audiovisual equipment

Automatic Data Processing 

 ADP services - batch processing, time-sharing, facility

management, etc.

 Programming and systems analysis, design,

development, and simulation

 Key punching, data entry, transmission, and

teleprocessing services

 Systems engineering and installation

 Equipment installation, operation, and maintenance

Food Services 

 Operation of cafeterias, mess halls, kitchens, bakeries,

dairies, and commissaries

 Vending machines

 Ice and water

Health Services 

 Surgical, medical, dental, and psychiatric care

 Hospitalization, outpatient, and nursing care

 Physical examinations

 Eye and hearing examinations and manufacturing and

fitting glasses and hearing aids

 Medical and dental laboratories

 Dispensaries

 Preventive medicine

 Dietary services

 Veterinary services

Industrial Shops and Services 

 Machine, carpentry, electrical, plumbing, painting,

and other shops

 Industrial gas production and recharging

 Equipment and instrument fabrication, repair and

calibration

 Plumbing, heating, electrical, and air conditioning

services, including repair

 Fire protection and prevention services

 Custodial and janitorial services

 Refuse collection and processing

Maintenance, Overhaul, Repair, and Testing 

 Aircraft and aircraft components

 Ships, boats, and components

 Motor vehicles

 Combat vehicles

 Railway systems

 Electronic equipment and systems

 Weapons and weapon systems

 Medical and dental equipment

 Office furniture and equipment

 Industrial plant equipment

 Photographic equipment

 Space systems

Management Support Services 

 Advertising and public relations services

 Financial and payroll services

 Debt collection

Manufacturing, Fabrication, Processing, Testing, and

Packaging 

 Ordnance equipment

 Clothing and fabric products

 Liquid, gaseous, and chemical products

 Lumber products

 Communications and electronics equipment

 Rubber and plastic products

 Optical and related products

 Sheet metal and foundry products

 Machined products

 Construction materials

 Test and instrumentation equipment

Office and Administrative Services 

 Library operations

 Stenographic recording and transcribing

 Word processing/data entry/typing services

 Mail/messenger

 Translation

 Management information systems, products and

distribution

 Financial auditing and services

 Compliance auditing

 Court reporting

 Material management

 Supply services
Other Services 

 Laundry and dry cleaning

 Mapping and charting

 Architect and engineer services

 Geological surveys

 Cataloging

 Training -- academic, technical, vocational, and

specialized Operation of utility systems

 (power, gas, water steam, and sewage)

 Laboratory testing services

Printing and Reproduction 

 Facility management and operation

 Printing and binding -- where the agency or

department is exempted from the provisions of

 Title 44 of the U.S. Code

 Reproduction, copying, and duplication

 Blueprinting

Real Property 

 Design, engineering, construction, modification,

repair, and maintenance of buildings and

 structures; building mechanical and electrical

equipment and systems; elevators; escalators;

 moving walks

 Construction, alteration, repair, and maintenance of

roads and other surfaced areas

 Landscaping, drainage, mowing and care of grounds

 Dredging of waterways

Security 

 Guard and protective services

 Systems engineering, installation, and maintenance of

security systems and individual

 privacy systems

 Forensic laboratories

Special Studies and Analyses 

 Cost benefit analyses

 Statistical analyses

 Scientific data studies

 Regulatory studies

 Defense, education, energy studies

 Legal/litigation studies

 Management studies

Systems Engineering, Installation, Operation,

Maintenance, and Testing

 Communications systems - voice, message, data, radio,

wire, microwave, and satellite

 Missile ranges

 Satellite tracking and data acquisition

 Radar detection and tracking

 Television systems - studio and transmission

equipment, distribution systems, receivers,

 antennas, etc.

 Recreational areas

 Bulk storage facilities

Transportation 

 Operation of motor pools

 Bus service

 Vehicle operation and maintenance

 Air, water, and land transportation of people and

things

 Trucking and hauling