OFFICE OF MANAGEMENT AND BUDGET 

AGENCY: Office of Management and Budget 

Executive Office of the President 

ACTION: Issuance of Transmittal Memorandum No. 23, amending OMB Circular No. A-76, 

“Performance of Commercial Activities." 

SUMMARY: This Transmittal Memorandum updates the annual Federal pay raise assumptions 

and inflation factors used for computing the Government's in-house personnel and non-pay costs, 

as generally provided in the President's Budget for Fiscal Year 2002. 

DATES: All changes in the Transmittal Memorandum are effective immediately and shall 

apply to all cost comparisons in process where the Government's in-house cost estimate has not 

been publicly revealed before this date. 

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, Telephone (202) 395-6104. 

AVAILABILITY: Copies of the OMB Circular A-76, its Revised Supplemental Handbook and 

currently applicable Transmittal Memoranda changes may be obtained at the online OMB Home 

page address (URL) http://www.whitehouse.gov/OMB. 

Mitchell E. Daniels, Jr. 

Director 

Attachment 
Circular No. A-76 (Revised) 

Transmittal Memorandum No. 23 

TO THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES 

SUBJECT: Performance of Commercial Activities 

This Transmittal Memorandum updates the annual Federal pay raise assumptions and 

inflation factors used for computing the Government's in-house personnel and non-pay costs, as 

generally provided in the President's Budget for Fiscal Year 2002. 

The non-pay inflation factors are for purposes of A-76 cost comparison determinations 

only. They reflect the generic non-pay inflation assumptions used to develop the FY 2002 

Budget baseline estimates required by law. The law requires that a specific inflation factor (GDP 

FY/FY chained price index) be used for this purpose. These inflation factors should not be 

viewed as estimates of expected inflation rates for major long-term procurement items or as an 

estimate of inflation for any particular agency’s non-pay purchases mix. 

Federal Pay Raise Assumptions 

Effective Date 

January 2000 

January 2001 

January 2002 

January 2003 

January 2004 

January 2005 

January 2006 

Non-Pay Categories (Supplies and Equipment, etc.) 

FY 2000 1.9% 

FY 2001 2.1% 

FY 2002 2.1% 

FY 2003 2.1% 

FY 2004 2.1% 

FY 2005 2.1% 

FY 2006 2.1% 

Military/Civilian 

4.8% 

3.7% 

3.6% 

3.9% 

3.9% 

3.9% 

3.9% 

The pay rate (including geographic pay differentials) that are in effect for 2001 shall be 

included for the development of in-house personnel costs. The pay raise factors provided for 

2002 and beyond shall be applied to all employees, with no assumption being made as to how 

they will be distributed between possible locality and ECI-based increases. 
Agencies are reminded that OMB Circular No. A-76, Transmittal Memoranda 1 through 

Transmittal Memorandum 14 are canceled. Transmittal Memorandum No. 15 provides the 

Revised Supplemental Handbook, and is dated March 27, 1996 (Federal Register, April 1, 1996, 

pages 14338-14346). Transmittal Memoranda No. 16, 17, 18, and 19 (to the extent it provided 

Circular A-76 Federal pay raise and inflation factors) are canceled. Transmittal Memorandum 

No. 20 provided changes to the Revised Supplemental Handbook to implement the Federal 

Activities Inventory Reform Act of 1998 (P.L. 105.270). Transmittal Memorandum No. 21, 

which provided last year’s Circular A-76 Federal pay raise and inflation factor assumptions is 

hereby canceled. Transmittal Memorandum No. 22 made additional technical changes to the 

Revised Supplemental Handbook regarding the implementation of the FAIR Act, A-76 

administrative appeals, and the participation of directly affected employees on A-76 Source 

Selection Boards and their evaluation teams. 

Mitchell E. Daniels, Jr. 

Director