34962 Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Notices

OFFICE OF MANAGEMENT AND

BUDGET

Performance of Commercial Activities

AGENCY: Office of Management and

Budget, Executive Office of the

President.

ACTION: Proposed change to the OMB

circular A–76 revised supplemental

handbook.

SUMMARY: . The Office of Management

and Budget (OMB) publishes a request

for agency and public comments on

proposed changes to the OMB Circular

A–76, Performance of Commercial

Activities, Revised Supplemental

Handbook. The proposed changes

eliminate the ‘‘grandfather clauses’’ at

Part 1, Chapter 2, paragraph A.5 and

paragraph 5.a., of the Handbook. The

Handbook would then be changed to

expand public-private competition for

all Inter-Service 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. These changes are an

important first step in OMB’s efforts to

expand competition, improve service

quality, and enhance agency

accountability by integrating budgeting

and performance.

OMB is requesting public and agency

comment on these revisions. OMB

expects that the expanded competition

requirements of the Circular will

encourage the service requesting or

customer agencies to take full account of

their support agreements, the alternative

levels of service available, and the most

efficient and cost effective private sector

or other public offeror.

DATES: Agency and public comments on

the proposed changes are due to OMB

not later than August 16, 2001.

ADDRESSES: Address all comments to

the Office of Federal Procurement

Policy, NEOB Room 9013, Office of

Management and Budget, 725 17th

Street, NW, Washington, DC 20503,

FAX Number (202) 395–5105.

Availability: Copies of the OMB

Circular A–76, its Revised

Supplemental Handbook, currently

applicable Transmittal Memoranda and

additional information regarding the

Federal Activities Inventory Reform Act

(FAIR Act) and its implementation may

be obtained at the OMB home page. The

online address (URL) http://

www.whitehouse.gov/OMB/

procurement/fair-index.html. Paper

copies of this information can also 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, Telephone No.

(202) 395–7579.

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 No. (202) 395–6104.

SUPPLEMENTARY INFORMATION:

Background

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, e.g.,

Federal transfers of funds, grants,

services and credit to the public and

support activities, which provide

administrative, professional and

logistical support to an agency itself in

meeting 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. Even when a

reimbursable rate or price 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 crosssubsidies and other pricing strategies to

expand their volume of business.

It is for this reason that the March

1996 A–76 Supplemental Handbook

introduced, for the first time, the

requirement to compete for new or

expanded reimbursable work on the

basis of an A–76 cost comparison. A–76

competitions can be a key driver to

encourage agencies to understand the

real cost of their programs. They also

serve to invite private sector and other

public offerors into the mix of possible

offerors, by competing on a level

playing field.

However, the March 1996 A–76

Supplemental Handbook did 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 3–5 year review cycle,

work performed by a reimbursable

support activity provider (ISSA) has not

been required to undergo recurring

competition once that agency is

awarded the work. In addition, a policy

decision was made that the March 1996

A–76 Supplemental Handbook would

not require recurring competitions for

existing reimbursable support activity

work—work that was already performed

under an ISSA before October 1, 1997.

As a result, a large and increasing

amount of commercial work is being

performed under reimbursable service

agreements without the benefits of

recurring competition. These

reimbursable service agreements are not

competing with the private sector or

with other public offerors who might be

able to provide higher levels of service

at less cost.

As a result, OMB hereby proposes to

revise the A–76 Supplemental

Handbook at Part 1, Chapter 2 paragraph

5 and paragraph 5.a, to delete the

‘‘grandfathering clauses’’ that permit

reimbursable agreements for commercial

services to continue indefinitely and

without competition and to replace

them with a requirement that all ISSA’s

be recompeted every 3–5 years or as

otherwise permitted by related

procurement regulations for comparable

types of commercial work (see

Competition-in-Contracting Act (CICA)

and the Federal Acquisition

Regulations). OMB recognizes that the

burden of this requirement falls to the

customer or consuming agency to

conduct these competitions. It also falls

to the prospective reimbursable service

provider to submit an A–76 comparable

offer, in accordance with Part 1, Chapter

2 paragraph B, for the renewal of

existing service agreements or for the

award of new or expanded work.

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

Federal Register / Vol. 66, No. 127 / Monday, July 2, 2001 / Notices 34963

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.

OMB also recognizes that the

proposed requirement to conduct

competitions on a level playing field

and on the basis of the full cost of

performance to the taxpayer poses other

budgetary challenges. The President’s

FY 2002 Budget includes a proposal to

integrate performance and budget data.

Three major changes are presently

envisioned. They include: (1)

identifying high quality outcome

measures, accurately monitoring the

performance of programs, and

integrating this presentation with

associated cost, (2) changes to create a

market based government, of which this

initiative is a part, to open the

government’s activities to more

competition, and to require agencies to

budget for costs in a way that will

simplify cost comparison for A–76

competition, and (3) full integration of

financial (finance, budget, and cost),

program, and oversight information, and

processes. The government’s chief

financial officers have endorsed as a

long-term goal that program and

financial officers work in partnership, to

achieve the full integration of financial

(finance, budget, and cost), program,

and oversight information and

processes. The Administration will soon

transmit legislative proposals to support

changes in the way costs are charged in

the budget to permit the consideration

of full budget costs in a cost

comparison. However, in the interim,

while competitions and the decisions to

award shall be based upon comparisons

conducted in accordance with the A–76

Revised Supplemental Handbook, the

reimbursable costs charged to a

customer agency, if a public

reimbursable service provider wins such

a competition, will rely on budget based

reimbursable rates, prepared under

current law.

OMB requests comment on the

proposed revisions.

Sean O’Keefe,

Deputy Director.

Executive Office of the President

Office of Management and Budget

[Circular No. A–76 (Revised) Proposed

Transmittal Memorandum No. 24]

June 26, 2001.

To the Heads of Executive Departments

and Agencies

From: Sean O’Keefe, Deputy Director

Subject: Performance of Commercial

Activities

This Transmittal Memorandum

implements changes to the OMB

Circular A–76 Revised Supplemental

Handbook in furtherance of the

President’s FY 2002 Budget Blueprint

commitment to expand the level of

competition for the acquisition of

commercial support work required by

the Federal Government and to establish

a competitive baseline in preparation for

the integration of other budgeting,

performance and accountability

initiatives. The March 1996 Revised

Supplemental Handbook was issued

through Transmittal Memorandum No.

15 (61 FR 14338). The March 1996

Revised Supplemental Handbook was

further revised to implement the

requirements of the Federal Activities

Inventory Reform Act through

Transmittal Memorandum No. 20 (64 FR

33927) and Transmittal Memorandum

No. 22 (65 FR 54568). Transmittal

Memorandum No. 23 (66 FR 14943)

provided updated labor and non-labor

related escalation factors for use in A–

76 cost comparisons.

OMB is making two changes to the A–

76 Revised Supplemental Handbook.

First, Part 1, Chapter 2, paragraph 5 and

paragraph 5.a. are deleted. Paragraph 5

has permitted agencies to consolidate

administrative, logistical and other

commercial support activities through

the transfer of work to Inter-Service

Support Agreements (ISSAs), within

and between agencies, without cost

comparison if the consolidation was

accomplished prior to October 1, 1997,

and if the consolidation did not involve

the conversion of work to or from inhouse or contract performance.

Paragraph 5.a., has exempted existing

reimbursable support work and the

renewal of related ISSAs from the cost

comparison requirements of the

Circular. However, paragraph 5.a. also

established a government-wide

requirement that all new and expanded

ISSAs shall be justified on the basis of

a cost comparison, conducted in

accordance with the requirements of the

Circular and Supplemental Handbook,

unless as otherwise provided by the

Supplemental Handbook or by law.

In order to emphasize the need to

expand the level of competition

required and to establish a consistent

baseline for the acquisition of

commercial support, OMB is revising

Part 1, Chapter 2, paragraph 5, to read

as follows:

‘‘5. Reimbursable support service providers

within the Federal Government are providing

a large and an increasing amount of

commercial work to Federal program

activities (customers) under reimbursable

service agreements and without the benefits

of recurring competitions. These ISSAs are

not competing with the private sector or with

other public offerors who might be able to

provide higher levels of service at less cost.

Therefore, not later than October 1, 2001,

each customer agency shall establish a

recurring schedule for all work performed for

it on a reimbursable basis by another agency

for competition. ISSAs shall be recompeted

every 3–5 years or as otherwise permitted by

related procurement regulations for

comparable types of commercial work (see

Competition-in-Contracting Act (CICA) and

the Federal Acquisition Regulations). These

competitions shall permit offers from the

private sector, the current reimbursable

service provider and other public offerors, as

appropriate. In addition, all new or expanded

work required by a customer agency shall be

submitted to competition, as provided in this

Chapter.’’

A conforming change is also hereby made

to Part 1, Chapter 2, paragraph B.1, as

follows: ‘‘1. The prospective providing

agency will furnish the requesting agency a

firm price or reimbursable rate for the

existing, new or expanded workload * * *.’’

This change is effective immediately.

Current A–76 and FAIR Act implementation

guidance can be accessed at OMB’s home

page at:

http://www.whitehouse.gov/OMB/

procurement/fair-index.html.

[FR Doc. 01–16480 Filed 6–29–01; 8:45 am]

BILLING CODE 3110–01–P

OFFICE OF MANAGEMENT AND

BUDGET

Draft Report to Congress on the Costs

and Benefits of Federal Regulations

AGENCY: Office of Management and

Budget, Executive Office of the

President.

ACTION: Notice of extension of public

comment period.

SUMMARY: On May 2, 2001, OMB

published a notice and request for

comments for its Draft Report to

Congress on the Costs and Benefits of

Federal Regulations. The comment

period was scheduled to end on July 2,

2001. This notice extends the public