Circular A-76 Revision 2003: Selected Issues

Publication Date: January 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Business

Type:

Abstract:

Office of Management and Budget (OMB) Circular A-76 provides guidance for
federal agencies on how to conduct public-private competitions. The outcome of a
competition determines who — government agency or private business — will
perform commercial activities. (A commercial activity is a service that could be
performed by the private sector.) OMB Circular A-76 was issued initially in 1966;
the Circular No. A-76 Revised Supplemental Handbook was first issued in 1979. The
handbook provided guidance for implementing Circular A-76 policy and included
procedures for conducting A-76 cost comparisons. In 1999, the Federal Activities
Inventory Reform (FAIR) Act of 1998 (P.L. 105-270) was incorporated into the
circular and the handbook.
The most recent A-76 revision, which was issued in 2003, is arguably the most
significant change to the circular and its supplement in the document’s history. The
revision is one of several steps the Bush Administration has taken to further its
competitive sourcing initiative, which is one of the components of the President’s
Management Agenda (PMA). Other activities include the promotion of competitive
sourcing goals and the requirement that agencies submit lists of their inherently
governmental activities to OMB. (An inherently governmental activity is a function
that is so intimately related to the public interest that it must be performed by federal
government employees, according to OMB’s Circular No. A-76 (Revised), May 29,
2003, p. A-2.) Combining the circular and the Circular No. A-76 Revised
Supplemental Handbook into one document, OMB modified the definition of
“inherently governmental,” established the concept of an agency tender (which is the
government’s response to a solicitation), and eliminated the direct conversion option.
Under this option, and as long as certain conditions were met, agencies were allowed
to convert a function from in-house performance to private-sector performance
without conducting a cost comparison.
Several of the latest changes to Circular A-76 have generated a significant
amount of interest. Requirements for the preparation of commercial activities and
inherently governmental inventories have changed, and the latter inventories now are
subject to challenge and appeal processes. The deadline for what are now called
standard competitions has been shortened, with the expectation that agencies will
complete a host of planning activities prior to beginning a competition. These and
other changes have raised questions about the ability of agencies to comply with the
revised circular and other competitive sourcing requirements. Possible implications
for the civil service system and federal employees is another area that has garnered
attention. This report will be updated if there are further changes to the circular or
information about implementation of the circular becomes available.