Order Code RL32017
CRS Report for Congress
Received through the CRS Web
Circular A-76 Revision 2003: Selected Issues
Updated January 7, 2005
L. Elaine Halchin
Analyst in American National Government
Government and Finance Division
Congressional Research Service { The Library of Congress

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Circular A-76 Revision 2003: Selected Issues
Summary
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.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Selected Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Agency Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
OMB Guidance on Inherently Governmental Activities Inventories . . . 7
Challenge and Appeal Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Rationale for Inherently Governmental Inventories . . . . . . . . . . . . . . . 11
Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Deadline for Completing Standard Competitions . . . . . . . . . . . . . . . . . . . . 14
Agency Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Burden on Agency Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Resources Needed to Prepare Competitive Offers . . . . . . . . . . . . . . . . 21
Possible Implications for the Civil Service System . . . . . . . . . . . . . . . . . . 24
Disposition of Federal Employees and Positions . . . . . . . . . . . . . . . . . 24
Performance Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Civil Service as an Institution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Selected Glossary of Circular A-76 Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
List of Tables
Table 1. Comparison of Inventory Challenge and Appeal Processes . . . . . . . . . 10

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Circular A-76 Revision 2003:
Selected Issues
Introduction
Office of Management and Budget (OMB) Circular A-76,1 which was first
issued in 1966, provides guidance for federal agencies to use in determining who —
government agency or private business — will perform commercial activities.2
Circular A-76 and the Circular No. A-76 Revised Supplemental Handbook have been
modified over the years. The handbook expanded upon Circular A-76 policy and
provided guidance for conducting cost comparisons. Key changes include the initial
publication of the handbook in 1979; the incorporation of the language of
government reinvention in 1996; and the implementation of the Federal Activities
Inventory Reform Act (FAIR) of 1998 in 1999.3
In spring 2001, the Comptroller General convened a panel of experts, identified
as the Commercial Activities Panel (CAP), to examine Circular A-76 and FAIR. The
panel was established at the direction of Section 832 of P.L. 106-398.4 Having noted
the concerns of federal employee unions and private industry about Circular A-76,
Senator John Warner proposed the amendment that became Section 832. After a
year-long study, CAP released its report, Improving the Sourcing Decisions of the
Government, on April 30, 2002. The panel recommended that government adopt a
set of 10 sourcing principles, promote the development of high-performing
organizations (HPOs), make limited changes to Circular A-76, and create an
integrated competition process that would draw from both the Federal Acquisition
Regulation (FAR)5 and Circular A-76.6
1 See CRS Report RL31024, The Federal Activities Inventory Reform Act and Circular A-
76, by L. Elaine Halchin; CRS Report RS21489, OMB Circular A-76: Legal Reach and
Proposed Modifications, by John R. Luckey.
2 A commercial activity is “a recurring service that could be performed by the private
sector.” An inherently governmental activity “is an activity that is so intimately related to
the public interest as to mandate performance by government personnel.” (U.S. Office of
Management and Budget, Circular No. A-76 (Revised), May 29, 2003, available at
[http://www.whitehouse.gov/omb/circulars/a076/a76_incl_tech_correction.pdf], visited Jan.
3, 2005, pp. D-2, A-2.)
3 P.L. 105-270; 112 Stat. 2382; 31 U.S.C. 501 note. Circular A-76 also was revised in 1967,
1979, and 1983. Additional revisions to the Revised Supplemental Handbook were made
in 1983 and 1996.
4 Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001; 114 Stat.
1654A-1, at 1654A-221.
5 The Federal Acquisition Regulation includes regulations concerning government
(continued...)

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CRS-2
OMB released a proposed revision of Circular A-76 and the Revised
Supplemental Handbook on November 14, 2002,7 which was followed by a notice
in the Federal Register on November 19, 2002.8 The Federal Register notice marked
the beginning of a 30-day public comment period. The agency received, by e-mail
and facsimile, 694 comments about the proposed revision.9 However, any comments
that were submitted via the U.S. Postal Service were not listed on the OMB website.
For example, a letter submitted by the Comptroller General to the Director of OMB
concerning the proposed revision was not listed on the OMB website.10
The final revised version of the circular11 was released on May 29, 2003, the
same date that OMB published a notice in the Federal Register.12 In addition to
replacing the 1999 circular, the 2003 version
supersedes and rescinds ... OMB Circular No. A-76 Revised Supplemental
Handbook (Revised 2000), March 1996; OMB Circular No. A-76 Transmittal
Memoranda Nos. 1-25; and Office of Federal Procurement Policy (OFPP) Policy
Letter 92-1, Inherently Governmental Functions, September 23, 1992.13
The three-page circular, which addresses, among other things, the purpose,
authority, and scope of Circular A-76, includes four attachments on the following
topics: the inventory process, public-private competition, calculating public-private
competition costs, and acronyms and definitions. Effective May 29, 2003, the
circular applies to competitions initiated, and inventories required, after the effective
date. Transition procedures for direct conversions and cost comparisons in progress,
but not completed, on May 29 are included in the circular. As with the proposed
revision, an individual may obtain the 2003 circular from OMB’s website or by
5 (...continued)
procurement. The FAR is Parts 1 through 53 of Title 48 of the Code of Federal
Regulations.
6 Commercial Activities Panel, Improving the Sourcing Decisions of the Government
(Washington: U.S. General Accounting Office, 2002), pp. 46-53.
7 U.S. Office of Management and Budget, Circular No. A-76 (Revised), Nov. 14, 2002,
available at [http://www.whitehouse.gov/omb/circulars/index.html], visited Jan. 3, 2005.
8 U.S. Office of Management and Budget, “Performance of Commercial Activities,” Federal
Register, Nov. 19, 2002, vol. 67, no. 223, p. 69769.
9 The faxes and e-mail messages are listed on OMB’s website at [http://www.whitehouse.
gov/omb/circulars/index.html], visited Jan. 3, 2005.
10 Letter from David M. Walker, Comptroller General, to Mitchell E. Daniels, Jr., Director,
U.S. Office of Management and Budget, GAO-03-391R, Jan. 16, 2003.
11 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003,
available at [http://www.whitehouse.gov/omb/circulars/a076/a76_incl_tech_correction.pdf],
visited Jan. 3, 2005.
12 U.S. Office of Management and Budget, “Performance of Commercial Activities,”
Federal Register, vol. 68, no. 103, May 29, 2003, pp. 32134-32142.
13 Ibid., p. 32134.

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CRS-3
telephoning the Office of Federal Procurement Policy (OFPP) (the Federal Register
notice includes contact information).
The 2003 revision accompanies other competitive sourcing initiatives
implemented by the Bush Administration. In 2001, OMB notified agencies and
departments that they were required to compete (that is, public-private competition)
or directly convert14 a minimum of 5% of the full-time equivalents (FTEs)15 listed on
their FAIR inventories by the end of FY2002 and compete or convert an additional
10% by the end of FY2003.16 The combined goal of 15% equated to 127,500 FTEs.17
Subsequently, in spring 2003, the target date for 15% was shifted to July 1, 2004, the
15% target was presented as a governmentwide goal, and agencies learned they
would receive credit not only for studies they had completed, but also for studies they
had initiated.18 A report released by OMB on July 24, 2003, Competitive Sourcing:
Conducting Public-Private Competition in a Reasoned and Responsible Manner,
stated that OMB “recognized its initial numerically-based directions were
inadequate.” OMB also determined that customized competitive sourcing plans,
which are based on agencies’ research and analyses, would be more appropriate.19
In congressional testimony provided the same day that the OMB report was issued,
the OFPP Administrator emphasized that
OMB has moved away from mandated numerical goals and uniform baselines
that were introduced at the beginning of the [competitive sourcing] initiative to
ensure a level of commitment that would institutionalize use of the tool within
14 A cost comparison study is not performed before an agency function is converted from
one sector to another. The conditions under which a direct conversion was permissible are
described in U.S. Office of Management Budget, Circular No. A-76 Revised Supplemental
Handbook, Performance of Commercial Activities, March 1996 (updated June 1999), pp.
3-4. The direct conversion option is not included in the 2003 circular.
15 A full-time equivalent (FTE) is “[t]he staffing of Federal civilian employee positions,
expressed in terms of annual productive work hours (1,776 [hours]) rather than annual
available hours that includes non-productive hours (2,080 hours).” (U.S. Office of
Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p. D-5.)
16 The 5% target was announced in an OMB memorandum: “Performance Goals and
Management Initiatives for the FY 2002 Budget,” Memorandum M-01-15, March 9, 2001.
The 10% target was communicated to agencies, by OMB correspondence, in June 2001.
(Information provided electronically by the Office of Federal Procurement Policy, Jan. 14,
2003.)
17 U.S. Congress, House Committee on Government Reform, Subcommittee on Technology
and Procurement Policy, Oversight Hearing to Review the Findings of the Commercial
Activities Panel, hearing, 107th Cong., 2nd sess., Sept. 27, 2002 (Washington: GPO, 2003),
p. 43.
18 “OMB ‘Proud to Be’ Assessment for Competitive Sourcing,” Government Executive,
Daily Briefing, May 22, 2003, available at [http://www.govexec.com/dailyfed/0503/
0503p1a.htm], visited Jan. 3, 2005.
19 U.S. Office of Management and Budget, Competitive Sourcing: Conducting Public-
Private Competition in a Reasoned and Responsible Manner, July 2003, pp. 1, 4-5, available
at [http://www.whitehouse.gov/omb/procurement/index.html], visited Jan. 3, 2005.

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CRS-4
each agency. Instead, we have negotiated tailored baselines based on mission
needs and conditions unique to the agency.20
A second report issued by OMB, in fall 2003, Competitive Sourcing: Reasoned and
Responsible Public-Private Competition, Agency Activities, described agency
competitive sourcing efforts, explained how agency progress is measured, outlined
benefits associated with the 2003 revision to the circular, and explained additional
initiatives necessary for achieving success in competitive sourcing. Also included
in this report was information about the 24 agencies and departments that OMB
tracks.21
Following OMB’s disavowal of externally imposed targets, it issued guidance
for agencies seeking to achieve a rating of green for competitive sourcing on the
PMA scorecard that requires the development and implementation of a long-range
competition plan.22 An essential component of such a plan is identifying, by fiscal
year, through FY2008, which commercial activities the agency plans to announce for
competition. (Only those commercial activities already identified as eligible for
competition are to be included in long-range competition plans.) Agencies are
required to update their competition plans by August 1 each year.23
The Bush Administration also established a requirement, effective in 2001, that
agencies and departments compile lists of their inherently governmental functions
and submit them to OMB together with annual inventories of their commercial
activities each year.24
After a brief review of several key features of the revised circular, this report
examines the new guidance for agency inventories, the 12-month deadline for
standard competitions, agency compliance issues, and possible implications for the
civil service system and federal employees.
20 U.S. Congress, Senate Committee on Governmental Affairs, Subcommittee on Oversight
of Government Management, the Federal Workforce and the District of Columbia, statement
of Angela B. Styles, Administrator, Office of Federal Procurement Policy, unpublished
hearing, 108th Cong., 1st sess., July 24, 2003, available at [http://www.whitehouse.gov/
omb/legislative/testimony/index.html], visited Jan. 3, 2005, p. 5.
21 U.S. Office of Management and Budget, Competitive Sourcing: Reasoned and
Responsible Public-Private Competition, Agency Activities, Sept. 2003, available at
[http://www.whitehouse.gov/omb/procurement/comp_sourc_addendum.pdf], visited Jan. 3,
2005.
22 Clay Johnson III, Deputy Director for Management, U.S. Office of Management and
Budget, “Development of ‘Green’ Plans for Competitive Sourcing,” memorandum, Dec. 22,
2003, available at [http://www.whitehouse.gov/omb/procurement/comp_sourc-green_
plans122203.pdf], visited Jan. 3, 2005.
23 For a more-detailed discussion of competitive sourcing targets, see CRS Report RL32079,
Federal Contracting of Commercial Activities: Competitive Sourcing Targets, by L. Elaine
Halchin.
24 U.S. Office of Management and Budget, “Year 2001 Inventory of Commercial Activities,”
Memorandum M-01-16, April 3, 2001, p. 1.

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Background
The 2003 revision of A-76 is, arguably, the most significant change to the
circular and its supplement in the document’s history. Previously, the circular stated
that it was the policy of the federal government to rely on the private sector for the
provision of commercial activities.25 With the publication of the 2003 circular, this
policy has been replaced by one that focuses on subjecting commercial activities
performed by the government to competition.26 Under the 2003 revision:
! Agencies designate an assistant secretary, or equivalent level
official, as the competitive sourcing official (CSO).
! The government’s response to a solicitation is identified as an
agency tender, which is the equivalent of a bid or a proposal
submitted by a contractor.
! Two types of competition, standard and streamlined, are still
allowed, but some features have changed. A standard competition
may be used for a work center of any size, but a most efficient
organization (MEO) is required, and a conversion differential is
used.27 A streamlined competition may be used only for functions
that have 65 or fewer FTEs, an MEO is optional, and a conversion
differential is not used.
! Contracting officers use the same source selection criteria or
procedure to evaluate both the agency tender and private businesses’
bids or proposals. An agency may use sealed bidding, lowest price
technically acceptable, phased evaluation, or tradeoff criteria to
evaluate tenders and proposals.
! Where the performance decision28 favors the agency tender, the
agency issues a letter of obligation to the MEO.
25 U.S. Office of Management and Budget, “Implementation of the Federal Activities
Inventory Reform Act of 1998 (Public Law 105-270) (‘FAIR Act’),” Federal Register, vol.
64, no. 121, June 24, 1999, p. 33931.
26 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
1.
27 The MEO is the staffing plan of the agency tender. It is the entity that would perform the
work where the government wins the competition. The conversion differential is either 10%
of line 1 (personnel costs) on the standard competition form or $10 million over all
performance periods, whichever is less. It is added to the non-incumbent’s price or cost of
performance. (U.S. Office of Management and Budget, Circular No. A-76 (Revised), May
29, 2003, p. C-2.) For example, in a competition where a federal agency is the current
provider, the differential would be added to the contractor’s costs.
28 The performance decision, which is accomplished by completing the standard competition
form or streamlined competition form, determines which provider, a government agency or
a private business, will perform the work. The forms may be found on pp. C-5 and C-6,
respectively, of the 2003 circular.

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CRS-6
! The definition of “inherently governmental” is more concise.
Among other changes, the word “substantial” was inserted in this
sentence: Inherently governmental “activities require the exercise of
substantial discretion in applying government authority and/or in
making decisions for the government.”29
! All businesses and federal agencies30 are treated as offerors.31
! There is no guarantee that the agency tender will still be under
consideration when the performance decision is made.
! Agencies establish performance standards for agency officials who
have been designated to implement and comply with Circular A-76.
Apparently, the standards would concern performance on Circular
A-76 activities.
! The direct conversion option no longer exists. This alternative
allowed agencies to convert a function from government
performance to contractor performance without having to conduct a
cost comparison. Direct conversions were allowed only under
certain circumstances.
! References to inter-service support agreements (ISSAs) have been
eliminated. Unlike the proposed revision, the 2003 circular does not
address the competition or re-competition of ISSAs.
The 2003 circular could have a significant impact on public-private competitions,
federal agencies, and the allocation of government work between government
agencies and private sector sources.
Selected Issues
Agency Inventories
Background. The compilation of commercial activities inventories by federal
agencies has been required by Circular A-76, or the accompanying Revised
29 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
A-2. In June 2003, the National Treasury Employees Union (NTEU) filed a lawsuit, in the
U.S. District Court for the District of Columbia, against OMB, alleging, among other things,
that the definition of “inherently governmental” found in Circular A-76 is contrary to the
definition included in FAIR. See Jason Peckenpaugh, “Union Sues Bush Administration
over Job Competition Rules,” Government Executive, Daily Briefing, June 19, 2003,
available at [http://www.govexec.com/dailyfed/0603/061903p1.htm], visited Jan. 3, 2005.
30 The federal agency that is conducting a competition may not be the only agency
competing for the work. Other agencies, referred to as public reimbursable sources in the
circular, also can submit agency tenders.
31 “Offeror” is another term for a contractor that has submitted a bid or a proposal.

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CRS-7
Supplemental Handbook, since at least 1979.32 With the enactment of FAIR in 1998,
the responsibility to compile commercial activities inventories annually, and submit
them to OMB, became a statutory requirement. The first set of inventories prepared
under FAIR was submitted to OMB in 1999.
Two years later, in April 2001, OMB established a requirement for agencies to
prepare and submit inventories of their inherently governmental activities along with
lists of their commercial functions. It is, and has been, federal policy under Circular
A-76 that inherently governmental activities are to be performed by federal
government employees.33 Commercial functions may be performed by government
employees or contractor employees.
Each commercial activity listed on a FAIR inventory is assigned a reason code.
The reason code identifies the status of that activity with regard to competitive
sourcing. The reason codes for inventories are:
A — The Commercial Activity is not appropriate for private sector performance
pursuant to a written determination.
B — The Commercial Activity is suitable for a Cost Comparison or a Direct
Conversion. [The 2003 circular does not include the direct conversion option
and, instead of “cost comparison,” uses the term “competition.”]
C — The Commercial Activity is the subject of an in-progress Cost Comparison
or Direct Conversion.
D — The Commercial Activity is performed by a Most Efficient Organization
(MEO) resulting from a Cost Comparison decision made within the past five
years.
E — The Commercial Activity is pending an agency approved restructuring
decision (e.g., closure, realignment).
F — Performance of the commercial activity by government personnel is
required due to a statutory prohibition against private sector performance.34
OMB Guidance on Inherently Governmental Activities Inventories.
Since the inception of the requirement to submit lists of inherently governmental
activities, OMB has changed its approach to these inventories. Initially, inherently
governmental inventories were not made available to the public, and agency
32 U.S. Office of Management and Budget, “Acquiring of Commercial of [sic] Industrial
Products and Services Needed by the Government; Policy Revision,” Federal Register, vol.
44, no. 67, April 5, 1979, p. 20560. Confirmation that this requirement existed prior to
1979, or continuously thereafter, is not possible, because early editions of the supplemental
handbook are not available.
33 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
1.
34 U.S. Office of Management and Budget, “Year 2003 Inventories of Commercial and
Inherently Governmental Activities,” Memorandum M-03-09, March 14, 2003, p. 3.

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CRS-8
justifications, written or otherwise, were not required for activities bearing this
designation. Two years after the initial directive was issued, language in Circular A-
76 states that inherently governmental inventories are to be made available to the
public; interested parties are allowed to challenge activities that are included on, or
omitted from, an inherently governmental inventory; and written justifications must
be provided, upon request, by agencies.
The following chronology demonstrates how OMB has changed its treatment
of inherently governmental inventories. Its initial guidance of April 3, 2001, stated:
[A]gencies are requested to submit, with their FAIR Act inventories, a separate
report that lists the agency’s civilian inherently governmental positions. Military
positions and other civilian employees that are exempt, as a class of employee,
from the FAIR Act inventory of commercial functions should not be reported.
This report should be in the same format and level of detail used for the 2001
FAIR Act inventory of commercial functions. The information will be used as
a part of OMB’s statutory review and consultation process, but will not be
released as a part of the FAIR Act inventory nor will it be subject to the FAIR
Act’s administrative challenge and appeal process.35
Guidance for the 2002 inventories alerted agencies to the possibility that inventories
of inherently governmental activities could be released to the public.
For 2002, agencies will provide to OMB a single inventory submission that
reflects both the agency’s civilian inherently governmental FTE[s] and civilian
commercial FTE[s], by location and function. Upon completion of OMB’s
review and consultation with the agency regarding the content of this submission,
each agency shall provide a separate report listing only the agency’s commercial
civilian FTE[s] to the Congress and the public in accordance with the
requirements of the FAIR Act. Agencies should anticipate the possibility that
after review and consultation, OMB may request the release of inherently
governmental inventories.... As a result of this [memorandum], OMB expects to
conduct a more thorough review of agency inventory submissions and will seek
improved consistency within and among agencies in the determination of what
is commercial or inherently governmental.36
Shortly after the release of this memorandum, the Administrator of the OFPP,
testifying before the Senate Committee on Governmental Affairs, stated that the
FAIR challenge process would not apply to inherently governmental activities.
Again this year, agencies will be requested to submit a separate report that lists
the agency’s civilian inherently governmental positions. OMB will analyze this
data as part of its overall management responsibilities, but it will not be subject
to the FAIR Act’s administrative challenge and appeal process.37
35 U.S. Office of Management and Budget, “Year 2001 Inventory of Commercial Activities,”
p. 1.
36 Angela Styles, Administrator, Office of Federal Procurement Policy, “Year 2002
Inventory of Commercial Activities,” Memorandum M-02-04, Feb. 27, 2002, p. 2.
37 U.S. Congress, Senate Committee on Governmental Affairs, “Who’s Doing Work for the
(continued...)

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OMB guidance for the 2003 inventories was provided initially by a
memorandum dated March 14, 2003.38 The document stated that it provided
guidance for the preparation and submission of FAIR inventories and inherently
governmental activities inventories. No explicit statement was made about the
disposition of inherently governmental activities inventories, such as whether they
would be made available to the public or subjected to the FAIR challenge and appeal
process.
The requirement for agencies to submit inventories of their inherently
governmental activities was incorporated into the 2003 circular. OMB’s role did not
change: it reviews the inventories and consults with agencies. Then, agencies are
required to make their commercial and inherently governmental inventories available
to Congress and the public, except information that is classified or “otherwise
protected for national security reasons.”39
Two major changes in the treatment of inherently governmental inventories
were effected by the circular. Agencies must prepare written justifications for
activities classified as inherently governmental.
The CSO [the agency’s competitive sourcing officer] shall justify, in writing, any
designation of government personnel performing inherently governmental
activities. The justification shall be made available to OMB and the public upon
request. An agency shall base inherently governmental justifications on the
[circular’s revised definition of “inherently governmental.”]40
Similar to the challenge and appeal processes under FAIR that apply to commercial
activities inventories, the circular allows interested parties to challenge the contents
of inherently governmental inventories.
It appears that additional guidance may be necessary to address questions
concerning detailed instructions for preparing justifications, how agency-OMB
disputes might be resolved, and the frequency of justification submissions.
Challenge and Appeal Processes. In effect, the 2003 circular modified
the challenge and appeal process that was established by FAIR. In addition to
altering time frames from “days” to “working days,” and providing direction on who
should serve as agency challenge authorities and appeal authorities, the circular
allows for challenges to reason codes and the classification of activities as inherently
governmental.
37 (...continued)
Government?: Monitoring, Accountability and Competition in the Federal and Service
Contract Workforce,” hearing, 107th Cong., 2nd sess., March 6, 2002 (Washington: GPO,
2002), p. 55.
38 U.S. Office of Management and Budget,”Year 2003 Inventories of Commercial and
Inherently Governmental Activities.”
39 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
A-1.
40 Ibid., p. A-2.

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CRS-10
Table 1. Comparison of Inventory Challenge
and Appeal Processes
FAIR (P.L. 105-270)
Circular A-76
Attachment A
Sec. 2.(c)(2)(A)
Para. D.6.
Any changes made to an inventory as a
A copy of the change shall also be
result of a challenge shall be made
provided to OMB.
available to the public. A copy of the
changes shall be sent to Congress, and a
notice shall be published in the Federal
Register.
Sec. 3.(a)
Para. D.2.
An interested party may challenge the
An interested party may challenge the
inclusion of an activity on, or the
application of reason codes and the
omission of an activity from, a
reclassification of an activity as
commercial activity inventory.
inherently governmental or commercial.
Sec. 3.(c)
Para. D.2.
A challenge must be submitted, in
A challenge must be submitted within 30
writing, to an agency within 30 days after
working days.
notice has been published in the Federal
Register that an agency’s inventory is
available.
Sec. 3.(d)
Para. D.1.a.
An agency head shall designate an
Inventory challenge authorities shall be at
official to handle challenges.
the same level, or higher, than the
individual who prepared the inventory.
Sec. 3.(d)
Para. D.3.
The designated official shall make a
Inventory challenge authorities must
determination and respond within 28 days
make a determination and respond within
after receiving the challenge.
28 working days.
Sec. 3.(e)
Para. D.1.b.
The head of an agency shall handle
Agency heads shall appoint inventory
appeals.
appeal authorities. They shall be
independent and at a higher level in the
agency than inventory challenge
authorities.
Sec. 3.(e)(1)
Para. D.4.
An interested party shall have 10 days
An interested party shall have 10 working
after receipt of an adverse decision to file
days.
a written appeal.
Sec. 3.(e)(2)
Para. D.5.
The agency head shall decide the appeal
An inventory appeal authority shall
and respond, in writing, within 10 days
respond within 10 working days.
after receipt of the appeal.

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CRS-11
Only individuals or entities that qualify as an interested party may submit
challenges and appeals. The circular and FAIR share the same definition of
“interested party”:
For purposes of challenging the contents of an agency’s commercial activities
inventory pursuant to the Federal Activities Inventory Reform Act, an interested
party is (1) a private sector source that is an actual or prospective offeror for a
contract or other form of agreement to perform the activity and 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 organizations 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 paragraph (3).41
Several questions or issues may arise with the revised challenge and appeal
process.
! The text at the beginning of the circular’s definition of “interested
party” indicates that the purpose of the definition is to identify who
may challenge the contents of commercial activities inventories.
However, Paragraph D.2 of Attachment A of the circular suggests
that interested parties may challenge the classification of inherently
governmental activities. Has this apparent discrepancy been
resolved? If so, how?
! Assuming that individuals and organizations are allowed to file
challenges on the classification of inherently governmental
activities, how many have been filed? What kind of burden will they
place on agencies? Do agencies have the capability to respond,
within the circular’s timelines, to challenges and appeals?
! Does the new approach toward inherently governmental activities
affect how agency personnel classify activities?
! Are there any implications of using an executive directive (Circular
A-76) to broaden the application of FAIR to inherently
governmental activities?42
Rationale for Inherently Governmental Inventories. The 2001
memorandum that initially established a requirement for agencies to compile
inventories of inherently governmental activities noted that the information would
41 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
D-6.
42 CRS Report RS21489, OMB Circular A-76: Legal Reach and Proposed Modifications,
by John R. Luckey, p. 2.

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CRS-12
be “used as a part of OMB’s statutory review and consultation process ....”43 While
OMB’s 2002 inventory guidance did not provide a rationale for requesting inherently
governmental inventories,44 the Administrator of OFPP, testifying at a congressional
hearing on March 6, 2002, stated that OMB would analyze this information “as part
of its overall management responsibilities.”45 OMB’s guidance for the 2003
inventories did not state why information about inherently governmental activities
needs to be collected. However, in testimony presented on March 25, 2003, the
OFPP Administrator indicated why OMB wants agencies to compile and submit
inherently governmental activities inventories:
[Inherently governmental] functions must be performed by public employees and
we will continue to depend on our able workforce to execute these important
responsibilities on behalf of our citizenry. This notwithstanding, we will still
require agencies to identify their inherently governmental functions to ensure
activities are properly characterized. By doing so, commercial functions that
should be considered for competition will not remain insulated from the savings
that a fair competition can yield.46
The May 29, 2003 Federal Register notice stated that the circular would
“increase visibility into government management by requiring agencies to develop
lists of their commercial and inherently governmental activities.”47 Another excerpt
from the Federal Register notice stated:
An accurate inventory identifying an agency’s commercial and inherently
governmental activities is vital to a federal manager’s ability to identify
opportunities for which application of public-private competition is likely to
yield the best return for the agency. For this reason, the revised Circular refines
and expands guidance on the establishment of inventories .... The revised
Circular builds on existing statutory obligations set forth in ... FAIR ... that
require agencies to prepare annual inventories of the commercial activities
performed by their employees. These enhancements ... include a more accurate
picture of agencies’ overall activities. The revised Circular requires agencies to
categorize all activities performed by government personnel as either commercial
or inherently governmental.48
43 U.S. Office of Management and Budget, “Year 2001 Inventory of Commercial Activities,”
p. 1.
44 U.S. Office of Management and Budget, “Year 2002 Inventory of Commercial Activities.”
45 U.S. Congress, Senate Committee on Governmental Affairs, “Who’s Doing Work for the
Government?: Monitoring, Accountability and Competition in the Federal and Service
Contract Workforce,” p. 55.
46 U.S. Congress, House Committee on the Armed Services, Subcommittee on Readiness,
statement of Angela B. Styles, Administrator, Office of Federal Procurement Policy,
unpublished hearing, 108th Cong., 1st sess., March 25, 2003, available at [http://
armedservices.house.gov/schedules/2003.html#mar03], visited Jan. 3, 2005.
47 U.S. Office of Management and Budget, “Performance of Commercial Activities,” May
29, 2003, p. 32134.
48 Ibid., pp. 32137-32138. (italics in original)

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CRS-13
Implementation. Agency implementation of this portion of the circular
(attachment A, inventory process) might create additional work for agencies. In
addition to preparing written justifications for activities designated as inherently
governmental or designated as commercial and assigned reason code A, agency
personnel might be called upon to respond to challenges and appeals concerning
reason codes or the contents of inherently governmental activities inventories.
In light of OMB’s emphasis on competitive sourcing, one possible outcome of
changing, and expanding the applicability of, the inventory procedures could be the
establishment of an environment conducive to erroneous classification of activities.
Activities that are arguably inherently governmental, or that are commercial but
should be exempt from competition (reason code A), might be misclassified as
commercial and eligible for competition (reason code B). Less work is required for
placing activities on the FAIR inventory and assigning reason code B. Written
justifications are not required for these activities, but they are required for inherently
governmental activities and commercial activities assigned reason code A.
This potential problem may be mitigated by the visibility of agency inventories
and the accountability mechanisms established by FAIR and enhanced by Circular
A-76. Requiring commercial activities inventories and inherently governmental
inventories to be made available to the public allows for scrutiny of both types of
activities. Union and private sector reviews of inventories could be particularly
useful in guarding against potential misclassification of activities as commercial
when they are not, or vice versa. Additionally, the release of inherently governmental
inventories could aid in examining the belief, held by some commenters, that some
commercial activities are placed on inherently governmental inventories in order to
shield them from competition. One issue that might arise is how to balance an
agency’s determinations, based upon familiarity with its own work, and, for example,
its exercise of discretionary authority in applying reason code A, against the
assessments of outside organizations concerning the proper classification of agency
activities. In the absence of a disclosure process akin to the one used for inventories
of commercial and inherently governmental activities, it is difficult to gauge whether,
and how, outside organizations use the opportunities available to them under the
revised challenge and appeal process.
Useful information can be gleaned from inherently governmental and
commercial inventories, such as the variety of functions performed by an agency and
the number of FTEs associated with each activity. However, the utility of this
information is somewhat limited. The inventories are based on a dichotomy between
commercial and inherently governmental, which makes them useful for competitive
sourcing, but they appear not to capture the complexities and interdependence of
government work and government organizations.
Changes to the definition of “inherently governmental” might not end with the
revised definition that appears in the 2003 circular. Various factors, such as the
production and publication of lists of inherently governmental and commercial
activities, the increasing number of competitions, or the revised definition itself,
could act as a catalyst for an open, informed, and thoughtful discussion on the
concept of inherently governmental and its validity.

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CRS-14
Some policy issues and questions that might arise as agencies attempt to comply
with the circular and OMB inventory guidance include the following:
! The circular states that agency personnel shall use the circular’s
definition of “inherently governmental” in preparing their
justifications for inherently governmental activities. No other
guidance is provided to indicate what type and scope of information
constitutes sufficient justification.
! What happens if OMB disagrees with an agency’s justifications for
inherently governmental activities? Who — the agency, OMB, a
third party — has final authority over the agency’s list of inherently
governmental activities and accompanying justification?
! Does an initial justification remain valid until, for example, an
agency elects to change its inherently governmental activity
inventory and/or justifications? If not, how frequently does OMB
require agencies to prepare justification statements for their
inherently governmental activities?
! How has OMB encouraged compliance? What happens if an agency
does not comply with OMB’s directives?
! There is no statutory requirement for agencies to submit lists of
inherently governmental activities. Do all agencies that submit
FAIR inventories also submit inventories of inherently governmental
activities?
! Have OMB-agency consultations resulted in shifting activities from
an inherently governmental list to a commercial inventory and vice
versa? If so, how many functions and FTEs have been shifted, for
each agency and each year, from one list to another? What has been
the net result governmentwide?
Deadline for Completing Standard Competitions
Under the 1999 circular, agencies were allowed 18 months to complete a
standard cost comparison for a single function and 36 months for a multifunction
study. The cost comparison start date was the date a study team had been identified
and the public or the union had been notified of the study.49
The 2003 revision imposes a shorter timeframe for study completion and does
not make a distinction between single function and multifunction studies. The 2003
circular requires an agency to complete a competition (that is, reach a performance
49 U.S. Office of Management and Budget, Circular No. A-76 Revised Supplemental
Handbook, Performance of Commercial Activities, p. 10.

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CRS-15
decision) within 12 months of the public announcement of the competition.50 The
Federal Register notice that announced the release of the 2003 circular stated OMB’s
rationale for the 12-month deadline:
Timeframe standards have been incorporated into the revised Circular to
motivate agencies to complete competitions and to instill greater confidence that
agencies will follow through on their plans. Current processes have been
criticized for allowing agencies to extend public-private competitions
indefinitely.... In addition to instilling confidence in the process, time limits
ensure that the benefits of competition are realized.51
A time limit waiver of up to six months may be granted by the agency competitive
sourcing official (CSO). A waiver applies only to a competition that is particularly
complex and must be signed by the CSO before the public announcement of the
competition. The CSO is to provide a copy of the waiver to the Deputy Director for
Management, OMB. If an agency exceeds the time limit (whether 12 or 18 months)
for a study, the CSO is to notify OMB in writing.52 The 2003 circular does not
indicate whether there will be any consequences for an agency that fails to meet the
deadline.
In practice, agencies have more than 12 (or 18) months to complete
competitions. In establishing a timeframe, what OMB did was identify a set of
activities an agency must accomplish between a study’s start date and the end date.
All other necessary tasks can occur before or after the 12- or 18-month timeframe.
At a minimum, agencies are expected to perform these tasks within the allotted time:
! Issue a public announcement.
! Appoint agency personnel to the performance work statement (PWS)
team, the most efficient organization (MEO) team, and the source
selection evaluation board (SSEB).
! Prepare the PWS.
! Develop and issue a solicitation.
! Create a plan for establishing an MEO.
! Develop a quality assurance surveillance plan (QASP).53
! Prepare an agency tender, which includes, in addition to an MEO, a
certified agency cost estimate, the MEO’s quality control plan, the
MEO’s phase-in plan, and copies of any existing, awarded MEO
subcontracts.
! Receive and evaluate all tenders and offers.
50 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
B-6.
51 U.S. Office of Management and Budget, “Performance of Commercial Activities,” May
29, 2003, p. 32136.
52 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
B-6.
53 A QASP “identifies the methods the government will use to measure the performance of
the service provider against the requirements of the PWS.” (U.S. Office of Management and
Budget, Circular No. A-76 (Revised), May 29, 2003, p. B-10.)

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CRS-16
! Perform price analysis and cost realism on all private sector cost
proposals and agency cost estimates.54
! Make the performance decision.55
The imposition of a 12-month deadline, when combined with a list of tasks that
need to be accomplished prior to the start date, alerts agencies to the importance of
planning for a competition. In the May 29, 2003 Federal Register notice, OMB
stated that many commenters on the proposed revision noted that agency personnel
“lack experience planning for and conducting public-private competitions.” OMB
agreed with these commenters, responding that it had refined and bolstered its
coverage of this area in the 2003 circular.56 Prior to the start date of a competition,
agencies are to:
! Determine what function(s) are to be competed and identify the
associated FTEs.
! Carry out preliminary research to determine how to group activities
as business units.
! Review workload data, quantifiable outputs of activities or
processes, and other similar data. If necessary, establish workload
data collection systems.
! Determine the activity’s baseline costs.
! Determine whether to conduct a streamlined or a standard
competition.
! Develop schedules for completing the study.
! Determine the roles and responsibilities of agency participants in the
competition.
! Appoint competition officials: agency tender official, contracting
officer, PWS team leader, human resource advisor (HRA), and
source selection authority (SSA).
! Notify incumbent service providers when the public announcement
will be made.57
While this list might aid agency personnel who are trying to determine what
resources and skills are needed to conduct rigorous planning for competitions, neither
the circular nor the Federal Register notice addressed the matter of training personnel
54 Price analysis is used to determine that “the proposed price is reasonable in comparison
with current or recent prices for the same or similar items, adjusted to reflect changes in
market conditions, economic conditions, quantities, or terms and conditions under contracts
that resulted from adequate price competition.” (48 CFR 15.403-1(c)(1)(B)(III).) Cost
realism is a process used to ensure that the costs in an offeror’s proposal are realistic, reflect
a thorough understanding of the requirements, and are consistent with the technical
proposal. (48 CFR 2.1.)
55 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, pp.
B-6-B-16.
56 U.S. Office of Management and Budget, “Performance of Commercial Activities,” May
29, 2003, p. 32138.
57 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, pp.
B-1-B-3.

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CRS-17
to plan and conduct competitions. Training for agency personnel was addressed in
OMB’s May 2004 report on competitive sourcing, which identified the Federal
Acquisition Council, senior managers governmentwide, the Defense Acquisition
University, and the Federal Acquisition Institute as key participants in the effort to
plan for, develop, and offer training tailored to meet the needs of agency personnel
conducting public-private competitions.
Successful application of competitive sourcing requires that our workforce be the
best it can be in identifying activities that are suitable for competition, applying
streamlined and standard competition techniques in a strategic manner, running
a fair and transparent selection process, and properly managing the resulting
contract or letter of obligation established with a winning government provider.
The Federal Acquisition Council has been inventorying agency resources, skill
sets and training needs. OMB will work closely with the Council and ask senior
agency management to give priority attention to developing plans that address
identified skills gaps. The Defense Acquisition University and Federal
Acquisition Institute will be asked to play a lead role in providing training
materials geared to skills such as market analysis, cost analysis, and contract
administration.58
Whereas OMB has imposed requirements on agencies regarding, for example, the
inclusion of inherently governmental activities in their inventories, it remains to be
seen whether OMB issues any directives or requirements regarding training.
A shorter timeframe was incorporated into the 2003 circular in an effort to
alleviate problems caused, or aggravated, by time-consuming studies. Studies that
take a long time to complete, some argue, create problems for federal agencies,
government employees, and businesses. Michael Wynne, Deputy Undersecretary of
Defense for Acquisition, Technology, and Logistics, summarized this perspective:
The entire process is frustrating for all concerned: government employees who
are in limbo about their jobs, contractors who have tied up considerable bid and
proposal investments and the government activity that is managing the process
while simultaneously performing their day-to-day mission.59
Additionally, it is possible that the emphasis on rigorous planning prior to the public
announcement will decrease the likelihood that an agency announces, then cancels,
a competition.
Implementation of the new deadline might not alter the amount of time agencies
take to plan and conduct competitions, however. A-76 studies for which figures are
available have taken considerably longer than 12 or 18 months. Information from,
for example, the Department of Defense (DOD), shows that the average time for
58 Executive Office of the President, U.S. Office of Management and Budget, “Competitive
Sourcing: Report on Competitive Sourcing Results, Fiscal Year 2003,” May 2004, available
at [http://www.whitehouse.gov/omb/pubpress/fy2004/cs_omb_647_report.pdf], visited Jan.
3, 2005, pp. 18-19.
59 Richard W. Walker, “Rebuilding,” Government Computer News, July 22, 2002 available
at [http://www.gcn.com/21_20/mgmt_edition/19325-1.html], visited Jan. 3, 2005.

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CRS-18
completing studies has varied. For the period October 1, 1978, through December
31, 1986, the average time was 24 months. Between 1987 and 1990, the average was
51 months. In FY1990, the average was 56 months for 53 studies.60 In
correspondence dated January 16, 2003, the Comptroller General reported that, over
the past five years, the average time to complete cost studies in DOD was 25
months.61 Presumably, these figures include the time necessary for planning the
studies. If so, and if OMB does not impose a deadline for the planning phase, then
it is unclear how the 12-month deadline will result in shorter studies.
Furthermore, the requirement to establish a workload data collection system
(which an agency apparently must do during the planning phase if a system is not
already in place)62 might impede an agency’s efforts to complete a study quickly.
The circular does not address the issue of the amount of time for data collection.
Apparently, agencies will determine how many weeks or months of data they will
need to collect prior to starting a competition.
Documentation that shows why studies take as long as they do, or that indicates
what amount of time is reasonable for producing quality competitions, is lacking.63
In the Federal Register notice for the 2002 proposed revision to the circular, OMB
suggested that agencies have a great deal of control over the duration of competitions
and that “managers often ... unnecessarily draw out competitions without
consequence.”64 If reluctance on the part of agencies is a primary reason why A-76
studies take as long to complete as they do, then the tightened deadlines may be
realistic. However, other factors might play a role, too. GAO has found that, in
addition to the failure of agencies to place “a sufficiently high priority” on cost
studies, “the absence of ... skills needed to prepare the statement of work, and ...
work load data needed to define work requirements in the function being studied”
contributed to delays in completing cost studies.65
60 U.S. General Accounting Office, OMB Circular A-76: Legislation Has Curbed Many Cost
Studies in the Military Services, GAO/GGD-91-10 (Washington: GAO, 1991), p. 3.
61 Letter from David M. Walker, Comptroller General, to Mitchell E. Daniels, Jr., Director,
U.S. Office of Management and Budget, GAO-03-391R, Jan. 16, 2003, p. 3.
62 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
B-1.
63 A provision in the 1999 circular required agencies “to provide an annual report to OMB
on all cost comparisons that exceed [the 18-month timeframe for single function studies and
the 36-month timeframe for multifunction studies], including a description of the problems
encountered, remedial actions, status and expected completion date.” (U.S. Office of
Management and Budget, Circular No. A-76 Revised Supplemental Handbook, Performance
of Commercial Activities, p. 10.) It is not known whether agencies submitted reports to
OMB.
64 U.S. Office of Management and Budget, “Performance of Commercial Activities,” Nov.
19, 2002, p. 69771.
65 U.S. General Accounting Office, OMB Circular A-76: Legislation Has Curbed Many Cost
Studies in the Military Services, p. 4.

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CRS-19
In its initial report on competitive sourcing results, dated May 2004, OMB
stated:
The timeframes in the new Circular are motivating agencies to carry out their
commitments in a timely manner. For example, the Department of Health and
Human Services (HHS) reports that it completed streamlined competitions within
three-month timeframes and standard competitions within a year.... Equally
important, these timeframes are not causing agencies to sacrifice quality decision
making. Competitive sourcing efforts by HHS have generated savings or cost
avoidances.66
HHS completed 44 streamlined and 8 standard competitions in FY2003.67 The
duration of competitions in other departments, such as Agriculture (398 streamlined
and 2 standard completed in FY2003) and Defense (7 streamlined and 71 standard),
is not known. Turning briefly to OMB’s comment that HHS decision making was
not impaired by meeting the respective deadlines, only one criterion — cost — is
presented as evidence of the quality of decision making. Focusing on a single factor
excludes other dimensions or criteria that also might contribute to a quality decision
making process. For example, the accuracy and thoroughness of a performance work
statement, or the performance of the organization that won the competition, might be
viewed by some as an indicator of a quality competition.
Agency Compliance
Burden on Agency Resources. The 2003 circular levies a series of new
requirements on agencies and expands or alters some existing competitive sourcing
requirements. These requirements include the following:
! Complete standard competitions within 12 months (18 months, if a
time limit waiver has been issued).68
! Complete streamlined competitions within 90 calendar days (135
days, if a time limit waiver has been issued).69
! Using the circular, subject all work that is being performed by the
agency as a result of a performance decision to follow-on
competition at the end of the last performance period. For a
performance decision that resulted in contractor performance, apply
the Federal Acquisition Regulation for any follow-on competition.70
66 Executive Office of the President, U.S. Office of Management and Budget, “Competitive
Sourcing: Report on Competitive Sourcing Results, Fiscal Year 2003,” pp. 8-9.
67 Ibid., p. A-1.
68 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
B-6.
69 Ibid., p. B-5.
70 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
B-19-B-20.

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CRS-20
! Prepare written justifications for activities designated as inherently
governmental.71
! Prepare written justifications for commercial activities that have
been assigned reason code A.72
! Respond to challenges and appeals on the classification of activities
as inherently governmental.73
! Respond to challenges and appeals on the application of reason
codes to commercial activities.74
! Post best practices and lessons learned to the DOD website SHARE
A-76.75
! Maintain a database for tracking streamlined and standard
competitions.76
! Prepare and submit a competitive sourcing quarterly report to
OMB.77
! Monitor the performance of all service providers (MEOs and
contractors).78
The resulting increase in the number of competitions and the pace at which they are
to be completed presumably will increase the number of contracts agencies must
monitor. The issuance of letters of obligation where the government wins the
competition will likely add to an agency’s contract monitoring workload.79
Whether agencies have sufficient resources to fulfill competitive sourcing and
Circular A-76 requirements in a timely manner is unknown. Two senior government
officials have expressed their concerns on this issue. At the Department of Justice,
Paul Corts, Assistant Attorney General for Administration, reportedly said: “We do
not have the resources to prepare the justifications and particularly for the number of
criticisms this process would invite from contractors.”80 According to the
Washington Post, the Director of the National Park Service (NPS) stated, in a
memorandum dated April 4, 2003: “‘[W]e do not have a fund source to cover the
cost of completing these [A-76] studies .... The costs are too significant to be
covered by the affected parts, as some in the [Interior] Department have suggested.’”
NPS anticipated that the cost of consultants needed to conduct studies would reach
71 Ibid., p. A-2.
72 Ibid., p. A-3.
73 Ibid., p. A-4.
74 Ibid.
75 Ibid, p. B-19.
76 Ibid.
77 Ibid.
78 Ibid.
79 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
B-18.
80 Chet Dembeck, “Managers Pan Administration’s Outsourcing Push,” Federal Times, Jan.
13, 2003, p. 4.

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CRS-21
$2.5 to $3 million, and that, as a result, there would be “serious consequences for
visitor services and seasonal operations.”81
The list of needed resources could include agency employees who have Circular
A-76 experience or experience preparing bids and proposals, funding to hire
contractors to conduct A-76 studies, and sufficient numbers of agency personnel
qualified to monitor contracts. Also unknown is whether additional resources will
be provided to agencies to help them meet these requirements. A lack of sufficient
resources could affect the quality of A-76 studies and the effectiveness of contract
monitoring efforts. A possible implication of insufficient resources could be a
preference on the part of agencies for streamlined competitions, under which MEOs
are not required, over standard competitions. If an agency elected to handle the
increased competitive sourcing workload by diverting greater numbers of employees
to A-76 studies, the normal work these employees perform might have to be deferred.
Robert Kugelman, head of the Commerce Department’s Office of Executive
Budgeting and Management, in a comment in Federal Times, acknowledged this
problem: “The bottom line is really about finding ways to do things more effectively,
but doing that while still performing your job can be daunting.”82 Finally, there is no
indication of how OMB might respond to agencies that are unable, because of
inadequate resources, to meet all of the competitive sourcing requirements.
Resources Needed to Prepare Competitive Offers. Designing an MEO
is one of the steps in the public-private competition process.83 Designing an MEO
that is competitive84 might help to ensure that competition between a government
agency and private sector sources is carried out on a level playing field. In its
recommendation for developing an integrated competition process, a process that
would combine elements of Circular A-76 and the Federal Acquisition Regulation,
the Commercial Activities Panel noted:
As with “most efficient organizations” under A-76, federal employees should be
able to propose process improvements and efficiencies and be supported in that
effort. Federal employees involved in submission of an in-house offer also
should receive assistance in planning for a competition, preparing a proposal,
conducting discussions, attending a debriefing, and filing a protest.
In-house teams [should] receive reasonable consideration and support from
management in their efforts to participate in competitions: Where there is an in-
house workforce currently performing, it would be expected that management
generally will authorize in-house submission of a proposal, which includes
81 Christopher Lee, “Park Service Plans Outsourcing,” Washington Post, April 19, 2003, p.
A4.
82 David Phinney, “Officials Struggle at the Starting Line in Outsourcing Efforts,” Federal
Times, Feb. 10, 2003, p. 4.
83 Under a standard competition, an MEO is required. It is optional in a streamlined
competition. ( U.S. Office of Management and Budget, Circular No. A-76 (Revised), May
29, 2003, pp. B-4, B-7.)
84 A competitive MEO (or agency tender) is one that has a reasonable chance of being
selected to perform the work.

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CRS-22
commitment of resources for a proposal with a reasonable prospect of award
(which may include increasing staff or making capital investments).85
In addition to the knowledge necessary to perform their jobs, employees may
need the assistance of management experts to redesign the workspace, reengineer
processes, and identify capital improvements. The 2003 circular acknowledges the
types of studies and analyses which can be used to develop an MEO:
The MEO is an agency’s staffing plan as identified in the agency tender. The
MEO is not usually a representation of the incumbent organization, but is the
product of management analyses that include, but are not limited to, activity
based costing, business case analysis, consolidation, functionality assessment,
industrial engineering, market research, productivity assessment, reengineering,
reinvention, utilization studies, and value engineering.86
The Federal Register notice acknowledged the need for technical assistance to be
provided to the agency tender official, but it does not require the agency to provide
the necessary support, through either agency personnel or outside sources.
The revised Circular, like the proposed Circular, recognizes the talents of the
federal workforce, the conditions under which it operates, and the importance of
providing the workforce with adequate training and technical support during the
competition process to ensure it is able to compete effectively. In this regard, the
revised Circular requires that the ATO [agency tender official] have access to
available resources (e.g., skilled manpower, funding) necessary to develop a
competitive agency tender.87
In his or her role as the agency tender official (ATO), this individual shall,
among other things, “provide the necessary resources and training to prepare a
competitive agency tender.”88 Most likely, resources and training are necessary to
prepare, and aid, agency personnel responsible for developing an agency tender
(including an MEO). Immediately following the list of ATO responsibilities, the
circular states: “An agency shall ensure that the ATO has access to available
resources (e.g., skilled manpower, funding) necessary to develop a competitive
agency tender.”89 The circular does not identify who within the agency, whether a
particular office or official, should be responsible for ensuring that the ATO receives
needed resources. In Appendix B of the revision, under the heading “Competition
Officials,” no one is identified as having this responsibility.90 What kind of, or how
much, authority an ATO might have in order to obtain the resources necessary to
85 Commercial Activities Panel, Improving the Sourcing Decisions of the Government, p. 51.
86 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
B-10.
87 U.S. Office of Management and Budget, “Performance of Commercial Activities,” May
29, 2003, p. 32139.
88 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
B-2.
89 Ibid.
90 Ibid., pp. B-1-B-3.

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CRS-23
develop a competitive agency tender is unknown. The lack of specificity and the
absence of a requirement for agencies to provide sufficient resources as determined
by the ATO could affect implementation. Some questions that might arise include:
! Given that an agency’s competitive sourcing official is responsible
for implementing the circular, why was this official not identified as
the responsible party for providing resources to the ATO?
! What might happen if an ATO believes the agency is not providing
sufficient resources? What recourse, if any, might the ATO have?
Who in the agency would be held responsible?
! Could a claim that the circular levels the playing field be sustained
if preparation for, and development of, agency tenders were
underfunded?
! How might a dispute over the type, quality, or quantity of agency
resources provided to the agency tender effort affect the legitimacy
of a competition?
! What costs might an agency incur for preparing inventories,
conducting competitions, and establishing MEOs (where the
government has won the competition)?
In its May 2004 report on competitive sourcing results, OMB stated that the
success of most efficient organizations in winning public-private competitions in
FY2003 suggests that “agencies are taking steps envisioned by the revised Circular
to ensure government providers have a fair opportunity to demonstrate their
capability to serve the taxpayer.”91 “Requir[ing] agencies to ensure that their in-
house providers have access to available resources (e.g., skilled, manpower, funding)
necessary to develop competitive agency tenders” is one of the steps credited to the
2003 circular. Other steps, or factors, cited by OMB, and included in the 2003
circular, were eliminating direct conversions, encouraging federal agencies to
develop MEOs for streamlined competitions, and allowing agencies to use a source
selection method that involves a trade-off between cost and other, non-cost factors.92
Attributing the success of in-house efforts to, in part, the provision of resources by
agencies might not accurately reflect the extent of in-house support for MEOs.
Other, possibly more accurate measures of agency support might include the amount
91 Executive Office of the President, U.S. Office of Management and Budget, “Competitive
Sourcing: Report on Competitive Sourcing Results, Fiscal Year 2003,” p. 9. The percentage
of competitions won by in-house providers in FY2003 for agencies that conducted at least
five competitions or competitions that cumulatively involved 50 or more FTEs was: Dept.
of Agriculture, 100%; Dept. of Defense, 81%; Dept. of Energy, 96%; Dept. of Health and
Human Services, 99%; Dept. of the Interior, 99%; Dept. of Justice, 100%; Dept. of
Transportation, 100%; Dept. of the Treasury, 91%; Dept. of Veterans Affairs, 0%; General
Services Administration, 100%; Office of Personnel Management, 100%; and Small
Business Administration, 58% (ibid., p. 10).
92 Ibid., pp. 9-10.

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CRS-24
of funds expended on training, the number of agency personnel who have been
trained, documentation of services (for example, reorganization, workload analysis,
or reengineering) provided to the MEO, or the type and extent of support requested
by the ATO compared to what was provided by the agency. Generally, unless a cost-
technical tradeoff (a tradeoff between cost and non-cost factors) source selection
method has been used, the prospective provider (that is, a government agency or a
contractor) whose offer promises to yield greater savings will be awarded a contract
(private business) or a letter of obligation (MEO). OMB has noted “that savings
were largely attributable to reductions in federal labor costs,” but they also “may be
derived in other ways.” One interpretation of this statement is that savings resulted
mostly from a reduction in the number of an agency’s FTEs as a result of an A-76
competition.93 If this is an accurate statement, then it might be helpful to ask how an
agency determined that a smaller number of FTEs could perform the work. A related
issue is the question of whether fewer FTEs are required by the MEO because the
scope of work, as documented in the performance work statement (PWS), has been
decreased. In short, it is not clear that OMB’s suggestion that agency-provided
resources are a factor in successful competitions accurately portrays what has
occurred, or is occurring. Other factors may need to be taken into account, and it
appears there are other, possibly more accurate ways, to measure the amount of
agency support provided to MEOs.
Possible Implications for the Civil Service System
Disposition of Federal Employees and Positions. Throughout the
competition process, and even after a performance decision has been made, there are
various milestones where circumstances or decisions could affect federal employees
and/or their positions.
For instance, when an agency cannot complete a streamlined or a standard
competition within the allotted time (a maximum of 135 days and 18 months,
respectively, if the CSO has granted a time limit waiver), the circular provides
guidance on what the agency should do. In the former case, the agency has the option
of converting the streamlined competition to a standard competition or requesting an
additional extension from OMB using the circular’s deviation procedure.94 If an
agency exceeds the time limit for a standard competition, the CSO is to notify
OMB’s Deputy Director for Management in writing.95 The circular mentions no
possible consequences for the failure to meet the 12- or 18-month time limit.
However, the OFPP Administrator reportedly suggested that
93 When a contractor wins a competition, the FTEs associated with a government function
or activity are eliminated. When a government agency wins a competition, the number of
FTEs associated with a particular function or activity might be decreased. A decrease would
occur if the MEO’s staffing plan includes fewer FTEs than the number employed prior to
the implementation of the MEO.
94 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
B-5.
95 Ibid., p. B-6.

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CRS-25
Agencies that fall behind in their competitions will undergo sharp scrutiny by
OMB, and if in-house employees fail to submit a proposal on time, their jobs
could be directly outsourced to the private sector ....96
If this sequence of events were to occur, it is unclear what would happen to the
employees who otherwise would have staffed the MEO included in the agency
tender.
One of the changes effected by the 2003 revision is the establishment of an
evaluation process that applies the same criteria to contractor offers and agency
tenders and generally treats sources from both sectors the same. Coupled with this
change is a move to use, in addition to sealed bidding, source selection processes that
allow offerors, under certain conditions, to correct deficiencies in, and resubmit, their
offers.97 Because of this package of changes, an agency tender could be dropped
from further consideration before a performance decision is made. Previously, under
the 1999 circular, an agency’s in-house cost estimate was included in the
performance decision calculation. As for private sector contractors, there has been
no change in how their offers are treated. Their offers have been, and continue to be,
susceptible to elimination for failure to correct deficiencies. The applicable provision
of the 2003 circular states:
If the CO [contracting officer] perceives that a private sector offer, public
reimbursable tender, or agency tender is materially deficient, the CO shall ensure
that the ATO, private sector offer, or the public reimbursable tender official
receives a deficiency notice. The CO shall afford the ATO, the private sector
offeror, or the public reimbursable tender official a specific number of days to
address the material deficiency and, if necessary, to revise and recertify the
tender or offer. If the ATO is unable to correct the material deficiency, the CSO
shall determine if a commitment of additional resources will enable the ATO to
correct the material deficiency within the specified number of days. If the CSO
determines that the ATO cannot correct the material deficiency with a reasonable
commitment of additional resources, the CSO may advise the SSA to exclude the
agency tender from the standard competition. If the CO determines that a private
sector offeror or public reimbursable tender official has not corrected a material
deficiency, the SSA may exclude the private sector offer or public reimbursable
tender from the standard competition.98
In cases where a performance decision results in the awarding of a contract to
a private sector offeror, federal employees have a right of first refusal for positions
with the successful offeror. The following clause must be inserted in solicitations
that might result in the conversion of work from the government to a contractor and
96 Jason Peckenpaugh, “OMB Outlines New Federal Outsourcing Rules,” Government
Executive, Nov. 14, 2002, available at [http://www.govexec.com/dailyfed/1102/111402p2.
htm], visited Jan. 3, 2005.
97 The source selection processes include lowest price technically acceptable, tradeoff, and
variations of these methods developed by OMB for use in A-76 competitions. (U.S. Office
of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, pp. B-13-B-15.)
98 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, pp.
B-15-B-16.

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CRS-26
must be inserted in contracts that result from solicitations, whether or not a cost
comparison was conducted. According to 48 CFR 52.207-3:
(a) The Contractor shall give Government employees who have been or will be
adversely affected or separated as a result of award of this contract the right of
first refusal for employment openings under the contract in positions for which
they are qualified, if that employment is consistent with post-Government
employment conflict of interest standards. (b) Within 10 days after contract
award, the Contracting Officer will provide to the Contractor a list of all
Government employees who have been or will be adversely affected or separated
as a result of award of this contract. (c) The Contractor shall report to the
Contracting Officer the names of individuals identified on the list who are hired
within 90 days after contract performance begins. This report shall be forwarded
within 120 days after contract performance begins.
As with the 1999 circular, the contractor determines who is qualified.99 It is possible,
then, that an individual who is qualified as far as the agency is concerned might not
meet a contractor’s qualifications, and thus would not be offered a job. Under the
2002 proposed revision, the government would have been allowed to tell a contractor
whom to hire. The agency’s human resource adviser would have determined which
government employees were qualified, and the contractor would have been required
to offer these individuals employment before hiring new employees or transferring
existing employees.100 In effect, the right of first refusal clause is a limited safeguard
in that it does not guarantee that all federal employees will be offered jobs with the
contractor. On the other hand, it is unclear under what authority (aside from the 2002
proposed revision to the circular) the government would have to dictate to contractors
whom they should hire.
Consider, for example, a competition that the government wins. The MEO is
established and begins performing the work as described in the PWS. The prospect
of recompetition at the end of the letter of obligation’s performance period could
affect employees’ decisions to leave or remain with their agencies. The question is
whether attrition would occur less frequently, more frequently, or remain the same.
Regardless of the pace of attrition, as it occurs, the agency would need to hire new
employees to staff the MEO. Also, as implementation of the circular proceeds, and
more competitions are conducted, agencies have to decide whether, how, and when
to inform prospective employees that they are being recruited for an office or a work
center that is an MEO. Prospective employees might want to know about the MEO,
the letter of obligation, and the recompetition requirement. How might these
individuals respond to this information? The Assistant Secretary for Administration
at the Department of Transportation comments, from the agency’s perspective:
By mandating competitions every three to five years regardless of who wins a
competition, the draft circular will hinder an agency’s ability to develop a long-
99 U.S. Office of Management and Budget, “Performance of Commercial Activities,” May
29, 2003, p. 32140.
100 U.S. Office of Management and Budget, Circular No. A-76 (Revised), Nov. 14, 2002, p.
B-19.

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CRS-27
term work force strategy for recruiting and retaining top-notch people for
government service.101
Under another scenario where the agency tender is selected and the MEO is
established, it is possible the MEO could be terminated for failure to perform.102 The
circular states:
Upon terminating an MEO letter of obligation, an agency shall change the
inventory coding to reflect that the activity is no longer performed by an MEO
and shall perform either a streamlined competition or standard competition.103
Under the “temporary remedies” for failure to perform, the circular states:
If the CO terminates a contract, fee-for-service agreement, or MEO letter of
obligation for the service provider’s failure to perform, an agency may use
interim contracts, public reimbursable sources, or government personnel on an
emergency basis. An agency shall not allow these temporary remedies to be used
for longer than one year from the date of termination.104
In the event that the agency opts for a temporary remedy or terminates a letter of
obligation, it is unclear what might happen to the employees in the MEO.
Performance Standards. Publicly, when the issue of compliance with the
competitive sourcing initiative is broached, it is presented as an agency, or
institutional, responsibility. Agencies are held accountable for meeting competitive
sourcing targets and producing inventories. Under the 2003 circular, certain agency
personnel — individuals — also bear responsibility for competitive sourcing. The
circular states that agencies shall
Require full accountability of agency officials designated to implement and
comply with this circular by establishing performance standards in annual
performance evaluations.105
Presumably, the performance standards will concern compliance with Circular A-76.
The circular is not clear about the breadth of this mandate. Possibly, the requirement
could apply to everyone who works on a competition and any other officials who are
charged with complying with the circular. Or, the circular might apply only to
individuals who serve in positions identified in the circular as having to comply with
A-76. The list of these positions includes:
101 Steve Watkins, “Plans for Job Competitions Ill-Advised, Managers Warn,” Federal
Times, Dec. 30, 2002, p. 1.
102 The same consequences would apply to contractors and public reimbursable tenders, too.
103 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
B-20.
104 Ibid., p. B-20.
105 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, p.
1.

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CRS-28
! Competitive sourcing official,
! Agency tender official,
! Contracting officer,
! PWS team leader,
! Human resource advisor,
! Source selection authority,
! PWS team,
! MEO team, and
! Source selection evaluation board.106
Other questions concern the contents of the performance standards and the precedent,
if any exists, for developing standards for management programs.
Apparently, separate and distinct from the circular’s requirement, the National
Institutes of Health (NIH) developed and issued, in mid-2003, an addendum to
employee performance standards. The top portion of the one-page form lists five
department-wide program objectives, all of which relate to health care or science and
medical research. The second section consists of 10 department-wide management
objectives, one of which is: “Complete the FY2003 Competitive Sourcing
Program.”107
Civil Service as an Institution. Since the inception of the competitive
sourcing initiative in early 2001, the Administration has remained focused on public-
private competition and the anticipated benefits of competition. This commitment
is accompanied by a recognition that, in the words of the Administrator of the Office
of Federal Procurement Policy, “[f]ederal employees are some of the Nation’s most
highly trained and dedicated employees.”108 The Administrator also acknowledged
that:
Competitive sourcing asks agencies to make some difficult choices. These
choices affect real jobs, held by dedicated and loyal career civil servants. In
many respects, this initiative comes down to one simple reality: very few people,
whether they are working in the private sector or the public sector, like to work
under the pressure of knowing that their work is on the line if they do not figure
out how to perform it more efficiently and effectively. But, the fact that this
initiative requires hard choices and a lot of hard work makes it an initiative that
can bring about fundamental and lasting improvements to the way the federal
government is managed.109
Some commentators have a different perspective on competitive sourcing and
the civil service, noting that it might have significant implications for the civil service
106 Ibid., pp. 1, B-2-B-3, B-6-B-7.
107 Information provided electronically by the Office of Communications and Public Liaison,
Office of the Director, National Institutes of Health, June 18, 2003.
108 U.S. Congress, House Committee on Government Reform, Subcommittee on Technology
and Procurement Policy, Oversight Hearing to Review the Findings of the Commercial
Activities Panel, p. 46.
109 Ibid., p. 42.

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CRS-29
as an institution. Donald Kettl, a professor of public affairs and political science at
the University of Wisconsin-Madison, said:
The bedrock of the civil service has long been neutral competence and strong
expertise, grounded in a career service .... Staging regular competitions ... would
undermine the commitment to a career service, especially if the scope of services
and the standards for competition shift over time and, in the process, put more
federal workers at risk.110
As more competitions are carried out, which, presumably could result in more
government work going to contractors, it is unclear how the “neutral competence and
strong expertise” of the civil service might be affected. Yet another scholar, Dan
Guttman, who is a fellow with the National Academy of Public Administration,
raises a different issue:
Both the Clinton/Gore reinventing government [initiative] and the Bush
management agenda aim to render civil servants more ‘contractor like,’ but do
so with little or no reflection on the fact that our longstanding laws do not now
provide for the blurring of the boundaries between official and contractor
status.111
Diversity. Another unanswered question about the Administration’s
competitive sourcing program is how the implementation of the 2003 circular,
coupled with agencies’ efforts to meet their targets, might affect the diversity of the
federal workforce. Some agency managers reportedly have voiced concerns about
this issue. The Assistant Secretary of Planning and Evaluation for the Department
of Veterans Affairs (VA) reportedly stated that, within the VA, “there are numerous
occupations such as maintenance, laundry [and] food service that could be
competitively bid .... However, these occupations have the highest proportions of
women and minorities and any significant effort to outsource these jobs will have
huge diversity implications.”112 A news article reported that the National Park
Service Director, in an April 4, 2003 memorandum, said that job competitions in
Washington and San Francisco “may affect the diversity of our workforce.”113 It is
difficult to know how competitive sourcing policy has, or might, affect the diversity
of the federal workforce since it appears that historical information on this issue is
not available.
110 Jason Peckenpaugh, “New Rules Should Make Competition Routine in Government, Says
OMB,” Government Executive, Daily Briefing, May 29, 2003, available at
[http://www.govexec.com/dailyfed/0503/052903p1.htm], visited Jan. 3, 2005.
111 Ibid.
112 Chet Dembeck, “Managers Pan Administration’s Outsourcing Push,” Federal Times, Jan.
13, 2003, p. 1.
113 Jason Peckenpaugh, “Democrats Say Job Competitions Could Hurt Diversity at Park
Service,” Government Executive, Daily Briefing, June 6, 2003, available at
[http://www.govexec.com/dailyfed/0603/060603p1.htm], visited Feb. 10, 2004.

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CRS-30
Conclusion
The 2003 revision to Circular A-76 is the latest effort to improve public-private
competitions. The circular makes major changes to some of the procedures and
underlying concepts of the circular and the accompanying handbook. These changes
could have significant implications. Ongoing monitoring of the implementation of
the revised circular could be helpful in gauging the utility of the changes.

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CRS-31
Selected Glossary of Circular A-76 Terms114
Agency tender — The agency management plan submitted in response to a
solicitation for a standard competition. The agency tender includes an MEO, agency
cost estimate, MEO quality control plan, MEO phase-in plan, and copies of any MEO
subcontracts (with the private sector providers’ proprietary information redacted).
Agency tender official (ATO) — An inherently governmental agency official with
decision-making authority who is responsible for the agency tender and represents
the agency tender during source selection.
Commercial activity — A recurring service that could be performed by the private
sector. This recurring service is an agency requirement that is funded and controlled
through a contract, fee-for-service agreement, or performance by government
personnel. Commercial activities may be found within, or throughout, organizations
that perform inherently governmental activities or classified work.
Competition — A formal evaluation of sources to provide a commercial activity
that uses pre-established rules (e.g., the FAR [Federal Acquisition Regulation],
[Circular A-76]). Competitions between private sector sources are performed in
accordance with the FAR. Competitions between agency, private sector, and public
reimbursable sources are performance in accordance with the FAR and [Circular A-
76].
Competitive sourcing official (CSO) — An inherently governmental agency official
responsible for the implementation of Circular A-76 within an agency.
Contracting officer (CO) — An inherently governmental agency official who
participates on the PWS team, and is responsible for the issuance of the solicitation
and the source selection evaluation methodology. The CO awards the contract and
issues the MEO letter of obligation or fee-for-service agreement resulting from a
streamlined or standard competition. The CO and the SSA [source selection
authority] may be the same individual.
Directly interested party — The agency tender official who submitted the agency
tender; a single individual appointed by a majority of directly affected employees as
their agent; a private sector offeror; or the official who certifies the public
reimbursable tender.
Fee-for-service agreement — A formal agreement between agencies, in which one
agency provides a service (a commercial activity) for a fee paid by another agency.
The agency providing the service is referred to in [the] circular as a public
reimbursable source.
Inherently governmental activity — An activity that is so intimately related to the
public interest as to mandate performance by government personnel.
114 Quoted directly from U.S. Office of Management and Budget, Circular No. A-76
(Revised), May 29, 2003, pp. D-2-D-9.

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CRS-32
MEO letter of obligation — A formal agreement that an agency implements when
a standard or streamlined competition results in agency performance (e.g., MEO).
MEO team — A group of individuals, comprised of [sic] technical and functional
experts, formed to assist the ATO in developing the agency tender.
Most efficient organization (MEO) — The staffing plan of the agency tender,
developed to represent the agency’s most efficient and cost-effective organization.
An MEO is required for a standard competition and may include a mix of
government personnel and MEO subcontracts.
Offer — A private sector source’s formal response to a request for proposals or
invitation for bid. The term “offeror” refers to the specific source rather than the
response.
Performance work statement (PWS) — A statement in the solicitation that
identifies the technical, functional, and performance characteristics of the agency’s
requirements. The PWS is performance-based and describes the agency’s needs (the
“what”), not specific methods for meeting those needs (the “how”). The PWS
identifies essential outcomes to be achieved, specifies the agency’s required
performance standards, and specifies the location, units, quality and timeliness of the
work.
Public reimbursable source — A service provider from a federal agency that could
perform a commercial activity for another federal agency on a fee-for-service or
reimbursable basis by using either civilian employees or federal contracts with the
private sector.
Public reimbursable tender — A federal agency’s formal response to another
federal agency’s solicitation for offers or tenders. The public reimbursable tender ...
includes a cost estimate ....
Source selection authority (SSA) — A competition official with decision-making
authority who is responsible for source selection as required by the FAR and
[Circular A-76]. The SSA and CO may be the same individual.
Source selection evaluation board (SSEB) — The team or board appointed by the
SSA to assist in a negotiated acquisition.

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