Order Code RL32833
Competitive Sourcing Statutes and
Statutory Provisions
Updated June 26, 2008
L. Elaine Halchin
Analyst in American National Government
Government and Finance Division

Competitive Sourcing Statutes and Statutory Provisions
Summary
As a federal government policy, competitive sourcing debuted in 1966 with the
publication of Office of Management and Budget (OMB) Circular A-76. Under the
circular, commercial activities performed by federal employees are subjected to
public-private competition. Until the late 1990s, the executive branch, namely OMB,
almost exclusively, led the competitive sourcing effort, issuing revisions to the
circular, overseeing implementation of the policy, and providing guidance to
agencies.
In recent years, congressional interest and involvement in competitive sourcing,
as measured by legislation that has been enacted, has grown. Throughout the 1980s
and 1990s (93rd through the first session of the 106th Congresses), a total of 10 bills
with competitive sourcing provisions were enacted, including, for example, the
Federal Activities Inventory Reform (FAIR) Act (P.L. 105-270). The 108th and 109th
Congresses experienced a marked increase in the number of bills enacted with
competitive sourcing provisions. Nine bills with competitive sourcing provisions
were passed, and signed by the President, during the 108th Congress. Protest rights
for federal government employees, funding limits on competitive sourcing activities,
and reporting requirements were some of the issues addressed by these provisions.
A requirement for agencies to develop a most efficient organization (MEO) and to
apply the conversion differential to competitions that involve more than 10 full-time
equivalents (FTEs) was included in five statutes (P.L. 108-87, P.L. 108-108, P.L.
108-199, P.L. 108-287, and P.L. 108-375). (The MEO is the staffing plan of the
agency tender, which is the government’s response to a solicitation. The conversion
differential, $10 million or 10% of the government’s personnel costs for the function
under study, whichever is less, is added to the price or cost of the non-incumbent’s
proposal. An FTE is the staffing of a federal civilian position expressed in terms of
annual productive work hours (1,776 hours).) Eight bills containing competitive
sourcing provisions were enacted during the 109th Congress. Although some
provisions were the same or similar to legislation enacted previously (P.L. 109-54,
P.L. 109-90, P.L. 109-97, P.L. 109-148, P.L. 109-289, and P.L. 109-295), P.L. 109-
115, in amending the FAIR Act, added agencies with fewer than 100 full-time
employees to the list of government entities not subject to the FAIR Act.
Additionally, the competitive sourcing language included in P.L. 109-163 revised and
reorganized certain competitive sourcing provisions in Title 10 of the U.S. Code
(Department of Defense). To date, three bills with competitive sourcing provisions
have been enacted during the 110th Congress: P.L. 110-28, P.L. 110-161, and P.L.
110-181. This report will be updated if relevant legislation is enacted.

Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Selected Topics Related to Competitive Sourcing Legislation . . . . . . . . . . . . . . 39
Commercial Activities Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Commercial Activities Panel (CAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Competitive Sourcing Targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Conversion from Contractor to Government Performance . . . . . . . . . . . . . 41
Funding Limits on Agency Competitive Sourcing Activities . . . . . . . . . . . 42
MEO and Conversion Differential Requirement . . . . . . . . . . . . . . . . . . . . . 43
Protest Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Reporting to Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Concluding Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
List of Tables
Table 1. Statutes That Include Competitive Sourcing Provisions,
93rd Congress — Present . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Table 2. Competitive Sourcing Statutes and Provisions . . . . . . . . . . . . . . . . . . . . 4

Competitive Sourcing Statutes and
Statutory Provisions
Background
Competitive sourcing is a government-wide initiative that subjects commercial
activities performed by federal government employees to public-private competition.1
A commercial activity is “a recurring service that could be performed by the private
sector,” whereas “an inherently governmental activity is an activity that is so
intimately related to the public interest as to mandate performance by government
personnel.”2 In a public-private competition, federal agency employees prepare an
“agency tender,” which is, in effect, the government’s equivalent of a contractor’s bid
or proposal.
The primary source of the policy and procedures (including revisions and other
changes) involving competitive sourcing has been the executive branch, namely the
U.S. Office of Management and Budget (OMB) and its predecessor, the Bureau of
the Budget. The bureau issued the original Circular A-76, dated March 3, 1966.
OMB has published six revisions to the circular and issued additional guidance,
generally in the form of memoranda, on various subjects related to competitive
sourcing.3 The Administrations of Presidents Ronald Reagan and George W. Bush
also have been directly involved in competitive sourcing policy and guidance. In
1987, President Reagan signed an executive order that directed federal agencies,
beginning in FY1989, to subject at least 3% of their civilian positions to public-
private competition each fiscal year until all commercial activities had been studied.4
In 2001, President Bush identified competitive sourcing as one of the five major
components of the President’s Management Agenda (PMA).5 In an effort “to
achieve efficient and effective” public-private competition, the Bush Administration
“committed itself to simplifying and improving the procedures for evaluating public
1 Competitive sourcing is one of the President’s Management Agenda (PMA) initiatives.
See [http://www.whitehouse.gov/results/agenda/index.html].
2 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, pp.
D-2 and A-2, available at [http://www.whitehouse.gov/omb/circulars/a076/a76_incl_tech_
correction.pdf].
3 Revisions were published in 1967, 1979, 1983, 1996, 1999, and 2003. The 1999 and 2003
revisions are available at [http://www.whitehouse.gov/omb/circulars/index.html].
4 U.S. President (Reagan), “Performance of Commercial Activities,” Executive Order 12615,
Federal Register, vol. 52, no. 225, November 23, 1987, p. 44853.
5 See [http://www.whitehouse.gov/results/agenda/index.html].

CRS-2
and private sources, to better publicizing the activities subject to competition and to
ensuring senior level agency attention to the promotion of competition.”6
Legislation
Congressional involvement in the policies and procedures governing
competitive sourcing, as measured by legislation that has been enacted, has increased
over the years, from the 93rd Congress through the present.7
Table 1. Statutes That Include Competitive Sourcing Provisions,
93rd Congress — Present
Congress
Number of
Scope of Statute(s)a
Statutes
93rd
0
94th
0
95th
0
96th
0
97th
1
Department of Veterans Affairs (VA)
98th
0
99th
0
100th
0
101st
2
Department of Defense (DOD)
102nd
3
DOD
103rd
1
DOD
105th
1
Government-wide
106th
2
DOD and government-wide
107th
0
6 Executive Office of the President, Office of Management and Budget, The President’s
Management Agenda, FY2002
, p. 17, available at [http://www.whitehouse.gov/omb/budget/
fy2002/mgmt.pdf].
7 The identification of statutes that include competitive sourcing provisions is made possible
by the Legislative Information System (LIS), available at [https://www.congress.gov]. LIS
includes all Congresses beginning with the 93rd Congress.

CRS-3
Congress
Number of
Scope of Statute(s)a
Statutes
108th
9
Government-wide, DOD, Department of the Interior
(DOI), Department of Agriculture (USDA),
Department of Energy (DOE), Department of
Homeland Security (DHS), U.S. Equal Employment
Opportunity Commission (EEOC)
109th
8
DOI, USDA, DHS, Government-wide, DOD
110th
3
DOE, Department of Labor, USDA, Department of
Justice, DOD, DHS, DOI, and Government-wide
Source: Legislative Information System, available at [http://www.congress.gov].
Notes:
a. Within each statute, the applicability of competitive sourcing provisions varies. Some provisions
apply to the entire agency; other provisions apply to a specific function, activity, or, for the
Department of Defense, military installation.
As Table 1 shows, three or fewer statutes with competitive sourcing provisions
were enacted during each Congress until the 108th and 109th Congresses, when nine
and eight statutes were enacted, respectively.
The competitive sourcing provisions of measures enacted during the 97th
through 110th Congresses are summarized below, in Table 2. Following the table is
a discussion of selected topics related to competitive sourcing legislation that has
been enacted.

CRS-4
Table 2. Competitive Sourcing Statutes and Provisions
Statute
Scope
Duration
Summarya
P.L. 97-66, Section 601
Department of Veterans
Indefinite
— Funds appropriated to the accounts for medical care,
Affairs (VA)
medical and prosthetic research, and medical
Veterans’ Disability
administration and miscellaneous operating expenses
Compensation, Housing, and
may not be used for conducting public-private
Memorial Benefits
competitions unless funds are specifically appropriated
Amendments of 1981
for this purpose.
P.L. 101-189, Sections 1131-
Department of Defense
Varies
— Commanders of military installations have the authority
1134
(DOD)
and responsibility to enter into contracts that resulted
from A-76 competitions. Commanders are to prepare an
National Defense
inventory of commercial activities; decide which
Authorization Act, FY1990
commercial activities will be subjected to A-76
and FY1991
competitions; issue solicitations for commercial
activities selected for conversion to contractor
performance; and, for activities selected for conversion,
assist in finding suitable employment for any DOD
employees displaced as a result of the contract.
— A DOD commercial or industrial type of function that is
included on the procurement list of goods and services
produced and provided pursuant to the Javits-Wagner-
O’Day (JWOD) Act is exempt from A-76 competition.
— Commercial activities performed by government
personnel at Ft. Benjamin Harrison, IN, may not be
converted to private sector performance under Circular

CRS-5
Statute
Scope
Duration
Summarya
A-76 until the Secretary of the Army completes a
commercial activities study for the installation.
— Commercial activities performed by government
personnel at the Niagara Falls Air Force Reserve Base,
NY, may not be converted to private sector
performance under Circular A-76 until the Comptroller
General evaluates the most recently completed
commercial activities study for the base and submits a
report to the Secretary of the Air Force; and the
Secretary, in turn, submits a report to the Committees on
Armed Services.
P.L. 101-511, Title II (Navy
DOD
FY1991
— Funds from the appropriation for the alteration, overhaul,
and Marine Corps), Sections
and repair of naval vessels and aircraft shall be available
8072, 8087, and 8129
to acquire these functions by competition among public
and private shipyards, naval aviation depots, and private
Department of Defense
companies.
Appropriations Act, FY1991
— None of the funds appropriated for the operation and
maintenance of the Marine Corps may be used for
converting facilities maintenance, utilities, and motor
transport functions at Cherry Point Marine Corps Air
Station, NC, to performance by a private contractor
under Circular A-76 until the U.S. General Accounting
Officeb (GAO) completes its audit and validates the
decision.
— The Secretary of Defense may acquire the modification,
depot maintenance, and repair of aircraft, vehicles, and

CRS-6
Statute
Scope
Duration
Summarya
vessels through competition between DOD depot
maintenance activities and private firms. Circular A —
76 shall not apply to these competitions.
— None of the funds appropriated by this act may be used
for a public-private competition carried out under
Circular A-76 if the competition exceeds 24 months
(single function study) or 48 months (multifunction
study).
— None of the funds available during FY1991 to DOD, any
of its components, or any other federal department,
agency, or entity may be used to complete an A-76
competition for firefighting or security guard functions
at Indian Springs Air Force Auxiliary Field, NV.
P.L. 102-172, Title II,
DOD
FY1992
— Funds from the appropriation for the alteration, overhaul,
Sections 8069 and 8120
and repair of naval vessels and aircraft shall be available

to acquire these functions by competition among public
Department of Defense
and private shipyards, naval aviation depots, and private
Appropriations Act, FY1992
companies.
— None of the funds appropriated for the operation and
maintenance of the Marine Corps may be used for
converting facilities maintenance, utilities, and motor
transport functions at Cherry Point Marine Corps Air
Station, NC, to performance by a private contractor
under Circular A-76 until GAO completes its audit and
validates the decision.
— None of the funds appropriated by this act may be used

CRS-7
Statute
Scope
Duration
Summarya
for a public-private competition carried out under
Circular A-76 if the competition exceeds 24 months
(single function study) or 48 months (multifunction
study).
— The Secretary of Defense may acquire the modification,
depot maintenance, and repair of aircraft, vehicles, and
vessels through competition between DOD depot
maintenance activities and private firms. Circular A-76
shall not apply to these competitions.
P.L. 102-396, Title II
DOD
FY1993
— None of the funds appropriated for the operation and
(Marine Corps), Sections
maintenance of the Marine Corps may be used for
9065 and 9095
converting facilities maintenance, utilities, and motor
transport functions at Cherry Point Marine Corps Air
Department of Defense
Station, NC, to performance by a private contractor
Appropriations Act, FY1993
under Circular A-76 until GAO completes its audit and
validates the decision.
— None of the funds appropriated by this act may be used
for a public-private competition carried out under
Circular A-76 if the competition exceeds 24 months
(single function study) or 48 months (multifunction
study).
— The Secretary of Defense may acquire the modification,
depot maintenance, and repair of aircraft, vehicles, and
vessels through competition between DOD depot
maintenance activities and private firms. Circular A-76
shall not apply to these competitions.

CRS-8
Statute
Scope
Duration
Summarya
P.L. 102-484, Section 312
DOD
FY1993
— The Secretary of Defense is prohibited from entering into
any contract that is the result of a public-private
National Defense
competition under Circular A-76.
Authorization Act, FY1993
— This prohibition does not apply to any contracts for work
performed at a location outside the United States where
U.S. military personnel would have to perform the
commercial activity at the expense of unit readiness, or
any contracts (including renewals) for a commercial
activity under contract as of Sept. 30, 1992.
P.L. 103-160, Section 313
DOD
November 30, 1993 through
— The Secretary of Defense is prohibited from entering into
April 1, 1994
any contract that is the result of a public-private
National Defense
competition under Circular A-76.
Authorization Act, FY1994
— This prohibition does not apply to any contracts for work
performed at a location outside the United States where
U.S. military personnel would have to perform the
commercial activity at the expense of unit readiness, or
any contracts (including renewals) for a commercial
activity under contract as of Sept. 30, 1992.
P.L. 105-270
Government-wide, excluding
Indefinite
— Agencies are required to submit inventories of
GAO, government
commercial activities to OMB by June 30.
Federal Activities Inventory
corporations,
— Inventories are sent to Congress and made available to
Reform (FAIR) Act
nonappropriated funds
the public.
instrumentalities, and certain
— Interested parties may appeal the omission of an activity
DOD depot-level
from, or the inclusion of an activity on, an agency’s list.c
maintenance and repair
— An inherently governmental activity is a function that is

CRS-9
Statute
Scope
Duration
Summarya
functions
so intimately related to the public interest as to require
performance by federal government employees.
P.L. 106-79, Sections 8026,
DOD
FY2000
— None of the funds appropriated by this act may be used
8037, 8108, and 8109
for a public-private competition carried out under
Circular A-76 if the competition exceeds 24 months
Department of Defense
(single function study) or 48 months (multifunction
Appropriations Act, FY2000
study).
— Circular A-76 can not be used for competitions between
DOD depot maintenance activities and private firms for
certain functions, including depot maintenance and
repair of aircraft, vehicles, and vessels.
— The total amount appropriated in Title II of this act is
reduced by $100,000,000 to reflect savings that resulted
from reviews of DOD missions and functions conducted
pursuant to Circular A-76.
— The Secretary of Defense is required to submit a report
within 90 days of enactment of the act that provides
specified information about DOD public-private
competitions that had been conducted since 1995. The
report also is to include information about any A-76
competitions held for work that had been converted
from contractor performance to government
performance, and recommendations for maximizing the
possibility of effective competitions for work that had
been contracted out previously.
— The Comptroller General is required to submit to the

CRS-10
Statute
Scope
Duration
Summarya
House and Senate Appropriations Committees his or her
views on whether DOD has complied with the reporting
requirements.
P.L. 106-398, Section 832
Government-wide
Report due by May 1, 2002
— GAO is directed to convene a panel of experts to study the
policies and procedures governing the transfer of
Floyd D. Spence National
commercial activities to contractors, including how to
Defense Authorization Act,
determine what functions should continue to be
FY2001
performed by federal employees, how costs of public
and private performance should be compared, and how
DOD has implemented the FAIR Act and Circular A-
76.d
— Commercial Activities Panel (CAP) is required to study
A-76 procedures, implementation by DOD of the FAIR
Act, and DOD procedures for public-private
competitions.
P.L. 108-7, Section 647
Government-wide
FY2003
— None of the funds appropriated by the Treasury and
General Government Appropriations Act, FY2003, may
Consolidated Appropriations
be used to establish, apply, or enforce any numerical
Resolution, FY2003
goal, target, or quota for public-private competitions
unless the goal, target, or quota is based on considered
research and sound analysis.
P.L. 108-87, Sections 8014
DOD
FY2004
— None of the funds appropriated by this act may be used to
and 8022
convert a function that had more than 10 DOD civilian
employees from government performance to contract

CRS-11
Statute
Scope
Duration
Summarya
Department of Defense
performance unless a most efficient organization (MEO)
Appropriations Act, FY2004
is developed and the conversion differential is applied.e
— This section does not apply to Javits-Wagner-O’Day
(JWOD) Act suppliers, Indian tribes, Native Hawaiian
organizations, and depot contracts or contracts for depot
maintenance.f
— Any conversions to contractor performance under this
section count toward any competitive sourcing goal or
target.
— None of the funds appropriated by this act may be used
for a public-private competition carried out under
Circular A-76 if the competition exceeds 24 months
(single function study) or 36 months (multifunction
study).
P.L. 108-108, Section 340
Department of the Interior,
Varies
— Beginning with FY2005, the Departments of the Interior
Forest Service (Department
and Energy and the Forest Service are to identify
Department of the Interior
of Agriculture (USDA)), and
separately in their budget requests funds needed to
and Related Agencies
Department of Energy (DOE)
perform competitive sourcing studies.
Appropriations Act, FY2004
programs and activities for
— Beginning in 2003, the Secretaries of Agriculture (Forest
which funds are appropriated
Service), Energy, and the Interior are to submit reports
by this statute
on their competitive sourcing studies to the Committees
on Appropriations no later than December 31 each year.
— For FY2004, each Secretary named above is to submit a
report that identifies planned competitive sourcing
studies.
— In FY2004, the Department of Energy and the Department

CRS-12
Statute
Scope
Duration
Summarya
of the Interior may spend only $500,000 and $2.5
million, respectively, on competitive sourcing activities
unless a reprogramming proposal is processed. No
more than $5 million of the funds appropriated by this
act may be used in FY2004 for Forest Service
competitive sourcing studies.
— None of the funds appropriated by this act may be used to
convert a function with more than 10 federal employees
from government performance to contract performance
unless an MEO is developed and the conversion
differential is applied. Exceptions include JWOD
suppliers, Indian tribes, and Native Hawaiian
organizations. Any conversions to contractor
performance that occurs under this section is to be
counted toward any competitive sourcing goal or target.
P.L. 108-136, Sections 334-
DOD
Varies
— Any deadline or other schedule-related milestone for the
337 and 906
completion of a DOD public-private competition shall
be established solely on the basis of considered research
National Defense
and sound analysis regarding the availability of
Authorization Act, FY2004
sufficient personnel, training, and technical resources
for conducting a competition in a timely manner. The
DOD official responsible for the managing the
department’s competitions shall extend any deadline or
schedule if insufficient resources are available for
timely completion of the competition.
— The Secretary of Defense is required to submit a report to

CRS-13
Statute
Scope
Duration
Summarya
Congress on the effect of the May 29, 2003, revisions on
DOD competitions and employees. No A-76
competition may be conducted until 45 days after the
Secretary submits his report to Congress.
— The Secretary of Defense is authorized to conduct a pilot
program whereby the best-value source selection
method may be used for A-76 competitions involving
information technology services. The pilot program
expiration date is Sept. 30, 2008. GAO is to review the
pilot program and submit a report to Congress.
— The Secretary of Defense is authorized to establish a pilot
program under which high-performing organizations
(HPO) may be created or continued at selected military
installations and facilities through the department’s
Business Process Reengineering initiative. The
Secretary may not require any organization to conduct
an A-76 competition or other public-private competition
involving any function of the organization covered by
the reengineering initiative.
— Regarding the transfer of personnel security investigation
functions from DOD to the Office of Personnel
Management (OPM), any function performed by DOD
employees as of the date of enactment of this act may
not be converted to contractor performance until the
Director of OPM reviews the function, determines that
the function is not inherently governmental, and

CRS-14
Statute
Scope
Duration
Summarya
conducts an A-76 competition.
P.L. 108-199, Divisions A
Agriculture, Rural
Varies
— None of the funds in this act may be obligated for FAIR
and F
Development, Food and Drug
Act or Circular A-76 activities until the Secretary of
Administration, and Related
Agriculture submits a report to the Committees on
Consolidated Appropriations
Agencies (Division A);
Appropriations that describes the department’s
Act, FY2004
Departments of
contracting-out policies, including agency budgets for
Transportation and Treasury,
contracting out.
and Independent Agencies
— Unless USDA receives specific authorization in
(Division F)
subsequent legislation, the department may not use the
funds made available in this statute to study a
competitive sourcing activity relating to rural
development or farm loan programs.
— None of the funds appropriated by this statute may be
used to convert a function with more than 10 federal
employees from government performance to contractor
performance unless an MEO is accomplished and the
conversion differential is applied.
— Annually, the head of each executive agency is to submit
to Congress a report on competitive sourcing activities
in his or her agency.
— Agency heads are not required to limit the performance
period in a letter of obligation issued to an MEO to five
years or less.h
— Agency heads may use appropriated funds, and any other
funds made available to their agencies, for monitoring
the performance of an activity that has been subjected to

CRS-15
Statute
Scope
Duration
Summarya
a public-private competition.
— Any work converted to contractor performance cannot be
moved to a location outside the United States if the
work has been previously performed by federal
government employees within the United States.
P.L. 108-287, Sections 8014
DOD
FY2005
— None of the funds appropriated by this act may be used to
and 8022
convert a function that has more than 10 civilian
employees from government performance to contract
Department of Defense
performance unless an MEO is developed, the
Appropriations Act, FY2005
conversion differential is applied, and the contractor
does not receive an advantage for his or her proposal by
not making a health insurance plan available to
employees who are to be employed in the function or
study, or by offering a health insurance plan that costs
the contractor less than the amount paid by DOD.
— This section does not apply to JWOD suppliers, Indian
tribes, Native Hawaiian organizations, or depot
contracts or contracts for depot maintenance.
— Any conversions to contractor performance occurring
under this section are to count toward any competitive
sourcing goal or target.
— None of the funds appropriated by this act may be used
for a public-private competition carried out under
Circular A-76 if the competition exceeds 24 months
(single function study) or 36 months (multifunction
study).

CRS-16
Statute
Scope
Duration
Summarya
P.L. 108-334, Section 527
Department of Homeland
FY2005
— None of the funds appropriated by this statute may be
Security (DHS)
used to approve or conduct a public-private competition
Department of Homeland
involving employees of U.S. Citizenship and
Security Appropriations Act,
Immigration Services (USCIS) who are known as
FY2005
immigration information officers, contact
representatives, or investigative assistants.
P.L. 108-375, Sections 326-
Government-wide (Section
Varies
— Amends 31 U.S.C. §§ 3551(2), 3552, and 3553, which
328
326); DOD (Sections 327 and
means, in effect, that an agency tender official (ATO)
328)
may file a protest in connection with a public-private
Ronald W. Reagan National
competition.h The determination to file, or not file, a
Defense Authorization Act,
protest is not subject to administrative or judicial
FY2005
review. An agency tender official is to notify Congress
when he or she determines there is no reasonable basis
for a protest.
— For any competition that is required to include a formal
comparison of the cost of federal employee performance
with the cost of contractor performance, the function is
to remain in-house unless the competitive sourcing
official (CSO) determines that contractor performance
would be less costly by an amount that equals or
exceeds the lesser of the following: 10% of the MEO’s
personnel-related costs or $10 million.i
— The Secretary of Defense is to ensure that no DOD
organization, function, or activity is altered in any way
for the purpose of exempting the department from the
requirement to formally compare the cost of federal

CRS-17
Statute
Scope
Duration
Summarya
government performance with the cost of contractor
performance. This provision does not apply to any
competitions conducted as part of a pilot program
authorized by Section 336 of P.L. 108-136 (National
Defense Authorization Act for Fiscal Year 2004).
— The DOD Inspector General (IG) is required to submit a
report no later than February 1, 2005, to Congress that
addresses the questions of whether DOD has a sufficient
number of adequately trained civilian employees to
conduct public-private competitions and to administer
any resulting contracts, and whether the department has
implemented a comprehensive, reliable system to track
and assess the cost and quality of work done by service
contractors.
P.L. 108-447, Divisions A,
Agriculture, Rural
FY2005
— None of the funds in this act may be obligated for the
B, and E
Development, Food and Drug
FAIR Act or Circular A-76 activities until the Secretary
Administration, and Related
of Agriculture has submitted a report to the Committees
Consolidated Appropriations
Agencies (Division A);
on Appropriations and the House Committee on
Act, FY2005
Departments of Commerce,
Government Reform that describes the department’s
Justice, and State, the
contracting out policies, including agency budgets for
Judiciary, and Related
contracting out.
Agencies (Division B);
— Unless the Department of Agriculture receives specific
Department of the Interior
authorization in subsequent legislation, the department
and Related Agencies
cannot use the funds made available in this statute to
(Division E)
study a competitive sourcing activity relating to rural
development or farm loan programs.

CRS-18
Statute
Scope
Duration
Summarya
— The EEOC cannot implement any workforce
repositioning, restructuring, or reorganization until the
Committees on Appropriations have been notified of
such proposals.
— None of the funds provided under this act or under
previous appropriations acts for these agencies is to be
used, through a reprogramming of funds, for contracting
out or privatizing any functions or activities presently
performed by federal employees, unless the
Appropriations Committees are notified 15 days in
advance of such reprogramming of funds.
— In FY2005, the Department of Energy and the Department
of the Interior may spend only $500,000 and $3.25
million, respectively, to continue or initiate competitive
sourcing studies until a reprogramming proposal has
been processed. No more than $2 million of the funds
appropriated by this act may be used in FY2005 for
Forest Service competitive sourcing studies and related
activities.
— Section 340(b) of P.L. 108-108 is repealed.
— For any competitions conducted by the Forest Service
prior to FY2005 that meet the criteria outlined in
Section 332(d), the Forest Service is exempt from
implementing a letter of obligation and post-competition
accountability guidelines.j
— Agencies funded by this act are to include, in any

CRS-19
Statute
Scope
Duration
Summarya
competitive sourcing reports submitted to the
Committees on Appropriations, incremental costs
directly attributable to conducting competitions.
P.L. 109-54, Section 422
Department of the Interior
FY2006
— In FY2006, the Department of the Interior can spend only
and the Forest Service
$3.45 million from this act or any other act on
Department of the Interior,
(USDA)
competitive sourcing activities, unless a reprogramming
Environment, and Related
proposal is processed. No more than $3 million of the
Agencies Appropriations
funds appropriated by this act can be used by the Forest
Act, FY2006
Service in FY2006 for competitive sourcing activities.

For any public-private competition conducted by the
Forest Service that involves 65 or fewer full-time
equivalents (FTEs), that is decided in favor of the
agency provider, that does not yield a net savings, and
that was completed prior to the date of this act, the
Forest Service is exempted from implementing the letter
of obligation and post-competition accountability
guidelines.
— Agencies funded by this act shall, in preparing any reports
to be submitted to the Committees on Appropriations,
include all costs directly attributable to conducting
public-private competitions, including costs attributable
to paying outside consultants and contractors.
— For any competitions involving Forest Service employees,
the Secretary of Agriculture is to determine whether any
of the employees concerned are also qualified to
participate in wildland fire management activities and to

CRS-20
Statute
Scope
Duration
Summarya
consider the effect that outsourcing would have on the
Forest Service’s ability to fight and manage wildfires.
P.L. 109-90, Section 520
DHS
FY2006
— None of the funds appropriated by this act may be used to
process or approve a public-private competition for
Department of Homeland
services provided as of June 1, 2004, by employees of
Security Appropriations Act,
Citizenship and Immigration Services who are known as
FY2006
immigration information officers, contact
representatives, or investigative assistants.
P.L. 109-97, Title I
USDA
FY2006
— None of the funds provided by this act may be obligated
(specifically, “Office of the
for the FAIR Act or Circular A-76 activities until the
Chief Financial Officer”) and
Secretary has submitted a report to the Committees on
Section 786
Appropriations and the House Committee on
Government Reform that describes the department’s
Agriculture, Rural
contracting out policies, including agency budgets for
Development, Food and Drug
contracting out.l
Administration, and Related
— Unless the department receives specific authorization in
Agencies Appropriations
subsequent legislation, the department cannot use the
Act, FY2006
funds made available in this statute to conduct a
competition of an agency activity relating to rural
development or farm loan programs.
P.L. 109 -115, Sections 840
Government-wide
Varies
— The FAIR Act does not apply to executive agencies with
and 842
fewer than 100 full-time employees. However, if such
an agency plans to conduct a public-private competition,
Transportation, Treasury,
it is subject to Section 2 of the FAIR Act.

CRS-21
Statute
Scope
Duration
Summarya
Housing and Urban
— None of the funds in this act or any other act can be used
Development, the Judiciary,
to convert a function with more than 10 federal
the District of Columbia, and
employees from government performance to contractor
Independent Agencies
performance unless an MEO is accomplished and the
Appropriations Act, FY2006
conversion differential is applied. This provision does
not apply to, for example, DOD, commercial or
industrial type functions that can be provided by JWOD
organizations, and depot contracts.
— Nothing in Circular A-76 shall prevent an agency head
from conducting public-private competitions to evaluate
the benefits of converting work performed by
contractors to the federal government. Circular A-76 is
to provide procedures and policies for these types of
competitions that are similar to the procedures and
policies applied to competitions where the government
is the incumbent.
P.L. 109-148, Sections 8014
DOD
FY2006
— None of the funds provided by this act can be used to
and 8021
convert a DOD function that has more than 10 civilian
employees from government performance to contract
Department of Defense
performance unless an MEO is developed, the
Appropriations Act, FY2006
conversion differential is applied, and the contractor
does not receive an advantage by not making a health
insurance plan available to employees who are to be
employed in the function, or by offering a health
insurance plan that costs the contractor less than the
amount paid by DOD for the affected civilian

CRS-22
Statute
Scope
Duration
Summarya
employees.
— This section does not apply to JWOD suppliers, Indian
tribes, Native Hawaiian organizations, depot contracts,
or contracts for depot maintenance.
— Any conversions to contractor performance occurring
under this section are to count toward any competitive
sourcing goal or target.
— None of the funds appropriated by this act may be used
for a public-private competition carried out under
Circular A-76 if the competition exceeds 24 months
(single function study) or 36 months (multifunction
study).
P.L. 109-163, Sections 341-
DOD
Indefinite

Public-private competitions that involve 10 or more DOD
344 and 672 m
civilians cannot be converted to contractor performance
unless the public-private competition includes a formal
National Defense
comparison of the cost of government performance and
Authorization Act, FY2006
the cost of contractor performance, an agency tender
(including an MEO), a solicitation, a determination of
whether submitted offers meet DOD’s needs with
respect to non-cost factors, the application of the
conversion differential, estimated costs of government
performance and contractor performance, an estimate of
all costs and expenditures the government would incur if
the work was converted to contractor performance, and
an examination of the effect contractor performance
would have on the military mission associated with the

CRS-23
Statute
Scope
Duration
Summarya
function to be competed.
— A DOD function that is, for example, reengineered or
reorganized, but still provides essentially the same
services is not to be considered a new requirement.n
— A DOD function cannot be changed in any way for the
purpose of exempting the function from the
requirements of Section 341, and a function cannot be
converted to contractor performance to circumvent a
civilian personnel ceiling.
— The Secretary is no longer permitted to delegate report
preparation pursuant to 10 U.S.C. § 2461(b)(1).
— The Secretary is required to submit a report for each
public-private competition conducted by DOD to
Congress. A decision made on the basis of a public-
private competition cannot be implemented until after
the report has been submitted to Congress.
— The Secretary is required to submit an annual report to
Congress by June 30 each year with information about,
for example, the cost of conducting competitions and
the actual savings.
— The Secretary is required to monitor the performance of
functions that have been the subject of public-private
competitions.
— 10 U.S.C. 2461(a)(1)(E), as amended by P.L. 109-163,
does not apply to the pilot program for best-value source
selection for information technology services.

CRS-24
Statute
Scope
Duration
Summarya
— 10 U.S.C. § 2463 is repealed.o
— Section 327 of P.L. 108-37 is repealed.p
— The description of how a contractor may help fund health
care for employees has been broadened to include
payments that could be used in lieu of a health care plan,
a health savings account, and a medical savings account.
An inadequate contractor-provided health plan is one
that does not comply with any federal law that governs
the provision of health care benefits by government
contractors.
— The Secretary is required to prescribe guidelines and
procedures for ensuring that consideration is given to
federal employees for work that is currently performed
or would otherwise be performed under DOD contracts.
The guidelines and procedures are to provide special
consideration to certain contracts, such as contracts that
were not awarded on a competitive basis or are
associated with the performance of inherently
governmental functions.
— The expiration date of the Secretary’s authority to award
contracts for increased performance of security guard
functions at military installations or facilities under the
Secretary’s jurisdiction is extended from 2006 to 2007.
— The Defense Commissary Agency is exempt from
performing any public-private competitions until
December 31, 2008.

CRS-25
Statute
Scope
Duration
Summarya
P.L. 109-289, Sections 8013,
DOD
FY2007
— None of the funds provided by this act can be used to
8019, and 8026
convert a DOD function that has more than 10 civilian
employees from government performance to contract
Department of Defense
performance unless an MEO is developed, the
Appropriations Act, FY2007
conversion differential is applied, and the contractor
does not receive an advantage by not making a health
insurance plan available to employees who are to be
employed in the function, or by offering a health
insurance plan that costs the contractor less than the
amount paid by DOD for the affected civilian
employees.
— This section does not apply to JWOD suppliers, Indian
tribes, Native Hawaiian organizations, depot contracts,
or contracts for depot maintenance.
— Any conversions to contractor performance occurring
under this section are to count toward any competitive
sourcing goal or target.
— None of the funds appropriated by this act may be used
for a public-private competition carried out under
Circular A-76 if the competition exceeds 24 months
(single function study) or 36 months (multifunction
study).
— Circular A-76 shall not apply to competitions between
DOD depot maintenance activities and private firms that
involve the acquisition of the modification, depot
maintenance, and repair of aircraft, vehicles, and

CRS-26
Statute
Scope
Duration
Summarya
vessels, and the production of components and other
DOD-related articles.
P.L. 109-295, Section 516
DHS
FY2007
— None of the funds appropriated by this act may be used to
process or approve a public-private competition for
Department of Homeland
services provided as of June 1, 2004, by employees of
Security Appropriations Act,
USCIS who are known as immigration information
FY2007
officers, contact representatives, or investigative
assistants.
P.L. 110-28, Sections 6201
DOE and Department of
Varies
— Employees of the National Energy Technology
and 6602
Labor
Laboratory are classified as inherently governmental for
the purposes of the FAIR Act.q
U.S. Troop Readiness,
— None of the funds made available to the Mine Safety and
Veterans’ Care, Katrina
Health Administration by P.L. 109-289, as amended by
Recovery, and Iraq
P.L. 110-5, can be used to pay for a contract awarded as
Accountability
the result of a public-private competition under Circular
Appropriations Act, FY2007
A-76.
P.L. 110-161, Divisions A,
USDA, Department of
Varies
— None of the funds provided by this act may be obligated
B, C, D, E, F, and G
Justice, DOD, DHS,
for the FAIR Act or Circular A-76 activities until the
Department of the Interior,
Secretary has submitted a report to the Committees on
Consolidated Appropriations
Department of Labor, and
Appropriations and the House Committee on
Act, 2008
Government-wide
Government Reform that describes the department’s
contracting out policies, including agency budgets for
contracting out.l
— Unless USDA receives specific authorization in
subsequent legislation, the department may not use the
funds made available in this act to study a competitive
sourcing activity relating to rural development or farm

CRS-27
Statute
Scope
Duration
Summarya
loan programs.
— None of the funds appropriated by this act may be used
for any activities related to conducting a public-private
competition under Circular A-76, or any successor
administrative directive, policy, or regulation, for work
performed by employees of the Bureau of Prisons or
Federal Prison Industries.
— None of the funds appropriated by this act may be used
for conducting a Circular A-76 competition or for
converting a function from government to private sector
performance (without a competition) unless the
following condition is met: a representative selected by
a majority of the affected employees is treated as an
interested party for the purpose of submitting a protest
to GAO.
— None of the funds in this act, or previous acts, available
for energy and water development can be used for any
competitive sourcing activities under Circular A-76, or
for implementing high-performing organizations for the
Army Corps of Engineers.
— None of the funds in this act or any other act can be used
to convert a function with more than 10 federal
employees from government performance to contractor
performance unless an MEO is accomplished; a public-
private competition is held; the conversion differential is
applied; and the contractor does not receive an
advantage by not making a health insurance plan
available to employees who are to be employed in the
function, by offering a health insurance plan that costs

CRS-28
Statute
Scope
Duration
Summarya
the contractor less than the amount paid by the federal
government for the affected civilian employees, or by
offering to such workers a retirement benefit that costs
less than the annual retirement cost factor applicable to
federal employees. This provision does not apply to, for
example, DOD, commercial or industrial type functions
that can be provided by JWOD organizations, and depot
contracts.
— Nothing in Circular A-76 shall prevent an agency head
from conducting public-private competitions to evaluate
the benefits of converting work performed by
contractors to the federal government. Circular A-76 is
to provide procedures and policies for these types of
competitions that are similar to the procedures and
policies applied to competitions where the government
is the incumbent.
— Amends 31 U.S.C. §3551(2) to include under the
definition of “interested party” any official who submits
an agency tender in a Circular A-76 competition
(regardless of the number of “full-time equivalent
employees” in the affected agency work centerr, s), and
any one person who has been designated by a majority
of agency employees in the affected work center as
their representative for the purpose of representing them
in a protest.
— An interested party (as defined in 31 U.S.C. §3551(2), as
amended by this statute) is entitled to intervene in a civil
action that was initiated by a private sector interested
party.

CRS-29
Statute
Scope
Duration
Summarya
— 31 U.S.C. §3551(2)(B) and 28 U.S.C. §1491(b) apply to
protests and civil actions that challenge final selections
of sources of performance that are made pursuant to a
Circular A-76 competition begun on or after January 1,
2004, and any other protests and civil actions related to
Circular A-76 competitions or decisions to convert
performance of an agency function from government
employees to a contractor on or after the date of
enactment.
— None of the funds available in this act may be used by
OMB to require an agency to prepare for or conduct a
public-private competition or direct conversion under
Circular A-76 or any other directive, policy, or
regulation. Additionally, none of the funds available in
this statute may be used by an agency to take any of the
specified actions as a result of direction or requirement
by OMB.
— None of the funds available under this act or any other act
may be used to conduct a public-private competition or
direct conversion under Circular A-76 or any other
directive, regulation, or policy for the human resources
lines of business (LOB) initiative until 60 days after
OMB submits a report on the use of competitions and
direct conversions for the human resources LOB
initiative to the Senate and House Appropriations
Committees and GAO. The report is to include, for
example, an estimate of the annual and recurring
savings the initiative is expected to generate. GAO is to
review the report and brief the Appropriations

CRS-30
Statute
Scope
Duration
Summarya
Committees within 45 days after receiving the report.
— None of the funds appropriated by this act may be used to
conduct a Circular A-76 competition for services
provided as of June 1, 2004, by immigration information
officers, contract representatives, or investigative
assistants employed by USCIS.
— None of the funds appropriated by this act may be used to
conduct or implement the results of a Circular A-76
competition for Coast Guard National Vessel
Documentation Center functions or activities.
— The Department of the Interior cannot spend more than
$3,450,000 of the funds made available by this act or
any other act to the department in FY2008 on
competitive sourcing studies for programs, projects, and
activities for which funds are appropriated by this act.
— None of the funds made available by this act or any other
act may be used for competitive sourcing studies in
FY2008 that involve Forest Service personnel.
— The Forest Service is exempted from implementing the
letter of obligation and post-competition accountability
guidelines for certain competitive sourcing studies
conducted prior to FY2006. This exemption applies to
competitive sourcing studies that involved 65 or fewer
FTEs; resulted in decisions in favor of agency
performance; did not achieve any net savings; and were
completed prior to the date of this act.
— In preparing any reports to the Committees on
Appropriations regarding competitive sourcing
activities, agencies funded in this act are to include all

CRS-31
Statute
Scope
Duration
Summarya
costs attributable to conducting public-private
competitions including, for example, any costs
attributable to outside consultants and contractors.
— The Secretary of the Interior shall, for any competitive
sourcing study involving department employees,
determine whether any of the employees concerned are
also qualified to participate in wildland fire management
activities and consider the effect that contracting with a
private sector source would have on the ability of the
department to fight and manage wildfires effectively
and efficiently.
— None of the funds available in this act may be used to
conduct a public-private competition or a direct
conversion until 60 days after GAO provides a report to
the Committees on Appropriations on the Department of
Labor’s use of competitive sourcing.
P.L. 110-181, Sections 326
DOD and Government-wide
Indefinite
— Amends 10 U.S.C. §2461(a)(1). DOD cannot convert a
and 327
function that has more than 10 civilian employees from
government performance to contract performance unless
National Defense
the contractor does not receive an advantage by not
Authorization Act, FY2008
making a health insurance plan (or a health savings
account or medical savings account) available to
employees who are to be employed in the function, by
offering a health insurance plan that costs the contractor
less than the amount paid by the federal government for
the affected civilian employees, or by offering to such
workers a retirement benefit that costs less than the
annual retirement cost factor applicable to federal
employees.

CRS-32
Statute
Scope
Duration
Summarya
— Each officer or employee of DOD who is responsible for
determining under Circular A-76 whether to convert a
DOD function to contractor performance shall consult at
least monthly with the civilian employees who will be
affected by the determination and consider their views
on the performance work statement and management
efficiency study. Under certain circumstances,
consultation with representatives of the appropriate
labor organization, or other representative(s) of the
employees, shall satisfy this requirement.
— Amends 10 U.S.C. §2461(a). A military department or a
defense agency may not be required to conduct a public-
private competition at the end of the performance period
specified in a letter of obligation or other agreement.
— Amends Title 10 of the U.S. Code by adding a new
section (Section 2463). The Under Secretary of Defense
for Personnel and Readiness is required to issue
guidelines and procedures designed to ensure that
consideration is given, on a regular basis, to using DOD
civilian employees to perform new functions and work
that is being performed by contractors. Special
consideration is to be given to certain functions and
activities. Under certain circumstances, conducting a
public-private competition is conditional. For example,
a public-private competition cannot be conducted for a
new function until performance of the function has been
assigned to DOD civilian employees. The Secretary of
Defense is to implement the guidelines and procedures
within 60 days of the date of enactment of this statute.

CRS-33
Statute
Scope
Duration
Summarya
DOD’s inspector general shall report on the
implementation of this section within180 days after the
date of enactment.
— OMB may not direct or require the Secretary of Defense
or the Secretary of a military department to prepare for,
undertake, continue, or complete a public-private
competition or direct conversion of a DOD function.
— The Secretary of Defense and the Secretaries of the
military departments may not prepare for, undertake,
continue, or complete a public-private competition or
direct conversion of a DOD function by reason of any
direction or requirement provided by OMB. DOD’S IG
shall conduct a review that addresses the department’s
compliance with this restriction, and shall report to the
congressional defense committees on this matter.
— Amends 31 U.S.C. §3551(2) to include under the
definition of “interested party” any official who submits
an agency tender in a Circular A-76 competition, and
any one person who has been designated by a majority
of agency employees in the affected work center as
their representative for the purpose of representing them
in a protest.r, s
— An interested party (as defined in 31 U.S.C. §3551(2), as
amended by this statute) is entitled to intervene in a civil
action that was initiated by a private sector interested
party.
— 31 U.S.C. §3551(2)(B) and 28 U.S.C. §1491(b) apply to
protests and civil actions that challenge final selections
of sources of performance that are made pursuant to a

CRS-34
Statute
Scope
Duration
Summarya
Circular A-76 competition begun on or after January 1,
2004, and any other protests and civil actions related to
Circular A-76 competitions or decisions to convert
performance of an agency function from government
employees to a contractor on or after the date of
enactment.
— Amends 41 U.S.C. §403 et seq. by adding a new section
(Section 43). A public-private competition involving 10
or more civilian employees may not be converted to
contractor performance unless the public-private
competition includes the following: a formal
comparison of the cost of performance by agency
employees with the cost of performance by a contractor;
an agency tender (including an MEO); a solicitation; a
determination that submitted offers meet the agency’s
needs with regard to non-cost factors; an examination of
the cost of performance by agency employees and the
cost of performance by one or more contractors to show
whether conversion to contractor performance will
result in savings to the government over the life of the
contract; and an examination of the effect of contractor
performance of the function on the agency mission.
Additionally, continued performance of the function by
agency personnel is required unless it has been
determined that contractor performance would be less
costly by an amount that equals or exceeds the lesser of
the following: 10% of the MEO’s personnel-related
costs or $10 million. An agency function that has been,
for example, reengineered or reorganized, but still

CRS-35
Statute
Scope
Duration
Summarya
provides essentially the same service shall not be
considered a new requirement. A function being
performed by executive agency personnel cannot be
altered for the purpose of exempting the conversion of
the function from the requirements of this section. Each
civilian employee of an agency who is responsible for
determining under Circular A-76 whether to convert an
agency function to contractor performance shall consult
at least monthly with the civilian employees who will be
affected by the determination and consider their views
on the performance work statement and management
efficiency study. Under certain circumstances,
consultation with representatives of the appropriate
labor organization, or other representative(s) of the
employees, shall satisfy this requirement. Before an
agency begins a public-private competition, the agency
head shall submit a report to Congress containing, for
example, the number of civilian employees who might
be affected by the competition and an examination of
the potential economic effect of contractor performance
of the function on agency civilian employees who would
be affected by a conversion to contractor performance.
The report must include a certification that proposed
performance of the function by a contractor is not a
result of an agency official’s decision to impose
predetermined constraints or limitations on agency
employees. A representative individual or entity at a
facility where a public-private competition is conducted
may submit an objection to the agency head on the

CRS-36
Statute
Scope
Duration
Summarya
grounds that the report to Congress has not been
submitted or the certification was not included in the
report. If the agency head determines that the report
was not submitted or did not include the certification, a
contract may not be awarded until a (complete) report is
submitted. This section does not apply to an agency’s
commercial or industrial type of function that is
included on a list established pursuant to JWOD, or
during war or a national emergency declared by the
President or Congress.
— A public-private competition cannot be conducted
pursuant to 10 U.S.C. §2461 for a DOD function at a
military medical facility until the Secretary of Defense
submits a certification and a report to the Armed
Services Committees. The Secretary of Defense is to
certify that he or she has taken steps to ensure that the
quality of medical care and the availability of qualified
personnel to carry out DOD functions related to military
medical care will not be adversely affected by the
process of considering the function for possible
conversion to contractor performance or the conversion
of such a function to contractor performance. Within
180 days after the date of enactment of this act, the
Secretary of Defense shall submit a report to the
Committees on Armed Services regarding public-private
competitions for DOD functions that are in progress at
military medical facilities. The report shall include for
each competition, for example, the cost of conducting
the competition, the estimated savings, and the savings
actually achieved.

CRS-37
Notes:
In an omnibus appropriations statute, a reference to “this act” generally refers to a specific division in the statute. For example, at the end of Division E in P.L. 110-161, Consolidated
Appropriations Act FY2008, it is noted that the division may be cited as the “Department of Homeland Security Appropriations Act, 2008.” (Division E of P.L. 110-161; 121 Stat.
1844, at 2097.)
a. In the earlier years of Circular A-76, several different terms, such as “cost comparison study,” were used to refer to a competition between an agency and private companies. For
the sake of consistency, the terms currently used, such as “public-private competition,” or simply “competition,” are used throughout the table.
b. In 2004, the General Accounting Office was renamed the Government Accountability Office.
c. For the purposes of filing a challenge or appeal under the FAIR Act, an interested party is, in brief, a private sector source, a representative of a business or professional association,
an officer or employee of an organization within an executive agency, or the head of a labor organization. See Sec. 3(b) of P.L. 105-270 for the specific criteria that qualify
an individual or an organization as an “interested party.”
d. Commercial Activities Panel, Improving the Sourcing Decisions of the Government (Washington: U.S. General Accounting Office, 2002).
e. The most efficient organization (MEO) is the staffing plan of the agency tender, which is the government’s response to a solicitation. It is the entity that would perform the work
if the government wins the competition. The conversion differential, $10 million or 10% of the government’s personnel costs for the function under study, whichever is less,
is added to the price or cost of the non-incumbent’s proposal.
f. The Javits-Wagner-O’Day Act (JWOD; 41 U.S.C. § 47) directed that, when government agencies purchase goods, priority is to be accorded to qualified nonprofit agencies for the
blind and qualified nonprofit agencies for other severely handicapped individuals.
g. A letter of obligation is “a formal agreement that an agency implements when a ... competition results in agency performance (e.g, MEO).” (U.S. Office of Management and Budget,
Circular No. A-76 (Revised), May 29, 2003, p. D-6.)
h. An agency tender official (ATO) is “an inherently governmental agency official with decision-making authority who is responsible for the agency tender and represents the agency
tender during source selection.” (Ibid., p. D-2.)
i. A competitive sourcing official (CSO) is “an inherently governmental agency official responsible for the implementation” of Circular A-76 within his or her agency. (Ibid., p. D-3.)
j. Post-competition accountability guidelines may be found in Circular No. A-76 (Revised), pp. B-19-B-20.
k. 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), p. D-5.)
l. Contracting out is one of several possible outcomes of a public-private competition. Considering the context in which the term “contracting out” is used here, it is likely that this
term actually refers to, or means, competitive sourcing.
m. Sections 341-344 of P.L. 109-163 amend 10 U.S.C. §§ 2461-2463; and, therefore, it may be necessary to closely examine the statute and the U.S. Code in order to fully understand
the changes.
n. A new requirement is an “agency’s newly established need for a commercial product or service that is not” being provided or performed by federal government personnel or a
contractor. A public-private competition “is not required” for a new requirement if an agency decides that a contractor should perform the work. However, government personnel
cannot perform work associated with a new requirement until and unless a public-private competition has been held. (U.S. Office of Management and Budget, OMB Circular
No. A-76
, pp. 2 and D-7.)

CRS-38
o. 10 U.S.C. § 2463 had required the Secretary to collect and retain cost information on DOD functions converted to contract performance, and DOD functions converted from contract
performance to government performance. Apparently, cost data are or will be collected pursuant to some other provision, because the title of Sec. 341(f), which repealed 10 U.S.C.
§ 2463, is “Repeal of Redundant Provision.”
p. Section 327 of P.L. 108-375 had required, under certain conditions, the application of the conversion differential to public-private competitions and had prohibited modifying DOD
functions in order to avoid having to formally compare the cost of government performance and the cost of contractor performance of a function. Section 327 was rendered moot
by Section 341(a) of P.L. 109-163, which requires, when 10 or more DOD civilian employees are involved, the use of the conversion differential and a formal comparison of
the cost of government performance and the cost of contractor performance.
q. Although this legislative provision states that employees shall be classified as inherently governmental, it is actually activities and full-time equivalents that are designated as
inherently governmental, or commercial. (Italics added for emphasis.)
r. Prior to the passage of P.L. 110-161, the relevant portion of the definition of “interested party” was as follows: an interested party “includes the official responsible for submitting
the Federal agency tender [also known as the agency tender official] in a public-private competition conducted under Office of Management and Budget Circular A-76 regarding
an activity or function of a Federal agency performed by more than 65 full-time equivalent employees of the Federal agency.” (31 U.S.C. §3551(2).) The correct term is “full-time
equivalent” (FTE). It is unclear why the word “employees” was inserted, or whether the inclusion of this word would alter the meaning of “full-time equivalent” in this case.
A full-time equivalent is the “staffing of [a] Federal civilian employee [position], expressed in terms of annual productive work hours (1,776) 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, available at
[http://www.truckload.org/pressroom/2005/ISAC%20050919.pdf], p. D-5.)
s. As discussed in the preceding note, prior to the passage of P.L. 110-161, an agency official who submitted a tender was an interested party, but only for a competition that involved
an agency function or activity that had more than 65 FTEs. The inclusion of the FTE criterion is consistent with Circular A-76: the circular permits protests for standard
competitions, and a standard competition must be used for competitions involving more than 65 FTEs. (U.S. Office of Management and Budget, Circular No. A-76 (Revised),
pp. B-1 and B-20.) Under Circular A-76, protests are not permitted for streamlined competitions, which an agency may use for a competition involving 65 or fewer FTEs. (Ibid.,
p. B-20.) The effect of Sec. 739(c)(1) of P.L. 110-161, which permits an agency tender official for a streamlined competition to be considered an interested party for the purpose
of filing a protest, is unclear. One possible interpretation is that, by amending 31 U.S.C. §3551(2), Sec. 739(c)(1) will enable an agency tender official to file a protest in a
streamlined competition.

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Selected Topics Related to
Competitive Sourcing Legislation8
Commercial Activities Inventory
The requirement for federal agencies to compile inventories of their commercial
activities, or functions, dates to the original Circular A-76 in 1966. Passage of the
FAIR Act in 1998 transformed this requirement into a statutory one and directed
agencies to submit their commercial activities inventories to OMB by June 30 each
year. The FAIR Act is also notable for including a definition of “inherently
governmental,” a term that previously had been defined only in OMB guidance.9 The
subject of inventories was revisited in 2003, when OMB, in its revision of Circular
A-76, included a requirement for agencies to compile and forward to OMB lists of
their inherently governmental activities.
Applicable statutes: P.L. 105-270, P.L. 109-115.
Commercial Activities Panel (CAP)
During the 106th Congress, Senator John Warner proposed an amendment to S.
2549,10 S.Amdt. 3464, that directed GAO to convene a panel to study the policies and
procedures governing the transfer of commercial activities from the federal
government to a contractor. Taking note of concerns voiced by federal employee
unions and private industry about Circular A-76, Senator Warner concluded that an
objective, systematic study of the competitive sourcing process was needed. The 13-
member Commercial Activities Panel (CAP), which was chaired by the Comptroller
General, issued its report, Improving the Sourcing Decisions of the Government, on
April 30, 2002. The panel recommended that the government adopt a series of 10
sourcing principles, make limited changes to Circular A-76, develop and demonstrate
an integrated competition process that would draw from both the Federal Acquisition
Regulation
(FAR) and Circular A-76, and promote the development of high-
8 For additional information on competitive sourcing, see CRS Report RL32017, Office of
Management and Budget Circular A-76: Selected Issues
; CRS Report RL32079, Federal
Contracting of Commercial Activities: Competitive Sourcing Targets
; CRS Report RL31024
The Federal Activities Inventory Reform Act and Circular A-76, by L. Elaine Halchin; and
CRS Report RS21489, OMB Circular A-76: Explanation and Discussion of the Recently
Revised Federal Outsourcing Policy
, by John R. Luckey.
9 Office of Federal Procurement Policy (OFPP) Policy Letter 92-1, dated September 23,
1992, available at [http://www.whitehouse.gov/omb/procurement/policy_letters/
92-1_092392.html].
10 S. 2549 was a defense authorization bill. It was incorporated as an amendment to H.R.
4205, which was enacted as the Floyd D. Spence National Defense Authorization Act for
Fiscal Year 2001 (P.L. 106-398, 114 Stat. 1654A-1, at 1654A).

CRS-40
performing organizations (HPOs).11 The panel’s work may have served as an
impetus to OMB, which issued a revised Circular A-76 on May 29, 2003.12
Applicable statute: P.L. 106-398.
Competitive Sourcing Targets13
When the Bush Administration launched its competitive sourcing initiative in
2001, it established competitive sourcing targets for federal government agencies:
subject 5% of the full-time equivalents (FTEs)14 listed on their commercial activities
inventories to public-private competition by the end of FY2002; and compete an
additional 10% by the end of FY2003.15 An OMB memorandum indicated that the
long-term goal for the federal government was to subject at least 50% of the FTEs
listed on FAIR Act inventories to public-private competition.16 Criticism of these
targets arose in 2002; the primary criticism was that the goals were arbitrary. Senator
George V. Voinovich commented, in March 2002, that the targets were “arbitrary and
potentially damaging.”17 Eventually, in 2003, OMB dropped the 5% and 10% targets
while encouraging agencies, with the promise of earning the highest grade for
competitive sourcing on the President’s PMA scorecard, to develop a competition
schedule that would show that all agency commercial activities from FY2004 through
FY2008 were slated for competition.18
11 Commercial Activities Panel, Improving the Sourcing Decisions of the Government
(Washington: U.S. General Accounting Office, 2002), pp. 46-53.
12 The Office of Federal Procurement Policy (OFPP) Administrator, who headed the effort
to revise the circular, was a member of the panel.
13 See CRS Report RL32079, Federal Contracting of Commercial Activities: Competitive
Sourcing Targets
, by L. Elaine Halchin.
14 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), p. D-5.)
15 U.S. Office of Management and Budget, “Performance Goals and Management Initiatives
for the FY2002 Budget,” memorandum M-01-15, March 9, 2001, p. 1, available at
[http://www.whitehouse.gov/omb/memoranda/index.html]; information provided
electronically by the Office of Federal Procurement Policy, Jan. 14, 2003.
16 U.S. Office of Management and Budget, “Performance Goals and Management Initiatives
for the FY2002 Budget,” p. 1.
17 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
, 107th Cong., 2nd sess., Mar. 6, 2002 (Washington: GPO, 2002), pp. 19-
20.
18 U.S. Office of Management and Budget, Competitive Sourcing: Conducting Public-
Private Competition in a Reasoned and Responsible Manner
, July 2003, pp. 4-5; Clay
Johnson III, Deputy Director for Management, U.S. Office of Management and Budget,
“Development of ‘Green’ Plans for Competitive Sourcing,” memorandum to the President’s
Management Council, Dec. 22, 2003, available at [http://www.whitehouse.gov/omb/
procurement/index_comp_sourcing.html].

CRS-41
Applicable statute: P.L. 108-7.
Conversion from Contractor to Government Performance
Although Circular A-76 does not prohibit conducting a public-private
competition for a function or activity that is being performed by a contractor, this
type of competition apparently is rarely held.19 The government’s competitive
sourcing initiative focuses exclusively on inventorying work — both commercial and
inherently government — that is being done by federal government employees and,
where appropriate, subjecting commercial activities to public-private competition.
A recent example where OMB declined an opportunity for federal government
employees to participate in a public-private competition for work being performed
by a contractor involved the Defense Logistics Agency (DLA).20 According to a
2005 article in Federal Times, a private firm won a public-private competition in
2001 for distribution operations at DLA’s Defense Distribution Depot at Cherry
Point, North Carolina (DDCN).21 The contract was allowed to expire because the
agency and the contractor had disagreed over pricing and workload. To keep
distribution operations functioning, DLA hired temporary civilian employees to work
at DDCN. When it was suggested that the temporary employees be permitted to
continue working for two years so that their performance could be compared to a
contractor’s, OMB objected. Reportedly, the then-head of the Office of Federal
Procurement Policy (OFPP) responded to this idea by saying:
A second public-private competition so soon after the first would not likely yield
significantly different results in terms of public-sector performance.... By
contrast, a recompetition among private-sector sources should enable [the
Defense Logistics Agency] to enter into a better contract.22
The head of competitive sourcing for the Department of Homeland Security, who
previously had been the focal point at OMB for competitive sourcing, offered the
following rationale for focusing on commercial activities:
Managers ought to know enough about their business to have a sense where
competition for contracted work and competition for in-house work has the
greatest probability of payback to the taxpayer.... It’s an economic decision by
19 Apparently, a function was insourced (that is, converted from contractor performance to
government performance) approximately 20 years ago. As reported in Federal Times, after
the General Services Administration had outsourced building maintenance at the Interior
Department’s headquarters, agency officials came to believe that the contractor was
charging too much for its services. A new public-private competition was held, and GSA
employees won the competition. (Tichakorn Hill, “Competitive Sourcing Manager Also
‘Insourcing’ Advocate,” Federal Times, Jan. 9, 2006, available at
[http://www.federaltimes.com/index2.php?S=1451960].)
20 The term “insourcing” refers to converting a function from contractor performance to
government performance as a result of a public-private competition.
21 Tichakorn Hill, “DLA Employees Barred from Competing for Jobs; OMB: Past Study
Already Proved Outsourcing Is the Better Deal,” Federal Times, June 27, 2005, p. 4.
22 Ibid.

CRS-42
competent managers to study that [commercial activities being performed by
government employees] which has never been studied before.23
On the other side of the issue of insourcing, some are concerned that the lack of
support for allowing federal government employees to compete for work that was
done previously by a government agency is unfair to the employees. Critics also use
the infrequency of insourcing to argue that the purpose of competitive sourcing is to
outsource government work.
Applicable statutes: P.L. 109-115, P.L. 109-163, P.L. 110-161, P.L. 110-181.
Funding Limits on Agency Competitive Sourcing Activities
Over the years, since the inception of Circular A-76, there does not appear to
have been any coordinated, government-wide effort to calculate the costs of
competitive sourcing to agencies, and to provide them, in turn, with funding for this
initiative.24 Addressing this apparent lack of financial support, the conference
committee that was convened for H.R. 2691 (P.L. 108-108) wrote:
The managers support the underlying principle of the Administration’s
competitive sourcing initiative.... The managers are concerned that this far-
reaching initiative appears to be on such a fast track that the Congress and the
public are neither able to participate nor understand the costs and implications
of the decisions being made. The managers remain concerned that the
Administration has failed to budget adequately for the cost of the initiative and
to justify such costs in budget documents. As a result, significant sums are being
expended in violation of reprogramming guidelines and at the expense of critical,
on-the-ground work such as the maintenance of Federal facilities.25
Other efforts to address the funding of competitive sourcing include a statutory
prohibition involving the Department of Veterans Affairs (VA) and certain reporting
requirements levied on federal agencies. 38 U.S.C. § 8110(a)(5) states that “funds
appropriated for the Department [of Veterans Affairs] under the appropriation
accounts for medical care, medical and prosthetic research, and medical
administration and miscellaneous operating expenses may not be used for” any
public-private competition. Among the information agencies are required to report
annually to Congress under Section 647(b) of P.L. 108-199 is “the incremental cost
directly attributable to conducting [public-private] competitions ... including costs
attributable to paying outside consultants and contractors.”
23 Ibid.
24 Competitive sourcing activities include, but are not limited to, the development and
maintenance of inventories of commercial activities and inherently governmental activities;
responding to challenges and appeals concerning the inventories; preparing for, and
conducting competitions; and carrying out post-competition tasks and activities.
25 U.S. Congress, Conference Committee, 2003, Making Appropriations for the Department
of the Interior and Related Agencies for the Fiscal Year Ending September 30, 2004, and
for Other Purposes
, conference report to accompany H.R. 2691, H.Rept. 108-330, 108th
Cong., 1st sess. (Washington: GPO, 2003), pp. 85-86.

CRS-43
Applicable statutes: P.L. 97-66, P.L. 108-108, P.L. 108-447, P.L. 109-54, P.L. 110-
161.
MEO and Conversion Differential Requirement
Under the 2003 circular, the instructions for standard competitions and
streamlined competitions vary concerning, among other things, MEOs and the
conversion differential.26 An MEO and the conversion differential are required for
standard competitions.27 An MEO is not required for, and the conversion differential
is not applied to, streamlined competitions.28
An argument for requiring an MEO is that government employees should have
an opportunity to prepare an agency tender that is competitive. In developing an
MEO, agency employees may draft a staffing plan that is more efficient and effective
than the current plan, incorporates innovative practices or procedures not used by the
incumbent function, and/or includes new or different equipment that would enhance
the function’s productivity or quality of work. If an MEO is not developed, then an
agency bases its agency tender on an estimate of the cost of the incumbent activity.
As described in Circular A-76, the rationale for having and applying a conversion
differential is that it “preclude[s] conversions based on marginal estimated savings,
and captures non-quantifiable costs related to a conversion, such as disruption and
decreased productivity.”29
Applicable statutes: P.L. 108-87, P.L. 108-108, P.L. 108-199, P.L. 108-287, P.L.
108-375, P.L. 109-115, P.L. 109-148, P.L. 109-163, P.L. 109-289, P.L. 110-161, P.L.
110-181.
Protest Rights
Private sector sources, but not federal employees, have been eligible to file
protests involving Circular A-76 competitions with GAO.30 By amending 31 U.S.C.
§§ 3551(2), 3552, and 3553, P.L. 108-375 has made it possible for an agency tender
official (ATO) to file a protest on behalf of agency employees whose work is the
26 A standard competition must be performed for functions that have more than 65 FTEs.
An agency may use streamlined competition procedures for functions that have 65 or fewer
FTEs.
27 The MEO is the staffing plan of the agency tender, which is the government’s response
to a solicitation; and it is the entity that would perform the work if the government wins the
competition. The conversion differential, $10 million or 10% of the government’s personnel
costs for the function under study, whichever is less, is added to the price or cost of the non-
incumbent’s proposal.
28 U.S. Office of Management and Budget, Circular No. A-76 (Revised), May 29, 2003, pp.
B-4, C-2.
29 Ibid., p. B-16.
30 GAO does not have bid protest jurisdiction over the Federal Aviation Administration
(FAA), which has its own procurement system. FAA’s Office of Dispute Resolution for
Acquisition (ODRA) handles bid protests involving the FAA.

CRS-44
subject of a public-private competition. Individual employees and unions are not
allowed to file protests.
Applicable statute: P.L. 108-375, P.L. 110-161, P.L. 110-181.
Reporting to Congress
A longstanding problem of competitive sourcing has been the dearth of accurate,
reliable, useful, and comprehensive information about agency competitive sourcing
activities and outcomes. Information has been made available, or otherwise obtained,
on an ad hoc basis. Notable exceptions are DOD’s Commercial Activities
Management Information System (CAMIS) and the release of FAIR Act inventories
and inherently governmental inventories. The statutory requirement for agencies to
provide the same competitive sourcing information on a regular basis to Congress
might aid in conducting oversight of the competitive sourcing initiative.31
Applicable statutes: P.L. 106-79, P.L. 108-108 (relevant section subsequently
repealed), P.L. 108-199, P.L. 109-54, P.L. 109-163, P.L. 110-161, P.L. 110-181.
Concluding Observations
For many years — since the original circular was issued in 1966 — the
executive branch has led the competitive sourcing effort. Circular A-76 was
developed by OMB, and this agency has been actively involved in its
implementation, particularly since 2001, when competitive sourcing was identified
as one of the components of the President’s Management Agenda. Increasing
interest on the part of Congress in competitive sourcing is demonstrated by the
legislation that has been enacted, particularly during the 108th and 109th Congresses.
Legislation has touched upon a variety of topics, such as protest rights for federal
employees, competitive sourcing targets, and the circular itself. It remains to be seen
whether this trend of competitive sourcing legislation continues throughout the
current Congress and, if so, what kinds of issues Members elect to address.

31 Sec. 647(b) of P.L. 108-199; 118 Stat. 361.