EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
CIRCULAR NO. A-76 (REVISED 1999)
August 4, 1983
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Performance of Commercial Activities
- Purpose. This Circular establishes Federal
policy regarding the performance of commercial activities and implements the statutory
requirements of the Federal Activities Inventory Reform Act of 1998, Public Law 105-270.
The Supplement to this Circular sets forth the procedures for determining whether
commercial activities should be performed under contract with commercial sources or
in-house using Government facilities and personnel.
- Rescission. OMB Circular No. A-76 (Revised),
dated March 29, 1979; and Transmittal Memoranda 1 through 14 and 16 through 18.
- Authority. The Budget and Accounting Act of 1921
(31 U.S.C. 1 et seq.), The Office of Federal Procurement Policy Act Amendments of
1979. (41 U.S.C. 401 et seq.), and The Federal Activities Inventory Reform Act of
1998. (P. L. 105-270).
- In the process of governing, the Government should not
compete with its citizens. The competitive enterprise system, characterized by
individual freedom and initiative, is the primary source of national economic strength. In
recognition of this principle, it has been and continues to be the general policy of the
Government to rely on commercial sources to supply the products and services the
- This national policy was promulgated through Bureau of
the Budget Bulletins issued in 1955, 1957 and 1960. OMB Circular No. A-76 was
issued in 1966. The Circular was previously revised in 1967, 1979, and 1983. The
Supplement (Revised Supplemental Handbook) was previously revised in March 1996
(Transmittal Memorandum 15).
- Policy. It is the policy of the United States
- Achieve Economy and Enhance Productivity.
Competition enhances quality, economy, and productivity. Whenever commercial sector
performance of a Government operated commercial activity is permissible, in accordance
with this Circular and its Supplement, comparison of the cost of
contracting and the cost of in-house performance shall be performed to determine who will
do the work. When conducting cost comparisons, agencies must ensure that all costs are
considered and that these costs are realistic and fair.
- Retain Governmental Functions In-House. Certain
functions are inherently Governmental in nature, being so intimately related to the
public interest as to mandate performance only by Federal employees. These functions are
not in competition with the commercial sector. Therefore, these functions shall be
performed by Government employees.
- Rely on the Commercial Sector. The Federal
Government shall rely on commercially available sources to provide commercial products and
services. In accordance with the provisions of this Circular and its Supplement, the
Government shall not start or carry on any activity to provide a commercial product or
service if the product or service can be procured more economically from a commercial
- Definitions. For purposes of this Circular:
- A commercial activity is one which is operated
by a Federal executive agency and which provides a product or service that could be obtained
from a commercial source. Activities that meet the definition of an inherently
Governmental function provided below are not commercial activities. A representative list
of commercial activities is provided in Attachment A. A commercial activity also may be
part of an organization or a type of work that is separable from other functions or
activities and is suitable for performance by contract.
- A conversion to contract is the changeover of an
activity from Government performance to performance under contract by a commercial
- A conversion to in-house is the changeover of an
activity from performance under contract to Government performance.
- A commercial source is a business or other
non-Federal activity located in the United States, its territories and possessions, the
District of Columbia or the Commonwealth of Puerto Rico, which provides a commercial
product or service.
- An inherently Governmental function is a
function which is so intimately related to the public interest as to mandate performance by
Government employees. Consistent with the definitions provided in the Federal Activities
Inventory Reform Act of 1998 and OFPP Policy Letter 92-1, these functions include those
activities which require either the exercise of discretion in applying Government
authority or the use of value judgment in making decisions for the Government. Services or
products in support of inherently Governmental functions, such as those listed in
Attachment A, are commercial activities and are normally subject to this Circular.
Inherently Governmental functions normally fall into two categories:
- (1) The act of governing; i.e., the discretionary
exercise of Government authority. Examples include criminal investigations, prosecutions
and other judicial functions; management of Government programs requiring value judgments,
as in direction of the national defense; management and direction of the Armed Services;
activities performed exclusively by military personnel who are subject to deployment in a
combat, combat support or combat service support role; conduct of foreign relations;
selection of program priorities; direction of Federal employees; regulation of the use of
space, oceans, navigable rivers and other natural resources; direction of intelligence and
counter-intelligence operations; and regulation of industry and commerce, including food
- (2) Monetary transactions and entitlements, such as
tax collection and revenue disbursements; control of the Treasury accounts and money
supply; and the administration of public trusts.
- A cost comparison is the process of developing
an estimate of the cost of Government performance of a commercial activity and
comparing it, in accordance with the requirements of the Supplement, to the cost to the
Government for contract performance of the activity.
- Directly affected parties are Federal employees
and their representative organizations and bidders or offerors on the instant
- Interested parties for purposes of challenging
the contents of an agency's Commercial Activities Inventory under the Federal Activities
Inventory Reform Act of 1998 are:
- (1) A private sector source that (A) is an actual or
prospective offeror for any contract or other form of agreement to perform the activity;
and (B) 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
- (2) A representative of any business or professional
association that includes within its membership private sector sources referred to in (1)
- (3) An officer or employee of an organization 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 (3) above.
- Unless otherwise provided by law, this Circular and its
Supplement shall apply to all executive agencies and shall provide administrative
direction to heads of agencies.
- This Circular and its Supplement apply to printing and
binding only in those agencies or departments which are exempted by law from the
provisions of Title 44 of the U.S. Code.
- This Circular and its Supplement shall not:
- (1) Be applicable when contrary to law, Executive Orders,
or any treaty or international agreement;
- (2) Apply to inherently Governmental functions as defined
in paragraph 6.e.;
- (3) Apply to the Department of Defense in times of a
declared war or military mobilization;
- (4) Provide authority to enter into contracts;
- (5) Authorize contracts which establish an
employer-employee relationship between the Government and contractor employees. An
employer-employee relationship involves close, continual supervision of individual
contractor employees by Government employees, as distinguished from general oversight of
contractor operations. However, limited and necessary interaction between Government
employees and contractor employees, particularly during the transition period of
conversion to contract, does not establish an employer-employee relationship.
- (6) Be used to justify conversion to contract solely to avoid personnel ceilings or
- (7) Apply to the conduct of research and development. However, severable in-house
commercial activities in support of research and development, such as those listed in
Attachment A, are normally subject to this Circular and its Supplement; or
- (8) Establish and shall not be construed to create any substantive or procedural basis
for anyone to challenge any agency action or inaction on the basis that such action or
inaction was not in accordance with this Circular, except as specifically set forth in
Part 1, Chapter 3, paragraph K of the Supplement, "Appeals of Cost Comparison
Decisions" and as set forth in Appendix 2, Paragraph G, consistent with Section 3 of
the Federal Activities Inventory Reform Act of 1998.
- The requirements of the Federal Activities Inventory
Reform Act of 1998 apply to the following executive agencies:
- (1) an executive department named in 5 USC 101,
- (2) a military department named in 5 USC 102, and
- (3) an independent establishment as defined in 5 USC 104.
- The requirements of the Federal Activities Inventory
Reform Act of 1998 do not apply to the following entities or activities:
- (1) the General Accounting Office,
- (2) a Government corporation or a Government controlled corporation as defined in 5 USC
- (3) a non-appropriated funds instrumentality if all of its employees are referred to in
5 USC 2105(c), or
- (4) Depot-level maintenance and repair of the Department of Defense as defined in 10
- Government Performance of a Commercial Activity.
Government performance ofa commercial activity is authorized under any of the
- No Satisfactory Commercial Source Available.
Either no commercial source is capable of providing the needed product or service, or use
of such a source would cause unacceptable delay or disruption of an essential program.
Findings shall be supported as follows:
- (1) If the finding is that no commercial source is capable
of providing the needed product or service, the efforts made to find commercial sources
must be documented and made available to the public upon request. These efforts shall
include, in addition to consideration of preferential procurement programs (see Part I,
Chapter 1, paragraph C of the Supplement) at least three notices describing the
requirement in the Commerce Business Daily over a 90-day period or, in cases of bona
fide urgency, two notices over a 30-day period. Specifications and requirements in
the solicitation shall not be unduly restrictive and shall not exceed those required of
in-house Government personnel or operations.
- (2) If the finding is that a commercial source would cause
unacceptable delay or disruption of an agency program, a written explanation, approved by
the assistant secretary or designee in paragraph 9.a. of the Circular, must show the
specific impact on an agency mission in terms of cost and performance. Urgency alone is
not adequate reason to continue in-house operation of a commercial activity. Temporary
disruption resulting from conversion to contract is not sufficient support for such a
finding, nor is the possibility of a strike by contract employees. If the commercial
activity has ever been performed by contract, an explanation of how the instant
circumstances differ must be documented. These decisions must be made available to the
public upon request.
- (3) Activities may not be justified for in-house
performance solely on the basis that the activity involves or supports a classified
program or the activity is required to perform an agency's basic mission.
- National Defense.
- (1) The Secretary of Defense shall establish criteria for
determining when Government performance of a commercial activity is required for national
defense reasons. Such criteria shall be furnished to OMB, upon request.
- (2) Only the Secretary of Defense or his designee has the
authority to exempt commercial activities for national defense reasons.
- Patient Care. Commercial activities performed at
hospitals operated by the Government shall be retained in-house if the agency head,
in consultation with the agency's chief medical director, determines that in-house
performance would be in the best interests of direct patient care.
- Lower cost. Government performance of a
commercial activity is authorized if a cost comparison prepared in accordance with the Supplement
demonstrates that the Government is operating or can operate the activity on an ongoing
basis at an estimated lower cost than a qualified commercial source.
- Action Requirements. To ensure that the
provisions of this Circular and its Supplement are followed, each agency head shall:
- Designate an official at the assistant secretary or
equivalent level and officials at a comparable level in major component organizations to have
responsibility for implementation of this Circular and its Supplement within the agency.
- Establish one or more offices as central points of
contact to carry out implementation. These offices shall have access to all
documents and data pertinent to actions taken under the Circular and its Supplement and
will respond in a timely manner to all requests concerning inventories, schedules,
reviews, results of cost comparisons and cost comparison data.
- Be guided by Federal Acquisition Regulation (FAR)
Subpart 24.2 (Freedom of Information Act) in considering requests for information.
- Implement this Circular and its Supplement with
a minimum of internal instructions. Cost comparisons shall not be delayed pending issuance
of such instructions.
- Ensure the reviews of all existing in-house commercial
activities are completed within a reasonable time in accordance with the
Federal Activities Inventory Reform Act of 1998 and the Supplement.
- Annual Reporting Requirement. As required by
the Federal Activities Inventory Reform Act of 1998 and Appendix 2 of the Supplement, no later
than June 30 of each year, agencies shall submit to OMB a Commercial Activities Inventory
and any supplemental information requested by OMB. After review and consultation by OMB,
agencies will transmit a copy of the Commercial Activities Inventory to Congress and make
the contents of the Inventory available to the public. Agencies will follow the process
provided in the Supplement for interested parties to challenge (and appeal) the contents
of the inventory.
- OMB Responsibility and Contact Point. All
questions or inquiries should be submitted to the Office of Management and Budget, Room 6002 NEOB,
Washington, DC 20503. Telephone number (202) 395-6104, FAX (202) 395-7230.
- Effective Date. This Circular and the changes
to its Supplement are effective immediately.
OMB Circular No. A-76
EXAMPLES OF COMMERCIAL ACTIVITIES
- Audiovisual Products and Services
- Photography (still, movie, aerial, etc.)
Photographic processing (developing, printing, enlarging, etc.)
Film and videotape production (script writing, direction, animation,
editing, acting, etc.)
Microfilming and other microforms
Art and graphics services
Distribution of audiovisual materials
Reproduction and duplication of audiovisual products
Audiovisual facility management and operation
Maintenance of audiovisual equipment
- Automatic Data Processing
- ADP services - batch processing, time-sharing, facility management, etc.
Programming and systems analysis, design, development, and simulation
Key punching, data entry, transmission, and teleprocessing services
Systems engineering and installation
Equipment installation, operation, and maintenance
- Food Services
- Operation of cafeterias, mess halls, kitchens, bakeries, dairies, and commissaries
Ice and water
- Health Services
- Surgical, medical, dental, and psychiatric care
Hospitalization, outpatient, and nursing care
Eye and hearing examinations and manufacturing and fitting glasses and hearing aids
Medical and dental laboratories
- Industrial Shops and Services
- Machine, carpentry, electrical, plumbing, painting, and other shops
Industrial gas production and recharging
Equipment and instrument fabrication, repair and calibration
Plumbing, heating, electrical, and air conditioning services, including repair
Fire protection and prevention services
Custodial and janitorial services
Refuse collection and processing
- Maintenance, Overhaul, Repair, and Testing
- Aircraft and aircraft components
Ships, boats, and components
Electronic equipment and systems
Weapons and weapon systems
Medical and dental equipment
Office furniture and equipment
Industrial plant equipment
- Management Support Services
- Advertising and public relations services
Financial and payroll services
- Manufacturing, Fabrication, Processing, Testing, and Packaging
- Ordnance equipment
Clothing and fabric products
Liquid, gaseous, and chemical products
Communications and electronics equipment
Rubber and plastic products
Optical and related products
Sheet metal and foundry products
Test and instrumentation equipment
- Office and Administrative Services
- Library operations
Stenographic recording and transcribing
Word processing/data entry/typing services
Management information systems, products and distribution
Financial auditing and services
- Other Services
- Laundry and dry cleaning
Mapping and charting
Architect and engineer services
Training -- academic, technical, vocational, and specialized Operation of utility
systems (power, gas, water steam, and sewage)
Laboratory testing services
- Printing and Reproduction
- Facility management and operation
Printing and binding -- where the agency or department is exempted from the provisions
of Title 44 of the U.S. Code
Reproduction, copying, and duplication
- Real Property
- Design, engineering, construction, modification, repair, and maintenance
of buildings and structures; building mechanical and electrical equipment and
systems; elevators; escalators; moving walks
Construction, alteration, repair, and maintenance of roads and other surfaced areas
Landscaping, drainage, mowing and care of grounds
Dredging of waterways
- Guard and protective services
Systems engineering, installation, and maintenance of security systems and
individual privacy systems
- Special Studies and Analyses
- Cost benefit analyses
Scientific data studies
Defense, education, energy studies
- Systems Engineering, Installation, Operation, Maintenance, and Testing
- Communications systems - voice, message, data, radio, wire, microwave, and
Satellite tracking and data acquisition
Radar detection and tracking
Television systems - studio and transmission equipment, distribution systems,
receivers, antennas, etc.
Bulk storage facilities
- Operation of motor pools
Vehicle operation and maintenance
Air, water, and land transportation of people and things
Trucking and hauling
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