February 18, 1998

Circular No. A-76 (Revised)
Transmittal Memorandum No. 18


SUBJECT:      Performance of Commercial Activities

     This Transmittal Memorandum updates the Federal pay raise assumptions and inflation factors used for computing the Government's in-house personnel and non-pay costs, as generally provided in the President's Budget for Fiscal Year 1999.

     The non-pay inflation factors are for purposes of A-76 cost comparison determinations only. They reflect the generic non-pay inflation assumptions used to develop the FY 1999 Budget baseline estimates required by law. The law requires that a specific inflation factor (GDP FY/FY chained price index) be used for this purpose. These inflation factors should not be viewed as estimates of expected inflation rates for major long-term procurement items or as an estimate of inflation for any particular agency's non-pay purchases mix.

     The following factors should be applied per paragraph B, pages 19-21 of the OMB Circular A-76 Revised Supplemental Handbook (March 1996).

Federal Pay Raise Assumptions
Effective Date
January 19993.1
January 20003.0
January 20013.0
January 20023.0
January 20033.0

  Non-Pay Categories (Supplies and Equipment, etc.)
FY 19972.2
FY 19981.9
FY 19992.0
FY 20002.1
FY 20012.2
FY 20022.2
FY 20032.2

     Geographic pay differentials received in 1998 shall be included for the development of in-house personnel costs. The above pay raise factors shall be applied after consideration is given to the geographic pay differentials. The pay raise factors provided for 1999 and beyond shall be applied to all employees, with no assumption being made as to how they will be distributed between possible locality and ECI-based increases.

     These updates are effective as follows: all changes in the Transmittal Memorandum are effective immediately and shall apply to all cost comparisons in process where the Government's in-house cost estimate has not been publicly revealed before this date.

     Agencies are reminded that OMB Circular No. A-76, Transmittal Memoranda 1 through Transmittal Memorandum 14 are canceled. Transmittal Memorandum No. 15 provided the Revised Supplemental Handbook, and is dated March 27, 1996 (Federal Register, April 1, 1996, pages 14338-14346). Transmittal Memoranda No. 16 and 17, which provided the last two year's OMB Circular A-76 Federal pay raise and inflation factor assumptions are also canceled.



Franklin D. Raines

| OMB Home Page | Budget Information | Legislative Information | Management Reform/GPRA |
| Grants Management | Financial Management | Procurement Policy |
| Information & Regulatory Policy | Special Topics |