February 13, 1997

Circular No. A-76 (Revised)
Transmittal Memorandum No. 17


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 1998. However, because the 1998 Budget did not specify 1999-2003 pay raises for civilian employees, for purposes of A-76 cost comparison determinations only, the civilian pay raise percentages for 1999-2003 shall be assumed to be the same as the military pay raise assumptions for the corresponding years as shown below. It should NOT be assumed that these civilian pay raises will be those that will be in effect for preparation of the FY 1999 Budget. Guidance on pay raise assumptions to use for the FY 1999 Budget will be issued to agencies prior to the Budget submission date.

Similarly, 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 1998 Budget baseline estimates required by law. The law requires that a specific inflation factor (GNP fixed-weight FY/FY 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 19982.8
January 19993.0
January 20003.0
January 20013.0
January 20023.0
January 20033.0

Non-Pay Categories (Supplies and Equipment, etc.)
    FY 1996
    FY 1997
    FY 1998
    FY 1999
    FY 2000
    FY 2001
    FY 2002
    FY 2003

Geographic pay differentials received in 1997 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 1998 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 Memorandum No. 16, which provided last year's OMB Circular A-76 Federal pay raise and inflation factor assumptions is also hereby canceled.


Franklin D. Raines

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