Under the current Circular A-76 and the Handbook, if "commercial" goods or services are being produced or performed by government employees the government will generally not "outsource" them to the private sector unless the private sector prevails in a "cost comparison" between the public and private sector. Once a suitable in-house commercial-type activity is identified the first step is for a cost comparison among private offerors. The successful contractor proposal from that competition is then compared to the cost of continued in-house performance. The cost comparison process then involves six steps:

1. the development of a Performance Work Statement (PWS) and Quality Assurance Surveillance Plan (QASP)

2. The performance of a management study to determine the Government’s Most Efficient Organization (MEO)

3. The development of an in-house Government cost estimate

4. Issuance of a request for proposal or invitation for bid (IFB)

5. Comparison of the in-house bid against the proposed private sector bid

6. The inevitable appeal process designed to assure that all costs entered into the Cost Comparison Form are fair and accurate and calculated in accordance with the guidance of the supplement handbook.

Under Circular A-76 the competition to select the private offeror to be compared to the in-house offeror is limited either to the low bidder in response to an IFB or to low cost/technically acceptable offeror in a negotiated procurement. A 1996 revision provides for the possibility of a "best value" comparison (cost/technical tradeoff) and an adjustment to the offeror’s bid to make them comparable but this provision is often confusing and has rarely been followed.

In response to numerous concerns expressed inside and outside of government Congress required the Comptroller General to convene a panel of experts to study the policies and procedures related to transferring commercial activities from government to federal contractors. The following changes primarily adopts the Panel’s recommendations.

New Proposed Revisions to Circular A-76 - OMB’s Proposed Changes

The changes would rescind the existing Circular and Supplemental Handbook and replace them with a completely rewritten two-page Circular and six attachments:

Attachment A: Inventory Process

Attachment B: Public-Private Competition

Attachment C: Direct Conversion Process

Attachment D: Inter-Service Support Agreements (ISSA)

Attachment E: Calculating Public-Private Competition Costs

Attachment F: Glossary of Acronyms and Definitions

The changes are intended to modify several perceived weakness including (1) the Circular provides excess opportunities for agency work to be performed without competition (2) the competition process is too complicated (3) there is insufficient flexibility to make best value decisions (4) many believe the process is susceptible to "gaming" and (5) accountability for results is lacking. The OMB is touting the proposed changes as (1) expanding use of public-private competitions by eliminating exceptions previously permitted that resulted in sole-source work across agencies (i.e. ISSAs) and requiring periodic re-competitions of commercial activities performed by the government (2) making competition simpler and easier to understand including greater reliance on FAR based practices (3) improve effectiveness of competition by giving agencies greater flexibility to consider quality in their source selections (4) improve public trust in public-private competitions by avoiding appearances of conflict of interest (5) increase visibility into how government agencies are managed by requirements of agencies to develop lists of commercial and inherently governmental activities and (6) strengthen accountability for achieving results by centralizing agency oversight for management of commercial activities and increasing the focus on post-award administration of agreements with public providers.

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