As you were informed earlier, we initiated a comprehensive review in June of OMB Circular A-76, which expresses the Government's general policy of reliance on the private sector for goods and services. This review was under my personal direction as Administrator for Federal Procurement Policy with statutory responsibility for that policy under Public Law 93-400. Our review has been completed, and we are now proposing a number of actions to revise the Circular and its implementing guidelines. As announced at the beginning of the review, it was conducted with two fundamental precepts: (1) the longstanding policy of Government reliance on the private sector is a basic tenet of our democratic society, and (2) governmental functions should be performed by Government employees. We had the benefit of more than 100 responses to our request for comments; from the legislative branch, executive agencies, private firms and industry groups, Federal employee unions and associations, and individuals. Analysis of these responses and other available information, and identification of the underlying issues, led to the proposed actions which are detailed in the attached notice. We feel that these proposals constitute a balanced approach to re-structuring the Circular in a way that will promote equity and consistency in the application of the policy by executive agencies. They also reflect our concern for greater predictablity and stability for the workers, both Government and private, who are affected by this policy. By the attached notice of proposed changes, we are soliciting the views of all interested parties. In view of the interest which has been shown in this subject by your Committee, we would be particularly pleased to have the benefit of your comments. Thank you very much for your interest in this issue and in efforts to improve the guidelines for implementation of this policy. Enclosure Sincerely, 呼 Lester A. Fettig nrཁྐྲ་ 59% MAJORITY MEMBERS GEORGE H. MAHON, TEX.. JANE WY YTEN, MISS. JOHN M. BLACK, W. VA ROBERT N. GIAIMO, CONN. DAVID R. OBEY, WIS. EDWARD R. ROYBAL, CALIF. LOUIS STOKES, OHIO GUNN MCKAY, UTAM YOM BEVILL, ALA. BILL CHAPPELL, JR., PLA BILL D. BURLISON, MO, BILL ALEXANDER, ARK. EDWARD I. KOCH, N.Y. YVONNE BRATHWAITE BURKE, CALIF. JOHN P. MURTHA, PA. BOB TRAXLER, MICH. ROBERT DUNCAN, ORED. JOSEPH D. EARLY, MASS. MAX BAUCUS, MONT. CHARLES WILSON, TEL. LINDY (MRS, HALE) BOGGS, LA. ADAM BENJAMIN, JR, IND. NORMAN D. DICKS, WASH. CHAIRMAN Congress of the United States House of Representatives January 9, 1978 MINORITY MEMBERS J. KENNETH ROBINSON, VA. WILLIAM L. ARMSTRONG, COLO. RALPH S. REGULA, OHIO CLAIR W. BURGENER, CALIF. GEORGE M. O'BRIEN, B VIRGINIA SMITH, NEBR CLERK AND STAFF DIRECTOR TELEPHONE: CAPITOL 1-312 EXT. BUT OR I am writing in response to your letter of November 22, 1977, in which you enclosed a statement of proposed changes to OMB circular A-76 for the Committee's review and comments. As you know, many Members of the Appropriations Committee have been very concerned over the Government's recent "contracting-out" policies. This concern was reflected by the adoption of a general provision in the Defense Appropriation Act which has the effect of placing a moratorium on any further conversion to contract for many services currently performed by Department of Defense military and civilian employees. The policies and cost criteria espoused in this document should be helpful in reducing misunderstanding and controversy over the use and application of circular A-76, if your agency and the entire Office of Management and Budget actively support implementation of its provisions. The new cost criteria, especially the use of firm contract prices for comparisons with in-house costs as currently done by the Air Force, should help resolve current difficulties. In implementing the new provision further consideration should be given to eliminating one of the more frustrating aspects of the evaluation process as it is currently conducted, i.e., not informing the Members of Congress nor affected government employees that conversion of in-house Mr. Lester A. Fettig Page 2 activities is being considered. Under current procedures, the Committee is not provided any information with respect to possible conversion. Only after the decision is made, are we provided any detail such as to the functions to be converted, their locations, number of employees affected, etc. Even then the notification generally reaches Congress via correspondence from constituents not via the executive branch. The Committee should be given an opportunity to review these proposals in the same manner that it does other aspects of the President's budget. I believe that providing additional visibility prior to announcing implementation will over the long run make the process more understandable and reduce controversy. A change to A-76 to insure that this information is provided to the Congress should be considered. I would like to also make a note of some aspects of the proposed new regulation that would primarily affect the Department of Defense. Proposed action 1D states that DoD should develop more specific criteria for the exception relating to military readiness. In fact, it may be nigh on impossible to develop and implement meaningful, uniform criteria for DoD. At the present time, it appears that each activity, function, weapons system, etc., is handled on an exception basis by the DoD. For example, it is not unusual to find one particular model or type of aircraft or aircraft component being overhauled in a government-owned/governmentoperated facility, in a government-owned/contractor-operated facility, and in a total contractor facility all in the same year. Also, maintenance support and engineering support for various weapons systems which in the past were totally supported by military personnel and government civilians are now partially supported by contractor personnel and the same weapon system or components of that system may be supported differently by different military services. I am concerned that an overly ambitious attempt to provide uniformity among DoD activities could prove to be far more disruptive and expensive than simply proceeding on a case-by-case basis as is currently done, but with the new guidelines as contained in your proposal. I am also concerned that over-zealous enforcement of a provision that prohibits one agency (military service) from obtaining a product or service from another federal agency could be detrimental to further use of interservice support agreements and the conduct of maintenance functions on the aircraft, radars, engines, communications equipment, etc., of one military service at another service's facility. For example, in some instances, two or more military services use basically the same aircraft or helicopter and in a large number of instances related aircraft engines are used by each service. Yet, each service maintains one or more facilities for the maintenance/overhaul of these items. A-76 should not be used to preclude further economies in these circumstances. The Committee appreciates the opportunity to comment on the proposed changes to OMB circular A-76. REPORT OF PERFORMANCE REVIEW OF DEPARTMENT OF DEFENSE COMMERCIAL OR INDUSTRIAL FUNCTIONS (31 December 1977) Prepared Jointly by the Office of Management and Budget and |