https://crsreports.congress.gov
Updated June 2, 2020
A-76 Competitions in the Department of Defense
OMB Circular A-76
Office of Management and Budget (OMB) Circular A-76,
“Performance of Commercial Activities,” establishes policy
for the performance of recurring commercial services by
federal agencies, stating that the policy of the “federal
government has been to rely on the private sector for
needed commercial services,” and that those “commercial
activities should be subject to the forces of competition.”
The general concept underlying Circular A-76 began as a
statement of policy – that the federal government “will not
start or carry on any commercial activity to provide a
service or product for its own use if such service or product
can be procured from” the private sector – issued by the
Eisenhower Administration-era Bureau of the Budget (later
OMB). That 1955 policy provided a framework for the
development of Circular A-76, which was first issued in
1966. Circular A-76 has been revised and amended over
time, and was last substantially amended in 2003.
The A-76 Competition Process
Circular A-76 outlines a complex process for conducting
managed competitions, sometimes referred to as A-76
competitions or public-private competitions. Services
categorized as inherently governmental in nature are not
subject to A-76 competitions. Executive branch agencies,
such as the Department of Defense (DOD), may use the
Circular’s guidance and procedures to determine whether
government sources or private-sector sources should
perform recurring commercial-type services (i.e., those that
are required on a consistent, long-term basis). In carrying
out a public-private competition under Circular A-76,
executive branch agencies are required to:
develop a performance work statement that defines the
technical aspects of the work to be performed; then
determine the most efficient organizational structure to
perform the work using the current government
workforce (called the “Most Efficient Organization,” or
MEO) through realignment of existing management
structures, personnel requirements, and procedures; and
finally
conduct cost comparison studies among the private
sector, other public agencies, and the current MEO to
determine the most cost effective option for work
performance.
Circular A-76 provides two forms of public-private
competitions: a streamlined competition that must be
completed within 90 calendar days (extendable by no more
than 45 calendar days) and a standard competition that
must be completed within 12 months (extendable by no
more than 6 months). Section 2461 of Title 10, United
States Code (U.S.C), also specifies that DOD public-private
competitions may not exceed 24 months (or 33 months,
upon determination of the Secretary of Defense).
In order to compare public sector and private sector
personnel, materiel, and overhead costs on a relatively
consistent basis, Circular A-76 provides a number of
standard factors to calculate public sector costs. For
example, general and administrative overhead rates are
calculated at a set rate of 12% of labor costs, with no
allowance for inflation. In order to prevent conversion of
commercial-type services from the public to the private
sector for marginal estimated savings, private sector bids
are also subject to an conversion differential calculated as
the lesser of 10% of agency labor costs or $10 million.
DOD may not decide in favor of the private sector unless
the private sector bid equals or exceeds the lesser of $10
In the context of federal procurement, competition indicates
a marketplace condition in which two or more entities, each
acting independently, attempt to obtain business by
submitting bids or proposals to provide goods or services.
Requiring competition may serve to motivate reduced costs
and improved performance. In the context of the A-76
process, competition also indicates “a formal evaluation of
sources to provide commercial services that uses pre-
established rules” and procedures.
Circular A-76 categorizes services performed by
government employees as either commercial or
inherently governmental in nature. Commercial services –
such as medical care or maintenance of real property
– are those that could be obtained through the private
sector, but could also be provided by a government
employee (i.e., the public sector). Two definitions of
inherently governmental services exist in federal law and
policy: a statutory and a policy-focused definition. The
statutory definition (as enacted through P.L. 105-270,
the FAIR Act) describes an inherently governmental
activity as one “so intimately related to the public
interest as to require performance by Federal
Government employees.” The policy-focused
definition (as established by Circular A-76) describes
an inherently governmental activity as one “so
intimately related to the public interest as to mandate
performance by government personnel.” Inherently
governmental functions may include activities such as
commanding U.S. military forces or determining U.S.
foreign policy. Other sources of law or policy that
define inherently governmental functions do so either
by referencing the FAIR Act or Circular A-76. Most
notably, the Federal Acquisition Regulation
incorporates by reference the definition of Circular A-
76, while the Office of Federal Procurement Policy’s Policy
Letter 11-01 adopts the FAIR Act’s definition.
