GUIDELINES FOR APPLICATION OF OMB CIRCULAR A-76 TO GOVERNMENT ADP REQUIREMENTS
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Collection:
Document Number (FOIA) /ESDN (CREST):
CIA-RDP79-00498A000300060003-9
Release Decision:
RIPPUB
Original Classification:
K
Document Page Count:
10
Document Creation Date:
December 9, 2016
Document Release Date:
August 4, 2000
Sequence Number:
3
Case Number:
Publication Date:
August 27, 1976
Content Type:
MF
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He I
ODP 1684-76
*OMB Waiver Letter In ERU File*
27 AUG 4
MEMORANDUM FOR: DDI ADP Control Officer
DDO ADP Control Officer
DDS&T ADP Control Officer
FROM Clifford D. May, Jr.
Director of Data Processing
SUBJECT Guidelines for Application of OMB Circular.
A-76 to Government ADP Requirements
1. The Agency has received a draft Df subject guide-
lines and action to develop a response has been delegated to
the Office of Data Processing. You are requested to furnish
such comments as you feel are appropriate to include in the
ber 1976.
Agency's response tol ODP/MS, x4011, by 7 Septem-
2. To facilitate your review and comment, we have at-
tached two sets of the following information:
Tab A - Highlights of OMB Circular A-76 and OBM's
Draft Memorandum of Transmittal to OMB
Circular No. A-76, dated 10 August 1976
Tab B - OMB Memorandum of 10 August 1976 and
Attachment
Tab C - Transmittal Memorandum No. 1 to OMB
Circular A-76, Revised, and Attachments
Clifford D. May, Jr.
cc: A EXO DDA
STATINTL OL
DD/A Eogistry
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27 August 1976
ODP
Highlights of OMB Circular A-76 and OMB's Draft Memorandum
of Transmittal to OMB Circular No. A-76, dated 10 August 1976
Background
Circular A-76 was issued in March 1976.
It establishes a policy for the Government to obtain
services.from private suppliers rather than to provide
services to itself.
There is virtually no limit to the range of services--
from a government guard to, presumably, medical services,
training services, complex technological projects, etc.
The policy has met with very limited success, particularly
in complex data processing services. These services have
continued to grow in the Federal Government.
Renting or buying equipment and having private contractors
operate the equipment is not considered responsive to the
policy. The policy suggests that the Government only have
enough technicians to establish the service requirements
and to monitor the performance of the contractor. The type
of equipment or programs for providing the service are con-
sidered beyond the purview of the Government.
Contracts for ADP services are not to be used to escape
ceilings on personnel. The clear implication is that
present ceilings will be reduced as contracting out is
accomplished.
Exceptions to the policy are allowed, if fully reviewed
and documented, for such situations as:
? Commercial services would disrupt or delay
accomplishment of mission. The fact that
activities are classified or related to mis-
sion are not adequate reason for exception
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Combat support.
?
No commercial source available.
?
Service is available from another Federal Agency.
?
Commercial
elaborate
analysis.)
service will cost more. (There are
instructions for making this cost
Current Situation
The Transmittal Memorandum to Circular No. A-76 provides
specific guidance to step up the action on contracting
for ADP services.
This guidance requires:
? Revision of Agency instructions and directives
for policy enforcement.
? Review of new ADP service requirements for
compliance.
? Preparation and submission to 0MB of annual
multi-year ADP plans detailing actions, sched-
ules, etc., for increasing reliance on private
sector.
? Development of a program with milestones and
targets for achieving greater reliance on com-
mercial services within 90 days.
? Full justification and/or detailed cost studies
for exceptions to contracting out. Cost studies
require competitive bids for all service require-
ments and would be based on the assumption that
Agency-owned equipment will be disposed of for
its fair market value. More cost study guidelines
will be forthcoming from OMB.
? A complete review of all on-going ADP activities
by 30 September 1977 to determine if Government
performance of the service is justified and to
develop plans for conversion to commercial ADP
services, including plans for displaced personnel.
The subject of contracting for all services has hit the
newspapers and government unions are taking issue with
the policy.
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EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
OFFICE OF FEDERAL
PROCUREMENT POLICY
August 10, 1976
7
DD/A Pet.,istry r
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Guidelines for Application of OMB Circular A-76
to Government ADP Requirements
In our efforts to improve the implementation of OMB
Circular A-76, "Policies for Acquiring Commercial or
Industrial Products and Services for Government Use,"
data processing has been identified as an area in which
there is extensive Government involvement in providing a
service that is commercially available. It is also one of
several functional areas in which application of the policy
and requirements of the Circular is difficult, and supple-
mental guidance is needed to facilitate agency implementa-
tion efforts.
Consequently, the attached draft of a Transmittal Memorandum
to Circular A-76 has been prepared, with the assistance of
a small interagency task group, to provide guidelines for
application of this policy to Government ADP requirements.
The purpose of this issuance is to move Government practice
toward greater use of commercial ADP services, in lieu of
Government ownership and operation of ADP facilities.
Please review this draft Transmittal memorandum and give
us your comments and recommendations by S ptem_bx _l,_..1976~
7 OIL
Haigh E. Witt
Administrator
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EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
OFFICE OF FEDERAL
PROCUREMENT POLICY
August 10, 1976
DD/A I'nni ~trv li!
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Guidelines for Application of OMB Circular A-76
to Government ADP Requirements
In our efforts to improve the implementation of OMB
Circular A-76, "Policies for Acquiring Commercial or
Industrial Products and Services for Government Use,"
data processing has been identified as an area in which
there is ex u-,giveGovernment involvement in Providing a
service that i.s mmercia1ll It is also
`5 veral functional areas in which application of the olic
ancT"requirements of the ClrcuTdr-is d i' ficult, and supple-
agency implementa-
maT~guicCancdis = rieecfe~'"~b"~faci itate--
tion efforts.
Consequently, the attached draft of a Transmittal Memorandum
to Circular A-76 has been prepared, with the assistance of
a small interaaencv task croup, to provide. guidelines for
application of this policy to Government ADP requirements.
The purpose of this issuance is to m? eC ex]u$.aP?,t
toward greater use of commercial ADP?sgrv?ices, in lieu of
Government ownership and operation of ADP facilities.
Please review this draft Transmittal Memorandum and give
us your comments and recommendations by e__ptembex 1. 197.6
01,
H gh E. Witt
Administrator
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EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON. D.C. 20503
CIRCULAR NO. A-76
Transmittal Memorandum '4.
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Government Reliance on Commercial Services to Meet
Automatic Data Processing Requirements
1. Purpose. ' This memorandum provides guidane for
executive agencies in meeting their requirements for' ell
purpose data processin services" in accordance with the
o ernment s general po icy reliance on the private
sector for its needs, as set forth in Office of Management
and Budget (OMB) Circular No. A-76, Policies for Acquiring
Commercial or Industrial Products and Services for
Government Use.
2. Authorit and Scope. This Transmittal Memorandum is
issued under the authority granted to the Office of Federal
Procurement Policy by P x 1,~~,- La3-400 to monitor and
revise "policies, regulations, procedures, and forms
relating to reliance by the Federal Government on the
private sector to provide needed property and services" X41
U.S.C. 405). It is applicable to all general purpose data
proceessff"1'ng activities operated and managed by executive
agencies that provide services that are obtainable from a
private source, as defined in Circular No. A-76.
3. Background. It is the longstanding policy of the
Federal Government to rely on the private enterprise system
to satisfy its needs for products and services, except in
those specific cases where it isA cleAr,1demonsj:n ta,Mbe
in the National interest for an a~enc ,,,provide a M ,rode t
or service for itsowniuse. In theK-area of data processing,
agencies h'ave generally purchased or leased equipment and
facilities to provide their automatic data processing (ADP).
services. In this approach, the nature and degree of
reliance on the private sector is distinctly different from
acquisition of the needed service directly from a .private
source.
(No. A-76)
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An agency that procures facilities instead _,.o,f ,services
generally maintains a sta with the expertise necessary to
perform system design, software development, operation,
maintenance, and logistic support. The service approach,
which shifts the agency role-from performance to management
of the ADP function, does not eliminate the need for in-
house expertise, but establishes it at the level necessary
to prepare service performance specification.s~..?d,,,t~. man.i,.Qr.
t,.,e.ype~:s~,rtn:aCe.;,,~Qfbommercial services. Under the policy of
Circular No. A-76, direct procurem'ent'"'of services, with all
the associated functions being performed in the private
sector, is the preferred alternative for meeting data
processing requirements.
4. Polic1. Consistent with the Government's general policy
of reliance on the private sector, agencies will obtain ADP
services from competitiv_ a commercial sources-in preference
to d"irect operation of in-house activities, except as
provided in pg,ra.ph 5 ofCircular No. A-76. All
Government ADP activities that meet the Circular No. A-76
definition of a commercial or industrial activity are
subject to the requirements of the Circular,. including a
"new start" review for initiation, expansion, upgrade,
replacement, or modernization. Current agency ADP
operations that cannot be justified under the criteria
specified in Circular No. A-76 and this Transmittal
Memorandum shall be terminated in a planned and appropriate
manner., ""
5. Planning and Management Guidelines. Each agency will
initiate a positive action -program to ensure that the policy
and requirements of this Transmittal Memorandum are fully
and effectively implemented. This program will include the
following elements:
revision as necessary) of .all agency
a. Review (and
instructions and directives"re5ated'"to tree acquisition of
"ADP support to identify and fricorporate xC rcular No ---31-76
requirements with"emphasis on the application of this policy
early in the ADP system planning process
b. Maximum emphasis on "new starts" to avoid canes
investment and financial commitments for new, expanded, or
,moc~ernized"~faciites for ADP activitiesthat have not been
reviewed anc justified under Circular No. A-76.
(No. A-76)
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c. Preparation of a multiyear plan, to be included in
the Spring ADP Plan submitted annually to OMB, beginning
with the 1977 submission. This plan should project new and
continuing ADP requirements, and include a schedule of
actions that will achieve greater reliance on the private
.sector for ADP services. Where appropriate, agencies should
set goals and make use of Management by Objective (MBO)
methodology to increase reliance on the private sector.
d. Development o._?a _2ro9ram outline fpr achieving
greater reliance, on cocncge, ., a.~-services, with ,,m, . on_ .,,ar~c
op riate for submission to OMB
specific taXget,, ~_~dkL e ap.P.. o ~..e.._..
irhin ninety days from the date of issuance o#t~is
Transmittal Memorandg_q,,
6. Acquisition Guidelines. Agency policies and procedures
for acquiring ADP har ware, software, and services must
reflect the policy of Circular No. A-76 and provide for the
efficient procurement of commercial ADP services. As a
minimum, the following guidelines will be implemented
immediately:
a. Government ADP requirements normally will be
expressed in ter,.s o# the ~s,,vcs to b ~.pe formed, rather
than the equipment and software to be used in performing
these services. The statement of requirements should allow
the contractor maximum flexibility in the type of equipment
and personnel used, as long as satisfactory services are
provided.
b. Agency requests to the General Services
Administration (GSA) for delegation of procurement authority
for acquisition of ADP equipment to be operated by the.Y_-1
agency will include a specific statement ind'cat1ng t at lie ~y
proposed acquisition has be6n r'eviewedd=;'and ' appr.o.ved1 ,-'under
the provisions of?""'Circular No. A-76, or an`-e-xplanation or VJ (40,..
. .. - ??...nc ... b..:, .:xb?.w.rw:.'.Ylbaea:"X>r++w. ru.4a n?u.:v raR dw Wai.tri'?`iaimS W-Y+TnV+.ayNro.{,~
why~",+,r~the Circular-.: does not apply.
c. Studies to determine whether a commercial or
industrial ADP activity can be justified on the basis of
co s k a _ Q ld belimited to situations where there is- ,n,,
to assume that in-house costs wi1 _be sini~cant~,y_e,s?
t a`n Competitive commercial,,prices When cost studies are
made they will include all the cost elements specified in
Circular No. A-76. The cost differential favoring reliance
on commercial sources will reflect the possibility of early
obsolescence and the uncertainty of requirements which are
(No. A-76)
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characteristic of ADP operations. This differential (which
Circular No. A-76 specifies should normally be at least 10%
for any new start) should be established for each cost study
at a level that is appropriate for the degree of risk and
uncertainty involved in Government operation of that
particular activity.. In the case of ADP activities, this
differential can be substantially more than 10%.
d. In the preparation of a cost comparison, particular
attention must be given to the following areas to ensure an
equitable and accurate result.
( 1 ) Determination of a valid
..__.__.--- commercial cost f figure
presents a serious proolein genera~.ly this requires
solicitation ocompetitive bids for the required services.
Commercial f i'ms-have i.ndicated'";'-' a-""'willingness' "to' "'"prov de
cost or price -proposals if they are assured that an
objective cost study will be made.
(2) The Government and commercial cost estimates
must be based on equivalent services.
ft~lv
(3) Fair market value of equipment and facilities
used in existing Government ADP activities, which would
become excess if the service were obtained commercially,
must be determined and included in the study as a cost of
Government performance.
(4) Determination of the proper residual or salvage
value of equipment that the agency proposes to acquire, in
order to ensure the correct depreciation cost in the cost
comparison.
e. More comprehensive guidelines are being developed to
assist agencies in calculating both the Government and
commercial costs of providing ADP services. In the interim,
guidance available in Circular No. A-76 and this Memorandum
will be used.
7. Termination Guidelines. All agency ADP activities
shoull be reviewe by September 30, 1977 to determine
whether Government performance is justified under the
exception criteria of Circular No. A-76. When a Government
commercial or industrial activity is to be terminated or
reduced, the action must be carefully planned to ensure
transition without the disruption of vital services. Agency
planning should-include:
(No. A-76)
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a. All reasonable consideration for Government
employees displaced by termination or curtailment of
Government ADP activities, including a phased reduction of
operations to facilitate reassignment and reduction by
attrition.
b. Careful coordination of contract services, including
a period of overlap, when necessary, to avoid disruption of
the agency mission.
8. Inquiries. Inquiries concerning this Transmittal
Memorandum may be submitted to the Office of Management and
Budget, Office of Federal Procurement Policy, 726 Jackson
Place, N.W., Washington, D.C. 20503, telephone 395-3327
(IDS Code 103).
James T. Lynn
Director
(No. A-76)
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