GUIDELINES FOR APPLICATION OF OMB CIRCULAR A-76 TO GOVERNMENT ADP REQUIREMENTS

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CIA-RDP79-00498A000300060003-9
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RIPPUB
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K
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10
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December 9, 2016
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August 4, 2000
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3
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Publication Date: 
August 27, 1976
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MF
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Approved For Release 2002/05/02: CIA-RDP79-00803-9 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 Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 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 Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 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. Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003- 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 Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003 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 Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 Approved For Release 20021)R j 79-00498A000300060003-9 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) Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 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) Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 ? Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 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) Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 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) Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9 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) Approved For Release 2002/05/02 : CIA-RDP79-00498A000300060003-9