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This Directive was canceled November 16, 2004.

Order
Subject
Acquiring Commercial or Industrial Products and Services
Classification Code Date Office of Primary Interest
4400.2 May 15, 1981  

Par.

  1. Purpose

  2. Scope

  3. References

  4. Background

  5. Responsibilities

  6. Procedures

  1. PURPOSE. To establish responsibilities and implementing instructions for the acquisition of commercial or industrial products and services (hereinafter referred to as CI activities). A listing of CI activities (for example, audiovisual products and services and automatic data processing) is provided in the documents referenced in Paragraph 3. This Order supplements the policies and procedures established by the Office of Management and Budget (OMB) and the Department relative to such acquisition.

  2. SCOPE. This Order applies to Washington Headquarters and regional offices. (The offices currently affected by the Order are the Associate Administrator for Administration and the Associate Administrator for Engineering and Traffic Operations -- see Attachment 1). [SEE PRINTED COPY OF ORDER FOR A COPY OF THIS ATTACHMENT] Research, development and testing activities are temporarily exempt from provisions of this Order pending issuance of Government-wide guidelines, except for new requirements (new starts) and expansions as defined in Department of Transportation (DOT) Order 4400.2Breferenced below.

  3. REFERENCES.

    1. Office of Management and Budget Circular No. A-76, Revised, Policies for Acquiring Commercial or Industrial Products and Services Needed by the Government, dated March 29, 1979, and Supplement No. 1, Cost Comparison Handbook, dated March 1979.

    2. DOT Order 4400.2B, Acquiring Commercial or Industrial Products and Services, dated March 14, 1980.

  4. BACKGROUND.

    1. The revised OMB Circular A-76 reaffirms the Government's policy of reliance on the private sector to supply its needs. While recognizing that certain functions are governmental in nature and should be performed in-house, it also recognizes that when there are no overriding reasons favoring in-house performance of functions, total cost will be the deciding factor on whether the work will be performed in-house or contracted out.

    2. The DOT Order 4400.2B sets forth detailed policies, definitions, and procedures governing implementation of OMB Circular A-76. The Cost Comparison Handbook, Supplement No. 1 to the OMB Circular, contains the criteria and instructions necessary to conduct a comparative cost study. In view of the scope and detail of DOT Order 4400.2B and the OMB Handbook, this Order is limited to providing supplementary instructions relative to the designated Federal Highway Administration elements responsible for implementation actions.

  5. RESPONSIBILITIES.

    1. Federal Highway Administrator. In accordance with the provisions of DOT Order 4400.2B, the Administrator is responsible for the following:

        (1) Approve new starts of CI activities or the conversion of existing in-house CI activities to contract, where the capital investment or annual operating cost is $500,000 or more.

        (2) Approved waivers for future A-76 reviews of an in-house CI activity with a capital investment or annual operating cost of $500,000 or more.

        (3) Serve as the FHWA appeals official, who will conduct an independent review of and decide on written appeals made by parties affected by A-76 approval actions of paragraph 5b(5).

    2. Associate Administrators, Staff Office Directors, and Regional Administrators. These officials have overall responsibility for implementing A-76 requirements pertinent to an existing or proposed CI activity within their purview. Such requirements would include the following actions specified in DOT Order 4400.2B:

        (1) Notify the FHWA contact point (Office of Management Systems, Systems and Surveys Division (HMS-30)) of a proposed new or expanded CI activity at such a time as a decision has been made to acquire the product or service in order to determine a schedule for an A-76 review of the activity.

        (2) Approve changes in the A-76 review schedule listed in the FHWA inventory of in-house and contract CI activities, where such changes will be in the interest of the Government.

        (3) Notify affected employees and their representatives providing 60 days notice of A-76 reviews scheduled; such notice is also required when changes are approved in the review schedule.

        (4) Conduct an A-76 review of each CI activity to determine whether in-house or contract performance is required (where appropriate, other staff offices will participate in the review process -- see paragraph 6b).

        (5) Following A-76 reviews, approve:

          (a) new starts of CI activities or the conversion of existing in-house CI activities to contract, where the capital investment or annual operating cost is less than $500,000;

          (b) expansions of existing in-house activities;

          (c) continuation of existing in-house or contract activities; and

          (d) waivers for future A-76 reviews of an in-house CI activity with a capital investment or annual operating cost under $500,000.

        (6) Following A-76 reviews, recommend approval to the Administrator of:

          (a) new starts of CI activities or the conversion of existing in-house CI activities to contract, where the capital investment or annual operating cost is $500,000 or more; and

          (b) waivers for future A-76 reviews of an in-house CI activity with a capital investment or annual operating cost of $500,000 or more.

    3. Associate Administrator for Administration. In addition to those functions listed in paragraph 5b, this official, through the offices designated, is responsible for other OMB Circular A-76 implementation activities as follows:

        (1) The Office of Management Systems, Systems and Surveys Division (HMS-30). This office, which will act as the FHWA contact point for OMB Circular A-76, has overall responsibility for coordinating implementation of A-76 actions, and shall:

          (a) prepare and maintain an inventory of and review schedule for FHWA's in-house and contract CI activities;

          (b) in cooperation with other responsible offices, assist in implementation of the A-76 review process; and

          (c) monitor the implementation of the A-76 review process to ensure effective accomplishment.

        (2) The Office of Contracts and Procurement. This office is responsible for any procurement actionsrelative to the cost comparison process, including review of the statement of work, issuance of a solicitation, bid openings or negotiations, and contract award (if appropriate).

        (3) The Office of Fiscal Services. This office shall conduct an independent validation of comparative cost studies prepared in connection with reviews of FHWA CI activities, to ensure conformance with the A-76 Cost Comparison Handbook.

  6. PROCEDURES. The chief aspects of A-76 procedures, which are covered in detail in DOT Order 4400.2B, are summarized below.

    1. Preparation of Inventories and Review Schedules.

        (1) The inventory covering the FHWA's in-house and contract CI activities is updated at the beginning of each fiscal year. The inventory contains a schedule to review each activity to determine whether in-house or contract performance of the activity is appropriate. The current inventory and schedule is provided as Attachment 1.

        (2) Initial review of in-house activities will be performed during a 3-year period ending in March 1983 in accordance with the current inventory schedule. Subsequently, each in-house activity will be reviewed on a 5-year cycle, unless a waiver is obtained. A waiver is obtainable where the initial review indicates that the circumstances which supported approval for continued in-house performance of the activity are not subject to change. After initial review of a contract activity, a subsequent review will be conducted prior to completion of the contract or the final contract option period.

        (3) A-76 reviews are scheduled and conducted in conjunction with the annual budget process to assure that the necessary resources are available to implement A-76 review decisions.

    2. A-76 Reviews.

        (1) The review of a CI activity required by A-76 isbasically a two-step process. The first step involves the application of non-cost criteria to determine whether any of these criteria require or justify in-house performance of the CI activity. Such criteria would include a determination that (a) the activity is by nature a governmental function, (b) no satisfactory commercial source is available, or (c) use of a private commercial source would cause unacceptable delay or disruption of an essential program. If non-cost criteria do not apply, the second step, a comparative cost analysis, is performed. Due to the time and expense of such a cost analysis, it is normally only undertaken for CI activities where annual operating costs exceed $100,000.

        (2) Where a comparative cost analysis is required, several FHWA staff functions will be involved. To coordinate the responsibilities related to these staff functions, meet established scheduling requirements, and ensure responsiveness to affected parties, a task group approach should be utilized. For CI activities in the Washington Headquarters, the task group will consist of representatives from the offices listed in paragraphs 5b and c of this Order and other staff functions as appropriate, and be chaired by the office responsible for the A-76 review.

    3. Review Reports. The results of A-76 reviews are summarized in accordance with the formats provided in the DOT Order. The report will contain a recommendation, with supporting data, for in-house or contract performance of the CI activity.

    4. Approval. The A-76 review report is submitted by the office responsible for the A-76 review to the appropriate Associate Administrator, Staff Office Director, or Regional Administrator for recommendation or approval as appropriate. A copy of the A-76 review report shall be furnished to the FHWA contact point.

    5. Appeals. Parties affected by an A-76 determination may file a written request for a review of the determination in accordance with the procedures outlined in thereferenced DOT Order.

/s/
R. A. Barnhart
Federal Highway Administrator

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