B. Inherently Governmental Activities
C. Government Performance of Commercial Activities
a. If a commercial activity could be contracted, but there is no commercial source, the activity is to be operated using the Government's Most Efficient Organization (MEO).
b. Efforts to solicit commercial interest are to be documented, to include: (1) consideration of preferential and non-preferential procurement and (2) a determination that the solicitation did not limit commercial participation.
a. Performance by in-house, contract or ISSA may be authorized if an agency demonstrates that performance meets or exceeds generally recognized industry performance and cost standards.
b. Competitions based upon output and cost performance measures must reflect the agency's fully allocated costs of performance and must be certified as being in full compliance with the Statement of Federal Accounting Standards No.4, "Managerial Cost Accounting Standards for the Federal Government." The cost comparability procedures described in this Supplement, such as those related to fringe benefit factors, must also be considered in assessing the comparability of Government and private sector performance measures and costs. Adjustments to Government and private sector performance measures and costs may be required. Performance standards should be monitored in conjunction with the Chief Financial Officers Act (CFO Act) and the Government Performance Results Act of 1993 (GPRA).
c. A full description of the standards, performance measures, costs and adjustments made will be developed by the agency and made available to the public upon request. The use of selected standards, performance measures and adjustments are subject to the administrative appeal procedures provided at Part I, Chapter 3, paragraph K, of this Supplement.
D. Contract Performance of Commercial Activities
a. Commercial activities may be performed by in-house or contract resources or through ISSAs as provided by law and Part I, Chapter 2 of this Supplement.
b. In responding to interservice support requests, potential agency service providers will certify that their reimbursable cost estimates reflect the full competitive costs to the Government as defined in this Supplement.
a. The official in paragraph 9.a. of the Circular, or designee, may authorize the direct conversion of activities performed by uniformed military service personnel to contract performance, without cost comparison, if the contracting officer determines that fair and reasonable prices can be obtained from qualified commercial sources.
b. If a cost comparison is conducted or otherwise required to convert to ISSA performance, the uniformed military positions included in the Government's in-house cost estimate are cost at the standard composite rate for uniformed personnel published by the DOD or other applicable agency Comptroller. The Comptroller will also establish the number of productive hours for uniformed personnel (see Part II, Chapter 2, paragraph B, "Personnel").
c. Civilian personnel will be cost as provided by this Supplement. While the uniformed positions may or may not be converted to civilian positions as a part of this process, the conversion of in-house civilian positions to uniformed positions is not authorized.
E. Agency Cost Comparison Waivers
a. A written cost comparison waiver will be prepared and signed by the authorized waiver official. The waiver will be accompanied by a detailed determination that the conversion meets the following requirements:
(1) The conversion will result in a significant financial or service quality improvement and a finding that the conversion will not serve to reduce significantly the level or quality of competition in the future award or performance of work; or
(2) The waiver will establish why in-house or contract offers have no reasonable expectation of winning a competition conducted under the cost comparison procedures of this Supplement.
F. Commercial Activities Inventory
G. Review of Documents
a. At the earliest possible stages of development, consistent with procurement and conflict of interest requirements, affected parties will have the opportunity to fully participate in the development of supporting documents and proposals, including the development of performance standards, performance work statements, management plans, and the development of in-house and contract cost estimates.
b. Upon issuance, a solicitation used in the conduct of a cost comparison will be made available to directly affected Federal employees or their representatives for comment. The employees or their representatives will be given sufficient time to review the document and submit comments before final receipt of offers from the private sector. Private sector offerors shall comment as provided by the Federal Acquisition Regulations (FAR).
H. Personnel Considerations
a. A standard clause is included in direct conversion and A-76 cost comparison solicitations notifying potential contractors of this requirement (see FAR 52.207-3). The Right-of-First-Refusal is afforded to all Federal employees adversely affected by the decision to convert to contract performance.
b. Executive Order 12933, "Non-Displacement of Qualified Workers Under Certain Contracts," dated October 20, 1994, also provides the Right-of-First-Refusal to contract employees (see FAR 7.305 (c)). As a matter of policy, the Right-of-First-Refusal offered at FAR 52.207-3 is superior.
c. Personnel officers should work with the contracting officer and employees to implement these provisions.
a. giving priority consideration for available positions within the agency;
b. establishing a reemployment priority list and an effective placement program;
c. paying reasonable costs for training and relocation that contribute directly to placement, and
d. coordinating with the Office of Personnel Management (OPM) to ensure employees have access to placement programs, including the OPM-operated Displaced Employee Program (DEP) and the Interagency Placement Assistance Program (IPAP).
I. Relationship to the Budget
CONDITIONS PERMITTING GOVERNMENT PERFORMANCE OF COMMERCIAL ACTIVITIES ---------------------------------------------------------------------- 1. National Defense or Intelligence Security. The Secretary of Defense, or designee, approves national defense justifications. The Director of Central Intelligence, or designee, approves national security justifications. 2. Patient Care. Commercial activities at Government-owned hospitals or other health facilities may be performed by in-house, ISSA or contract employees when needed to maintain the quality of direct patient care. 3. Core Capability. A core capability of in-house and contract resources may be warranted for certain functional areas. 4. Research and Development. Research and development activities may be converted to or from in-house, contract or ISSA without cost comparison. Severable support activities are subject to the cost comparison provisions of this Supplement. 5. No Satisfactory Commercial Source Available. Agencies will solicit private sector interest and certify that the solicitation did not restrict or otherwise limit competition. 6. Functions With 10 or Fewer FTE. May be converted to or from in-house, contract or ISSA, without a cost comparison, if the contracting officer determines that reasonable prices cannot otherwise be obtained. 7. Meet Performance Standard. Agencies may demonstrate that the activity meets or exceeds generally recognized industry cost and performance standards, after all adjustments required by this Supplement. 8. Lower Cost. Results of a cost comparison demonstrate that in-house performance is less costly. 9. Temporary Authorization. Temporary emergency performance may be warranted not to exceed the next full contract option year. ---------------------------------------------------------------------- CONDITIONS PERMITTING CONTRACT PERFORMANCE OF COMMERCIAL ACTIVITIES ---------------------------------------------------------------------- 1. Contracted Activities. Should be obtained by contract, unless a cost comparison demonstrates that in-house or ISSA performance is more cost effective. 2. New Requirement. Should be obtained by contract, unless contract quality or price appear unreasonable. A cost comparison is performed to convert the activity to in-house or ISSA performance. 3. Severable Expansions. Same as above. 4. ISSAs. Commercial activities should not be performed through new or expanded ISSAs, except as provided by law or this Supplement. 5. Activities With 10 or Fewer FTE. May be converted to or from in-house, contract or ISSA, without a cost comparison. 6. Activities with 11 or More FTE. May be converted to contract or ISSA, without cost comparison, if fair and reasonable contract prices can be obtained by competitive award and all directly affected Federal employees on permanent appointments can be reassigned to other comparable Federal positions. 7. Activities Performed by the Military. Activities performed by military (uniformed) personnel may be converted to contract without cost comparison. Military positions included in cost comparisons are cost at the composite rates provided by the DOD or other appropriate agency Comptroller. 8. Preferential Procurement Programs. Contract performance may be granted, without cost comparison, if the contract is awarded to a preferential procurement program. 9. Lower Cost. Conversion to contract is required if a cost comparison indicates that contract performance is the lower cost alternative. ----------------------------------------------------------------------
a. Effective October 1, 1997, the cost comparison requirements of this Supplemental Handbook will not apply to existing or renewed ISSAs or to the consolidation of commercial or other services within a Department or agency, unless that consolidation includes the conversion of work to or from in-house or contract performance. New, expanded or transferred work requirements will be authorized for performance by an ISSA only as provided by the cost comparison or other provisions of this Supplemental Handbook.
a. If the prospective provider is responding to a formal solicitation issued by the requesting agency, the prospective provider shall submit to the requesting agency a synopsis, management plan and Government cost estimate developed in accordance with this Supplement. A complete response, as required by the Federal Acquisition Regulations (FAR), is not required.
(1) Under no condition, shall the requesting agency cancel or otherwise delay bid opening or contract award in order to permit an agency to submit an ISSA price or reimbursable rate.
(2) The requesting agency may accept or reject the prospective provider's offer as technically qualified or unqualified as it deems appropriate and without appeal. Prospective providers who submit a technically acceptable offer shall compete with private sector and other in-house offers.
b. Agencies that wish to provide a commercial activity to another Department or agency may petition the agency to conduct a cost comparison.
c. At the sole discretion of the requesting agency, the prospective provider may submit performance standard data, as provided by Chapter 1, paragraph C.7. of this Part. The prospective provider shall certify that all necessary adjustments to its performance measures and cost standards have been made. The requesting agency shall review the documentation for these adjustments and make similar adjustments to the private and other in-house offers based upon the submission of performance measures.
--Contract Administration Costs
--One-time Conversion Costs
--Gain/Loss on Disposal/Transfer of Assets
--Federal Income Taxes
--Other Adjustment Costs
--Minimum Differential Costs
a. Once an interservice support provider has competed its entire interservice support workload with the private sector, that provider may provide new or expanded interservice support work--of the same type--to other agencies, without further review or cost comparison on its or the requesting agency's part. This ability to offer services, without cost comparison, will continue until the providing agency has increased its capability and total workload by the lesser of (1) the expansion requirements of this Supplement or (2) more than 65 FTE are added to the in-house capability, at which time another full review or individual cost comparisons are required.
b. Paragraph 5.a. notwithstanding, if a new or expanded ISSA results in a general conversion of work to or from in-house or contract performance and a cost comparison has not previously justified the provider's method of performance, a cost comparison is required.
B. The Cost Comparison Study Team
a. Employees who participate or provide data to support the development of the various study elements, but do not review, approve or have direct knowledge of the final performance work statement, performance standards, MEO, in-house or contract cost estimates are not considered "procurement officials" and are not affected by this restriction.
b. The participation of functional experts is essential to the quality of the cost comparison. However, when participation on the study team could adversely affect their rights under the Right-of-First-Refusal or the opportunity for future employment with the contractor, employees should be given the option to decline participation.
c. At a minimum, certifying officials for the PWS and Management Plan, the Independent Review Officer(s), those who sign the cost comparison form and the Administrative Appeal Authority are considered procurement officials.
C. Performance Work Statements
D. Quality Assurance Surveillance Plans
E. Management Plans
a. Summary. An overall comparison of the current organization with the MEO and a review of any special initiatives or assumptions, including equipment or productivity changes.
b. The Quality Assurance Surveillance Plan (QASP). A description of the Government's in-house Quality Assurance Surveillance Plan and how it will differ, including resources, if services are provided by ISSA or contract, and why.
c. Assets. When existing assets used by the Government's MEO are not provided to the ISSA or contractor for use, an analysis of the benefits to the Government may be warranted.
d. Transition Plan. A plan for the transition to or from current organizational structure to MEO, contract or ISSA performance--designed to minimize disruption, adverse impacts, capitalization and start-up requirements.
e. In-house Cost Estimate. A description of all costs associated with the performance of the MEO, calculated in accordance with Part II of this Supplement.
F. Safeguarding the MEO
H. Methods of Procurement
a. In addition to the PWS, Management Plan and in-house cost estimate, the Government, like the private sector offerors, shall submit the Technical Performance Plan required by the solicitation to the A-76 Independent Review Officer (IRO). The Technical Performance Plan reflects the MEO and is sealed prior to the consideration of any part of any contract offer.
b. As required by the FAR, the Government should establish a Source Selection Authority, including assurances that there are no potential conflicts of interest in the membership of the Authority.
c. The Authority reviews contract and ISSA offers and identifies that offer which represents the "best overall value to the Government." This contract offer competes with the Government's in-house cost estimate.
d. With the selection of the competitive offer, the contracting officer submits to the Authority the Government's in-house Management Plan, which must comply with the technical proposal requirements of the solicitation. The Authority evaluates the in-house offer and assesses whether or not the same level of performance and performance quality will be achieved. The Authority should not review or have access to the in-house cost estimate.
e. The Government makes all changes necessary to meet the performance standards accepted by the Authority. Revised cost estimates are resubmitted to the IRO for acceptance. This will assure that the Government's in-house cost estimate is based upon the same scope of work and performance levels as the best value contract offer.
I. The Independent Review
a. ensure that the data contained in the Management Plan reasonably establish the Government's ability to perform the PWS within the resources provided by the MEO, and
b. ensure that all costs entered on the CCF are fully justified and calculated in accordance with the procedures described in Part II of this Supplement.
J. Evaluation of Bids and Tentative Decisions
K. Appeals of Tentative Waiver and Cost Comparison Decisions
a. Be submitted by an eligible appellant.
b. In the case of a waiver, be received by the official in paragraph 9.a. of the Circular, or designee. In the case of a tentative cost comparison decision, be received by the contracting officer. In either case, the appeal must be received in writing and within 20 calendar days after the date that all supporting documentation is made publicly available. The agency may extend the appeal period to a maximum of 30 days if the cost comparison is particularly complex.
c. Address specific questions regarding an agency's compliance with the requirements and procedures of this Circular, factual questions regarding agency justifications to waive a cost comparison, or address specific questions regarding the costs entered by the Government on the applicable Cost Comparison Form and set forth the rationale for questioning those items.
d. Identify specific instances of agency denials of information not otherwise protected by law or regulation.
e. Demonstrate that the items appealed, individually or in aggregate, would reverse the tentative decision.
a. Federal employees (or their representatives) and existing Federal contractors affected by a tentative decision to waive a cost comparison;
b. Federal employees (or their representatives) and contractors that have submitted formal bids or offers who would be affected by a tentative decision to convert to or from in-house, contract or ISSA performance as a result of a cost comparison; or
c. agencies that have submitted formal offers to compete for the right to provide services through ISSAs.
a. the selection of one contract offeror or another for competition with the in-house cost estimate;
b. award to one contractor in preference to another;
c. Government management decisions involving the Government's certified in-house MEO, and
d. the policies or procedures contained in the Circular and this Supplement.
L. Post-MEO Performance Review
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