FAIR Act Inventory
August 15, 2000
Reason Codes applicable to commercial activities included on the Year 2000 FAIR Act
Inventory of Commercial Activities are the same as those used in 1999. Additional clarification is
provided to avoid confusion and facilitate consistency among agencies. The Reason Codes come from
the OMB Circular A-76 Transmittal Memorandum 20. They are provided below, followed by an
A - Indicates that the function is performed by Federal employees and is specifically exempt
by the agency from the cost comparison requirements of the Circular and this
This Reason Code is designed to permit the Agency Head to identify specific
commercial activities as those that he/she does not believe should be subjected to
privatization, outsourcing or competition. Certainly, these are core mission
activities that are commercial in nature. Many core activities may however, be
achieved through contract support and may also be found in Reason Code "B" or
"C." Functions assigned Reason Code "A" are commercial functions that the
Agency Head has determined must remain in-house.
B - Indicates that the activity is performed by Federal employees and is subject to the cost
comparison or direct conversion requirements of the Circular and this Supplement.
This Reason Code should be applied to any Function or Activity where the decision
as to who should perform the work is a quality and cost based decision and the
agency would expect that this decision would be based upon the results of a direct
conversion competition (when authorized), or a cost comparison, conducted in
accordance with OMB Circular A-76 and its Supplemental Handbook.
C - Indicates that the activity is performed by Federal employees, but is has been specifically
made exempt from the provisions of the Circular and this Supplement by Congress,
Executive Order or OMB.
This Reason Code should be applied to any Function/Activity where the decision as
to who should perform the work is not primarily a cost-based decision and a cost
comparison would be inappropriate. This code applies to the Supplemental
Handbook's exemption from the cost comparison requirements of the Circular,
including, for example, national defense related activities, direct patient care, core
and research and development activities. Here the decision to convert to or from
in-house or contract performance is not primarily a cost-based decision. The
problem is to get the right people, the right skills, the right knowledge at the right
place and at the right time. Small functions that involve 10 or fewer FTE are also
exempt from the cost comparison requirements of the Circular. These commercial
activities are currently performed by Federal employees and may be outsourced,
but, they do not enjoy the cost comparison protections afforded by the Circular;
cost is a secondary consideration.
D - Indicates that the function is currently performed by in-house Federal employees and is in
the process of being cost compared or converted directly to contract or inter-service
support agreement performance.
Employees in Functions/Activities listed under this code have been advised that the
work performed is undergoing formal A-76 cost comparison or the agency is
preparing for the direct conversion of work to contract or ISSA performance, in
accordance with the Supplement.
E - Indicates that the function is retained in-house as a result of a cost comparison.
F - Indicates the function is currently being performed by Federal employees, but a review is
pending force restructuring decisions (i.e., base closure, realignment, consolidation, etc.).
G - Indicates that the function is prohibited from conversion to contract because of legislation.
H - Waiver issued.
I - Indicates the function is being performed in-house as a result of a cost comparison
resulting from a decision to convert from contract to in-house performance
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