Review of OMB Circular A-76 Health Benefit Cost Factor Needed Page: 1 of 8
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G G A O Comptroller General
Accountability * Integrity * Reliability of the United States
United States Government Accountability Office
Washington, DC 20548
November 17, 2005
Subject: Review of OMB Circular A-76 Health Benefit Cost Factor Needed
Determining whether to obtain required services using government employees or
through contracts with the private sector is an important economic and strategic
decision for agency managers. In this regard, Office of Management and Budget
(OMB) Circular A-76 prescribes policies and procedures for use by agencies as they
select service providers through competitions among public and private-sector
sources.' The Circular is intended to ensure that the competitive sourcing process is
conducted as fairly as possible, and that the estimated cost of government
performance reflects all of the costs of performing the work in house.
The purpose of this letter is to convey an issue we identified during the course of an
ongoing review of how the costs of health benefits for federal and private-sector
employees are reflected in public-private competitions conducted by the Department
of Defense.2 We have determined that the health benefit cost factor prescribed in
Circular A-76 may not reflect the current cost to the government of providing health
insurance under the Federal Employees Health Benefits Program (FEHBP). The cost
to the government of providing health benefits under the FEHBP has risen by more
than 65 percent between 1999 and 2005. Yet the health benefit cost factor prescribed
in A-76 has not been changed at all in that time. In view of the increased cost of
providing health insurance since the cost factor last was revised, we recommend that
OMB review the health benefit cost factor to determine if an adjustment is needed
and establish a process to update it periodically, as OMB does for other cost factors.
Standard Costing Factors for Estimating Personnel
Costs Include Employee Benefits
Circular A-76 establishes standard costing factors that agencies must use to estimate
the costs of in-house performance. When preparing these estimates, agencies use cost
'OMB Circular A-76, Performance of Commercial Activities, revised in May 2003, establishes federal policy and procedures for
determining whether commercial activities should be performed in-house, by another federal agency, or by the private sector.
Circular A-76 contains procedures agencies must use in calculating and comparing the costs of performance by in-house,
private, or public reimbursable sources.
2In response to direction in the conference report on the Ronald W. Reagan National Defense Authorization Act, House Rep. No.
108-767, we are reviewing the implementation of section 8014 of the Department of Defense Appropriations Act, 2005, Public
Law No. 108-287. Section 8014 contains requirements concerning the costs of health benefits in public-private competitions
conducted by the Department of Defense.
GAO-06-87R Circular A-76 Cost Factor
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United States. Government Accountability Office. Review of OMB Circular A-76 Health Benefit Cost Factor Needed, text, November 17, 2005; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc298451/m1/1/: accessed December 18, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.