TO THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES
SUBJECT: Performance of Commercial Activities
This Transmittal Memorandum updates the Federal pay raise assumptions and inflation factors used for
computing the Government's in-house personnel and non-pay costs, as generally provided in the
President's Budget for Fiscal Year 2000.
The non-pay inflation factors are for purposes of A-76 cost comparison determinations only. They
reflect the generic non-pay inflation assumptions used to develop the FY 2000 Budget baseline
estimates required by law. The law requires that a specific inflation factor (GDP FY/FY chained price
index) be used for this purpose. These inflation factors should not be viewed as estimates of expected
inflation rates for major long-term procurement items or as an estimate of inflation for any particular
agency's non-pay purchases mix.
Federal Pay Raise Assumptions
Non-Pay Categories (Supplies and Equipment, etc.)
Geographic pay differentials received in 1999 shall be included for the development of in-house
personnel costs. The above pay raise factors shall be applied after consideration is given to the
geographic pay differentials. The pay raise factors provided for 2000 and beyond shall be applied to all
employees, with no assumption being made as to how they will be distributed between possible locality
and ECI-based increases.
In addition, the standard retirement cost factors for the weighted average CSRS\FERS pension and
Federal retiree health cost numbers are reduced from those published in the March 1996 A-76
Supplemental Handbook. These numbers are being revised because of downward estimates in actuarial
normal cost estimates, which more than offset the gradual shift toward FERS in the total. However, the
post-retirement health cost was revised up by a full percentage point. The net result is that the cost
factors provided at Part II, Chapter 2, paragraph B.6. f. 1.a., are up by 0.3 to 0.6 percentage points. In
addition, the current benefit component for Federal employee insurance and health benefits at Part II,
Chapter 2, paragraph 6. f. 1.b is revised up by 0.1 percentage points on the health side to 5.7 percent.
The Medicare factor of 1.45 at Part II, Chapter 2, paragraph 6. f. 1.b and the cost of miscellaneous
fringe benefits of 1.7 percent at Part II, Chapter 2, paragraph 6. f. 1.c ., are unchanged.
Current Handbook - as printed in the March 1996 Revised Supplemental Handbook at Part II,
Chapter 2, Paragraph 6.f.1.a (page 20):
23.7% Regular (19.6 pension + 4.1 retiree health)
32.3% Air Traffic Controllers (28.2 pension + 4.1 retiree health)
37.7% Law Enforcement (33.6 pension + 4.1 retiree health)
Revised Handbook - as provided by this Transmittal at Part II, Chapter 2, Paragraph 6.f.1.a
24.0% Regular (18.9 pension + 5.1 retiree health)
33.0% Air Traffic Controllers (27.9 pension + 5.1 retiree health)
38.2% Law Enforcement (33.1 pension + 5.1 retiree health)
Other Current Benefits - as provided at Part II, Chapter 2, Paragraph 6.f.1.b (page 20):
Current Handbook (March 1996) 5.6%
Revised per this Transmittal 5.7%
These updates are effective as follows: all changes in the Transmittal Memorandum are effective
immediately and shall apply to all cost comparisons in process where the Government's in-house cost
estimate has not been publicly revealed before this date.
Agencies are reminded that OMB Circular No. A-76, Transmittal Memoranda 1 through Transmittal
Memorandum 14 are canceled. Transmittal Memorandum No. 15 provided the Revised Supplemental
Handbook, and is dated March 27, 1996 (Federal Register, April 1, 1996, pages 14338-14346).
Transmittal Memoranda No. 16, 17 and 18, which provided the last three year's OMB Circular A-76
Federal pay raise and inflation factor assumptions are also canceled.