OMB Circular A-76 provides a framework for conducting cost comparisons to determine the most cost effective delivery method for commercial activities in the government, whether by public or private sector providers. The document announces the commencement of an A-76 study for a printing and reprographics function involving 11 FTE positions. The study will follow the standard 12-month competition process to compare the costs of the government performing the function in-house versus contracting it out commercially. Key officials overseeing the study are identified.

1. Capital Equipment Acquisition
Total Cost Analysis
*Presentation prepared by Mark Kinsey for the Capitol Chapter of AZ NIGP Career Seminar, March 5, 2013.
This presentation has been slightly modified since originally presented.
1
“In today’s business environment, we must
more carefully examine our processes and
ultimately each acquisition of goods and services
decision; furthermore, I believe we must do this
with a total cost (e.g., life cycle, direct, indirect,
opportunity, etc.) or 360 degree view.”
Mark Kinsey (March 5, 2013)
Project Procurement Manager

2. Acquisition/Procurement Today
Buying for a mine or buying for a government entity…it’s still the same, but different!
 Understanding your customer’s needs (never changes); understanding the rules by which you
must act (changes, but not frequently in government)
 Turning your customer’s “proper expectation” into a “proper solicitation”
 The process…“you never want to see hot dogs or procurement actions are made”
 The end result “customer satisfied, resources properly and efficiently allocated, and/or game
changed”
 Area reengineered,outsourced, or simply improved by your procurement action
 Did I add value to the process through my process(es)? Yes, always!
2

3. Acquisition/Purchasing Today
 In my opinion, procurement professionals today are “uniquely positioned”
to lead change efforts in their organizations
 Why? We possess the “analytical skill set”, the “big screen” monitor, and
the “opportunity” to see how business units in our organization and in the
private sector are operating…no one else has as much visibility to what is
going on in an organization from top to bottom
 What are we going to do with this power…be a buyer, a manager, or a
strategic sourcer for the organization we serve
 It depends…on you, your organization, and your immediate boss
3

4. Capital Equipment Acquisition
Your View
How many of you believe you
are “360 degree viewers (not to
be confused with “doers”)” in
the world of government
procurement?
For example, up to date on latest
trends, know what “Best Practices”
are being implemented in your
profession within your category or
type of agency.
Remember your answer…
4

5.  All great ideas come from “outside of government?”
 A great idea or process can come from “within
government?”
 The following are some examples of a great ideas that
came from government:
 __________________________________________
 __________________________________________
 __________________________________________
Capital Equipment Acquisition
Your View
5

6. Capital Equipment Acquisition
Introduction of “the Requirement”
 When the discussion about replacing large capital equipment is made, does your procurement
group have “a seat at the table?”
 Does part of that discussion include “pros and cons” about various makers of that equipment?
 What else does that discussion include?
 Based on what you know right now, how would you proceed?
 Your vote?
 _____ Ask more questions
 _____ Buy the new piece of equipment as requested
 _____ Suggest RFI to find out more information
 _____ Ask if this work area has been “business process” reviewed recently
 _____ Other
6

7. Traditional Approach
Capital Equipment Replacement
Multi-Function Commercial Grade Copier & Reproduction Unit
Assessment
1. Replace 8-yr old machine
2. Upgrade technology
3. Budget is $100,000
4. Buy, Lease, Lease w/option
to Buy
5. Want most cost effective
solution (life cycle cost
analysis)
6. Director needs replacement
within 60 days (current lease
expires)
7

8. Business Process Analysis
Capital Equipment Replacement
Assessment
1. Replace 8-yr
old machine
2. Upgrade
technology
3. Budget is
$100,000
4. Buy, Lease,
Lease w/option
to Buy
5. …
6. …
Multi-Function Commercial Grade Copier & Reproduction Unit
Start
End
Current
Process =
New
Process
Decrease
Need by 50%
=
Consultant
Leaves
8

9.  Example - Computer and Software industries
 From Wikipedia (online free encyclopedia), 2/27/2013
 Total Cost of Ownership (TCO) analysis was popularized by the Gartner Group in
1987…Many different methodologies and software tools have been developed to
analyzeTCO.TCO tries to quantify the financial impact of deploying an information
technology product over its life cycle.These technologies include software and
hardware, and training.
 Technology deployment can include the following as part ofTCO:
 Computer hardware and programs
 Network hardware and software
 Server hardware and software
 Workstation hardware and software
 Installation and integration of hardware and software
 Purchasing research
 Warranties and licenses
 License tracking - compliance
 Migration expenses
 Risks: susceptibility to vulnerabilities, availability of upgrades, patches and future licensing
policies, etc.
Capital Equipment Acquisition
Traditional Total Cost Analysis
9

10.  Operation expenses
 Infrastructure (floor space)
 Electricity (for related equipment,cooling, backup power)
 Testing costs
 Downtime, outage and failure expenses
 Diminished performance (i.e. users having to wait, diminished money-making ability)
 Security (including breaches, loss of reputation, recovery and prevention)
 Backup and recovery process
 Technology training
 Audit (internal and external)
 Insurance
 Information technology personnel
 Corporate management time
 Long term expenses
 Replacement
 Future upgrade or scalability expenses
 Decommissioning
 In the case of comparingTCO of existing versus proposed solutions, consideration should put towards
costs required to maintain the existing solution that may not necessarily be required for a proposed
solution. Examples include cost of manual processing that are only required to support lack of existing
automation,and extended support personnel.
Capital Equipment Acquisition
Total Cost Analysis
10

11. IT Activity Name:
Description Qty Unit Price Upcoming FY FY1 FY2 FY3 FY4 FY5 Total
Hardware
Server Hardware $ -
Network Upgrades $ -
Desktop Hardware $ -
Hardware Total $ - $ - $ - $ - $ - $ -
Software
Product License $ -
Database $ -
Operating System Software $ -
Additional Server Software $ -
Additional Network Software $ -
Software Total $ - $ - $ - $ - $ - $ -
Consulting
Third-Party - Technical $ -
Third-Party - Business $ -
Deployment $ -
Upgrade
Consulting Total $ - $ - $ - $ - $ - $ -
State Personnel
Technical Staff (enter total cost in each FY) $35.86 $ -
Business Staff (enter total cost in each FY) $35.86 $ -
For example 90 hrs x 35.86 = $3,227.40
State Personnel Total $ - $ - $ - $ - $ - $ -
Training
Trainer $ -
Other $ -
Training Total $ - $ - $ - $ - $ - $ -
Other
Other 1 $ -
Other 2 $ -
Other Total $ - $ - $ - $ - $ - $ -
GRAND TOTAL $ - $ - $ - $ - $ - $ -
NOTES / ASSUMPTIONS:
11
http://humanresources.vermont.gov/training
Vermont Department of Human Resources ***EXAMPLE***

12. Capital Equipment Acquisition
Total Cost Analysis
= Computer hardware, software,
fixed facility storage or “lost
opportunity” to use for other
things
= Labor, Suppliers, Maintenance,
Utilities tied to equipment usage
$
12

13. Capital Equipment Acquisition
Strategic Sourcing
 FromWikipedia, 2/27/2013
 Strategic sourcing is an institutional procurement
process that continuously improves and re-evaluates the
purchasing activities of a company. In a production
environment, it is often considered one component of
supply chain management. Strategic sourcing techniques
are also applied to nontraditional areas such as services
or capital.
13

14. Capital Equipment Acquisition
Strategic Sourcing
As listed in Wikipedia, the steps in a strategic sourcing process are:
1. Assessment of a company's current spending (what is bought, where, at
what prices?).
2. Assessment of the supply market (who offers what?).
3. Total cost analyses (how much does it cost to provide those
goods or services?).
4. Identification of suitable suppliers.
5. Development of a sourcing strategy (where to purchase, considering
demand and supply situations, while minimizing risk and costs).
6. Negotiation with suppliers (products, service levels, prices, geographical
coverage, etc.).
7. Implementation of new supply structure.
8. Track results and restart assessment (continuous cycle).
9. Negotiate payment terms with vendors.
14

15. Total Costs Analysis - Strategic Sourcing
Capital Equipment Replacement
Assessment
1. Replace 8-yr
old machine
2. Upgrade
technology
3. Budget is
$100,000
4. Buy, Lease,
Lease w/option
to Buy
5. …
6. …
Multi-Function Commercial Grade Copier & Reproduction UnitWork Center Analysis
1. Is this a function we still need?
2. If needed, is there a more efficient
manner to complete the work?
 GSA Schedule
 Inter-Agency Agreement
 Public-Private Partnership
 Grant funding
 Other
3. Could this function be
outsourced?
4. What is the impact of outsourcing
the function
5. What is the “total costs” for this
function
 Equipment
 O&M Costs
 Facility/Labor/OH/Other
Office Imaging & Document Solutions –
Schedule 36
15

16. Total Cost Analysis
***Cost Factors***
Multi-
Function
Printing/Doc
Mgmt
System
O&M costs
Labor, Facilities, Other
Capital Budget - $$
Supplies Budget - $
Contract Maint - $
Payroll Budget - $$
Facilities Budget - $$
$$$
16

17. Total Cost Analysis
Cost Factors ***Impact***
Multi-
Function
Printing
System
O&M costs - $
Labor, Facilities, Oth L/F/O - $$$
$$
Total Costs
Eqpt $100K
O&M 25
L/F/O 375
$500K
Opportunity
Costs
$500,000
17

18. Capital Equipment Acquisition
Opportunity Cost
 FromWikipedia…Opportunity cost is the cost of any
activity measured in terms of the value of the next best
alternative forgone (that is not chosen). It is the sacrifice
related to the second best choice available to someone, or
group, who has picked among several mutually exclusive
choices.The opportunity cost is also the "cost" (as a lost
benefit) of the forgone products after making a choice.
 Opportunity cost in our example was $500,000
 Categorizing the Opportunity Cost (OC)
 Essential to “as is” operations (therefore, not an OC),
 Opportunity for optimizing (can free up $),
 Non-essential currently or to “will be” operations
 General Electric in the 90’s…business model to be #1 in all product
lines or get out of them
18

19. Capital Equipment Acquisition
Total Cost Analysis
 Eqpt / Supplies / O&M / Labor / Utilities / Facilities
$500,000.00
19

20. Capital Equipment Acquisition
Total Cost Analysis
 Eqpt / Supplies / O&M / Labor / Utilities / Facilities
$500,000.00
Open 10 Hours
$250,000.00
20

21. Capital Equipment Acquisition
Total Costs – The Answer
 What if I told you the tool for completing this total costs
analysis is available?
 What if I told you the tool has been available and in use since
at least 1966?
 What if I told you that the only thing keeping you from using
this tool in your governmental entity is a discussion with your
boss?
 OK, so you know it’s won’t be that easy…but, what if?
21

22. Federal Government Program (an “Idea”)
OMB Circular A-76 – Performance of Commercial Activities
 A FORMAL NOTICE OF A76 COMPETITIVE SOURCING STUDY.
 This notice constitutes the formal announcement and commencement of the A-76 cost comparison study for
the Printing and Reprographics study (A-76 codesT806 andY860) under the newly revised OMB Circular A-
76, dated 29 May 2003.
 The start date is 20 February 2004, until concluded under the Standard Competition Process that covers twelve months.This
Standard Competition study will review 11 FTE positions as follows: 4 Printing Specialists, 1 Management Service Assistant, 1
Printing Assistant, 1 Electronic Printing Technician, and 4 Electronic Document Technicians.
 The purpose of the A-76 study is determine the least costly and most efficient method of operation as
prescribed in the Office of Management and Budget (OMB) Circular A-76, "Performance of Commercial
Activities", which sets forth the general policy of the Government to achieve economy and enhance
productivity.The circular requires Federal agencies to review their commercial activities (CA) functions to determine
whether it would be more economical to continue operating them in-house (i.e., with Government employees) or under
contract with commercial sources.
 The review will be conducted in accordance with Circular A-76.
 This synopsis serves to publish the official state at the FEDBIZOPPS web site www.eps.gov at www.eps.gov.
 The Competitive Sourcing Offiicial (CSO) is Mr. Patrick Pizzella, the AgencyTender Official (ATO) is Mr. Leonard Pettiford, the
PWS Team Lead is Mr. Dennis Goruondy and the MEO Team Lead is Mr. John Brevard.The Contracting Officer (CO) is
Robert Knauer, CPCM.
 Note for all potential vendors and interested parties: all announcements, notices, solicitation documents, amendments,
instructions, questions and answers to future RFP documents wll be posted only at this site and no other location.
POTENTIAL COMMERCIALVENDORS AND ISSA'S, Until such time as the formal REQUEST FOR PROPOSAL (RFP)is
posted on FEDBIZOPPS, DO NOT CALL OR WRITE the DOL Office of Competitive Sourcing, as no information will be
available or shall be released until it is legally available to ALL PARTIES on the official date of RFP release.
 There are NO EXCEPTIONS.Any comments should be directed solely to the Director of Competitive Sourcing, Mr.Thomas
Kaplan at Kaplan.Thomas@dol.gov or to the Contracting Officer, Mr. Robert Knauer at Knauer.Robert@dol.gov once the
RFP is issued.
OMB Circular A-76
It is and has been available
and can be successfully done.
22

23. Federal Government Program (an “Idea”)
OMB Circular A-76 – Performance of Commercial Activities
 A FORMAL NOTICE OF A76 COMPETITIVE SOURCING STUDY.
 This notice constitutes the formal announcement and commencement of the A-76 cost comparison study for
the Printing and Reprographics study (A-76 codesT806 andY860) under the newly revised OMB Circular A-
76, dated 29 May 2003.
 The start date is 20 February 2004, until concluded under the Standard Competition Process that covers twelve months.This
Standard Competition study will review 11 FTE positions as follows: 4 Printing Specialists, 1 Management Service Assistant, 1
Printing Assistant, 1 Electronic Printing Technician, and 4 Electronic Document Technicians.
 The purpose of the A-76 study is determine the least costly and most efficient method of operation as
prescribed in the Office of Management and Budget (OMB) Circular A-76, "Performance of Commercial
Activities", which sets forth the general policy of the Government to achieve economy and enhance
productivity.The circular requires Federal agencies to review their commercial activities (CA) functions to determine
whether it would be more economical to continue operating them in-house (i.e., with Government employees) or under
contract with commercial sources.
 The review will be conducted in accordance with Circular A-76.
 This synopsis serves to publish the official state at the FEDBIZOPPS web site www.eps.gov at www.eps.gov.
 The Competitive Sourcing Offiicial (CSO) is Mr. Patrick Pizzella, the AgencyTender Official (ATO) is Mr. Leonard Pettiford, the
PWS Team Lead is Mr. Dennis Goruondy and the MEO Team Lead is Mr. John Brevard.The Contracting Officer (CO) is
Robert Knauer, CPCM.
 Note for all potential vendors and interested parties: all announcements, notices, solicitation documents, amendments,
instructions, questions and answers to future RFP documents wll be posted only at this site and no other location.
POTENTIAL COMMERCIALVENDORS AND ISSA'S, Until such time as the formal REQUEST FOR PROPOSAL (RFP)is
posted on FEDBIZOPPS, DO NOT CALL OR WRITE the DOL Office of Competitive Sourcing, as no information will be
available or shall be released until it is legally available to ALL PARTIES on the official date of RFP release.
 There are NO EXCEPTIONS.Any comments should be directed solely to the Director of Competitive Sourcing, Mr.Thomas
Kaplan at Kaplan.Thomas@dol.gov or to the Contracting Officer, Mr. Robert Knauer at Knauer.Robert@dol.gov once the
RFP is issued.
23

24. Federal Government Program (an “Idea”)
OMB Circular A-76 – Performance of Commercial Activities
 A FORMAL NOTICE OF A76 COMPETITIVE SOURCING STUDY.
 This notice constitutes the formal announcement and commencement of the A-76 cost comparison study for
the Printing and Reprographics study (A-76 codesT806 andY860) under the newly revised OMB Circular A-
76, dated 29 May 2003.
 The start date is 20 February 2004, until concluded under the Standard Competition Process that covers twelve months.This
Standard Competition study will review 11 FTE positions as follows: 4 Printing Specialists, 1 Management Service Assistant, 1
Printing Assistant, 1 Electronic Printing Technician, and 4 Electronic Document Technicians.
 The purpose of the A-76 study is determine the least costly and most efficient method of operation as
prescribed in the Office of Management and Budget (OMB) Circular A-76, "Performance of Commercial
Activities", which sets forth the general policy of the Government to achieve economy and enhance
productivity.The circular requires Federal agencies to review their commercial activities (CA) functions to determine
whether it would be more economical to continue operating them in-house (i.e., with Government employees) or under
contract with commercial sources.
 The review will be conducted in accordance with Circular A-76.
 This synopsis serves to publish the official state at the FEDBIZOPPS web site www.eps.gov at www.eps.gov.
 The Competitive Sourcing Offiicial (CSO) is Mr. Patrick Pizzella, the AgencyTender Official (ATO) is Mr. Leonard Pettiford, the
PWS Team Lead is Mr. Dennis Goruondy and the MEO Team Lead is Mr. John Brevard.The Contracting Officer (CO) is
Robert Knauer, CPCM.
 Note for all potential vendors and interested parties: all announcements, notices, solicitation documents, amendments,
instructions, questions and answers to future RFP documents wll be posted only at this site and no other location.
POTENTIAL COMMERCIALVENDORS AND ISSA'S, Until such time as the formal REQUEST FOR PROPOSAL (RFP)is
posted on FEDBIZOPPS, DO NOT CALL OR WRITE the DOL Office of Competitive Sourcing, as no information will be
available or shall be released until it is legally available to ALL PARTIES on the official date of RFP release.
 There are NO EXCEPTIONS.Any comments should be directed solely to the Director of Competitive Sourcing, Mr.Thomas
Kaplan at Kaplan.Thomas@dol.gov or to the Contracting Officer, Mr. Robert Knauer at Knauer.Robert@dol.gov once the
RFP is issued.
What does an A-76 (or similar total cost analysis model) do for your organization?
A-76 studies will be chartered to define the performance requirements and develop a PerformanceWork
Statement (PWS) for the functions under review.A proposal called a Most Efficient Organization (MEO) will
identify the most efficient way the Department’s employees can achieve these performance goals. Private
contractors and other Federal agencies will be invited to submit proposals based on the PWS. Only after a
thorough review of the proposals will a decision be made on whether to retain the function in-house (accept
the government’s MEO/bid) or outsource these functions based on a comprehensive cost comparison.
Ultimately, DOE is looking for the best value/best price service for the U.S. taxpayers
24

25. Capital Equipment Acquisition
Non-Cost Factors
 What about the non-cost factors to such a decision?
 What are those factors?
 How can those be handled?
 In terms of total cost analysis, they can be treated as follows:
_______________________________________
 How do we know we made the right decision?
25

26. Capital Equipment Acquisition
“Do A-76 Studies result in savings?”
 CRS Report for Congress; January 16, 2013 (Grasso,V.)
 Circular A-76 and the Moratorium on DOD Competition: Background and
Issues for Congress
 OMB Circular A-76 is federal executive branch policy for managing
public-private competitions for the federal government
 A-76 states “wherever possible, and to achieve greater efficiency and
productivity, the federal government should conduct competitions
between public agencies and the private sector to determine who
should perform the work”
 The report states “(regardless the winner)…the act of
competition alone generates cost savings from 10-40% (difference
due to MIS/financial system concerns)”
 Congress through various legislation suspended A-76 studies government
wide in 2009
26

27. Capital Equipment Acquisition
Recap
 Purchasing is “uniquely qualified” to make powerful suggestions and/or requests to
department heads and others about the right path to pursue in acquiring
replacement or new capital equipment
 True _______ (why?) False _______ (why?)
 Traditional and Business Process Analysis only go so far in determining the best path
to pursue in buying new or replacement equipment
 True _______ (why?) False _______ (why?)
 What methods are available to analyze total costs?
 Are there non-cost factors to be considered? How do you handle them?
27

28.  What did you LIKE about today’s presentation?
 What did you NOT LIKE?
 Do you believe you became more of a “360 degree
viewer” today in the world of procurement?
 Would you like this presentation emailed to you?
Capital Equipment Acquisition
Feedback
28

29. References
29
 As noted throughout the presentation
 Wikipedia, free online encyclopedia, 2/27/2013
 Vermont Department of Human Resources
 http://humanresources.vermont.gov/training
 OMB Circular A-76
 http://www.whitehouse.gov/omb/circulars_default
 CRS Report for Congress; January 16, 2013 (Grasso,V.)
 Circular A-76 and the Moratorium on DOD Competition: Background and
Issues for Congress
 All other narrative, scenario development, and content were authored by
presenter, Mark Kinsey, M3 Engineering (2013)

30. Capital Equipment Acquisition
Total Cost Analysis
*Presentation prepared by Mark Kinsey for the Capitol Chapter of AZ NIGP Career Seminar, March 5, 2013.
This presentation has been slightly modified since originally presented.
30
“In today’s business environment, we must
more carefully examine our processes and
ultimately each acquisition of goods and services
decision; furthermore, I believe we must do this
with a total cost (e.g., life cycle, direct, indirect,
opportunity, etc.) or 360 degree view.”
Mark Kinsey (March 5, 2013)
Project Procurement Manager