A new unnumbered paragraph has been added to provide guidelines for applying provisions of the circular to purchase versus lease of equipment, and to construction of buildings versus acquisition under lease-construction arrangements. The paragraph requires a determination of the difference in costs under the alternatives, and application of the principles set forth in the circular in making judgments in these areas. 6.a. A sentence has been added providing that if discontinuance of a Government commercial or industrial activity will result in premature retirement of Government employees, and will cause a significant increase in retirement costs to the Government, such increased costs should be added to the cost of procurement from commercial sources. 6.b. This is a new subparagraph. It provides that costs which would tend to be the same for both Government and industry need not be measured and included in comparative cost analyses (for example, bid and award costs and operating costs under lease-purchase alternatives). The change is made in the interest of economy and simplicity in making cost comparisons. 6.c. (Paragraph 6.b. in the earlier circular.) A sentence has been added to clarify the fact that the incremental method of costing is to be employed and to emphasize the importance of a realistic recognition of all such additional or incremental costs. 6.c.(1). (Paragraph 6.b.(1) in the earlier circular.) Some additional wording has been added to clarify, in connection with personal services and benefits, that the full cost to the Government of retirement systems should be included. 6.c.(6). (Paragraph 6.b.(6) in the earlier circular.) A sentence has been added to make clear that appropriate recognition should be given to estimated residual or salvage value of facilities or equipment in computing depreciation. 6.c.(7). (Paragraph 6.b.(7) in the earlier circular.) This paragraph has been rewritten to provide that the computation of interest for any new or additional capital to be invested will be based upon the average rate of yield for long-term Treasury bonds as shown in the current monthly Treasury bulletin. Also, the method of computation suggested would provide for reduction in the capital investment to which interest is applied as the asset is depreciated. The purpose of the change is to clarify the rate and source of interest to be charged and to provide guidance as to the principal to which it is to be applied. The suggested rate is a readily available measure of the current cost of money to the Government and the provision for reducing the balance to which interest is applied is considered reasonable because the interest cost should not go on indefinitely. 6.c. (8). (Paragraph 6.b. (8) in the earlier circular.) A change in wording has been made to clarify that Government costs should include any additional indirect costs incurred for such activities as management and supervision, budgeting, accounting, personnel, legal and other applicable services. PARAGRAPH 7-ADMINISTERING THE POLICY 7.b.(8). In the past there has been some misunderstanding about the cost differential in favor of private enterprise due to uncertainties relating to Government production costs, equipment obsolescence, and other factors, including the amount of capital investment involved. A sentence has been added to clarify the fact that the 10-percent cost differential in favor of private enterprise, mentioned in this subparagraph, is not intended to be a fixed figure. The differential may be more or less than 10 percent, depending upon the circumstances in each individual case. PARAGRAPH 8-IMPLEMENTATION A sentence has been added requiring agencies to furnish the Bureau of the Budget with a copy of their implementing instructions. |