Action of OMB Designed To Expand the Amount of Contracting Out of Functions Now Performed In-House by Civil Service Employees

PSAD-77-7: Published: Nov 5, 1976. Publicly Released: Nov 5, 1976.

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Questions are answered regarding actions of the Office of Management and Budget (OMB) designed to expand the amount of contracting out of functions now performed in-house by civil service employees. The questions and answers concern retirement costs, methods to estimate future costs, and the need for cost-comparison analyses before each contracting-out action.

The annual retirement costs to the government for civil service employees are higher than 7 percent of payroll costs. The Civil Service Commission's estimate of 31.7 percent of current payroll costs as the dynamic normal cost for the retirement system is reasonable, provided that one accepts the economic assumptions prescribed by OMB that were used in calculating the costs. The models used to calculate normal cost and the input data were examined; different normal costs based upon different economic assumptions were consistent with one another. In making cost comparisons to determine whether activities should be contracted out, proper consideration should be given to costs in both sectors, including computation of social security costs for private sector employees on the same normal basis as retirement costs for government employees.

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