The Short Guide to FAIR Act Challenges and Appeals

(for an original copy, please go to




                    A-76 and FAIR Act Resources


FAIR Act Resources


                    The AFGE Activist's Guide to Fair Act Challenges and Appeals was used to train AFGE activists around the country during the last year. (Available to AFGE members in HTML or MS-WORD '97 at


A-76 Resources


                    To participate effectively in an A-76 Competition Study, you will need the following documents:


                       1.  AFGE Activist's Personal Consultant to A-76 Policy Implementation (PDF). (Available to AFGE members at


                       2.  Office of Management and Budget Circular A-76 and the A-76 Supplemental Handbook. Both of these documents can be accessed as either an HTML document or in PDF format from the OMB website (


                    What is the FAIR Act?


                    The Federal Activities Inventory Reform Act (FAIR Act) requires each federal agency to publish an annual announcement of jobs that it considers "commercial". A commercial designation means the job could be contracted-out, but it does not mean that the job either must or will be contracted-out. It also does not mean that the job will be automatically subjected to a public-private competition.


                    Why You Should Challenge


                    As a Union, it important for us to engage in the policy debate regarding the proper role of government. It is also important as a matter of principle to oppose any further erosion of work historically performed by federal employees. The FAIR Act challenge and appeal process provides a means to fight back.


                    Examining the Inventory


                    The OMB has a FAIR Act page with links to every inventory.


                    As you review the inventory, keep the following in mind:


                         Functional Codes identify the jobs.

                         Reason Codes indicate how the agency has categorized the functions.


                    AFGE Councils and Locals can challenge the categorization of a job as commercially competitive. The challenge process is outlined below.


                    The Decision to Challenge


                    This marks the third year that the FAIR Act has been in effect. In the past, AFGE was far more successful in its challenges than any other union and more successful than any one contractor. Even so, the challenge process is tough and tilted in favor of the agencies (and contractors). Therefore, Locals and Councils that issue a challenge should realize that they face a difficult fight. Last year, the challenges that succeeded were highly specific and drew their reasoning straight from the relevant policy documents.


                    This should not deter anyone from issuing a challenge. It is important to register AFGE's views regardless of whether agencies respond positively. Challenging these lists puts AFGE on record in the fight against wholesale privatization of federal jobs.


                    Under the FAIR Act you have the right to challenge an agency's decision that a particular activity is "commercial" as defined by the Reason Code. Two Reason Codes have potentially negative consequences for AFGE members:


                    Reason Code B


                      This indicates that "the activity is performed by federal employees and is subject to the cost comparison or direct conversion requirements," which means that the agency can contract out these jobs using public-private competition (also known as A-76).


                    Reason Code C


                        "The activity is performed by federal employees, but is has been specifically made exempt from the provisions of the Circular and this Supplement by Congress, Executive Order or OMB." These functions can be contracted out without public-private competition.


        Preparing a Challenge


                    First, a challenge letter must be submitted to the agency. This should provide specific evidence to indicate that the functions are not commercial in nature. The agency must rule on the challenge in writing. If the challenge fails the decision can be appealed. If submitted, this appeal must be sent to a senior official within the agency.


                    Follow these steps to prepare and file a challenge:


                       1.  Review the list to determine the activities that are performed by AFGE members. The following information, which should be provided by in each agency's inventory, will assist AFGE activists to identify the jobs of their members:


                         a. Organization Unit

                         b. State

                         c. Location

                         d. Full Time Equivalents (FTE)

                         e. Activity Function Code

                         f. Reason Code


                         To challenge the decision to define an activity as commercial submit a letter to the individual designated in the agency's instructions. This official will receive and rule on the challenge.


                       2.  Identify those activities that are categorized as either Reason Code B or C. Consider challenging positions held by AFGE members, since these functions could be contracted out.


                       3.  The boilerplate challenge letter (at page 5, below) should make the process easier. The Public Policy Department has assembled all the necessary references here on the "FAIR Act Resources" site. Simply read through the letter and insert the appropriate information to formulate your challenge. A copy of AFGE Council 222’s challenge letter from last year can be found on the Resource page of Council 222’s website.


                       4.  The challenge must reach the appropriate official, preferably by registered mail, within 30 working days after the publication of the availability of the inventory in the Federal Register. This individual will be designated in the agency's instructions. This official will receive and rule on the challenge.


                       5.  To be successful, a challenge must specifically state the reasons an activity should be inherently governmental. These arguments should use terms similar to those expressed in the policy guidelines contained in OFPP Policy Letter 92-1. This letter is provided in Appendix 5 of OMB Circular A-76's Revised Supplemental Handbook.


                       6.  FAIR Act regulations require the individual who receives the challenge to provide a ruling and notify the appellant within 28 working days. The notification must include a discussion of the rationale for the decision and, if the decision is adverse, an explanation of the party's right to file an appeal.


                    Preparing An Appeal


                       1.  Only consider an appeal if the challenge was rejected. Appeal letters must be submitted within 10 working days after written notification of the adverse judgment was received. The appeal letter should be addressed to the official designated in the agency's FAIR Act guidelines. Additionally, the agency should describe the appeal procedures in the response to the challenge. Depending on the instructions provided by the agency, the appeal will be submitted to either the agency head or to another delegated official.


                       2.  The AFGE website includes a boilerplate appeal letter. 


                       3.  The appellate authority has 10 working days from the date of receipt of the appeal to reach a decision. The authority must provide a written response to the appeal.


                       4.  If the appeal is successful, the agency must transmit to OMB and Congress a copy of any changes to the inventory that result from this process, and make these changes available to the public through a Federal Register notice of public availability.


                    Challenge and Appeal Letters


                    The AFGE Public Policy Department has prepared a boilerplate challenge letter for Locals and Councils.  This provides a guide to make it easier to compose your challenge (available to AFGE members in HTML MS-WORD '97 , or TEXT format at


                    This letter may be used to compose your appeal. Do not send an appeal letter unless your challenge was denied by your agency (available to AFGE members in HTML, MS-WORD '97, or TEXT format at




Boilerplate FAIR Act Challenge Letter



[Individual Authorized to Receive the Challenge]

[Name of Agency]

[Address of Agency]


Dear [Individual Authorized to Receive the Challenge]:


I serve as the President of [Local # or Council #] of the American Federation of Government Employees, AFL-CIO, which represents [ # ] employees working at the [name of agency]. In this capacity I am an "interested party" as established under the provisions of section 3(b) of the Federal Activities and Inventory Reform Act (FAIR Act) of 1998, Public Law 105-270. As the head of a labor organization as described in section 7103(a)(4) of title 5, United States Code, I submit the following challenge to select items contained in the [the agency’s] Commercial Activities Inventory of [date].


The Office of Federal Procurement Policy (OFPP) Policy Letter 92-1, "Inherently Governmental Functions" of September 23, 1992 defines inherently governmental functions as follows:


"As a matter of policy, an "inherently governmental function" is a function that is so intimately related to the public interest as to mandate performance by Government employees. These functions include those activities that require either the exercise of discretion in applying government authority or the making of value judgements in making decisions for the Government."


In accordance with the above definition, the work described below should be defined as inherently governmental and reclassified as such. Specifically, I am challenging the decision to include the items listed below on the inventory list as commercial activities:




[ Describe where you can find the inventory, such as page number or website address ],

[ The organization within the agency ],

[ unit ],

[ state code ],

[ number of FTEs ], and

[ activity function code ].


Basis of Challenge:


Employees who perform duties within Function Code [ # ] should be classified as inherently governmental. Their work requires the interpretation and execution of the laws of the United States.


[ See below for sample challenges. Insert the relevant paragraphs. ]




[ The agency ] should uphold this challenge and change its decision and exclude the functions from its list of commercial activities.


Thank you for your consideration of this matter. Please send the challenge decision by fax and U.S. Mail. The fax is: [give fax # ]. The address is: [your name, title and address].






[Your Name]

[Your Title]


[End of Challenge Letter]






Read through the arguments below. Insert the paragraphs that apply to the work in the challenge. (To insert the text, simply use the "cut" and "paste" functions on your word processor.)




§         If the function involves management, procurement or contracting functions:


The employees who perform this function bind the United States to take actions by contract, policy, regulation, authorization, and/or order. [Describe the work and provide examples to make your argument.] These activities require the exercise of discretion involving monetary transactions and entitlements. Therefore, they are inherently governmental. By defining this function as inherently governmental, the agency will guarantee that any final agency action complies with the laws and policies of the United States. Additionally, this will ensure that the decisions performed by these employees reflect the independent conclusions of agency officials.


§         If the employees have access to procurement or competition sensitive documentation:


The employees who perform this function have access to competition and procurement sensitive information.  [Describe the work and provide examples to make your argument.] These activities necessitate the use of discretion with regard to monetary transactions and entitlements. Access by a non-federal employee would compromise the integrity of future competitions, contracts, and procurement actions. It would impede governmental authority and disrupt the procurement process.


§         If it involves access to personal information (health, privacy or confidential matters) insert the following:


The employees who perform this function have access to private, personnel sensitive, and confidential information.  Preserving the sanctity of this data demands the discretionary exercise of Government authority and therefore involves the act of governing. These activities require the use of Government authority to protect the interests of its citizens as this data significantly affects the life, liberty, or property of private persons. [Describe the work and provide examples to make your argument.] Maintaining this function as inherently governmental guarantees that any final agency action complies with the laws and policies of the United States. It ensures that decisions reflect the independent conclusions of agency officials and not those of contractors and private companies that may profit from the misuse of this personal information.


§         If it involves disbursing or bill collecting insert the following:


The employees who perform this function exert ultimate control over the acquisition, use, or disposition of the property, real or personal, tangible or intangible, of the United States, including the collection, control, or disbursement of appropriated and other Federal funds. [Describe the work and provide examples to make your argument.] Maintaining this function as inherently governmental ensures in using the products of these contracts, that any final agency action complies with the laws and policies of the United States.


§         The agency can assign only one Reason Code for each Function Code. For example, "Function Code L-100, Grants Management Application Services," cannot be classified with Reason Code A in one department, Reason Code B in another department, and left off of the inventory completely in another department. If an agency makes this mistake, it is in violation of the FAIR Act. You should make a challenge.

Keep one thing in mind: AFGE does not want Functions to be classified with Reason Code B or C, since these codes put the jobs at the most risk. Therefore, only appeal those functions that are classified as B or C.


In accordance with Circular A-76 (see Appendix 2, paragraph (G)(3) of OMB Circular No. A-76 Revised Supplemental Handbook) the definition of this activity as a commercial activity violates the precedent established within this inventory. This same activity Function Code was assigned a Reason Code of [give the letter of the code]. Therefore, as a matter of consistency and for reason of established precedent, all activities with a functional code should be designated as inherently governmental.