31:0322(30)NG - AFSCME Local 3097 and Justice, Justice Management Division -- 1988 FLRAdec NG



[ v31 p322 ]
31:0322(30)NG
The decision of the Authority follows:


31 FLRA NO. 30

AKA:              0-NG-1372
                  31 FLRA 322

Date:             23 FEB 1988

AFSCME LOCAL 3097

                   Union

         and

DEPARTMENT OF JUSTICE
JUSTICE MANAGEMENT DIVISION

                   Agency

Case No. 0-NG-1372

DECISION AND ORDER ON NEGOTIABILITY ISSUES

     I. Statement of the Case

     This case is before the Authority because of a negotiability
appeal filed under section 7105(a)(2)(E) of the Federal Service
Labor - Management Relations Statute (the Statute) and concerns
the negotiability of five proposals. These proposals concern an
Agency study of its library operations in conjunction with a
decision regarding contracting out. For the reasons which follow,
we find that all five proposals are negotiable.

     Proposal 1 requires the Agency to comply with Office of
Management and Budget (OMB) Circular No. A-76 (the Circular) in
conducting a library study and deciding whether to contract out.
Proposal 1 is within the duty to bargain because: (1) it concerns
a condition of employment of bargaining unit employees; (2) it is
a "rule or regulation" within the meaning of section
7103(a)(9)(C)(ii); (3) it does not violate management's right to
contract out under section 7106(a)(2)(B); and (4) it does not
conflict with a Government-wide regulation. Proposals 2 and 3,
provide that the Union will receive a copy of the aggregate
figures from the library study and may submit comments on them
which the Agency will consider. Proposals 4 and 5 provide that
the Union will receive a copy of the report and recommendations
on library functions and staff and may submit comments on it
which the Agency will consider. Proposals 2, 3, 4 and 5 are [ v31 
p322 ] negotiable because: (1) they concern conditions of
employment of bargaining unit employees; (2) they do not
interfere with management's right to contract out under section
7106(a)(2)(B); (3) they do not conflict with management's right
to determine its internal security practices under section
7106(a) (1); and they are not inconsistent with a Government-wide
rule or regulation under section 7117(a)(1).

     II. Background

     This negotiability dispute arose during bargaining over the
Agency's management effectiveness study of its library. The study
was conducted under the Circular to obtain information to help
the Agency decide whether certain library functions should be
contracted out. The Union made 12 proposals and the parties
reached agreement on seven. The parties disagreed on five
proposals and the Union filed this appeal.

     III. Proposal 1

     The Agency agrees to comply with OMB circular (No.) A-76 and
other applicable laws and regulations in conducting the library
study and making decisions on contracting-out.

     A. Positions of the Parties

     The Agency makes four principal arguments to support its
position that Proposal 1 is nonnegotiable. First, the Agency
contends that this proposal does not concern a condition of
employment. Rather, it involves management's deliberative process
concerning whether the Agency should contract out. Second, the
Agency argues that the Circular is not a law, rule, or regulation
within the meaning of section 7103(a)(9)(C)(ii) of the Statute.
Third, the Agency states that the proposal violates management's
right to contract out under section 7106(a)(2)(B). Fourth, the
Agency argues that Proposal 1 is nonnegotiable under section
7117(a)(1) because it is inconsistent with a Government-wide
regulation.

     The Union responds that Proposal 1 affects the conditions of
employment of bargaining unit employees. In addition, the Union
argues that the circular is a law, rule, or regulation as defined
by section 7103(a)(9)(C)(ii). The Union also contends that
Proposal 1 does not violate management's right to contract out
under section 7106(a)(2)(B). Finally, the Union points out that
the [ v31 p323 ] Authority and the D.C. Circuit Court of Appeals
have held that grievances concerning noncompliance with the
Circular are arbitrable.

     B. Analysis and Conclusion

     1. The Proposal Concerns Conditions of Employment of
Bargaining Unit Employees

     Under the statutory scheme established by sections
7103(a)(12), 7106, 7114 and 7117 of the Statute, a matter
proposed to be bargained which is consistent with Federal law,
including the Statute, Government-wide regulations or agency
regulations is, nonetheless, outside the duty to bargain unless
the matter directly affects the condition of employment of
bargaining unit employees. The term "conditions of employment" is
defined in 7103(a)(14) as "personnel policies, policies,
practices, and matters whether established by rule, regulation,
or otherwise, affecting working conditions(.)"

     In Antilles Consolidated Education Association and Antilles
Consolidated School System, 22 FLRA  235 (1986) the Authority
stated that in deciding whether a proposal involves a condition
of employment of bargaining unit employees, two basic factors
will be considered:

     (1) Whether the matter proposed to be bargained pertains to
bargaining unit employees; and

     (2) The nature and extent of the effect of the matter
proposed to be bargained on working conditions of those
employees.

     a. The Proposal Concerns Bargaining Unit Employees

     Applying the first factor to the disputed proposal, we find
that the proposal pertains to bargaining unit employees. The
proposal concerns studies related to the contracting out of
library functions. According to the record, library employees are
included in the bargaining unit. See Reply Brief at 2. Further,
the Agency makes no claim that this proposal has any impact on
nonbargaining unit employees. Rather, the Agency contends that
decisions relating to contracting out do not concern conditions
of employment of bargaining unit employees. Thus, we must also
assess the nature and effect of the proposal on bargaining unit
conditions of employment under the second factor. [ v31 p324 ]

     b. The Proposal Directly Affects the Conditions of
Employment of Bargaining Unit Employees

     In determining whether a proposal affects "conditions of
employment" the Authority examines the nature and the effect of
the proposal on conditions of employment of bargaining unit
employees. See, for example American Federation of Government
Employees, AFL - CIO and Air Force Logistics Command, Wright -
Patterson Air Force Base, Ohio, 2 FLRA  604, 614-15 (1980)
(Proposals I, VII, IX), enforced as to other matters sub nom.
Department of Defense v. FLRA,  659 F.2d 1140 (D.C. Cir. 1981),
cert. denied sub nom. AFGE v. FLRA,  455 U.S. 945 (1982), where
Proposal 1, which required the establishment of a union operated
daycare facility on agency property was found to directly affect
conditions of employment of bargaining unit employees because it
enhanced an individual's ability to accept employment or to
continue employment within the agency and promoted workforce
stability and prevented tardiness and absenteeism. Proposals VIII
and IX, which required the establishment of equal employment
opportunity plans and specified the contents of those plans, were
also found to directly affect the "conditions of employment" of
bargaining unit employees. See also National Federation of
Federal Employees, Local 1363 and Headquarters, U.S. Army
Garrison, Yongsan, Korea, 4 FLRA  139 (1980), enforced sub nom.
Department of Defense v. FLRA,  685 F.2d 641 (1982), where a
proposal concerning the agency's merchandise rationing program
for employees in an overseas area was found to directly affect
the "conditions of employment" of bargaining unit employees
because the ration control program was related to the agency's
duty, imposed by its own regulations, to provide certain
essential facilities and services to employees overseas. Compare
National Association of Air Traffic Specialists and Department of
Transportation, Federal Aviation Administration, 6 FLRA  588,
591-93 (1981) (Proposal IV which permitted employee allotments
from pay for "Political Action Fund" to be used in "political
efforts to improve working conditions" found nonnegotiable
because it affected "conditions of employment" in only a remote
and speculative manner); Maritime Metal Trades Council and Panama
Canal Commission, 17 FLRA  890, 890-92 (1985) (Proposals 1 and 2
which permitted employees to cash personal checks at the agency's
treasury found not to directly affect "conditions of employment"
of bargaining unit employees).

     The record indicates that the contracting out of particular
library functions or services will result in those functions or
services being performed by contractor personnel [ v31 p325 ]
instead of bargaining unit employees. See, for example, Statement
of Position at 9-10. Thus, a decision to contract out library
functions or services will result in a loss of bargaining unit
positions and the possible release of bargaining unit employees
from Federal employment. Certainly the potential loss of
employment due to a decision to contract out bargaining unit
functions clearly affects the conditions of employment of the
employees who perform those functions. See National Treasury
Employees Union and Department of the Treasury, Internal Revenue
Service, 27 FLRA  976, 976-78 (1987) (Proposal 1) (Internal
Revenue Service), petition for review filed sub nom. Department
of The Treasury, Internal Revenue service v. FLRA,  No. 87-1439
(D.C. Cir. Aug. 28, 1987).

     We also note that OMB itself has acknowledged that decisions
relating to contracting out agency functions directly affect
"conditions of employment." The appeals procedure set out in the
Supplement to Circular No. A-76 states in Part I, Chapter 2,
Paragraph I.7 that "the appeal procedure is intended to protect
the rights of all directly affected parties--Federal employees
and their representative organizations(.)" Moreover, OMB has
extended to Federal sector unions national consultation rights
over the circular in accordance with the requirement of Section
7117(d)(1) of the Statute. Section 7117(d)(1) provides that
national consultation rights be accorded by "any agency with
respect to any Government-wide rule or regulation issued by the
agency affecting any substantive change in any condition of
employment." (Emphasis added.) See Brief for Petitioner to the
Supreme Court at 43 n.23, EEOC v. FLRA,  No. 84-1728 cert.
dismissed 106 S.Ct. 1678 (1986). Obviously, if the Circular and
its Supplement did not affect "conditions of employment" there
would be no obligation to provide national consultation rights
under section 7117(d)(1).

     C. The Agency's Arguments that This Proposal Does Not Affect
Conditions of Employment Are Rejected

     We turn now to the Agency's specific arguments raised in
support of its claim that matters related to contracting out do
not affect conditions of employment of bargaining unit employees.
The Agency argues that case law developments in the private
sector are applicable to the Federal sector and establish that
many, if not all, decisions relating to contracting out do not
concern conditions of employment of bargaining unit employees. In
support of this argument, the Agency relies on First National
Maintenance Corp. v. NLRB, 452 U.S. 666 (1981) (First National
Maintenance Corp.) and subsequent decisions of the National Labor
Relations Board [ v31 p326 ] (NLRB). The Agency argues further that
even if the private sector law is not dispositive, the difference
in motivation behind decisions to contract out in the Federal
sector as contrasted with decisions to contract out in the
private sector indicate that Federal sector contracting out
decisions do not concern conditions of employment. Finally, the
Agency argues that a decision to contract out under section
7106(a)(2)(B) may necessitate subsequent management decisions to
determine the number of employees under section 7106 (a)(1) and
to layoff under section 7106(a)(2)(B). Thus, the Agency claims
that this proposal impermissibly would interject the Union
through arbitration into the deliberative process leading up to
decisions to determine personnel and to lay off as well as the
decision to contract out. In the Agency's view, Congress did not
intend the deliberative process leading up to the exercise of
management rights to be considered a condition of employment. We
will address these arguments in turn.

     (1) The Proposal is Consistent with Private Sector Law

     As to the Agency's reliance on First National Maintenance
Corp. and decisions of the NLRB, we note that this case arises
under the comprehensive scheme governing Federal sector
labor-management relations and that analogies to laws governing
the private sector must be drawn with care. See Library of
Congress v. FLRA,  699 F.2d 1280, 1287 (D.C. Cir. 1983).
Moreover, our determination that contracting out decisions
directly affect the working conditions of bargaining unit
employees is consistent with First National Maintenance Corp.

     In First National Maintenance Corp., the Supreme Court held
that while a private sector employer may be obligated to bargain
about the effect of a decision to terminate a portion of its
business for economic reasons, the employer is not obligated
under the National Labor Relations Act (NLRA) to bargain over the
decision itself. In so holding, the Court noted that the
obligation to bargain over working conditions under the NLRA
previously had been interpreted to include only issues that
settle an aspect of the relationship between the employer and the
employees. The Court stated that some management decisions such
as choice of advertising and promotion, product type and design,
and financing arrangements, have only an indirect and attenuated
impact on the employment relationship. The Court stated further
that other management decisions, such as the order of succession
of layoffs and recalls, production quotas, and work rules, [ v31 p
327 ] are almost exclusively an aspect of the relationship between
the employer and employees. However, the Court found that the
decision to terminate a portion of the employer's business in
that case was a third type of management decision. The Court
stated that this type of decision had a "direct impact on
employment, since jobs were inexorably eliminated by the
termination, but had as its focus only the economic
profitability" of that portion of the employer's business, which
was a concern wholly apart from the employment relationship. Id.
at 677.

     Since the Court in First National Maintenance Corp. found
that private sector management must be free from the constraints
of the bargaining process to the extent essential for the running
of a profitable business, the Court stated that bargaining over
management decisions that have a substantial impact on the
continued availability of employment should be required only if
the benefit for labor-management relations and the collective
bargaining process outweighs the burden placed on the conduct of
business. In applying this test to the situation which was before
it in First National Maintenance Corp., the Court found that the
harm likely to be done to an employer's need to operate freely in
deciding whether to shut down part of its business purely for
economic reasons outweighs the incremental benefit that might be
gained through the union's participation in making that
decision.

     The Court distinguished its earlier decision in Fibreboard
Paper Products Corp. v. NLRB, 379 U.S. 203 (1964) (Fibreboard)
where a decision to contract out a particular portion of a
private sector employer's business was found to be within the
obligation to bargain under the NLRA. In Fibreboard, the Court
noted that a decision to contract out the employer's maintenance
function, based on a management determination that significant
labor costs could be saved, did not alter the employer's basic
operation. Rather, the Court found that the decision to contract
out merely resulted in the replacement of existing employees with
those of an independent contractor to do the same work under
similar conditions of employment. Thus, in Fibreboard, the Court
found that requiring the employer to bargain about the matter
would not significantly abridge the employer's freedom to manage
its business. The Court in Fibreboard also emphasized that a
desire to reduce labor costs was suitable for resolution within
the collective bargaining framework.

     Contrary to the Agency's argument, a decision to contract
out the library functions or services in this case is more like
the contracting out of the maintenance function [ v31  p328 ]
involved in Fibreboard than the decision to terminate a portion
of a business involved in First National Maintenance Corp.
Library functions and services would still be performed on the
Agency's premises but with contractor personnel instead of
bargaining unit employees. Thus, we find that even if the
decision in First National Maintenance Corp. is relevant to an
interpretation of "conditions of employment" under the Statute,
the test set out in First National Maintenance Corp. does not
apply to the contracting out decision in-this case. Further, even
applying the test set out in First National Maintenance Corp., we
find that Proposal 1 places no burden on management's right to
contract out under section 7106(a)(2)(B). Rather, and as we will
discuss in greater detail later in this decision, Proposal 1
merely recognizes the limitations on management's right to
contract out which are imposed by applicable Government-wide
regulations.

     (2) Contracting Out Determinations are Based on Economic
Considerations

     We also reject the Agency's claim that Federal sector
decisions relating to contracting out are based on factors other
than reducing costs. Rather, OMB Circular No. A-76 indicates that
the basis for a decision to contract out or not to contract out
is economic. Paragraph 5 of the Circular sets out the policy of
the Government and states in paragraph 5a that "(w)henever
commercial sector performance of a Government operated commercial
activity is permissible, in accordance with this Circular and its
Supplement, comparison of the cost of contracting and the cost of
in-house performance shall be performed to determine who will do
the work." Further, paragraph 5c provides that "(i)n accordance
with the provisions of this Circular, the Government shall not
start or carry on any activity to provide a commercial product or
service if the product or service can be procured more
economically from a commercial source." It is also clear from the
Supplement to OMB Circular No. A-76 that labor costs are a
significant factor in the comparison of the cost of contracting
out and the cost of in-house performance. See Supplement to OMB
Circular No. A-76, Part IV, Cost Comparison Handbook.

     (3) The Proposal Would Not Interject the Union into the
Deliberative Process Leading up to the Exercise of Management
Rights

     Finally, we reject the Agency's argument that Proposal 1
would interject the Union through arbitration into the [ v31  p329 ]
deliberative process leading to the exercise of management
rights, including the right to contract out.

     This argument fails to take into account the distinction
between an arbitrator's decision as to the arbitrability of a
grievance and an arbitrator's decision (including remedy)
resolving the substantive issue presented by a grievance. A
grievance concerning the impact or application of a section 7106
management right is arbitrable. See Marine Corps Logistics
Support Base, Pacific, Barstow, California and American
Federation of Government Employees, AFL - CIO, Local 1482, 3 FLRA
397 (1980). In that case, the issue before the arbitrator was
whether the work assignment which gave rise to the grievance was
a grievable matter. The arbitrator ruled that it was not
arbitrable because management has the right to assign work under
section 7106 and therefore, the assignment of personnel is not
subject to grievance and arbitration. On review, in holding the
award deficient, the Authority stated at 3 FLRA  398-99:

     (T)he arbitrability question submitted to the arbitrator
concerned whether the dispute in this case, which involved a work
assignment and allegations by the union that such assignment was
made in violation of specific provisions of parties' negotiated
agreement, could be properly subject to arbitration. Section 7106
of the Statute, on which the arbitrator relied in finding the
dispute nonarbitrable, specifies and enumerates rights which are
reserved to management. However, nothing in section 7106
precludes an arbitrator from reaching the merits of a grievance
in cases where, as in this case, the union has alleged a
violation of certain specified provisions of a collective
bargaining agreement. Thus, while an arbitrator may find, on the
merits of the grievance, that there has been no violation of the
specified provisions of the agreement because the actions taken
by management which gave rise to the grievance were within the
ambit of the rights reserved under section 7106, or that, while
there has been a violation, the scope and nature of possible
remedies available to the arbitrator is limited by section 7106,
nothing in section 7106 in and of itself prevents an arbitrator
from deciding if there has been a violation of a particular
contract provision. [ v31  p330 ]

     The proper phase of the arbitration proceeding in which to
determine the impact of section 7106 is not at the outset so as
to preclude by law an arbitrator from having jurisdiction over a
matter. Rather, the determination as to the impact or application
of section 7106 is to be made in connection with the arbitrator's
consideration of the substantive issue presented by the grievance
and any possible remedy. See U.S. Marshals Service v. FLRA,  708
F.2d at 1421 n.5 (citing the definition of grievance in section
7103(a)(9), and stating that the management rights section of the
Statute is a law affecting conditions of employment and its
meaning was properly before the arbitrator in that case). See
also, for example, American Federation of Government Employees
Local 1513 and Naval Air Station, Whidbey Island, 26 FLRA  289
(1987).

     Thus, a determination that the grievance concerning
contracting out in this case is arbitrable is not in any way
inconsistent with the provision in section 7106 that "nothing in
(the Statute) shall effect the authority" of management under
section 7106(a)(2) to exercise its rights in accordance with
applicable laws. Rather, section 7106 must be addressed in
conjunction with an arbitrator's consideration of the substantive
issue and any possible remedy. See General Services
Administration and American Federation of Government Employees,
AFL - CIO, National Council 236, 27 FLRA  3, 9-10 (1987) (General
Services Administration) (in finding that a grievance was
arbitrable, we noted that arbitrators' awards "which resolve the
merits of the dispute involving the exercise of management's
rights are also subject to the requirements of the Statute and
the scope of an arbitrator's remedial authority in such cases may
be limited").

     Moreover, as to grievances involving contracting out
determinations, the Authority stated in Headquarters, 97th Combat
Support Group (SAC), Blytheville Air Force Base, Arkansas and
American Federation of Government Employees, AFL - CIO, Local
2840, 22 FLRA  656, 661-62 (1986) (Blytheville Air Force Base) as
follows:

     In sum, arbitrators are not authorized to cancel a
procurement action and are authorized to consider only grievances
challenging a decision to contract out on the basis that the
agency failed to comply with mandatory and nondiscretionary
provisions of applicable procurement law or regulation. These
provisions must be sufficiently specific to permit the arbitrator
to adjudicate whether [ v31  p331 ] there has been compliance with
such provisions. When presented with such a grievance, an
arbitrator on finding a failure to comply may sustain the
grievance. In sustaining the grievance, the arbitrator as a
remedy may properly order a reconstruction of the procurement
action when the arbitrator finds that an agency's noncompliance
materially affected the final procurement decision and harmed
unit employees. An agency in taking the action required by such
an award must reconstruct the procurement process in accordance
with the provisions which were previously not complied with and
must determine on reconstruction whether the decision to contract
out is now in accordance with law and regulation. If the decision
to contract out can no longer be justified, the agency must
determine whether considerations of cost, performance, and
disruption override cancelling the procurement action and take
whatever action is appropriate on the basis of that
determination. For example, an agency could determine that
immediate cancellation is warranted, or an agency could determine
that cancellation is not warranted, but that an improperly
granted contract should not be renewed. Additionally, an agency
may use its discretion to fashion other remedies appropriate to
the circumstances.

     Consequently, we find that Proposal 1 would not interject
the Union into management's deliberative process leading up to a
decision to contract out. See also American Federation of
Government Employees, AFL - CIO, Local 1923 and Department of
Health and Human Services, Office of the Secretary, Office of the
General Counsel, Baltimore, Maryland, 22 FLRA  1071 (1986),
enforced sub nom. Department of Health and Human services, v.
FLRA  822 F.2d 430 (4th Cir. 1987) petition for rehearing in banc
granted, No. 86-2619 (4th Cir. Sept. 23, 1987).

     In summary, we find that Proposal 1 directly affects working
conditions of bargaining unit employees.

     2. OMB Circular A-76 Is a "rule, or regulation" Within the
Meaning of Section 7103 (a)(9)(C)(ii)

     The Agency argues that because OMB Circular A-76 does not
have the effect of law it is not a "law, rule, or [ v31  p332 ]
regulation" within the meaning of section 7103(a)(9)(C)(ii) and
thus, cannot be enforced through grievance arbitration. In
support, the Agency relies on AFGE, Local 2017 v. Brown, 680 F.2d
722, 726-27 (11th Cir. 1982) and Local 2855, AFGE v. United
States, 602 F.2d 574, 582 (3d Cir. 1979).

     The Agency's argument cannot be sustained. The Statute
refers to rules and regulations in the definition of "grievance"
under section 7103(a)(9)(C)(ii), in the definition of "conditions
of employment" under section 7103(a)(14) and in the description
of the duty to bargain under sections 7117(a)(1) and (2).
Congress did not define the meaning of rules and regulations in
the Statute. However, the House - Senate Conference Committee
stated that the rules and regulations referred to in section 7117
include "official declarations of policy of an agency which are
binding on officials and agencies to which they apply." The
Report of the House - Senate Conference Committee, H.R. Rep. No.
95-1717, 95th Cong., 2d Sess. 158 (1978); reprinted in Subcomm.
on Postal Personnel and Modernization of the House Comm. on Post
Office and Civil Service, 96th Cong., 1st Sess., Legislative
History of the Federal Service Labor - Management Relations
Statute, Title VII of the Civil Service Reform Act of 1978, at
826 (Comm. print No. 96-7) (Legislative History). Thus, it is
clear that Congress did not intend the rules and regulations
referred to in section 7117 to be confined only to those rules
and regulations which meet formal requirements for notice and
comment under, for example, 5 U.S.C. 553. We find nothing in the
language of the Statute or in its legislative history to indicate
that Congress intended a different meaning for rules and
regulations when mentioned in section 7103(a)(9)(C)(ii), section
7103(a)(14), or section 7117(a). Accordingly, whenever the
Statute refers to rules and regulations, we will apply the
definition set out by the House - Senate Conference Committee.

     OMB Circular No. A-76 and its Supplement were revised on
August 4, 1983. This revision of the Circular rescinded
an-earlier version which had been issued in 1979. See OMB
Circular No. A-76, paragraph 2. Rescission. The purpose of the
Circular is to establish Federal Policy regarding the performance
of commercial activities. See OMB Circular No. A-76, paragraph 1.
Purpose. According to paragraph 3 of the Circular, the Circular
and its Supplement were issued pursuant to "The Budget and
Accounting Act of 1921 (31 U.S.C. 1 et seq.), and the Office of
Federal Procurement Policy Act Amendments of 1979 (41 U.S.C. 401
et seq.)." See OMB [ v31  p333 ] Circular No. A-76, paragraph 3.
Authority. Paragraph 5 of the Circular, as noted previously in
this decision, provides that "in accordance with this Circular
and its Supplement" cost comparisons will be made to determine
whether a commercial activity will continue to be performed by
the Government or by an independent contractor. OMB Circular No.
A-76, paragraph 5. Policy. Paragraph 7 of the Circular provides
that " (u)nless otherwise provided by law, this Circular and its
supplement shall apply to all executive agencies and shall
provide administrative direction to heads of agencies." OMB
Circular No. A-76, paragraph 7. Scope. Paragraph 9 of the
Circular states that "(t)o ensure that the provisions of this
Circular and its Supplement are followed, each agency head
shall(,)" among other actions, "(i)implement this Circular and
its Supplement within 90 days after its issuance . . . ." OMB
Circular No. A-76, paragraph 9. Action Requirements.

     Thus, the Circular and its Supplement constitute an official
declaration of policy concerning contracting out which is binding
on agencies and officials in the executive branch of the Federal
Government. The Circular and its Supplement, therefore, meet the
definition of rule or regulation set out by the House - Senate
Conference Committee. See American Federation of Government
Employees, Local 225, AFL - CIO and Department of the Army, U.S.
Army Armament Research and Development Command, Dover, New
Jersey, 17 FLRA  417, 419-21 (1985) (Proposal 3).

     In determining that the 1983 version of OMB Circular No.
A-76 and its Supplement establish binding policy on agencies and
officials in the executive branch of the Federal Government, we
find that the Agency's reliance on such court decisions as Local
2855, AFGE v. United States and AFGE. Local 2017 v. Brown is
misplaced. The Court in each of these cases found that OMB
Circular A-76 was not amenable to court review because it did not
prescribe sufficiently detailed standards. However, the Court in
Local 2855, AFGE v. United States considered a 1967 version of
OMB Circular No. A-76 and the Court in AFGE, Local 2017 v. Brown
had before it a 1979 version of the Circular. This case concerns
the 1983 version of the Circular, which we have found imposes
mandatory requirements on agencies to which it applies.

     OMB Circular No. A-76 and its Supplement regulate
contracting out determinations which we have found to be within
the definition of "conditions of employment." The Circular and
its Supplement, therefore, constitute a rule or [ v31  p334 ]
regulation for the purposes of 7103(a)(9)(c)(ii). While we find
that the OMB Circular No. A-76 and its Supplement constitute a
rule or regulation within the meaning of section
7103(a)(9)(C)(ii), we note that the D.C. Circuit Court of Appeals
found that a claim that an agency failed to comply with OMB
Circular No. A-76 and its Supplement could also fall within the
definition of a grievance set out in section 7103(a)(9)(A) or
(B), which includes any matter relating to the employment of an
employee. EEOC v. FLRA,  744 F.2d at 850 n.18 (D.C. Cir. 1984).

     3. Grievances Concerning the Circular may be Included in
Negotiated Grievance Procedures

     We turn now to the question of whether the Circular and its
Supplement may properly be included in coverage of a grievance
procedure negotiated under section 7121 of the Statute. The
legislative history of the Statute indicates that grievance
procedures negotiated under section 7121 were intended to be
broad in scope and to cover all matters which legally could be
included in a negotiated grievance procedure unless the parties
agreed through negotiations that a particular matter would not be
covered. Specifically, the House - Senate Conference Committee in
reconciling H.R. 11280 as passed by the House and S. 2640 as
passed by the Senate, stated as follows:

     All matters that under the provision of law could be
submitted to the grievance procedures shall in fact be within the
scope of any grievance procedure negotiated by the parties unless
the parties agree as part of the collective bargaining process
that certain matters shall not be covered by the grievance
procedures.

     Joint Explanatory Statement of the Committee on Conference,
H.R. Rep. No. 1717, 95th Cong., 2d Sess. 157, reprinted in
Legislative History at 825.

     Further, the legislative history of the Statute indicates
that Congress intended to include within coverage of a negotiated
grievance procedure matters related to the exercise of
management's rights under section 7106(a). The final version of
the management's rights clause which appears in the Statute was
added by the Udall substitute. In an accompanying Sectional
Analysis, Representative Udall explained the relationship between
management's rights and the grievance procedure as follows: [ v31 p335 ]

     (The language of the Udall substitute) preserves
management's right to make the final decisions in these
additional areas, in accordance with applicable laws, including
other provisions of chapter 71 of title 5. For example,
management has the reserved right to make the final decision to
'remove' an employee, but that decision must be made in
accordance with applicable laws and procedures, and the
provisions of any applicable collective bargaining agreement.

     124 Cong. Rec. 29,183 (1978), reprinted in Legislative
History at 924 (Statement of Representative Udall).

     The language of the Udall substitute was adopted without
comment by the House - Senate Conference Committee, H.R. Rep. No.
97-1717 95th Cong., 2d Sess. 153-54 (1978), reprinted in
Legislative History at 821-22. Representative Ford, a member of
the Conference committee, indicated in a post-enactment statement
that the broad definition of grievance in section 7103(a)(9) was
put into the Statute by the Conference members so that:

     So long as a rule or regulation 'affects conditions of
employment', infractions of that rule or regulation are fully
grievable, even if the rule or regulation implicates some
management right. This interpretation of the definition is
required by both the express language of the section and by the
greater priority given the negotiability of procedures over the
right of management to bar negotiations because of a retained
management right.

     124 Cong. Rec. 38,717 (1978), reprinted in Legislative
History at 998 (Statement of Representative Ford). The remarks of
Representative Ford were endorsed by several other members of the
Conference Committee. See 124 Cong. Rec. 37,333 (1978), reprinted
in Legislative History at 1001-02 (Statement of Representative
Clay); 124 Cong. Rec. 37,336 (1978), reprinted in Legislative
History at 1002 (Statement of Representative Schroeder).

     Congress listed in Section 7121(c) of the Statute five
general subject matters which may not be included in a negotiated
grievance procedure. Neither matters related to [ v31  p336 ]
contracting out nor OMB circular No. A-76 and its Supplement are
included in that list.

     In addition to section 7121(c), we note that other Federal
statutes exclude certain matters related to specific categories
of employees from coverage in a grievance procedure negotiated
under section 7121. See, for example, Veterans Administration,
Medical Center, Northport, New York v. FLRA,  732 F.2d 1128 (2d
Cir. 1984) (holding that matters related to disciplinary actions
of Veterans Administration personnel employed under title 38
U.S.C. may not be included in a grievance procedure negotiated
under section 7121 of the Statute); New Jersey Air National Guard
v. FLRA,  677 F.2d 276 (3d Cir. 1982), cert. denied 459 U.S. 988
(1982) (holding that matters related to adverse actions of
National Guard Technicians employed under 32 U.S.C. 709 may not
be included in a grievance procedure negotiated under section
7121 of the Statute). See also United States Department of
Justice, Immigration and Naturalization Service v. FLRA,  709
F.2d 724 (D.C. Cir. 1983) (holding that a proposal to bring
probationary employees within the mandatory coverage of a
negotiated grievance procedure is nonnegotiable).

     The Agency refers to no provision of law such as those
mentioned above which would operate to exclude contracting out
matters related to the employees in the Agency or Circular No.
A-76 and its Supplement from coverage in a negotiated grievance
procedure. Therefore, we find that matters related to contracting
out, including compliance with OMB Circular No. A-76 and its
Supplement fall within the definition of "grievance" set out in
section 7103 (a)(9)(C)(ii) and may be included in a grievance
procedure negotiated under section 7121.

     4. The Proposal Does Not Interfere with Management's Right
to Contract Out under Section 7106(a)(2)(B)

     a. The Proposal Does Not Violate Section 7106(a)(2)(B)

     The Agency contends that the limitation on the scope of
bargaining imposed by the management rights clause is subject
only to the obligation to negotiate proposals on the "impact and
implementation" of decisions which reflect the exercise of those
rights. The Agency also contends that because Proposal 1 is
intended to permit an arbitrator to substitute his judgment for
that of Agency management and the President with respect to
whether OMB Circular No. A-76 and its Supplement have been
complied with, the proposal interferes with the process by which
management makes contracting out [ v31  p337 ] determinations under
section 7106(a)(2)(B). Finally, the Agency argues that arbitral
review of questions concerning whether the Agency complied with
OMB Circular No. A-76 and its Supplement could result in an award
requiring the Agency to reconstruct the contracting out decision
making process. According to the Agency, this reconstruction
could cause delay sufficient for a potential contractor to
withdraw a bid even if that bid would have been accepted as a
result of the reconstructed contracting out determination. The
Agency argues that in this circumstance it would be prevented
from "acting at all" to exercise its right to make determinations
with respect to contracting out under section 7106(a)(2)(B).

     Contrary to the Agency's position, we find that Proposal 1
does not interfere with management's right to contract out under
section 7106(a)(2)(B). Proposal 1 only requires the Agency to
adhere to the requirements of applicable laws and regulations
relating to contracting out; requirements which the Agency would
be obligated to follow even absent this proposal.

     Management's right to contract out is contained in section
7106(a) which provides as follows:

     7106. Management rights

     (a) Subject to subsection (b) of this section, nothing in
this chapter shall affect the authority of any management
official--

     (2) in accordance with applicable laws--

     (B) . . . to make determinations with respect to contracting
out(.)

     The Authority consistently has held that while section
7106(a) reserves to management the right to take the actions
enumerated therein, management's right to exercise its rights
must, of course, be exercised in accordance with all applicable
laws and regulations. See, for example, General Services
Administration, 27 FLRA  3 (finding arbitrable a grievance
relating to the agency's right to determine its organization
under section 7106(a)(1) of the Statute). See [ v31  p338 ] also
American Federation of Government Employees, AFL - CIO, Local
1692 and Department of the Air Force, Mather Air Force Base,
California, 8 FLRA  194, 195-96 (1982) (Provision 2) (Provision
2, which was found to be negotiable, required that
reductions-in-force would be carried out in strict compliance
with applicable laws and regulations); National Federation of
Federal Employees. Local 1497 and Department of the Air Force,
Lowry Air Force Base, Colorado, 9 FLRA  151, 156-57 (1982)
(Proposal 2) (Proposal 2, which was found to be negotiable,
provided that work assignments not violate any relevant law, rule
or regulation).

     Thus, the Agency's assertion that OMB Circular No. A-76 and
its Supplement are not a "law" within the meaning of the phrase
"in accordance with applicable laws" as used in section
7106(a)(2), is not relevant to deciding whether the proposal is
negotiable. Even assuming that the Circular is not a "law," the
Agency must exercise its right to contract out in accordance with
the Circular and its Supplement because, as we found earlier in
this decision, the Circular and its Supplement establish binding
policy on agencies and officials in the executive branch of the
Federal Government. Thus, any limitation on management's right to
contract out is not imposed by Proposal 1, but rather, is imposed
by OMB Circular No. A-76 and its Supplement. Since Proposal 1
merely reflects existing requirements applicable to the
contracting-out process, determining whether or not the Circular
constitutes a "law" within the meaning of section 7106(a)(2) is
not dispositive of the negotiability of the proposal. Therefore,
the Agency's arguments to the contrary are misplaced.

     b. The Proposal is a Negotiable Procedure Under Section
7106(b)(2)

     The terms of subsection (a) of the management rights clause
are "(s)ubject to subsection (b)" which provides as follows:

     (b) Nothing in this section shall preclude any agency and
any labor organization from negotiating--

     (2) procedures which management officials of the agency will
observe in exercising any authority under this section; or [ v31 p339 ] (3) appropriate arrangements for employees adversely
affected by the exercise of any authority under this section by
such management officials.

     Thus, management's right to contract out under section
7106(a) is clearly subject to the obligation to negotiate
procedures under section 7106(b)(2) by which management will act
under section 7106(a) and not just the "impact and
implementation" of a decision to contract out, as claimed by the
Agency. See Department of Defense v. FLRA,  659 F.2d at 1153.

     In our view, this proposal constitutes nothing more than the
procedures by which management will act in making determinations
with respect to contracting out under section 7106(a)(2)(B). Our
determination that the section 7106 (a) rights are subject to the
negotiation of procedures under section 7106(b) is consistent
with the legislative history of this section. The language of
section 7106 as it appears in the Statute evolved from language
contained in Title VII of H.R. 11280 (the Clay-Ford-Solarz print)
considered by the House Committee on Post Office and Civil
Service. That management rights clause did not include within its
scope matters related to contracting out. See Legislative History
at 325-26. 1

     The House Committee expanded this management rights clause
to include within management's right to act in accordance with
applicable laws, the right, in a new subsection (a)(2)(A), to
direct employees and the rights, in a new subsection (a)(2)(B),
to assign work, to make determinations with respect to
contracting out, and to determine the personnel by which agency
operations are conducted. See H. R. Rep. No. 95-1403, 95th Cong.,
2d Sess. 274 (1978). 2 In explaining its action to expand the
management rights clause the committee stated as follows:

     The committee's intention in section 7106 is to achieve a
broadening of the scope of collective bargaining to an extent
greater than the scope [ v31  p340 ] has been under Executive Order
program, but preserve the essential prerogative and flexibility
Federal managers must have. The management rights' language of
Executive Order 11491 has been a substantial barrier against
negotiations. The committee intends that section 7106--which
retains several of management's rights under the Executive Order,
but also eliminates several--be read to favor collective
bargaining whenever there is doubt as to the negotiability of a
subject or proposal.

     H.R. Rep. No. 95-1403, or H.R. 11280, 95th Cong.; 2d Sess.
43-44 (1978), reprinted in Legislative History at 689-90.

     H.R. 11280 as reported out by the House Committee was
amended on the floor of the House by the Udall substitute which,
among other things, further revised the language of the
management rights clause.

     In an accompanying Sectional Analysis, Representative Udall
explained the relationship between reserved rights and negotiable
procedures as follows:

     This substitute strengthens the 'Management rights' section
reported by the Committee, but it is still to be treated narrowly
as an exception to the general obligation to bargain over
conditions of employment. . . . The new language preserves
management's right to make the final decision in these additional
areas, in accordance with applicable laws, including other
provisions of Chapter 71 of title 5. For example, management has
the reserved right to make the final decision to 'remove' an
employee, but that decision must be made in accordance with
applicable laws and procedures, and the provisions of any
applicable collective bargaining agreement.

     124 Cong. Rec. 29,183 (1978), reprinted in Legislative
History at 924 (Statement of Representative Udall). Other
statements made on the floor of the House further indicate that
the management rights clause was intended to be treated as a
narrow exception to the obligation to bargain over [ v31  p341 ]
conditions of employment and to be subject to limitations on its
scope imposed by applicable laws and regulations and the duty to
bargain over procedures and appropriate arrangements. See, for
example, 124 Cong. Rec. 29,187 (1978), reprinted in legislative
History at 932 (Statement of Representative Clay). See also, 124
Cong. Rec. 29,198-99 (1978), reprinted in Legislative History at
953-56 (Statement of Representative Ford).

     The management rights clause of the Udall substitute was
passed by the House on September 13, 1978. 124 Cong. Rec. 29,203
(1978), reprinted in Legislative History at 963. This clause was
subsequently adopted by the House - Senate Conference Committee
without change, H.R. Rep. No. 97-1717 95th Cong., 2d Sess.
153-154 (1978), reprinted in Legislative History at 821-22, and
enacted into law as section 7106 of the Statute.

     Consequently, we reject the Agency's claim that it is only
obligated to negotiate over the "impact and implementation" of a
decision to contract out under section 7106(a)(2)(B). Rather, we
find the Agency is obligated to negotiate over procedures under
section 7106(b)(2) by which the Agency exercises its decision to
contract out under section 7106(a)(2)(B).

     We turn to the question of whether Proposal 1 constitutes a
procedure under section 7106(b)(2) or, on the other hand, whether
the proposal directly interferes with management's right to
contract out under section 7106(a)(2)(B). As previously noted,
Proposal 1 merely obligates the Agency to adhere to the
requirements imposed by OMB Circular No. A-76 and its Supplement
when making a determination with respect to contracting out under
section 7106(a)(2)(B).

     We have concluded in this decision that OMB Circular No.
A-76 and its Supplement establish binding policies and procedures
concerning an agency's determination to contract out particular
functions. Thus, even absent this proposal, the Agency would not
be free to act in a manner inconsistent with the procedures set
out in the Circular and its Supplement. See EEOC v. FLRA,  744
F.2d at 848. See also United States v. Heffner, 420 F.2d 809,
811-13 (4th Cir. 1969) (an agency of the government must
scrupulously observe rules, regulations, or procedures which it
has established). [ v31  p342 ]

     Consequently, any limitation on management's right to
contract out is not imposed by Proposal 1, but rather, by OMB
Circular No. A-76 and its Supplement. Therefore, we find that
Proposal 1 does not directly interfere with management's right to
contract out under section 7106(a)(2)(B). See EEOC v. FLRA,  at
848-49. Compare Defense Language Institute, Presidio of Monterey,
California v. FLRA,  767 F.2d 1398 (9th Cir. 1985), denying
enforcement of National Federation of Federal Employees, Local
1263 and Defense Language Institute, Presidio of Monterey
'California, 14 FLRA  761 (1984) (Provision 2) , where the Court
rejected the Authority's determination that Provision 2, which
required the agency to exercise its right to contract out in
accordance with OMB Circular No. A-76, did not impose any
particular limitation on management's right. As we previously
have stated, we adhere to the view that the Authority's position
in EEOC is correct. See Internal Revenue Service, 27 FLRA  976,
979 n.1.

     Further, our decision that Proposal 1 does not interfere
with management's right to contract out under section
7106(a)(2)(B) avoids an anomalous situation which would occur if
we found Proposal 1 to be nonnegotiable. Matters related to an
agency's compliance with OMB Circular No. A-76 and its Supplement
are included within the scope of a negotiated grievance procedure
unless the parties agree otherwise. Finding Proposal 1 to be
nonnegotiable would lead to a union being unable to negotiate a
contract provision requiring compliance with OMB Circular No.
A-76 and its Supplement even though the union could enforce such
compliance through the negotiated grievance procedure.

     c. Arbitral Review of Contracting Out Determinations is
Consistent with Section 7106(a)(2)(B)

     In finding the proposal to be negotiable, we reject the
Agency's claim that the proposal is nonnegotiable because it
would permit arbitrators to substitute their judgment for that of
the Agency on contracting out determinations. The Agency's
concern with arbitrators "substituting their judgment" for that
of management presents no basis on which to find this proposal
nonnegotiable. In Newark Air Force Station and American
Federation of Government Employees, Local 2221, 30  FLRA  616
(1987), we rejected a similar claim by the agency concerning
arbitral review of the legality of performance standards. We
stated at 635-36:

     Resolution of the grievance in this case by an arbitrator
would not require the arbitrator to do [ v31  p343 ] anything other
than what arbitrators do routinely in resolving other disputes,
including those involving the exercise of other management rights
such as discipline. An arbitrator would simply be examining an
action by management to determine whether that action was lawful
. . . .

     This is precisely one of the functions that arbitrators
perform, and that Congress intended that arbitrators perform,
under the Statute. In requiring the parties to negotiate
grievance procedures that result in binding arbitration, and in
broadly defining what grievances could encompass, Congress fully
expected arbitrators to review a wide variety of actions,
including actions taken by management pursuant to section 7106.

     Moreover, we previously stated in this decision that an
arbitrator, in sustaining a grievance that an agency failed to
comply with mandatory and nondiscretionary provisions of
applicable procurement law and regulations, including OMB
Circular No. A-76 and its Supplement, may order a reconstruction
of the procurement action in certain circumstances. However, the
arbitrator may not cancel the contract or require a contract to
be awarded to some other bidder. See Blytheville Air Force Base,
22 FLRA  at 661-62. See also U.S. Army Engineer District, St.
Louis and American Federation of Government Employees, Local No.
3838, 26 FLRA  398 (1987).

     We also reject the Agency's argument that permitting
arbitral review of the Agency decisions to contract out would
result in such delay as to prevent the Agency from "acting at
all." The Agency provides no support for its claim that the
grievance arbitration process including the possibility of having
to reconstruct a contracting out determination could be so long
as to prevent the Agency from exercising its right to contract
out. Further, we note that any delay which would occur if the
Agency were required to reconstruct a contracting out
determination would result from the Agency's failure to abide by
the OMB Circular No. A-76 procedures in the first place.

     Finally, it is well established that a proposal which would
stay management action pending the completion of a negotiated
grievance procedure or other applicable appellate procedures is a
negotiable procedure. See American Federation of Government
Employees, AFL - CIO, Local 1760 and [ v31  p344 ] Department of
Health and Human Services, Social Security Administration, 28
FLRA  160, 166-67 (1987) (Provision 4).

     5. The Proposal is not inconsistent with Section 7117(a)

     The Agency argues that if OMB Circular No. A-76 and its
Supplement constitute a rule or regulation within the meaning of
section 7103(a)(9)(C)(ii), then Proposal 1 is nonnegotiable under
section 7117(a)(1) because the proposal is inconsistent with the
Circular and Supplement.

     First, according to the Agency, the Circular provides that
it is intended only to guide agency managers in deciding whether
or not to contract out certain functions currently performed
in-house and thus, does not create any individual rights to
challenge agency decisions relating to contracting out. In
support, the Agency relies on paragraph 7.C. of OMB Circular No.
A-76, which states as follows:

     7. Scope.

     C. This Circular and its Supplement shall not:

     (8) Establish and shall not be construed to create any
substantive or procedural basis for anyone to challenge any
agency action or inaction on the basis that such action or
inaction was not in accordance with this Circular, except as
specifically set forth in Part I, Chapter 2, paragraph I of the
Supplement, 'Appeals of Cost Comparison Decisions.'

     The Agency argues that by permitting questions relating to
compliance with the Circular and its Supplement to be covered in
a negotiated grievance procedure, the proposal is inconsistent
with the Circular because such questions must be pursued only
through the appeal procedures prescribed in the Circular. The
Agency contends further that the appeal procedures prescribed by
the Circular are intended to authorize affected private sector
contractors as well as their employees to challenge actions taken
under the Circular and its Supplement. The Agency argues that
under the Statute a negotiated grievance procedure only can
resolve grievances involving bargaining unit employees. Thus, the
Agency contends that by permitting questions relating to
compliance [ v31  p345 ] with the Circular and its Supplement to be
covered by a negotiated grievance procedure, Proposal 1 negates
the rights of the private sector contractors and their employees
and, thereby, is inconsistent with the Circular and its
Supplement.

     Finally, the Agency argues that because the Authority has no
power to rule on the validity of Government-wide regulations, the
Authority is not permitted to find that the internal appeals
procedure established by the Circular violates section 7121(a) of
the Statute. In support, the Agency relies on Defense Logistics
Agency, Council of AFGE Locals, AFL - CIO and Department of
Defense, Defense Logistics Agency, 24 FLRA  367, 369 n.2 (1986)
(Defense Logistic Agency) and American Federation of Government
Employees, AFL - CIO, National Council of Grain Inspection Locals
v. FLRA,  794 F.2d 1013 (5th Cir. 1986) (National Council of
Grain Inspection Locals).

     First, we reject the Agency's claim that Proposal 1 is
inconsistent with OMB Circular No. A-76 and its Supplement. There
is nothing in Proposal 1 which would limit or negate the right of
independent contractors or their employees to challenge
contracting out determinations under the procedures set out in
Part I, Chapter 2, paragraph I of the Supplement. Nor does the
proposal create any new right to appeal contracting out
determinations. The right to file grievances regarding
contracting out decisions is authorized by the broad scope
negotiated grievance procedure under section 7121 of the Statute.
See American Federation of Government Employees, Locals 225, 1504
and 3723, AFL - CIO v. FLRA,  712 F.2d 640, 641-42 (D.C. Cir.
1983).

     Further, even assuming that there is a conflict between the
proposal and OMB Circular No. A-76, the language of the Circular
cannot limit the statutorily prescribed scope of a negotiated
grievance procedure. As we stated earlier in this decision, the
legislative history of section 7121 indicates that grievance
procedures negotiated under section 7121 were intended to be
broad in scope and to cover all matters which could legally be
included in a negotiated grievance procedure unless the parties
agreed through negotiations to exclude a particular matter from
coverage in a negotiated grievance procedure.

     Thus, unless a matter is expressly excluded from coverage in
a negotiated grievance procedure by section 7121(c) or by other
Federal statute, or unless the parties [ v31  p346 ] agree through
negotiations to exclude a matter from coverage, that matter may
not be excluded from coverage in a negotiated grievance procedure
by regulation. See American Federation of Government Employees,
AFL - CIO, Local 2782 and Department of Commerce, Bureau of the
Census, Washington, D.C, 6 FLRA  314 (1981). See also National
Treasury Employees Union v. Cornelius, 617 F. Supp. 365 (D.D.C.
1985). Consequently, the Agency's reliance on Defense Logistics
Agency, 24 FLRA  367 and National Council of Grain Inspection
Locals, 794 F.2d 1013 to support its argument that we have no
authority to invalidate a Government-wide regulation is
misplaced. In Defense Logistics Agency the Authority, and in
National Council of Grain Inspection Locals the U.S. Court of
Appeals for the 5th Circuit, rejected union claims that the
Authority may rule on the legality or validity of a
Government-wide regulation. Our finding in this case does not
concern the legality or validity of OMB Circular No. A-76 and its
Supplement. Rather, we hold that the language of the circular and
its Supplement cannot limit a statutorily prescribed scope of a
negotiated grievance procedure.

     Neither matters related to contracting out in general, nor
OMB Circular No. A-76 and its Supplement in particular, are
expressly excluded from inclusion in a negotiated grievance
procedure by section 7121(c). Further, the Agency refers to no
other provision of law which would operate to exclude contracting
out matters or OMB Circular No. A-76 and its Supplement from
coverage in a negotiated grievance procedure. Thus, the language
of OMB Circular No. A-76 does not limit the statutorily
prescribed scope and coverage of the parties' negotiated
grievance procedure. See American Federation of Government
Employees, AFL - CIO, National Council of EEOC Locals and Equal
Employment Opportunity Commission, 10 FLRA  3 (1982), enforced
sub nom. EEOC v. FLRA,  744 F.2d 842, 851-52 (1984).

     In summary, we find that Proposal 1: (1) directly affects
working conditions of bargaining unit employees; (2) is a rule or
regulation within the meaning of section 7103(a)(9)(C)(ii); (3)
does not violate management's right to contract out under section
7106(a)(2)(B); and (4) is not inconsistent with section 7117(a).
Rather, we find that Proposal 1 constitutes a negotiable
procedure under section 7106(b)(2) by which the Agency exercises
its right to contract out under section 7106(a)(2)(B). Thus,
Proposal 1 is within the duty to bargain. [ v31  p347 ]

     IV. Proposal 2, 3, 4 and 5

     Proposal 2: The Agency shall provide the Union with a copy
of the aggregate figures compiled from the surveys as soon as the
aggregates are completed.

     Proposal 3: The Union may submit comments regarding the
aggregate figures, and such comments shall be considered by the
Agency in writing its report and recommendations.

     Proposal 4: The Agency shall provide a copy of its report
and recommendations on the Library functions and staff as soon as
that report is completed.

     Proposal 5: The Union may comment on the report and
recommendations, and such comments shall be considered by the
Agency in making decisions on contracting out.

     A. Positions of the Parties

     Proposals 2, 3, 4, and 5 concern the Agency's surveys of the
library workforce and the library's users. The Agency argues that
these proposals improperly seek internal management reports and
information which the Agency obtained as part of its deliberative
process and, therefore, interfere with management's right to
contract out under section 7106(a)(2)(B). In addition, the Agency
contends that the proposals do not concern conditions of
employment of bargaining unit employees. Furthermore, the Agency
states that furnishing cost data to the Union would interfere
with management's right to determine its internal security
practices under section 7106(a)(1) by compromising the
confidentiality of the cost data. In support of this argument,
the Agency states that the terms of Circular No. A-76 require
that cost data be confidential. Because of this requirement, the
Agency also argues that these the proposals are nonnegotiable
under section 7117(a)(1) of the Statute.

     The Union responds that it is not seeking information
produced as a result of management's deliberative process.
Further, the Union asserts that it is not seeking cost data or
the amount of the Government's bid. In addition, the Union
contends that the proposals regarding information gathered
through the library study do involve conditions of employment and
that none of the proposals interfere with management's right to
contract out. [ v31  p 348 ]

     B. Analysis and Conclusion

     In our opinion, Proposals 2 and 3 are inextricably linked as
are Proposals 4 and 5. If the Union does not obtain the aggregate
figures compiled from the library surveys, it will be unable to
submit comments on the figures to the Agency. Similarly, if the
Union does not receive a copy of the Agency's report and
recommendations on library functions, it cannot comment on it.

     1. The Proposals Concern conditions of Employment of
Bargaining Unit Employees

     In Section III.B.1 of this decision, we found that proposals
concerning contracting out of bargaining unit functions concern
conditions of employment of bargaining unit employees. It is
unnecessary to reiterate that discussion here, since Proposals 2,
3, 4, and 5 all relate to contracting out of the Agency's library
functions, which we previously found will result in the loss of
bargaining unit positions and the possible release of bargaining
unit employees from Federal employment.

     In addition, we note that the Agency's reliance on the
Authority's decision holding Proposal 3 nonnegotiable in American
Federation of Government Employees, AFL - CIO Local 3403 and
National Science Foundation, Washington, D.C., 6 FLRA  669,
673-74 (1981) (National Science Foundation), is misplaced.
Proposal 3 in that case provided, among other things, that
detailed analyses of reviews relating to contracting out would be
made available to interested parties. Proposal 3, however, was
not found to be nonnegotiable because it did not affect
conditions of employment of bargaining unit employees. Rather, it
was found nonnegotiable because it permitted arbitrators to
substitute their judgment for that of the agency on contracting
out determinations. Of course, as we have stated in this
decision, an arbitrator, in sustaining a grievance that an agency
failed to comply with mandatory and nondiscretionary provisions
of applicable procurement law and regulations may order a
reconstruction of the procurement action in certain
circumstances. However, an arbitrator may not cancel the contract
or require a contract to be awarded to some other bidder. See
Blytheville Air Force Base, 22 FLRA  at 661-62.

     Therefore, National Science Foundation does not provide
support for the Agency's claim that Proposals 2, 3, 4 and 5 do
not concern conditions of employment of bargaining unit
employees. [ v31  p349 ]

     2. The Proposals Do Not Interfere with The Agency's Right to
Contract Out Under Section 7106(a)(2)(B)

     The Agency argues that the "aggregate figures compiled from
surveys" required to be disclosed by Proposal 2, and the "report
and recommendations on library functions and staff" required to
be disclosed by Proposal 4, are an integral part of its internal
deliberations concerning decisions relating to contracting out.
Thus, the Agency claims that the Proposals interfere with its
right to contract out under section 7106(a)(2)(B). In support,
the Agency asserts that the information required to be disclosed
by Proposals 4 and 5 is comparable to the "milestone charts"
sought by the union and found nonnegotiable by the Authority in
National Federation of Federal Employees, Local 1167 and
Department of the Air Force Headquarters, 31st Combat Support
Group (TAC), Homestead Air Force Base, Florida, 6 FLRA  574
(1981) (Homestead), aff'd, NFFE, Local 1167 v. FLRA,  681 F.2d
886 (D.C. Cir. 1982).

     Contrary to the Agency's claim, we find that Proposals 2, 3,
4, and 5 do not interject the Union into the deliberative process
leading up to a decision relating to contracting out under
section 7106(a)(2)(B). The Union has indicated that Proposals 2
and 4 do not require the disclosure of cost data required to be
kept confidential under OMB Circular No. A-76. Reply Brief at
13-14. Further, except for its claim that the information sought
to be disclosed by Proposals 2 and 4 is precluded by section
7106(a)(2)(B) of the Statute, the Agency cites no other law, rule
or regulation which would prevent disclosure of the
information.

     We also find that the Agency's reliance on Homestead to
support its claim that section 7106(a)(2)(B) of the Statute
prevents disclosure of the information sought by Proposals 2 and
4 to be misplaced. It was uncontested in Homestead that the
"milestone charts" sought to be disclosed by the union were an
essential element in the internal deliberative process leading up
to the exercise of the agency's right to contract out under
section 7106(a)(2)(B). Here, while the "aggregate figures
compiled from the surveys" required to be disclosed by Proposal
2, and the "report and recommendations on the Library functions
and staff" required to be disclosed by Proposal 4, will be
utilized by management in its deliberations in deciding whether
to contract out the library functions, the release of that
information does not provide access to the Agency's
deliberations. Rather, the Agency will use the information sought
by Proposals 2 and 4, and any Union comments on that information
provided under Proposals 3 and 5, in any manner it so chooses in
its deliberations. In other [ v31  p350 ] words, these proposals
permit the Union to offer its nonbinding views on certain data
and records before the Agency actually deliberates and makes a
decision relating to contracting out of the library functions.
Thus, management's right to freely engage in internal discussion
and deliberation to make a decision whether to contract out the
library functions is not violated in any manner by Proposals 2,
3, 4, and 5. See American Federation of Government Employees, AFL
- CIO, Local 1738 and Veterans Administration Medical Center,
Salisbury North Carolina, 27 FLRA  52, 62-63 (Proposal 10,
Paragraph C) (Paragraph C requiring the agency to consult with
the union prior to making a decision on excused absences found
not to involve the union in the deliberative process by which the
agency makes a decision on requests for excused absences).
Compare National Labor Relations Board and National Labor
Relations Board Union, Local 6, 26 FLRA  108 (1987), petition for
review filed sub nom. National Labor Relations Board Union v.
FLRA,  No. 87-1203 (D.C. Cir. May 6, 1987) (Union request for
disclosure of an internal management recommendation made during
management deliberations concerning a part-time work request
found to be prohibited by law because the information requested
would improperly interject the Union into and give it access to
management's internal decision making process).

     Consequently, we find that Proposals 2, 3, 4, and 5 do not
violate management's right to contract out under section
7106(a)(2)(B).

     3. The Proposals Do Not Interfere with the Agency's Right to
Determine its Internal Security Practices Under Section
7106(a)(1)

     The Agency asserts that the Supplement to OMB Circular No.
A-76 requires in Part IV, C.2.g, h(1) and i(1) that certain cost
data be kept confidential in order to preserve the integrity of
the bidding process. Thus, according to the Agency, since the
proposals would result in the release of such cost data before
bids are submitted, the proposals are inconsistent with OMB
Circular No. A-76 and directly interfere with the Agency's right
to determine its internal security practices under section
7106(a)(1).

     The Agency's argument cannot be sustained. As we stated
previously, the Union expressly asserted that it is not seeking
disclosure of cost data required to be kept confidential by OMB
Circular No. A-76. There is no information in the record, and the
Agency has offered none, which contradicts the Union's assertion
that the information sought by Proposals 2 and 4 does not concern
cost data. [ v31  p351 ]

     Based on the record and the proposals' wording, we conclude
that the proposals do not seek cost data which is prohibited from
disclosure prior to the public bid openings by OMB Circular A-76.
Therefore, the proposals do not conflict with the Circular or
interfere with the Agency's right to determine its internal
security practices under section 7106(a)(1).

     In sum, we find that Proposals 2, 3, 4, and 5: (1) concern
conditions of employment of bargaining unit employees;

     (2) do not violate management's right to contract out under
section 7106(a)(2)(B); (3) are not inconsistent with OMB Circular
No. A-76; and (4) do not violate management's right to determine
its internal security practices under section 7106(a)(1) of the
Statute.

     V. Order

     The Agency shall upon request, or as otherwise agreed to by
the parties, bargain on Proposals 1, 2, 3, 4, and 5. 3

     Issued, Washington, D.C., February 23, 1988

Jerry L. Calhoun,      Chairman,

Jean McKee,            Member

FEDERAL LABOR RELATIONS 

FOOTNOTES

     Footnote 1 The management rights clause of Title VII of H.R.
11280 (the Clay-Ford-Solarz print) provided as follows:   7106.
Management rights   (a) Nothing in this chapter shall affect the
authority of any management official of any agency--   (1)
Subsect to subsection (b) to determine the mission, budget,
organization, and internal security practices of such agency; and
(2) in accordance with applicable laws, to take whatever actions
may be necessary to carry out the mission of such agency during
national emergencies.   (b) Nothing in this section shall
preclude any agency and labor organization from negotiating--  
(1) procedures which management officials of such agency will
observe in exercising their authority to determine the mission,
budget, organization, and internal security of such agency, or  
(2) appropriate arrangements for employees adversely affected by
the exercise of such authority by such management officials.

     Footnote 2 The management rights