Inherently Governmental Functions and Department of Defense Operations: Background, Issues, and Options for Congress
Congressional research reportApr 1, 2010
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Inherently Governmental Functions and
Department of Defense Operations:
Background, Issues, and Options for Congress
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Legislative Attorney
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Specialist in Defense Acquisition
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Legislative Attorney
April 1, 2010
Congressional Research Service
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R40641
CRS Report for Congress
Prepared for Members and Committees of Congress
Inherently Governmental Functions and Department of Defense Operations
Summary
An “inherently governmental function” is one that, as a matter of law and policy, must be
performed by federal government employees and cannot be contracted out because it is
“intimately related to the public interest.” Two main definitions of “inherently governmental
functions” currently exist within federal law and policy. One is a statutory definition, enacted as
part of the Federal Activities Inventory Reform (FAIR) Act of 1998. This definition states that an
inherently governmental function is “a function so intimately related to the public interest as to
require performance by Federal Government employees.” The other is a policy-oriented
definition contained in OMB Circular A-76. This definition states that an inherently governmental
activity is “an activity that is so intimately related to the public interest as to mandate
performance by government personnel.” Other statutes and regulations that define inherently
governmental functions do so either by reproducing the language of the FAIR Act or OMB
Circular A-76, or by incorporating one of these definitions by reference.
Concerned that the existence of multiple or inconsistent definitions of “inherently governmental
functions” might be partly responsible for the alleged contracting out of inherently governmental
functions by the Department of Defense (DOD) and other agencies, the 110th Congress enacted
legislation (P.L. 110-417) requiring the Office of Management and Budget (OMB) to develop a
“single consistent definition” of “inherently governmental functions.” This definition is to
“ensure that the head of each ... agency is able to identify each position … that exercises an
inherently governmental function.” In response, on March 31, 2010, OMB, through the Office of
Federal Procurement Policy, issued a proposed policy letter which would adopt the FAIR Act
definition as the single definition.
The current debate over which functions are inherently governmental is part of a larger debate
about the proper role of the federal government vis-à-vis the private sector. This debate is as old
as the Constitution, which prohibits privatization of certain functions (e.g., Congress’s legislative
function), a prohibition courts enforce under various judicial tests (e.g., nondelegation, functions
“affected with the public interest,” etc.). Since the 1920s, federal contracting has been a primary
arena for the public/private debate, with the executive and legislative branches contesting (1)
which functions the government must perform because they are inherently governmental; (2)
which functions the government should perform because they are closely related to inherently
governmental functions or for some policy reason; and (3) which functions should be left to the
private sector.
Congress has several options if it is concerned that deficiencies in the existing definitions of
inherently governmental functions may lead agencies to improperly contract out such functions.
Options include (1) relying upon recent statutory changes and/or the policies of the Obama
Administration, which proposes to limit contracting out generally, to effect desired changes in
agency contracting; (2) changing the existing definition of “inherently governmental functions”;
(3) placing limits on contracting out or use of appropriated funds; (4) addressing structural factors
potentially prompting agencies to rely on contractors; (5) providing for more effective oversight
of executive branch contracting decisions; and (6) focusing more on questions of contracting
policy (i.e., what functions should the government perform?) than on contracting law (i.e., what
functions must the government perform?). The 111th Congress has enacted or is considering
several bills addressing inherently governmental functions, including P.L. 111-8, P.L. 111-84, P.L.
111-117, H.R. 1436, H.R. 2142, H.R. 2177, H.R. 2682, H.R. 2736, H.R. 2868, and S. 924.
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Contents
Introduction ................................................................................................................................1
Background ................................................................................................................................1
The Constitutional Grounding for the Public/Private Debate..................................................2
The Public/Private Debate Surrounding Federal Contracting .................................................4
Roosevelt Administration ................................................................................................4
Truman Administration ...................................................................................................4
Eisenhower Administration .............................................................................................5
Reagan and George H.W. Bush Administrations ..............................................................5
Clinton and George W. Bush Administrations..................................................................5
Obama Administration ....................................................................................................6
Current Definitions of “Inherently Governmental Functions” ......................................................7
Statutory Definitions and Declarations ..................................................................................8
The FAIR Act..................................................................................................................8
Other Statutory Definitions ........................................................................................... 10
Statutory Declarations of Specific Functions as Inherently Governmental...................... 11
Policy-Based Definitions and Declarations .......................................................................... 12
OMB Circular A-76 ...................................................................................................... 12
Proposed OFPP Letter ................................................................................................... 15
OFPP Letter 92-1 .......................................................................................................... 15
DODI 1100.22 .............................................................................................................. 16
Administrative Law Provisions and Declarations................................................................. 17
Federal Acquisition Regulation ..................................................................................... 17
Defense Federal Acquisition Regulation Supplement..................................................... 18
Executive Orders........................................................................................................... 19
GAO Decisions............................................................................................................. 19
Judicial Decisions ............................................................................................................... 21
Issues and Options for Congress................................................................................................ 23
Reliance on Prior Statutory Changes and/or Policies of the Obama Administration .............. 24
Amending the Definition of “Inherently Governmental Functions”...................................... 27
Standardizing the Definition of “Inherently Governmental Functions”........................... 27
Replacing “Inherently Governmental Functions” with Another Construct ...................... 29
Defining Other Terms Related to “Inherently Governmental Functions” and
Prohibiting Contracting Them Out ............................................................................. 30
Clarifying Terms within the Existing Definition of Inherently Governmental
Functions ................................................................................................................... 31
Potential Limitations of Definitional Changes ............................................................... 32
Placing Limits on Contracting Out Or Use of Appropriated Funds ....................................... 34
Addressing Structural Factors Prompting Agencies to Rely on Contractors.......................... 36
More Effective Oversight of Executive Branch Contracting Decisions................................. 37
Focusing on Questions of Contracting Policy ...................................................................... 40
Figures
Figure 1. Categorization of Functions as Inherently Governmental or Commercial .................... 33
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Figure 2. Sample FAIR Act Listing of Commercial Functions.................................................... 38
Figure 3. Processes Under the FAIR Act and OMB Circular A-76.............................................. 39
Figure 4. A Possible Framework for Distinguishing Between Questions of Contracting
Law and Contracting Policy ................................................................................................... 41
Figure 5. A Possible Framework for Addressing Questions of Contract Policy ........................... 42
Tables
Table 1. Comparison of the Treatments of Inherently Governmental Functions in the
FAIR Act, OMB Circular A-76, and the FAR.......................................................................... 28
Appendixes
Appendix A. Examples of Congressional and Executive Branch Interactions in Defining
Inherently Governmental Functions During the 1980s ............................................................ 43
Appendix B. Factors Used in Determining Whether a Function Is Inherently
Governmental Under OMB Circular A-76 .............................................................................. 49
Appendix C. Functions Performed by Military Personnel as Classified by DODI 1100.22 ......... 50
Appendix D. Functions Performed by DOD Civilian Employees as Classified by DODI
1100.22.................................................................................................................................. 52
Appendix E. Inherently Governmental Functions and Functions Approaching Inherently
Governmental as Classified by the FAR ................................................................................. 54
Appendix F. Functions Recognized as Inherently Governmental or Commercial by the
GAO ...................................................................................................................................... 56
Appendix G. Side-by-Side Comparison of the Definitions of Inherently Governmental
Functions from the FAIR Act and OMB Circular A-76 ........................................................... 57
Contacts
Author Contact Information ...................................................................................................... 59
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Inherently Governmental Functions and Department of Defense Operations
Introduction
An “inherently governmental function” is one that, as a matter of law and policy, must be
performed by federal government employees and cannot be contracted out because it is
“intimately related to the public interest.” Concerned that the existence of multiple and/or
inconsistent definitions of “inherently governmental functions” might be partly responsible for
the alleged contracting out of inherently governmental functions by the Department of Defense
(DOD) and other agencies, the 110th Congress enacted legislation (P.L. 110-417) requiring the
Office of Management and Budget (OMB) to develop a “single consistent definition” of
“inherently governmental functions.” This definition is to “ensure that the head of each ... agency
is able to identify each position within that department or agency that exercises an inherently
governmental function.” In response, on March 31, 2010, OMB, through the Office of Federal
Procurement Policy, issued a proposed policy letter which would adopt the FAIR Act definition as
the single definition.
This report provides background, issues, and options for Congress on defining inherently
governmental functions within the context of DOD operations. It situates contemporary debates
over which functions are inherently governmental within the context of the broader debate about
the proper roles of the public and private sectors, surveys existing definitions of “inherently
governmental functions” within federal law and policy, and discusses issues and options for
Congress in redefining inherently governmental functions or otherwise ensuring that the
executive branch’s categorization of functions corresponds to the definition of inherently
governmental functions. The report focuses upon DOD because of the specific functions that it
performs; its prominent role in federal contracting; its unique workforce, which consists of
military and civilian personnel; and recent allegations that DOD, among other agencies, has
improperly contracted out inherently governmental functions.
Background
The current debate over which functions are inherently governmental is part of a larger debate
about the proper role of the federal government vis-à-vis the private sector that is as old as the
Republic itself. All government functions can arguably be divided into three categories: those that
must be performed by government employees, those that should be performed by government
employees, and those suitable for private sector performance. However, the size and content of
these categories have fluctuated throughout American history. The “must” category has arguably
experienced the least fluctuation, whereas the “should” and “private” categories have
significantly increased or diminished over time with changes in administrations or even within
administrations (e.g., moving from peacetime to war). The “Background” section surveys the
history of this public/private debate, focusing particularly upon how it has played out in the
context of federal contracting.
The debate over DOD functions generally corresponds to the overall public/private debate;
however, it sometimes reflects unique aspects of DOD or its procurement system. First, because
DOD has two distinct workforces, military and civilian, capable of performing functions, DOD
must determine which workforce will perform functions in the “must” or “should” categories.
Where functions in the “must” category are concerned, DOD has to determine whether it matters
which DOD employees, military or civilian, perform the function. Similarly, where functions in
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the “should category” are concerned, DOD must determine not only whether the function should
be performed in-house or by the private sector, but also which workforce will perform functions
deemed appropriate for in-house performance. Second, DOD relies upon ammunition and
armaments in its operations, items which some commentators at various periods of time have
thought should be manufactured by defense agencies in arsenals or Navy shipyards, for example,
instead of by the private sector. 1 The arguments for in-house manufacturing of DOD materiels
have varied over the years, but have included the claim that manufacturing of weapons is an
inherently governmental function and thus falls within the “must” category. However, such
arguments appear to confuse considerations of national defense policy (i.e., the security of having
an in-house supply of important products), which might argue for placing the function in the
“should” category, with functions “intimately related to the public interest.” Third, the federal
government has consistently maintained two parallel acquisition systems, civilian and defense,
wherein the rules for DOD are not always identical to those for the rest of the federal government.
The Constitutional Grounding for the Public/Private Debate
The Constitution, with its enumerated powers and limits on these powers, is the logical, best
starting point for distinguishing between “must,” “should,” and commercial functions. The
Constitution envisioned certain functions that must be carried out by one branch or other of the
federal government. The legislative function of Article I is clearly an inherently governmental
function entrusted to Congress.2 Article II, with equal clarity, entrusted several inherently
governmental functions to the President, such as the executive power,3 the Commander-in-Chief
function,4 the appointment power,5 the power to conduct foreign affairs,6 and the granting of
pardons. 7 The Constitution also recognized the public/private tension with explicit limitations on
certain public functions when they directly affect private interests. For example, takings of
private property under the Fifth Amendment must be for public purpose.8 However, more than
200 years after ratification of the Constitution, commentators are still trying to determine what
constitutes a public purpose. 9 The Constitution also recognized and provided for the other end of
the spectrum: private functions. The most explicit such recognition is in the Tenth Amendment,
which states, “The powers not delegated to the United States by the Constitution, nor prohibited
by it to the States, are reserved to the States respectively, or to the people.”10
Very early in American history, the Supreme Court in Marbury v. Madison recognized that the
President and other executive branch officials exercise inherent powers founded upon their
1
Daniel Guttman, Public Purpose and Private Service: The Twentieth Century Culture of Contracting Out and the
Evolving Law of Diffused Sovereignty, 52 Admin. L. Rev. 859, 864 (2000).
2
U.S. Const. art. I, § 1.
3
U.S. Const. art. II, § 1, cl. 1.
4
U.S. Const. art. II, § 2, cl. 1.
5
U.S. Const. art. II, § 2, cl. 2.
6
Id.
7
U.S. Const. art. II, § 2, cl. 1.
8
U.S. Const. amend. V.
9
See Kelo v. City of New London, 545 U.S. 469 (2005) (holding that economic development by private entities
constitutes an acceptable public use).
10
U.S. Const. amend. X.
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discretion and accountability. 11 In Marbury, while addressing whether a judge whose commission
was not delivered to him by a new administration had a legal remedy, the Court distinguished
between “ministerial functions” of the executive branch, which officials are legally required to
perform, and “political powers,” in which executive officials may exercise discretion. Regarding
the latter, the Court stated
By the constitution of the United States, the President is invested with certain important
political powers, in the exercise of which he is to use his own discretion, and is accountable
only to his country in his political character, and to his own conscience. To aid him in the
performance of these duties, he is authorized to appoint certain officers, who act by his
authority and in conformity with his orders.12
These two issues, discretion and accountability, have remained central to discussions of what
functions the government must perform to this day. 13 Various commentators would afford the
executive branch different degrees of discretion in classifying particular functions as inherently
governmental or commercial and seek to hold the executive branch accountable for its
classifications to differing degrees and in differing ways.
In attempting to protect the public and private sectors as defined by the Constitution, postMarbury courts articulated various theories and tests, several of which also appear in some recent
discussions of inherently governmental functions. One key test focuses upon functions “affected
with the public interest.” Courts in the 19th century, in particular, distinguished between functions
“affected with the public interest” and other functions when determining whether government
regulation (an exercise of the public sector) of certain businesses (private-sector entities) was
permissible. Where the business was “affected with a public interest,” such as common carriers
were, courts found the regulation permissible. 14 This test arguably focuses upon the functions that
the government “should” or “may” perform, however, rather than those that the government
“must” perform. Another key test focused upon “public interests” or “public functions.” This test
was used to determine when private-sector entities were accountable to individuals for certain
public-sector protections, such as due process. The courts concluded that when entities, such as
company towns, performed public functions, they owed individuals due process.15 Another key
test, largely used in the 1930s, was the “private delegation doctrine,” which precluded Congress
from delegating its power to legislate (a public-sector power) to third parties not in the
government (private-sector entities).16
11
5 U.S. 137 (1803).
Id. at 165-66.
13
See infra notes 121-145 and accompanying text. See also Arrowhead Metals, Ltd. v. United States, 8 Cl. Ct. 703, 714
(1985) (finding that coinage of money is inherently governmental but that the U.S. Mint has discretion to determine
whether the stamping of blanks constitutes coinage and is thus exempt from OMB Circular A-76); Northrop Grumman
Info. Tech., Inc. v. United States, 74 Fed. Cl. 407 (2006) (addressing information management and technology services
under OMB Circular A-76); United States v. Kenney, 185 F.3d 1217 (11th Cir. 1999) (stating that functions are not
inherently governmental, for purposes of contracting out, unless the contractor is in a position to make decisions that
are binding on the agency); Nat’l Air Traffic Controllers Ass’n v. Sec’y of the Dep’t of Trans., 997 F. Supp. (1998)
(stating that air traffic control is inherently governmental because it involves national defense).
14
See, e.g., Munn v. Illinois, 94 U.S. 113 (1876).
15
See, e.g., Marsh v. Alabama, 326 U.S. 501 (1946); Smith v. Allwright, 321 U.S. 649 (1944). See also Paul R.
Verkuil, Public Law Limitations on Privatization of Government Functions, 84 N.C. L. Rev. 397, 410-15 (2006).
16
See, e.g., Carter v. Carter Coal Co., 298 U.S. 238 (1936) (striking down as an unconstitutional private delegation
legislation that would have subjected an industry to maximum hours agreed to by a supermajority of workers and
producers in the industry); A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935) (striking down as an
(continued...)
12
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The Public/Private Debate Surrounding Federal Contracting
Since World War I, one of the primary arenas for the public/private debate and the definition of
inherently governmental functions has been federal contracting. The emphasis on public or
private entities as the preferred source of goods or services has swung back and forth over the
years with the change of administrations or even during administrations. The emphasis has also
shifted depending upon which agencies are conducting the procurements and the nature of the
goods or services procured. In the 1920s, for example, the government had different emphases in
civilian and defense contracting: while the alleged abuses of military contractors during World
War I caused the military to perform more work in-house, public contracting by civilian agencies
expanded. 17
Roosevelt Administration
President Franklin D. Roosevelt essentially reversed the relative use of civilian and military
contractors as compared to the 1920s. Prior to World War II, the Roosevelt Administration placed
renewed emphasis on the government’s role and the benefits of the government performing
functions for socioeconomic purposes even when doing so brought it into competition with the
private sector (e.g., creation of the Civilian Conservation Corps and the Public Works
Administration).18 In contrast, mobilization for World War II brought greater emphasis on using
the private sector to meet the country’s defense needs, as well as many changes in the ways in
which the government contracted for goods and services.19
Truman Administration
The Truman Administration was generally a period of change and reorganization in the federal
government’s procurement of goods and services. Several important statutes were enacted in this
period, including the Armed Services Procurement Act of 1947,20 the Renegotiation Act of
1948,21 the Federal Property and Administrative Services Act of 1949,22 and the Defense
Production Act of 1950.23 These statutes greatly changed the federal procurement landscape,
although they did not directly address which functions the government must perform (i.e., what is
inherently governmental). They did, however, address how to make decisions as to who should
perform specific functions.
(...continued)
unconstitutional private delegation legislation that would have allowed industrial organizations or trade associations to
establish “codes of fair competition” for their industry).
17
James F. Nagle, A History of Government Contracting 333-59 (2d ed. 1999).
18
Id. at 364-77.
19
Id. at 379-444.
20
62 Stat. 21 (1948).
21
62 Stat. 259 (1948).
22
63 Stat. 377 (1949).
23
64 Stat. 798 (1950).
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Eisenhower Administration
President Eisenhower was the first to formally declare a federal policy of not competing with the
private sector.24 This policy was originally published by the Bureau of the Budget (BOB) in a
directive issued in 1955:
It is the stated policy of the administration that the Federal government will not start or carry
on any commercial activity to provide a service or product for its own use if such product or
service can be procured from private enterprise through ordinary business channels.25
This policy was expressed in, and entered the vernacular as, Office of Management and Budget’s
(OMB’s) Circular A-76 in 1966 during the Johnson Administration. 26 Since that time, OMB
Circular A-76 has become the primary focal point for discussions of what is an inherently
governmental function because it and its four attachments establish guidelines and procedures for
determining whether an activity should be performed in-house with government personnel or
whether it should be contracted out to the private sector.27
Reagan and George H.W. Bush Administrations
The 1980s saw numerous disputes between proponents of the government and private sectors. Of
these two administrations, the Reagan Administration, in particular, was a strong proponent of
smaller government and had many confrontations with Congress over who should perform
various functions. This administration would propose or attempt to privatize particular functions,
such as depot maintenance. Congress would then respond with either an appropriations rider,
prohibiting or conditioning the use of funds to implement the privatization, or with a substantive
law declaring a function inherently governmental, among other things. Appendix A provides
examples of congressional responses to proposed contracting out by the Reagan and George H.W.
Bush Administrations to illustrate possible legislative responses to allegedly improper contracting
out by federal agencies.
Clinton and George W. Bush Administrations
The Clinton Administration was arguably on both sides of the public/private debate, sponsoring
plans, such as comprehensive health care reform, that might have expanded the public sector, as
well as attempting to end “big government” with its “reinventing government” initiative and
enactment of the Federal Activities Inventory Reform (FAIR) Act. The FAIR Act, which is
discussed in more detail in the section on definitions of inherently governmental functions, sought
to foster increased contracting out of agencies’ commercial functions. The George W. Bush
24
Nagle, supra note 17, at 487.
BOB Bulletin 55-4, January 15, 1955.
26
The authority cited for issuing the Circular is the Budget and Accounting Act of 1921, 31 U.S.C. §§ 501-502; the
Office of Federal Procurement Policy Act, 41 U.S.C. § 401 et seq.; and Federal Activities Inventory Reform (FAIR)
Act of 1998, P.L. 105-270. OMB Circular A-76 was substantially revised in 1967, 1979, 1983, 1991, 1999, and, most
recently and extensively, in May 2003. The 1999 amendment, in particular, was issued to bring the Circular into
conformance with and assist in implementation of the FAIR Act.
27
Attachment A contains the inventory process for categorizing activities as commercial or inherently governmental.
Attachment B sets out the processes to be used in public-private competitions. Attachment C gives the rules for
calculating the cost of these competitions. Attachment D supplies the definitions for the Circular.
25
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Administration could be described as having an even narrower conception of the role of the
public sector. Among other things, the Bush Administration proposed amending OMB Circular A76 so that all functions were presumed commercial unless agencies justified why they were
inherently governmental. 28 The Bush Administration’s extensive use of contractors in Iraq and
Afghanistan also engendered much discussion as to propriety of contracting out certain functions.
Critics claimed that the Bush Administration improperly contracted out acquisition, armed
security, and contract management functions, among others.
Obama Administration
Recent announcements by President Obama and Secretary of Defense Robert M. Gates could
signal a shift to increased governmental performance of certain functions. President Obama
issued a three-page memorandum on March 4, 2009, announcing his Administration’s priorities in
contracting policy. It highlighted four initiatives: (1) increased competition; (2) use of fixed-price
contracts; (3) ensuring that the acquisition workforce can manage and oversee contracts; and (4)
ensuring that functions considered to be inherently governmental are not contracted out. As
regards contracting out, in particular, the memorandum states
Government outsourcing for services also raises special concerns. For decades, the Federal
Government has relied on the private sector for necessary commercial services used by the
Government, such as transportation, food, and maintenance. Office of Management and
Budget Circular A-76, first issued in 1966, was based on the reasonable premise that while
inherently governmental activities should be performed by Government employees,
taxpayers may receive more value for their dollars if non-inherently governmental activities
that can be provided commercially are subject to the forces of competition.
However, the line between inherently governmental activities that should not be outsourced
and commercial activities that may be subject to private sector competition has been blurred
and inadequately defined. As a result, contractors may be performing inherently
governmental functions. Agencies and departments must operate under clear rules
prescribing when outsourcing is and is not appropriate.29
Secretary Gates made the President’s proposal more concrete with the budget announcement he
issued prior to the President’s submission of the budget on May 7, 2009:
A final recommendation ... will have a significant impact on how defense organizations are
staffed and operated. Under this budget request, we will reduce the number of support
service contractors from our current 39 percent of the workforce to the pre-2001 level of 26
percent and replace them with full-time government employees. Our goal is to hire as many
as 13,000 new civil servants in FY10 to replace contractors and up to 30,000 new civil
servants in place of contractors over the next five years.30
28
See 67 Fed. Reg. 69769 (Nov. 19, 2002). This proposal was dropped from the final version of the Circular adopted in
2003.
29
The White House, Office of the Press Secretary, Government Contracting: Memorandum for the Heads of Executive
Departments and Agencies, Mar. 4, 2009, available at http://www.whitehouse.gov/the_press_office/Memorandum-forthe-Heads-of-Executive-Departments-and-Agencies-Subject-Government-Contracting.
30
Defense Budget Recommendation Statement, As Prepared for Delivery by Secretary of Defense Robert M. Gates,
Arlington, VA, Monday, April 06, 2009, available at http://www.defenselink.mil/speeches/speech.aspx?speechid=
1341.
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Current Definitions of “Inherently Governmental
Functions”
Two main definitions of inherently governmental functions currently exist within federal law and
policy. One is a statutory definition, enacted as part of the Federal Activities Inventory Reform
(FAIR) Act of 1998.31 This definition states that an inherently governmental function is “a
function so intimately related to the public interest as to require performance by Federal
Government employees.”32 The other is a policy-oriented definition contained in Office of
Management and Budget (OMB) Circular A-76.33 This definition states that an inherently
governmental activity is “an activity that is so intimately related to the public interest as to
mandate performance by government personnel.”34 Other statutes and regulations that define
inherently governmental functions do so either by reproducing the language of the FAIR Act or
OMB Circular A-76, or by incorporating the definitions of the FAIR Act or OMB Circular A-76
by reference. The Federal Acquisition Regulation (FAR) is a prime example of this.35 The FAR
does not provide a unique definition of inherently governmental functions. Rather, it incorporates
the definition of OMB Circular A-76 by reference for purposes of Subpart 7.3, which focuses
upon “contractor versus government performance,” 36 and it reproduces this definition in its own
definitions section37 for purposes of Subpart 7.5, which identifies “inherently governmental
functions.”
In addition to these definitions, there are numerous statutory, regulatory, and policy provisions
designating specific functions as inherently governmental or commercial. These provisions also
help establish the meaning of “inherently governmental functions” by specifying what is—and is
not—included within that category. Similarly, while not offering their own definitions of
inherently governmental functions, the Government Accountability Office (GAO) and the federal
courts have tests for identifying inherently governmental functions that they use in designating
specific functions as inherently governmental or commercial.
This section surveys the current definitions of inherently governmental functions, as well as the
functions that have been designated as inherently governmental or commercial by statute,
regulation, policy, or GAO or judicial decision. It addresses (1) statutory definitions and
declarations; (2) policy-based definitions and declarations; (3) definitions and declarations from
administrative law, including GAO decisions; and (4) designations in federal court decisions.
31
P.L. 105-270, 112 Stat. 2382 (1998) (codified at 31 U.S.C. § 501 note).
31 U.S.C. § 501 note, at § 5(2)(A).
33
OMB, Circular No. A-76 Revised, May 29, 2003, available at http://www.whitehouse.gov/omb/circulars/a076/
a76_incl_tech_correction.html.
34
OMB Circular A-76, Attachment A, at § (B)(1)(a).
32
35
The FAR is promulgated by the General Services Administration (GSA), the Department of Defense (DOD), and the
National Aeronautics and Space Administration (NASA) under the authority of the Office of Federal Procurement
Policy Act of 1974. See Office of Federal Procurement Policy Act of 1974, P.L. 93-400, 88 Stat. 796 (codified at 41
U.S.C. §§ 401-438); DOD, GSA & NASA, Establishing the Federal Acquisition Regulation: Final Rule, 48 Fed. Reg.
42102, 42142 (Sept. 19, 1983).
36
48 C.F.R. § 7.301.
37
See 48 C.F.R. § 2.101 (“‘Inherently governmental function’ means, as a matter of policy, a function that is so
intimately related to the public interest as to mandate performance by Government employees. This definition is a
policy determination, not a legal determination.”).
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Statutory Definitions and Declarations
The FAIR Act provides the primary statutory definition of inherently governmental functions.
There are, however, several other statutory definitions of inherently governmental functions and
“functions closely associated with inherently governmental functions.” Some of these definitions
mirror the definitions of the FAIR Act or OMB Circular A-76, while others incorporate the
definitions of the FAIR Act or OMB Circular A-76 by reference. There are also numerous
statutory provisions declaring that specific functions are inherently governmental.
The FAIR Act
Originally introduced as the Freedom from Government Competition Act of 1997, the FAIR Act
was designed to promote executive agencies’ compliance with OMB Circular A-76.38 OMB
Circular A-76 predated the FAIR Act and expressed the federal government’s general policy of
relying on competitive private enterprises to supply the commercial products and services it
needs. 39 OMB Circular A-76 also provided procedures for agencies to conduct cost comparisons
to determine whether the government or private enterprises should perform specific activities on
the government’s behalf.40 However, although OMB Circular A-76 established policies and
procedures, it reportedly failed to result in public-private competitions for performance of
commercial activities, or agencies’ contracting with the private sector for performance of their
commercial activities. 41 The FAIR Act sought to address this situation by requiring agencies to
compile annual lists of all commercial activities they perform and make these lists available to
Congress and the public.42 The FAIR Act does not require agencies to contract out any particular
activities, however.43 It requires only that agencies use competitive processes to select the source
when they consider contracting with private sector sources for performance of certain activities
performed by government employees.44
Although the FAIR Act’s primary focus is upon commercial activities performed by government
agencies, it defined inherently governmental functions in order to contrast them with commercial
38
See, e.g., H.R. 4244, Federal Activities Inventory Reform Act: Hearing Before the Subcomm. on Gov’t Mgmt., Info.,
& Tech. of the Comm. on Gov’t Reform & Oversight, 105th Cong., 2d Sess. 1 (Aug. 6, 1998) (statement of John J.
Duncan, Jr., Representative from Tennessee). As originally introduced, the Freedom from Government Competition
Act would have prohibited agencies from beginning or carrying out any activity whose products or services could be
provided by the private sector.
39
Bulletin 55-4 of the Bureau of the Budget, issued on January 15, 1955, first articulated the policy of OMB Circular
A-76. Bulletin 55-4 was revised in 1957 and 1960 before being reissued as OMB Circular A-76 in 1966. OMB Circular
A-76 was itself revised in 1967, 1979, 1983, 1991, 1999, and 2003. For more on OMB Circular A-76, see CRS Report
RS21489, OMB Circular A-76: Explanation and Discussion of the Recently Revised Federal Outsourcing Policy, by
(name redacted).
40
See Luckey, supra note 39, at 2.
41
See, e.g., H.R. 4244, supra note 38, at 30 (statement of Stephen Horn, Chairman, House Subcommittee on
Government Management, Information, and Technology) (“Outside of the Department of Defense, not one single
agency uses A-76 competitions.”).
42
31 U.S.C. § 501 note, at § 2(a) & (c).
43
In fact, there is no statute establishing a general federal policy of or requirement for contracting out. There is only
Section 2462(a) of Title 10 of the United States Code, which says that the Department of Defense should contract out
services that the private sector can provide more cheaply.
44
31 U.S.C. § 501 note, at § 2(e).
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activities. 45 The FAIR Act’s definition of inherently governmental functions is itself brief: “The
term ‘inherently governmental function’ means a function that is so intimately related to the
public interest as to require performance by Federal Government employees.”46 This definition is,
however, followed by lengthy lists of functions included in and excluded from the definition of
inherently governmental functions under the act.47
The FAIR Act describes the “functions included” within its definition of inherently governmental
function as ones that “require either the exercise of discretion in applying Federal Government
authority or the making of value judgments in making decisions for the Federal Government,
including judgments relating to monetary transactions and entitlements.”48 The act then gives a
non-exclusive list of examples of the types of “functions included.” These are
1. binding the United States to take, or not to take, action by contract, policy,
regulation, authorization, order or otherwise;
2. determining, protecting, and advancing U.S. economic, political, territorial,
property, or other interests by military or diplomatic action, civil or criminal
judicial proceedings, contract management, or otherwise;
3. significantly affecting the life, liberty, or property interests of private persons;
4. commissioning, appointing, directing or controlling officers or employees of the
United States; or
5. exerting ultimate control over the acquisition, use, or disposition of the real or
personal, tangible or intangible, property of the United States, including the
collection, control or disbursement of appropriated and other federal funds. 49
The FAIR Act further describes the “functions excluded” from its definition of inherently
governmental functions as those involving (1) gathering information for or providing advice,
opinions, recommendations, or ideas to federal officials, or (2) any function that is primarily
ministerial and internal in nature.50 It concludes by giving examples of ministerial and internal
functions, which include building security, mail operations, cafeteria operations, housekeeping,
facilities operations and maintenance, warehouse operations, motor vehicle fleet management
operations, or other routine electrical or mechanical services. 51
The FAIR Act’s definition of inherently governmental functions and listing requirements apply to
all executive branch agencies named in 5 U.S.C. § 101, all military departments named in 5
U.S.C. § 102, and all independent establishments as defined in 5 U.S.C. § 104.52 However, the
FAIR Act explicitly exempts from the act’s requirements (1) GAO; (2) government corporations
or government-controlled corporations, as defined in 5 U.S.C. § 103; (3) non-appropriated funds
45
31 U.S.C. § 501 note, at § 5(2)(A). The FAIR Act does not define commercial activities. Only OMB Circular A-76
provides such a definition.
46
Id.
47
31 U.S.C. § 501 note, at § 5(2)(B)&(C).
48
31 U.S.C. § 501 note, at § 5(2)(B).
49
31 U.S.C. § 501 note, at § 5(2)(B)(i)-(v).
50
31 U.S.C. § 501 note, at § 5(2)(C).
51
Id.
52
31 U.S.C. § 501 note, at § 4(a)(1)-(3).
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instrumentalities, as described in 5 U.S.C. § 2105(c); (4) certain depot-level maintenance and
repair activities of the Department of Defense, as described in 10 U.S.C. § 2460; and (5) agencies
with fewer than 100 full-time employees as of the first day of the fiscal year.53
Other Statutory Definitions
In addition to the FAIR Act, other statutes have “definitions” sections that include “inherently
governmental functions” or “functions closely associated with inherently governmental
functions.”
Two of these statutes provide a definition of inherently governmental functions that, while closely
related to the definitions of the FAIR Act and OMB Circular A-76, does not reproduce either of
these definitions verbatim. The Coast Guard appropriations authorization act for FY2004 and
FY2005 and the National and Community Service Trust Act of 1993 both define an inherently
governmental function as
any activity that is so intimately related to the public interest as to mandate performance by
an officer or employee of the Federal Government, including an activity that requires either
the exercise of discretion in applying the authority of the Government or the use of judgment
in making a decision for the Government.54
The verb “mandate” in this definition matches the verb in the definition of OMB Circular A-76,
but this definition departs from the definition of OMB Circular A-76 by using “officer or
employee of the Federal Government” where OMB Circular A-76 uses “Federal Government
employees.”55 This definition also specifically incorporates the functions of exercising discretion
and using judgment that are mentioned in OMB Circular A-76 and are among the “functions
included” within the FAIR Act’s definition of inherently governmental functions. 56
Outside of the Coast Guard appropriations authorization act for FY2004 and FY2005 and the
National and Community Service Trust Act of 1993, however, no statute provides a definition of
inherently governmental functions different from that in the FAIR Act or OMB Circular A-76.
Many statutes incorporate the definition from OMB Circular A-76 by reference when defining
inherently governmental functions. 57 Several of these statutes also use the related term, “functions
closely associated with inherently governmental functions,” but likewise incorporate the
definition of OMB Circular A-76 by reference. 58
53
31 U.S.C. § 501 note, at § 4(b)(1)-(5).
National and Community Service Trust Act of 1993, P.L. 103-82, § 196, 107 Stat. 785 (codified at 42 U.S.C. §
12651g(a)(1)(C)(iii)); A Bill to Authorize Appropriations for Fiscal Years 2004 and 2005 for the United States Coast
Guard, and for Other Purposes, P.L. 108-293, § 302, 118 Stat. 1028 (codified at 33 U.S.C. § 1223(e)).
55
Compare 33 U.S.C. § 1223(e) and 42 U.S.C. § 12651g(a)(1)(C)(iii) with OMB Circular A-76, Attachment A, at
(B)(1)(a).
56
Compare 33 U.S.C. § 1223(e) and 42 U.S.C. § 12651g(a)(1)(C)(iii) with OMB Circular A-76, Attachment A, § at
(B)(1)(a) and 31 U.S.C. § 501 note, at § 5(2)(B).
57
See, e.g., 10 U.S.C. § 2330a(g)(4) (defining inherently governmental functions by reference to 10 U.S.C.§
2383(b)(2)). Section 2383(b)(2) of Title 10 of the United States Code does not itself define inherently governmental
functions. Rather, it incorporates the FAR’s definition by reference. See infra notes 94 to 96 and accompanying text for
more on how the FAR defines inherently governmental functions.
58
See, e.g., 10 U.S.C. § 2330a(g)(3) (defining functions closely associated with inherently governmental functions by
reference to 10 U.S.C.§ 2383(b)(3)); 10 U.S.C. § 2463(e) (same). Section 2383(b)(3) of Title 10 of the United States
(continued...)
54
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Statutory Declarations of Specific Functions as Inherently Governmental
Several provisions of federal law declare that specific functions are inherently governmental
without defining inherently governmental functions. Sometimes, specific functions are defined as
inherently governmental without reference to the FAIR Act or the employees performing the
functions at the time of the statute’s enactment. Examples of such functions are (1) the
preparation of agency strategic plans and program performance reports under the Government
Performance and Results Act of 199359 and (2) functions connected with the operation and
maintenance of hydroelectric power-generating facilities at water resources projects of the Army
Corps of Engineers.60 At other times, specific groups of employees, who were performing certain
functions at the time of the statute’s enactment, are classified as inherently governmental for
purposes of the FAIR Act. Examples include federal employees at the National Energy
Technology Laboratory61 and instructor staff at the Federal Law Enforcement Training Center.62
At yet other times, Congress effectively renders certain functions inherently governmental, at
least temporarily, without classifying them as such, by providing that appropriated funds cannot
be expended to contract them out.63 Finally, Congress sometimes signals its concerns about the
executive branch’s classification of specific functions without either enacting legislation
designating the functions as inherently governmental or precluding the use of appropriated funds
to contract the functions out. Congress can do this by expressing its sense that certain functions
are inherently governmental,64 or by imposing additional restrictions—beyond those in the FAIR
Act, OMB Circular A-76, or the FAR—upon contracting out activities that are arguably closely
associated with inherently governmental functions.65
(...continued)
Code does not itself define functions closely associated with inherently governmental functions. Rather, it incorporates
by reference the definition of the FAR. See infra notes 94 to 96 and accompanying text for more on how the FAR
defines inherently governmental functions.
59
P.L. 103-62, 107 Stat. 285 (1993) (codified at 5 U.S.C. § 306; 31 U.S.C. §§ 1115-1116; & 39 U.S.C. § 2805).
60
Water Resources Development Act of 1990, P.L. 101-640, § 314, 104 Stat. 4641 (codified at 33 U.S.C. § 2321).
61
U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, P.L.
110-28, § 6201, 121 Stat. 112 (May 25, 2007).
62
Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, P.L. 110-329, § 521, 122 Stat.
3574 (September 30, 2008).
63
See, e.g., Consolidated Appropriations Act, P.L. 110-161, § 730, 121 Stat. 1846 (Dec. 26, 2007) (“None of the funds
made available in this Act maybe used to study, complete a study of, or enter into a contract with a private party to
carry out, without specific authorization in a subsequent Act of Congress, a competitive sourcing activity of the
Secretary of Agriculture, including support personnel of the Department of Agriculture, relating to rural development
or farm loan programs.”). See also id. at §§ 103, 111, 415, & 739.
64
See, e.g., Duncan Hunter National Defense Authorization Act for FY2009, P.L. 110-417, § 832, 122 Stat. 4535 (Oct.
14, 2008) (“It is the sense of Congress that ... the regulations issued by the Secretary of Defense pursuant to section
862(a) of the National Defense Authorization Act for Fiscal Year 2008 ... should ensure that private security
contractors are not authorized to perform inherently governmental functions in an area of combat operations.”).
65
See, e.g., 5 U.S.C. § 1101 (providing that functions formerly performed by the Defense Security Service and
transferred to the Office of Personnel Management (OPM) may not be converted to contractor performance until the
Director of OPM makes a written determination that they are commercial or appropriate for contractor performance);
10 U.S.C. § 2330a(e)(2)(B)-(C) (requiring the secretary or head of each defense agency responsible for activities on a
list created under the FAIR Act to review the list and ensure that it does not include inherently governmental functions
or, to the maximum extent practicable, functions closely associated with inherently governmental functions); 10 U.S.C.
§ 2383 (allowing the head of a defense agency to enter into a contract for the performance of acquisitions functions
closely associated with inherently governmental functions only when, among other requirements, there are appropriate
military and civilian employees to supervise the contractor’s performance and to perform all inherently governmental
functions associated with the functions to be performed under the contract).
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Alternatively, but more rarely, Congress expresses its sense that certain functions are
commercial, 66 or appropriates funds to contract out activities that some commentators might seek
to classify as inherently governmental. 67
Policy-Based Definitions and Declarations
OMB Circular A-76 provides the other main definition of inherently governmental functions used
in federal law and policy. Office of Federal Procurement Policy Letter 92-1, which provided
another significant policy-based definition of inherently governmental functions, was superseded
by the 2003 revision of OMB Circular A-76. On March 31, 2010, OMB, through the Office of
Federal Procurement Policy, issued a proposed policy letter which would adopt the FAIR Act
definition as the single definition of inherently governmental and provide guidance as to its
implementation. Another policy document, Department of Defense Instruction Number 1100.22,
in its revision of April 6, 2007, both provides a basic definition of inherently governmental
functions and designates numerous DOD functions as inherently governmental or commercial.
OMB Circular A-76
Like its predecessors, the current OMB Circular A-76 “establishes federal policy for the
competition of commercial activities.”68 It both (1) articulates the “longstanding policy of the
federal government ... to rely on the private sector for needed commercial services” and (2)
establishes procedures for agencies to use in determining whether their commercial activities
should be performed under contracts with the private sector or in-house by agency personnel. 69
Although pre-2003 versions of OMB Circular A-76 focused on listing only commercial activities,
the current version of OMB Circular A-76 requires agencies to list all activities they perform and
classify these activities as commercial or inherently governmental. 70 All activities classified as
66
See, e.g., National Aeronautics and Space Administration Authorization Act of 2008, P.L. 110-422, § 901, 122 Stat.
4803-04 (Oct. 15, 2008) (“It is the sense of Congress that a healthy and robust commercial sector can make significant
contributions to the successful conduct of NASA’s space exploration program. While some activities are inherently
governmental in nature, there are many other activities, such as routine supply of water, fuel, and other consumables to
low Earth orbit or to destinations beyond low Earth orbit, and provision of power or communications services to lunar
outposts, that potentially could be carried out effectively and efficiently by the commercial sector at some point in the
future.”).
67
See, e.g., 31 U.S.C. § 3711 & 3718 (allowing use of private contractors to collect debts owed to the United States);
Social Security Amendments of 1965, P.L. 89-97, 79 Stat. 286 (authorizing the Department of Health and Human
Services to use contractors to administer the Medicare Insurance Program); Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, P.L. 96-510, 94 Stat. 2767 (allowing use of contractors in the Superfund
program).
68
OMB Circular A-76 Revised, May 29, 2003, at § 1.
69
OMB Circular A-76, at § 4.
70
Compare OMB Circular A-76, at § 4(a) (“[A]gencies shall ... [i]dentify all activities performed by government
personnel as either commercial or inherently governmental.”) with OMB Circular No. A-76, Revised 1999, at § 10,
available at http://www.whitehouse.gov/omb/circulars/a076/a076.html (“As required by the Federal Activities
Inventory Reform Act of 1998 and Appendix 2 of the Supplement, no later than June 30 of each year, agencies shall
submit to OMB a Commercial Activities Inventory and any supplemental information requested by OMB.”). In fact,
the current version of OMB Circular A-76 requires that agencies “justify, in writing, any designation of governmental
personnel performing inherently governmental functions.” This difference between the 1999 and 2003 versions of
OMB Circular A-76 reflects the Bush Administration’s attempt in 2002 to create a presumption that all functions of
government agencies are commercial. See OMB, Performance of Commercial Activities, 67 Fed. Reg. 69769, 69772
(Nov. 19, 2002) (“The revised Circular will require agencies to presume that all activities are commercial in nature
(continued...)
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inherently governmental under OMB Circular A-76 must be performed by government
personnel. 71 Only those activities classified as commercial can be considered for contracting out.
Even in its pre-2003 versions, before agencies were required to list and classify inherently
governmental activities, OMB Circular A-76 defined inherently governmental functions when
characterizing them as the opposite of commercial activities. The definition in OMB Circular A76 is itself brief, like the definition in the FAIR Act. The current version of OMB Circular A-76
says only that “An inherently governmental activity is an activity that is so intimately related to
the public interest as to mandate performance by government personnel.”72 However, OMB
Circular A-76, also like the FAIR Act, follows its brief definition of inherently governmental
functions with clarification and examples. The paragraph within the current version of OMB
Circular A-76 that defines inherently governmental functions continues by stating
[Inherently governmental] activities require the exercise of substantial discretion in applying
government authority and/or in making decisions for the government. Inherently
governmental activities normally fall into two categories: the exercise of sovereign
government authority or the establishment of procedures and processes related to the
oversight of monetary transactions or entitlements. An inherently governmental activity
involves:
(1) Binding the United States to take or not to take some action by contract, policy,
regulation, authorization, order, or otherwise;
(2) Determining, protecting, and advancing economic, political, territorial, property, or other
interests by military or diplomatic action, civil or criminal judicial proceedings, contract
management, or otherwise;
(3) Significantly affecting the life, liberty, or property of private persons; or
(4) Exerting ultimate control over the acquisition, use, or disposition of United States
property (real or personal, tangible or intangible), including establishing policies or
procedures for the collection, control, or disbursement of appropriated and other federal
funds.73
This language largely corresponds to that of the FAIR Act’s examples of “functions included” in
its definition of inherently governmental functions. 74 However, the FAIR Act does include one
example that is not included in OMB Circular A-76: the commissioning, appointing, directing, or
controlling of officers or employees of the United States.75
The current version of OMB Circular A-76 then provides some further explanations that are
unlike those in the FAIR Act or other sources, however. It first distinguishes between the exercise
of discretion per se, which it says does not make a function inherently governmental, and the
(...continued)
unless an activity is justified as inherently governmental.... To reinforce this presumption, agencies will be required to
submit annual inventories of their inherently governmental positions.”).
71
OMB Circular A-76, at § 4.b.
72
OMB Circular A-76, Attachment A, at § (B)(1)(a).
73
Id.
74
See 31 U.S.C. § 501 note, at § 5(2)(B)(i)-(v).
75
See id. at § 5(2)(B)(iv).
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exercise of substantial discretion, which it says makes a function inherently governmental. 76 It
then notes that “[a]n activity may be provided by contractor support ... where the contractor does
not have the authority to decide on the course of action, but is tasked to develop options or
implement a course of action, with agency oversight,” before listing six factors that agencies
should consider to avoid transferring inherently governmental functions to contractors.77 See
Appendix B for a listing of these six factors. The current version of OMB Circular A-76 also
explicitly defines commercial activities:
A commercial activity is a recurring service that could be performed by the private sector
and is resourced, performed, and controlled by the agency through performance by
government personnel, a contract, or a fee-for-service agreement. A commercial activity is
not so intimately related to the public interest as to mandate performance by government
personnel. Commercial activities may be found within, or throughout, organizations that
perform inherently governmental activities or classified work.78
Additionally, it includes—but does not define—a category of activities that are commercial but
“not appropriate for private sector performance.”79
OMB Circular A-76 and its definition of inherently governmental functions apply to all executive
departments named in 5 U.S.C. § 101 and all independent establishments as defined in 5 U.S.C. §
104. There are no exemptions.
OMB Circular A-76 is, however, a statement of policy, not law. For OMB Circular A-76 to have
the force of law, it would need (1) to be the product of a congressional grant of legislative
authority promulgated in accordance with any procedural requirements imposed by Congress and
(2) a substantive- or legislative-type rule affecting individual rights and obligations. 80 Neither of
76
OMB Circular A-76, Attachment A, at § (B)(1)(b) (“While inherently governmental activities require the exercise of
substantial discretion, not every exercise of discretion is evidence that an activity is inherently governmental. Rather,
the use of discretion shall be deemed inherently governmental if it commits the government to a course of action when
two or more alternative courses of action exist and decision making is not already limited or guided by existing
policies, procedures, directions, orders, and other guidance that (1) identify specified ranges of acceptable decisions or
conduct and (2) subject the discretionary authority to final approval or regular oversight by agency officials.”). The
focus upon the exercise of substantial discretion, as opposed to discretion per se, is a difference between the 1999 and
2003 versions of OMB Circular A-76. See OMB Circular No. A-76, Revised 1999, supra note 70 (“[T]hese functions
include those activities which require either the exercise of discretion in applying Government authority or the use of
value judgment in making decisions for the Government.”) (emphasis added). Some commentators have suggested that
the addition of “substantial” in 2003 represented a significant change in the definition of inherently governmental
functions and facilitated the contracting out of allegedly inherently governmental functions by the Bush
Administration. See, e.g., Am. Fed’n of Gov’t Employees (AFGE), Privatization: Cleaning Up the Mess, Feb. 9, 2009,
available at http://www.afge.org/index.cfm?page=2005LegislativeConferenceIssuePapers&fuse=Content&ContentID=
1745 (“OMB officials illegally watered down the statutory definition when they overhauled the A-76 Circular” in
2003). However, Office of Federal Procurement Policy Letter 92-1, discussed below, also referred to the exercise of
“substantial discretion” as characterizing inherently governmental functions, and the Bush Administration’s revision of
OMB Circular A-76 incorporated and superseded Policy Letter 92-1.
77
OMB CircularA-76, Attachment A, at § (B)(1)(c).
78
OMB Circular A-76, Attachment A, at § (B)(2).
79
OMB Circular A-76, Attachment A, at § (C)(1). Pre-2003 versions of OMB Circular A-76 also listed examples of
108 commercial activities, grouped within 16 categories. OMB Circular No. A-76, Revised 1999, Attachment A, supra
note 70. One of these categories was security, which included guard and protective services. Id.
80
See, e.g., Chrysler Corp. v. Brown, 441 U.S. 281, 295-302 (1979) (articulating the requirements for a statement of
executive branch policy to have the force of law).
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these requirements are met in the case of OMB Circular A-76.81 Congress did not explicitly grant
the executive branch legislative authority to promulgate OMB Circular A-76; rather, the
Eisenhower Administration took it upon itself to promulgate Bulletin 55-4 of the Bureau of the
Budget, the predecessor of OMB Circular A-76.82 Similarly, OMB Circular A-76 prescribes
federal policy and procedures for agencies’ contracting out, matters not affecting individual
rights. Contractors do not generally have due process or other rights to prospective contracts with
the federal government.83
Proposed OFPP Letter
On March 31, 2010, OMB, through the Office of Federal Procurement Policy, issued notice of a
proposed policy letter. 84 The proposed policy letter adopts the FAIR Act definition as the single,
government-wide definition. It also provides guidance to help agencies determine whether a
given function meets the definition of an “inherently governmental function.” The letter retains a
list of examples of inherently governmental functions, currently found in FAR Subpart 7.5.85
Created are two tests for agencies to use in determining whether functions not appearing on the
list otherwise fall within the definition of inherently governmental. The “nature of the function”
test would ask agencies to consider whether the direct exercise of sovereign power is involved.
Such functions are uniquely governmental and, therefore, inherently governmental. The
“discretion” test would ask agencies to evaluate whether the discretion associated with the
function, when exercised by a contractor, would have the effect of committing the government to
a course of action.
The proposed letter, also, gives guidance as to identifying “functions which are closely associated
with inherently governmental functions,” and “critical functions.” Public comment is requested
on 11 specific aspects of the proposed letter. The letter is open to comment until June 1, 2010, and
will not become final until 30 days after issuance of the final policy letter.
OFPP Letter 92-1
Prior to the 2003 revision of OMB Circular A-76, Office of Federal Procurement Policy (OFPP)
Letter 92-1 was another important policy document containing a definition of inherently
81
See, e.g., U.S. Dep’t of Health & Human Servs. v. Fed. Labor Relations Auth. (FLRA), 844 F.2d 1087 (4th Cir. 1988)
(holding that OMB Circular A-76 does not have the force of law); Defense Language Inst. v. FRLA, 767 F.2d 1398 (9th
Cir. 1985) (same).
82
H.R. 4244, supra note 38, at 73 (“In 1954, a bill to address [government competition with the private sector] was
reported by this committee, passed the House, and was reported ... in the Senate. At that point, the Eisenhower
administration indicated that they would resolve the matter administratively. Bureau of the Budget Bulletin 55-4 was
issued and further action on the legislation was suspended.”).
83
See, e.g., Perkins v. Lukens Steel Co., 310 U.S. 113, 127 (1940) (“We find nothing ... indicating any intention to
abandon a principle acted upon since the Nation’s founding under which the legislative and executive departments have
exercised complete and final authority to enter into contracts for Government purchases.”).
84
75 F.R. 16188 (March 31, 2010). This proposal was in response to the Presidential Memorandum on Government
Contracting of March 4, 2009 (See, supra, at note 29) and consistent with the mandate of § 321 of the National Defense
Authorization Act for Fiscal Year 2009 to create a single definition for the term “inherently governmental function”
that addresses any deficiencies in the existing definitions and reasonably applies to all agencies; and to establish criteria
to be used by agencies to identify “critical” functions and positions that should only be performed by federal employees
(P.L. 110-417, § 321, 122 Stat. 4356, 4411 (Oct. 14, 2008)).
85
See, Appendix E of this report.
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governmental functions.86 It was designed to “assist Executive Branch officers and employees in
avoiding an unacceptable transfer of official responsibility to Government contractors.”87 It
specifically prohibited contracting out inherently governmental functions,88 which it defined as
“[functions] that [are] so intimately related to the public interest as to mandate performance by
Government employees.”89 This definition is identical to that in OMB Circular A-76 except for its
last word and the capitalization of its next-to-last word. OFPP Letter 92-1 uses “Government
employees” where OMB Circular A-76 uses “government personnel.” 90 OFPP Letter 92-1 is still
occasionally cited as an authority on the definition of inherently governmental functions.91
However, the 2003 revision of OMB Circular A-76 incorporated some of its contents and
superseded it.92
DODI 1100.22
When DOD functions are involved, Department of Defense Instruction (DODI) 1100.22,
Guidance for Determining Workforce Mix, also provides a basic definition of inherently
governmental functions and designates specific functions as inherently governmental or
commercial. Like OMB Circular A-76, but unlike the FAIR Act, DODI 1100.22 includes a clear
statement that “functions and tasks that are [inherently governmental] shall be performed by
government personnel.”93 DODI 1100.22 provides a basic definition of inherently governmental
functions as “includ[ing], among other things, activities that require either the exercise of
discretion when applying Federal Government authority or value judgments when making
decisions for the Federal Government.”94 This definition corresponds to the description of the
types of functions included in the definitions of inherently governmental functions in the FAIR
Act and OMB Circular A-76.95
In addition to this basic definition, however, DODI 1100.22 provides lengthy lists of what
functions do—and do not—qualify as an inherently governmental in the context of DOD
operations. Appendix C summarizes how functions performed by military personnel are
classified as inherently governmental or commercial within DODI 1100.22. Appendix D
provides a similar summary of DODI 1100.22’s classification of functions performed by civilian
employees of DOD.
86
OMB, Policy Letter 92-1, Sept. 23, 1992, available at http://www.whitehouse.gov/omb/procurement/policy_letters/
92-1_092392.html.
87
Id. at § 1.
88
Id. at § 6(a)(1).
89
Id. at § 5.
90
Compare id. with OMB Circular A-76, Attachment A, at § (B)(1)(a).
91
See, e.g., Statement of P. Jackson Bell, Deputy Under Secretary, Logistics and Materiel Readiness, Department of
Defense, to the House Armed Services Subcommittee on Readiness, CQ Cong. Testimony, Mar. 11, 2008.
92
OMB Circular A-76, at § 2.
93
Dep’t of Def., Instruction Number 1100.22, April 6, 2007, at § 4.1, available at http://www.dtic.mil/whs/directives/
corres/pdf/110022p.pdf.
94
Id.
95
Compare id. with 31 U.S.C. § 501 note, at § 5(2)(B) and OMB CircularA-76, Attachment A, at § (B)(1)(a).
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Administrative Law Provisions and Declarations
The key administrative law source on inherently governmental functions is the Federal
Acquisition Regulation. Where DOD functions are involved, the Defense Federal Acquisition
Regulation Supplement also addresses inherently governmental functions. Further declarations of
specific functions as inherently governmental or commercial come from executive orders and
GAO decisions.
Federal Acquisition Regulation
In addition to the FAIR Act and OMB Circular A-76, the Federal Acquisition Regulation (FAR) is
the third major source of federal law and policy on inherently governmental functions. Two
subparts of the FAR—Subpart 7.3 on “contractor versus government performance” and Subpart
7.5 on “inherently governmental functions”—address such functions.
Subpart 7.3 is designed to provide executive branch officials with procedures for contracting out
those functions that were found to be appropriate for private-sector performance under OMB
Circular A-76 or other authority. This subpart incorporates the definition of OMB Circular A-76
by reference96 and, like OMB Circular A-76, which requires that agencies perform inherently
governmental functions with government personnel, specifies that “[c]ontracts shall not be used
for the performance of inherently governmental functions.”97
Subpart 7.5 relies on a definition of inherently governmental functions, contained in Subpart 2 of
the FAR, that essentially mirrors the definition of OMB Circular A-76:
“Inherently governmental function” means, as a matter of policy, a function that is so
intimately related to the public interest as to mandate performance by Government
employees. This definition is a policy determination, not a legal determination. An inherently
governmental function includes activities that require either the exercise of discretion in
applying Government authority, or the making of value judgments in making decisions for
the Government. Governmental functions normally fall into two categories: the act of
governing, i.e., the discretionary exercise of Government authority, and monetary
transactions and entitlements.
(1) An inherently governmental function involves, among other things, the interpretation and
execution of the laws of the United States so as to—
(i) Bind the United States to take or not to take some action by contract, policy, regulation,
authorization, order, or otherwise;
(ii) Determine, protect, and advance United States economic, political, territorial, property,
or other interests by military or diplomatic action, civil or criminal judicial proceedings,
contract management, or otherwise;
(iii) Significantly affect the life, liberty, or property of private persons;
96
48 C.F.R. § 7.301 (“Definitions of “inherently governmental activity” and other terms applicable to this subpart are
set forth at Attachment D of the Office of Management and Budget Circular No. A-76 (Revised), Performance of
Commercial Activities, dated May 29, 2003 (the Circular).”).
97
Compare 48 C.F.R. § 7.503(a) with OMB CircularA-76, § 4(b).
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(iv) Commission, appoint, direct, or control officers or employees of the United States; or
(v) 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 Federal funds.
(2) Inherently governmental functions do not normally include gathering information for or
providing advice, opinions, recommendations, or ideas to Government officials. They also
do not include functions that are primarily ministerial and internal in nature, such as building
security, mail operations, operation of cafeterias, housekeeping, facilities operations and
maintenance, warehouse operations, motor vehicle fleet management operations, or other
routine electrical or mechanical services.98
Subpart 7.5 provides lengthy, but “not all inclusive,” lists of (1) functions that are to be
considered inherently governmental99 and (2) functions that, although not inherently
governmental, “may approach being in that category because of the nature of the function, the
manner in which the contractor performs the contract, or the manner in which the Government
administers contract performance.”100 Appendix E illustrates the functions designated as
inherently governmental, or “approaching” inherently governmental, in the FAR.
Beyond the examples in these lists, the FAR provides none of the elaboration upon the meaning
or identification of inherently governmental functions given by the FAIR Act or OMB Circular A76. The FAR also provides no guidance upon “functions that approach being inherently
governmental” beyond identifying them. It does not bar agencies’ contracting out these functions,
and at least one decision by the U.S. Court of Federal Claims suggests that these functions can
legally be contracted out.101
The FAR’s provisions on inherently governmental functions and functions approaching inherently
governmental functions apply to all executive branch agencies not specifically exempted from the
FAR102 and to all service contracts not obtained through personnel appointments, advisory
committees, or under statutory authority.103
Defense Federal Acquisition Regulation Supplement
The Defense Federal Acquisition Regulation Supplement (DFARS) provides additional guidance
on inherently governmental functions for DOD agencies. Like the provisions of the FAR, the
provisions of the DFARS are developed by notice-and-comment rulemaking and have the force of
law. The DFARS declares that serving as a lead system integrator104 on a DOD contract entails
performing acquisitions functions closely associated with inherently governmental functions and
98
48 C.F.R. § 2.101.
48 C.F.R. § 7.503(c).
100
48 C.F.R. § 7.503(d).
99
101
Gulf Group, Inc. v. United States, 61 Fed. Cl. 338, 341, n.7 (2004) (treating items on the FAR’s list of “functions
approaching inherently governmental” as capable of being contracted out by agencies).
102
Examples of agencies exempted from the FAR include the Federal Aviation Administration and the Postal Service.
103
48 C.F.R. §2.101 & 7.502.
104
A lead system integrator is an agent with authority to acquire and integrate goods from a variety of suppliers on
behalf of the organization that is acquiring a complex system.
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places certain limits on contractors serving as lead systems integrators.105 Other provisions of the
DFARS (1) establish limits, which are lacking in the FAR, on contractor performance of certain
functions closely associated with inherently governmental functions;106 (2) require written
determinations that none of the functions to be performed under contract are exempt from private
sector performance or inherently governmental prior to contracting them out;107 and (3) prohibit
the award of contracts for functions exempted from private sector performance, as well as those
that are inherently governmental.108
Other statements contained in the Federal Register notices introducing DFARS rules, while not
themselves incorporated into the DFARS, indicate that defense agencies consider protection of
property and persons, as performed by private security contractors, a commercial activity. 109
Performing preemptive or other types of attacks, in contrast, is considered inherently
governmental.110
Executive Orders
Executive orders have also been used to designate certain functions as inherently governmental or
commercial. For example, Executive Order 13180, issued by President Clinton on December 7,
2000, designated the “provision of air traffic services” as an inherently governmental function.111
This order was effectively repealed by Executive Order 13264, issued by President George W.
Bush on June 4, 2002, which removed the language designating provision of air traffic services as
an inherently governmental function from its discussion of such services. 112
GAO Decisions
Numerous GAO decisions have also addressed the designation of specific functions as inherently
governmental or commercial. GAO comes to address this question in two contexts: (1) in issuing
advisory opinions, requested by agency officials, addressing whether agencies’ proposed uses of
appropriated funds are permissible and (2) in deciding bid protests when a protester challenges
105
DFARS 252.209-7006.
DFARS 207.503 (S-70) (allowing the head of a DOD agency to enter a contract for the performance of acquisition
functions closely associated with inherently governmental functions only if the contracting officer (1) determines that
appropriate military or civilian DOD personnel (A) cannot reasonably be made available to perform the functions; (B)
will supervise contractor performance of the contract; and (C) will perform all inherently governmental functions
associated with functions to be performed under the contract and (2) ensures that the agency addresses any potential
organizational conflicts of interest of the contractor in performing functions under the contract).
107
DFARS 207.503(e)(ii).
108
DFARS 237.102.
109
Contractor Personnel Authorized to Accompany U.S. Armed Forces, 73 Fed. Reg. 16764, 16765 (Mar. 23, 2005).
See also Brian X. Scott, Comp. Gen. Dec. B-298370 (Aug. 18, 2006) (holding that DOD solicitations for private
security services in and around Iraq complied with DOD policies and regulations, including those prohibiting the
contracting out of inherently governmental functions, because the contractors were not allowed to conduct direct
combat activities or offensive operations).
110
Contractor Personnel Authorized to Accompany U.S. Armed Forces, 71 Fed. Reg. 34826, 34826 (June 16, 2006).
106
111
Executive Order 13180 of December 7, 2000: Air Traffic Performance-Based Organization, 65 Fed. Reg. 77493,
77493 (Dec. 11, 2000).
112
Executive Order 13264 of June 4, 2002: Amendment to Executive Order 13180, Air Traffic Performance-Based
Organization, 67 Fed. Reg. 39243, 39243 (June 7, 2002).
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agencies’ proposed contracting out of allegedly inherently governmental functions.113 GAO’s
decisions in bid protests lack the force of law and do not bind federal agencies or protesters.114 In
neither context does GAO offer its own definition of inherently governmental functions. Rather,
GAO uses a test for identifying inherently governmental functions that is based heavily on OMB
Circular A-76 and the FAR.115
GAO’s test of inherently governmental functions looks for (1) the exercise of substantial
discretionary authority by government contractors or (2) the contractor’s making value judgments
on the government’s behalf. 116 Both are factors mentioned along with the definitions of inherently
governmental functions in the FAIR Act and OMB Circular A-76 and illustrated by the examples
in the FAR.117 In its decision on NRC Contracts for Reactor Licensing Tests, for example, GAO
applied this test to the Nuclear Regulatory Commission’s (NRC’s) proposal to contract out some
of its functions in administering licensing tests for nuclear reactor operators. Under the proposed
contract, the contractor would have prepared, administered, and graded the tests, as well as
provided the NRC with recommendations on which candidates should be granted licenses. GAO
found that the proposed contract did not involve inherently governmental functions because the
NRC guidelines relating to the tests provided “such extensive detail and guidance” that the
contractors had no opportunity to exercise discretion or make value judgments in preparing,
administering, or grading the tests. GAO also emphasized that agency personnel—not the
contractor—would ultimately decide who received licenses. When emphasizing ultimate agency
decision making, GAO highlighted a further distinction between performing a function and
advising or assisting with a function that GAO and the courts sometimes also use when
identifying inherently governmental functions.118
GAO’s decision in the Matter of GSA Transportation Audit Contracts similarly illustrates another
characteristic of GAO decisions addressing whether specific functions are inherently
governmental.119 In this case, the General Services Administration (GSA) proposed to contract
out seven functions it had formerly performed in-house when conducting transportation audits.
113
See, e.g., 2B Brokers et al., Comp. Gen. Dec. B-298651 (Nov. 27, 2006) (a pre-award bid protest claiming that the
agency’s request for proposals provided for the performance of inherently governmental functions by winning bidders);
Gerald P. Carmen, Comp. Gen. Dec. B-198137.1 (June 3, 1982) (advising the General Services Administration on its
proposal to contract out seven functions involved in the conduct of transportation audits).
114
GAO may only issue recommendations to executive branch agencies because it is a legislative branch agency and
the doctrine of separation of powers precludes it from compelling the actions of executive branch agencies. See
Ameron, Inc. v. United States Army Corps of Eng’gs, 809 F.2d 979, 986 (3d Cir. 1986). However, when agencies
decline to implement the recommendations in GAO bid-protest decisions, they must notify GAO within 60 calendar
days. GAO then notifies four congressional committees. 31 U.S.C. § 3554(b)(3). Similarly, protesters who are unhappy
with the recommendations in GAO bid-protest decisions may file suit on the same matter in the Court of Federal
Claims. See Robert S. Metzger & Daniel A. Lyons, A Critical Reassessment of the GAO Bid-Protest Mechanism, 6
Wis. L. Rev. 1225, 1232 & 1248 (2007).
115
GAO focuses on executive branch sources in identifying inherently governmental functions because it addresses
whether the proposed actions of the executive branch agencies conform to the agencies’ governing authorities.
116
See, e.g., Nuclear Regulatory Commission, Comp. Gen. Dec. B-242942 (Aug. 27, 1991).
117
Compare id. with 31 U.S.C. § 501 note, at § 5(2)(B); OMB Circular A-76, Attachment A, at § (B)(1)(a); and 48
C.F.R. § 7.503.
118
See, e.g., Internal Revenue Service: Issues Affecting IRS’ Private Debt Collection Pilot, Comp. Gen. Dec. B-275430
(July 18, 1997) (distinguishing between collection of taxes, which is inherently governmental, and assisting in
collecting taxes by locating and contacting taxpayers to remind them of their tax liability and suggest payment
methods, which is not inherently governmental).
119
Gerald P. Carmen, Comp. Gen. Dec. B-198137.1 (June 3, 1982).
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GAO found that two of these functions were inherently governmental, two were commercial, and
the remaining three were not clearly inherently governmental or commercial based on GSA’s
description of the proposed contracts.120 As this decision illustrates, GAO examines the context of
contractual performance, including the degree of actual supervision that agencies exercise over
contractors allegedly assisting government agencies in performing inherently governmental
functions. It does not typically classify functions as inherently governmental or commercial in the
abstract.
Appendix F illustrates how GAO has classified various functions as inherently governmental or
commercial. Such GAO classifications do not, however, themselves have the force of law. They
are advice or recommendations to agencies.
Judicial Decisions
Federal courts have also addressed the question of whether specific functions are inherently
governmental or commercial. Two contexts prompt courts to determine what is an inherently
governmental function. The first context involves litigation under the FAIR Act, OMB Circular
A-76, and the FAR.121 This context actually entails a smaller number of published decisions than
the second context, which involves litigation concerning constitutional rights. The litigation
concerning constitutional rights itself takes two forms. First, there are cases involving the “state
action doctrine,” which consider whether private actors are performing inherently governmental
functions in determining (1) whether those actors must provide the same constitutional rights to
third parties that the government must provide and (2) whether those actors can claim sovereign
immunity for certain actions like government officials can.122 Second, there are cases involving
the “private delegation doctrine,” which center upon whether a private party was given
impermissible authority to legislate or make rules on the government’s behalf. 123 Legislating and
rulemaking are inherently governmental functions.
120
The three functions that could not be categorized as inherently governmental or commercial based upon the
contractual descriptions of them were (1) answering carriers’ protests on behalf of GSA, (2) communicating with
bankruptcy courts, and (3) preparing proofs of claims under Chapter 11. See id.
121
See, e.g., Arrowhead Metals, Ltd. v. United States, 8 Cl. Ct. 703, 714 (1985) (finding that coinage of money is
inherently governmental but that the U.S. Mint has discretion to determine whether the stamping of blanks constitutes
coinage and is thus exempt from Circular A-76); Northrop Grumman Info. Tech., Inc. v. United States, 74 Fed. Cl. 407
(2006) (addressing information management and technology services under OMB Circular A-76); United States v.
Kenney, 185 F.3d 1217 (11th Cir. 1999) (stating functions are not inherently governmental, for purposes of contracting
out, unless the contractor is in a position to make decisions that are binding on the agency); Nat’l Air Traffic
Controllers Ass’n v. Secretary of the Dep’t of Trans., 997 F. Supp. 874 (1998) (stating that air traffic control is
inherently governmental because it involves national defense).
122
See, e.g., Street v. Corrections Corp. of Am., 102 F.3d 811, 814 (6th Cir. 1996) (finding that operation of a prison is
an inherently governmental function requiring the prison’s operators to respect prisoners’ constitutional rights); Giron
v. Corrections Corp. of Am., 14 F. Supp. 2d 1245, 1248-50 (D.N.M. 1998) (same).
123
See, e.g., Carter v. Carter Coal Co., 298 U.S. 238 (1938) (finding the Bituminous Coal Conservation Act
unconstitutional, in part, because the statute penalized people who failed to observe the requirements for minimum
wages and maximum hours drawn up by prescribed majorities of coal producers and employees); A.L.A. Schechter
Poultry Corp. v. United States, 295 U.S. 495, 537 (1935) (finding unconstitutional the provisions of the National
Industrial Recovery Act, which allowed trade and industry groups to develop codes of fair competition that would
become binding on all participants in the industry once they were approved by the president); St. Louis, Iron Mt. & So.
Ry. v. Taylor, 210 U.S. 281 (1908) (upholding the constitutionality of a statute which gave the American Railway
Association the authority to determine the standard height of draw bars on freight cars and to certify that figure to the
Interstate Commerce Commission, which was required to accept it).
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The courts, like GAO, do not have an independent definition of inherently governmental
functions. In deciding cases under the FAIR Act, OMB Circular A-76, or the FAR, the courts use
the definitions provided in these sources.124 Moreover, in at least some cases, courts give
considerable deference to the executive branch’s classification of a function as inherently
governmental or commercial because of the political question doctrine, under which courts
decline to hear issues that have been entrusted to the discretion of another branch of
government.125 In Arrowhead Metals, Ltd. v. United States, for example, the court found that
coinage of money is inherently governmental but that the U.S. Mint has discretion to determine
whether the stamping of blanks constitutes coinage. 126 In reaching this conclusion, the court noted
its “desire to avoid a legislative-executive controversy” regarding whether the striking of blanks
in the production of coins constitutes an inherently governmental function. 127
In other cases, the courts use a test of inherently governmental functions much like that used by
GAO, focusing upon the degree to which a private party exercises substantial discretion,128 or
makes judgments,129 on the government’s behalf. Functions classified as inherently governmental
under the constitutional test include conducting elections;130 exercising the power of eminent
domain;131 providing police services;132 investigating allegations of child abuse;133 exercising
prosecutorial discretion;134 chartering, oversight, and regulation of companies;135 creation of
public monopolies;136 holding the personal property of prisoners;137 limiting the First Amendment
rights of prisoners;138 taxing and paying governmental indebtedness or obligations;139 devising
tariff regimes;140 and hiring diplomatic staff or civil servants.141 Functions categorized as
124
See, e.g., Arrowhead Metals, 8 Cl. Ct. at 714; Northrop Grumman Info. Tech., 74 Fed. Cl. 407; Kenney, 185 F.3d
1217; Nat’l Air Traffic Controllers Ass’n v. Sec’y of the Dep’t of Transp., 997 F. Supp. 874.
125
See, e.g., Marbury v. Madison, 5 U.S. (1 Cr.) 137, 170 (1803) (“The province of the court is, solely, to decide on the
rights of individuals, not to inquire how the executive, or executive officers, perform duties in which they have a
discretion. Questions in their nature political, or which are, by the constitution and laws, submitted to the executive can
never be made in this court.”). See also Martin v. Mott, 25 U.S. (12 Wheat.) 19 (1827) (holding that the President
acting under congressional authorization has exclusive and unreviewable power to determine when the militia should
be called out); Ware v. Hylton, 3 U.S. (3 Dall.) 199 (1796) (declining to determine whether a treaty had been broken).
126
Arrowhead Metals, Ltd., 8 Cl. Ct. at 717. The U.S. Constitution specifies that Congress shall have the power to
“coin Money.” U.S. Const. art. 1, § 8, cl. 5.
127
Id.
128
See, e.g., Doe v. V. of T., 2003 U.S. Dist. LEXIS 17570 (N.D. Ill., Sept. 30, 2003) (characterizing maintaining a fire
department as inherently governmental because it entails “the exercise of discretion on almost every level of
operation”).
129
See, e.g., Sierra Club v. Lynn, 502 F.2d 43, 59 (5th Cir. 1974) (emphasizing that the agency independently
performed its “judgmental functions” despite the contractor’s involvement).
130
Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 157-58 (1978).
131
Contributors to Pa. Hospital v. Philadelphia, 245 U.S. 20 (1917); Republic of the Philippines v. Marcos, 818 F.2d
1473 (9th Cir. 1987); Chesapeake & Ohio Ry. Co. v. Greenup County, 175 F.2d 169 (6th Cir. 1949).
132
Takle v. Univ. of Wisc. Hosp. & Clinics Auth., 402 F.3d 768 (7th Cir. 2005).
133
Kauch v. Dep’t for Children, Youth & Their Families, 321 F.3d 1 (1st Cir. 2003).
134
Sigman v. United States, 208 F.3d 760 (9th Cir. 2000).
135
Week v. Cayman Islands, 1992 U.S. App. LEXIS 32985 (7th Cir. 1992).
136
Republic of the Philippines v. Marcos, 818 F.2d 1473 (9th Cir. 1987).
137
Kimbrough v. O’Neil, 545 F.2d 1059 (7th Cir. 1976).
138
Bonner v. Coughlin, 545 F.2d 565 (7th Cir. 1976).
139
S.J. Constr., Inc. v. Lewis & Clark Reg’l Water Sys., 2008 U.S. Dist. LEXIS 62192 (D.S.D. 2008).
140
Royal Thai Gov’t v. United States, 441 F. Supp. 2d 1350 (Ct. Int’l Trade 2006).
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commercial, in contrast, include providing transportation services to citizens142 and selling
government land on the government’s behalf.143
Designations of specific functions as inherently governmental in judicial decisions have the force
of law, at least within the jurisdictions where the decisions are precedent and for so long as the
decisions are not overturned. However, a judicial declaration that a function is inherently
governmental under a constitutional test would not necessarily preclude the executive branch
from contracting out this function under the FAIR Act, OMB Circular A-76, or the FAR. Rather,
in the “state action” context, the designation of a function as inherently governmental means only
that the contractor performing the inherently governmental function (1) owes private individuals
the same constitutional rights that the government owes them and (2) can claim sovereign
immunity like government officials can.144 Similarly, in the “private delegation” context, the
designation means only that any regulations issued by the contractor cannot be constitutionally
applied to private individuals.145 The “private delegation” doctrine would not necessarily preclude
the contractor from performing other functions under the contract that resulted in the contractor’s
issuance of the regulations.
Issues and Options for Congress
The 110th Congress required the Office of Management and Budget (OMB) to review existing
definitions of inherently governmental functions and “develop a single consistent definition” of
inherently governmental functions by October 14, 2009.146 Congress did so, in part, because of its
concern that federal agencies may have recently contracted out inherently governmental functions
due to the existence of multiple and/or inconsistent definitions of this term. 147 This section
provides an overview of major policy and legal issues that could be raised by amending the
existing definitions of “inherently governmental functions,” either in response to OMB’s proposal
or otherwise, as well as by other options that Congress could employ to prevent alleged
contracting out of inherently governmental functions.
(...continued)
141
Elliott v. British Tourist Auth., 986 F. Supp. 189 (S.D.N.Y. 1997).
142
Helvering v. Powers, 293 U.S. 214, 216 (1934).
143
Week v. Cayman Islands, 1992 U.S. App. LEXIS 32985 (7th Cir. 1992).
144
See, e.g., West v. Atkins, 487 U.S. 42, 55-56 (1988) (finding that a private doctor was a state actor for purposes of
the Eighth Amendment duty to provide adequate medical care to prisoners). See generally Verkuil, supra note 15, at
431 (“[T]he state action concept does not limit the functions that government can delegate. Instead it
‘constitutionalizes’ after-the-fact delegations that amount to the exercise of public authority.”).
145
See, e.g., Carter v. Carter Coal Co., 298 U.S. 238 (1938) (finding the Bituminous Coal Conservation Act
unconstitutional in part because the statute penalized people who failed to observe the requirements for minimum
wages and maximum hours drawn up by prescribed majorities of coal producers and employees).
146
P.L. 110-417, § 321, 122 Stat. 4411-12 (Oct. 14, 2008). OMB had not issued this report as of January 2010.
147
See, e.g., Correction of Long-Standing Errors in Agencies’ Unsustainable Procurements (CLEAN-UP) Act of 2009,
S. 924, 111th Cong., § 3 (congressional finding that inherently governmental functions “have been wrongly
outsourced”); Concurrent Resolution on the Budget for FY2010, S. Con. Res. 13-42, 111th Cong. (requiring DOD to
“review the role that contractors play in operations, including the degree to which they are performing inherently
governmental functions”) (emphasis added).
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Reliance on Prior Statutory Changes and/or Policies of the Obama
Administration
One option for Congress would be to enact no new legislation addressing the definition of
inherently governmental functions or the classification of specific functions as inherently
governmental until changes required under existing legislation or proposed by the Obama
Administration have been fully implemented.
The 110th and 111th Congresses have enacted several statutes that address contracting out in
general or inherently governmental functions in particular. In addition to the Duncan Hunter
National Defense Authorization Act for FY2009, which required OMB to “develop a single
consistent definition” of inherently governmental functions,148 the Omnibus Appropriations Act,
2009, prohibited agencies from conducting new public-private competitions under OMB Circular
A-76 through September 30, 2009.149 This moratorium on public-private competitions was
effectively extended beyond FY2009 by provisions in subsequent appropriations acts that require
agencies to complete certain studies prior to conducting such competitions.150 Other enacted
legislation
•
requires the Secretary of Defense to include in the Annual Defense Manpower
Requirements Report a “summary of the replacement during the preceding fiscal
year of contract workyears providing support to major Department of Defense
headquarters activities with military end strength or civilian full-time equivalents,
including an estimate of the number of contract workyears associated with the
replacement of contracts performing inherently governmental or exempt
functions”;151
•
grants the Department of Defense authority to use appropriated funds available
for the purchase of contract services that meet requirements anticipated to
continue for five or more years to compensate civilian employees for performing
the same requirements and calls for the promulgation of regulations ensuring that
the department uses this authority to “build government capabilities that are
needed to perform inherently governmental functions, functions closely
associated with inherently governmental functions, and other critical
functions”;152
•
classifies specific functions as inherently governmental;153
148
P.L. 110-417, § 321, 122 Stat. 4411-12 (Oct. 14, 2008).
P.L. 111-8, Title VII, Transfer of Funds, § 737. For more on public-private competitions generally, see CRS Report
RL32079, Federal Contracting of Commercial Activities: Competitive Sourcing Targets, by (name redacted).
150
See Consolidated Appropriations Act, 2010, P.L. 111-117, § 743,—Stat.—(Dec. 16, 2009) (civilian agencies);
Department of Defense Appropriations Act, 2010, P.L. 111-84, § 325, 123 Stat. 2253-54 (Oct. 28, 2009) (defense
agencies).
151
National Defense Authorization Act for FY2010, P.L. 111-84, § 1109, 123 Stat. 2492 (Oct. 28, 2009) (codified at 10
U.S.C. § 115a(f)(1)-(4)).
152
Id. at § 1111.
149
153
See, e.g., Department of Homeland Security Appropriations Act, 2010, P.L. 111-83, § 520, 123 Stat. 2171 (Oct. 28,
2009) (classifying the functions of the Federal Law Enforcement Training Center instructor staff as inherently
governmental).
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•
requires the Secretary of Defense to develop guidance related to personal service
contracts establishing clear distinctions between DOD employees and the
employees of DOD contractors;154
•
expresses the sense of Congress that
security operations for the protection of resources (including people, information,
equipment, and supplies) in uncontrolled or unpredictable high-threat environments
should ordinarily be performed by members of the Armed Forces if they will be
performed in highly hazardous public areas where the risks are uncertain and could
reasonably be expected to require deadly force
and requires that regulations to be issued under Section 862(a) of the National
Defense Authorization Act for FY2008 ensure that private security contractors
are not authorized to perform inherently governmental functions in areas of
combat operations;155
•
requires the Administrator for Federal Procurement Policy to develop and issue a
standard policy to prevent personal conflicts of interest by contractor employees
performing acquisitions functions closely associated with inherently
governmental functions;156
•
expresses Congress’s sense that interrogation of enemy prisoners of war, civilian
internees, retained persons, other detainees, terrorists, or criminals captured,
confined, or detained during or in the aftermath of hostilities is an inherently
governmental function and cannot appropriately be transferred to private sector
contractors;157
•
requires DOD to develop guidelines and procedures to ensure that DOD
considers using DOD civilian employees to perform new or currently contractedout functions that are closely associated with the performance of inherently
governmental functions, among other things;158
•
requires DOD to ensure that DOD’s acquisition workforce is of the appropriate
size and skill level to accomplish inherently governmental functions related to
the acquisition of major systems and defines a “lead system integrator” as “a
prime contractor under a contract for the procurement of services the primary
purpose of which is to perform acquisition functions closely associated with
inherently governmental functions with respect to the development or production
of a major system”;159
154
Duncan Hunter National Defense Authorization Act for FY2009, P.L. 110-417, § 831, 122 Stat. 4534 (Oct. 14,
2008).
155
Id. at § 832, 122 Stat. 4535.
156
Id. at § 841, 122 Stat. 4537-39.
157
Id. at § 1057, 122 Stat. 4611. Subsequent legislation generally prohibited using contractor personnel to interrogate
enemy prisoners of war, civilian internees, retained personnel, or other detainees or personnel in the custody of the
Department of Defense without classifying these functions as inherently governmental. National Defense Authorization
Act for FY2010, P.L. 111-84, § 1038, 123 Stat. 2451-52 (Oct. 28, 2009).
158
National Defense Authorization Act for FY2008, P.L. 110-181, § 324, 122 Stat. 60-61 (Jan. 28, 2008) (codified at
10 U.S.C. § 2463). A similar provision relating to civilian agencies was enacted as part of the Omnibus Appropriations
Act, 2009. P.L. 111-8, § 736, 123 Stat. 689-91 (Mar. 11, 2009).
159
Id. at § 802, 122 Stat. 206-07.
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•
requires the Commission on Wartime Contracting to make specific
recommendations regarding, among other things, the process for determining
which functions are inherently governmental in contingency operations,
including whether providing security in an area of combat operations is
inherently governmental;160 and
•
requires OMB to develop an inventory to track contracts that, among other
things, involve inherently governmental functions. 161
Many of these changes have not yet been fully implemented.
Similarly, the Obama Administration has recently signaled its commitment to have more
functions, in general, performed by the federal government and to ensure that inherently
governmental functions, in particular, are not improperly contracted out. Some commentators
attributed the alleged contracting out of inherently governmental functions during the George W.
Bush Administration, in part, to President Bush’s “management agenda,” which prominently
featured a competitive sourcing initiative. 162 The Obama Administration, in contrast, apparently
intends to in-source, as a matter of policy. 163 Members of the administration have signaled their
belief that contractors have performed inherently governmental functions,164 and that too many
functions were contracted out in prior administrations.165 Additionally, OMB released guidance
concerning “Managing the Multi-Sector Workforce” in July 2009 that cautions against
“overreliance on contractors” and instructs agencies to ensure that functions which are “critical”
but not “inherently governmental” be performed only with federal employees to the extent
required to retain control of the agency mission and operations. However, once the agency has
“sufficient internal capacity” to control its mission and operations, such “essential functions” can
be performed by either contractor or governmental personnel, as can functions that are “essential”
but not “inherently governmental.”166 Executive agencies have also made some plans for in-house
performance of two functions—acquisitions work and provision of security services—whose
160
Id. at § 841, 122 Stat. 230-34.
Consolidated Appropriations Act, 2008, P.L. 110-161, § 748, 121 Stat. 2035 (Dec. 26, 2007). The Omnibus
Appropriations Act, 2009, expanded on this provision by requiring the Office of Management and Budget to submit a
status report on its progress. P.L. 111-8, § 747, 123 Stat. 693 (Mar. 11, 2009).
162
See OMB, Executive Office of the President, Competitive Sourcing: Conducting Public-Private Competition in a
Reasoned and Responsible Manner, July 2003, available at http://www.whitehouse.gov/omb/procurement/
comp_sourcing_072403.pdf.
163
See, e.g., Dana Hedgepeth, Contracting Boom Could Fizzle Out: Jobs Would Return to the Pentagon, Wash. Post,
Apr. 7, 2009, at A1 (“The government said it would hire as many as 13,000 civil servants to replace contractors in the
coming year and up to 39,000 over the next five years.”); Holly Roth & Stephen M. Ryan, President Obama’s Directive
to Evaluate and Change Federal Procurement, Monday Bus. Briefing, Mar. 19, 2009 (noting Obama’s intent to “end[]
the outsourcing of work that should be performed by government workers”).
164
See, e.g., Elisa Castelli, DOD Redirects Contracting Support Work, Fed. Times, June 15, 2008, available at
http://www.federaltimes.com/index.php?S=3578693 (quoting Shay Assad, currently the Defense Procurement and
Acquisition Policy Director, as saying “[W]e do have pockets ... that have small numbers of people that are actually
performing functions I consider inherently governmental.”).
165
Cf. Kevin Baron, Gates’ Plan for Acquisitions Seen as a Start, Stars & Stripes, Apr. 10, 2009, available at
http://www.stripes.com/article.asp?section=104&article=61936 (describing Secretary of Defense Robert Gates’s plan
to expand the DOD’s acquisition workforce by 39,000 jobs, 9,000 of which will be new positions and 30,000 of which
are positions formerly filled by employees of DOD contractors).
166
OMB, Managing the Multi-Sector Workforce, July 29, 2009, available at http://www.whitehouse.gov/omb/assets/
memoranda_fy2009/m-09-26.pdf.
161
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performance by contractors has been of particular concern to Congress.167 Such changes in policy
may suggest that the executive branch is no longer likely to contract out functions that some
allege are inherently governmental.
Waiting to see whether implementation of previously enacted legislation and/or the change in
administration brings the desired changes in agencies’ treatment of specific functions (e.g.,
performance in-house as opposed to contracting out) is one option for Congress. Prior changes in
the law, coupled with the change in administration, might suffice to realize Congress’s intent
without resorting to more extensive changes in the law that could inadvertently limit the options
of future administrations. 168 For example, even without any statutory requirement to do so, the
Department of Homeland Security (DHS) recently announced that it would review all newly
awarded or renewed DHS contracts for services in excess of $1 million “to ensure that proposed
contract awards do not include inherently government functions or impact core functions that
must be performed by federal employees.”169
Alternatively, Congress might decide that additional oversight or further statutory changes are
immediately necessary to support current executive branch policy initiatives or ensure that future
administrations do not have the opportunity to contract out allegedly inherently governmental
functions before Congress can check them.
Amending the Definition of “Inherently Governmental Functions”
Standardizing the Definition of “Inherently Governmental Functions”
One common theme in the recent literature on inherently governmental functions is that there are
numerous and/or inconsistent definitions of inherently governmental functions within federal law
and policy. For example, in its report on the Duncan Hunter National Defense Authorization Act
for FY2009, the House of Representatives noted that the task of determining which functions
must be performed by government employees
is made even more difficult by the lack of a single definition and accompanying guidance on
what constitutes an “inherently governmental function.” Currently, the Federal Acquisition
Regulation defines that term in multiple places, the Office of Management and Budget
Circular A-76 also defines the term, and there is yet another definition in the Federal
Activities Inventory Reform Act (P.L. 105-270). There is also the additional DOD-specific
definition of [functions] “closely associated with inherently governmental functions.”170
167
See id. (decreasing reliance on contractors to perform acquisition functions); Karen DeYoung, U.S. Moves to
Replace Contractors in Iraq, Wash. Post, Mar. 17, 2009, at A7 (describing the State Department’s plan to hire shortterm “Protective Security Specialists,” who are government employees, in lieu of private security contractors).
168
See, e.g., PSC Opposes Mikulski’s Outsourcing Bill; NTEU ‘Welcomes Privatization Reform Effort,’ 91 Fed. Cont.
Rep. 393 (May 12, 2009) (quoting the head of the Professional Services Council (PSC) as stating that the CLEAN-UP
Act could “inappropriately limit[] the Obama administration’s ability to achieve its goals”).
169
See, e.g., DHS Requires Review of Professional Services Contracts Valued at More Than $1 Million, Fed. Contr.
Daily, June 2, 2009; Alice Lipowicz, DHS Scrutiny of Service Contracts Draws Flak: Some Suspect Ulterior Motives,
Wash. Tech., June 10, 2009, available at http://www.washingtontechnology.com/Articles/2009/06/10/NEWS-DHScontracts.aspx.
170
Duncan Hunter National Defense Authorization Act for Fiscal Year 2009: Report of the Committee on Armed
Services of the House of Representatives on H.R. 5658 Together with Additional Views, 110th Cong., 2d Sess. 333-34
(2008).
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Similarly, in its report Changing the Culture of Pentagon Contracting, the New America
Foundation noted that the phrase “inherently governmental functions” appears 15 times in the
United States Code “without a clear or consistent definition.”171 Commentators raising this point
appear to be suggesting that agencies would not contract out allegedly inherently governmental
functions if (1) they did not have to determine which definition applied in particular cases and/or
(2) they had clear definitions to guide their decision making in particular cases.
Despite being pervasive, however, such concerns about multiple or inconsistent definitions of
inherently governmental functions may be overstated given that there are only two main
definitions of inherently governmental functions in federal law and policy. Moreover, these two
definitions are arguably compatible, as Table 1 and Appendix G illustrate.172 In fact, the
definitions differ in only a few words, although the materials accompanying the definitions
diverge to a greater degree. The FAIR Act defines an inherently governmental function as “a
function that is so intimately related to the public interest as to require performance by Federal
Government employees,” while OMB Circular A-76 defines an inherently governmental activity
as an “activity that is so intimately related to the public interest as to mandate performance by
government personnel.” The differences between “activity” and “function,” “require” and
“mandate,” and “government personnel” and “Federal Government employees” are arguably not
legally or operationally significant. That there is such apparent compatibility between these
definitions should not be surprising, given the history of the three main documents establishing
federal law and policy on inherently governmental functions. The FAIR Act was intended to
encourage agencies to at least consider outsourcing their commercial functions under the policies
and processes of OMB Circular A-76. OMB Circular A-76 was, in turn, amended in 1999 to bring
it into conformity with the FAIR Act, and much of OMB Circular A-76 was later incorporated
into the FAR.173
Table 1. Comparison of the Treatments of Inherently Governmental Functions in the
FAIR Act, OMB Circular A-76, and the FAR
Feature
FAIR Act
OMB Circular A-76
FAR
Includes its own definition of
inherently governmental functions
Yes (legal definition)
Yes (policy definition)
No (incorporates and
reproduces definition
of OMB Circular A-76)
Provides elaboration on the meaning
of the definition
Yes
Yes
No
Lists exemplary functions classified
as inherently governmental
No
No
Yes
Explicitly prohibits contracting out
inherently governmental functions
No
Yes
Yes
Defines commercial activities
No
Yes
No
171
See, e.g., Roger D. Carstens, Michael A. Cohen & Maria Figueroa Küpçü, Changing the Culture of Pentagon
Contracting 12 (2008).
172
See also Report of the Acquisition Advisory Panel to the Office of Federal Procurement Policy and the United States
Congress 420 (2007) (“The Panel did not believe that there was any need for OFPP to adopt a new formal definition of
what constitutes an [inherently governmental function].”).
173
See Luckey, supra note 39, at 1-2.
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Feature
Addresses functions closely
associated with inherently
governmental functions
FAIR Act
No
OMB Circular A-76
No
FAR
Yes
Source: Congressional Research Service
Replacing “Inherently Governmental Functions” with Another Construct
Other commentators have suggested using another phrase instead of inherently governmental
functions, such as “core functions,” “mission essential functions,” or “critical government
functions.”174 Commentators making this proposal often do not clarify whether this substitution is
largely semantic, with agencies to be prohibited from contracting out core functions, for example,
in the same way that they are currently prohibited from contracting out inherently governmental
ones, or whether the substitution is intended to shift the debate from questions of law (i.e., what
may be contracted out?) to questions of policy (i.e., which of the functions that may lawfully be
contracted out should be contracted out?). Proposals of the latter sort are not definitional and are
discussed in the section on “Focusing on Questions of Contracting Policy” below.
Proposals of the former sort—to replace inherently governmental functions with another phrase
that defines which functions agencies may lawfully contract out—would seem to be premised on
the belief that agencies will more easily and accurately ascertain which functions they must
perform in-house if they can consider specific functions in relation to a defined word or phrase
that more clearly expresses the grounds for their decision making. That is, while agency officials
may have difficulty determining which functions are inherently governmental because “inherently
governmental” is an abstract-sounding concept, core or mission essential or critical functions may
be easier to recognize because their very names make clear the basis for recognizing them. By its
name, a “core function” would seem to be one central to an agency’s activities; a mission
essential function, one necessary for the successful accomplishment of a task; and a critical
function, one that could have harmful consequences if not performed.
All of the terms suggested as definitional replacements for “inherently governmental functions”
could also potentially connote a broader set of functions than those encompassed by the term
inherently governmental functions, especially under its current definition. The range of mission
essential functions, for example, could include any function necessary for the completion of a
task, not just those functions that must be performed by government employees because they are
“intimately related to the public interest.” Translating directions from a foreign language into
English could be mission essential (e.g., necessary in order for commanders to get troops from
Point A to Point B) without being inherently governmental (e.g., if the troops were on a routine
patrol in friendly territory). Replacing “inherently governmental functions” with one of these
terms could thus expand the range of functions exempt from contracting out, which might also
constitute a short-term solution to any alleged over-reliance on contractors. However, this
approach would not necessarily address which functions government employees must perform
because they are in the public interest. Moreover, tying functions more closely to agency
174
See, e.g., Carstens et al., supra note 169, at 12-13 (core functions); Geoffrey Emeigh, Contracting Out: Law
Professor Suggests Focus on “Core,” Not “Inherently Governmental,” Functions, 89 Fed. Cont. Rep. 649 (2008)
(same); AFGE, supra note 76 (mission essential); Orszag Stresses Importance of Procurement Reform for Effective,
Efficient Government, Fed. Cont. Rep., Mar. 10, 2009 (critical government functions).
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operations than to the public interest could result in situations where a function is categorized
differently by different agencies. 175 For example, translators would not necessarily be mission
essential for the Interior Department, although they might be for the State Department. Similarly,
translators could be essential for some DOD missions, but not for others.176
Defining Other Terms Related to “Inherently Governmental Functions” and
Prohibiting Contracting Them Out
The Correction of Long-Standing Errors in Agencies’ Unsustainable Procurements (CLEAN-UP)
Act of 2009 (S. 924, 111th Congress) would effectively diminish agencies’ ability to contract out
inherently governmental functions, among others, by defining other categories of functions
related to inherently governmental ones and precluding agencies from contracting out these
functions. S. 924 would adopt the FAR’s definition of functions closely associated with inherently
governmental functions and create its own definition of mission essential functions. This
definition includes “functions that, although neither necessarily inherently governmental nor
necessarily closely related to an inherently governmental function, are nevertheless considered by
executive agency officials to be more appropriate for performance by Federal employees.”177 It
then would require heads of executive agencies to “ensure that inherently governmental
functions, functions closely related to inherently governmental functions, and mission-essential
functions are performed by Federal employees.”178
Such a proposal would, among other things, ensure that allegedly inherently governmental
functions are effectively shielded from potential contracting out by “insulating” them within
additional layers of functions that could not be contracted out. Executive branch categorizations
of particular functions would have less significance under this proposal than under the current
law, where functions may be contracted out provided that the contracting agency determines that
they are not inherently governmental. Provision of security services in combat zones is one
function that might be more easily kept in-house under the CLEAN-UP Act than under existing
law. Under existing law, DOD contracted out such services after finding they were not inherently
governmental,179 although some Members of Congress contend that they are inherently
governmental functions or functions approaching inherently governmental.180 Under the CLEAN175
One of the criticisms of the current approach to inherently governmental functions is that the governing authorities
leave room for “subjective and inconsistent judgment.” See, e.g., Tara Lee, Redefining Inherently Governmental,
available at http://peaceops.com/web/v4n1/1-v4n1/4-v4n1redefininginherentlygovernmental.html?tmpl=component&
print=1&page=.
176
See, e.g., Conner Bros. Constr. Co. v. Geren, 550 F.3d 1368, 1377 (Fed. Cir. 2008) (noting that military officials had
characterized operation of the dining facilities and custodial services—functions then performed by contractors—as
“mission essential” when troops were restricted to base while preparing to deploy).
177
S. 924, 111th Cong., § 2. A version of the CLEAN-UP Act was introduced in the House of Representatives on June
4, 2009. It essentially corresponds to the Senate version discussed here, including in its section numbers.
178
Id. at § 5.
179
See, e.g., Brian X. Scott, Comp. Gen. B-298370, 2006 WL 2390513 (Aug. 18, 2006) (denying a protest alleging, in
part, that DOD solicitations for contracts to transport cargo in Iraq contracted out inherently governmental functions by
calling for armed security escorts). GAO reached its conclusion because the existing laws and regulations permitted
contracts for armed security services when the contracts prohibited escorts from performing direct combat or offensive
operations.
180
See, e.g., Duncan Hunter National Defense Authorization Act for FY2009, P.L. 110-417, § 831, 122 Stat. 4534 (Oct.
14, 2008) (expressing the sense of Congress that “security operations for the protection of resources ... in uncontrolled
or unpredictable high-threat environments” are inherently governmental functions).
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UP Act, however, DOD would have to find that these functions are not inherently governmental,
closely related to inherently governmental, or mission essential in order to contract them out. The
two additional categories into which functions might fall, which would keep them from being
contracted out, could increase the likelihood of certain functions being performed in-house. For
example, while it may seem plausible, at least to some, that private security contractors do not
perform inherently governmental functions, it could seem less plausible that their functions are
neither closely associated with inherently governmental functions nor mission essential.
Such a change would be a significant one, given that agencies currently may generally contract
out functions that they do not find to be inherently governmental.181 The change might, however,
serve only to shift the functions about which disagreements arise. Rather than disagreements over
the categorization of functions as inherently governmental, Congress and federal agencies might
find themselves in disagreements over the categorization of functions as mission essential.
Moreover, such disagreements might have to be resolved by the legislative or political process
given the limits on standing to challenge agencies’ contracting determinations182 and the political
question doctrine.183
Clarifying Terms within the Existing Definition of Inherently Governmental
Functions
Another option, not widely discussed, would be to define terms within the existing definition of
inherently governmental functions. The existing definition of inherently governmental functions
could, perhaps, be made clearer by establishing the meaning of key terms under it. Statutes could
prescribe what it means for a function to be “intimately related to the public interest” or
“performed by the federal government,” for example. Defining “performance by the federal
government,” in particular, could potentially help remove the distinction between performing and
assisting with inherently governmental functions that characterizes GAO opinions and executive
branch discussions of inherently governmental functions.184 For example, in its consideration of
the IRS’s proposed private debt collection program—which was one of the most prominent nonDOD examples of an agency contracting out allegedly inherently governmental functions—GAO
distinguished between collection of taxes, which is inherently governmental, and assisting in
181
See, e.g., Gulf Group, Inc. v. United States, 61 Fed. Cl. 338, 341, n.7 (2004) (treating items on the FAR’s list of
“functions approaching inherently governmental” as capable of being contracted out by agencies). There are, however,
some limits on DOD’s ability to contract out functions closely associated with inherently governmental functions
where lead systems integrators or the performance of acquisition functions are involved. See DFARS 252.209-7006
(lead systems integrators); DFARS 207.503 (S-70) (performance of acquisition functions closely associated with
inherently governmental functions).
182
The doctrine of standing requires that plaintiffs demonstrate (1) injury in fact, (2) causation, and (3) redressibility
before a court hears the merits of their claims. See, e.g., Valley Forge Christian Coll. v. Ams. United for Separation of
Church & State, Inc., 454 U.S. 464, 472 (1982); Allen v. Wright, 468 U.S. 737, 751 (1984); Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560-61 (1992). Standing to challenge allegedly unlawful contracting out of inherently
governmental functions could potentially be difficult to demonstrate because courts generally do not recognize harms
arising from the government’s allegedly illegal use of taxpayers’ money as sufficient injury in fact. See, e.g.,
Massachusetts v. Mellon, 262 U.S. 447 (1923) (finding that the plaintiff lacked standing to challenge alleged “taxation
for illegal purposes” because the administration of federal statutes “likely to produce additional taxation to be imposed
upon a vast number of taxpayers” is essentially a matter of public concern, not an individual concern).
183
See supra note 125 and accompanying text.
184
See, e.g., Internal Revenue Service, supra note 118; DODI 1100.22, supra note 93.
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collecting taxes by locating and contacting taxpayers to remind them of their tax liability and
suggest payment methods, which is not inherently governmental.185
Potential Limitations of Definitional Changes
Any definitional changes, along the lines suggested above or otherwise, may be of limited
effectiveness in ensuring that executive branch agencies do not contract out functions that some
Members of Congress or commentators believe are inherently governmental.186 This is, in large
part, because many functions are not patently inherently governmental or commercial, as Figure
1 illustrates. The potential effectiveness of definitional changes is also limited by the fact that any
definition—of inherently governmental functions or some other construct—would be applied in
specific circumstances by executive branch officials, who might not classify functions in the same
way that Congress or third-parties would classify them. 187 For example, DOD determined that
private security contractors would not be performing inherently governmental functions under the
existing law.188 Some Members of Congress disagreed, however, as is evidenced by their
enactment of legislation expressing the sense of Congress that “security operations for the
protection of resources ... in uncontrolled or unpredictable high-threat environments should
ordinarily be performed by members of the Armed Forces.”189
185
Internal Revenue Service, supra note 118. See also Diane Freda, Shulman Formally Announces End of Private Debt
Collection Program, 91 Fed. Contr. Rep. 191, Mar. 17, 2009 (referencing Representative John Lewis’s “often repeated
view” that tax collection is an inherently governmental function).
186
Cf. OMB, Managing the Multi-Sector Workforce, supra note 166 (suggesting that the problem may be the “manner
in which agencies identify critical functions to be performed by federal employees,” rather than the definition of
inherently governmental functions per se); Elise Castelli, DOD Redirects Contracting Support Work: Less Work to
Contractors, More to GSA, Interior, Fed. Times, June 16, 2008, at 1.
187
See also Verkuil, supra note 15, at 440 (noting that the definitions of OMB Circular A-76 and related authorities
may not protect agencies from erroneously classifying particular functions as inherently governmental or commercial);
Lee, supra note 173 (noting “subjective and inconsistent judgment” in DOD application of the governing laws and
regulations); Report of the Acquisition Advisory Panel, supra note 170, at 420 (noting that problems with agencies’
application of the definitions of inherently governmental functions are more significant than deficiencies in the current
definitions of inherently governmental functions).
188
Under the existing law, DOD could not have contracted out these private security functions had it determined that
the functions were inherently governmental. Thus, its contracting out of these functions reflects a determination that
they were not inherently governmental.
189
P.L. 110-417, § 831, 122 Stat. 4534 (Oct. 14, 2008).
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Figure 1. Categorization of Functions as Inherently Governmental or Commercial
Source: Congressional Research Service
Congress has attempted to address alleged deficiencies in agencies’ application of the definitions
of inherently governmental functions in several ways. The 110th Congress required the
Commission on Wartime Contracting to include in its report recommendations on the process for
determining which functions are inherently governmental in contingency operations, including
whether providing security in an area of combat operations is inherently governmental.190 The
110th Congress, as well as other Congresses, also enacted legislation classifying particular
functions as inherently governmental.191 Congress could also require agencies to provide
190
P.L. 110-181, § 841, 122 Stat. 230-34.
191
See, e.g., Consolidated Security, Disaster Assistance and Continuing Appropriations Act of 2009, P.L. 110-329, §
520, 122 Stat. 3684 (Sept. 30, 2008) (classifying the functions of the Federal Law Enforcement Training Center
instructor staff as inherently governmental). Similar legislation has been introduced in the 111th Congress. See, e.g.,
H.R. 2868, § 3, 111th Cong. (“The approval or disapproval of a security vulnerability assessment or site security plan
(continued...)
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mandatory training for their contracting officers, in particular, on what constitutes an inherently
governmental function. Or Congress could provide agencies with lists of functions that are
inherently governmental, or potentially suitable for contracting out, like the lists found in the FAR
or formerly contained in OMB Circular A-76.192
None of these approaches is likely to prevent the recurrence of future inter-branch differences of
opinion in the classification of particular functions, however. The recommendations of the
Commission on Wartime Contracting will be context-specific, and while they might adequately
guide DOD in the near future in similar situations, they may not be sufficient to guide decision
making by other agencies, in the future, or in dissimilar situations. Enactment of legislation
classifying particular functions as inherently governmental is necessarily ad hoc, and often
possible only after agencies have already engaged in allegedly improper contracting for
performance of inherently governmental functions. Mandatory training for agency officials could
cost money, and it would be hard to ensure that the persons providing the training would
categorize specific functions in the same way that some Members of Congress or commentators
would. These trainers would be employees of or working for the executive branch, which has its
own interests in asserting its constitutional and statutory prerogatives in the realm of
contracting. 193 No listing of functions could be comprehensive, and even if the list covered all
functions currently of concern to Congress, problems may arise in the future related to the
performance of functions not presently at issue. Some current disputes over the alleged
contracting out of inherently governmental functions during the Bush Administration were
arguably exacerbated by the fact that agencies categorize functions as inherently governmental or
commercial without knowing all the details about how specific contracts will be performed in
specific settings that often later prompt commentators to allege the functions were inherently
governmental and should never have been contracted out to begin with. Had Blackwater
employees not been involved in several shooting incidents in Iraq, which were unanticipated at
the time the State Department entered the contracts with Blackwater, the debate over whether
private security contractors perform inherently governmental functions might not have ensued.194
Placing Limits on Contracting Out Or Use of Appropriated Funds
Prohibiting agencies from contracting out specific functions, or from using appropriated funds to
contract out specific functions, would also serve to ensure that certain allegedly inherently
governmental functions are not contracted out. Section 730 of the Consolidated Appropriations
Act for FY2008, for example, specifies that
(...continued)
under this section is an inherently governmental function.”); H.R. 2892, § 518, 111th Cong. (“The functions of the
Federal Law Enforcement Training Center instructor staff shall be classified as inherently governmental.”); S. 1298, §
521, 111th Cong. (same).
192
See supra note 76 and 48 C.F.R. §7.503(c)-(d).
193
See, e.g., Arrowhead Metals, 8 Cl. Ct. at 714 (finding that the U.S. Mint has discretion to determine whether the
stamping of blanks constitutes coinage and is thus exempt from Circular A-76). Coinage is a power given to Congress
under Article I of the Constitution. However, once it is delegated to the executive branch, the executive branch has
discretion in performing this function, even if Congress might disagree with its exercise of this discretion.
194
Dana Hedgpeth, State Department to Renew Deal with Blackwater for Iraq Security, Wash. Post, April 5, 2008, at
D2. Some commentators seem to focus upon whether private security contractors perform inherently governmental
functions to avoid the difficulties in holding such contractors criminally or civilly liable for their conduct.
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[n]one of the funds made available in this Act may be used to study, complete a study of, or
enter into a contract with a private party to carry out, without specific authorization in a
subsequent Act of Congress, a competitive sourcing activity of the Secretary of Agriculture,
including support personnel of the Department of Agriculture, relating to rural development
or farm loan programs.195
Such approaches do not require any changes in the definition of inherently governmental
functions, and they remove all possible questions about whether the executive branch will
categorize a function as Congress might wish. These approaches are probably best utilized as
tailored responses to specific concerns, however, because they are reactive and potentially timelimited. Congress generally uses these approaches on an ad hoc basis in response to agencies’
contracting out, or proposed contracting out, of specific functions. Moreover, if included in an
appropriations bill, such prohibitions could be limited to specific agencies or time periods.
Prohibitions in a DOD appropriations bill would not necessarily apply to the Department of State,
for example, and prohibitions could be limited to funds covered by the appropriation, or
automatically carried over to future appropriations bills long after the situation prompting the
prohibition has otherwise been resolved.
A more general prohibition on the use of the OMB Circular A-76 process, such as was in place
through September 30, 2009, might seem helpful in preventing the contracting out of inherently
governmental functions because it addresses all contracting out under OMB Circular A-76.196
However, such an approach is arguably both over-inclusive and under-inclusive. It is overinclusive in the sense that prohibiting agencies’ contracting out under OMB Circular A-76
encompasses all functions performed by the government, not just those that are allegedly
inherently governmental. OMB Circular A-76 articulates the competitive process that agencies
are to use in source selection whenever they consider contracting with private sector sources for
the performance of commercial activities performed by government employees.197 It thus
potentially applies to contracts for functions that are generally not considered to be inherently
governmental (e.g., custodial services), as well as to those for functions that some might argue are
inherently governmental (e.g., acquisitions-related functions). A general prohibition on the use of
the A-76 process is also under-inclusive in the sense that A-76 addresses only commercial
functions performed by government employees. It does not apply to new functions, which have
not been performed by government employees, nor does it provide a mechanism for “insourcing,”
or determining whether government employees or contractors should perform functions currently
performed by contractors. Such a prohibition may also generate opposition from trade groups if it
appears designed to protect government employees at the expense of contractor employees.198
195
P.L. 110-161, § 730, 121 Stat. 1846 (2008). See also id. at §§ 103, 111, 415, & 739. See Appendix A for historical
examples of this approach. The Omnibus Appropriations Act, 2009, expanded upon the requirement in Section 739 of
P.L. 110-161 by requiring that the guidelines to be developed on insourcing new and contracted out functions give
special consideration to using federal employees to perform functions that are closely associated with the performance
of inherently governmental functions, among other things. P.L. 111-8, § 739, 123 Stat. 689-90 (Mar. 11, 2009).
196
Omnibus Appropriations Act, 2009, P.L. 111-8, Title VII, Transfer of Funds, § 737. For more on how this
prohibition was effectively extended beyond FY2009, see supra note 148 and accompanying text.
197
OMB Circular A-76, at § 4.
198
See PSC Opposes Mikulski’s Outsourcing Bill, supra note 168.
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Addressing Structural Factors Prompting Agencies to Rely on
Contractors
Some commentators have suggested that Congress could potentially make agencies less prone to
contract out allegedly inherently governmental functions, or other functions, by addressing
structural factors that may lead agencies to rely on contractors instead of military personnel or
civil servants.199 “Personnel ceilings” have been identified as one such factor.200 A personnel
ceiling establishes the maximum number of positions that may be budgeted in a job category or
for all personnel in an organization. Although DOD is prohibited from converting a function
performed by DOD civilian personnel to contractor performance to circumvent a personnel
ceiling,201 it is otherwise subject to ceilings on the number of civilian employees and military
personnel. It may also hire contractors without engaging in public-private competitions under
OMB Circular A-76 when converting functions from military to DOD civilian performance if the
director of the local Human Resources Office determinates that civilian employees cannot be
hired. 202 Some commentators have suggested that DOD relied on contractors to perform certain
functions, most notably acquisition functions, in part because of the operation of such personnel
ceilings.203 Recently enacted or introduced legislation removed or would remove personnel
ceilings imposed by the executive branch, as well as certain congressionally imposed ceilings on
the number of DOD personnel. 204 However, such legislation does not address congressionally
imposed ceilings outside DOD, or troop needs in situations where DOD civilian personnel cannot
be substituted for military ones and there are insufficient volunteers for the military.205 However,
complete removal of personnel ceilings is not possible because of limits on the use of
appropriated funds and, arguably, would not comport with some Members’ desire to keep
agencies within their budgets.206
199
See, e.g., Verkuil, supra note 15, at 440.
Id.
201
10 U.S.C. § 2461(a)(3)(B).
202
Office of the Sec’y of Defense, Military Conversions: Contracting for Services When Civilians Cannot Be Hired,
Feb. 13, 2008, available at http://competitivesourcing.navy.mil/StrategicSourcing.cfm?doc=178.
203
A key concern here has been DOD’s use of lead systems integrators (LSIs) or contractors who oversee the work of
other contractors. LSIs are contractors or teams of contractors hired to execute large, complex, defense-related
acquisition programs, particularly so-called system-of-systems (SOS) acquisition programs. According to one estimate,
DOD reduced its acquisition workforce by approximately 49% between FY1990 and FY1999 to comply with
congressional mandates. Office of the Inspector Gen., Dep’t of Defense, DOD Acquisition Workforce Reduction:
Trends and Impacts, Feb. 29, 2000, available at http://www.dodig.mil/audit/reports/fy00/00-088.pdf.
204
See, e.g., National Defense Authorization Act for FY2010, P.L. 111-84, § 1109, 123 Stat. 2492 (extending the
authority of the Secretary of Defense to adjust baseline personnel limitations contained in 10 U.S.C. §§ 143, 194, 3014,
5014, and 8014 when the performance of inherently governmental or related functions is involved); CLEAN-UP Act,
S. 924, § 5 (stating that the heads of executive agencies “shall not be constrained by any in-house personnel ceiling,
headcount, or staffing limitation in ensuring that functions” other than inherently governmental functions, functions
closely related to inherently governmental functions, or mission essential functions “are performed in the most efficient
manner possible”).
205
See, e.g., David Isenberg, Dogs of War: Contractors with No Names, Apr. 10, 2009, available on LEXIS Newswire
(“[T]he American public has made it clear that it is not willing to provide the commensurate resources, at least in terms
of bodies, to allow the military ... to do their roles.”).
206
See, e.g., Agency Administrative Expenses Reduction Act of 2009, S. 948, § 2 (requiring a 3% reduction in agency
administrative expenses, as compared to a FY2009 baseline, by FY2010 and an 11% reduction by FY2013).
200
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Inherently Governmental Functions and Department of Defense Operations
Another factor involves the ease of hiring and firing government personnel.207 Because of the
procedural requirements for hiring new federal employees, as well as the procedural protections
ensuring that federal employees are not improperly dismissed, agencies can experience
difficulties matching their existing personnel to the functions they need to perform when there are
sudden changes in their missions. An unanticipated need for workers to perform a new function,
or the actual or anticipated ending of a particular mission, poses particular problems. This factor
may become less salient over time, however, as Congress has given, or is considering giving,
agencies expedited or other hiring authorities, 208 and agencies have begun creating some termlimited positions for federal employees.209
More Effective Oversight of Executive Branch Contracting
Decisions
Congress receives some information about agencies’ contracting decisions under the FAIR Act,
but this information may be insufficient to enable Congress to adequately ascertain which
functions agencies may be improperly contracting out. Under the FAIR Act, agencies must
compile annual lists of all activities they perform that are not inherently governmental and make
these lists available to Congress and the public.210 However, such lists include only functions that
agencies currently perform, not new functions,211 and the listings may not provide Congress or
the public with enough information to ascertain whether a listed function is, in fact, commercial,
as Figure 2 illustrates. Moreover, under the FAIR Act, agencies’ lists are not directed to any
specific committee(s) of Congress, nor is there an established procedure for congressional review
of or response to the lists once they are received.212 This is not to say that Congress and its
Members cannot or do not exercise their oversight functions in response to specific items on
agencies’ FAIR Act inventories. It does, however, mean that congressional involvement with
FAIR Act inventories is ad hoc, not systemic, which could limit Congress’s ability to provide
effective oversight of contracting out under the FAIR Act. Systemic congressional involvement in
the OMB Circular A-76 process is equally limited. OMB Circular A-76 focuses primarily upon
public notice, as Figure 3 illustrates; notice to Congress is mentioned only as an accompaniment
to public notice.
207
See, e.g., Verkuil, supra note 15, at 440.
See, e.g., National Defense Authorization Act for FY2010, P.L. 111-84, § 831, 123 Stat. 2414 (Oct. 28, 2009)
(extending the Department of Defense’s expedited hiring authority for acquisitions workforce positions); id. at § 1122,
123 Stat. 2505-06 (allowing retired federal employees to be rehired on a limited basis without taking a reduction in
salary corresponding to their retirement annuity); CLEAN-UP Act, S. 924, § 10, 111th Cong. (proposing to create
expedited hiring authority for “shortage category” positions); S. 629, 111th Cong. (proposing to allow federal agencies
to re-employ retired federal employees on a limited basis without forcing them to take a reduction in salary
corresponding to their retirement annuities). Agencies’ authority under P.L. 109-313 will sunset on December 31, 2011.
209
See, e.g., DeYoung, supra note 167 (describing the State Department’s plan to hire short-term “Protective Security
Specialists,” who are government employees, in lieu of private security contractors).
210
31 U.S.C. § 501 note, at § 2(a) & (c).
211
Id.
212
31 U.S.C. § 501 note, at § (c)(1)(A) (“[T]he head of the executive agency shall promptly transmit a copy of the list
to Congress and make the list available to the public.”). The FAIR Act was arguably more concerned with making
agencies’ lists available to the public than to Congress, as it was designed to ensure that private persons were aware of
potential opportunities to perform commercial functions for the government. See H.R. 4244, supra note 38, at 1.
208
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Figure 2. Sample FAIR Act Listing of Commercial Functions
As Made Available to the Public on an Agency Website
Source: Congressional Research Service, from http://www.uspto.gov/web/offices/ac/comp/fairact/index.html
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Inherently Governmental Functions and Department of Defense Operations
Figure 3. Processes Under the FAIR Act and OMB Circular A-76
Activities That Involve Opportunities for Congressional or Public Notification or Objections
Source: Congressional Research Service
Congress has recently considered several proposals that would increase the information about
agencies’ contracting decisions available to Congress and/or the public. The CLEAN-UP Act, for
example, would require that the Chief Acquisition Officer of each agency, or his or her
equivalent, certify that each function to be performed under an agency service contract (including
task or delivery orders and exercises of options) is not inherently governmental, closely related to
inherently governmental, or mission essential.213 In addition, agency heads would have to report
to the head of OMB annually on each contract, with the report being posted on the Internet and
notice of the report’s availability being published in the Federal Register.214 The hope is,
213
CLEAN-UP Act, S. 924, § 6. The Financial Services and General Governmental Appropriations Act (H.R. 3170, §
743) would similarly require agency heads to review functions that are presently contracted out to ensure that no
inherently governmental functions are among them. However, no reporting or certification accompanies these reviews,
as it would with the CLEAN-UP Act.
214
Id. See also id. at §§ 7-9 (requiring similar public reporting of “functions at risk,” which include inherently
(continued...)
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apparently, that increased congressional or public awareness of agencies’ decisions may diminish
the likelihood that an agency will improperly classify as commercial an activity that is arguably
inherently governmental. 215 With increased awareness of potentially problematic decisions,
Congress could exercise oversight or enact legislation. However, oversight may be insufficient to
get an agency to change its classification of a particular function, especially in the short term, and
enacting legislation can take time.
Focusing on Questions of Contracting Policy
Another option for Congress would be to shift its focus from questions of contracting law to
questions of contracting policy, or from discussions of whether specific functions are inherently
governmental to discussions of which of the functions that are not inherently governmental
should be performed in-house. The current discussions regarding the definition of inherently
governmental functions, or whether certain functions are inherently governmental, do not address
what should be done with those functions which are not inherently governmental. Agencies are
presently answering these questions on an ad hoc basis,216 without appreciable congressional
guidance, in part because the only government-wide authorities on contracting out were designed
for different purposes and focus upon contracting out of commercial functions. The FAIR Act
focuses upon listings of commercial functions that could be lawfully contracted out, while OMB
Circular A-76 focuses upon how to determine whether government employees or the private
sector will perform specific commercial functions.217
No legislation, regulation, or policy document systematically addresses how agencies should
determine which of the non-inherently governmental functions they perform should be performed
in-house because of concerns related to transparency, accountability, employment policy, or
related issues, although commentators have proposed some such frameworks. Figure 4 illustrates
one possible model for separating questions of contract law from those of contract policy, while
Figure 5 illustrates one model for deciding questions of contracting policy. The need for
“balance” and “reasonableness” in agencies’ use of contractors, as well as their need to “maintain
agency capability to perform core functions” have been particularly noted.218 However,
discussions of “balance” and “reasonableness” can have two different focal points. While the
focus is often on the perceived overuse of contracting out, there are those who believe that the
problem is under-use of the private sector. 219 The Freedom from Government Competition Act of
2009, for example, takes the latter view. 220 The cost of performing functions is assessed as part of
(...continued)
governmental functions performed by contractors; annual inventories of functions performed by contractors; and
annual strategic human capital plans).
215
Cf. United States v. New York & Puerto Rico Steamship Co., 239 U.S. 88, 93 (1915) (noting that the government
needs the “protection of publicity”).
216
See, e.g., Gov’t Accountability Office, Afghanistan: Key Issues for Congressional Oversight, Apr. 2009, at 30,
available at http://www.gao.gov/new.items/d09473sp.pdf (“DOD’s increased use of contractors at deployed locations
was the result of thousands of individual decisions, not a result of a strategic or deliberate planning process.”).
217
Cf. Verkuil, supra note 15, at 440 (noting that the procedural protections of the FAIR Act and OMB Circular A-76
are directed at the competitive sourcing process, not the classification of functions as inherently governmental or
commercial).
218
See, e.g., Report of the Acquisition Advisory Panel, supra note 179, at 420.
219
See, e.g., PSC Opposes Mikulski’s Outsourcing Bill, supra note 166.
220
H.R. 2682, § 2(4), 111th Cong. (“Unfair government competition with the private sector of the economy is at an
(continued...)
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Inherently Governmental Functions and Department of Defense Operations
the A-76 process, although there have been some concerns about how accurately this process
reflects the costs of either performance in-house or by contractors.221
Figure 4. A Possible Framework for Distinguishing Between Questions of
Contracting Law and Contracting Policy
Source: Congressional Research Service
(...continued)
unacceptably high level, both in scope and in dollar volume.”).
221
PSC Opposes Mikulski’s Outsourcing Bill, supra note 166.
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Inherently Governmental Functions and Department of Defense Operations
Figure 5. A Possible Framework for Addressing Questions of Contract Policy
Source: Congressional Research Service, based on Rand Research Brief, Civilian or Military? Assessing the Risk
of Using Contractors on the Battlefield (2005), available at http://www.rand.org/pubs/research_briefs/RB9123/
index1.html.
Congress has arguably recently begun to pay increased attention to questions of contract policy.
Sections 3 and 11 of the CLEAN UP Act, for example, encourage executive branch agencies to
pursue business process engineering, “even if such efforts reduce or increase the need for Federal
employees or contractors.”222 Business process engineering is, however, more concerned with
cost-savings in operations than it is with decision making as to who performs specific functions.
Congress could take additional actions to focus attention on questions of contracting policy by,
among other things, holding hearings at which agencies can present and discuss their developing
frameworks for deciding questions of contracting policy, mandating that executive branch
officials develop a framework for deciding questions of contracting policy, or legislatively
establishing such a framework to be used by executive branch officials.
A focus on contracting policy may also allow Congress to better address related questions, such
as the management and oversight of contractors’
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