Definitions of “Inherently Governmental Function” in Federal Procurement Law and Guidance
Congressional research reportDec 23, 2014
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Definitions of “Inherently Governmental
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and Guidance
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December 23, 2014
Congressional Research Service
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Definitions of “Inherently Governmental Function” in Federal Procurement Law
Summary
Functions that federal law and policy require to be performed by government personnel, not
contractor employees, are known as “inherently governmental functions.” Such functions have
been a topic of interest in recent Congresses, in part, because of questions about sourcing policy
(i.e., whether specific functions should be performed by government personnel or contractor
employees). There have also been questions about the various definitions of inherently
governmental function given in federal law and policy and, particularly, whether the existence of
multiple definitions of this term may have resulted in contractor employees performing functions
that should be performed by government personnel.
Two primary definitions of inherently governmental function currently exist in 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 Office of Management and
Budget (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.” These two definitions arguably do not differ significantly in and of
themselves. However, both the FAIR Act and OMB Circular A-76 include further elaboration and
expansion upon the meaning of inherently governmental function that differ in certain ways.
Other statutes, regulations, and guidance documents that define inherently governmental function
do so either by reproducing the language of the FAIR Act or OMB Circular A-76, or by
incorporating their definitions by reference. Most notably, the Federal Acquisition Regulation
(FAR) incorporates by reference or otherwise adopts the definition of OMB Circular A-76, while
Office of Federal Procurement Policy (OFPP) Policy Letter 11-01, discussed below, adopts the
FAIR Act’s definition. However, like the FAIR Act and OMB Circular A-76, both the FAR and
Policy Letter 11-01 also include some unique elaboration and expansion upon the term.
In addition to these definitions, there are numerous statutory, regulatory, and policy provisions
designating specific functions as inherently governmental or, alternatively, commercial. (A
commercial function is one that could be performed by contractor employees, although there is
generally no requirement that contractor employees perform commercial functions.) Such
designations also help establish the meaning of inherently governmental function by specifying
what is—and is not—included within this category. Similarly, while not offering their own
definitions of inherently governmental function, the Government Accountability Office (GAO)
and the federal courts have developed tests that they use in identifying specific functions as
inherently governmental or commercial. However, a judicial declaration that a particular function
is inherently governmental under a constitutional test would not necessarily preclude the
executive branch from contracting out this function.
The 110th Congress tasked OMB with reviewing existing definitions of inherently governmental
function and developing a “single consistent definition” of this term. Partly in response to this
charge, OMB, though the OFPP, issued Policy Letter 11-01. Policy Letter 11-01 adopts the FAIR
Act’s definition of inherently governmental function, rather than establishing a new definition.
However, Policy Letter 11-01 does establish two tests for identifying inherently governmental
functions, as well as defines a critical function as one “that is necessary to the agency being able
to effectively perform and maintain control of its mission and operations.”
Congressional Research Service
Definitions of “Inherently Governmental Function” in Federal Procurement Law
Congressional Research Service
Definitions of “Inherently Governmental Function” in Federal Procurement Law
Contents
Statutory Definitions and Declarations ............................................................................................ 2
The FAIR Act ............................................................................................................................ 2
Other Statutory Definitions ....................................................................................................... 4
Statutory Declarations of Specific Functions as Inherently Governmental ............................... 5
Policy-Based Definitions and Declarations ..................................................................................... 6
OMB Circular A-76 ................................................................................................................... 7
OFPP Policy Letter 11-01 ........................................................................................................ 10
Administrative Law Provisions and Declarations.......................................................................... 12
Federal Acquisition Regulation ............................................................................................... 13
Executive Orders ..................................................................................................................... 15
GAO Decisions........................................................................................................................ 15
Judicial Decisions .......................................................................................................................... 18
Conclusion ..................................................................................................................................... 21
Tables
Table 1. Side-by-Side Comparison of the Definitions of Inherently Governmental
Functions Provided in the FAIR Act, OMB Circular A-76, the FAR, and OFPP Policy
Letter 11-01 ................................................................................................................................ 22
Contacts
Author Contact Information........................................................................................................... 26
Acknowledgments ......................................................................................................................... 26
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Definitions of “Inherently Governmental Function” in Federal Procurement Law
F
unctions that federal law and policy require to be performed by government personnel, not
contractor employees, are known as “inherently governmental functions.” Such functions
have been a topic of interest in recent Congresses, in part, because of questions about
sourcing policy (i.e., whether specific functions should be performed by government personnel or
contractor employees).1 There have also been questions about the various definitions of inherently
governmental function given in federal law and policy and, particularly, whether the existence of
multiple definitions of this term may have resulted in contractor employees performing functions
that should be performed by government personnel.
Previously, the 110th Congress had tasked the Office of Management and Budget (OMB) with
•
reviewing existing definitions of inherently governmental function to determine
whether such definitions are “sufficiently focused” to ensure that only
government personnel perform inherently governmental functions or “other
critical functions necessary for the mission of a Federal department or agency”;
•
developing a “single consistent definition” of inherently governmental function
that would address any deficiencies in the existing definitions, reasonably apply
to all agencies, and ensure that agency personnel can identify positions that
perform inherently governmental functions;
•
developing criteria for identifying “critical functions” that should be performed
by government personnel; and
•
developing criteria for identifying positions that government personnel should
perform in order to ensure that agencies develop and maintain “sufficient organic
expertise and technical capacity” to perform their missions and oversee
contractors’ work.2
Partly in response to this charge, OMB, through the Office of Federal Procurement Policy
(OFPP), issued Policy Letter 11-01 on September 12, 2011.3 As explained below, Policy Letter
11-01 adopts the definition of inherently governmental function given in the Federal Activities
Inventory Reform (FAIR) Act of 1998, rather than creating a new definition.4 However, Policy
Letter 11-01 does establish two tests for identifying inherently governmental functions, as well as
1
For further discussion of sourcing policy, see generally CRS Report RL32833, Sourcing Policy: Statutes and
Statutory Provisions, by (name redacted) and CRS Report R42341,Sourcing Policy: Selected Developments and Issues,
by (name redacted). Also, an earlier report, archived CRS Report R40641,Inherently Governmental Functions and
Department of Defense Operations: Background, Issues, and Options for Congress, by (name redacted), (name redacted)
, and (name redacted), discussed aspects of sourcing
policy as they pertain to Department of Defense (DOD)
operations, including DOD’s use of private security contractors, a particular issue during the Iraq War.
2
National Defense Authorization Act for FY2009, P.L. 110-417, §321(a)(1)-(4), 122 Stat. 4411 (October 14, 2008).
3
Office of Management and Budget, Office of Federal Procurement Policy, Publication of the Office of Federal
Procurement Policy (OFPP) Policy Letter 11-01, Performance of Inherently Governmental and Critical Functions, 76
Federal Register 56227 (September 12, 2011). This letter also responds to President Obama’s instruction, in his March
4, 2009, memorandum on government contracting, that OMB clarify when outsourcing is “appropriate.” The White
House, Office of the Press Secretary, Government Contracting, March 4, 2009, available at
http://www.whitehouse.gov/the_press_office/Memorandum-for-the-Heads-of-Executive-Departments-and-AgenciesSubject-Government. This memorandum specifically notes that “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.” Id.
4
P.L. 105-270, 112 Stat. 2382 (1998) (codified at 31 U.S.C. §501 note).
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defines a critical function as one “that is necessary to the agency being able to effectively perform
and maintain control of its mission and operations.”5
This report surveys the definitions of inherently governmental function given in Policy Letter 1101, the FAIR Act, and other sources. It also notes specific functions that have been designated as
inherently governmental or commercial by statute, regulation, policy, or GAO or judicial
decision. Its primary focus is upon government-wide statutes, regulations, and policy documents,
not agency-specific ones.6 The report begins with (1) statutory definitions and declarations before
turning to those in (2) policy guidance, (3) administrative law, and (4) judicial decisions.
However, the report’s discussion of one type of definition often cross-references other types of
definitions because of the complex interrelationships Congress and the Executive have
established between the various provisions of law and policy on this topic.7
Statutory Definitions and Declarations
The Federal Activities Inventory Reform (FAIR) Act of 1998 provides the primary statutory
definition of inherently governmental function. There are, however, several other statutory
definitions of inherently governmental function and “functions closely associated with inherently
governmental functions.” Some of these definitions mirror the definitions of the FAIR Act or
Office of Management and Budget (OMB) Circular A-76, discussed below, 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-76.8 OMB
Circular A-76 predates the FAIR Act and expresses the federal government’s general policy of
5
76 Federal Register at 56241.
For example, the Defense Federal Acquisition Regulation Supplement (DFARS) contains several provisions
addressing functions closely associated with inherently governmental functions, in particular. See, e.g., 48 C.F.R.
§207.503 (allowing the head of a defense agency to enter a contract for the performance of acquisitions functions
closely associated with inherently governmental functions only if certain conditions are met). See also Dep’t of
Defense Instruction Number 1100.22: Policies and Procedures for Determining Workforce Mix, April 12, 2010, pg. 17,
available at http://www.dtic.mil/whs/directives/corres/pdf/110022p.pdf (“Command of military forces is an [inherently
governmental] function.”).
7
See infra note 26 (noting a statutory definition of inherently governmental function that defines this term by
incorporating another statutory definition that itself incorporates the definition in the Federal Acquisition Regulation
(FAR), which, in turn, reproduces and incorporates by reference the definition given in Office of Management and
Budget (OMB) Circular A-76).
8
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 (August 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. Bills with the same title (i.e., Freedom from Government
Competition Act) have been introduced in later Congresses, notwithstanding the enactment of the FAIR Act. See, e.g.,
H.R. 1072, 113th Cong. (exempting inherently governmental functions from a proposed requirement that all supplies
and services “necessary for or beneficial to” the accomplishment of an agency’s “authorized functions” be obtained
from private sources); S. 523, 113th Cong. (same).
6
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Definitions of “Inherently Governmental Function” in Federal Procurement Law
relying on competitive private enterprises to supply the commercial supplies and services it
needs.9 OMB Circular A-76 also provides procedures for agencies to conduct cost comparisons to
determine whether the government or private enterprises should perform specific activities on the
government’s behalf.10 However, although OMB Circular A-76 established these policies and
procedures prior to 1998, it reportedly failed to result in public-private competitions for the
performance of commercial activities, or in agencies’ contracting with the private sector for
performance of their commercial activities.11 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.12 The FAIR Act does not require agencies to
contract out any particular activities, however. 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.13
Although the FAIR Act’s primary focus is upon commercial activities performed by government
agencies, it defined inherently governmental function in order to contrast such functions with
commercial activities.14 The FAIR Act’s definition of inherently governmental function is 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.”15 This definition is,
however, followed by extensive elaboration on the types of functions included in and excluded
from the definition of inherently governmental functions under the act.16
The FAIR Act describes the “functions included” within its definition of inherently governmental
function as functions 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.”17 The act
then gives a non-exclusive list of the types of “functions included,” namely:
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;
9
See infra note 39 and accompanying text.
See archived CRS Report RS21489, OMB Circular A-76: Explanation and Discussion of the Recently Revised
Federal Outsourcing Policy, by (name redacted). (Questions about this report may be referred to (name redacted).)
11
See, e.g., H.R. 4244, supra note 8, 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.”).
12
31 U.S.C. §501 note, at §2(a) & (c).
13
31 U.S.C. §501 note, at §2(e).
14
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. See infra note 50 and accompanying text.
15
31 U.S.C. §501 note, at §5(2)(A).
16
31 U.S.C. §501 note, at §5(2)(B)&(C).
17
31 U.S.C. §501 note, at §5(2)(B).
10
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Definitions of “Inherently Governmental Function” in Federal Procurement Law
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.18
The FAIR Act further describes the “functions excluded” from its definition of inherently
governmental function as functions 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.19 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, and other routine electrical or mechanical services.20
The FAIR Act’s definition of inherently governmental function 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. §104.21 However, the
FAIR Act explicitly exempts from the act’s requirements (1) the Government Accountability
Office (GAO); (2) government corporations or government-controlled corporations, as defined in
5 U.S.C. §103; (3) non-appropriated funds 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.22
Other Statutory Definitions
In addition to the FAIR Act, other statutes have “definitions” sections that include inherently
governmental function or functions closely associated with inherently governmental functions.
Two of these statutes provide a definition of inherently governmental function that, while closely
related to the definitions of the FAIR Act and OMB Circular A-76, discussed below, does not
reproduce either of these definitions verbatim. Specifically, 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.23
18
31 U.S.C. §501 note, at §5(2)(B)(i)-(v).
31 U.S.C. §501 note, at §5(2)(C).
20
Id.
21
31 U.S.C. §501 note, at §4(a)(1)-(3).
22
31 U.S.C. §501 note, at §4(b)(1)-(5).
23
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)).
19
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Definitions of “Inherently Governmental Function” in Federal Procurement Law
The verb “mandate” in this definition matches the verb in the definition of OMB Circular A-76,
but the definition otherwise 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.”24 However, this definition does expressly incorporate 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.25
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 function different from that in the FAIR Act or OMB Circular A-76.
Many statutes incorporate the definition from OMB Circular A-76, in particular, by reference
when defining inherently governmental function.26 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.27
Statutory Declarations of Specific Functions as Inherently
Governmental
Several provisions of federal law declare that specific functions are inherently governmental
without defining inherently governmental function. 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 1993,28 and (2) functions connected with the operation and
maintenance of hydroelectric power-generating facilities at water resources projects of the Army
Corps of Engineers.29 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 Laboratory30 and instructor staff at the Federal Law Enforcement Training Center.31
At yet other times, Congress effectively renders certain functions inherently governmental, at
24
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).
25
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).
26
See, e.g., 10 U.S.C. §2330a(g)(4) (defining inherently governmental function by reference to 10 U.S.C. §2383(b)(2)).
The U.S. Code section referenced here, i.e., 10 U.S.C. §2383(b)(2), does not itself define inherently governmental
function. Rather, it incorporates the FAR’s definition by reference. The FAR, in turn, reproduces and incorporates by
reference the definition of OMB Circular A-76. See infra notes 122-124 and accompanying text.
27
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). 10 U.S.C. § 2383(b)(3) also does not itself define
functions closely associated with inherently governmental functions. Rather, it incorporates by reference the definition
of the FAR, which, in turn, reproduces and incorporates the definition of OMB Circular A-76.
28
P.L. 103-62, 107 Stat. 285 (August 3, 1993) (codified at 5 U.S.C. §306; 31 U.S.C. §§1115-1116; 39 U.S.C. §2805).
29
Water Resources Development Act of 1990, P.L. 101-640, §314, 104 Stat. 4641 (November 28, 1990) (codified at 33
U.S.C. §2321).
30
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).
31
See, e.g., Consolidated Appropriations Act, 2014, P.L. 113-76, §519, 128 Stat. 272 (Jan. 17, 2014).
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least temporarily, without classifying them as such, by providing that appropriated funds cannot
be expended to contract them out.32 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,33 or by imposing additional restrictions—beyond those in the FAIR
Act, OMB Circular A-76, the Federal Acquisition Regulation (FAR), or OFPP Policy Letter 1101—upon contracting out activities that some commentators may assert are inherently
governmental.34
Alternatively, but more rarely, Congress expresses its sense that certain functions are
commercial.35 As discussed below, commercial functions are functions that could potentially be
performed by contractor personnel.36 In other cases, Congress appropriates funds to contract out
activities that some commentators might seek to classify as inherently governmental.37
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 (OFPP) Policy Letter 11-01,
32
See, e.g., Consolidated Appropriations Act, 2008, P.L. 110-161, §730, 121 Stat. 1846 (December 26, 2007) (“None
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.”). See also id. at §§103, 111, 415, 739.
33
See, e.g., Duncan Hunter National Defense Authorization Act for FY2009, P.L. 110-417, §832, 122 Stat. 4535
(October 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.”).
34
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 acquisition functions
closely associated with inherently governmental functions only when there are appropriate military and civilian
employees to supervise the contractor’s performance and perform all inherently governmental functions associated with
the functions to be performed under the contract, among other things).
35
See, e.g., National Aeronautics and Space Administration Authorization Act of 2008, P.L. 110-422, §901, 122 Stat.
4803-04 (October 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.”).
36
See infra note 50 and accompanying text.
37
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 (July 30, 1965) (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 (December 11, 1980) (authorizing the
use of contractors in the Superfund program).
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which was issued on September 12, 2011, also provides guidance on inherently governmental and
related functions. Policy Letter 11-01 adopts the FAIR Act’s definition of inherently governmental
function,38 as well as the listings of inherently governmental functions and functions closely
associated with the performance of inherently governmental functions given in the Federal
Acquisition Regulation (FAR). Policy Letter 11-01 does, however, establish a definition of
critical functions, as well as new tests for identifying inherently governmental functions and
guidance on pre- and post-award management of contracts for critical functions and functions
closely associated with the performance of inherently governmental functions.
OMB Circular A-76
Like its predecessors,39 the current OMB Circular A-76 “establishes federal policy for the
competition of commercial activities.”40 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.41
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.42 All activities classified as
inherently governmental under OMB Circular A-76 must be performed by government
personnel.43 Only those activities classified as commercial may 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 function when
characterizing such functions as the opposite of commercial activities. Circular A-76’s definition
is itself brief, like the definition in the FAIR Act. The current version of OMB Circular A-76 says
only that “[a]n inherently governmental activity is an activity that is so intimately related to the
38
An earlier OFPP policy letter, Policy Letter 92-1, had previously defined inherently government function, but was
superseded by the 2003 revision of OMB Circular A-76. See OMB, Policy Letter 92-1, September 23, 1992 (copy on
file with the author).
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 archived
CRS Report RS21489, OMB Circular A-76: Explanation and Discussion of the Recently Revised Federal Outsourcing
Policy, by (name redacted). (Questions about this report may be referred to (name redacted).)
40
OMB Circular A-76 Revised, May 29, 2003, at §1.
41
OMB Circular A-76, at §4.
42
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
(copy on file with the author) (“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.”). Indeed, 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 67 Federal Register at 69772 (“The revised Circular will require agencies to presume that all activities are
commercial in nature 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.”). The Obama
Administration has not revised Circular A-76.
43
OMB Circular A-76, at §4.b.
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public interest as to mandate performance by government personnel.”44 However, OMB Circular
A-76, also like the FAIR Act, follows its brief definition of inherently governmental function with
clarification and examples. Thus, the paragraph within the current version of OMB Circular A-76
that defines inherently governmental function 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.45
This language largely corresponds to that in the FAIR Act’s examples of “functions included” in
its definition of inherently governmental function.46 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.47
The current version of OMB Circular A-76 then provides some further explanations that are
unlike those in the FAIR Act or other sources. It first distinguishes between the exercise of
discretion per se, which it says does not make a function inherently governmental, and the
exercise of “substantial discretion,” which it says makes a function inherently governmental.48 It
44
OMB Circular A-76, Attachment A, at §(B)(1)(a).
Id.
46
See 31 U.S.C. §501 note, at §5(2)(B)(i)-(v).
47
See id. at §5(2)(B)(iv).
48
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 42 (“[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
function and facilitated the alleged contracting out of inherently governmental functions by the Bush Administration.
See, e.g., Am. Fed’n of Gov’t Employees (AFGE), Privatization: Cleaning Up the Mess, February 9, 2009, available at
(continued...)
45
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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 (e.g., the
nature of the activity; the degree of discretion involved).49
The current version of OMB Circular A-76 also explicitly defines commercial activity:
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.50
Additionally, OMB Circular A-76 includes—but does not define—a category of activities that are
commercial but “not appropriate for private sector performance.”51
OMB Circular A-76 and its definition of inherently governmental function 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. However, OMB Circular A-76 repeatedly describes itself as a
“policy” document, and expressly states that it “shall not be construed to create any substantive or
procedural basis for anyone to challenge any agency action or inaction on the basis that such
action or inaction was not in accordance with [the] Circular,” with certain narrow exceptions
involving appeals of cost comparisons and specific matters addressed in the FAIR Act.52 While
OMB Circular A-76’s characterization of itself in this manner is not necessarily dispositive of its
legal effect,53 courts in some cases have found that OMB Circular A-76 is not the product of a
(...continued)
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, OFPP Policy Letter 92-1 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. See supra note 84. As previously noted, the Obama Administration has not revised Circular A-76.
49
OMB CircularA-76, Attachment A, at §(B)(1)(c). These factors take into consideration: (1) any statutory restrictions
that define an activity as inherently governmental; (2) the degree to which official discretion is or would be limited
(i.e., whether involvement of the private sector is or would be so extensive that the ability of senior agency
management to develop and consider options is or would be inappropriately restricted); (3) in claims or entitlement
adjudication and related services, the finality of any action affecting individual claimants or applicants, among other
things; (4) the provider’s authority to take action that will significantly and directly affect the life, liberty, or property
of individual members of the public, including the likelihood of the provider’s need to resort to force in support of a
police or judicial activity, among other things; (5) the availability of special agency authorities and the appropriateness
of their application to the situation at hand; and (6) whether the activity in question is already being performed by the
private sector.
50
OMB Circular A-76, Attachment A, at §(B)(2).
51
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
42. One of these categories was security, which included guard and protective services. Id.
52
OMB Circular A-76, at §7(c)(8).
53
In certain circumstances, policy documents may be found to be legally binding upon the agency, if the agency
intended to be bound or has employed the guidelines in such a manner that they are binding as a practical matter. See,
e.g., United States v. Alameda Gateway Ltd., 213 F.3d 1161, 1168 (9th Cir. 2000); Chiron Corp. v. Nat’l Transp. Safety
Bd., 198 F.3d 935, 943-44 (D.C. Cir. 1999); Troy Corp. v. Browner, 120 F.3d 277, 287 (D.C. Cir. 1997); Am. Portland
(continued...)
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congressional grant of legislative authority promulgated in accordance with any procedural
requirements imposed by Congress,54 which is one of the requirements for a policy document to
be seen as legally binding.55 In other cases, the courts have found that the plaintiffs lacked
standing to challenge alleged violations of OMB Circular A-76.56 It is worth noting, however, that
OMB Circular A-76’s definition of inherently governmental function is incorporated into the
Federal Acquisition Regulation (FAR), as discussed below, and the FAR is generally seen to be
legally binding.
OFPP Policy Letter 11-01
Issued on September 12, 2011, partly in response to the requirements of the National Defense
Authorization Act for FY2009 (P.L. 110-417), OFPP Policy Letter 11-01 constitutes the most
recent guidance for federal agencies on inherently governmental and related functions.57 In
several key places, Policy Letter 11-01 relies upon existing authorities. For example, rather than
giving its own definition of “inherently governmental function,” it adopts the FAIR Act’s
definition of an inherently governmental function as “one that is so intimately related to the
public interest as to require performance by Federal Government employees.”58 It also provides
clarification and elaboration of this definition like that provided in the FAIR Act, noting, for
example, that inherently governmental functions require “the exercise of discretion in applying
Federal Government authority or the making of value judgments in making decisions for the
(...continued)
Cement Alliance v. Envt’l. Prot. Agency, 101 F.3d 772, 776 (D.C. Cir. 1996). But see U.S. Tel. Ass’n v. Fed.
Commc’ns Comm’n, 28 F.3d 1232, 1234-35 (D.C. Cir. 1994) (policy statement not binding on agency unless
promulgated as rule).
54
See, e.g., Diebold v. United States, 947 F.2d 787, 800 (6th Cir. 1991) (finding that the 1983 version of OMB Circular
A-76 was issued pursuant to statutory authority, although an earlier version of the circular was not); Labat-Anderson,
Inc. v. United States, 65 Fed. Cl. 570, 578 (2005) (“The 2003 version was [issued pursuant to statutory authority.”]. But
see United States Dep’t of Health & Human Servs. v. Fed. Labor Relations Auth., 844 F.2d 1087, 1096 (4th Cir. 1988)
(Circular A-76 was not “applicable law” for purposes of the Civil Service Reform Act of 1978 because it was not
issued pursuant to statutory authority); Defense Language Inst. v. Fed. Labor Relations Auth., 767 F.2d 1398 (9th Cir.
1985) (similar).
55
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). The other requirement—that the policy be a substantive- or
legislative-type rule affecting individual rights and obligations—has generally not been addressed by a court as to
OMB Circular A-76.
56
See, e.g., Int’l Ass’n of Machinists & Aerospace Workers, AFL-CIO Naval Air Lodge 1630 v. Sec’y of Navy, 915
F.2d 727, 729 (D.C. Cir. 1990); Nat’l Federation of Fed. Employees v. Cheney, 883 F.2d 1038 (D.C. Cir. 1989). See
also Nat’l Maritime Union of Am. v. Commander, Military Sealift Command, 824 F.2d 1228, 1238, 1240 (D.C. Cir.
1987) (declining to reach questions of standing or justiciability relating to claims stemming from OMB Circular A-76
because claims clearly failed on their merits).
57
For a more thorough analysis of the Policy Letter, see CRS Report R42039, Performance of Inherently
Governmental and Critical Functions: The Obama Administration’s Final Policy Letter, by (name redacted), (name r
edacted), and (name redacted).
58
76 Federal Register at 56236. The policy letter similarly follows other authorities when it directs agencies to give
“special consideration” to using government personnel to perform functions closely associated with the performance of
inherently governmental functions. Id. at 56236, 56238. Currently, agencies are required by statute to give “special
consideration” to using federal employees to perform functions closely associated with the performance of inherently
governmental functions. Omnibus Appropriations Act, 2009, P.L. 111-8, div. D, §736(b)(2)(A)(ii), 123 Stat. 690
(March 11, 2009) (civilian agencies); National Defense Authorization Act for FY2008, P.L. 110-181, div. A,
§324(a)(1), 122 Stat. 60 (January 28, 2008) (codified at 10 U.S.C. §2463(b)(1)(B)) (defense agencies).
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Federal Government, including judgments relating to monetary transactions and entitlements.”59
Similarly, the listings of inherently governmental functions and functions closely approaching
inherently governmental functions provided in its Appendices mirror those in the Federal
Acquisition Regulation (FAR),60 discussed below.
Policy Letter 11-01 also expands upon existing authorities, however. For example, it establishes
two new tests for identifying inherently governmental functions that agencies are required to use
when considering whether particular functions may be contracted out.61 One is a “nature of the
function” test, which categorizes functions involving the exercise of U.S. sovereign power as
inherently governmental due to their “uniquely governmental nature,” regardless of any “type or
level of discretion associated with them.”62 The other is an “exercise of discretion” test, which
prohibits agencies from contracting out functions involving an exercise of discretion that would:
commit[] the government to a course of action where 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: (I) identify specified ranges of
acceptable decisions or conduct concerning the overall policy or direction of the action; and
(II) subject the discretionary authority to final approval or regular oversight by agency
officials.63
In addition, the policy letter requires agencies to take certain steps, before and after awarding a
contract, to ensure that contractors do not come to perform inherently governmental functions.
Before awarding a contract, agencies must review the listings of functions designated as
inherently governmental in statute and the Appendices to Policy Letter 11-01 to ensure that their
requirements do not entail the performance of inherently governmental functions, as well as
analyze their requirements in light of the tests described above.64 Then, after awarding a contract,
agencies must monitor both contractor performance and agency contract management.65 If
monitoring reveals that contractors are performing inherently governmental functions, agencies
are instructed to “reestablish control” over these responsibilities by strengthening oversight,
insourcing the work, refraining from exercising options under the contract,66 or terminating all or
part of the contract.67
59
76 Federal Register at 56236.
Id. at 56240-42.
61
The version of the policy letter first proposed on March 31, 2010, solicited comments on a potential third test, the
“principal-agent test,” which would have required agencies to identify functions as inherently governmental “where
serious risks could be created by the performance of these functions by those outside the government, because of the
difficulty of ensuring sufficient control over such performance.” 75 Federal Register at 16192. However, OFPP
ultimately decided not to include this test in the final policy letter. See 76 Federal Register at 56231 (noting that OFPP
instead “made refinements” to the other tests).
62
76 Federal Register at 56237.
63
Id.
64
See id. at 56238-39.
65
Id. at 56239.
66
An option is a unilateral right in a contract under which the government may, for a specific period, purchase
additional supplies or services or otherwise extend the contract. The prototypical federal contract is for one year, but
could potentially be extended to five years through agencies’ use of options. 48 C.F.R. §17.204(e). It is always within
the government’s power to decline to exercise an option.
67
See 76 Federal Register at 56239. Such a termination would generally be a termination for convenience, requiring
the government to pay the contractor an agreed-upon amount or, in the absence of such an agreement, (1) the costs
incurred in performing the terminated work, (2) the costs of settling and paying settlement proposals under terminated
(continued...)
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Policy Letter 11-01 also establishes a definition of and guidance regarding “critical functions”—
or functions “necessary to the agency being able to effectively perform and maintain control of its
mission and operations”68—that were previously lacking in federal law and policy. The policy
letter requires that agencies ensure “federal employees perform and/or mange critical functions to
the extent necessary for the agency to operate effectively and maintain control of its mission and
operations.”69 However, it would permit agencies to contract out critical functions provided that
certain conditions are met (e.g., the agency determines in writing, prior to issuing a solicitation,
that it has “sufficient internal capability” so that federal employees maintain control of missions
and operations).70 The policy letter also expressly notes that functions deemed to be critical will
differ among agencies, as well as within each agency over time.71
Finally, the policy letter provides certain guidance regarding functions closely associated with the
performance of inherently governmental functions that was also previously lacking in federal law
and policy. Pursuant to this guidance, before awarding a contract for a function closely associated
with the performance of an inherently governmental function, the agency must determine in
writing that it (1) has given special consideration to having federal employees perform the work;
(2) has the resources to give “special management attention” to contract performance; and (3) will
comply with the agency responsibilities laid out in Policy Letter 11-01.72 Similarly, after
awarding the contract, the agency must regularly monitor both contractor performance and
agency contract management, as it must do with critical functions.
Policy Letter 11-01 applies to all “executive departments and agencies.”73 Like OMB Circular A76, Policy Letter 11-01 is a policy document that arguably lacks the force and effect of law.74
However, OFPP does appear to contemplate amending other authorities, including the Federal
Acquisition Regulation (FAR), in light of Policy Letter 11-01.75
Administrative Law Provisions and Declarations
The key administrative law source on inherently governmental functions is the Federal
Acquisition Regulation (FAR), which is the “primary document” in the Federal Acquisition
(...continued)
subcontracts, and (3) a fair and reasonable profit on work performed. See 48 C.F.R. §49.103.
68
76 Federal Register at 56236.
69
Id.
70
Id. at 56238-39. The agency must also ensure that it is cost effective to use private-sector contractors. See id.
71
See id. at 56238.
72
See id. at 56239, 56241-42 (requiring agencies to “limit or guide” contractors’ exercise of discretion and reasonably
identify contractors and their work product, among other things).
73
See http://www.whitehouse.gov/omb/procurement_index_work_performance/. Policy Letter 11-01 was originally
addressed to “the heads of civilian executive departments and agencies.” 76 Federal Register at 56236. However, it
was subsequently amended to include defense agencies. See Office of Management and Budget, Office of Federal
Procurement Policy, Policy Letter 11-01, Performance of Inherently Governmental and Critical Functions, 77 Federal
Register 7609 (February 13, 2012).
74
See supra notes 52 to 56 and accompanying text.
75
76 Federal Register at 56227 (“The definition provided by this policy letter will replace existing definitions in
regulation and policy, including the Federal Acquisition Regulation (FAR).”). However, as of the date of this report,
the FAR had not been amended to reflect the issuance of Policy Letter 11-01.
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Regulations System established for the “codification and publication of uniform policies and
procures for acquisition by all executive agencies.”76 Further declarations of specific functions as
inherently governmental or commercial come from executive orders and GAO decisions
construing executive branch regulations and guidance.
Federal Acquisition Regulation
In addition to the FAIR Act, OMB Circular A-76, and Policy Letter 11-01, the Federal Acquisition
Regulation (FAR) is another 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 reference77 and, like OMB Circular A-76, specifies that “[c]ontracts shall not be used for the
performance of inherently governmental functions.”78
Subpart 7.5, in contrast, is intended to ensure that “inherently governmental functions are not
performed by contractors.”79 It relies on a definition of inherently governmental function,
contained in Subpart 2 of the FAR, which essentially mirrors the definition of OMB Circular A76:
“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;
76
48 C.F.R. §1.101.
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.”).
78
Compare 48 C.F.R. §7.503(a) with OMB CircularA-76, §4(b).
79
48 C.F.R. §7.500.
77
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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.80
However, Subpart 7.5 also goes beyond OMB-Circular A-76 by providing lengthy, but “not all
inclusive,” listings of (1) functions that are to be considered inherently governmental,81 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.”82 The former category
includes direct control of criminal investigations, leadership of military personnel, conducting
foreign relations, and directing and controlling federal employees. The latter category includes
services involving or related to budget preparation, services in support of acquisition planning,
participating as technical advisors on source selection boards, and serving as arbitrators or
providing alternative methods of dispute resolution.
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, OMB Circular A76, or OFPP Policy Letter 11-01. The FAR also provides no guidance upon “functions that
approach being inherently governmental” beyond identifying them. In particular, it does not bar
agencies from contracting out these functions, and at least one federal court decision suggests that
agencies may contract for the performance of functions closely associated with inherently
governmental functions.83
The FAR’s provisions on inherently governmental functions and functions approaching inherently
governmental functions generally apply to all executive branch agencies not specifically
exempted from the FAR.84 However, Subpart 7.5 does not apply to services obtained through
personnel appointments, advisory committees, or personal services contracts issued under
statutory authority.85 A personal services contract is “a contract that, by its express terms or as
administered, makes the contractor personnel appear to be, in effect, Government employees.”86
80
48 C.F.R. §2.101.
48 C.F.R. §7.503(c).
82
48 C.F.R. §7.503(d).
83
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).
84
See 48 C.F.R. §2.101. Examples of agencies exempted from the FAR include the Federal Aviation Administration
and the Postal Service.
85
48 C.F.R. §7.502.
86
48 C.F.R. §2.101. Because obtaining personal services by contract, rather than by direct hire under competitive
appointment or other procedures required by the civil service laws, can “circumvent” civil service laws, agencies are
prohibited from awarding personal services contracts unless specifically authorized by statute. Most contracts for
(continued...)
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As a regulation promulgated through notice-and-comment procedures, the FAR is generally
legally binding.87 However, agencies are expressly authorized to deviate from the FAR on a
contract-specific or “class” basis provided that certain conditions are met.88
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.89
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.90 There do not appear to
be other such designations presently in effect.
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
agencies’ proposed contracting out of allegedly inherently governmental functions.91 GAO’s
decisions in bid protests lack the force of law and do not bind federal agencies or protesters.92
Moreover, in neither context does GAO offer its own definition of inherently governmental
(...continued)
services entered into by government agencies are not personal services contracts because neither their terms nor their
administration results in contractor personnel appearing to be government employees.
87
See generally CRS Report R41546, A Brief Overview of Rulemaking and Judicial Review, by (name redacted) and
(name redacted).
88
See 48 C.F.R. §1.403 (contract-specific or “individual” deviations may be authorized by the agency head, and the
contracting officer must document the justification and the agency approval in the contract file); 48 C.F.R. §1.404
(class deviations, applicable to more than one contract, may generally be made by the agency head after consultation
with or the approval of certain parties specified in the FAR). For more on deviations, see CRS Report R42826, The
Federal Acquisition Regulation (FAR): Answers to Frequently Asked Questions, by (name redacted) et al.
89
Executive Order 13180 of December 7, 2000: Air Traffic Performance-Based Organization, 65 Federal Register
77493, 77493 (December 11, 2000).
90
Executive Order 13264 of June 4, 2002: Amendment to Executive Order 13180, Air Traffic Performance-Based
Organization, 67 Federal Register 39243, 39243 (June 7, 2002).
91
See, e.g., 2B Brokers et al., B-298651 (November 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, 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).
92
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’rs, 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 a certain time
frame. GAO then notifies four congressional committees. 31 U.S.C. §3554(b)(3). Similarly, protesters who are
dissatisfied 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).
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functions. Rather, GAO uses a test for identifying inherently governmental functions that is based
heavily on OMB Circular A-76 and the FAR. In part because GAO focuses on executive branch
sources in identifying inherently governmental functions, its decisions are discussed here, instead
of with federal court decisions, in the following section.
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.93 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.94 For example, in its decision in NRC Contracts for Reactor Licensing
Tests, 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.95
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.96 In this case, the General Services Administration (GSA) proposed to contract out
seven functions it had formerly performed in-house when conducting transportation audits. Based
upon GSA’s descriptions of the proposed contracts, GAO ultimately found that two of these
functions were inherently governmental, two were commercial, and the remaining three were not
clearly inherently governmental or commercial.97 As this decision illustrates, GAO examines the
context of contractual performance, including the degree of actual supervision that agencies
exercise over contractors allegedly performing inherently governmental functions. It generally
does not classify functions as inherently governmental or commercial in the abstract.
Among the functions that GAO has classified as inherently governmental, at least in certain
circumstances, are:
93
See, e.g., Nuclear Regulatory Commission, B-242942 (August 27, 1991).
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.
95
See, e.g., Internal Revenue Service: Issues Affecting IRS’ Private Debt Collection Pilot, 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).
96
Gerald P. Carmen, B-198137.1 (June 3, 1982).
97
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.
94
Congressional Research Service
16
Definitions of “Inherently Governmental Function” in Federal Procurement Law
•
requesting set-off actions against transportation carriers;98
•
communicating with U.S. attorneys to request collection actions against
delinquent transportation carriers;99
•
the functions of the organization head, contracting officer, and supply branch;100
•
serving as an agency hearing officer;101
•
preparing congressional testimony on behalf of an agency;102
•
performing legally required audit tasks;103
•
deciding to accept or reject a particular candidate for a program;104
•
approving departures from policy and guidance in issuing certifications;105
•
certifying new or unproven technologies;106
•
determining what constitutes a standard of safety equivalent to a required
standard;107
•
finding the existence of special conditions or exceptions;108
•
making preemptive or other attacks;109 and
•
determining individuals’ suitability for employment or eligibility for security
clearances.110
GAO has similarly recognized the following functions as commercial, at least in certain contexts:
•
identifying overcharges related to billing above established audit minima;111
•
sending notices of overcharges or other notices;112
•
collecting user fees in national forests;113
98
Id.
Id.
100
JL Assocs., Inc., B-218137 (May 6, 1985).
101
Questions Regarding DOE and EPA Use of Contractors, B-237356 (December 29, 1989).
102
Id.
103
Questions Concerning Reimbursement of GSA Audit Contractors, B-198137 (April 29, 1980).
104
Management of Young Adult Conservation Corps, B-192518 (August 9, 1979).
105
Vertol Sys. Co., Inc., B-295936 (April 19, 2005).
106
Id.
107
Id.
108
Id.
109
Brian X. Scott, B-298370, B-298490 (August 18, 2006).
110
Privatizing OPM Investigations, T-GGD-95-186 (June 15, 1995).
111
Gerald P. Carmen, B-198137.1 (June 3, 1982).
112
Id.
113
Debt Collections, B-207731 (April 22, 1983).
99
Congressional Research Service
17
Definitions of “Inherently Governmental Function” in Federal Procurement Law
•
answering an agency hotline where the answers do not involve interpretation of
laws or regulations;114
•
examining vouchers, verifying invoice accounts and identifying billing errors;115
•
administering programs in accordance with agency regulations and policy;116
•
writer-editor services in preparing statements or testimony where the
government’s position is established;117
•
property accountability, forecasting, programming and budgeting;118
•
examination, inspection, and testing services necessary to issue certifications;119
•
provision of guard or protective services;120 and
•
gathering and reporting information on investigations.121
Judicial Decisions
Federal courts have also addressed the question of whether specific functions are inherently
governmental or commercial. Two contexts typically 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.122 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 can take 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.123 Second,
there are cases involving the “private delegation doctrine,” which center upon whether a private
114
Questions Regarding DOE and EPA Use of Contractors, B-237356 (December 29, 1989).
Questions Concerning Reimbursement of GSA Audit Contractors, B-198137 (April 29, 1980).
116
Management of Young Adult Conservation Corps, B-192518 (August 9, 1979).
117
Id.
118
Tecom, Inc., B-253740.3 (July 7, 1994).
119
Vertol Sys. Co., Inc., B-295936 (April 19, 2005).
120
Brian X. Scott, B-298370, B-298490 (August 18, 2006).
121
Privatizing OPM Investigations, T-GGD-95-186 (June 15, 1995).
122
See, e.g., Nat’l Air Traffic Controllers Ass’n v. Sec’y of the Dep’t of Trans., 654 F.3d 654, 658-59 (6th Cir. 2011)
(finding that amendments made to 49 U.S.C. §47124(b)(2) in 2003 demonstrate Congress’s intent that certain air traffic
control activities are commercial functions that may be contracted to private entities); 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); Northrop Grumman Info. Tech., Inc. v.
United States, 74 Fed. Cl. 407 (2006) (addressing information management and technology services under OMB
Circular A-76); 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).
123
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) (similar).
115
Congressional Research Service
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Definitions of “Inherently Governmental Function” in Federal Procurement Law
party was given impermissible authority to legislate or make rules on the government’s behalf.124
Legislating and rulemaking are inherently governmental functions.125
The courts, like GAO, do not have an independent definition of inherently governmental
functions. In deciding cases under the FAIR Act or other authorities, the courts use the definitions
provided in these sources.126 Moreover, in at least some such 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 and that lack judicially
discoverable and management standards for their resolution.127 In Arrowhead Metals, Ltd. v.
United States, for example, the court categorized the coinage of money as inherently
governmental because it is one of the powers that the Constitution grants to Congress.128
However, the court also found that the U.S. Mint has discretion to determine whether the
stamping of blanks constitutes coinage.129 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.130
In other cases not involving the FAIR Act or specific provisions of procurement law or policy, 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,131 or makes
124
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).
125
See, e.g., U.S. Const. art. II, §1, cl. 1 (entrusting the legislative function to Congress); 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 unconstitutional private delegation legislation
that would have allowed industrial organizations or trade associations to establish “codes of fair competition” for their
industry).
126
See, e.g., Arrowhead Metals, 8 Cl. Ct. at 714; Northrop Grumman Info. Tech., Inc. v. United States, 74 Fed. Cl. 407
(2006); United States v. Kenney, 185 F.3d 1217 (11th Cir. 1999); Nat’l Air Traffic Controllers Ass’n v. Sec’y of the
Dep’t of Transp., 997 F. Supp. 874 (N.D. Ohio 1998).
127
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).
128
Arrowhead Metals, 8 Cl. Ct. at 717 (citing U.S. Const. art. 1, §8, cl. 5).
129
Id.
130
Id.
131
See, e.g., Doe v. V. of T., 2003 U.S. Dist. LEXIS 17570 (N.D. Ill., September 30, 2003) (characterizing maintaining
a fire department as inherently governmental because it entails “the exercise of discretion on almost every level of
operation”).
Congressional Research Service
19
Definitions of “Inherently Governmental Function” in Federal Procurement Law
judgments,132 on the government’s behalf. Functions classified as inherently governmental under
the constitutional test include:
•
conducting elections;133
•
exercising the power of eminent domain;134
•
providing police services;135
•
investigating allegations of child abuse;136
•
exercising prosecutorial discretion;137
•
chartering, oversight, and regulation of companies;138
•
creation of public monopolies;139
•
holding the personal property of prisoners;140
•
limiting the First Amendment rights of prisoners;141
•
taxing and paying governmental indebtedness or obligations;142
•
devising tariff regimes;143 and
•
hiring diplomatic staff or civil servants.144
Functions categorized as commercial, in contrast, include providing transportation services to
citizens,145 and selling government land on the government’s behalf.146
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, the FAR, or OFPP
Policy Letter 11-01. Rather, in the “state action” context, the designation of a function as
132
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).
133
Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 157-58 (1978).
134
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).
135
Takle v. Univ. of Wisc. Hosp. & Clinics Auth., 402 F.3d 768 (7th Cir. 2005).
136
Kauch v. Dep’t for Children, Youth & Their Families, 321 F.3d 1 (1st Cir. 2003).
137
Sigman v. United States, 208 F.3d 760 (9th Cir. 2000).
138
Week v. Cayman Islands, 1992 U.S. App. LEXIS 32985 (7th Cir. 1992).
139
Republic of the Philippines v. Marcos, 818 F.2d 1473 (9th Cir. 1987).
140
Kimbrough v. O’Neil, 545 F.2d 1059 (7th Cir. 1976).
141
Bonner v. Coughlin, 545 F.2d 565 (7th Cir. 1976).
142
S.J. Constr., Inc. v. Lewis & Clark Reg’l Water Sys., 2008 U.S. Dist. LEXIS 62192 (D.S.D. 2008).
143
Royal Thai Gov’t v. United States, 441 F. Supp. 2d 1350 (Ct. Int’l Trade 2006).
144
Elliott v. British Tourist Auth., 986 F. Supp. 189 (S.D.N.Y. 1997).
145
Helvering v. Powers, 293 U.S. 214, 216 (1934).
146
Week v. Cayman Islands, 1992 U.S. App. LEXIS 32985 (7th Cir. 1992).
Congressional Research Service
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Definitions of “Inherently Governmental Function” in Federal Procurement Law
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 potentially claim sovereign immunity like government officials can.147
Similarly, in the “private delegation” context, the designation means only that any regulations
issued by the contractor cannot be constitutionally applied to private individuals.148 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.
Conclusion
In sum, the various authorities discussed herein differ somewhat in their treatment of inherently
governmental and other functions. The primary differences between them are arguably not in their
definitions of inherently governmental function, however, as Table 1 illustrates. Rather, the key
differences are in their provisions elaborating and expanding on the definition of inherently
governmental functions, provisions which arguably reflect the source’s intended purpose and use,
not differing conceptions of what constitutes an inherently governmental functions. For example,
OMB Circular A-76, which “establishes federal policy for the competition of commercial
activities,”149 includes a definition and discussion of commercial services that is not found in
other sources. Similarly, OFPP Letter 11-01, which is designed to “assist agency officers and
employees in ensuring that only Federal employees perform work that is inherently governmental
or otherwise needs to be reserved to the public sector,”150 includes a definition of critical
functions and tests for identifying inherently governmental functions, among other things, not
found in other sources.
147
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 Paul R. Verkuil, Public Law
Limitations on Privatization of Government Functions, 84 N.C. L. REV. 397, 431 (2006) (“[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.”).
148
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).
149
OMB Circular A-76 Revised, May 29, 2003, at §1.
150
76 Federal Register at 56236.
Congressional Research Service
21
Table 1. Side-by-Side Comparison of the Definitions of Inherently Governmental Functions
Provided in the FAIR Act, OMB Circular A-76, the FAR, and OFPP Policy Letter 11-01
FAIR Act
OMB Circular A-76
FARa
OFPP Policy Letter 11-01
Type of
definition
Legal definition
Policy-based definition
Legal definition
Policy-based definition
Used for
Compiling lists of agency
functions, classified as
commercial or inherently
governmental, for Congress
and the public
Determining which agency functions are
commercial and may be contracted out;
establishing procedures for contracting
them out
Determining which agency functions are
commercial and may be contracted out;
establishing procedures for contracting
them out
Ensuring that only federal employees
perform work that is inherently
governmental or otherwise needs to be
reserved to the public sector (e.g., to
maintain control of agency’s mission)
Basic
definition
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.
Inherently Governmental Activit[y:] An
activity that is so intimately related to
the public interest as to mandate
performance by government personnel.
“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.
“Inherently governmental function,” as
defined in Section 5 of the Federal
The term includes activities
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. An inherently
governmental function
involves, among other
things, the interpretation
and execution of the laws of
the United States so as—
These 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:
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.
(i) to bind the United States
to take or not to take some
action by contract, policy,
regulation, authorization,
(1) Binding the United States to take or
not to take some action by contract,
policy, regulation, authorization, order,
or otherwise;
(i) Bind the United States to take or not
to take some action by contract, policy,
regulation, authorization, order, or
otherwise;
Functions
Included
CRS-22
An inherently governmental function
involves, among other things, the
interpretation and execution of the laws
of the United States so as to—
Activities Inventory Reform Act, P.L.
105-270, means a function that is so
intimately related to the public interest
as to require performance by Federal
Government employees.
The term includes functions 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. An inherently
governmental function involves, among
other things, the interpretation and
execution of the laws of the United
States so as—
(1) to bind the United States to take or
not to take some action by contract,
policy, regulation, authorization, order,
or otherwise;
FAIR Act
OMB Circular A-76
FARa
OFPP Policy Letter 11-01
(ii) to 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;
(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;
(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;
(2) to 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) to significantly affect the
life, liberty, or property of
private persons;
(3) Significantly affecting the life, liberty,
or property of private persons; or
(iii) Significantly affect the life, liberty, or
property of private persons;
(3) to significantly affect the life, liberty,
or property of private persons;
(iv) to commission, appoint,
direct, or control officers or
employees of the United
States; 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.
(iv) Commission, appoint, direct, or
control officers or employees of the
United States; or
(4) to 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.
(5) to 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 appropriations and other Federal
funds.
order, or otherwise;
(v) to exert ultimate control
over the acquisition, use, or
disposition of the property,
real or personal, tangible or
intangible, of the United
States, including the
collection, control, or
disbursement of
appropriated and other
Federal funds.
CRS-23
Functions
excluded
FAIR Act
OMB Circular A-76
FARa
OFPP Policy Letter 11-01
The term does not normally
include—
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.
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.
The term does not normally include—
(i) gathering information for
or providing advice,
opinions, recommendations,
or ideas to Federal
Government officials; or
(ii) any function that is
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).
(1) gathering information for or
providing advice, opinions,
recommendations, or ideas to Federal
Government officials; or
(2) any function that is 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).
c. An activity may be provided by
contract support (i.e., a private sector
source or a public reimbursable source
using contract 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.
Lists
exemplary
functions
classified as
inherently
governmental
No
No
Yes
Yes
Addresses
functions
closely
associated
with
inherently
governmental
functions
No
No
Yes
Yes
CRS-24
FAIR Act
OMB Circular A-76
FARa
OFPP Policy Letter 11-01
Definition of
commercial
activities
None
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-forservice 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.
None
None
Definition of
critical
functions
None
None
None
“Critical function” means a function that
is necessary to the agency being able to
effectively perform and maintain control
of its mission and operations. Typically,
critical functions are recurring and longterm in duration.
a.
CRS-25
This definition is the one given in the “definitions” section of the FAR and used for purposes of Subpart 7.5 (“inherently governmental functions”). Subpart 7.3 of the
FAR (“contractor versus government performance”) incorporates by reference the definition of inherently governmental functions given in OMB Circular A-76.
Definitions of “Inherently Governmental Function” in Federal Procurement Law
Author Contact Information
(name redacted)
Legislative Attorney
[redacted]@crs.loc.gov, 7-....
Acknowledgments
Former CRS legislative attorney, (name redacted), co-authored this report.
Congressional Research Service
26
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