Federal Acquisition Regulation; Inherently Governmental Functions

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 7, 11, and 37

[FAC 90-37; FAR Case 92-051 Item I]

RIN 9000-AF56

Federal Acquisition Regulation; Inherently Governmental Functions

AGENCIES: Department of Defense (DOD), General Services Administration

(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense

Acquisition Regulations Council have agreed to revise the Federal

Acquisition Regulation (FAR) to implement Office of Federal Procurement

Policy (OFPP) Policy Letter 92-1, Inherently Governmental Functions.

This rule provides a definition of, and internal Government

responsibilities and procedures relating to, inherently governmental

functions. This regulatory action was not subject to Office of

Management and Budget review under Executive Order 12866, dated

September 30, 1993.

EFFECTIVE DATE: March 26, 1996.

FOR FURTHER INFORMATION CONTACT:

Mr. Peter O'Such (202) 501-1759 in reference to this FAR case. For

general information, contact the FAR Secretariat, Room 4037, GS

Building, Washington, DC 20405 (202) 501-4755. Please cite FAC 90-37,

FAR case 92-051.

SUPPLEMENTARY INFORMATION:

A. Background

This final rule implements the requirements of the Office of

Federal Procurement Policy (OFPP) Policy Letter 92-1, Inherently

Governmental Functions. The OFPP published its proposed policy letter

for public comment in the Federal Register at 56 FR 65279, December 16,

1991. OFPP evaluated public comments and published the final policy

letter in the Federal Register at 57 FR 45096, September 30, 1992.

A FAR proposed rule to implement the policy letter was published in

the Federal Register at 59 FAR 29696, June 8, 1994. Thirteen sources

submitted public comments. Minor revisions were made to the rule as a

result of those comments.

B. Regulatory Flexibility Act

The Department of Defense, the General Services Administration, and

the National Aeronautics and Space Administration certify that this

final rule will not have a significant economic impact on a substantial

number of small entities under the Regulatory Flexibility Act, 5 U.S.C.

601, et seq., because the rule pertains to internal Government

responsibilities and procedures relating to inherently governmental

functions.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the changes to

the FAR do not impose recordkeeping or information collection

requirements, or collections of information from offerors,

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contractors, or members of the public which require the approval of the

Office of Management and Budget under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Part 7, 11, and 37

Government procurement.

Dated: January 11, 1996.

Edward C. Loeb,

Acting Director, Office of Federal Acquisition Policy.

Therefore, 49 CFR parts 7, 11, and 37 are amended as set forth

below:

The authority citation for 48 CFR parts 7, 11, and 37 continues to

read as follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42

U.S.C. 2473(c).

PART 7--ACQUISITION PLANNING

2. Section 7.000 is amended in paragraph (b) by removing the word

``and''; in paragraph (c) by removing the period at the end of the

sentence and inserting in its place ``; and''; and by adding paragraph

(d) to read as follows:

Sec. 7.000 Scope of part.

* * * * *

(d) Determining whether functions are inherently governmental.

3. Section 7.103 is amended by adding paragraph (p) to read as

follows:

7.103 Agency-head responsibilities.

* * * * *

(p) Ensuring that no purchase request is initiated or contract

entered into that would result in the performance of an inherently

governmental function by a contractor and that all contracts are

adequately managed so as to ensure effective official control over

contract performance.

4. Section 7.105 is amended by redesignating paragraphs (b)(9)

through (b)(19) as (b)(10) through (b)(20) and adding a new (b)(9) to

read as follows:

7.105 Contents of written acquisition plans.

* * * * *

(b) * * *

(9) Inherently governmental functions. Address the consideration

given to OFPP Policy Letter 92-1 (see subpart 7.5).

5. Subpart 7.5 is added to read as follows:

Subpart 7.5--Inherently Governmental Functions

Sec.

7.500 Scope of subpart.

7.501 Definition.

7.502 Applicability.

7.503 Policy.

Subpart 7.5--Inherently Governmental Functions

7.500 Scope of subpart.

The purpose of this subpart is to prescribe policies and procedures

to ensure that inherently governmental functions are not performed by

contractors. It implements the policies of Office of Federal

Procurement Policy (OFPP) Policy Letter 92-1, Inherently Governmental

Functions.

7.501 Definition.

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.

(a) An inherently governmental function involves, among other

things, the interpretation and execution of the laws of the United

States so as to--

(1) Bind the United States to take or not to take some action by

contract, policy, regulation, authorization, order, or otherwise;

(2) 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;

(3) Significantly affect the life, liberty, or property of private

persons;

(4) Commission, appoint, direct, or control officers or employees

of the United States; or

(5) 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.

(b) 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 list of commercial

activities included in the attachment to Office of Management and

Budget (OMB) Circular No. A-76 is an authoritative, nonexclusive list

of functions which are not inherently governmental functions.

7.502 Applicability.

The requirements of this subpart apply to all contracts for

services. This subpart does not apply to services obtained through

either personnel appointments, advisory committees, or personal

services contracts issued under statutory authority.

7.503 Policy.

(a) Contracts shall not be used for the performance of inherently

governmental functions.

(b) Agency decisions which determine whether a function is or is

not an inherently governmental function may be reviewed and modified by

appropriate Office of Management and Budget officials.

(c) The following is a list of examples of functions considered to

be inherently governmental functions or which shall be treated as such.

This list is not all inclusive:

(1) The direct conduct of criminal investigations.

(2) The control of prosecutions and performance of adjudicatory

functions other than those relating to arbitration or other methods of

alternative dispute resolution.

(3) The command of military forces, especially the leadership of

military personnel who are members of the combat, combat support, or

combat service support role.

(4) The conduct of foreign relations and the determination of

foreign policy.

(5) The determination of agency policy, such as determining the

content and application of regulations, among other things.

(6) The determination of Federal program priorities for budget

requests.

(7) The direction and control of Federal employees.

(8) The direction and control of intelligence and counter-

intelligence operations.

(9) The selection or non-selection of individuals for Federal

Government employment, including the interviewing of individuals for

employment.

(10) The approval of position descriptions and performance

standards for Federal employees.

(11) The determination of what Government property is to be

disposed of and on what terms (although an agency may give contractors

authority to dispose of property at prices within

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specified ranges and subject to other reasonable conditions deemed

appropriate by the agency).

(12) In Federal procurement activities with respect to prime

contracts--

(i) Determining what supplies or services are to be acquired by the

Government (although an agency may give contractors authority to

acquire supplies at prices within specified ranges and subject to other

reasonable conditions deemed appropriate by the agency);

(ii) Participating as a voting member on any source selection

boards;

(iii) Approving any contractual documents, to include documents

defining requirements, incentive plans, and evaluation criteria;

(iv) Awarding contracts;

(v) Administering contracts (including ordering changes in contract

performance or contract quantities, taking action based on evaluations

of contractor performance, and accepting or rejecting contractor

products or services);

(vi) Terminating contracts;

(vii) Determining whether contract costs are reasonable, allocable,

and allowable; and

(viii) Participating as a voting member on performance evaluation

boards.

(13) The approval of agency responses to Freedom of Information Act

requests (other than routine responses that, because of statute,

regulation, or agency policy, do not require the exercise of judgment

in determining whether documents are to be released or withheld), and

the approval of agency responses to the administrative appeals of

denials of Freedom of Information Act requests.

(14) The conduct of Administrative hearings to determine the

eligibility of any person for a security clearance, or involving

actions that affect matters of personal reputation or eligibility to

participate in Government programs.

(15) The approval of Federal licensing actions and inspections.

(16) The determination of budget policy, guidance, and strategy.

(17) The collection, control, and disbursement of fees, royalties,

duties, fines, taxes, and other public funds, unless authorized by

statute, such as 31 U.S.C. 952 (relating to private collection

contractors) and 31 U.S.C. 3718 (relating to private attorney

collection services), but not including--

(i) Collection of fees, fines, penalties, costs, or other charges

from visitors to or patrons of mess halls, post or base exchange

concessions, national parks, and similar entities or activities, or

from other persons, where the amount to be collected is easily

calculated or predetermined and the funds collected can be easily

controlled using standard case management techniques; and

(ii) Routine voucher and invoice examination.

(18) The control of the treasury accounts.

(19) The administration of public trusts.

(20) The drafting of Congressional testimony, responses to

Congressional correspondence, or agency responses to audit reports from

the Inspector General, the General Accounting Office, or other Federal

audit entity.

(d) The following is a list of examples of functions generally not

considered to be inherently governmental functions. However, certain

services and actions that are not considered to be inherently

governmental functions 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

contractor performance. This list is not all inclusive:

(1) Services that involve or relate to budget preparation,

including workload modeling, fact finding, efficiency studies, and

should-cost analyses, etc.

(2) Services that involve or relate to reorganization and planning

activities.

(3) Services that involve or relate to analysis, feasibility

studies, and strategy options to be used by agency personnel in

developing policy.

(4) Services that involve or relate to the development of

regulations.

(5) Services that involve or relate to the evaluation of another

contractor's performance.

(6) Services in support of acquisition planning.

(7) Contractors providing assistance in contract management (such

as where the contractor might influence official evaluations of other

contractors).

(8) Contractors providing technical evaluation of contract

proposals.

(9) Contractors providing assistance in the development of

statements of work.

(10) Contractors providing support in preparing responses to

Freedom of Information Act requests.

(11) Contractors working in any situation that permits or might

permit them to gain access to confidential business information and/or

any other sensitive information (other than situations covered by the

Defense Industrial Security Program described in 4.402(b)).

(12) Contractors providing information regarding agency policies or

regulations, such as attending conferences on behalf of an agency,

conducting community relations campaigns, or conducting agency training

courses.

(13) Contractors participating in any situation where it might be

assumed that they are agency employees or representatives.

(14) Contractors participating as technical advisors to a source

selection board or participating as voting or nonvoting members of a

source evaluation board.

(15) Contractors serving as arbitrators or providing alternative

methods of dispute resolution.

(16) Contractors constructing buildings or structures intended to

be secure from electronic eavesdropping or other penetration by foreign

governments.

(17) Contractors providing inspection services.

(18) Contractors providing legal advice and interpretations of

regulations and statutes to Government officials.

(19) Contractors providing special non-law enforcement, security

activities that do not directly involve criminal investigations, such

as prisoner detention or transport and non-military national security

details.

(e) Agency implementation shall include procedures requiring the

agency head or designated requirements official to provide the

contracting officer, concurrent with transmittal of the statement of

work (or any modification thereof), a written determination that none

of the functions to be performed are inherently governmental. This

assessment should place emphasis on the degree to which conditions and

facts restrict the discretionary authority, decision-making

responsibility, or accountability of Government officials using

contractor services or work products. Disagreements regarding the

determination will be resolved in accordance with agency procedures

before issuance of a solicitation.

PART 11--DESCRIBING AGENCY NEEDS

6. Section 11.105 is added to read as follows:

11.105 Purchase descriptions for service contracts.

In drafting purchase descriptions for service contracts, agency

requiring activities shall ensure that inherently governmental

functions (see subpart 7.5) are not assigned to a contractor. These

purchase descriptions shall

(a) Reserve final determination for Government officials;

(b) Require proper identification of contractor personnel who

attend meetings, answer Government telephones, or work in situations

where

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their actions could be construed as acts of Government officials

unless, in the judgment of the agency, no harm can come from failing to

identify themselves; and

(c) Require suitable marking of all documents or reports produced

by contractors.

PART 37--SERVICE CONTRACTING

7. Section 37.102 is revised to read as follows:

37.102 Policy.

(a) Agencies shall generally rely on the private sector for

commercial services (see OMB Circular No. A-76, Performance of

Commercial Activities and subpart 7.3).

(b) Agencies shall not award a contract for the performance of an

inherently governmental function (see subpart 7.5).

(c) Non-personal service contracts are proper under general

contracting authority.

8. Section 37.114 is added to read as follows:

37.114 Special acquisition requirements.

Contracts for services which require the contractor to provide

advice, opinions, recommendations, ideas, reports, analyses, or other

work products have the potential for influencing the authority,

accountability, and responsibilities of Government officials. These

contracts require special management attention to ensure that they do

not result in performance of inherently governmental functions by the

contractor and that Government officials properly exercise their

authority. Agencies must ensure that--

(a) A sufficient number of qualified Government employees are

assigned to oversee contractor activities, especially those that

involve support of government policy or decision making. During

performance of service contracts, the functions being performed shall

not be changed or expanded to become inherently governmental.

(b) A greater scrutiny and an appropriate enhanced degree of

management oversight is exercised when contracting for functions that

are not inherently governmental but closely support the performance of

inherently governmental functions (see 7.503(c)).

(c) All contractor personnel attending meetings, answering

Government telephones, and working in other situations where their

contractor status is not obvious to third parties are required to

identify themselves as such to avoid creating an impression in the

minds of members of the public or Congress that they are Government

officials, unless, in the judgment of the agency, no harm can come from

failing to identify themselves. They must also ensure that all

documents or reports produced by contractors are suitably marked as

contractor products or that contractor participation is appropriately

disclosed.

[FR Doc. 96-1015 Filed 1-25-96; 8:45 am]

BILLING CODE 6820-EP-M