Inherently Governmental Functions and
Department of Defense Operations:
Background, Issues, and Options for Congress
John R. Luckey
Legislative Attorney
Valerie Bailey Grasso
Specialist in Defense Acquisition
Kate M. Manuel
Legislative Attorney
June 15, 2009
Congressional Research Service
7-5700
www.crs.gov
R40641
CRS Report for Congress
P
repared for Members and Committees of Congress
Inherently Governmental Functions and Department of Defense Operations
Summary
An “inherently governmental function” is one that, as a matter of law and policy, must be
performed by federal government employees and cannot be contracted out because it is
“intimately related to the public interest.” Concerned that the existence of multiple and/or
inconsistent definitions of “inherently governmental functions” might be partly responsible for
the alleged contracting out of inherently governmental functions by the Department of Defense
(DOD) and other agencies, the 110th Congress enacted legislation (P.L. 110-417) requiring the
Office of Management and Budget (OMB) to develop a “single consistent definition” of
“inherently governmental functions.” This definition is to “ensure that the head of each ... agency
is able to identify each position within that department or agency that exercises an inherently
governmental function.” By statute, OMB is to report on its definition by October 14, 2009.
The current debate over which functions are inherently governmental is part of a larger debate
about the proper role of the federal government vis-à-vis the private sector. This debate is as old
as the Constitution, which prohibits privatization of certain functions (e.g., Congress’s legislative
function), a prohibition courts enforce under various judicial tests (e.g., nondelegation, functions
“affected with the public interest,” etc.). Since the 1920s, federal contracting has been a primary
arena for the public/private debate, with the executive and legislative branches contesting (1)
which functions the government must perform because they are inherently governmental; (2)
which functions the government should perform because they are closely related to inherently
governmental functions or for some policy reason; and (3) which functions should be left to the
private sector. DOD functions are often central to debates over which functions are inherently
governmental because of the specific functions DOD performs; its prominent role in federal
contracting; and its unique workforce, which blends military and civilian personnel.
Two main definitions of “inherently governmental functions” currently exist within federal law
and policy. One is a statutory definition, enacted as part of the Federal Activities Inventory
Reform (FAIR) Act of 1998. This definition states that an inherently governmental function is “a
function so intimately related to the public interest as to require performance by Federal
Government employees.” The other is a policy-oriented definition contained in OMB Circular A-
76. This definition states that an inherently governmental activity is “an activity that is so
intimately related to the public interest as to mandate performance by government personnel.”
Other statutes and regulations that define inherently governmental functions do so either by
reproducing the language of the FAIR Act or OMB Circular A-76, or by incorporating the
definitions of the FAIR Act or OMB Circular A-76 by reference.
Congress has several options if it is concerned that deficiencies in the existing definitions of
inherently governmental functions may lead agencies to improperly contract out inherently
governmental functions. Options include (1) relying upon recent statutory changes and/or the
policies of the Obama Administration, which proposes to limit contracting out generally, to effect
desired changes in agency contracting; (2) changing the existing definition of “inherently
governmental functions”; (3) placing limits on contracting out or use of appropriated funds; (4)
addressing structural factors potentially prompting agencies to rely on contractors; (5) providing
for more effective oversight of executive branch contracting decisions; and (6) focusing more on
questions of contracting policy (i.e., what functions should the government perform?) than on
contracting law (i.e., what functions must the government perform?). The 111th Congress is
considering several bills addressing inherently governmental functions, including H.R. 1436,
H.R. 2142, H.R. 2177, H.R. 2647, H.R. 2682, H.R. 2736, S. 629, S. 924, and S. 1033.
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Inherently Governmental Functions and Department of Defense Operations
Contents
Introduction ................................................................................................................................ 1
Background ................................................................................................................................ 1
The Constitutional Grounding for the Public/Private Debate.................................................. 2
The Public/Private Debate Surrounding Federal Contracting ................................................. 4
Roosevelt Administration ................................................................................................ 4
Truman Administration ................................................................................................... 4
Eisenhower Administration ............................................................................................. 5
Reagan and George H.W. Bush Administrations .............................................................. 5
Clinton and George W. Bush Administrations.................................................................. 5
Obama Administration .................................................................................................... 6
Current Definitions of “Inherently Governmental Functions” ...................................................... 7
Statutory Definitions and Declarations .................................................................................. 8
The FAIR Act.................................................................................................................. 8
Other Statutory Definitions ........................................................................................... 10
Statutory Declarations of Specific Functions as Inherently Governmental...................... 11
Policy-Based Definitions and Declarations .......................................................................... 12
OMB Circular A-76 ...................................................................................................... 12
OFPP Letter 92-1 .......................................................................................................... 15
DODI 1100.22 .............................................................................................................. 15
Administrative Law Provisions and Declarations................................................................. 16
Federal Acquisition Regulation ..................................................................................... 16
Defense Federal Acquisition Regulation Supplement..................................................... 17
Executive Orders........................................................................................................... 18
GAO Decisions............................................................................................................. 19
Judicial Decisions ............................................................................................................... 20
Issues and Options for Congress................................................................................................ 22
Reliance on Prior Statutory Changes and/or Policies of the Obama Administration .............. 23
Amending the Definition of “Inherently Governmental Functions”...................................... 26
Standardizing the Definition of “Inherently Governmental Functions”........................... 26
Replacing “Inherently Governmental Functions” with Another Construct ...................... 27
Defining Other Terms Related to “Inherently Governmental Functions” and
Prohibiting Contracting Them Out ............................................................................. 28
Clarifying Terms within the Existing Definition of Inherently Governmental
Functions ................................................................................................................... 30
Potential Limitations of Definitional Changes ............................................................... 30
Placing Limits on Contracting Out Or Use of Appropriated Funds ....................................... 32
Addressing Structural Factors Prompting Agencies to Rely on Contractors.......................... 33
More Effective Oversight of Executive Branch Contracting Decisions................................. 35
Focusing on Questions of Contracting Policy ...................................................................... 37
Figures
Figure 1. Categorization of Functions as Inherently Governmental or Commercial .................... 31
Figure 2. Sample FAIR Act Listing of Commercial Functions.................................................... 36
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Figure 3. Processes Under the FAIR Act and OMB Circular A-76.............................................. 36
Figure 4. A Possible Framework for Distinguishing Between Questions of Contracting
Law and Contracting Policy ................................................................................................... 38
Figure 5. A Possible Framework for Addressing Questions of Contract Policy ........................... 39
Tables
Table 1. Comparison of the Treatments of Inherently Governmental Functions in the
FAIR Act, OMB Circular A-76, and the FAR.......................................................................... 27
Appendixes
Appendix A. Examples of Congressional and Executive Branch Interactions in Defining
Inherently Governmental Functions During the 1980s ............................................................ 40
Appendix B. Factors Used in Determining Whether a Function Is Inherently
Governmental Under OMB Circular A-76 .............................................................................. 46
Appendix C. Functions Performed by Military Personnel as Classified by DODI 1100.22 ......... 47
Appendix D. Functions Performed by DOD Civilian Employees as Classified by DODI
1100.22.................................................................................................................................. 49
Appendix E. Inherently Governmental Functions and Functions Approaching Inherently
Governmental as Classified by the FAR ................................................................................. 51
Appendix F. Functions Recognized as Inherently Governmental or Commercial by the
GAO ...................................................................................................................................... 53
Appendix G. Side-by-Side Comparison of the Definitions of Inherently Governmental
Functions from the FAIR Act and OMB Circular A-76 ........................................................... 54
Contacts
Author Contact Information ...................................................................................................... 56
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Inherently Governmental Functions and Department of Defense Operations
Introduction
An “inherently governmental function” is one that, as a matter of law and policy, must be
performed by federal government employees and cannot be contracted out because it is
“intimately related to the public interest.” Concerned that the existence of multiple and/or
inconsistent definitions of “inherently governmental functions” might be partly responsible for
the alleged contracting out of inherently governmental functions by the Department of Defense
(DOD) and other agencies, the 110th Congress enacted legislation (P.L. 110-417) requiring the
Office of Management and Budget (OMB) to develop a “single consistent definition” of
“inherently governmental functions.” This definition is to “ensure that the head of each ... agency
is able to identify each position within that department or agency that exercises an inherently
governmental function.” By statute, OMB is to report on its definition by October 14, 2009.
This report provides background, issues, and options for Congress on defining inherently
governmental functions within the context of DOD operations. It situates contemporary debates
over which functions are inherently governmental within the context of the broader debate about
the proper roles of the public and private sectors, surveys existing definitions of “inherently
governmental functions” within federal law and policy, and discusses issues and options for
Congress in redefining inherently governmental functions or otherwise ensuring that the
executive branch’s categorization of functions corresponds to the definition of inherently
governmental functions. The report focuses upon DOD because of the specific functions that it
performs; its prominent role in federal contracting; its unique workforce, which consists of
military and civilian personnel; and recent allegations that DOD, among other agencies, has
improperly contracted out inherently governmental functions.
Background
The current debate over which functions are inherently governmental is part of a larger debate
about the proper role of the federal government vis-à-vis the private sector that is as old as the
Republic itself. All government functions can arguably be divided into three categories: those that
must be performed by government employees, those that should be performed by government
employees, and those suitable for private sector performance. However, the size and content of
these categories have fluctuated throughout American history. The “must” category has arguably
experienced the least fluctuation, whereas the “should” and “private” categories have
significantly increased or diminished over time with changes in administrations or even within
administrations (e.g., moving from peacetime to war). The “Background” section surveys the
history of this public/private debate, focusing particularly upon how it has played out in the
context of federal contracting.
The debate over DOD functions generally corresponds to the overall public/private debate;
however, it sometimes reflects unique aspects of DOD or its procurement system. First, because
DOD has two distinct workforces, military and civilian, capable of performing functions, DOD
must determine which workforce will perform functions in the “must” or “should” categories.
Where functions in the “must” category are concerned, DOD has to determine whether it matters
which DOD employees, military or civilian, perform the function. Similarly, where functions in
the “should category” are concerned, DOD must determine not only whether the function should
be performed in-house or by the private sector, but also which workforce will perform functions
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deemed appropriate for in-house performance. Second, DOD relies upon ammunition and
armaments in its operations, items which some commentators at various periods of time have
thought should be manufactured by defense agencies in arsenals or Navy shipyards, for example,
instead of by the private sector.1 The arguments for in-house manufacturing of DOD materiels
have varied over the years, but have included the claim that manufacturing of weapons is an
inherently governmental function and thus falls within the “must” category. However, such
arguments appear to confuse considerations of national defense policy (i.e., the security of having
an in-house supply of important products), which might argue for placing the function in the
“should” category, with functions “intimately related to the public interest.” Third, the federal
government has consistently maintained two parallel acquisition systems, civilian and defense,
wherein the rules for DOD are not always identical to those for the rest of the federal government.
The Constitutional Grounding for the Public/Private Debate
The Constitution, with its enumerated powers and limits on these powers, is the logical, best
starting point for distinguishing between “must,” “should,” and commercial functions. The
Constitution envisioned certain functions that must be carried out by one branch or other of the
federal government. The legislative function of Article I is clearly an inherently governmental
function entrusted to Congress.2 Article II, with equal clarity, entrusted several inherently
governmental functions to the President, such as the executive power,3 the Commander-in-Chief
function,4 the appointment power,5 the power to conduct foreign affairs,6 and the granting of
pardons.7 The Constitution also recognized the public/private tension with explicit limitations on
certain public functions when they directly affect private interests. For example, takings of
private property under the Fifth Amendment must be for public purpose.8 However, more than
200 years after ratification of the Constitution, commentators are still trying to determine what
constitutes a public purpose.9 The Constitution also recognized and provided for the other end of
the spectrum: private functions. The most explicit such recognition is in the Tenth Amendment,
which states, “The powers not delegated to the United States by the Constitution, nor prohibited
by it to the States, are reserved to the States respectively, or to the people.”10
Very early in American history, the Supreme Court in Marbury v. Madison recognized that the
President and other executive branch officials exercise inherent powers founded upon their
discretion and accountability.11 In Marbury, while addressing whether a judge whose commission
was not delivered to him by a new administration had a legal remedy, the Court distinguished
1 Daniel Guttman, Public Purpose and Private Service: The Twentieth Century Culture of Contracting Out and the
Evolving Law of Diffused Sovereignty, 52 Admin. L. Rev. 859, 864 (2000).
2 U.S. Const. art. I, § 1.
3 U.S. Const. art. II, § 1, cl. 1.
4 U.S. Const. art. II, § 2, cl. 1.
5 U.S. Const. art. II, § 2, cl. 2.
6 Id.
7 U.S. Const. art. II, § 2, cl. 1.
8 U.S. Const. amend. V.
9 See Kelo v. City of New London, 545 U.S. 469 (2005) (holding that economic development by private entities
constitutes an acceptable public use).
10 U.S. Const. amend. X.
11 5 U.S. 137 (1803).
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between “ministerial functions” of the executive branch, which officials are legally required to
perform, and “political powers,” in which executive officials may exercise discretion. Regarding
the latter, the Court stated:
By the constitution of the United States, the President is invested with certain important
political powers, in the exercise of which he is to use his own discretion, and is accountable
only to his country in his political character, and to his own conscience. To aid him in the
performance of these duties, he is authorized to appoint certain officers, who act by his
authority and in conformity with his orders.12
These two issues, discretion and accountability, have remained central to discussions of what
functions the government must perform to this day.13 Various commentators would afford the
executive branch different degrees of discretion in classifying particular functions as inherently
governmental or commercial and seek to hold the executive branch accountable for its
classifications to differing degrees and in differing ways.
In attempting to protect the public and private sectors as defined by the Constitution, post-
Marbury courts articulated various theories and tests, several of which also appear in some recent
discussions of inherently governmental functions. One key test focuses upon functions “affected
with the public interest.” Courts in the 19th century, in particular, distinguished between functions
“affected with the public interest” and other functions when determining whether government
regulation (an exercise of the public sector) of certain businesses (private-sector entities) was
permissible. Where the business was “affected with a public interest,” such as common carriers
were, courts found the regulation permissible.14 This test arguably focuses upon the functions that
the government “should” or “may” perform, however, rather than those that the government
“must” perform. Another key test focused upon “public interests” or “public functions.” This test
was used to determine when private-sector entities were accountable to individuals for certain
public-sector protections, such as due process. The courts concluded that when entities, such as
company towns, performed public functions, they owed individuals due process.15 Another key
test, largely used in the 1930s, was the “private delegation doctrine,” which precluded Congress
from delegating its power to legislate (a public-sector power) to third parties not in the
government (private-sector entities).16
12 Id. at 165-66.
13 See infra notes 116-140 and accompanying text. See also Arrowhead Metals, Ltd. v. United States, 8 Cl. Ct. 703, 714
(1985) (finding that coinage of money is inherently governmental but that the U.S. Mint has discretion to determine
whether the stamping of blanks constitutes coinage and is thus exempt from OMB Circular A-76); Northrop Grumman
Info. Tech., Inc. v. United States, 74 Fed. Cl. 407 (2006) (addressing information management and technology services
under OMB Circular A-76); United States v. Kenney, 185 F.3d 1217 (11th Cir. 1999) (stating that functions are not
inherently governmental, for purposes of contracting out, unless the contractor is in a position to make decisions that
are binding on the agency); Nat’l Air Traffic Controllers Ass’n v. Sec’y of the Dep’t of Trans., 997 F. Supp. (1998)
(stating that air traffic control is inherently governmental because it involves national defense).
14 See, e.g., Munn v. Illinois, 94 U.S. 113 (1876).
15 See, e.g., Marsh v. Alabama, 326 U.S. 501 (1946); Smith v. Allwright, 321 U.S. 649 (1944). See also Paul R.
Verkuil, Public Law Limitations on Privatization of Government Functions, 84 N.C. L. Rev. 397, 410-15 (2006).
16 See, e.g., Carter v. Carter Coal Co., 298 U.S. 238 (1936) (striking down as an unconstitutional private delegation
legislation that would have subjected an industry to maximum hours agreed to by a supermajority of workers and
producers in the industry); A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935) (striking down as an
unconstitutional private delegation legislation that would have allowed industrial organizations or trade associations to
establish “codes of fair competition” for their industry).
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The Public/Private Debate Surrounding Federal Contracting
Since World War I, one of the primary arenas for the public/private debate and the definition of
inherently governmental functions has been federal contracting. The emphasis on public or
private entities as the preferred source of goods or services has swung back and forth over the
years with the change of administrations or even during administrations. The emphasis has also
shifted depending upon which agencies are conducting the procurements and the nature of the
goods or services procured. In the 1920s, for example, the government had different emphases in
civilian and defense contracting: while the alleged abuses of military contractors during World
War I caused the military to perform more work in-house, public contracting by civilian agencies
expanded.17
Roosevelt Administration
President Roosevelt essentially reversed the relative use of civilian and military contractors as
compared to the 1920s. Prior to World War II, the Roosevelt Administration placed renewed
emphasis on the government’s role and the benefits of the government performing functions for
socioeconomic purposes even when doing so brought it into competition with the private sector
(e.g., creation of the Civilian Conservation Corps and the Public Works Administration).18 In
contrast, mobilization for World War II brought greater emphasis on using the private sector to
meet the country’s defense needs, as well as many changes in the ways in which the government
contracted for goods and services.19
Truman Administration
The Truman Administration was generally a period of change and reorganization in the federal
government’s procurement of goods and services. Several important statutes were enacted in this
period, including the Armed Services Procurement Act of 1947,20 the Renegotiation Act of
1948,21 the Federal Property and Administrative Services Act of 1949,22 and the Defense
Production Act of 1950.23 These statutes greatly changed the federal procurement landscape,
although they did not directly address which functions the government must perform (i.e., what is
inherently governmental). They did, however, address how to make decisions as to who should
perform specific functions.
17 James F. Nagle, A History of Government Contracting 333-59 (2d ed. 1999).
18 Id. at 364-77.
19 Id. at 379-444.
20 62 Stat. 21 (1948).
21 62 Stat. 259 (1948).
22 63 Stat. 377 (1949).
23 64 Stat. 798 (1950).
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Eisenhower Administration
President Eisenhower was the first to formally declare a federal policy of not competing with the
private sector.24 This policy was originally published by the Bureau of the Budget (BOB) in a
directive issued in 1955:
It is the stated policy of the administration that the Federal government will not start or carry
on any commercial activity to provide a service or product for its own use if such product or
service can be procured from private enterprise through ordinary business channels.25
This policy was expressed in, and entered the vernacular as, Office of Management and Budget’s
(OMB’s) Circular A-76 in 1966 during the Johnson Administration.26 Since that time, OMB
Circular A-76 has become the primary focal point for discussions of what is an inherently
governmental function because it and its four attachments establish guidelines and procedures for
determining whether an activity should be performed in-house with government personnel or
whether it should be contracted out to the private sector.27
Reagan and George H.W. Bush Administrations
The 1980s saw numerous disputes between proponents of the government and private sectors. Of
these two administrations, the Reagan Administration, in particular, was a strong proponent of
smaller government and had many confrontations with Congress over who should perform
various functions. This administration would propose or attempt to privatize particular functions,
such as depot maintenance. Congress would then respond with either an appropriations rider,
prohibiting or conditioning the use of funds to implement the privatization, or with a substantive
law declaring a function inherently governmental, among other things. Appendix A provides
examples of congressional responses to proposed contracting out by the Reagan and George H.W.
Bush Administrations to illustrate possible legislative responses to allegedly improper contracting
out by federal agencies.
Clinton and George W. Bush Administrations
The Clinton Administration was arguably on both sides of the public/private debate, sponsoring
plans, such as comprehensive health care reform, that might have expanded the public sector, as
well as attempting to end “big government” with its “reinventing government” initiative and
enactment of the Federal Activities Inventory Reform (FAIR) Act. The FAIR Act, which is
discussed in more detail in the section on definitions of inherently governmental functions, sought
to foster increased contracting out of agencies’ commercial functions. The George W. Bush
24 Nagle, supra note 17, at 487.
25 BOB Bulletin 55-4, January 15, 1955.
26 The authority cited for issuing the Circular is the Budget and Accounting Act of 1921, 31 U.S.C. §§ 501-502; the
Office of Federal Procurement Policy Act, 41 U.S.C. § 401 et seq.; and Federal Activities Inventory Reform (FAIR)
Act of 1998, P.L. 105-270. OMB Circular A-76 was substantially revised in 1967, 1979, 1983, 1991, 1999, and, most
recently and extensively, in May 2003. The 1999 amendment, in particular, was issued to bring the Circular into
conformance with and assist in implementation of the FAIR Act.
27 Attachment A contains the inventory process for categorizing activities as commercial or inherently governmental.
Attachment B sets out the processes to be used in public-private competitions. Attachment C gives the rules for
calculating the cost of these competitions. Attachment D supplies the definitions for the Circular.
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Administration could be described as having an even narrower conception of the role of the
public sector. Among other things, the Bush Administration proposed amending OMB Circular A-
76 so that all functions were presumed commercial unless agencies justified why they were
inherently governmental.28 The Bush Administration’s extensive use of contractors in Iraq and
Afghanistan also engendered much discussion as to propriety of contracting out certain functions.
Critics claimed that the Bush Administration improperly contracted out acquisition, armed
security, and contract management functions, among others.
Obama Administration
Recent announcements by President Obama and Secretary of Defense Robert M. Gates could
signal a shift to increased governmental performance of certain functions. President Obama
issued a three-page memorandum on March 4, 2009, announcing his Administration’s priorities in
contracting policy. It highlighted four initiatives: (1) increased competition; (2) use of fixed-price
contracts; (3) ensuring that the acquisition workforce can manage and oversee contracts; and (4)
ensuring that functions considered to be inherently governmental are not contracted out. As
regards contracting out, in particular, the memorandum states:
Government outsourcing for services also raises special concerns. For decades, the Federal
Government has relied on the private sector for necessary commercial services used by the
Government, such as transportation, food, and maintenance. Office of Management and
Budget Circular A-76, first issued in 1966, was based on the reasonable premise that while
inherently governmental activities should be performed by Government employees,
taxpayers may receive more value for their dollars if non-inherently governmental activities
that can be provided commercially are subject to the forces of competition.
However, the line between inherently governmental activities that should not be outsourced
and commercial activities that may be subject to private sector competition has been blurred
and inadequately defined. As a result, contractors may be performing inherently
governmental functions. Agencies and departments must operate under clear rules
prescribing when outsourcing is and is not appropriate.29
Secretary Gates made the President’s proposal more concrete with the budget announcement he
issued prior to the President’s submission of the budget on May 7, 2009:
A final recommendation ... will have a significant impact on how defense organizations are
staffed and operated. Under this budget request, we will reduce the number of support
service contractors from our current 39 percent of the workforce to the pre-2001 level of 26
percent and replace them with full-time government employees. Our goal is to hire as many
as 13,000 new civil servants in FY10 to replace contractors and up to 30,000 new civil
servants in place of contractors over the next five years.30
28 See 67 Fed. Reg. 69769 (Nov. 19, 2002). This proposal was dropped from the final version of the Circular adopted in
2003.
29 The White House, Office of the Press Secretary, Government Contracting: Memorandum for the Heads of Executive
Departments and Agencies, Mar. 4, 2009, available at http://www.whitehouse.gov/the_press_office/Memorandum-for-
the-Heads-of-Executive-Departments-and-Agencies-Subject-Government-Contracting.
30 Defense Budget Recommendation Statement, As Prepared for Delivery by Secretary of Defense Robert M. Gates,
Arlington, VA, Monday, April 06, 2009, available at http://www.defenselink.mil/speeches/speech.aspx?
speechid=1341.
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Current Definitions of “Inherently Governmental
Functions”
Two main definitions of inherently governmental functions currently exist within federal law and
policy. One is a statutory definition, enacted as part of the Federal Activities Inventory Reform
(FAIR) Act of 1998.31 This definition states that an inherently governmental function is “a
function so intimately related to the public interest as to require performance by Federal
Government employees.”32 The other is a policy-oriented definition contained in Office of
Management and Budget (OMB) Circular A-76.33 This definition states that an inherently
governmental activity is “an activity that is so intimately related to the public interest as to
mandate performance by government personnel.”34 Other statutes and regulations that define
inherently governmental functions do so either by reproducing the language of the FAIR Act or
OMB Circular A-76, or by incorporating the definitions of the FAIR Act or OMB Circular A-76
by reference. The Federal Acquisition Regulation (FAR) is a prime example of this.35 The FAR
does not provide its own definition of inherently governmental functions; rather, it incorporates
the definition of OMB Circular A-76 by reference.36
In addition to these definitions, there are numerous statutory, regulatory, and policy provisions
designating specific functions as inherently governmental or commercial. These provisions also
help establish the meaning of “inherently governmental functions” by specifying what is—and is
not—included within that category. Similarly, while not offering their own definitions of
inherently governmental functions, the Government Accountability Office (GAO) and the federal
courts have tests for identifying inherently governmental functions that they use in designating
specific functions as inherently governmental or commercial.
This section surveys the current definitions of inherently governmental functions, as well as the
functions that have been designated as inherently governmental or commercial by statute,
regulation, policy, or GAO or judicial decision. It addresses (1) statutory definitions and
declarations; (2) policy-based definitions and declarations; (3) definitions and declarations from
administrative law, including GAO decisions; and (4) designations in federal court decisions.
31 P.L. 105-270, 112 Stat. 2382 (1998) (codified at 31 U.S.C. § 501 note).
32 31 U.S.C. § 501 note, at § 5(2)(A).
33 OMB, Circular No. A-76 Revised, May 29, 2003, available at http://www.whitehouse.gov/omb/circulars/a076/
a76_incl_tech_correction.html.
34 OMB Circular A-76, Attachment A, at § (B)(1)(a).
35 The FAR is promulgated by the General Services Administration (GSA), the Department of Defense (DOD), and the
National Aeronautics and Space Administration (NASA) under the authority of the Office of Federal Procurement
Policy Act of 1974. See Office of Federal Procurement Policy Act of 1974, P.L. 93-400, 88 Stat. 796 (codified at 41
U.S.C. §§ 401-438); DOD, GSA & NASA, Establishing the Federal Acquisition Regulation: Final Rule, 48 Fed. Reg.
42102, 42142 (Sept. 19, 1983).
36 48 C.F.R. § 7.301. The FAR does, however, reproduce the definition of OMB Circular A-76 in its own “definitions”
section with some slight modifications. See 48 C.F.R. § 2.101 (“‘Inherently governmental function’ means, as a matter
of policy, a function that is so intimately related to the public interest as to mandate performance by Government
employees. This definition is a policy determination, not a legal determination.”).
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Statutory Definitions and Declarations
The FAIR Act provides the primary statutory definition of inherently governmental functions.
There are, however, several other statutory definitions of inherently governmental functions and
“functions closely associated with inherently governmental functions.” Some of these definitions
mirror the definitions of the FAIR Act or OMB Circular A-76, while others incorporate the
definitions of the FAIR Act or OMB Circular A-76 by reference. There are also numerous
statutory provisions declaring that specific functions are inherently governmental.
The FAIR Act
The FAIR Act provides the primary statutory definition of inherently governmental functions.
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-76.37 OMB
Circular A-76 predated the FAIR Act and expressed the federal government’s general policy of
relying on competitive private enterprises to supply the commercial products and services it
needs.38 OMB Circular A-76 also provided procedures for agencies to conduct cost comparisons
to determine whether the government or private enterprises should perform specific activities on
the government’s behalf.39 However, although OMB Circular A-76 established policies and
procedures, it reportedly failed to result in public-private competitions for performance of
commercial activities, or agencies’ contracting with the private sector for performance of their
commercial activities.40 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.41 The FAIR Act does not require agencies to contract out any particular
activities, however.42 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.43
Although the FAIR Act’s primary focus is upon commercial activities performed by government
agencies, it defined inherently governmental functions in order to contrast them with commercial
37 See, e.g., H.R. 4244, Federal Activities Inventory Reform Act: Hearing Before the Subcomm. on Gov’t Mgmt., Info.,
& Tech. of the Comm. on Gov’t Reform & Oversight, 105th Cong., 2d Sess. 1 (Aug. 6, 1998) (statement of John J.
Duncan, Jr., Representative from Tennessee). As originally introduced, the Freedom from Government Competition
Act would have prohibited agencies from beginning or carrying out any activity whose products or services could be
provided by the private sector.
38 Bulletin 55-4 of the Bureau of the Budget, issued on January 15, 1955, first articulated the policy of OMB Circular
A-76. Bulletin 55-4 was revised in 1957 and 1960 before being reissued as OMB Circular A-76 in 1966. OMB Circular
A-76 was itself revised in 1967, 1979, 1983, 1991, 1999, and 2003. For more on OMB Circular A-76, see CRS Report
RS21489, OMB Circular A-76: Explanation and Discussion of the Recently Revised Federal Outsourcing Policy, by
John R. Luckey.
39 See Luckey, supra note 38, at 2.
40 See, e.g., H.R. 4244, supra note 37, 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.”).
41 31 U.S.C. § 501 note, at § 2(a) & (c).
42 In fact, there is no statute establishing a general federal policy of or requirement for contracting out. There is only
Section 2462(a) of Title 10 of the United States Code, which says that the Department of Defense should contract out
services that the private sector can provide more cheaply.
43 31 U.S.C. § 501 note, at § 2(e).
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activities.44 The FAIR Act’s definition of inherently governmental functions is itself brief: “The
term ‘inherently governmental function’ means a function that is so intimately related to the
public interest as to require performance by Federal Government employees.”45 This definition is,
however, followed by lengthy lists of functions included in and excluded from the definition of
inherently governmental functions under the act.46
The FAIR Act describes the “functions included” within its definition of inherently governmental
function as ones that “require either the exercise of discretion in applying Federal Government
authority or the making of value judgments in making decisions for the Federal Government,
including judgments relating to monetary transactions and entitlements.”47 The act then gives a
non-exclusive list of examples of the types of “functions included.” These are:
1. binding the United States to take, or not to take, action by contract, policy,
regulation, authorization, order or otherwise;
2. determining, protecting, and advancing U.S. economic, political, territorial,
property, or other interests by military or diplomatic action, civil or criminal
judicial proceedings, contract management, or otherwise;
3. significantly affecting the life, liberty, or property interests of private persons;
4. commissioning, appointing, directing or controlling officers or employees of the
United States; or
5. exerting ultimate control over the acquisition, use, or disposition of the real or
personal, tangible or intangible, property of the United States, including the
collection, control or disbursement of appropriated and other federal funds.48
The FAIR Act further describes the “functions excluded” from its definition of inherently
governmental functions as those involving (1) gathering information for or providing advice,
opinions, recommendations, or ideas to federal officials, or (2) any function that is primarily
ministerial and internal in nature.49 It concludes by giving examples of ministerial and internal
functions, which include building security, mail operations, cafeteria operations, housekeeping,
facilities operations and maintenance, warehouse operations, motor vehicle fleet management
operations, or other routine electrical or mechanical services.50
The FAIR Act’s definition of inherently governmental functions and listing requirements apply to
all executive branch agencies named in 5 U.S.C. § 101, all military departments named in 5
U.S.C. § 102, and all independent establishments as defined in 5 U.S.C. § 104.51 However, the
FAIR Act explicitly exempts from the act’s requirements (1) GAO; (2) government corporations
or government-controlled corporations, as defined in 5 U.S.C. § 103; (3) non-appropriated funds
44 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.
45 Id.
46 31 U.S.C. § 501 note, at § 5(2)(B)&(C).
47 31 U.S.C. § 501 note, at § 5(2)(B).
48 31 U.S.C. § 501 note, at § 5(2)(B)(i)-(v).
49 31 U.S.C. § 501 note, at § 5(2)(C).
50 Id.
51 31 U.S.C. § 501 note, at § 4(a)(1)-(3).
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instrumentalities, as described in 5 U.S.C. § 2105(c); (4) certain depot-level maintenance and
repair activities of the Department of Defense, as described in 10 U.S.C. § 2460; and (5) agencies
with fewer than 100 full-time employees as of the first day of the fiscal year.52
Other Statutory Definitions
In addition to the FAIR Act, other statutes have “definitions” sections that include “inherently
governmental functions” or “functions closely associated with inherently governmental
functions.”
Two of these statutes provide a definition of inherently governmental functions that, while closely
related to the definitions of the FAIR Act and OMB Circular A-76, does not reproduce either of
these definitions verbatim. The Coast Guard appropriations authorization act for FY2004 and
FY2005 and the National and Community Service Trust Act of 1993 both define an inherently
governmental function as:
... any activity that is so intimately related to the public interest as to mandate performance
by an officer or employee of the Federal Government, including an activity that requires
either the exercise of discretion in applying the authority of the Government or the use of
judgment in making a decision for the Government.53
The verb “mandate” in this definition matches the verb in the definition of OMB Circular A-76,
but this definition departs from the definition of OMB Circular A-76 by using “officer or
employee of the Federal Government” where OMB Circular A-76 uses “Federal Government
employees.”54 This definition also specifically incorporates the functions of exercising discretion
and using judgment that are mentioned in OMB Circular A-76 and are among the “functions
included” within the FAIR Act’s definition of inherently governmental functions.55
Outside of the Coast Guard appropriations authorization act for FY2004 and FY2005 and the
National and Community Service Trust Act of 1993, however, no statute provides a definition of
inherently governmental functions different from that in the FAIR Act or OMB Circular A-76.
Many statutes incorporate the definition from OMB Circular A-76 by reference when defining
inherently governmental functions.56 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.57
52 31 U.S.C. § 501 note, at § 4(b)(1)-(5).
53 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. 108-233, § 302, 118 Stat. 1028 (codified at 33 U.S.C. § 1223(e)).
54 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).
55 Compare 33 U.S.C. § 1223(e) and 42 U.S.C. § 12651g(a)(1)(C)(iii) with OMB Circular A-76, Attachment A, § at
(B)(1)(a) and 31 U.S.C. § 501 note, at § 5(2)(B).
56 See, e.g., 10 U.S.C. § 2330a(g)(4) (defining inherently governmental functions by reference to 10 U.S.C.§
2383(b)(2)). Section 2383(b)(2) of Title 10 of the United States Code does not itself define inherently governmental
functions. Rather, it incorporates the FAR’s definition by reference. The FAR does not define this term, however; the
FAR incorporates the definition of OMB Circular A-76 by reference.
57 See, e.g., 10 U.S.C. § 2330a(g)(3) (defining functions closely associated with inherently governmental functions by
reference to 10 U.S.C.§ 2383(b)(3)); 10 U.S.C. § 2463(e) (same). Section 2383(b)(3) of Title 10 of the United States
(continued...)
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Statutory Declarations of Specific Functions as Inherently Governmental
Several provisions of federal law declare that specific functions are inherently governmental
without defining inherently governmental functions. Sometimes, specific functions are defined as
inherently governmental without reference to the FAIR Act or the employees performing the
functions at the time of the statute’s enactment. Examples of such functions are (1) the
preparation of agency strategic plans and program performance reports under the Government
Performance and Results Act of 199358 and (2) functions connected with the operation and
maintenance of hydroelectric power-generating facilities at water resources projects of the Army
Corps of Engineers.59 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 Laboratory60 and instructor staff at the Federal Law Enforcement Training Center.61
At yet other times, Congress effectively renders certain functions inherently governmental, at
least temporarily, without classifying them as such, by providing that appropriated funds cannot
be expended to contract them out.62 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,63 or by imposing additional restrictions—beyond those in the FAIR
Act, OMB Circular A-76, or the FAR—upon contracting out activities that are arguably closely
associated with inherently governmental functions.64
(...continued)
Code does not itself define functions closely associated with inherently governmental functions. Rather, it incorporates
by reference the definition of the FAR, which itself incorporates by reference the definition of OMB Circular A-76.
58 P.L. 103-62, 107 Stat. 285 (1993) (codified at 5 U.S.C. § 306; 31 U.S.C. §§ 1115-1116; & 39 U.S.C. § 2805).
59 Water Resources Development Act of 1990, P.L. 101-640, § 314, 104 Stat. 4641 (codified at 33 U.S.C. § 2321).
60 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).
61 Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, P.L. 110-329, § 521, 122 Stat.
3574 (September 30, 2008).
62 See, e.g., Consolidated Appropriations Act, P.L. 110-161, § 730, 121 Stat. 1846 (Dec. 26, 2007) (“None of the funds
made available in this Act maybe used to study, complete a study of, or enter into a contract with a private party to
carry out, without specific authorization in a subsequent Act of Congress, a competitive sourcing activity of the
Secretary of Agriculture, including support personnel of the Department of Agriculture, relating to rural development
or farm loan programs.”). See also id. at §§ 103, 111, 415, & 739.
63 See, e.g., Duncan Hunter National Defense Authorization Act for FY2009, P.L. 110-417, § 832, 122 Stat. 4535 (Oct.
14, 2008) (“It is the sense of Congress that ... the regulations issued by the Secretary of Defense pursuant to section
862(a) of the National Defense Authorization Act for Fiscal Year 2008 ... should ensure that private security
contractors are not authorized to perform inherently governmental functions in an area of combat operations.”).
64 See, e.g., 5 U.S.C. § 1101 (providing that functions formerly performed by the Defense Security Service and
transferred to the Office of Personnel Management (OPM) may not be converted to contractor performance until the
Director of OPM makes a written determination that they are commercial or appropriate for contractor performance);
10 U.S.C. § 2330a(e)(2)(B)-(C) (requiring the secretary or head of each defense agency responsible for activities on a
list created under the FAIR Act to review the list and ensure that it does not include inherently governmental functions
or, to the maximum extent practicable, functions closely associated with inherently governmental functions); 10 U.S.C.
§ 2383 (allowing the head of a defense agency to enter into a contract for the performance of acquisitions functions
closely associated with inherently governmental functions only when, among other requirements, there are appropriate
military and civilian employees to supervise the contractor’s performance and to perform all inherently governmental
functions associated with the functions to be performed under the contract).
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Alternatively, but more rarely, Congress expresses its sense that certain functions are
commercial,65 or appropriates funds to contract out activities that some commentators might seek
to classify as inherently governmental.66
Policy-Based Definitions and Declarations
OMB Circular A-76 provides the other main definition of inherently governmental functions used
in federal law and policy. Office of Federal Procurement Policy Letter 92-1, which provided
another significant policy-based definition of inherently governmental functions, was superseded
by the 2003 revision of OMB Circular A-76. Another policy document, Department of Defense
Instruction Number 1100.22, in its revision of April 6, 2007, both provides a basic definition of
inherently governmental functions and designates numerous DOD functions as inherently
governmental or commercial.
OMB Circular A-76
Like its predecessors, the current OMB Circular A-76 “establishes federal policy for the
competition of commercial activities.”67 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. 68
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.69 All activities classified as
65 See, e.g., National Aeronautics and Space Administration Authorization Act of 2008, P.L. 110-422, § 901, 122 Stat.
4803-04 (Oct. 15, 2008) (“It is the sense of Congress that a healthy and robust commercial sector can make significant
contributions to the successful conduct of NASA’s space exploration program. While some activities are inherently
governmental in nature, there are many other activities, such as routine supply of water, fuel, and other consumables to
low Earth orbit or to destinations beyond low Earth orbit, and provision of power or communications services to lunar
outposts, that potentially could be carried out effectively and efficiently by the commercial sector at some point in the
future.”).
66 See, e.g., 31 U.S.C. § 3711 & 3718 (allowing use of private contractors to collect debts owed to the United States);
Social Security Amendments of 1965, P.L. 89-97, 79 Stat. 286 (authorizing the Department of Health and Human
Services to use contractors to administer the Medicare Insurance Program); Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, P.L. 96-510, 94 Stat. 2767 (allowing use of contractors in the Superfund
program).
67 OMB Circular A-76 Revised, May 29, 2003, at § 1.
68 OMB Circular A-76, at § 4.
69 Compare OMB Circular A-76, at § 4(a) (“[A]gencies shall ... [i]dentify all activities performed by government
personnel as either commercial or inherently governmental.”) with OMB Circular No. A-76, Revised 1999, at § 10,
available at http://www.whitehouse.gov/omb/circulars/a076/a076.html (“As required by the Federal Activities
Inventory Reform Act of 1998 and Appendix 2 of the Supplement, no later than June 30 of each year, agencies shall
submit to OMB a Commercial Activities Inventory and any supplemental information requested by OMB.”). In fact,
the current version of OMB Circular A-76 requires that agencies “justify, in writing, any designation of governmental
personnel performing inherently governmental functions.” This difference between the 1999 and 2003 versions of
OMB Circular A-76 reflects the Bush Administration’s attempt in 2002 to create a presumption that all functions of
government agencies are commercial. See OMB, Performance of Commercial Activities, 67 Fed. Reg. 69769, 69772
(Nov. 19, 2002) (“The revised Circular will require agencies to presume that all activities are commercial in nature
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.”).
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inherently governmental under OMB Circular A-76 must be performed by government
personnel.70 Only those activities classified as commercial can be considered for contracting out.
Even in its pre-2003 versions, before agencies were required to list and classify inherently
governmental activities, OMB Circular A-76 defined inherently governmental functions when
characterizing them as the opposite of commercial activities. The definition in OMB Circular A-
76 is itself brief, like the definition in the FAIR Act. The current version of OMB Circular A-76
says only that “An inherently governmental activity is an activity that is so intimately related to
the public interest as to mandate performance by government personnel.”71 However, OMB
Circular A-76, also like the FAIR Act, follows its brief definition of inherently governmental
functions with clarification and examples. The paragraph within the current version of OMB
Circular A-76 that defines inherently governmental functions continues by stating:
[Inherently governmental] activities require the exercise of substantial discretion in applying
government authority and/or in making decisions for the government. Inherently
governmental activities normally fall into two categories: the exercise of sovereign
government authority or the establishment of procedures and processes related to the
oversight of monetary transactions or entitlements. An inherently governmental activity
involves:
(1) Binding the United States to take or not to take some action by contract, policy,
regulation, authorization, order, or otherwise;
(2) Determining, protecting, and advancing economic, political, territorial, property, or other
interests by military or diplomatic action, civil or criminal judicial proceedings, contract
management, or otherwise;
(3) Significantly affecting the life, liberty, or property of private persons; or
(4) Exerting ultimate control over the acquisition, use, or disposition of United States
property (real or personal, tangible or intangible), including establishing policies or
procedures for the collection, control, or disbursement of appropriated and other federal
funds.72
This language largely corresponds to that of the FAIR Act’s examples of “functions included” in
its definition of inherently governmental functions.73
The current version of OMB Circular A-76 then provides some further explanations that are
unlike those in the FAIR Act or other sources, however. It first distinguishes between the exercise
of discretion per se, which it says does not make a function inherently governmental, and the
exercise of substantial discretion, which it says makes a function inherently governmental.74 It
70 OMB Circular A-76, at § 4.b.
71 OMB Circular A-76, Attachment A, at § (B)(1)(a).
72 Id.
73 See 31 U.S.C. § 501 note, at § 5(2)(B)(i)-(v). The FAIR Act does, however, explicitly include one example that is not
explicitly included in OMB Circular A-76: the commissioning, appointing, directing, or controlling of officers or
employees of the United States. See id. at § 5(2)(B)(iv).
74 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
(continued...)
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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.75 See
Appendix B for a listing of these six factors. The current version of OMB Circular A-76 also
explicitly defines commercial activities:
A commercial activity is a recurring service that could be performed by the private sector
and is resourced, performed, and controlled by the agency through performance by
government personnel, a contract, or a fee-for-service agreement. A commercial activity is
not so intimately related to the public interest as to mandate performance by government
personnel. Commercial activities may be found within, or throughout, organizations that
perform inherently governmental activities or classified work.76
Additionally, it includes—but does not define—a category of activities that are commercial but
“not appropriate for private sector performance.”77
OMB Circular A-76 and its definition of inherently governmental functions apply to all executive
departments named in 5 U.S.C. § 101 and all independent establishments as defined in 5 U.S.C. §
104. There are no exemptions.
OMB Circular A-76 is, however, a statement of policy, not law. For OMB Circular A-76 to have
the force of law, it would need (1) to be the product of a congressional grant of legislative
authority promulgated in accordance with any procedural requirements imposed by Congress and
(2) a substantive- or legislative-type rule affecting individual rights and obligations.78 Neither of
these requirements are met in the case of OMB Circular A-76.79 Congress did not explicitly grant
the executive branch legislative authority to promulgate OMB Circular A-76; rather, the
(...continued)
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 69 (“[T]hese functions
include those activities which require either the exercise of discretion in applying Government authority or the use of
value judgment in making decisions for the Government.”) (emphasis added). Some commentators have suggested that
the addition of “substantial” in 2003 represented a significant change in the definition of inherently governmental
functions and helped facilitate the inappropriate contracting out of allegedly inherently governmental functions by the
Bush Administration. See, e.g., Am. Fed’n of Gov’t Employees (AFGE), Privatization: Cleaning Up the Mess, Feb. 9,
2009, available at http://www.afge.org/index.cfm?page=2005LegislativeConferenceIssuePapers
&fuse=Content&ContentID=1745 (“OMB officials illegally watered down the statutory definition when they
overhauled the A-76 Circular” in 2003, leading, in part, to “uncontrolled growth in the contractor workforce” during
the Bush Administration).
75 OMB CircularA-76, Attachment A, at § (B)(1)(c).
76 OMB Circular A-76, Attachment A, at § (B)(2).
77 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 69. One of these categories was security, which included guard and protective services. Id.
78 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).
79 See, e.g., U.S. Dep’t of Health & Human Servs. v. Fed. Labor Relations Auth. (FLRA), 844 F.2d 1087 (4th Cir. 1988)
(holding that OMB Circular A-76 does not have the force of law); Defense Language Inst. v. FRLA, 767 F.2d 1398 (9th
Cir. 1985) (same).
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Eisenhower Administration took it upon itself to promulgate Bulletin 55-4 of the Bureau of the
Budget, the predecessor of OMB Circular A-76.80 Similarly, OMB Circular A-76 prescribes
federal policy and procedures for agencies’ contracting out, matters not affecting individual
rights. Contractors do not generally have due process or other rights to prospective contracts with
the federal government.81
OFPP Letter 92-1
Prior to the 2003 revision of OMB Circular A-76, Office of Federal Procurement Policy (OFPP)
Letter 92-1 was another important policy document containing a definition of inherently
governmental functions.82 It was designed to “assist Executive Branch officers and employees in
avoiding an unacceptable transfer of official responsibility to Government contractors.”83 It
specifically prohibited contracting out inherently governmental functions,84 which it defined as
“[functions] that [are] so intimately related to the public interest as to mandate performance by
Government employees.”85 This definition is identical to that in OMB Circular A-76 except for its
last word and the capitalization of its next-to-last word. OFPP Letter 92-1 uses “Government
employees” where OMB Circular A-76 uses “government personnel.” 86 OFPP Letter 92-1 is still
occasionally cited as an authority on the definition of inherently governmental functions.87
However, the 2003 revision of OMB Circular A-76 incorporated some of its contents and
superseded it.88
DODI 1100.22
When DOD functions are involved, Department of Defense Instruction (DODI) 1100.22,
Guidance for Determining Workforce Mix, also provides a basic definition of inherently
governmental functions and designates specific functions as inherently governmental or
commercial. Like OMB Circular A-76, but unlike the FAIR Act, DODI 1100.22 includes a clear
statement that “functions and tasks that are [inherently governmental] shall be performed by
government personnel.”89 DODI 1100.22 provides a basic definition of inherently governmental
functions as “includ[ing], among other things, activities that require either the exercise of
80 H.R. 4244, supra note 37, at 73 (“In 1954, a bill to address [government competition with the private sector] was
reported by this committee, passed the House, and was reported ... in the Senate. At that point, the Eisenhower
administration indicated that they would resolve the matter administratively. Bureau of the Budget Bulletin 55-4 was
issued and further action on the legislation was suspended.”).
81 See, e.g., Perkins v. Lukens Steel Co., 310 U.S. 113, 127 (1940) (“We find nothing ... indicating any intention to
abandon a principle acted upon since the Nation’s founding under which the legislative and executive departments have
exercised complete and final authority to enter into contracts for Government purchases.”).
82 OMB, Policy Letter 92-1, Sept. 23, 1992, available at http://www.whitehouse.gov/omb/procurement/policy_letters/
92-1_092392.html.
83 Id. at § 1.
84 Id. at § 6(a)(1).
85 Id. at § 5.
86 Compare id. with OMB Circular A-76, Attachment A, at § (B)(1)(a).
87 See, e.g., Statement of P. Jackson Bell, Deputy Under Secretary, Logistics and Materiel Readiness, Department of
Defense, to the House Armed Services Subcommittee on Readiness, CQ Cong. Testimony, Mar. 11, 2008.
88 OMB Circular A-76, at § 2.
89 Dep’t of Def., Instruction Number 1100.22, April 6, 2007, at § 4.1, available at http://www.dtic.mil/whs/
directives/corres/pdf/110022p.pdf.
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discretion when applying Federal Government authority or value judgments when making
decisions for the Federal Government.”90 This definition corresponds to the description of the
types of functions included in the definitions of inherently governmental functions in the FAIR
Act and OMB Circular A-76.91
In addition to this basic definition, however, DODI 1100.22 provides lengthy lists of what
functions do—and do not—qualify as an inherently governmental in the context of DOD
operations. Appendix C summarizes how functions performed by military personnel are
classified as inherently governmental or commercial within DODI 1100.22. Appendix D
provides a similar summary of DODI 1100.22’s classification of functions performed by civilian
employees of DOD.
Administrative Law Provisions and Declarations
The key administrative law source on inherently governmental functions is the Federal
Acquisition Regulation. Where DOD functions are involved, the Defense Federal Acquisition
Regulation Supplement also addresses inherently governmental functions. Further declarations of
specific functions as inherently governmental or commercial come from Executive Orders and
GAO decisions.
Federal Acquisition Regulation
In addition to the FAIR Act and OMB Circular A-76, the Federal Acquisition Regulation (FAR) is
the third major source of federal law and policy on inherently governmental functions. Subpart
7.5 of the FAR 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. Like OMB Circular A-76, which requires that agencies perform
inherently governmental functions with government personnel, the FAR specifies that
“[c]ontracts shall not be used for the performance of inherently governmental functions.”92
The FAR does not furnish its own definition of inherently governmental functions. Rather, it says
that its usages of “inherently governmental activity” and related terms carry the meanings given
to them in OMB Circular A-76 as it was revised in May 2003.93 The FAR then proceeds to give
90 Id.
91 Compare id. with 31 U.S.C. § 501 note, at § 5(2)(B) and OMB CircularA-76, Attachment A, at § (B)(1)(a).
92 Compare 48 C.F.R. § 7.503(a) with OMB CircularA-76, § 4(b).
93 48 C.F.R. § 7.301. The FAR does, however, reproduce the definition of OMB Circular A-76 in its own “definitions”
section with some slight modifications:
“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;
(continued...)
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lengthy, but “not all inclusive,” lists of (1) functions that are to be considered inherently
governmental94 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.”95 Appendix E illustrates the functions designated as inherently governmental, or
“approaching” inherently governmental, in the FAR.
Beyond the examples in these lists, the FAR provides none of the elaboration upon the meaning
or identification of inherently governmental functions given by the FAIR Act or OMB Circular A-
76. The FAR also provides no guidance upon “functions that approach being inherently
governmental” beyond identifying them. It does not bar agencies’ contracting out these functions,
and at least one decision by the U.S. Court of Federal Claims suggests that these functions can
legally be contracted out.96
The FAR’s provisions on inherently governmental functions and functions approaching inherently
governmental functions apply to all executive branch agencies not specifically exempted from the
FAR97 and to all service contracts not obtained through personnel appointments, advisory
committees, or under statutory authority.98
Defense Federal Acquisition Regulation Supplement
The Defense Federal Acquisition Regulation Supplement (DFARS) provides additional guidance
on inherently governmental functions for DOD agencies. Like the provisions of the FAR, the
provisions of the DFARS are developed by notice-and-comment rulemaking and have the force of
law.
(...continued)
(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;
(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.
48 C.F.R. § 2.101.
94 48 C.F.R. § 7.503(c).
95 48 C.F.R. § 7.503(d).
96 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).
97 Examples of agencies exempted from the FAR include the Federal Aviation Administration and the Postal Service.
98 48 C.F.R. §2.101 & 7.502.
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The DFARS declares that serving as a lead system integrator99 on a DOD contract entails
performing acquisitions functions closely associated with inherently governmental functions and
places certain limits on contractors serving as lead systems integrators.100 Other provisions of the
DFARS (1) establish limits, which are lacking in the FAR, on contractor performance of certain
functions closely associated with inherently governmental functions;101 (2) require written
determinations that none of the functions to be performed under contract are exempt from private
sector performance or inherently governmental prior to contracting them out;102 and (3) prohibit
the award of contracts for functions exempted from private sector performance, as well as those
that are inherently governmental.103
Other statements contained in the Federal Register notices introducing DFARS rules, while not
themselves incorporated into the DFARS, indicate that defense agencies consider protection of
property and persons, as performed by private security contractors, a commercial activity.104
Performing preemptive or other types of attacks, in contrast, is considered inherently
governmental.105
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.106
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.107
99 A lead system integrator is an agent with authority to acquire and integrate goods from a variety of suppliers on
behalf of the organization that is acquiring a complex system.
100 DFARS 252.209-7006.
101 DFARS 207.503 (S-70) (allowing the head of a DOD agency to enter a contract for the performance of acquisition
functions closely associated with inherently governmental functions only if the contracting officer (1) determines that
appropriate military or civilian DOD personnel (A) cannot reasonably be made available to perform the functions; (B)
will supervise contractor performance of the contract; and (C) will perform all inherently governmental functions
associated with functions to be performed under the contract and (2) ensures that the agency addresses any potential
organizational conflicts of interest of the contractor in performing functions under the contract).
102 DFARS 207.503(e)(ii).
103 DFARS 237.102.
104 Contractor Personnel Authorized to Accompany U.S. Armed Forces, 73 Fed. Reg. 16764, 16765 (Mar. 23, 2005).
See also Brian X. Scott, Comp. Gen. Dec. B-298370 (Aug. 18, 2006) (holding that DOD solicitations for private
security services in and around Iraq complied with DOD policies and regulations, including those prohibiting the
contracting out of inherently governmental functions, because the contractors were not allowed to conduct direct
combat activities or offensive operations).
105 Contractor Personnel Authorized to Accompany U.S. Armed Forces, 71 Fed. Reg. 34826, 34826 (June 16, 2006).
106 Executive Order 13180 of December 7, 2000: Air Traffic Performance-Based Organization, 65 Fed. Reg. 77493,
77493 (Dec. 11, 2000).
107 Executive Order 13264 of June 4, 2002: Amendment to Executive Order 13180, Air Traffic Performance-Based
Organization, 67 Fed. Reg. 39243, 39243 (June 7, 2002).
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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.108 GAO’s
decisions in bid protests lack the force of law and do not bind federal agencies or protesters.109 In
neither context does GAO offer its own definition of inherently governmental functions. Rather,
GAO uses a test for identifying inherently governmental functions that is based heavily on OMB
Circular A-76 and the FAR.110
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.111 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.112 In its decision on NRC Contracts for Reactor Licensing Tests, for example, GAO
applied this test to the Nuclear Regulatory Commission’s (NRC’s) proposal to contract out some
of its functions in administering licensing tests for nuclear reactor operators. Under the proposed
contract, the contractor would have prepared, administered, and graded the tests, as well as
provided the NRC with recommendations on which candidates should be granted licenses. GAO
found that the proposed contract did not involve inherently governmental functions because the
NRC guidelines relating to the tests provided “such extensive detail and guidance” that the
contractors had no opportunity to exercise discretion or make value judgments in preparing,
administering, or grading the tests. GAO also emphasized that agency personnel—not the
contractor—would ultimately decide who received licenses. When emphasizing ultimate agency
decision making, GAO highlighted a further distinction between performing a function and
advising or assisting with a function that GAO and the courts sometimes also use when
identifying inherently governmental functions.113
108 See, e.g., 2B Brokers et al., Comp. Gen. Dec. B-298651 (Nov. 27, 2006) (a pre-award bid protest claiming that the
agency’s request for proposals provided for the performance of inherently governmental functions by winning bidders);
Gerald P. Carmen, Comp. Gen. Dec. B-198137.1 (June 3, 1982) (advising the General Services Administration on its
proposal to contract out seven functions involved in the conduct of transportation audits).
109 GAO may only issue recommendations to executive branch agencies because it is a legislative branch agency and
the doctrine of separation of powers precludes it from compelling the actions of executive branch agencies. See
Ameron, Inc. v. United States Army Corps of Eng'gs, 809 F.2d 979, 986 (3d Cir. 1986). However, when agencies
decline to implement the recommendations in GAO bid-protest decisions, they must notify GAO within 60 calendar
days. GAO then notifies four congressional committees. 31 U.S.C. § 3554(b)(3). Similarly, protesters who are unhappy
with the recommendations in GAO bid-protest decisions may file suit on the same matter in the Court of Federal
Claims. See Robert S. Metzger & Daniel A. Lyons, A Critical Reassessment of the GAO Bid-Protest Mechanism, 6
Wis. L. Rev. 1225, 1232 & 1248 (2007).
110 GAO focuses on executive branch sources in identifying inherently governmental functions because it addresses
whether the proposed actions of the executive branch agencies conform to the agencies’ governing authorities.
111 See, e.g., Nuclear Regulatory Commission, Comp. Gen. Dec. B-242942 (Aug. 27, 1991).
112 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.
113 See, e.g., Internal Revenue Service: Issues Affecting IRS’ Private Debt Collection Pilot, Comp. Gen. Dec. B-275430
(July 18, 1997) (distinguishing between collection of taxes, which is inherently governmental, and assisting in
collecting taxes by locating and contacting taxpayers to remind them of their tax liability and suggest payment
methods, which is not inherently governmental).
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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.114 In this case, the General Services Administration (GSA) proposed to contract
out seven functions it had formerly performed in-house when conducting transportation audits.
GAO found that two of these functions were inherently governmental, two were commercial, and
the remaining three were not clearly inherently governmental or commercial based on GSA’s
description of the proposed contracts.115 As this decision illustrates, GAO examines the context of
contractual performance, including the degree of actual supervision that agencies exercise over
contractors allegedly assisting government agencies in performing inherently governmental
functions. It does not typically classify functions as inherently governmental or commercial in the
abstract.
Appendix F illustrates how GAO has classified various functions as inherently governmental or
commercial. Such GAO classifications do not, however, themselves have the force of law. They
are advice or recommendations to agencies.
Judicial Decisions
Federal courts have also addressed the question of whether specific functions are inherently
governmental or commercial. Two contexts prompt courts to determine what is an inherently
governmental function. The first context involves litigation under the FAIR Act, OMB Circular
A-76, and the FAR.116 This context actually entails a smaller number of published decisions than
the second context, which involves litigation concerning constitutional rights. The litigation
concerning constitutional rights itself takes two forms. First, there are cases involving the “state
action doctrine,” which consider whether private actors are performing inherently governmental
functions in determining (1) whether those actors must provide the same constitutional rights to
third parties that the government must provide and (2) whether those actors can claim sovereign
immunity for certain actions like government officials can.117 Second, there are cases involving
the “private delegation doctrine,” which center upon whether a private party was given
impermissible authority to legislate or make rules on the government’s behalf.118 Legislating and
rulemaking are inherently governmental functions.
114 Gerald P. Carmen, Comp. Gen. Dec. B-198137.1 (June 3, 1982).
115 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.
116 See, e.g., Arrowhead Metals, Ltd. v. United States, 8 Cl. Ct. 703, 714 (1985) (finding that coinage of money is
inherently governmental but that the U.S. Mint has discretion to determine whether the stamping of blanks constitutes
coinage and is thus exempt from Circular A-76); Northrop Grumman Info. Tech., Inc. v. United States, 74 Fed. Cl. 407
(2006) (addressing information management and technology services under OMB Circular A-76); United States v.
Kenney, 185 F.3d 1217 (11th Cir. 1999) (stating functions are not inherently governmental, for purposes of contracting
out, unless the contractor is in a position to make decisions that are binding on the agency); Nat’l Air Traffic
Controllers Ass’n v. Secretary of the Dep’t of Trans., 997 F. Supp. 874 (1998) (stating that air traffic control is
inherently governmental because it involves national defense).
117 See, e.g., Street v. Corrections Corp. of Am., 102 F.3d 811, 814 (6th Cir. 1996) (finding that operation of a prison is
an inherently governmental function requiring the prison’s operators to respect prisoners’ constitutional rights); Giron
v. Corrections Corp. of Am., 14 F. Supp. 2d 1245, 1248-50 (D.N.M. 1998) (same).
118 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
(continued...)
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The courts, like GAO, do not have an independent definition of inherently governmental
functions. In deciding cases under the FAIR Act, OMB Circular A-76, or the FAR, the courts use
the definitions provided in these sources.119 Moreover, in at least some cases, courts give
considerable deference to the executive branch’s classification of a function as inherently
governmental or commercial because of the political question doctrine, under which courts
decline to hear issues that have been entrusted to the discretion of another branch of
government.120 In Arrowhead Metals, Ltd. v. United States, for example, the court found that
coinage of money is inherently governmental but that the U.S. Mint has discretion to determine
whether the stamping of blanks constitutes coinage.121 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.122
In other cases, the courts use a test of inherently governmental functions much like that used by
GAO, focusing upon the degree to which a private party exercises substantial discretion,123 or
makes judgments,124 on the government’s behalf. Functions classified as inherently governmental
under the constitutional test include conducting elections;125 exercising the power of eminent
domain;126 providing police services;127 investigating allegations of child abuse;128 exercising
prosecutorial discretion;129 chartering, oversight, and regulation of companies;130 creation of
public monopolies;131 holding the personal property of prisoners;132 limiting the First Amendment
(...continued)
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).
119 See, e.g., Arrowhead Metals, 8 Cl. Ct. at 714; Northrop Grumman Info. Tech., 74 Fed. Cl. 407; Kenney, 185 F.3d
1217; Nat’l Air Traffic Controllers Ass’n v. Sec’y of the Dep’t of Transp., 997 F. Supp. 874.
120 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).
121 Arrowhead Metals, Ltd., 8 Cl. Ct. at 717. The U.S. Constitution specifies that Congress shall have the power to
“coin Money.” U.S. Const. art. 1, § 8, cl. 5.
122 Id.
123 See, e.g., Doe v. V. of T., 2003 U.S. Dist. LEXIS 17570 (N.D. Ill., Sept. 30, 2003) (characterizing maintaining a fire
department as inherently governmental because it entails “the exercise of discretion on almost every level of
operation”).
124 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).
125 Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 157-58 (1978).
126 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).
127 Takle v. Univ. of Wisc. Hosp. & Clinics Auth., 402 F.3d 768 (7th Cir. 2005).
128 Kauch v. Dep’t for Children, Youth & Their Families, 321 F.3d 1 (1st Cir. 2003).
129 Sigman v. United States, 208 F.3d 760 (9th Cir. 2000).
130 Week v. Cayman Islands, 1992 U.S. App. LEXIS 32985 (7th Cir. 1992).
131 Republic of the Philippines v. Marcos, 818 F.2d 1473 (9th Cir. 1987).
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rights of prisoners;133 taxing and paying governmental indebtedness or obligations;134 devising
tariff regimes;135 and hiring diplomatic staff or civil servants.136 Functions categorized as
commercial, in contrast, include providing transportation services to citizens137 and selling
government land on the government’s behalf.138
Designations of specific functions as inherently governmental in judicial decisions have the force
of law, at least within the jurisdictions where the decisions are precedent and for so long as the
decisions are not overturned. However, a judicial declaration that a function is inherently
governmental under a constitutional test would not necessarily preclude the executive branch
from contracting out this function under the FAIR Act, OMB Circular A-76, or the FAR. Rather,
in the “state action” context, the designation of a function as inherently governmental means only
that the contractor performing the inherently governmental function (1) owes private individuals
the same constitutional rights that the government owes them and (2) can claim sovereign
immunity like government officials can.139 Similarly, in the “private delegation” context, the
designation means only that any regulations issued by the contractor cannot be constitutionally
applied to private individuals.140 The “private delegation” doctrine would not necessarily preclude
the contractor from performing other functions under the contract that resulted in the contractor’s
issuance of the regulations.
Issues and Options for Congress
The 110th Congress required the Office of Management and Budget (OMB) to review existing
definitions of inherently governmental functions and “develop a single consistent definition” of
inherently governmental functions by October 14, 2009.141 Congress did so, in part, because of its
concern that federal agencies may have recently contracted out inherently governmental functions
due to the existence of multiple and/or inconsistent definitions of this term. 142 This section
provides an overview of major policy and legal issues that could be raised by amending the
(...continued)
132 Kimbrough v. O’Neil, 545 F.2d 1059 (7th Cir. 1976).
133 Bonner v. Coughlin, 545 F.2d 565 (7th Cir. 1976).
134 S.J. Constr., Inc. v. Lewis & Clark Reg’l Water Sys., 2008 U.S. Dist. LEXIS 62192 (D.S.D. 2008).
135 Royal Thai Gov’t v. United States, 441 F. Supp. 2d 1350 (Ct. Int’l Trade 2006).
136 Elliott v. British Tourist Auth., 986 F. Supp. 189 (S.D.N.Y. 1997).
137 Helvering v. Powers, 293 U.S. 214, 216 (1934).
138 Week v. Cayman Islands, 1992 U.S. App. LEXIS 32985 (7th Cir. 1992).
139 See, e.g., West v. Atkins, 487 U.S. 42, 55-56 (1988) (finding that a private doctor was a state actor for purposes of
the Eighth Amendment duty to provide adequate medical care to prisoners). See generally Verkuil, supra note 15, at
431 (“[T]he state action concept does not limit the functions that government can delegate. Instead it
‘constitutionalizes’ after-the-fact delegations that amount to the exercise of public authority.”).
140 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).
141 P.L. 110-417, § 321, 122 Stat. 4411-12 (Oct. 14, 2008).
142 See, e.g., Correction of Long-Standing Errors in Agencies’ Unsustainable Procurements (CLEAN-UP) Act of 2009,
S. 924, 111th Cong., § 3 (congressional finding that inherently governmental functions “have been wrongly
outsourced”); Concurrent Resolution on the Budget for FY2010, S. Con. Res. 13-42, 111th Cong. (requiring DOD to
“review the role that contractors play in operations, including the degree to which they are performing inherently
governmental functions”) (emphasis added).
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existing definitions of “inherently governmental functions,” either in response to OMB’s proposal
or otherwise, as well as by other options that Congress could employ to prevent alleged
contracting out of inherently governmental functions.
Reliance on Prior Statutory Changes and/or Policies of the Obama
Administration
One option for Congress would be to enact no new legislation addressing the definition of
inherently governmental functions or the classification of specific functions as inherently
governmental until changes required under prior legislation or proposed by the Obama
Administration have been fully implemented.
The 110th and 111th Congresses have enacted several statutes that address contracting out in
general or inherently governmental functions in particular. In addition to the Duncan Hunter
National Defense Authorization Act for FY2009, which required OMB to “develop a single
consistent definition” of inherently governmental functions,143 the Omnibus Appropriations Act of
2009 prohibited agencies from conducting new public-private competitions under OMB Circular
A-76 through September 30, 2009.144 Other enacted legislation:
• classified specific functions as inherently governmental;145
• required the Secretary of Defense to develop guidance related to personal service
contracts establishing clear distinctions between DOD employees and the
employees of DOD contractors;146
• expressed the sense of Congress that
... security operations for the protection of resources (including people, information,
equipment, and supplies) in uncontrolled or unpredictable high-threat environments
should ordinarily be performed by members of the Armed Forces if they will be
performed in highly hazardous public areas where the risks are uncertain and could
reasonably be expected to require deadly force
and required that regulations to be issued under Section 862(a) of the National Defense
Authorization Act for FY2008 ensure that private security contractors are not authorized
to perform inherently governmental functions in areas of combat operations;147
• required the Administrator for Federal Procurement Policy to develop and issue a
standard policy to prevent personal conflicts of interest by contractor employees
143 P.L. 110-417, § 321, 122 Stat. 4411-12 (Oct. 14, 2008).
144 P.L. 111-8, Title VII, Transfer of Funds, § 737. For more on public-private competitions generally, see CRS Report
RL32079, Federal Contracting of Commercial Activities: Competitive Sourcing Targets, by L. Elaine Halchin.
145 See, e.g., Consolidated Security, Disaster Assistance and Continuing Appropriations Act of 2009, P.L. 110-329, §
520, 122 Stat. 3684 (Sept. 30, 2008) (classifying the functions of the Federal Law Enforcement Training Center
instructor staff as inherently governmental).
146 Duncan Hunter National Defense Authorization Act for FY2009, P.L. 110-417, § 831, 122 Stat. 4534 (Oct. 14,
2008).
147 Id. at § 832, 122 Stat. 4535.
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performing acquisitions functions closely associated with inherently
governmental functions;148
• expressed Congress’s sense that interrogation of enemy prisoners of war, civilian
internees, retained persons, other detainees, terrorists, or criminals captured,
confined, or detained during or in the aftermath of hostilities is an inherently
governmental function and cannot appropriately be transferred to private sector
contractors;149
• required DOD to develop guidelines and procedures to ensure that DOD
considers using DOD civilian employees to perform new or currently contracted-
out functions that are closely associated with the performance of inherently
governmental functions, among other things;150
• required DOD to ensure that DOD’s acquisition workforce is of the appropriate
size and skill level to accomplish inherently governmental functions related to
the acquisition of major systems and defined a “lead system integrator” as “a
prime contractor under a contract for the procurement of services the primary
purpose of which is to perform acquisition functions closely associated with
inherently governmental functions with respect to the development or production
of a major system”;151
• required the Commission on Wartime Contracting to make specific
recommendations regarding, among other things, the process for determining
which functions are inherently governmental in contingency operations,
including whether providing security in an area of combat operations is
inherently governmental;152 and
• required OMB to develop an inventory to track contracts that, among other
things, involve inherently governmental functions.153
Many of these changes have not yet been fully implemented.
Similarly, the Obama Administration has recently signaled its commitment to have more
functions, in general, performed by the federal government and to ensure that inherently
governmental functions, in particular, are not improperly contracted out. Some commentators
attributed the alleged contracting out of inherently governmental functions during the George W.
Bush Administration, in part, to President Bush’s “management agenda,” which prominently
featured a competitive sourcing initiative.154 The Obama Administration, in contrast, apparently
148 Id. at § 841, 122 Stat. 4537-39.
149 Id. at § 1057, 122 Stat. 4611.
150 National Defense Authorization Act for FY2008, P.L. 110-181, § 324, 122 Stat. 60-61 (Jan. 28, 2008) (codified at
10 U.S.C. § 2463). A similar provision relating to civilian agencies was enacted as part of the Omnibus Appropriations
Act of 2009. P.L. 111-8, § 736, 123 Stat. 689-91 (Mar. 11, 2009).
151 Id. at § 802, 122 Stat. 206-07.
152 Id. at § 841, 122 Stat. 230-34.
153 Consolidated Appropriations Act of 2008, P.L. 110-161, § 748, 121 Stat. 2035 (Dec. 26, 2007).
154 See OMB, Executive Office of the President, Competitive Sourcing: Conducting Public-Private Competition in a
Reasoned and Responsible Manner, July 2003, available at http://www.whitehouse.gov/omb/procurement/
comp_sourcing_072403.pdf.
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intends to in-source, as a matter of policy.155 Members of the administration have signaled their
belief that contractors have performed inherently governmental functions,156 and that too many
functions were contracted out in prior administrations.157 Executive agencies have also made
some plans for in-house performance of two functions—acquisitions work and provision of
security services—whose performance by contractors has been of particular concern to
Congress.158 Such changes in policy may suggest that the executive branch is no longer likely to
contract out functions that some allege are inherently governmental.
Waiting to see whether implementation of previously enacted legislation and/or the change in
administration brings the desired changes in agencies’ treatment of specific functions (e.g.,
performance in-house as opposed to contracting out) is one option for Congress. Prior changes in
the law, coupled with the change in administration, might suffice to realize Congress’s intent
without resorting to more extensive changes in the law that could inadvertently limit the options
of future administrations.159 For example, even without any statutory requirement to do so, the
Department of Homeland Security (DHS) recently announced that it would review all newly
awarded or renewed DHS contracts for services in excess of $1 million “to ensure that proposed
contract awards do not include inherently government functions or impact core functions that
must be performed by federal employees.”160
Alternatively, Congress might decide that additional oversight or further statutory changes are
immediately necessary to support current executive branch policy initiatives or ensure that future
administrations do not have the opportunity to contract out allegedly inherently governmental
functions before Congress can check them.
155 See, e.g., Dana Hedgepeth, Contracting Boom Could Fizzle Out: Jobs Would Return to the Pentagon, Wash. Post,
Apr. 7, 2009, at A1 (“The government said it would hire as many as 13,000 civil servants to replace contractors in the
coming year and up to 39,000 over the next five years.”); Holly Roth & Stephen M. Ryan, President Obama’s Directive
to Evaluate and Change Federal Procurement, Monday Bus. Briefing, Mar. 19, 2009 (noting Obama’s intent to “end[]
the outsourcing of work that should be performed by government workers”).
156 See, e.g., Elisa Castelli, DOD Redirects Contracting Support Work, Fed. Times, June 15, 2008, available at
http://www.federaltimes.com/index.php?S=3578693 (quoting Shay Assad, currently the Defense Procurement and
Acquisition Policy Director, as saying “[W]e do have pockets ... that have small numbers of people that are actually
performing functions I consider inherently governmental.”).
157 Cf. Kevin Baron, Gates’ Plan for Acquisitions Seen as a Start, Stars & Stripes, Apr. 10, 2009, available at
http://www.stripes.com/article.asp?section=104&article=61936 (describing Secretary of Defense Robert Gates’s plan
to expand the DOD’s acquisition workforce by 39,000 jobs, 9,000 of which will be new positions and 30,000 of which
are positions formerly filled by employees of DOD contractors).
158 See id. (decreasing reliance on contractors to perform acquisition functions); Karen DeYoung, U.S. Moves to
Replace Contractors in Iraq, Wash. Post, Mar. 17, 2009, at A7 (describing the State Department’s plan to hire short-
term “Protective Security Specialists,” who are government employees, in lieu of private security contractors).
159 See, e.g., PSC Opposes Mikulski’s Outsourcing Bill; NTEU ‘Welcomes Privatization Reform Effort,’ 91 Fed. Cont.
Rep. 393 (May 12, 2009) (quoting the head of the Professional Services Council (PSC) as stating that the CLEAN-UP
Act could “inappropriately limit[] the Obama administration’s ability to achieve its goals”).
160 See, e.g., DHS Requires Review of Professional Services Contracts Valued at More Than $1 Million, Fed. Contr.
Daily, June 2, 2009.
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Amending the Definition of “Inherently Governmental Functions”
Standardizing the Definition of “Inherently Governmental Functions”
One common theme in the recent literature on inherently governmental functions is that there are
numerous and/or inconsistent definitions of inherently governmental functions within federal law
and policy. For example, in its report on the Duncan Hunter National Defense Authorization Act
for FY2009, the House of Representatives noted that the task of determining which functions
must be performed by government employees:
... is made even more difficult by the lack of a single definition and accompanying guidance
on what constitutes an “inherently governmental function.” Currently, the Federal
Acquisition Regulation defines that term in multiple places, the Office of Management and
Budget Circular A-76 also defines the term, and there is yet another definition in the Federal
Activities Inventory Reform Act (P.L. 105-270). There is also the additional DOD-specific
definition of [functions] “closely associated with inherently governmental functions.”161
Similarly, in its report Changing the Culture of Pentagon Contracting, the New America
Foundation noted that the phrase “inherently governmental functions” appears 15 times in the
United States Code “without a clear or consistent definition.”162 Commentators raising this point
appear to be suggesting that agencies would not contract out allegedly inherently governmental
functions if (1) they did not have to determine which definition applied in particular cases and/or
(2) they had clear definitions to guide their decision making in particular cases.
Despite being pervasive, however, such concerns about multiple or inconsistent definitions of
inherently governmental functions may be overstated given that there are only two main
definitions of inherently governmental functions in federal law and policy. Moreover, these two
definitions are arguably compatible, as Table 1 and Appendix G illustrate.163 In fact, the
definitions differ in only a few words, although the materials accompanying the definitions
diverge to a greater degree. The FAIR Act defines an inherently governmental function as “a
function that is so intimately related to the public interest as to require performance by Federal
Government employees,” while OMB Circular A-76 defines an inherently governmental activity
as an “activity that is so intimately related to the public interest as to mandate performance by
government personnel.” The differences between “activity” and “function,” “require” and
“mandate,” and “government personnel” and “Federal Government employees” are arguably not
legally or operationally significant. That there is such apparent compatibility between these
definitions should not be surprising, given the history of the three main documents establishing
federal law and policy on inherently governmental functions. The FAIR Act was intended to
encourage agencies to at least consider outsourcing their commercial functions under the policies
and processes of OMB Circular A-76. OMB Circular A-76 was, in turn, amended in 1999 to bring
161 Duncan Hunter National Defense Authorization Act for Fiscal Year 2009: Report of the Committee on Armed
Services of the House of Representatives on H.R. 5658 Together with Additional Views, 110th Cong., 2d Sess. 333-34
(2008).
162 See, e.g., Roger D. Carstens, Michael A. Cohen & Maria Figueroa Küpçü, Changing the Culture of Pentagon
Contracting 12 (2008).
163 See also Report of the Acquisition Advisory Panel to the Office of Federal Procurement Policy and the United States
Congress 420 (2007) (“The Panel did not believe that there was any need for OFPP to adopt a new formal definition of
what constitutes an [inherently governmental function].”).
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it into conformity with the FAIR Act, and much of OMB Circular A-76 was later incorporated
into the FAR.164
Table 1. Comparison of the Treatments of Inherently Governmental Functions in the
FAIR Act, OMB Circular A-76, and the FAR
Feature
FAIR Act
OMB Circular A-76
FAR
Includes its own definition of
Yes (legal definition)
Yes (policy definition)
No (incorporates
inherently governmental functions
definition of OMB
Circular A-76)
Provides elaboration on the meaning Yes Yes No
of the definition
Lists exemplary functions classified
No No Yes
as inherently governmental
Explicitly prohibits contracting out
No Yes Yes
inherently governmental functions
Defines commercial activities
No
Yes
No
Addresses functions closely
No No Yes
associated with inherently
governmental functions
Source: Congressional Research Service
Replacing “Inherently Governmental Functions” with Another Construct
Other commentators have suggested using another phrase instead of inherently governmental
functions, such as “core functions,” “mission essential functions,” or “critical government
functions.”165 Commentators making this proposal often do not clarify whether this substitution is
largely semantic, with agencies to be prohibited from contracting out core functions, for example,
in the same way that they are currently prohibited from contracting out inherently governmental
ones, or whether the substitution is intended to shift the debate from questions of law (i.e., what
may be contracted out?) to questions of policy (i.e., which of the functions that may lawfully be
contracted out should be contracted out?). Proposals of the latter sort are not definitional and are
discussed in the section on “Focusing on Questions of Contracting Policy” below.
Proposals of the former sort—to replace inherently governmental functions with another phrase
that defines which functions agencies may lawfully contract out—would seem to be premised on
the belief that agencies will more easily and accurately ascertain which functions they must
perform in-house if they can consider specific functions in relation to a defined word or phrase
that more clearly expresses the grounds for their decision making. That is, while agency officials
may have difficulty determining which functions are inherently governmental because “inherently
governmental” is an abstract-sounding concept, core or mission essential or critical functions may
be easier to recognize because their very names make clear the basis for recognizing them. By its
164 See Luckey, supra note 38, at 1-2.
165 See, e.g., Carstens et al., supra note 162, at 12-13 (core functions); Geoffrey Emeigh, Contracting Out: Law
Professor Suggests Focus on “Core,” Not “Inherently Governmental,” Functions, 89 Fed. Cont. Rep. 649 (2008)
(same); AFGE, supra note 74 (mission essential); Orszag Stresses Importance of Procurement Reform for Effective,
Efficient Government, Fed. Cont. Rep., Mar. 10, 2009 (critical government functions).
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name, a “core function” would seem to be one central to an agency’s activities; a mission
essential function, one necessary for the successful accomplishment of a task; and a critical
function, one that could have harmful consequences if not performed.
All of the terms suggested as definitional replacements for “inherently governmental functions”
could also potentially connote a broader set of functions than those encompassed by the term
inherently governmental functions, especially under its current definition. The range of mission
essential functions, for example, could include any function necessary for the completion of a
task, not just those functions that must be performed by government employees because they are
“intimately related to the public interest.” Translating directions from a foreign language into
English could be mission essential (e.g., necessary in order for commanders to get troops from
Point A to Point B) without being inherently governmental (e.g., if the troops were on a routine
patrol in friendly territory). Replacing “inherently governmental functions” with one of these
terms could thus expand the range of functions exempt from contracting out, which might also
constitute a short-term solution to any alleged over-reliance on contractors. However, this
approach would not necessarily address which functions government employees must perform
because they are in the public interest. Moreover, tying functions more closely to agency
operations than to the public interest could result in situations where a function is categorized
differently by different agencies.166 For example, translators would not necessarily be mission
essential for the Interior Department, although they might be for the State Department. Similarly,
translators could be essential for some DOD missions, but not for others.167
Defining Other Terms Related to “Inherently Governmental Functions” and
Prohibiting Contracting Them Out
The Correction of Long-Standing Errors in Agencies’ Unsustainable Procurements (CLEAN-UP)
Act of 2009 (S. 924, 111th Congress) would effectively diminish agencies’ ability to contract out
inherently governmental functions, among others, by defining other categories of functions
related to inherently governmental ones and precluding agencies from contracting out these
functions. S. 924 would adopt the FAR’s definition of functions closely associated with inherently
governmental functions and create its own definition of mission essential functions. This
definition includes “functions that, although neither necessarily inherently governmental nor
necessarily closely related to an inherently governmental function, are nevertheless considered by
executive agency officials to be more appropriate for performance by Federal employees.”168 It
then would require heads of executive agencies to “ensure that inherently governmental
functions, functions closely related to inherently governmental functions, and mission-essential
functions are performed by Federal employees.”169
166 One of the criticisms of the current approach to inherently governmental functions is that the governing authorities
leave room for “subjective and inconsistent judgment.” See, e.g., Tara Lee, Redefining Inherently Governmental,
available at http://peaceops.com/web/v4n1/1-v4n1/4-v4n1redefininginherentlygovernmental.html?
tmpl=component&print=1&page=.
167 See, e.g., Conner Bros. Constr. Co. v. Geren, 550 F.3d 1368, 1377 (Fed. Cir. 2008) (noting that military officials had
characterized operation of the dining facilities and custodial services—functions then performed by contractors—as
“mission essential” when troops were restricted to base while preparing to deploy).
168 S. 924, 111th Cong., § 2. A version of the CLEAN-UP Act was introduced in the House of Representatives on June
4, 2009. It essentially corresponds to the Senate version discussed here, including in its section numbers.
169 Id. at § 5.
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Such a proposal would, among other things, ensure that allegedly inherently governmental
functions are effectively shielded from potential contracting out by “insulating” them within
additional layers of functions that could not be contracted out. Executive branch categorizations
of particular functions would have less significance under this proposal than under the current
law, where functions may be contracted out provided that the contracting agency determines that
they are not inherently governmental. Provision of security services in combat zones is one
function that might be more easily kept in-house under the CLEAN-UP Act than under existing
law. Under existing law, DOD contracted out such services after finding they were not inherently
governmental,170 although some Members of Congress contend that they are inherently
governmental functions or functions approaching inherently governmental.171 Under the CLEAN-
UP Act, however, DOD would have to find that these functions are not inherently governmental,
closely related to inherently governmental, or mission essential in order to contract them out. The
two additional categories into which functions might fall, which would keep them from being
contracted out, could increase the likelihood of certain functions being performed in-house. For
example, while it may seem plausible, at least to some, that private security contractors do not
perform inherently governmental functions, it could seem less plausible that their functions are
neither closely associated with inherently governmental functions nor mission essential.
Such a change would be a significant one, given that agencies currently may generally contract
out functions that they do not find to be inherently governmental.172 The change might, however,
serve only to shift the functions about which disagreements arise. Rather than disagreements over
the categorization of functions as inherently governmental, Congress and federal agencies might
find themselves in disagreements over the categorization of functions as mission essential.
Moreover, such disagreements might have to be resolved by the legislative or political process
given the limits on standing to challenge agencies’ contracting determinations173 and the political
question doctrine.174
170 See, e.g., Brian X. Scott, Comp. Gen. B-298370, 2006 WL 2390513 (Aug. 18, 2006) (denying a protest alleging, in
part, that DOD solicitations for contracts to transport cargo in Iraq contracted out inherently governmental functions by
calling for armed security escorts). GAO reached its conclusion because the existing laws and regulations permitted
contracts for armed security services when the contracts prohibited escorts from performing direct combat or offensive
operations.
171 See, e.g., Duncan Hunter National Defense Authorization Act for FY2009, P.L. 110-417, § 831, 122 Stat. 4534 (Oct.
14, 2008) (expressing the sense of Congress that “security operations for the protection of resources ... in uncontrolled
or unpredictable high-threat environments” are inherently governmental functions).
172 See, e.g., Gulf Group, Inc. v. United States, 61 Fed. Cl. 338, 341, n.7 (2004) (treating items on the FAR’s list of
“functions approaching inherently governmental” as capable of being contracted out by agencies). There are, however,
some limits on DOD’s ability to contract out functions closely associated with inherently governmental functions
where lead systems integrators or the performance of acquisition functions are involved. See DFARS 252.209-7006
(lead systems integrators); DFARS 207.503 (S-70) (performance of acquisition functions closely associated with
inherently governmental functions).
173 The doctrine of standing requires that plaintiffs demonstrate (1) injury in fact, (2) causation, and (3) redressibility
before a court hears the merits of their claims. See, e.g., Valley Forge Christian Coll. v. Ams. United for Separation of
Church & State, Inc., 454 U.S. 464, 472 (1982); Allen v. Wright, 468 U.S. 737, 751 (1984); Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560-61 (1992). Standing to challenge allegedly unlawful contracting out of inherently
governmental functions could potentially be difficult to demonstrate because courts generally do not recognize harms
arising from the government’s allegedly illegal use of taxpayers’ money as sufficient injury in fact. See, e.g.,
Massachusetts v. Mellon, 262 U.S. 447 (1923) (finding that the plaintiff lacked standing to challenge alleged “taxation
for illegal purposes” because the administration of federal statutes “likely to produce additional taxation to be imposed
upon a vast number of taxpayers” is essentially a matter of public concern, not an individual concern).
174 See supra note 120 and accompanying text.
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Clarifying Terms within the Existing Definition of Inherently Governmental
Functions
Another option, not widely discussed, would be to define terms within the existing definition of
inherently governmental functions. The existing definition of inherently governmental functions
could, perhaps, be made clearer by establishing the meaning of key terms under it. Statutes could
prescribe what it means for a function to be “intimately related to the public interest” or
“performed by the federal government,” for example. Defining “performance by the federal
government,” in particular, could potentially help remove the distinction between performing and
assisting with inherently governmental functions that characterizes GAO opinions and executive
branch discussions of inherently governmental functions.175 For example, in its consideration of
the IRS’s proposed private debt collection program—which was one of the most prominent non-
DOD examples of an agency contracting out allegedly inherently governmental functions—GAO
distinguished 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.176
Potential Limitations of Definitional Changes
Any definitional changes, along the lines suggested above or otherwise, may be of limited
effectiveness in ensuring that executive branch agencies do not contract out functions that some
Members of Congress or commentators believe are inherently governmental.177 This is, in large
part, because many functions are not patently inherently governmental or commercial, as Figure
1 illustrates. The potential effectiveness of definitional changes is also limited by the fact that any
definition—of inherently governmental functions or some other construct—would be applied in
specific circumstances by executive branch officials, who might not classify functions in the same
way that Congress or third-parties would classify them.178 For example, DOD determined that
private security contractors would not be performing inherently governmental functions under the
existing law.179 Some Members of Congress disagreed, however, as is evidenced by their
enactment of legislation expressing the sense of Congress that “security operations for the
protection of resources ... in uncontrolled or unpredictable high-threat environments should
ordinarily be performed by members of the Armed Forces.”180
175 See, e.g., Internal Revenue Service, supra note 113; DODI 1100.22, supra note 89.
176 Internal Revenue Service, supra note 113. See also Diane Freda, Shulman Formally Announces End of Private Debt
Collection Program, 91 Fed. Contr. Rep. 191, Mar. 17, 2009 (referencing Representative John Lewis’s “often repeated
view” that tax collection is an inherently governmental function).
177 Cf. Elise Castelli, DOD Redirects Contracting Support Work: Less Work to Contractors, More to GSA, Interior,
Fed. Times, June 16, 2008, at 1.
178 See also Verkuil, supra note 15, at 440 (noting that the definitions of OMB Circular A-76 and related authorities
may not protect agencies from erroneously classifying particular functions as inherently governmental or commercial);
Lee, supra note 166 (noting “subjective and inconsistent judgment” in DOD application of the governing laws and
regulations); Report of the Acquisition Advisory Panel, supra note 163, at 420 (noting that problems with agencies’
application of the definitions of inherently governmental functions are more significant than deficiencies in the current
definitions of inherently governmental functions).
179 Under the existing law, DOD could not have contracted out these private security functions had it determined that
the functions were inherently governmental. Thus, its contracting out of these functions reflects a determination that
they were not inherently governmental.
180 P.L. 110-417, § 831, 122 Stat. 4534 (Oct. 14, 2008).
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Figure 1. Categorization of Functions as Inherently Governmental or Commercial
Source: Congressional Research Service
Congress has attempted to address alleged deficiencies in agencies’ application of the definitions
of inherently governmental functions in several ways. The 110th Congress required the
Commission on Wartime Contracting to include in its report recommendations on the process for
determining which functions are inherently governmental in contingency operations, including
whether providing security in an area of combat operations is inherently governmental.181 The
110th Congress, as well as other Congresses, also enacted legislation classifying particular
functions as inherently governmental.182 Congress could also require agencies to provide
mandatory training for their contracting officers, in particular, on what constitutes an inherently
181 P.L. 110-181, § 841, 122 Stat. 230-34.
182 See, e.g., Consolidated Security, Disaster Assistance and Continuing Appropriations Act of 2009, P.L. 110-329, §
520, 122 Stat. 3684 (Sept. 30, 2008) (classifying the functions of the Federal Law Enforcement Training Center
instructor staff as inherently governmental).
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governmental function. Or Congress could provide agencies with lists of functions that are
inherently governmental, or potentially suitable for contracting out, like the lists found in the FAR
or formerly contained in OMB Circular A-76.183
None of these approaches is likely to prevent the recurrence of future inter-branch differences of
opinion in the classification of particular functions, however. The recommendations of the
Commission on Wartime Contracting will be context-specific, and while they might adequately
guide DOD in the near future in similar situations, they may not be sufficient to guide decision
making by other agencies, in the future, or in dissimilar situations. Enactment of legislation
classifying particular functions as inherently governmental is necessarily ad hoc, and often
possible only after agencies have already engaged in allegedly improper contracting for
performance of inherently governmental functions. Mandatory training for agency officials could
cost money, and it would be hard to ensure that the persons providing the training would
categorize specific functions in the same way that some Members of Congress or commentators
would. These trainers would be employees of or working for the executive branch, which has its
own interests in asserting its constitutional and statutory prerogatives in the realm of
contracting.184 No listing of functions could be comprehensive, and even if the list covered all
functions currently of concern to Congress, problems may arise in the future related to the
performance of functions not presently at issue. Some current disputes over the alleged
contracting out of inherently governmental functions during the Bush Administration were
arguably exacerbated by the fact that agencies categorize functions as inherently governmental or
commercial without knowing all the details about how specific contracts will be performed in
specific settings that often later prompt commentators to allege the functions were inherently
governmental and should never have been contracted out to begin with. Had Blackwater
employees not been involved in several shooting incidents in Iraq, which were unanticipated at
the time the State Department entered the contracts with Blackwater, the debate over whether
private security contractors perform inherently governmental functions might not have ensued.185
Placing Limits on Contracting Out Or Use of Appropriated Funds
Prohibiting agencies from contracting out specific functions, or from using appropriated funds to
contract out specific functions, would also serve to ensure that certain allegedly inherently
governmental functions are not contracted out. Section 730 of the Consolidated Appropriations
Act for FY2008, for example, specifies that
...[n]one of the funds made available in this Act may be used to study, complete a study of,
or enter into a contract with a private party to carry out, without specific authorization in a
subsequent Act of Congress, a competitive sourcing activity of the Secretary of Agriculture,
183 See supra note 77 and 48 C.F.R. §7.503(c)-(d).
184 See, e.g., Arrowhead Metals, 8 Cl. Ct. at 714 (finding that the U.S. Mint has discretion to determine whether the
stamping of blanks constitutes coinage and is thus exempt from Circular A-76). Coinage is a power given to Congress
under Article I of the Constitution. However, once it is delegated to the executive branch, the executive branch has
discretion in performing this function, even if Congress might disagree with its exercise of this discretion.
185 Dana Hedgpeth, State Department to Renew Deal with Blackwater for Iraq Security, Wash. Post, April 5, 2008, at
D2. Some commentators seem to focus upon whether private security contractors perform inherently governmental
functions to avoid the difficulties in holding such contractors criminally or civilly liable for their conduct. If a function
is inherently governmental, it cannot be contracted out and there would no conduct for which some might wish to hold
a contractor responsible.
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including support personnel of the Department of Agriculture, relating to rural development
or farm loan programs.186
Such approaches do not require any changes in the definition of inherently governmental
functions, and they remove all possible questions about whether the executive branch will
categorize a function as Congress might wish. These approaches are probably best utilized as
tailored responses to specific concerns, however, because they are reactive and potentially time-
limited. Congress generally uses these approaches on an ad hoc basis in response to agencies’
contracting out, or proposed contracting out, of specific functions. Moreover, if included in an
appropriations bill, such prohibitions could be limited to specific agencies or time periods.
Prohibitions in a DOD appropriations bill would not necessarily apply to the Department of State,
for example, and prohibitions could be limited to funds covered by the appropriation, or
automatically carried over to future appropriations bills long after the situation prompting the
prohibition has otherwise been resolved.
A more general prohibition on the use of the OMB Circular A-76 process, such as is currently in
place, might seem helpful in preventing the contracting out of inherently governmental functions
because it addresses all contracting out under OMB Circular A-76.187 However, such an approach
is arguably both over-inclusive and under-inclusive. It is over-inclusive in the sense that
prohibiting agencies’ contracting out under OMB Circular A-76 encompasses all functions
performed by the government, not just those that are allegedly inherently governmental. OMB
Circular A-76 articulates the competitive process that agencies are to use in source selection
whenever they consider contracting with private sector sources for the performance of
commercial activities performed by government employees.188 It thus potentially applies to
contracts for functions that are generally not considered to be inherently governmental (e.g.,
custodial services), as well as to those for functions that some might argue are inherently
governmental (e.g., acquisitions-related functions). A general prohibition on the use of the A-76
process is also under-inclusive in the sense that A-76 addresses only commercial functions
performed by government employees. It does not apply to new functions, which have not been
performed by government employees, nor does it provide a mechanism for “insourcing,” or
determining whether government employees or contractors should perform functions currently
performed by contractors. Such a prohibition may also generate opposition from trade groups if it
appears designed to protect government employees at the expense of contractor employees.189
Addressing Structural Factors Prompting Agencies to Rely on
Contractors
Some commentators have suggested that Congress could potentially make agencies less prone to
contract out allegedly inherently governmental functions, or other functions, by addressing
structural factors that may lead agencies to rely on contractors instead of military personnel or
civil servants.190 “Personnel ceilings” have been identified as one such factor.191 A personnel
186 P.L. 110-161, § 730, 121 Stat. 1846 (2008). See also id. at §§ 103, 111, 415, & 739. See Appendix A for historical
examples of this approach.
187 Consolidated Appropriations Act of 2009, P.L. 111-8, Title VII, Transfer of Funds, § 737.
188 OMB Circular A-76, at § 4.
189 See PSC Opposes Mikulski’s Outsourcing Bill, supra note 159.
190 See, e.g., Verkuil, supra note 15, at 440.
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ceiling establishes the maximum number of positions that may be budgeted in a job category or
for all personnel in an organization. Although DOD is prohibited from converting a function
performed by DOD civilian personnel to contractor performance to circumvent a personnel
ceiling,192 it is otherwise subject to ceilings on the number of civilian employees and military
personnel. It may also hire contractors without engaging in public-private competitions under
OMB Circular A-76 when converting functions from military to DOD civilian performance if the
director of the local Human Resources Office determinates that civilian employees cannot be
hired.193 Some commentators have suggested that DOD relied on contractors to perform certain
functions, most notably acquisition functions, in part because of the operation of such personnel
ceilings.194 Recently introduced legislation would remove personnel ceilings imposed by the
executive branch, as well as certain congressionally imposed ceilings on the number of DOD
personnel.195 However, such legislation does not address congressionally imposed ceilings outside
DOD, or troop needs in situations where DOD civilian personnel cannot be substituted for
military ones and there are insufficient volunteers for the military.196 However, complete removal
of personnel ceilings is not possible because of limits on the use of appropriated funds and,
arguably, would not comport with some Members’ desire to keep agencies within their budgets.197
Another factor involves the ease of hiring and firing government personnel.198 Because of the
procedural requirements for hiring new federal employees, as well as the procedural protections
ensuring that federal employees are not improperly dismissed, agencies can experience
difficulties matching their existing personnel to the functions they need to perform when there are
sudden changes in their missions. An unanticipated need for workers to perform a new function,
or the actual or anticipated ending of a particular mission, poses particular problems. This factor
may become less salient over time, however, as Congress has given, or is considering giving,
(...continued)
191 Id.
192 10 U.S.C. § 2461(a)(3)(B).
193 Office of the Sec’y of Defense, Military Conversions: Contracting for Services When Civilians Cannot Be Hired,
Feb. 13, 2008, available at http://competitivesourcing.navy.mil/StrategicSourcing.cfm?doc=178.
194 A key concern here has been DOD’s use of lead systems integrators (LSIs) or contractors who oversee the work of
other contractors. LSIs are contractors or teams of contractors hired to execute large, complex, defense-related
acquisition programs, particularly so-called system-of-systems (SOS) acquisition programs. According to one estimate,
DOD reduced its acquisition workforce by approximately 49%, from 592,634 personnel to 303,849 personnel, between
FY1990 and FY1999 to comply with congressional mandates. Office of the Inspector Gen., Dep’t of Defense, DOD
Acquisition Workforce Reduction: Trends and Impacts, Feb. 29, 2000, available at http://www.dodig.mil/audit/reports/
fy00/00-088.pdf.
195 See, e.g., CLEAN-UP Act, S. 924, § 5 (stating that the heads of executive agencies “shall not be constrained by any
in-house personnel ceiling, headcount, or staffing limitation in ensuring that functions” other than inherently
governmental functions, functions closely related to inherently governmental functions, or mission essential functions
“are performed in the most efficient manner possible”); National Defense Authorization Act for FY2010, H.R. 2647, §
901 (repealing the limitations on the number of personnel assigned to major headquarters activities in 10 U.S.C. § 143;
10 U.S.C. § 194; 10 U.S.C. § 3014(f); 10 U.S.C. § 5014(f); 10 U.S.C. § 8014(f); and 10 U.S.C. § 194 note). The DOD
authorization for FY2010 would also require the Secretary of Defense to report to Congress on progress made in
replacing contractors with civilian or military personnel, including an estimate of the number of contractors performing
inherently governmental functions.
196 See, e.g., David Isenberg, Dogs of War: Contractors with No Names, Apr. 10, 2009, available on LEXIS Newswire
(“[T]he American public has made it clear that it is not willing to provide the commensurate resources, at least in terms
of bodies, to allow the military ... to do their roles.”).
197 See, e.g., Agency Administrative Expenses Reduction Act of 2009, S. 948, § 2 (requiring a 3% reduction in agency
administrative expenses, as compared to a FY2009 baseline, by FY2010 and an 11% reduction by FY2013).
198 See, e.g., Verkuil, supra note 15, at 440.
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agencies expedited or other hiring authorities,199 and agencies have begun creating some term-
limited positions for federal employees.200
More Effective Oversight of Executive Branch Contracting
Decisions
Congress receives some information about agencies’ contracting decisions under the FAIR Act,
but this information may be insufficient to enable Congress to adequately ascertain which
functions agencies may be improperly contracting out. Under the FAIR Act, agencies must
compile annual lists of all activities they perform that are not inherently governmental and make
these lists available to Congress and the public.201 However, such lists include only functions that
agencies currently perform, not new functions,202 and the listings may not provide Congress or
the public with enough information to ascertain whether a listed function is, in fact, commercial,
as Figure 2 illustrates. Moreover, under the FAIR Act, agencies’ lists are not directed to any
specific committee(s) of Congress, nor is there an established procedure for congressional review
of or response to the lists once they are received.203 This is not to say that Congress and its
Members cannot or do not exercise their oversight functions in response to specific items on
agencies’ FAIR Act inventories. It does, however, mean that congressional involvement with
FAIR Act inventories is ad hoc, not systemic, which could limit Congress’s ability to provide
effective oversight of contracting out under the FAIR Act. Systemic congressional involvement in
the OMB Circular A-76 process is equally limited. OMB Circular A-76 focuses primarily upon
public notice, as Figure 3 illustrates; notice to Congress is mentioned only as an accompaniment
to public notice.
199 See, e.g., P.L. 109-313, § 4, 120 Stat. 1737 (Oct. 6, 2006) (allowing agencies to reemploy retired federal personnel
without salary offsets); CLEAN-UP Act, S. 924, § 10, 111th Cong. (proposing to create expedited hiring authority for
“shortage category” positions); S. 629, 111th Cong. (proposing to allow federal agencies to re-employ retired federal
employees on a limited basis without forcing them to take a reduction in salary corresponding to their retirement
annuities). Agencies’ authority under P.L. 109-313 will sunset on December 31, 2011.
200 See, e.g., DeYoung, supra note 158 (describing the State Department’s plan to hire short-term “Protective Security
Specialists,” who are government employees, in lieu of private security contractors).
201 31 U.S.C. § 501 note, at § 2(a) & (c).
202 Id.
203 31 U.S.C. § 501 note, at § (c)(1)(A) (“[T]he head of the executive agency shall promptly transmit a copy of the list
to Congress and make the list available to the public.”). The FAIR Act was arguably more concerned with making
agencies’ lists available to the public than to Congress, as it was designed to ensure that private persons were aware of
potential opportunities to perform commercial functions for the government. See H.R. 4244, supra note 37, at 1.
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Figure 2. Sample FAIR Act Listing of Commercial Functions
As Made Available to the Public on an Agency Website
Source: Congressional Research Service, from http://www.uspto.gov/web/offices/ac/comp/fairact/index.html
Figure 3. Processes Under the FAIR Act and OMB Circular A-76
Activities That Involve Opportunities for Congressional or Public Notification or Objections
Source: Congressional Research Service
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Congress has recently considered several proposals that would increase the information about
agencies’ contracting decisions available to Congress and/or the public. The CLEAN-UP Act, for
example, would require that the Chief Acquisition Officer of each agency, or his or her
equivalent, certify that each function to be performed under an agency service contract (including
task or delivery orders and exercises of options) is not inherently governmental, closely related to
inherently governmental, or mission essential.204 In addition, agency heads would have to report
to the head of OMB annually on each contract, with the report being posted on the Internet and
notice of the report’s availability being published in the Federal Register.205 The hope is,
apparently, that increased congressional or public awareness of agencies’ decisions may diminish
the likelihood that an agency will improperly classify as commercial an activity that is arguably
inherently governmental.206 With increased awareness of potentially problematic decisions,
Congress could exercise oversight or enact legislation. However, oversight may be insufficient to
get an agency to change its classification of a particular function, especially in the short term, and
enacting legislation can take time.
Focusing on Questions of Contracting Policy
Another option for Congress would be to shift its focus from questions of contracting law to
questions of contracting policy, or from discussions of whether specific functions are inherently
governmental to discussions of which of the functions that are not inherently governmental
should be performed in-house. The current discussions regarding the definition of inherently
governmental functions, or whether certain functions are inherently governmental, do not address
what should be done with those functions which are not inherently governmental. Agencies are
presently answering these questions on an ad hoc basis,207 without appreciable congressional
guidance, in part because the only government-wide authorities on contracting out were designed
for different purposes and focus upon contracting out of commercial functions. The FAIR Act
focuses upon listings of commercial functions that could be lawfully contracted out, while OMB
Circular A-76 focuses upon how to determine whether government employees or the private
sector will perform specific commercial functions.208
No legislation, regulation, or policy document systematically addresses how agencies should
determine which of the non-inherently governmental functions they perform should be performed
in-house because of concerns related to transparency, accountability, employment policy, or
related issues, although commentators have proposed some such frameworks. Figure 4 illustrates
one possible model for separating questions of contract law from those of contract policy, while
Figure 5 illustrates one model for deciding questions of contracting policy. The need for
204 CLEAN-UP Act, S. 924, § 6.
205 Id. See also id. at §§ 7-9 (requiring similar public reporting of “functions at risk,” which include inherently
governmental functions performed by contractors; annual inventories of functions performed by contractors; and
annual strategic human capital plans).
206 Cf. United States v. New York & Puerto Rico Steamship Co., 239 U.S. 88, 93, (1915) (noting that the government
needs the “protection of publicity”).
207 See, e.g., Gov’t Accountability Office, Afghanistan: Key Issues for Congressional Oversight, Apr. 2009, at 30,
available at http://www.gao.gov/new.items/d09473sp.pdf (“DOD’s increased use of contractors at deployed locations
was the result of thousands of individual decisions, not a result of a strategic or deliberate planning process.”).
208 Cf. Verkuil, supra note 15, at 440 (noting that the procedural protections of the FAIR Act and OMB Circular A-76
are directed at the competitive sourcing process, not the classification of functions as inherently governmental or
commercial).
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“balance” and “reasonableness” in agencies’ use of contractors, as well as their need to “maintain
agency capability to perform core functions” have been particularly noted.209 However,
discussions of “balance” and “reasonableness” can have two different focal points. While the
focus is often on the perceived overuse of contracting out, there are those who believe that the
problem is under-use of the private sector.210 The Freedom from Government Competition of
2009, for example, takes the latter view.211 The cost of performing functions is assessed as part of
the A-76 process, although there have been some concerns about how accurately this process
reflects the costs of either performance in-house or by contractors.212
Figure 4. A Possible Framework for Distinguishing Between Questions of
Contracting Law and Contracting Policy
Source: Congressional Research Service
209 See, e.g., Report of the Acquisition Advisory Panel, supra note 163, at 420.
210 See, e.g., PSC Opposes Mikulski’s Outsourcing Bill, supra note 159.
211 H.R. 2682, § 2(4), 111th Cong. (“Unfair government competition with the private sector of the economy is at an
unacceptably high level, both in scope and in dollar volume.”).
212 PSC Opposes Mikulski’s Outsourcing Bill, supra note 159.
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Figure 5. A Possible Framework for Addressing Questions of Contract Policy
Source: Congressional Research Service, based on Rand Research Brief, Civilian or Military? Assessing the Risk
of Using Contractors on the Battlefield (2005), available at http://www.rand.org/pubs/research_briefs/
RB9123/index1.html.
Congress has arguably recently begun to pay increased attention to questions of contract policy.
Sections 3 and 11 of the CLEAN UP Act, for example, encourage executive branch agencies to
pursue business process engineering, “even if such efforts reduce or increase the need for Federal
employees or contractors.”213 Business process engineering is, however, more concerned with
cost-savings in operations than it is with decision making as to who performs specific functions.
Congress could take additional actions to focus attention on questions of contracting policy by,
among other things, holding hearings at which agencies can present and discuss their developing
frameworks for deciding questions of contracting policy, mandating that executive branch
officials develop a framework for deciding questions of contracting policy, or legislatively
establishing such a framework to be used by executive branch officials.
A focus on contracting policy may also allow Congress to better address related questions, such
as the management and oversight of contractors’ work, that often get caught up in the debate over
inherently governmental functions, but are arguably separate from it. For example, some
commentators seem to desire the expansion of the category of inherently governmental functions
because there have been problems with contractor performance under specific contracts and
classifying a function as inherently governmental ensures that a contractor cannot lawfully
perform that function. However, while it may be tempting to conflate “shall” and “should” and
categorize all functions as inherently governmental whenever there are any possible grounds for
saying that the government “should” perform them, such an approach could constrain the options
of future administrations and avoids the question of which functions must be performed by the
government in every case. A function that should be performed by the government could
potentially be contracted out in an emergency if it cannot be performed in-house. The same would
not be true of an inherently governmental function.
213 S. 924, § 3 & 11.
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Appendix A. Examples of Congressional and
Executive Branch Interactions in Defining
Inherently Governmental Functions During the
1980s
Some illustrations of Congress’s responses to attempts by the Reagan and George H.W. Bush
Administrations to contract out certain functions during the 1980s may help to clarify the give-
and-take in the current debate over the public and private sectors and contracting out. During this
period, Congress frequently used the appropriations rider to counter contracting-out decisions. An
appropriations rider places conditions—generally in the form of language specifying that “no
funds shall be used for ...”—on the outsourcing of a particular type of function or on outsourcing
in general. Alternatively, an appropriations rider might impose conditions that must be met before
funds can be expended (e.g., a report to Congress). This type of legislation is easily tailored to
particular concerns, but is generally only effective for the period of the appropriation.
Appropriations Riders
General Prohibitions on Contracting Out
An example of a general prohibition on contracting out was contained in the Further Continuing
Appropriations Act for FY1983, which provided that none of the funds appropriated under the act
for the General Services Administration (GSA) could be obligated or expended to contract out
any service performed by GSA employees.214 Another example of a general prohibition was
contained in the National Aeronautics and Space Administration Authorization Act for FY1989,
which prohibited the use of funds authorized by the act to contract out any function currently
performed by federal employees at the Kansas City National Weather Service Training Center.215
Prohibitions on Contracting Out Specific Functions
The 1984 appropriation for GSA illustrates a more specific type of restriction on contracting out.
The continuing resolution for FY1984 specified that no funds could be expended by GSA to
contract out any guard, elevator operator, messenger, or custodian functions performed by GSA
employees.216 However, the act granted an exception for certain services contracted out to
sheltered workshops employing the “severely handicapped.”217 Another example of a prohibition
on contracting out specific functions can be found in the Treasury, Postal Service and General
Government Appropriations Act for FY1989, which prohibited use of any funds made available
under the act to contract out positions at the Bureau of Engraving and Printing Police Force.218
214 P.L. 97-377, § 120, 96 Stat. 1913 (1982).
215 P.L. 100-685, § 412, 102 Stat. 4101 (1988).
216 P.L. 98-151, 97 Stat. 964 (1983).
217 Id. at § 112, 97 Stat. 976.
218 P.L. 100-440, § 525, 102 Stat. 1750 (1988).
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Requiring Agencies to Meet Certain Conditions Prior to Contracting Out
There were also many instances where Congress required agencies to meet certain conditions
before they could use appropriated funds to implement any outsourcing decision. The
Departments of Commerce, Justice, and State, the Judiciary and Related Agencies Appropriation
Act for FY1989, for example, specified that none of the funds provided under the act could be
obligated, or expended through a reprogramming of funds, to contract out any function or activity
performed by federal employees without first notifying the Appropriations Committees of both
Houses of Congress.219 The Department of Defense Appropriations Act for FY1989 similarly
prohibited the use of funds appropriated by the act for contracting out any activity performed by
the Defense Personnel Support Center in Philadelphia unless the Appropriations Committees of
both Houses of Congress received advance notice.220
Specifying Procedures for Contracting Out
Another approach was to limit agencies’ discretion by prescribing how particular agencies should
approach their outsourcing decisions. Congress used this approach to address both contracting out
generally and contracting out of specific functions. For example, Congress sometimes enacted
statutes setting out the criteria that an agency must use in making outsourcing determinations, the
procedure it must follow in any public/private cost comparisons, definitions of key terms (e.g.,
“inherently governmental functions”), penalties for violations, and any specific or generic
exemptions. Chapter 146 of Title 10 of the United States Code, which governs DOD contracting
for performance of civilian commercial or industrial functions, illustrates this type of
legislation.221 Chapter 146 has provisions (1) specifying the studies and reports that DOD must
perform before converting a function;222 (2) defining and exempting “core functions;”223 (3)
listing the requirements for conducting cost comparisons involving retirement costs;224 and (4)
listing specifically exempted functions.225
Interestingly, Chapter 146 was not enacted as one statute, but resulted from several provisions
enacted during the 1980s, as the following chronology illustrates.
• Department of Defense Authorization Act for FY1980. This act prohibited DOD
from converting, during that fiscal year, any commercial or industrial function of
DOD performed by DOD personnel as of November 9, 1979, to performance by
a contractor unless the Secretary of Defense notified Congress.226 Two types of
notification were required. First, the Secretary was to notify Congress of any
decision to study possible conversion and certify that the government in-house
cost calculation for the function was based on an estimate of the most efficient
and cost-effective organization for in-house performance. Then, if a decision to
219 P.L. 100-459, § 606, 102 Stat. 2227 (1989).
220 P.L. 100-463, 102 Stat. 2270 (1988).
221 10 U.S.C. §§ 2461-2475.
222 See 10 U.S.C. §§ 2461 & 2463.
223 See 10 U.S.C. § 2464.
224 See 10 U.S.C. § 2467.
225 See 10 U.S.C. §§ 2465 & 2466.
226 P.L. 96-107, 93 Stat. 803 (1979).
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convert the function was ultimately made, the Secretary had to report (1) the
economic impact on the employees affected, the community, and the federal
government; (2) the effects of the conversion on the military mission of the
function; and (3) the amount of the private bid for performance of the function,
the cost if the function were continued in-house, and any costs or expenditures
the government would incur because of the contract. The act also prohibited,
during the fiscal year, any conversion to circumvent civilian personnel
ceilings.227 The act exempted funds appropriated for any fiscal year for DOD
research, development, testing, or evaluation, or procurement or production
related thereto,228 unless the funds were obligated or expended for operation or
support of installations or equipment used for research and development,
including maintenance support for laboratories, operation and maintenance of test
ranges, or maintenance of test aircraft and ships.229
• Department of Defense Authorization Act for FY1981. This act contained
restrictions on contracting out that were nearly identical to those included in the
DOD authorization for FY1980, but made these restrictions permanent law with
an effective date of October 1, 1980.230 The act prohibited converting any
commercial or industrial function of DOD performed by DOD personnel on
October 1, 1980, to performance by a private contractor unless the Secretary of
Defense provided the following information to Congress in a timely manner: (1)
notice of any decision to study possible conversion; (2) a detailed summary
comparing the cost of DOD personnel performing the function and performance
by a private contractor and demonstrating that privatization of the function would
result in cost savings to the government over the life of the contract; (3)
certification that the government’s in-house cost calculation for the function was
based on an estimate of the most efficient and cost-effective organization for in-
house performance; (4) a report on the economic impact of the proposed contract
on the employees affected, the community, and the federal government; (5) the
effects of the conversion on the military mission of the function; and (6) the
amount of the private bid for performance of the function, the cost if the function
were to be continued in-house, and any cost or expenditure which the
government would incur because of the contract. If DOD decided to convert the
function after these studies were completed, the Secretary of Defense had to
report this decision to Congress. The effective date of this provision was October
1, 1980. The act also prohibited conversion to circumvent civilian personnel
ceilings.231
• Department of Defense Authorization Act for FY1983. This act amended the
1981 authorization for DOD so that the foregoing prohibitions applied only to
functions performed by civilian employees of DOD, as opposed to DOD
personnel.232 It exempted functions performed by 10 or fewer DOD civilian
227 Id. at § 806, 93 Stat. 813.
228 Expenditures authorized by law under 10 U.S.C. § 138(a)(2), now 10 U.S.C. § 114(a)(2).
229 P.L. 96-107, § 802, 93 Stat. 811.
230 P.L. 96-342, 94 Stat. 1077 (1980).
231 Id. at § 502, 94 Stat. 1086.
232 P.L. 97-252, 96 Stat. 718 (1982).
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employees, but prohibited modification, reorganization, or division of functions
to take advantage of this exemption.233 The amendment also provided that the
restrictions of the act should not apply during war or declared national
emergencies. The effective date of this amendment was October 1, 1982.234 The
act also specifically prohibited use of any funds appropriated pursuant to the
authorization to contract out firefighting or security-guard functions at any
military facility except for the renewal of existing contracts.235 The act also
placed a six-month moratorium on use of any funds appropriated under this
authorization for new studies of the benefits or feasibility of contracting out
functions performed by DOD civilian employees except for custodial, laundry,
refuse collection, grounds maintenance, food service and preparation, and base
transportation functions. The six-month period ran from October 1, 1982, to
March 31, 1983.236
• Department of Defense Authorization Act for FY1984.237 This act continued for
two years238 the prohibition on contracting out DOD firefighting and security-
guard functions that had been initiated in the DOD authorization for FY1983.239
The extended prohibition did not apply to contracts to be performed outside the
United States, situations where the use of military personnel would affect unit
readiness, contracts to be carried out on government-owned but privately
operated installations, or renewal of existing contracts.240
• Department of Defense Authorization Act for FY1985. This act required the
Secretary of Defense to identify logistics activities that are essential to the
national defense.241 The act prohibited contacting out these activities unless the
Secretary provided Congress with a “waiver” stating that the activity was no
longer required for national defense, as well as the criteria used in granting the
waiver.242
• Department of Defense Authorization Act for FY1986. This act declared that
certain functions of DOD should be deemed logistics activities essential to the
national defense under Section 307 of P.L. 98-525.243 These functions were
233 This number was increased to 40 or fewer by P.L. 99-145, § 1234, 99 Stat. 734 (1985) and then to 45 or fewer by
P.L. 99-661, § 1221, 100 Stat. 3976 (1986).
234 P.L. 97-252, § 1112, 96 Stat. 747-48. The provisions of P.L. 96-342, as amended by this act, were codified at 10
U.S.C. § 2461 by P.L. 100-370, § 2, 102 Stat. 851-52 (1988).
235 Id. at § 1111, 96 Stat. 747.
236 Id. at § 1111, 96 Stat. 747.
237 P.L. 98-94, 97 Stat. 614 (1983).
238 I.e., until October 1, 1985. This date was extended to October 1, 1986, by P.L. 99-145, § 1232, 99 Stat. 733 (1985).
The prohibition on contracting out firefighting services was enacted into permanent law and codified at 10 U.S.C. §
2693 by P.L. 99-661, § 1222, 100 Stat. 3976 (1986). The prohibition on contracting out security guards was extended
for one year, until October 1, 1987, by P.L. 99-661 and then codified at 10 U.S.C. § 2693 by P.L. 100-180, § 1112, 101
Stat. 1147 (1987). This provision was transferred to 10 U.S.C. § 2464 by P.L. 100-370, § 2, 101 Stat. 853-54 (1988).
239 See supra discussion of P.L. 97-252.
240 P.L. 98-94, § 1221, 97 Stat. 691-92.
241 P.L. 98-525, 98 Stat. 2492 (1984).
242 Id. at § 307, 98 Stat. 2514. This provision was codified at 10 U.S.C. § 2464 by P.L. 100-370, § 2, 101 Stat. 853-54
(1988).
243 P.L. 99-145, 99 Stat. 583 (1985).
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depot-level maintenance of mission essential materiel at certain facilities of the
Army, Navy, Marines, Air Force, Defense Logistics Agency, and Defense
Mapping Agency.244
Codifying Restrictions from Appropriations Riders
As the notes under many of the foregoing provisions indicate, numerous limitations were codified
late in the 99th Congress and or in the 100th Congress.245 The National Defense Authorization Act
for FY1987,246 for example, codified the prohibition on contracting out DOD firefighting
functions that had been initiated in the DOD authorization for FY1983.247 However, this
prohibition did not apply to contracts performed outside the United States, situations where use of
military personnel affected unit readiness, contracts performed on government-owned but
privately operated installations, or renewal of existing contracts.248 The prohibition on contracting
out security-guard functions was continued for one year with the same exceptions as for
firefighter functions. Also exempted from this prohibition were contracts for security-guard
services when the requirement for the services arose after the effective date of the act and the
Secretary of Defense determined that the functions could be contracted out without adversely
affecting installation security, safety, or readiness.249 The act also codified the general policy on
contracting out noted earlier, (i.e., that DOD should contract out any function not prohibited by
law if it would be provided at a lower cost—including any cost differential required by law,
executive order, or regulation—by the private sector). Guidelines were provided for determining
if money would be saved by contracting out.250 The National Defense Authorization Act for
FY1988 and 1989251 similarly made permanent the prohibition on contracting out security-guard
functions at DOD facilities, with the same exemptions as apply to firefighter functions.252
Permanent Laws
In addition to appropriations riders, Congress also enacted permanent laws to limit outsourcing.
For example, the Veterans’ Compensation, Education, and Employment Amendments of 1982
prohibited contracting out medical care provided by what was then the Veterans Administration
(VA).253 If the VA determined that an activity was not a direct patient care activity, or an activity
incident to direct patient care, it could contract out the activity provided that the then-
Administrator of the VA made two determinations after conducting a study required by the act.
244 Id. at § 1231, 99 Stat. 731. This provision was codified at 10 U.S.C. § 2464 by P.L. 100-370, § 2, 101 Stat. 853-54
(1988).
245 See 10 U.S.C. §§ 2461-2468.
246 P.L. 99-661, 100 Stat. 3816, 99th Cong., 2nd Sess. (1986).
247 See supra discussion of P.L. 97-252.
248 P.L. 99-661 at § 1222(a), 100 Stat. 3936. This provision was transferred to 10 U.S.C. § 2464 by P.L. 100-370, § 2,
101 Stat. 853-54 (1988).
249 Id. at § 1222(b).
250 Id. at § 1223. This provision was codified at 10 U.S.C. § 2462 by P.L. 100-370, § 2, 101 Stat. 853 (1988).
251 P.L. 100-180, 101 Stat. 1019 (1987).
252 Id. at § 1112, 101 Stat. 1147. See supra discussion of P.L. 99-661 for a description of exemptions. This provision
was transferred to 10 U.S.C. § 2464 by P.L. 100-370, § 2, 101 Stat. 853-54 (1988).
253 P.L. 97-306, 86 Stat. 1429 (1982). In 1989, the Veterans Administration became the Department of Veterans
Affairs.
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First, the Administrator of the VA had to determine that (1) the costs to the government (including
the costs of the study) would be lower by 15% or more than the costs of in-house performance
and (2) the quality or254 quantity of health care services would be maintained or enhanced by the
contract.255
The Comprehensive Omnibus Budget Reconciliation Act of 1986 similarly required the National
Oceanic and Atmospheric Administration to notify the President of the Senate; the Speaker of the
House; the Senate Committee on Commerce, Science, and Transportation; the House Committee
on Merchant Marine and Fisheries; and the House Committee on Science and Technology at least
30 days before awarding any contract for the performance of a commercial activity as defined in
OMB Circular A-76.256 The notice had to include a description of the contract, a comparison of
the costs of and services provided by contracting out or in-house performance, and an assessment
of the benefits to the federal government of proceeding with the proposed contract.257
The Sikes Act Extension and Amendments authorized the Secretary of Defense to enter into
cooperative plans with the Secretary of the Interior and state agencies for the development,
maintenance, and coordination of wildlife, fish, and game conservation and rehabilitation on
military reservations.258 The implementation and enforcement of these plans was specifically
exempted from OMB Circular A-76 and priority was given to federal and state agencies. This
exemption did not apply to existing contracts, but did cover renewals of existing contracts.259
254 This “or” was changed to an “and” by P.L. 98-160, § 702(19), 97 Stat. 1010 (1983).
255 P.L. 97-306, § 409, 96 Stat. 1446. This provision was codified at 38 U.S.C. § 5110(c). P.L. 100-322, § 401, 102
Stat. 543 (1988) added the requirement that bids be received from at least two responsible, financially autonomous
bidders.
256 P.L. 99-272, 100 Stat. 82 (1986).
257 Id. at § 6083, 100 Stat. 135. This provision was codified at 15 U.S.C. § 1530.
258 P.L. 99-561, 100 Stat. 3149 (1986).
259 Id. at § 3, 100 Stat. 3150. This provision was codified at 16 U.S.C. § 670a.
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Appendix B. Factors Used in Determining Whether
a Function Is Inherently Governmental Under OMB
Circular A-76
Factor
Considerations
Statutes
Statutory restrictions that define an activity as inherently governmental.
Degree of
The degree to which official discretion is or would be limited, i.e., whether involvement of the
discretion
private sector or public reimbursable provider is or would be so extensive that the ability of
senior agency management to develop and consider options is or would be inappropriately
restricted.
Adjudication of
In claims or entitlement adjudication and related services (a) the finality of any action affecting
claims or
individual claimants or applicants, and whether or not review of the provider’s action is de
entitlement
novo on appeal of the decision to an agency official; (b) the degree to which a provider may be
involved in wide-ranging interpretations of complex, ambiguous case law and other legal
authorities, as opposed to being circumscribed by detailed laws, regulations, and procedures;
(c) the degree to which matters for decisions may involve recurring fact patterns or unique
fact patterns; and (d) the discretion to determine an appropriate award or penalty.
Effect on people’s
The provider’s authority to take action that will significantly and directly affect the life, liberty,
life, liberty, or
or property of individual members of the public, including the likelihood of the provider’s need
property
to resort to force in support of a police or judicial activity; whether the provider is more likely
to use force, especial y deadly force, and the degree to which the provider may have to
exercise force in public or relatively uncontrolled areas. These policies do not prohibit
contracting for guard services, convoy security services, pass and identification services, plant
protection services, or the operation of prison or detention facilities, without regard to
whether the providers of these services are armed or unarmed.
Special agency
The availability of special agency authorities and the appropriateness of their application to the
authorities
situation at hand, such as the power to deputize private persons.
Nature of the
Whether the activity in question is already being performed by the private sector.
activity
Source: Congressional Research Service based on OMB-Circular A-76 Revised, May 29, 2003, Appendix A,
available at http://www.whitehouse.gov/omb/circulars/a076/a76_rev2003.pdf.
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Appendix C. Functions Performed by Military
Personnel as Classified by DODI 1100.22
Section #
Inherently Governmental Functions
Commercial Functions
E2.1.1:
• Exercises of command authority through the military chain
• n/a
Operational
of command, including discretionary decision making,
Command of
personnel safety, and mission accomplishment
Military
Forces
E2.1.2:
• Ordering the arrest or confinement of members of the
• n/a
Operational
U.S. Armed Forces, or civilians who accompany Armed
Control
Forces in the field during a declared war for violations of
the Uniform Code of Military Justice
• Legally assuming command or control of military
operations if the commander is killed or incapacitated
E2.1.3:
• Conducting combat authorized by the U.S. government,
• Providing technical advice
Combat
including situations where the planned use of disruptive or
on the operation of
operations
destructive combat capabilities is an inherent part of the
weapon systems or other
mission
support of a non-
discretionary nature in
direct support of combat
operations
E2.1.4:
• Security operations involving unpredictable, international,
• Providing security services
Provision of
or uncontrolled high-threat situations, where success
that do not involve
Security to
depends on how operations are handled and there is a
substantial discretion (e.g.,
Protect
potential to bind the United States to a course of action
decisions are limited or
Resources in
when alternative courses of action exist
guided by existing policies,
Hostile Areas
procedures, directions,
• Making a show of military force that demonstrates U.S.
orders, or other guidance
resolve to avert or delay hostilities while preserving the
that identify specific ranges
option to employ the ful range of destructive and
of acceptable decisions or
disruptive capabilities of the Armed Forces
conduct and subject the
• Exercising initiative and substantial discretion when
discretionary authority to
deciding how to accomplish the mission, particularly when
final approval or regular
unanticipated opportunities arise or when the original
oversight by governmental
concept of operations no longer applies
officials)
• Defending against military or paramilitary forces whose
• Providing physical security
capabilities are so sophisticated that only military forces
at buildings in secure
can provide an adequate defense, including situations
compounds in hostile
where there is such a high likelihood of hostile fire,
environments
bombings, or biological or chemical attacks by groups using
• Providing security services
sophisticated weapons and devices that the operation
for uniquely military
could evolve into combat
functions provided that
• Security operations involving more than a response to
certain conditions are meta
hostile attacks (e.g., security operations performed in
highly hazardous public areas where the risks are
uncertain)
E2.1.5:
• Services by military medical personnel and chaplains
• n/a
Medical &
embedded in military units that engage in hostile action
Chaplain
Services in
Hostile Areas
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Section #
Inherently Governmental Functions
Commercial Functions
E2.1.6:
• Determining how enemy prisoners of war, civilian
• Serving as linguists,
Criminal
internees, retained persons, other detainees, terrorists,
interpreters, report
Justice, Law
and other criminals are to be treated when captured,
writers, etc., in areas where
Enforcement,
transferred, detained, and interrogated during or in the
adequate security is
&
aftermath of hostilities
available, provided that
Interrogations
certain conditions are metb
in Operational •
Actual handling of such persons
Environments
• Drafting interrogation plans
• Control of prosecutions and performance of adjudicatory
for government approval
functions
and conducting government
• Direction and control of intelligence interrogations,
approved interrogations
including approval, supervision, and oversight of
where adequate security is
interrogations
available and expected to
continue and certain
• Certain law enforcement operations, including issuing
conditions are met b
warrants, making arrests, and preserving crime scenes
• Performing special non-law-
• Direction and control of detention facilities for enemy
enforcement security
prisoners of war, civilian internees, retained persons, other
activities that do not
detainees, terrorists, and other criminals in areas of
directly involve criminal
operations
investigations where certain
conditions are metb
• Direction and control of the confinement or correctional
facilities for U.S. military prisoners in areas of operations
E2.1.7: Other
• Direction and control of intelligence and
• n/a
Support
counterintelligence operations when performed in hostile
Functions
areas where security necessary for DOD civilian
Performed in
performance cannot be provided
Operational
Environments •
Federal procurement activities with respect to prime
contracts (included determining what supplies or services
are to be acquired; approving, awarding, administering, or
terminating contracts; and determining whether contract
costs are reasonable, allocable, and allowable) when
performed in hostile areas where security necessary for
DOD civilian performance cannot be provided
Source: Congressional Research Service based on Instruction Number 1100.22, April 6, 2007, available at
http://www.dtic.mil/whs/directives/corres/pdf/110022p.pdf.
a. The geographic combatant commander must (1) clearly articulate rules for the use of deadly force that
preclude ceding governmental control and authority to private sector contractors; (2) set clear limits on the
use of force based on U.S. and international law and clarify what is not protected by international
agreements or status of forces agreements; and (3) ensure that contracts include a description of the
anticipated threat and any known or potentially hazardous situations, as well as a plan for how appropriate
assistance will be provided to contract security personnel who become engaged in hostile situations.
b. These conditions are that (1) the contractors are properly trained and cleared and (2) contractors’ work is
properly reviewed by sufficient numbers of properly trained government officials.
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Inherently Governmental Functions and Department of Defense Operations
Appendix D. Functions Performed by DOD Civilian
Employees as Classified by DODI 1100.22
Inherently Governmental Functions
Commercial Functions
• Conducing foreign relations and determining foreign policy,
• Providing services involving or
including implementing international agreements and treaties,
relating to the development of
foreign military sales, and security assistance programs
regulations, subject to proper review
by government personnel
• Recommending and responding to Congress about changes in
DOD governing legislation and commenting on draft
• Gathering information, or providing
legislation on DOD-related matters
advice, opinions, or
recommendations, for use in
• Determining policies, directives, and regulatory guidance,
establishing terms for international
including the content and application of regulations
agreements, treaties, foreign military
• Approving strategic plans
sales, and security assistance
programs
• Determining DOD priorities for budget requests and
determining budget policy, guidance, and strategy
• Providing background information
for use in drafting or developing
• Making discretionary decisions regarding the effective,
proposed changes to governing
efficient, and economical organization, administration, and
legislation and commenting on draft
operation of DOD, such as decisions to transfer functions,
legislation and draft congressional
powers, or duties; delegate authority; or approve support
testimony, agency responses to
agreements, cooperative agreements, or non-procurement
congressional correspondence, or
transactions
agency responses to audit reports
• Directing and controlling certain functions and operations,
• Providing non-legal advice for use in
including intelligence and counterintelligence operations,
interpreting, developing, or
criminal investigations, and adjudications
evaluating legal opinions and
implementing policy for laws,
• Controlling treasury accounts and the administration of public
executive orders, treaties, and
trusts and grants
international agreements
• Directing and exercising ultimate control over the acquisition,
•
use, or disposal of U.S. property, including collection, control,
Assisting in developing or evaluating
program and budget requests by
and disbursement of funds
performing workload modeling, fact-
• Establishing terms for international agreements, treaties,
finding, feasibility studies, should-
foreign military sales, and security assistance programs
cost analyses, and other analyses
• Drafting or developing proposed changes to governing
• Assisting in maintaining control and
legislation and commenting on draft legislation and draft
accountability of governmental
congressional testimony, agency responses to congressional
operations, contracts, property, and
correspondence, or agency responses to audit reports
funds by performing workload
modeling, fact-finding, feasibility
• Interpreting, developing, or evaluating legal opinions and
studies, should-cost analyses, and
implementing policy for laws, executive orders, treaties, and
other analyses
international agreements
• Assisting in administering and
• Drafting, developing, or evaluating strategic plans
managing government operations by
•
providing advice, opinions, ideas, or
Developing or evaluating program and budget requests
recommendations; gathering
• Maintaining control and accountability of governmental
information; and performing non-
operations, contracts, property, and funds
discretionary services
• Administering and managing government operations
• Assisting in systems acquisitions
management by gathering
• Conducting systems acquisition management
information; providing advice,
•
opinions, recommendations, or
Allocating resources and obligating federal funds
ideas; monitoring programs; and
• Determining what supplies or services are to be acquired with
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Inherently Governmental Functions
Commercial Functions
prime contracts
tracking milestones and schedules
• Awarding, terminating, or administering contracts for goods
• Acquiring supplies at prices within
and services, including changes to contract performance or
specified ranges and subject to other
quantities
reasonable conditions deemed
appropriate by DOD
• Approving contracting documents or participating as voting
members on source selection or performance evaluation
• Developing statements of work and
boards
providing evaluations of contract
proposals, if contractors are
• Determining whether costs are reasonable, allocable, and
properly supervised
allowable
• Disposing of property identified by
• Determining what government property is to be disposed of
government employees at prices
and on what terms
within clearly specified ranges and
• Collecting, controlling, and disbursing fees, taxes, and other
subject to other reasonable
public funds unless the work of the contractor is authorized
restrictions
by statute; the fees, etc., are from visitors to mess halls,
• Conducting quality control,
concessions, or similar establishments; or the work involves
performance evaluations, and
routine voucher and invoice examination
inspection under government
• Maintaining direction and control of the DOD workforce and
oversight and with specific guidelines
contract services, including actions to commission, appoint,
• Assisting in adjudicatory functions by
direct, or control U.S. officers or employees, volunteers,
gathering information & providing
professional service contracts, and general service contracts
advice, opinions, or ideas
• Representing DOD interests at official functions
• Assisting in negotiations by gathering
• Controlling and performing adjudicatory functions
information and providing advice,
opinions, recommendations, or ideas
• Conducting negotiations
• Non-law-enforcement security
• Conducting certain law enforcement operations, including
activities not directly involving
executing and serving search warrants and making arrests
criminal investigations
• Direct conduct of criminal investigations
• Serving as arbitrators or providing
alternative dispute resolution in
• Conducting employee labor relations
employee labor relations
• Conducting administrative hearings to determine eligibility for
•
security clearances or government programs
Assisting in routine FOIA responses
that do not require the exercise of
• Approving federal licensing applications
judgment
• Developing and clarifying DOD policies on FOIA requests
• Providing direct support in testing
and evaluating systems and
• Conducting tests and evaluations to determine the potential
technologies under government
utility and operational suitability and effectiveness of systems
oversight and in accordance with
and technologies
applicable laws
• Conducting intelligence and counterintelligence operations
• Drafting interrogation plans for
and clandestine intelligence operations entailing substantial
government approval where
discretion
adequate security exists & when
properly trained, cleared, and
supervised
Source: Congressional Research Service based on Instruction Number 1100.22, April 6, 2007, available at
http://www.dtic.mil/whs/directives/corres/pdf/110022p.pdf.
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Inherently Governmental Functions and Department of Defense Operations
Appendix E. Inherently Governmental Functions
and Functions Approaching Inherently
Governmental as Classified by the FAR
Functions Approaching Inherently
Inherently Governmental Functions
Governmental
• Direct control of criminal investigations
• Services involving or relating to budget
preparation, including workload modeling, fact
• Controlling prosecutions and performing adjudicatory
finding, efficiency studies, should-cost analyses,
functions other than those relating to arbitration or other
etc.
methods of alternative dispute resolution
• Services involving or relating to reorganization
• Commanding military forces, especially the leadership of
and planning activities
military personnel who are members of the combat, combat
support, or combat service support role
• Services involving or relating to analyses,
feasibility studies, and strategy options to be
• Conducting foreign relations and determining foreign policy
used by agency personnel in developing policy
• Determining agency policy, including the content and
• Services involving or relating to the evaluation of
application of regulations
another contractor’s performance
• Determining federal program priorities for budget requests
• Services in support of acquisition planning
• Directing and controlling federal employees
• Assisting in contract management, such as when
• Directing and controlling intelligence and counter-intelligence
the contractor might influence official evaluations
operations
of other contractors
• Selecting individuals for government employment, including
• Technical evaluation of contract management
interviewing
• Assisting in developing statements of work
• Approving position descriptions and performance standards
• Providing support in preparing responses to
for federal employees
Freedom of Information Act requests
• Determining what government property is to be disposed of
• Working in any situation that permits, or might
and on what terms, although agencies may give contractors
permit, contractors to gain access to confidential
authority to dispose of property at prices within specified
business information or any other sensitive
ranges & subject to other reasonable conditions
information, other than situations covered by the
• Certain conduct with respect to prime contracts in federal
National Industrial Security Program described in
procurement activitiesa
48 C.F.R. § 4.402(b)
• Approving agency responses to Freedom of Information Act
• Providing information regarding agency policies
(FOIA) requests, other than routine responses that do not
or regulations, such as attending conferences on
require exercise of judgment, or agency responses to
behalf of an agency, conducting community
administrative appeals of denied FOIA requests
relations campaigns, or conducting agency
training courses
• Conducting administrative hearings to determine eligibility for
security clearances, or involving actions affecting matters of
• Participating in any situation where it might be
personal reputation or eligibility for government programs
assumed that contractors are agency employees
or representatives
• Approving federal licensing actions and inspections
• Participating as technical advisors to source
• Determining budget policy, guidance, and strategy
selection boards or as voting or nonvoting
members of source selection boards
• Collecting, controlling, and disbursing fees, royalties, duties,
fines, taxes, and other public funds, unless authorized by
• Serving as arbitrators or providing alternative
statute, but not including (1) collection of fees, etc., from
methods of dispute resolution
visitors to or patrons of mess halls, post concessions, etc., or
where the amount to be collected is easily calculated &
• Constructing buildings or structures intended to
predetermined & funds can be easily control ed using standard
be secure from electronic eavesdropping or
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Inherently Governmental Functions and Department of Defense Operations
Functions Approaching Inherently
Inherently Governmental Functions
Governmental
techniques or (2) routine voucher and invoice examination
other penetration by foreign governments
• Controlling treasury accounts
• Providing inspection services
• Administering public trusts
• Providing legal advice and interpretations of
regulations and statues to government officials
• Drafting congressional testimony; responses to congressional
correspondence; or agency responses to audit reports from
• Providing special, non-law-enforcement, security
the inspector general, GAO, or other federal audit agency
activities that do not directly involve criminal
investigations, such as prisoner detention or
transport, or non-military national security
details
Source: Congressional Research Service based on 48 C.F.R. § 7.503(c)-(d)
a. Such conduct involves (1) 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; (2) participating as a voting
member on any source selection boards; (3) approving any contractual documents, including documents
defining requirements, incentive plans, and evaluation criteria; (4) awarding contracts; (5) administering
contracts, including ordering changes in contract performance or quantities, taking action based on
evaluations of contractor performance, and accepting or rejecting contractor products or services; (6)
terminating contracts; (7) determining whether contract costs are reasonable, allocable, and allowable; and
(8) participating as a voting member on performance evaluation boards.
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Inherently Governmental Functions and Department of Defense Operations
Appendix F. Functions Recognized as Inherently
Governmental or Commercial by the GAO
Inherently Governmental Functions
Commercial Functions
• Requesting set-off actions against transportation
• Identifying overcharges related to billing above
carriers (B-198137.1)a
established audit minima (B-198137.1)
• Communicating with U.S. Attorneys to request
• Sending notices of overcharges or other notices (B-
col ection actions against delinquent
198137.1)
transportation carriers (B-198137.1)
• Collecting user fees in national forests (B-207731)b
• Functions of the organization head, contracting
officer, and supply branch (B-218137)
• Answering an agency hotline where the answers do not
involve interpretation of laws or regulations (B-237356)
• Serving as an agency hearing officer (B-237356)
• Examining vouchers; verifying invoice accounts; and
• Preparing congressional testimony (B-237356)
indentifying billing errors (B-198137)
• Performing legally required audit tasks (B-
• Administering programs in accordance with agency
198137)
regulations and policy (B-192518)
• Deciding to accept or reject a particular
• Writer-editor services in preparing statements or
candidate for a program (B-192518)
testimony where the government’s policy or position is
established (B-192518)
• Approving departures from policy and guidance
in issuing certifications (B-295936)
• Property accountability; forecasting; programming; and
budgeting (B-253740.3)
• Certifying new or unproven technologies (B-
295936)
• Examination, inspection and testing services necessary
to issue certifications, as well as issuing of certifications
• Determining what constitutes a standard of
(B-295936)
safety equivalent to a required standard (B-
295936)
• Provision of guard or protective services (B-298370, B-
298490)
• Finding the existence of special conditions or
exceptions (B-295936)
• Gathering and reporting information in investigations
(GAO/T-GGD-95-186)
• Making preemptive or other attacks (B-298370,
B-298490)
• Determining individuals’ suitability for
employment or eligibility for clearances (GAO/T-
GGD-95-186)
Source: Congressional Research Service based on GAO decisions cited in the table
a. The combination of letters and numbers after a function’s description indicates the GAO decision
addressing that function.
b. The GAO’s opinion on this function evolved over time. Originally, the GAO classified collection of fees as
inherently governmental. See, e.g., Matter of Col ection of Recreation User Fees by National Forest
Volunteers, Comp. Gen. Dec. B-207731 (April 22, 1983). The GAO later reversed itself and said that
routine col ection of established fees was not inherently governmental.
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Inherently Governmental Functions and Department of Defense Operations
Appendix G. Side-by-Side Comparison of the
Definitions of Inherently Governmental Functions
from the FAIR Act and OMB Circular A-76
FAIR Act
OMB Circular A-76
Type of
Legal definition
Policy-based definition
definition
Used for
Compiling lists of agency functions,
Determining which agency functions are commercial and
classified as commercial or inherently
may be contracted out; establishing procedures for
governmental, for Congress and the
contracting them out
public
Basic
The terma ‘inherentlyb governmental
Ana inherentlyb governmental activity is an activity
definition
function’ means a function that is so
that is so intimately related to the public interest
intimately related to the public
as to mandate performance by government
interest as to require performance
personnel.
by Federal Government employees.
Functions
The term includes activities that
These activities require the exercise of substantial
Included
require either the exercise of
discretion in applying government authority
discretion in applying Federal
and/or in making decisions for the government.
Government authority or the making Inherently governmental activities normally fal into two
of value judgments in making decisions categories: the exercise of sovereign government authority or
for the Federal Government,
the establishment of procedures and processes related to the
including judgments relating to
oversight of monetary transactions or entitlements. An
monetary transactions and
inherently governmental activity involves:
entitlements. An inherently
governmental function involves,
among other things, the interpretation and
execution of the laws of the United States
so as—
“(i) to bind the United States to take
(1) Binding the United States to take or not to take
or not to take some action by
some action by contract, policy, regulation,
contract, policy, regulation,
authorization, order, or otherwise;
authorization, order, or otherwise;
“(ii) to determine, protect, and advance
(2) Determining, protecting, and advancing economic,
United States economic, political,
political, territorial, property, or other interests
territorial, property, or other
by military or diplomatic action, civil or criminal
interests by military or diplomatic
judicial proceedings, contract management, or
action, civil or criminal judicial
otherwise;
proceedings, contract
management, or otherwise;
“(iii) to significantly affect the life,
(3) Significantly affecting the life, liberty, or
liberty, or property of private
property of private persons; or
persons;
“(iv) to commission, appoint, direct, or
(4) Exerting ultimate control over the acquisition,
control officers or employees of the United
use, or disposition of United States property (real or
States; or
personal, tangible or intangible), including
establishing policies or procedures for the collection,
“(v) to exert ultimate control over
control, or disbursement of appropriated and
the acquisition, use, or disposition
other federal funds.
of the property, real or personal,
tangible or intangible, of the United
States, including the collection,
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Inherently Governmental Functions and Department of Defense Operations
FAIR Act
OMB Circular A-76
control, or disbursement of
appropriated and other Federal
funds.
Functions
The term does not normally include—
While inherently governmental activities require the exercise
excluded
of substantial discretion, not every exercise of discretion is
“(i) gathering information for or providing
evidence that an activity is inherently governmental. Rather,
advice, opinions, recommendations, or ideas the use of discretion shall be deemed inherently governmental
to Federal Government officials; or
if it commits the government to a course of action when two
“(ii) any function that is primarily ministerial or more alternative courses of action exist and decision
and internal in nature (such as building
making is not already limited or guided by existing policies,
security, mail operations, operation of
procedures, directions, orders, and other guidance that (1)
cafeterias, housekeeping, facilities
identify specified ranges of acceptable decisions or conduct
operations and maintenance, warehouse
and (2) subject the discretionary authority to final approval or
operations, motor vehicle fleet management regular oversight by agency officials.
operations, or other routine electrical or
c. An activity may be provided by contract support (i.e., a
mechanical services).
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. An agency shall consider the fol owing to avoid
transferring inherently governmental authority to a contractor:
(1) 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 or
public reimbursable provider 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
(a) the finality of any action affecting individual claimants or
applicants, and whether or not review of the provider’s action
is de novo on appeal of the decision to an agency official; (b)
the degree to which a provider may be involved in wide-
ranging interpretations of complex, ambiguous case law and
other legal authorities, as opposed to being circumscribed by
detailed laws, regulations, and procedures; (c) the degree to
which matters for decisions may involve recurring fact
patterns or unique fact patterns; and (d) the discretion to
determine an appropriate award or penalty;
(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; whether the provider is more likely to use
force, especially deadly force, and the degree to which the
provider may have to exercise force in public or relatively
uncontrol ed areas. These policies do not prohibit contracting
for guard services, convoy security services, pass and
identification services, plant protection services, or the
operation of prison or detention facilities, without regard to
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Inherently Governmental Functions and Department of Defense Operations
FAIR Act
OMB Circular A-76
whether the providers of these services are armed or
unarmed;
(5) The availability of special agency authorities and the
appropriateness of their application to the situation at hand,
such as the power to deputize private persons; and
(6) Whether the activity in question is already being
performed by the private sector.
Definition of
None
A commercial activity is a recurring service that could be
commercial
performed by the private sector and is resourced, performed,
activities
and control ed 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.
Applicability
All executive branch agencies named in
All executive departments named in 5 U.S.C. § 101 and
5 U.S.C. § 101; all military departments
all independent establishments as defined in 5 U.S.C. §
named in 5 U.S.C. § 102; & al
104.
independent establishments as defined in
5 U.S.C. § 104, except for the GAO;
government corporations or
government-controlled corporations as
defined in 5 U.S.C. § 103; non-
appropriated funds instrumentalities, as
described in 5 U.S.C. § 2105(c); certain
depot-level maintenance and repair
activities of DOD; and agencies with
fewer than 100 ful -time employees as of
the first of the fiscal year. ‘
Source: Congressional Research Service
a. Words in italics are unique to one of the two definitions.
b. Words in bolded text are common to both definitions.
Author Contact Information
John R. Luckey
Kate M. Manuel
Legislative Attorney
Legislative Attorney
jluckey@crs.loc.gov, 7-7897
kmanuel@crs.loc.gov, 7-4477
Valerie Bailey Grasso
Specialist in Defense Acquisition
vgrasso@crs.loc.gov, 7-7617
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