[Federal Register Volume 75, Number 61 (Wednesday, March 31, 2010)]
[Notices]
[Pages 16188-16197]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-7329]


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OFFICE OF MANAGEMENT AND BUDGET

Office of Federal Procurement Policy


Work Reserved for Performance by Federal Government Employees

AGENCY: Office of Management and Budget, Office of Federal Procurement 
Policy.

ACTION: Notice of proposed policy letter.

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SUMMARY: The Office of Federal Procurement Policy (OFPP) in the Office 
of Management and Budget (OMB) is issuing a proposed policy letter to 
provide guidance to Executive Departments and agencies on circumstances 
when work must be reserved for performance by Federal government 
employees. The Presidential Memorandum on Government Contracting, 
issued on March 4, 2009, directs OMB to clarify when governmental 
outsourcing of services is, and is not, appropriate, consistent with 
section 321 of the National Defense Authorization Act (NDAA) for FY 
2009. Section 321 requires OMB to (i) create a single definition for 
the term ``inherently governmental function'' that addresses any 
deficiencies in the existing definitions and reasonably applies to all 
agencies; (ii) establish criteria to be used by agencies to identify 
``critical'' functions and positions that should only be performed by 
federal employees; and (iii) provide guidance to improve internal 
agency management of functions that are inherently governmental or 
critical. The Presidential Memorandum is available at http://www.whitehouse.gov/the_press_office/.
    Memorandum-for-the-Heads-of-Executive-Departments-and-Agencies-
Subject-Government/.
    Section 321 may be found at http://thomas.loc.gov/cgi-bin/query/
F?c110:5:./temp/~c110wWVqGQ: e178256.
    Comment Date: OFPP invites interested parties from both the public 
and private sectors to provide comments to be considered in the 
formulation of the final policy letter. Interested parties should 
submit comments in writing to

[[Page 16189]]

the address below on or before June 1, 2010.

ADDRESSES: Comments may be submitted by any of the following methods:
     E-mail: OFPPWorkReserved@omb.eop.gov.
     Facsimile: 202-395-5105.
     Mail: Office of Federal Procurement Policy, ATTN: Mathew 
Blum, New Executive Office Building, Room 9013, 724 17th Street, NW., 
Washington, DC 20503.
    Instructions: Please submit comments only and cite ``Proposed OFPP 
Policy Letter'' in all correspondence. All comments received will be 
posted, without change, to http://www.whitehouse.gov/omb/procurement/workreserved/work_comments.html, without redaction, so commenters 
should not include information that they do not wish to be posted (for 
example because they consider it personal or business-confidential).

FOR FURTHER INFORMATION CONTACT: Mathew Blum, OFPP, (202) 395-4953 or 
mblum@omb.eop.gov.

SUPPLEMENTARY INFORMATION: 

A. Overview

    OFPP is issuing a proposed policy letter to provide guidance 
addressing when work must be reserved for performance by federal 
employees. The policy letter is intended to implement direction in the 
President's March 4, 2009, Memorandum on Government Contracting that 
requires OMB to ``clarify when governmental outsourcing for services is 
and is not appropriate, consistent with section 321 of Public Law 110-
417 (31 U.S.C. 501 note).'' The proposed policy letter would:
     Clarify what functions are inherently governmental and 
must always be performed by federal employees. A single definition of 
``inherently governmental function'' built around the well-established 
statutory definition in the Federal Activities Inventory Reform Act 
(FAIR Act), Public Law 105-270, would replace existing definitions in 
regulation and policy. The FAIR Act defines an activity as inherently 
governmental when it is so intimately related to the public interest as 
to mandate performance by Federal employees. Examples and tests would 
be provided to help agencies identify inherently governmental 
functions.
     Help agencies identify when other functions (or portions 
of functions) need to be performed by Federal employees. Existing 
guidance addressing functions closely associated with inherently 
governmental functions would be strengthened to ensure that performance 
of such functions does not expand to include performance of inherently 
governmental functions or otherwise interfere with federal employees' 
ability to carry out their inherently governmental responsibilities. In 
addition, consistent with section 321, a new category, ``critical 
function,'' would be defined to help agencies identify and build 
sufficient internal capacity to effectively perform and maintain 
control over functions that are core to the agency's mission and 
operations.
     Outline a series of agency management responsibilities to 
strengthen accountability for the effective implementation of these 
policies. Agencies would be required to take specific actions, before 
and after contract award, to prevent contractor performance of 
inherently governmental functions and overreliance on contractors in 
``closely associated'' and critical functions. Agencies would also be 
required to develop agency-level procedures, provide training, and 
designate senior officials to be responsible for implementation of 
these policies.
    After public comment is considered and the policy letter is 
finalized, appropriate changes will be made to the Federal Acquisition 
Regulation (FAR).

B. Background

    The Presidential Memorandum on Government Contracting requires the 
Director of OMB to develop guidance addressing when governmental 
outsourcing of services is, and is not, appropriate. The Memorandum 
states that the line between inherently governmental activities that 
should not be outsourced and commercial activities that may be subject 
to private-sector performance has become blurred, which may have led to 
the performance of inherently governmental functions by contractors 
and, more generally, an overreliance on contractors by the government. 
It directs OMB to clarify when outsourcing is, and is not, appropriate, 
consistent with section 321 of the NDAA for FY 2009.
    Section 321 directed OMB to: (1) Create a single, consistent 
definition for the term ``inherently governmental function'' that 
addresses any deficiencies in the existing definitions and reasonably 
applies to all agencies; (2) develop criteria for identifying critical 
functions with respect to the agency's missions and structure; (3) 
develop criteria for determining positions dedicated to critical 
functions which should be reserved for federal employees to ensure the 
department or agency maintains control of its mission and operations; 
(4) provide criteria for identifying agency personnel with 
responsibility for (a) maintaining sufficient organic expertise and 
technical capability within the agency, and (b) issuing guidance for 
internal activities associated with determining when work is to be 
reserved for performance by Federal employees; and (5) solicit the 
views of the public regarding these matters.
    OMB's OFPP reviewed current laws, regulations, policies, and 
reports addressing the definition of inherently governmental functions 
and the reservation of work for government employees. The review was 
conducted with the assistance of an interagency team that included 
representatives from the Chief Acquisition Officers Council and the 
Chief Human Capital Officers Council. As part of this effort, OFPP 
reviewed the definition of inherently governmental functions in the 
Federal Activities Inventory Reform Act (FAIR Act), Public Law 105-270, 
section 2383 of title 10 (which cites to definitions in the Federal 
Acquisition Regulation (FAR)), the FAR, OMB Circular A-76, OFPP Policy 
Letter 92-1, Inherently Governmental Functions (which was rescinded and 
superseded by OMB Circular A-76 in 2003) and reports by the Government 
Accountability Office (GAO). OFPP also reviewed the analyses in a 
recent report by the Congressional Research Service, Inherently 
Governmental Functions and Department of Defense Operations: 
Background, Issues, and Options for Congress (June 2009) and relevant 
findings and recommendations set forth in the Report of the Acquisition 
Advisory Panel (January 2007), available at https://www.acquisition.gov/comp/aap/documents/Chapter6.pdf. The Panel 
concluded, among other things, that ``[t]here is a need to assure that 
the increase in contractor involvement in agency activities does not 
undermine the integrity of the government's decision-making 
processes.'' See the Panel's Report at 392.
    To supplement this review, OMB held a public meeting and solicited 
comments from the public last spring and summer to inform the 
development of guidance. Comments were specifically sought regarding 
the definition of inherently governmental functions and criteria for 
identifying critical functions. See 74 FR 25775 (May 29, 2009) for a 
copy of the notice. OMB received 11 comments addressing these issues. 
For a copy of public comments, go to http://www.whitehouse.gov/omb/assets/procurement_govcontracting/public_comments.pdf. For a 
transcript

[[Page 16190]]

of the public meeting, go to http://www.whitehouse.gov/omb/assets/procurement_gov_contracting/transcript_public_meeting.pdf.
    Respondents generally favored the definition of ``inherently 
governmental function'' found in the FAIR Act. Some concern was raised 
regarding changes made to the definition by OMB Circular A-76 when the 
Circular was revised in 2003.
    Some respondents recommended that the criteria OMB develops to 
identify critical functions and positions reserved for federal 
employees be tied to mission performance. Some cautioned that these 
criteria should also guard against the contracting out of a function if 
such action poses too great a risk of creating a single point of 
mission failure. However, at least one commenter expressed the view 
that, as long as the overall function is managed by a federal employee, 
not every position performing a critical function needs to be performed 
by federal employees in order to protect the government's interest and 
prevent mission failure. Another commenter stated that tasks closely 
associated with governmental decision-making should not be contracted 
out unless the government can effectively guard against or otherwise 
mitigate conflicts of interest.
    Based on this review and consideration of the public comments, OFPP 
has: (1) Developed a proposed policy letter and (2) formulated a list 
of tailored questions to elicit feedback on specific issues that will 
help inform its deliberations in shaping final guidance.

C. Proposed Policy Letter

1. Summary

    OFPP has developed a proposed policy letter to improve the rules 
addressing the proper roles of the public and private sectors in 
performing work for the government. The policy letter is designed to 
address a number of weaknesses with existing rules that are affecting 
the efficiency and effectiveness of government performance. These 
weaknesses are summarized below along with a brief description of how 
they would be addressed.
    Concern: The line has been blurred between functions that are 
inherently governmental and those that are not, potentially leading to 
confusion and to inappropriate judgments about when contractors may 
perform work that should be reserved for performance by Federal 
employees.
    Proposed actions: Adopt the FAIR Act definition of ``inherently 
governmental function'' as the single government-wide definition of 
this term. (The FAIR Act defines an activity as inherently governmental 
when it is so intimately related to the public interest as to mandate 
performance by Federal employees.) Develop guidance to help agencies 
identify whether a given function falls within the definition of 
``inherently governmental function'' or is otherwise closely associated 
with the performance of inherently governmental functions. Provide 
tests for analyzing whether a function is inherently governmental based 
on the nature of the function and the level of discretion to be 
exercised in performing the function. Reinforce management 
responsibilities--both before and after contract award--to guard 
against contractor performance of inherently governmental functions.
    Concern: Some government organizations may be overly reliant on 
contractors to perform critical functions that, while not inherently 
governmental, still need to be performed by Federal employees.
    Proposed actions: Provide guidance for determining the criticality 
of functions. Identify criteria for determining when positions 
dedicated to performing critical functions must or should be reserved 
for Federal employee performance. Hold appropriate officials 
accountable for ensuring adequate analysis has been performed to 
establish the sufficiency of internal capability in the event that 
contractors are to perform part of the function.
    Concern: There is insufficient management attention focused on 
ensuring work is properly reserved for federal employees and 
maintaining certain critical capability levels in-house. An appropriate 
governance and review structure must be established to support the 
successful performance of these duties.
    Proposed actions: Require agencies to develop agency-level 
procedures, conduct training, periodically review internal controls 
used to monitor implementation of this authority, and designate one or 
more senior officials to be responsible for implementation and 
maintenance of the policy.

2. Inherently Governmental Functions

    There are three main sources for definitions and guidance 
addressing inherently governmental function: (1) The FAIR Act, (2) the 
FAR, and (3) OMB Circular A-76.
    a. Definition. The FAIR Act, FAR, and Circular A-76 each make clear 
that the term ``inherently governmental function'' addresses functions 
that are so intimately related to the public interest as to require 
performance by federal government employees. There are some variations 
in the language used by the three sources to describe the types of 
functions included in the definition. In particular, the FAIR Act 
states that the term includes activities that require the ``exercise of 
discretion'' in applying ``Federal Government authority,'' whereas the 
Circular speaks in terms of the exercise of ``substantial discretion'' 
in applying ``sovereign'' Federal government authority. It is unclear 
what the impact of this type of variation has been. This 
notwithstanding, these variations can create confusion and uncertainty.
    The proposed policy letter adopts the FAIR Act definition as the 
single, government-wide definition. This definition reflects 
longstanding OFPP guidance that had been set out in OFPP Policy Letter 
92-1. 57 FR 45096 (September 30, 1992). Most public commenters 
expressed general satisfaction with the statutory definition in the 
FAIR Act, while also acknowledging uncertainties as to its construction 
and application in particular circumstances.
    b. Guidance. The proposed policy letter provides guidance to help 
agencies determine whether a given function meets the definition of an 
``inherently governmental function.'' The proposed policy letter 
retains a list of examples of inherently governmental functions, 
currently found in FAR Subpart 7.5. OFPP would also create tests for 
agencies to use in determining whether functions not appearing on the 
list otherwise fall within the definition of inherently governmental. 
The ``nature of the function'' test would ask agencies to consider 
whether the direct exercise of sovereign power is involved. Such 
functions are uniquely governmental and, therefore, inherently 
governmental. The ``discretion'' test would ask agencies to evaluate 
whether the discretion associated with the function, when exercised by 
a contractor, would have the effect of committing the government to a 
course of action. This test was included in OFPP Policy Letter 92-1, 
Inherently Governmental Functions, and currently may be found in OMB 
Circular A-76 (see Attachment A, para. B(1)(b)), which rescinded Policy 
Letter 92-1.
    OFPP seeks to clarify and reinforce that agencies have both pre-
award and post-award responsibilities for evaluating whether a function 
is inherently governmental and taking steps to avoid transferring 
inherently governmental authority to a contractor, such as through 
inadequate attention to contract administration. For proposed work, a 
determination that the work is not inherently governmental should be 
made prior to issuance of the

[[Page 16191]]

solicitation, preferably during acquisition planning. For ongoing 
contracts, agencies should review how work is performed, focusing, in 
particular, on functions that are closely associated with inherently 
governmental activities and professional and technical services, to 
ensure the scope of the work or the circumstances have not changed to 
the point that inherently governmental authority has been transferred 
to the contractor.

3. Functions That Are Closely Associated With Inherently Governmental 
Functions

    Policy guidance addressing inherently governmental functions must 
also address functions closely associated with inherently governmental 
functions to properly ensure that work that is intimately related to 
the public interest is performed by Federal employees. Closely 
associated functions approach the status of inherently governmental 
work because of the nature of these functions and the risk that their 
performance, if not appropriately managed, may materially limit Federal 
officials' performance of inherently governmental functions.
    The proposed policy letter retains an illustrative list of 
functions closely associated with inherently governmental functions 
from current FAR coverage. The guidance requires agencies to take a 
number of steps related to these functions. First, the proposed policy 
letter reiterates the requirement set forth in section 736 of Division 
D of the Omnibus Appropriations Act, 2009, Public Law 111-8, to give 
special consideration to reserving these functions to performance by 
federal employees. Second, the proposed policy letter lays out the 
responsibilities agencies must perform if they determine that 
contractor performance of a function closely associated with an 
inherently governmental function is appropriate. These responsibilities 
include pre-establishing in the contract specified ranges of acceptable 
decisions, subjecting the contractor's discretionary decision to final 
approval by an agency official, assigning a sufficient number of 
qualified federal employees with appropriate expertise to administer 
the work, and taking steps to avoid or mitigate conflicts of interest. 
Each of these actions is designed to help ensure that the contractor's 
activities do not expand to include inherently governmental 
responsibilities. Although these actions should currently be taken, 
they are not enumerated in one guidance document and often are given 
insufficient management attention (see paragraph 5, below, for 
additional discussion on new agency responsibilities for management and 
monitoring).

4. Critical functions

    Since at least the early 1990s, government-wide policy addressing 
when work must be reserved for Federal employees has focused almost 
exclusively on the definition of ``inherently governmental'' functions 
and functions closely associated with inherently governmental 
functions. This narrow focus has been cited as a cause of inadequate 
attention to maintaining a residual Federal core capability when 
considering contractor performance of critical functions that are tied 
to an agency's mission. The Acquisition Advisory Panel, established by 
Congress in 2003 to review the federal acquisition system, concluded in 
its 2007 report that the consequences of this inattention to contractor 
performance of critical functions include ``the loss of institutional 
memory, the inability to be certain whether the contractor is properly 
performing the specified work at a proper price and the inability to be 
sure that decisions are being made in the public interest rather than 
in the interest of the contractors performing the work.'' Following the 
issuance of the Panel's report, Congress, in the FY 2009 NDAA, directed 
OMB to develop criteria for agencies to use in identifying ``critical'' 
functions and in determining when such functions, or parts thereof, 
must be retained for performance by federal employees.
    Consistent with section 321 of the FY 2009 NDAA, the proposed 
policy letter provides guidance to address the handling of critical 
functions and the maintenance of a core capability by Federal 
employees. The proposed policy letter would define critical function to 
mean a function whose importance to the agency's mission and operation 
requires that at least a portion of the function must be reserved to 
federal employees in order to ensure the agency has sufficient internal 
capability to effectively perform and maintain control of its mission 
and operations. Agencies would be held responsible for ensuring a 
sufficient number of positions performing critical work are filled by 
federal employees with appropriate training, experience, and expertise 
to understand the agency's requirements, formulate alternatives, manage 
the work product, and manage any contractors used to support the 
Federal workforce. The proposed guidance would also require agencies to 
evaluate whether they have sufficient internal capability on a case-by-
case basis, taking into account factors such as the agency's mission, 
the complexity of the function and need for specialized skill, and the 
effect of contractor default on mission performance. The proposed 
guidance is built around the general principle that the more critical a 
function is, the greater the need for internal capability to maintain 
control of the agency's mission and operations. This is most obviously 
the case where the function is critical to achievement of the agency's 
core mission, but even for functions that may not be viewed as 
critical, such as functions that are not directly involved in 
performing the core mission, the agency may determine that the function 
is, nonetheless, sensitive enough as to require that many, most, or, in 
some situations, all positions be filled by Federal employees.
    Finally, if an agency determines that it has sufficient internal 
capability to control its mission and operations, the proposed policy 
would require the consideration of cost to establish the extent to 
which additional critical work is performed by Federal employees, 
unless performance and risk considerations in favor of Federal employee 
performance would clearly outweigh cost considerations.

5. Management Attention

    A clear understanding of responsibilities and heightened management 
attention will be required to ensure that work that should be performed 
by Federal employees is reserved for performance by them.
    The proposed policy letter lays out the determinations that must be 
documented by the agency head or designated requirements official 
before a contract solicitation is issued to show that functions to be 
acquired by contract are not inherently governmental. It would also 
require agencies to determine (also before issuing a solicitation) that 
they have sufficient internal capability to control their mission and 
operations. During contract performance, agencies would be required to 
(1) monitor how contractors are performing contracts, especially those 
involving work closely associated with inherently governmental 
functions or professional and technical services, and (2) take 
appropriate action where internal control of mission and operations is 
at risk due to inappropriate or excessive reliance on contractors to 
perform critical functions.
    Finally, the proposed policy letter would require agencies to 
strengthen internal agency management. Each agency with 100 or more 
full-time federal employees in the prior fiscal year would be required 
to identify one

[[Page 16192]]

or more senior officials to be accountable for the development and 
implementation of agency policies, procedures, and training to ensure 
the appropriate reservation of work for federal employees. The selected 
officials would be expected to facilitate the meaningful involvement of 
all relevant offices. In addition, agencies would be expected to 
develop and maintain (1) internal procedures, to be reviewed by agency 
management every two years, and (2) training plans to help their 
employees understand and meet their responsibilities.

D. Solicitation of Public Comment

    OFPP welcomes comments on the proposed policy letter. Respondents 
are also encouraged to offer their views on the following questions, 
many of which are designed to help elicit feedback on specific aspects 
of the draft guidance.

1. Definitions

    a. If the FAIR Act definition of ``inherently governmental'' is 
adopted, what additional definitional clarification is needed, if any?
    b. What additional guidance should be provided to make clear that 
identifying ``critical'' work is driven by mission and circumstance, 
which will differ between agencies and within agencies over time? Is 
there a term other than ``critical'' that might be used to more clearly 
convey this principle?
    c. What, if any, additional guidance should be provided to address 
what is meant by the term ``public interest''?

2. Inherently Governmental Functions

    a. Does the ``discretion'' test (which is derived from OMB Circular 
A-76, Attachment A and, before that, OFPP Policy Letter 92-1) help or 
hinder identification of inherently governmental functions? How might 
the language in the proposed policy letter be improved to make it more 
useful?
    b. Does the proposed ``nature of the function'' test help in the 
identification of inherently governmental functions? How might the 
coverage of this test in the proposed policy letter be improved to make 
it more useful?
    c. Should consideration be given to establishing a ``principal-
agent'' test that would require agencies to identify functions as 
inherently governmental where serious risks could be created by the 
performance of these functions by those outside government, because of 
the difficulty of ensuring sufficient control over such performance?
    d. What, if any, additional guidance might help agencies 
differentiate between circumstances where contractors are being used 
appropriately to inform government officials and those where 
contractors are limiting or constraining government exercise of 
inherently governmental responsibilities?
    e. What, if any, changes should be made to existing laws that 
currently deem specific functions or the work performed by specific 
organizations to be inherently governmental?

3. Closely Associated and Critical Functions

    a. Should the policy letter set out a presumption, or a 
requirement, in favor of performance of ``closely associated'' and/or 
critical functions by federal employees?
    b. What, if any, additional guidance may help agencies 
differentiate between critical functions and functions that are closely 
associated with the performance of inherently governmental functions?
    c. Should these categories be merged and treated in identical 
fashion? Why or why not?
    d. What, if any, additional guidance might be provided to help 
agencies identify the extent to which a critical function may be 
performed by a contractor?
    e. Should the policy clarify whether determinations regarding 
criticality are to be made at the departmental or component level?

4. Non-critical Functions

    a. What, if any, additional guidance may help agencies 
differentiate between functions that are critical and those that are 
not?
    b. Should guidance allow agency heads to identify categories of 
service contracts that may be presumed to be non-critical? Why or why 
not?

5. Specific Functions

    a. What functions, in particular, are the most difficult to 
properly classify as inherently governmental, closely associated with 
inherently governmental, critical, or non-critical--and why? What 
specific steps should be taken to address this challenge?
    b. What should guidance say--in place of, or in addition to, the 
draft guidance or currently existing federal regulations or policies--
to address the use (if any) of contractors performing any of the 
following functions?
    i. Pre-award acquisition support, such as acquisition planning, 
market research, development of independent government cost estimates, 
and preparation of documentation in support of contract award, 
including preparation of: price negotiation memoranda and price 
reasonableness determinations, technical evaluations, determinations of 
responsibility, determinations and findings, and justifications;
    ii. Post-award acquisition support, such as functions involving the 
use of contractors to manage other contractors, the development of 
contractor performance assessments, review of contract claims, and the 
preparation of termination settlement proposals;
    iii. Procurement management reviews;
    iv. Management of Federal grantees;
    v. Strategic planning;
    vi. Lead systems integration;
    vii. Physical security involving:
    A. Guard services, convoy security services, pass and 
identification services, plant protection services, the operation of 
prison or detention facilities;
    B. Security services other than those described in A; or
    C. The use of deadly force, including combat, security operations 
performed in direct support of combat, and security that could evolve 
into combat;
    viii. Cyber security, including IT network security;
    ix. Support for intelligence activities, such as covert operations;
    x. The assistance, reinforcement or rescue of individuals who 
become engaged in hostilities or offensive responses to hostile acts or 
demonstrated hostile intentions; and
    xi. Intelligence interrogation of detainees, including 
interrogations in connection with hostilities.
    c. Should the guidance provide an illustrative list of functions 
that are presumed to be critical? Why or why not? If so, what functions 
should be included on the list?

6. Human Capital Planning

    a. How, if at all, should this guidance address the problem of 
limitations on the number of authorized Federal positions and the 
impact of such limitations on decisions about reserving work for 
Federal employees?
    b. How, if at all, should this guidance address the potential nexus 
between decisions regarding reserving work for Federal employees and 
the unavailability of certain capabilities and expertise among Federal 
employees (e.g., ``hard to fill'' labor categories), and the impact of 
Federal salary limits on hiring people with those capabilities and 
expertise?
    c. Should the guidance address when it is appropriate to 
temporarily contract for performance of work that is generally reserved 
for Federal employees?
    d. How, if at all, should this guidance address situations where 
there is no basis to reserve work for Federal

[[Page 16193]]

employees, but the government is not in a position to provide adequate 
oversight of a contractor, whether due to the unavailability of federal 
employees with the skills needed for contract management or for other 
reasons?
    e. What, if any, additional guidance might be provided to help an 
agency analyze whether it has the best mix of private and public sector 
labor? Are there benchmarks that exist to help agencies make this 
determination? Can the concept of ``overreliance'' be effectively 
understood without also providing guidance on ``underreliance''? Why or 
why not?

7. Scope of Coverage

    a. How, if at all, should the draft guidance address advisory and 
assistance services? What, if any, changes should be considered to FAR 
Subpart 37.2 to improve how agencies draw upon the skills of the public 
and private sectors?
    b. How, if at all, should the draft guidance address personal 
services contracting? What, if any, changes should be considered to FAR 
Subpart 37.104 to improve how agencies draw upon the skills of the 
public and private sectors?
    c. What additional guidance, if any, would be beneficial to improve 
understanding and implementation of policies addressing functions that 
must be reserved for performance by Federal employees?
    d. What additional guidance, if any, would be beneficial to improve 
understanding and implementation of policies addressing functions that 
may be performed by contractors?

8. Form of Coverage

    Is an OFPP policy letter an effective vehicle to serve as the main 
document for consolidated policy guidance on the subject of work 
reserved for Federal employees and maintaining certain critical 
capability levels in-house? Does it effectively address the affected 
stakeholder communities? If not, which communities are not properly 
addressed and what form should the guidance take and why?

9. Implementation

    a. What best practices (e.g., flowcharts, decision trees, 
checklists, handbooks) exist to help agencies identify which functions 
should be reserved for performance by Federal employees? Note: 
Respondents are encouraged to submit copies of, or provide citations 
to, relevant documents with their responses.
    b. What questions arise most frequently that might be suitably 
addressed in a question and answer format? Examples of questions might 
include the following:
     What steps should contractor employees be required to take 
when working on a government site to ensure their status is clearly 
understood?
     Under what, if any, circumstances may a contractor attend 
a policy-making meeting?
     Under what, if any, circumstances may a contractor 
represent an agency at a policy-making meeting?

10. Management Responsibilities

    What, if any, additional guidance should be provided to ensure the 
policies and practices discussed in the draft guidance are given 
appropriate management attention?

11. Inventories of Federal and Contractor Employees

    a. What is the best way to optimize the value of Federal employee 
inventories that agencies prepare under the FAIR Act and OMB Circular 
A-76 to support policies for identifying work to be reserved for 
performance by Federal employees?
    b. What is the best way to optimize the value of the contractor 
employee inventory required by section 743 of Division C of the FY 2010 
Consolidated Appropriations Act, Public Law 111-117 (for civilian 
agencies) and section 807 of the National Defense Authorization Act for 
FY 2008, Public Law 110-181 (for defense agencies), to support policies 
for identifying work to be reserved for performance by Federal 
employees and those that may continue to be performed by contractors?

Daniel I. Gordon,
Administrator, Office of Federal Procurement Policy.
Policy Letter No. 10-XX
To the Heads of Executive Departments And Establishments
Subject: Work Reserved for Performance by Federal Government 
Employees

    1. Purpose. This guidance establishes Executive Branch policy 
addressing when work must be reserved for performance by federal 
employees. The policy is intended to assist agency officers and 
employees in ensuring that only federal employees perform work that 
is inherently governmental or otherwise needs to be reserved to the 
public sector.
    Nothing in this guidance is intended to discourage the 
appropriate use of contractors. Contractors can provide expertise, 
innovation, and cost-effective support to federal agencies for a 
wide range of services. Reliance on contractors is not, by itself, a 
cause for concern, provided that the work that they perform is not 
work that should be reserved for federal employees and that federal 
officials are appropriately managing contractor performance.
    2. Authority. This policy letter is issued pursuant to section 
6(a) of the Office of Federal Procurement Policy Act, 41 U.S.C. 
405(a), the President's March 4, 2009, Memorandum on Government 
Contracting, and section 321 of the FY 2009 National Defense 
Authorization Act, Public Law 110-417.
    3. Definitions.
    ``Inherently governmental function,'' as defined in section 5 of 
the Federal Activities Inventory Reform Act, Public Law 105-270, 
means a function that is so intimately related to the public 
interest as to require performance by Federal Government employees.
    (a) The term includes functions that require either the exercise 
of discretion in applying Federal Government authority or the making 
of value judgments in making decisions for the Federal Government, 
including judgments relating to monetary transactions and 
entitlements. An inherently governmental function involves, among 
other things, the interpretation and execution of the laws of the 
United States so as--
    (1) To bind the United States to take or not to take some action 
by contract, policy, regulation, authorization, order, or otherwise;
    (2) To determine, protect, and advance United States economic, 
political, territorial, property, or other interests by military or 
diplomatic action, civil or criminal judicial proceedings, contract 
management, or otherwise;
    (3) To significantly affect the life, liberty, or property of 
private persons;
    (4) To commission, appoint, direct, or control officers or 
employees of the United States; or
    (5) To exert ultimate control over the acquisition, use, or 
disposition of the property, real or personal, tangible or 
intangible, of the United States, including the collection, control, 
or disbursement of appropriations and other Federal funds.
    (b) The term does not normally include--
    (1) Gathering information for or providing advice, opinions, 
recommendations, or ideas to Federal Government officials; or
    (2) Any function that is primarily ministerial and internal in 
nature (such as building security, mail operations, operation of 
cafeterias, housekeeping, facilities operations and maintenance, 
warehouse operations, motor vehicle fleet management operations, or 
other routine electrical or mechanical services).
    ''Critical function'' means a function that is necessary to the 
agency being able to effectively perform and maintain control of its 
mission and operations. A function that would not expose the agency 
to risk of mission failure if performed entirely by contractors is 
not a critical function.
    4. Policy. It is the policy of the Executive Branch to ensure 
that government action is taken as a result of informed, independent 
judgments made by government officials. Adherence to this policy 
will ensure that the act of governance is performed, and decisions 
of significant public interest are made, by officials who are 
ultimately accountable to the President and bound by laws 
controlling the conduct and performance of Federal employees that 
are intended to protect or

[[Page 16194]]

benefit the public and ensure the proper use of funds appropriated 
by Congress. To implement this policy, agencies must reserve certain 
work for performance by federal employees and take special care to 
retain sufficient management oversight over how contractors are used 
to support government operations and ensure that Federal employees 
have the technical skills and expertise needed to maintain control 
of the agency mission and operations.
    (a) Performance of work by federal employees. To ensure that 
work that should be performed by federal employees is properly 
reserved for government performance, agencies shall:
    (1) Ensure that service contractors do not perform inherently 
governmental functions (see section 5-1);
    (2) Give special consideration to federal employee performance 
of functions closely associated with inherently governmental 
functions and, when such work is performed by contractors, provide 
greater attention and an enhanced degree of management oversight of 
the contractors' activities to ensure that contractors' duties do 
not expand to include performance of inherently governmental 
functions (see section 5-2a); and
    (3) Ensure that federal employees perform critical functions to 
the extent necessary for the agency to operate effectively and 
maintain control of its mission and operations (see section 5-2b).
    (b) Management of federal contractors. When work need not be 
reserved for Federal performance and contractor performance is 
appropriate, agencies shall take steps to employ an adequate number 
of government personnel to ensure that contract administration 
protects the public interest through the active and informed 
management and oversight of contractor performance, especially where 
contracts have been awarded for the performance of critical 
functions, functions closely associated with the performance of 
inherently governmental functions, or where, due to the nature of 
the contract services provided, there is a potential for confusion 
as to whether an activity is being performed by government employees 
or contractors. Contract management should be appropriate to the 
nature of the contract, ensure that the contract is under the 
control of government officials at all times, and make clear to the 
public when citizens are receiving service from contractors.
    (c) Strategic human capital planning. (1) As part of strategic 
human capital planning, agencies shall--
    (i) Dedicate a sufficient amount of work on critical functions 
to performance by federal employees in order to build competencies 
(both knowledge and skills), provide for continuity of operations, 
and retain institutional knowledge of government operations, 
including those unique to the agency's mission;
    (ii) Ensure that sufficient personnel is available to manage and 
oversee the contractor's performance and evaluate and approve or 
disapprove the contractor's work products and services, recruiting 
and retaining the necessary federal talent where it is lacking; and
    (iii) Consider the impact of decisions to establish a specified 
level of government employee authorizations (or military end 
strength) or available funding on the ability to use Federal 
employees for work that should be reserved for performance by such 
employees.
    (2) Agencies' annual Human Capital Plan for Acquisition shall 
identify specific strategies and goals for addressing both the size 
and capability of the acquisition workforce, including program 
managers and contracting officer technical representatives. The 
number of personnel required to administer a particular contract is 
a management decision to be made after analysis of a number of 
factors. These include, among others:
    (i) The scope of the activity in question;
    (ii) The technical complexity of the project or its compontents;
    (iii) The technical capability, numbers, and workload of federal 
mangement officials;
    (iv) The inspection techniques available;
    (v) The proven adequacy and reliability of contractor project 
management;
    (vi) The sophistication and track record of contract 
administration organizations within the agency; and
    (vii) The importance and criticality of the function.
    5. Implementation guidelines and responsibilities. Agencies 
shall use the guidelines below to determine (1) whether their 
requirements involve the performance of inherently government 
functions, functions closely associated with inherently governmental 
functions, or critical functions; and (2) the type and level of 
management attention necessary to ensure that functions that should 
be reserved for federal performance are not materially limited by or 
effectively transferred to contractors. The latter determination 
typically requires agencies to consider the totality of 
circumstances surrounding how, where, and when work is to be 
performed.
    5-1. Inherently governmental functions. Agencies shall ensure 
that inherently governmental functions are reserved exclusively for 
performance by federal employees.
    (a) Determining whether a function is inherently governmental. 
Every federal government organization performs some work that is so 
intimately related to the public interest as to require performance 
by federal government employees. Agencies should review the 
definition of inherently governmental function in section 3, any 
other statutory provisions that identify a function as inherently 
governmental, and the illustrative list of inherently governmental 
functions in Appendix A. In no case should any function described in 
the definition, identified in statute as inherently governmental, or 
appearing on the list be considered for contract performance. If a 
function is not listed in Appendix A or identified in a statutory 
provision as inherently governmental, agencies should determine 
whether the function otherwise falls within the definition in 
section 3 by evaluating, on a case-by-case basis, the nature of the 
work and the level of discretion associated with performance of the 
work using the tests below. A function meeting either of these tests 
would be inherently governmental.
    (1) The nature of the function. Functions which involve the 
exercise of sovereign powers--that is, powers that are uniquely 
governmental--are inherently governmental by their very nature. 
Examples of functions that, by their nature, are inherently 
governmental are an ambassador representing the United States, a 
police officer arresting a person, and a judge sentencing a person 
convicted of a crime to prison. A function may be classified as 
inherently governmental based strictly on its uniquely governmental 
nature and without regard to the type or level of discretion 
associated with the function.
    (2) The exercise of discretion. (i) A function requiring the 
exercise of discretion shall be deemed inherently governmental if 
the exercise of such discretion commits the government to a course 
of action where two or more alternative courses of action exist and 
decision making is not already limited or guided by existing 
policies, procedures, directions, orders, and other guidance that:
    (A) Identify specified ranges of acceptable decisions or conduct 
concerning the overall policy or direction of the action; and
    (B) Subject the discretionary authority to final approval or 
regular oversight by agency officials.
    (ii) The fact that decisions are made, and discretion exercised, 
by a contractor in performing its duties under the contract--such as 
how to allocate the contractor's own or subcontract resources, what 
conclusions to emphasize and, unless specified in the contract, what 
techniques and procedures to employ, whether and whom to consult, 
what research alternatives to explore given the scope of the 
contract, or how frequently to test--is not determinative of whether 
the contractor is performing an inherently government function. A 
function involving the exercise of discretion may be appropriately 
performed consistent with the restrictions in this section where the 
contractor does not have the authority to decide on the overall 
course of action, but is tasked to develop options or implement a 
course of action, and the agency official has the ability to 
countervail the contractor's action. By contrast, contractor 
performance would be inappropriate where the contractor's 
involvement is or would be so extensive, or the contractor's work 
product so close to a final agency product, as to effectively 
preempt the federal officials' decision-making process, discretion 
or authority.
    (b) Responsibilities--(1) Pre-award. Agencies shall determine 
prior to issuance of a solicitation that none of the functions to be 
contracted are inherently governmental. The agency head or 
designated requirements official shall provide the contracting 
officer, concurrent with transmittal of the statement of work (or 
any modification thereof), a written determination that none of the 
functions to be performed are inherently governmental. If a function 
is not listed in Appendix A, it still may be inherently 
governmental. Accordingly, the determination should take into 
consideration, as necessary, the tests in

[[Page 16195]]

paragraph (a). The file should include the analysis that supports 
the determination and this analysis should establish, at a minimum, 
that:
    (i) The function to be contracted does not appear on the list in 
Appendix A;
    (ii) A statute, such as an annual appropriations act, does not 
identify the function as inherently governmental or otherwise 
require it to be performed by Federal employees; and
    (iii) The proposed role for the contractor is not so extensive 
that the ability of senior agency management to develop and consider 
options is or would be preempted or inappropriately restricted.
    (2) Post-award. Agencies should review, on an ongoing basis, the 
functions being performed by their contractors, paying particular 
attention to the way in which contractors are performing, and agency 
personnel are managing, contracts involving functions that are 
closely associated with inherently governmental functions (see 
subsections 5-2a and Appendix B) or contracts for professional and 
technical services. If a determination is made that the contractor 
is performing work that is inherently governmental (or involves 
unauthorized personal services), but the contract, properly defined, 
does not entail performance of inherently governmental functions, 
the agency shall take prompt action to ensure performance by 
government employees of the inherently governmental 
responsibilities. In some cases, government control over, and 
performance of, these responsibilities can be reestablished by 
strengthening contract oversight using government employees with 
appropriate subject matter expertise and following the protocols 
identified in FAR 37.114 (see also section 5.2a, below). In other 
cases, agencies may need to in-source work on an accelerated basis 
through the timely development and execution of a hiring plan timed, 
if possible, to permit the non-exercise of an option or the 
termination of that portion of the contract being used to fulfill 
inherently governmental responsibilities.
    5-2. Other work that must be reserved for federal employees. In 
some cases, work that is not inherently governmental must also be 
reserved for performance by federal employees. Such reservation will 
be required under certain circumstances for functions that are 
closely associated with the performance of inherently governmental 
functions and critical functions.
    5-2a. Functions closely associated with the performance of 
inherently governmental functions. Agencies shall give special 
consideration to federal employee performance of functions closely 
associated with inherently governmental functions.
    (a) Determining whether a function is closely associated with 
the performance of an inherently governmental function. Certain 
services and actions that generally are not considered to be 
inherently governmental functions may approach being in that 
category because of the nature of the function and the risk that 
performance may impinge on federal officials' performance of an 
inherently governmental function. Appendix B provides a list of 
examples of functions that are closely associated with the 
performance of inherently governmental functions.
    (b) Special consideration for federal employee performance.
    (1) If the agency determines the function is closely associated 
with the performance of an inherently governmental function, section 
736 of Division D of the Omnibus Appropriations Act, 2009, Public 
Law 111-8, requires civilian agencies subject to the FAIR Act to 
give special consideration to using federal employees to perform the 
function. Civilian agencies shall refer to OMB Memorandum M-09-26, 
Managing the Multi-Sector Workforce (July 29, 2009), Attachment 3 
for criteria addressing the in-sourcing of work under Public Law 
111-8. Memorandum M-09-26 explains that federal employee performance 
would be expected if either contractor performance causes the agency 
to lack sufficient internal expertise to maintain control of its 
mission and operations or analysis suggests that public sector 
performance is more cost effective and it is feasible to hire 
federal employees to perform the function. The OMB Memorandum is 
available at http://www.whitehouse.gov/omb/assets/memoranda_fy2009/m-09-26.pdf.
    (2) The Department of Defense shall--
    (i) Ensure special consideration is given to federal employee 
performance consistent with the requirements of 10 U.S.C. 2463; and
    (ii) To the maximum extent practicable, minimize reliance on 
contractors performing functions closely associated with inherently 
governmental functions consistent with 10 U.S.C. 2330a.
    (c) Responsibilities. If the agency determines that contractor 
performance of a function closely associated with an inherently 
governmental function is appropriate and cost-effective, the agency 
shall--
    (1) Limit or guide a contractor's exercise of discretion and 
retain control of government operations by both--
    (i) Pre-establishing in the contract specified ranges of 
acceptable decisions and/or conduct; and
    (ii) Pre-establishing a process for subjecting the contractor's 
discretionary decisions and/or conduct to final approval by the 
agency official;
    (2) Assign a sufficient number of qualified government 
employees, with expertise to administer or perform the work, to give 
heightened management attention to the contractor's activities, in 
particular, to ensure that they do not expand to include inherently 
governmental functions, are not performed in ways not contemplated 
by the contract so as to become inherently governmental, do not 
undermine the integrity of the government's decision-making process, 
and do not interfere with federal employees' performance of the 
closely-associated inherently governmental functions (see section 5-
1(b)(2) for guidance on steps to take where a determination is made 
that the contract is being used to fulfill responsibilities that are 
inherently governmental);
    (3) Ensure that a reasonable identification of contractors and 
contractor work products is made whenever there is a risk that 
Congress, the public, or other persons outside of the government 
might confuse contractor personnel or work products with government 
officials or work products, respectively; and
    (4) Take appropriate steps to avoid or mitigate conflicts of 
interest, such as by:
    (i) Conducting pre-award conflict of interest reviews, to ensure 
contract performance is in accordance with objective standards and 
contract specifications, and developing a conflict of interest 
mitigation plan, if needed, that identifies the conflict and 
specific actions that will be taken to lessen the potential for 
conflict of interest or reduce the risk involved with a potential 
conflict of interest;
    (ii) Physically separating contractor personnel from government 
personnel at the worksite;
    (iii) Ensuring contractors are clearly identified as such in 
work product and on work support systems, such as in electronic mail 
systems and phone messaging systems, and on signature blocks, 
security and other identification badges, and office name plates;
    (iv) Having contractor personnel work off-site, if cost-
effective and without derogation to the work to be performed;
    (v) Excluding contractors from subsequent competitions if 
conflicts cannot be avoided; or
    (vi) Performing work with federal employees if (A) contractor 
conflicts cannot be satisfactorily resolved or (B) decision-making 
would be at risk of being transferred to the private sector because 
contractors have such influence and insight into government decision 
making or government officials would rely too heavily on contractor 
inputs (or rely almost exclusively on contractor fact-finding or 
memory).
    (5) Make a written determination concurrent with transmittal of 
the statement of work (or any modification thereof) to the 
contracting officer that
    (i) The function is closely associated with an inherently 
governmental function;
    (ii) Private sector performance of the function is appropriate 
and the most cost effective source of support for the agency; and
    (iii) The agency has sufficient internal capability to control 
its missions and operations, oversee the contractor's performance of 
the contract, limit or guide the contractor's exercise of 
discretion, ensure reasonable identification of contractors and 
contractor work products, and avoid or mitigate conflicts of 
interest and unauthorized personal services.
    5-2b. Critical functions. Agencies shall dedicate a sufficient 
number of federal employees to the performance of critical functions 
so that federal employees may maintain control of agencies' mission 
and operations.
    (a) Criteria for determining when critical positions must be 
reserved for federal employee performance. Determining the 
criticality of a function requires the exercise of informed judgment 
by agency officials. In making that determination, the officials 
shall consider the importance that a function holds for the agency 
and its mission and operations. The more critical the function, the 
more important that the agency have internal capability to maintain 
control of its

[[Page 16196]]

mission and operations. Examples of highly critical functions might 
include: designing and constructing the next generation of 
satellites at the National Aeronautics and Space Administration, 
analyzing areas of tax law that impose significant compliance 
burdens on taxpayers for the Internal Revenue Service's Office of 
the Taxpayer Advocate, and performing mediation services for the 
Federal Mediation and Conciliation Service. Where a critical 
function is not inherently governmental, the agency may 
appropriately consider filling positions dedicated to the function 
with both federal employees and contractors. However, to meet its 
fiduciary responsibility to the taxpayers, the agency must have a 
sufficient internal capability to control its mission and operations 
and must ensure it is cost effective to contract for the services.
    (1) Sufficient internal capability--
    (i) Generally requires that an agency have an adequate number of 
positions filled by federal employees with appropriate training, 
experience, and expertise (organic and technical) to understand the 
agency's requirements, formulate alternatives, take other 
appropriate actions to properly manage and be accountable for the 
work product, and continue critical operations in the event of 
contractor default; and
    (ii) Further requires that an agency have the ability and 
internal expertise to manage any contractors used to support the 
federal workforce and evaluate their work product.
    (2) Determinations concerning what constitutes sufficient 
internal capability must be made on a case-by-case basis taking into 
account, among other things:
    (i) The agency's mission;
    (ii) The complexity of the function and the need for specialized 
skill;
    (iii) The current strength of the agency's in-house organic and 
technical expertise;
    (iv) The current strength (capability and capacity) of the 
agency's acquisition workforce;
    (v) The effect of contractor default on mission performance; and
    (vi) The enforceability of criminal sanctions for crimes 
performed by contractors as compared to those applicable to federal 
employees.
    (b) Responsibilities--(1) Pre-award. (i) Agencies shall 
determine prior to issuance of a solicitation for private-sector 
performance of any aspect of a critical function that the agency has 
sufficient internal capability to control its mission and 
operations. The agency head or designated requirements or human 
capital official shall provide the contracting officer, concurrent 
with transmittal of the statement of work (or any modification 
thereof) a written determination and analysis.
    (ii) If an agency has sufficient internal capability to control 
its mission and operations, the extent to which additional work is 
performed by federal employees should be determined consistent with 
the parameters set forth in subsection (2)(ii) below.
    (2) Post-award. (i) Agencies should be alert for situations 
where internal control of mission and operations is at risk due to 
overreliance on contractors to perform critical functions. In these 
situations, requiring activities should work with their human 
capital office to develop and execute a hiring and/or development 
plan. Requiring activities should also work with the acquisition 
office to address the handling of ongoing contracts and the budget 
and finance offices to secure the necessary funding to support the 
needed in-house capacity. Agencies should also consider application 
of the responsibilities outlined in 5-2a(c), as appropriate.
    (ii) If an agency has sufficient internal capability to control 
its mission and operations, the extent to which additional work is 
performed by federal employees should be based on cost 
considerations unless performance and risk considerations in favor 
of federal employee performance will clearly outweigh cost 
considerations. Supporting cost analysis should address the full 
costs of government and private sector performance and provide like 
comparisons of costs that are of a sufficient magnitude to influence 
the final decision on the most cost effective source of support for 
the organization.
    6. Additional agency responsibilities. (a) Duty of federal 
employees. Every federal employee has an obligation to help avoid 
the performance by contractors of responsibilities that should be 
reserved to federal employees. As part of this obligation, federal 
employees who rely on contracts or their work product must take 
appropriate steps, in accordance with agency procedures, to ensure 
that any final agency action complies with the laws and policies of 
the United States and reflects the independent conclusions of agency 
officials and not those of contractors, who may not be motivated 
solely by the public interest, and who may be beyond the reach of 
management controls applicable to federal employees. These steps 
shall include increased attention and examination where contractor 
work product involves advice, opinions, recommendations, reports, 
analyses, and similar deliverables that are to be considered in the 
course of a federal employee's official duties and may have the 
potential to influence the authority, accountability, and 
responsibilities of the employee.
    (b) Development of agency procedures. Agencies shall develop and 
maintain internal procedures to address the requirements of this 
guidance. Such procedures shall be reviewed by agency management no 
less than every two years.
    (c) Training. Agencies shall develop training plans to help 
their employees understand and meet their responsibilities under 
this guidance. The plan should include training, no less than every 
two years, to improve employee awareness of their responsibilities.
    (d) Review of internal management controls. Agencies should 
periodically evaluate the effectiveness of their internal management 
controls for reserving work for federal employees and identify any 
material weaknesses in accordance with OMB Circular A-123, 
Management's Responsibility for Internal Control, and OFPP's 
Guidelines for Assessing the Acquisition Function, available at 
http://www.whitehouse.gov/omb/assets/omb/procurement/memo/a123_guidelines.pdf
    (e) Designation of responsible management official(s). Each 
federal agency with 100 or more full-time employees in the prior 
fiscal year shall identify one or more senior officials to be 
accountable for the development and implementation of agency 
policies, procedures, and training to ensure the appropriate 
reservation of work for federal employees in accordance with this 
guidance. Each such agency shall submit the names and titles of the 
designated officials, along with contact information, to OMB by June 
30 of each year. This information may be provided with the agency's 
submission of commercial and inherently governmental activities 
submitted pursuant to the FAIR Act and OMB Circular A-76.
    7. Federal Acquisition Regulatory Council. Pursuant to 
subsections 6(a) and 25(f) of the Office of Federal Procurement 
Policy Act, 41 U.S.C. 405(a) and 421(f), the Federal Acquisition 
Regulatory Council shall ensure that the policies established herein 
that pertain to the acquisition of services are incorporated in the 
FAR in a timely manner.
    8. Judicial review. This policy letter is not intended to 
provide a constitutional or statutory interpretation of any kind and 
it is not intended, and should not be construed, to create any right 
or benefit, substantive or procedural, enforceable at law by a party 
against the United States, its agencies, its officers, or any 
person. It is intended only to provide policy guidance to agencies 
in the exercise of their discretion concerning federal contracting. 
Thus, this policy letter is not intended, and should not be 
construed, to create any substantive or procedural basis on which to 
challenge any agency action or inaction on the ground that such 
action or inaction was not in accordance with this policy letter.
    9. Effective date. This policy letter is effective [insert date 
30 days after issuance of final policy letter]

Appendix A. Examples of inherently governmental functions

    The following is an illustrative list of functions considered to 
be inherently governmental.
    1. The direct conduct of criminal investigation.
    2. The control of prosecutions and performance of adjudicatory 
functions (other than those relating to arbitration or other methods 
of alternative dispute resolution).
    3. The command of military forces, especially the leadership of 
military personnel who are members of the combat, combat support or 
combat service support role.
    4. The conduct of foreign relations and the determination of 
foreign policy.
    5. The determination of agency policy, such as determining the 
content and application of regulations, among other things.
    6. The determination of Federal program priorities or budget 
requests.
    7. The direction and control of Federal employees.
    8. The direction and control of intelligence and counter-
intelligence operations.

[[Page 16197]]

    9. The selection or non-selection of individuals for Federal 
Government employment.
    10. The approval of position descriptions and performance 
standards for Federal employees.
    11. The determination of what Government property is to be 
disposed of and on what terms (although an agency may give 
contractors authority to dispose of property at prices with 
specified ranges and subject to other reasonable conditions deemed 
appropriate by the agency).
    12. In Federal procurement activities with respect to prime 
contracts:
    (a) 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);
    (b) participating as a voting member on any source selection 
boards;
    (c) approval of any contractual documents, to include documents 
defining requirements, incentive plans, and evaluation criteria;
    (d) awarding contracts;
    (e) administering contracts (including ordering changes in 
contract performance or contract quantities, taking action based on 
evaluations of contractor performance, and accepting or rejecting 
contractor products or services);
    (f) terminating contracts;
    (g) determining whether contract costs are reasonable, 
allocable, and allowable; and
    (h) participating as a voting member on performance evaluation 
boards.
    13. The approval of agency responses to Freedom of Information 
Act requests (other than routine responses that, because of statute, 
regulation, or agency policy, do not require the exercise of 
judgment in determining whether documents are to be released or 
withheld), and the approval of agency responses to the 
administrative appeals of denials of Freedom of Information Act 
requests.
    14. The conduct of administrative hearings to determine the 
eligibility of any person for a security clearance, or involving 
actions that affect matters of personal reputation or eligibility to 
participate in government programs.
    15. The approval of federal licensing actions and inspections.
    16. The determination of budget policy, guidance, and strategy.
    17. The collection, control, and disbursement of fees, 
royalties, duties, fines, taxes and other public funds, unless 
authorized by statute, such as title 31 U.S.C. 952 (relating to 
private collection contractors) and title 31 U.S.C. 3718 (relating 
to private attorney collection services), but not including:
    (a) collection of fees, fines, penalties, costs or other charges 
from visitors to or patrons of mess halls, post or base exchange 
concessions, national parks, and similar entities or activities, or 
from other persons, where the amount to be collected is easily 
calculated or predetermined and the funds collected can be easily 
controlled using standard cash management techniques, and
    (b) routine voucher and invoice examination.
    18. The control of the Treasury accounts.
    19. The administration of public trusts.
    20. The drafting of Congressional testimony, responses to 
Congressional correspondence, or agency responses to audit reports 
from the Inspector General, the Government Accountability Office, or 
other federal audit entity.

Appendix B. Examples of functions closely associated with the 
performance of inherently governmental functions

    The following is an illustrative list is of functions that are 
closely associated with the performance of inherently governmental 
functions.
    1. Services that involve or relate to budget preparation, 
including workforce modeling, fact finding, efficiency studies, and 
should-cost analyses.
    2. Services that involve or relate to reorganization and 
planning activities.
    3. Services that involve or relate to analyses, feasibility 
studies, and strategy options to be used by agency personnel in 
developing policy.
    4. Services that involve or relate to the development of 
regulations.
    5. Services that involve or relate to the evaluation of another 
contractor's performance.
    6. Services in support of acquisition planning.
    7. Assistance in contract management (particular where a 
contractor might influence official evaluations of other 
contractors' offers).
    8. Technical evaluation of contract proposals.
    9. Assistance in the development of statements of work.
    10. Support in preparing responses to Freedom of Information Act 
requests.
    11. Work in any situation that permits or might permit access to 
confidential business information and/or any other sensitive 
information (other than situations covered by the National 
Industrial Security Program described in FAR 4.402(b)).
    12. Dissemination of information regarding agency policies or 
regulations, such as attending conferences on behalf of an agency, 
conducting community relations campaigns, or conducting agency 
training courses.
    13. Participation in any situation where it might be assumed 
that participants are agency employees or representatives.
    14. Participation as technical advisors to a source selection 
board or as nonvoting members of a source evaluation board.
    15. Service as arbitrators or provision of alternative dispute 
resolution (ADR) services.
    16. Construction of buildings or structures intended to be 
secure from electronic eavesdropping or other penetration by foreign 
governments.
    17. Provision of inspection services.
    18. Drafting of legal advice and interpretations of regulations 
and statutes to government officials.
    19. Provision of special non-law-enforcement security activities 
that do not directly involve criminal investigations, such as 
prisoner detention or transport and non-military national security 
details.

[FR Doc. 2010-7329 Filed 3-30-10; 8:45 am]
BILLING CODE P