Performance of Inherently Governmental and Critical Functions: The Obama Administration's Final Policy Letter [October 5, 2011] [open pdf - 437KB]
"On September 12, 2011, the Office of Federal Procurement Policy (OFPP) within the Office of Management and Budget (OMB) issued its final policy letter on Performance of Inherently Governmental and Critical Functions. The policy letter is to guide executive branch agencies in (1) identifying inherently governmental and critical functions; (2) ensuring that only federal employees perform inherently governmental functions or work that 'otherwise needs to be reserved to the public sector;' and (3) managing functions that are closely associated with inherently governmental functions and critical functions. The policy letter defines an 'inherently governmental function,' in accordance with the Federal Activities Inventory Reform (FAIR) Act (P.L. 105-270), as 'one that is so intimately related to the public interest as to require performance by Federal Government employees.' […] In support of this policy, the letter directs agencies to (1) ensure that work which should be performed by federal employees is properly reserved for government performance; (2) take steps to employ and train an adequate number of government personnel to administer contracts when work is contracted out; and (3) as part of strategic human capital planning, dedicate a sufficient amount of work to performance by federal employees in order to build competencies, provide for continuity of operations, and retain institutional knowledge of operations. The policy letter establishes two tests for identifying inherently governmental functions, the 'nature of the function' test and the 'exercise of discretion' test, as well as lists examples of inherently governmental functions. These include certain security functions, but not routine building security. The policy letter also directs that, when agencies review outsourced work for potential insourcing, they should place a lower priority on reviewing certain work performed by small businesses, as well as give small businesses preference when determining who performs work that will remain in the private sector after related functions are insourced."
CRS Report for Congress, R42039