OFPP to issue final guidance on ‘inherently governmental’

Jason Miller, executive editor, Federal News Radio

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By Jason Miller
Executive Editor
Federal News Radio

After more than a year, the Office of Federal Procurement Policy is giving agencies final guidance for what jobs must be done by government employees and how to treat work that is considered closely associated to inherently government and critical functions.

OFPP will issue the final policy letter for those jobs in Monday’s Federal Register. Federal News Radio obtained a copy of the final policy letter. OMB previously issued the draft letter in March 2010.

“Today marks an important milestone in an effort that began with the President’s March 2009 memorandum on government contracting in which he called on us to clarify line between functions that cannot or should not be outsourced and those that may be subject to private sector performance,” said Dan Gordon, OFPP administrator, during a conference call with reporters Friday. “The final policy letter is largely similar to draft we issued last year. You will not see a document where you look at it and say, ‘Whoa, this is totally new.’ There are significant changes we have made.”

The policy letter makes eight changes to how agencies previously treated inherently government. It is effective Oct. 12.

For instance, starting with the name of the policy letter, OFPP changed it to “Performance and Management of Inherently Governmental and Critical Functions,” instead of “Work Reserved for Performance by Federal Government Employees.”

Gordon said the final letter keeps the definition of inherently governmental the same as what’s in the Federal Activities Inventory Reform (FAIR) Act. He said the comments OFPP received were mostly in favor of staying with the existing definition.

OFPP expands and clarifies what jobs should be done by federal officials:

  • All combat
  • Security operations in certain situations connected with combat or potential combat
  • Determination of an offer’s price reasonableness
  • Final determinations about a contractor’s performance, including approving award fee determinations or past performance evaluations and taking action based on those evaluations
  • Selection of grant and cooperative agreement recipients

Gordon said the new list of inherently governmental positions is about 90-to-95 percent the same as the previous one in the Federal Acquisition Regulations.

“The final version does clarify the inherently governmental status of several particular functions where there has been a lot of confusion and sometimes controversy about the role of contractors,” he said. “In particular, the discussion in the final version, which is new from the draft, about security operations, in a nutshell, what you will see there is our saying that when you are talking about security operations that are either part of combat or likely to evolve into combat, you cannot be using contractors.”

Additionally, OFPP provides agencies with another list of functions closely associated with inherently governmental work.

“Federal acquisitions that include conducting market research, developing inputs for independent government cost estimates, drafting the price negotiations memorandum and collecting information, performing an analysis or making a recommendation for a proposed performance rating to assist the agency in determining its evaluation of a contractor’s performance,” the final policy letter states.

Agencies also will be provided a list of comprehensive responsibilities for functions closely associated with inherently governmental functions to analyze when they are deciding how to classify the functions.

“Caution that, in many cases, functions include multiple activities that may be of a different nature — some activities within a function may be inherently governmental, some may be closely associated, and some may be neither — and by evaluating work at the activity level, an agency may be able to more easily differentiate tasks within a function that may be performed only by federal employees from those tasks that can be performed by either federal employees or contractors,” the letter states. Gordon said the final policy letter no longer separates closely associated and critical functions.

“We got public comments that said it was confusing to have that separate category,” he said. “So as a result, in final version, we treat it really only as a management issue. If a function is closely associated to an inherently governmental one, the government needs to be sure there isn’t mission creep, that the contractor doesn’t expand their work into what would be inherently governmental.”

OFPP wants agencies to define what are critical and closely associated functions and assess whether they are overly dependent on contractors in these areas. Agencies already had to do this assessment, but the policy letter calls for them to continue to pay attention to these functions.

Gordon said when agencies did their initial analysis they found mission creep in areas such as acquisition management and technology services.

“The problem was limited, but real,” he said. “That is to say, we weren’t talking about hundreds of thousands of positions that were inherently governmental but had been contracted out. The numbers were small, but they absolutely had to be corrected. The line had become blurred.”

The policy letter also requires agencies to use the “rule of two” when bringing previously contracted out functions to large and small businesses back in-house.

“The rule of two requires that acquisitions be reserved for award to small businesses, or certain subsets of small businesses, if there are two or more responsible small businesses capable of performing the work at fair market prices,” the letter states.

OFPP will work with the Federal Acquisition Regulations (FAR) Council to implement changes to the FAR. OFPP also will work with the Federal Acquisition Institute and the Defense Acquisition University on appropriate training materials for the acquisition workforce and others in the acquisition profession.

OFPP received more than 30,000 comments on the letter, but all but 110 were submitted as a form letter by interested parties.

“We have been working very closely with the agencies for more than a year and a half now on this,” Gordon said. “I wouldn’t expect the publication to lead to significant differences. DoD, DHS and the other large contracting agencies have been doing a review of their use of contractors to rebalance their use of contractors where appropriate. I think that process is largely complete, especially when talking inherently governmental.”


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