The Office of Federal Procurement Policy issued a long-awaited set of guidelines that clarifies what government functions “must always be performed by federal employees” and when it’s appropriate to turn to contractors to for a variety of services.

In a 75-page final policy letter, OFPP and Office of Management and Budget Officials lay out a new set of terms, guidelines and examples concerning government contracting.

It “helps agencies do better at balancing contracting out with management by federal employees,” said OMB Chief Performance Officer Jeffrey Zients (pictured). It also:

• Tells agencies agencies what they must do when work is “closely associated” with inherently governmental functions.
• Requires agencies to identify their “critical functions” in order to ensure they have sufficient internal capability to maintain control over functions that are core to their mission and operations.
• Outlines a series of agency management responsibilities to strengthen accountability for implementing the new policies.

The guidelines, which take effect Oct. 12, are similar to a draft released in March 2010, according to Dan Gordon, administrator for OFPP. But they represent the culmination of work requested by President Barack Obama’s in a March 4, 2009 memo for OMB to “clarify when governmental outsourcing for services is and is not appropriate,” consistent existing public law. The new rules are expect to help agencies with acquisition as well as the government contracting community.

OFPP offered several examples of what kind of work was “inherently governmental” and therefore must be performed by federal employees, and work that is “closely associated” with those functions and that may be performed by either federal employees or contractors (see table):

The new definition provided by the policy letter will replace existing definitions in regulation and policy, including the Federal Acquisition Regulation (FAR) and terms used by the Defense Acquisition Regulation Council, said OMB officials.

One difference in the new guidance, according to Gordon, is wording designed to “clarify the confusing and controversial” policy on the contracting of military security operations.

A key part of the debate leading up to the policy memo was how to define “critical function” from other functions deemed at the core of an agency’s mission or operations.

The new definition is predicated on the Federal Activities Inventory Reform (FAIR) Act, which had prescribed that when an activity is so intimately related to the public interest as to mandate performance by federal employees that it be considered inherently governmental. That still left many activities up for debate.

After reviewing a number of suggestions, OFPP concluded it “does not support the creation of a list of critical functions,” and instead would work with (civilian and defense acquisition councils) to “develop appropriate training” for agencies to develop their own lists.