	Introduction

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 the Performance of Inherently Governmental and Critical Functions ("Policy Letter 11-01" or "final policy letter"). Scheduled to take effect on October 12, 2011, the policy letter represents the Obama Administration's guidance for executive branch agencies on (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 was issued, in part, under the authority of the Duncan Hunter National Defense Authorization Act for FY2009 (NDAA'09) and President Obama's memorandum of March 4, 2009, on government contracting. Section 321 of NDAA'09 tasked OMB with (1) reviewing existing definitions of "inherently governmental function" to determine whether such definitions are "sufficiently focused" to ensure that only government personnel perform inherently governmental functions or "other critical functions necessary for the mission of a Federal department or agency;" (2) developing a "single consistent definition" of "inherently governmental function" that would address any deficiencies in the existing definitions, reasonably apply to all agencies, and ensure that agency personnel can identify positions that perform inherently governmental functions; (3) developing criteria for identifying "critical functions" that should be performed by government personnel; and (4) developing criteria for identifying positions that government personnel should perform in order to ensure that agencies develop and maintain "sufficient organic expertise and technical capacity" to perform their missions and oversee contractors' work. OFPP issued a proposed policy letter in response to these requirements on March 31, 2010. However, the proposed policy letter differed from the final one in focusing on "work reserved for performance by federal government employees" and in other ways discussed below. Congressional interest in inherently governmental functions may persist notwithstanding the issuance of the final policy letter. The Commission on Wartime Contracting included recommendations based on perceived deficiencies in existing guidance on inherently governmental functions in its final report to Congress, and several Members of the 112 th Congress have introduced legislation regarding inherently governmental functions (e.g., H.R. 1474 ; H.R. 1540 ; H.R. 1949 ; H.R. 2017 ; S. 709 ; S. 785 ; S. 991 ; S. 1253 ; S. 1254 ; S. 1546 ; S. 1573 ). Final Policy Letter

The final policy letter articulates that 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." In support of this policy, the letter directs agencies to do three things. Second, agencies are directed to take steps to employ and train an adequate number of government personnel to administer contracts when work is contracted out, particularly when contractors engage in functions that are critical or closely associated with an inherently governmental function. Third, agencies are required, as part of strategic human capital planning, to 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 also directs agencies, when reviewing outsourced work for potential insourcing, to place a lower priority on reviewing work performed by small businesses that is not inherently governmental, particularly if the agency has not met its small business goals. Agencies are also directed to give small businesses preference when determining who performs the private-sector work that remains after related activities are insourced. The 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." The policy letter establishes two tests for identifying inherently governmental functions. The policy letter does not define functions closely associated with inherently governmental functions, but lists examples in its Appendix B (see Table A-2 ). The policy letter defines a critical function as one "necessary to the agency being able to effectively perform and maintain control of its mission and operations."
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." It also defines a critical function as one "that is necessary to the agency being able to effectively perform and maintain control of its mission and operations." The policy letter does not define functions closely associated with inherently governmental functions, but lists examples of such functions in an Appendix.
The policy letter was issued, in part, in response to Section 321 of the Duncan Hunter National Defense Authorization Act for FY2009 (P.L. 110-417), which tasked OMB with reviewing existing definitions of "inherently governmental function" and developing a "single consistent definition" of this term which would address any deficiencies in existing definitions. President Obama's memorandum of March 4, 2009, on government contracting similarly charged OMB with clarifying when it is "appropriate" to contract out work. OFPP issued a proposed policy letter in response to these requirements on March 31, 2010. However, the proposed policy letter differed from the final one in focusing on "work reserved for performance by federal government employees" and in other ways.
Beyond defining "inherently governmental function" and "critical function," the final policy letter articulates that 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." 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.
Congressional interest in inherently governmental functions may persist notwithstanding the issuance of the final policy letter. The Commission on Wartime Contracting included recommendations based on perceived deficiencies in existing guidance on inherently governmental functions in its final report to Congress, and several Members of the 112th Congress have introduced legislation regarding inherently governmental functions (e.g., H.R. 1474; H.R. 1540; H.R. 1949; H.R. 2017; S. 709; S. 785; S. 991; S. 1253; S. 1254; S. 1546; S. 1573).