This increased reliance on  contractors to perform agency missions increases the risk that  government decisions can be influenced by contractor employees, which  can result in a loss of control and accountability. Civilian Agencies’ Efforts to Develop Insourcing Requirements

In response to the mandate in the 2009 Omnibus Appropriations Act, we  reviewed the status of civilian agencies’ efforts to develop and implement  insourcing guidance. We reported in October 2009 that none of the nine  civilian agencies we met with between July and October 2009 had met the  statutory deadline to produce insourcing guidance. Waiting for additional OMB guidance and clarification regarding  outsourcing and inherently governmental functions. Intending to use the results, best practices, and lessons learned from  the multisector workforce planning pilots to better inform their  insourcing guidelines and procedures. Although OMB and agencies have yet to issue insourcing guidance, OMB  reported in December 2009 that 24 agencies had launched planning pilots  to address the use of contractors in one or more of their organizations. Agencies were due to report the results of their pilots to OMB by May 1,  2010. Proposed OMB Policy on Work Reserved for Federal Employees

Following the initiative of the March 2009 Presidential memo on  government contracting and in response to a congressional mandate,  OMB’s Office of Federal Procurement Policy issued a public notice on  March 31, 2010 that provides proposed policy for determining when work  must be performed by, or reserved for, federal employees. The proposal  provides the following guidance to executive branch agencies:    Adopts the statutory definition in the Federal Activities Inventory  Reform (FAIR) Act of 1998 as a single, governmentwide definition of  inherently governmental functions. This definition classifies an activity  as inherently governmental when it is so intimately related to the  public interest that it must be performed by federal employees. Introduces the category of “critical functions,” as functions whose  importance to the agency’s mission and operation requires that at least  a portion of the function must be reserved for federal employees to  ensure the agency has sufficient internal capability to effectively  perform and maintain control. Comments from agencies and the public on the proposed policy are  due to OMB by June 1, 2010. Effective Implementation of Insourcing Policies Will Depend on Agencies’ Ability to Address Workforce Planning and Other Challenges

Agency efforts to effectively insource certain functions now performed by  contractors will in large part depend on their ability to assess their human- capital and mission requirements and develop and execute plans to fulfill  those requirements so they have a workforce that possesses the necessary  education, knowledge, skills, and competencies to accomplish their  mission. Our prior work has identified workforce  planning challenges that can affect an agency’s ability to obtain the right  mix of federal employees and contractor personnel. Furthermore agencies face other operational and administrative  challenges as our 2009 review of civilian agency insourcing efforts  identified with respect to implementing guidance to facilitate the  conversion of contractor personnel to government positions, including the  following:  Infrastructure. Agencies face difficulties in gathering and analyzing certain types  of service contracting data needed for making insourcing decisions. Tools Available for Agencies’ Insourcing Efforts

Agency implementation of insourcing efforts could be facilitated by tools  that we identified in prior work. Inventories. Business Case Analysis. A balanced analytical approach, used by some  agencies when deciding to outsource functions, could facilitate agency  decisions in determining whether insourcing a particular function has  the potential to achieve mission requirements. Human Capital Flexibilities.
Why GAO Did This Study

Federal agencies face a complicated set of decisions in finding the right mix of government and contractor personnel to conduct their missions. While contractors, when properly used, can play an important role in helping agencies accomplish their missions, GAO has found that agencies face challenges with increased reliance on contractors to perform core agency missions. Congress and the Executive branch also have expressed concern as to whether federal agencies have become over-reliant on contractors and have appropriately outsourced services. A March 2009 Presidential memorandum tasked the Office of Management and Budget (OMB) to take several actions in response to this concern. Based on GAO's prior work, this statement discusses (1) civilian agencies' development and implementation of guidelines to consider whether contracted functions should be brought in-house --a process known as insourcing; (2) OMB's proposed policy on work reserved for federal employees; (3) challenges agencies face in managing the federal workforce; and (4) key tools available for insourcing and related efforts.

What GAO Found

GAO reviewed the status of civilian agencies efforts to develop and implementinsourcing guidance and reported in October 2009 that none of the nine civilian agencies with whom we met had met the statutory deadline to produce insourcing guidance. Primarily, they were waiting to ensure their guidance was consistent with or receive additional OMB guidance, and to use the results, best practices, and lessons learned from their multisector workforce pilots to better inform their insourcing guidelines. Since the time of our review, OMB reported in December 2009 that 24 agencies had launched pilots to address overuse of contractors in one or more of their organizations. Agencies were due to report the results of their pilots to OMB by May 1, 2010. In response to a congressional mandate, OMB recently issued a public notice that provides proposed policy for determining when work must be performed by federal employees. Comments on the policy are due from federal agencies and the public by June 1, 2010. The proposed policy provides the following guidance to executive branch agencies: it adopts a single, governmentwide definition of inherently governmental functions in accordance with the definition in the Federal Activities Inventory Reform Act of 1998, which classifies an activity as inherently governmental when it is so intimately related to the public interest that it must be performed by federal employees; it provides guidance for determining functions "closely associated with inherently governmental;" and it introduces the category of "critical functions," as work that must be reserved for federal employees in order to ensure the agency has the internal capability to maintain control of its missions and operations. Agency efforts to effectively insource functions performed by contractors will in large part depend on the ability to assess mission and human capital requirements and develop and execute plans to fulfill those requirements so agencies have a workforce that possesses the necessary knowledge, skills, and competencies to accomplish their mission. Furthermore, GAO's 2009 review of civilian agency insourcing efforts identified operational and administrative challenges agencies face with respect to implementing the conversion of contractor personnel to government positions. For example, agencies face difficulties in gathering and analyzing certain types of service contracting data needed for making insourcing decisions. Agency implementation of insourcing efforts could be facilitated by tools that GAO has previously identified, including: (1) Inventories to identify inherently governmental functions; (2) Business case analysis to facilitate agency decisions in determining whether insourcing a particular function has potential to achieve mission requirements; and (3) Human-capital flexibilities to efficiently fill positions that should be brought in-house.