Under the Federal Activities Inventory Reform (FAIR) Act ( P.L. 105-270 ), agencies are required to submit inventories of their commercial activities to OMB by June 30 of each year. The federal government's written policy of relying on the private sector for the provision of goods and services has its origins in three Bureau of the Budget bulletins issued in the 1950s. Two similar bills introduced during the 112 th Congress, H.R. 1474 and S. 785 , appear to reflect this perspective. In recognition of this principle, it has been and continues to be the general policy of the Federal Government—(1) to rely on commercial sources to supply the products and services the Government needs; (2) to refrain from providing a product or service if the product or service can be procured more economically from a commercial sources; and (3) to utilize Federal employees to perform inherently governmental functions…. Recent Developments in the History of Sourcing Policy

		Competitive Sourcing

The historically predominant strain of sourcing policy—which focuses on governmental reliance on the private sector, Circular A-76, and public-private competitions —was designated one of the components of President George W. Bush's President's Management Agenda (PMA), and, as such, was named competitive sourcing. Some commentators might suggest that the Bush Administration did not support the possibility that work performed by a contractor could be subjected to public-private competition. The Panel believes that federal sourcing policy should:
1. OMB Memorandum on Multi-Sector Workforce Management

With the release of an OMB memorandum, in July 2009, regarding the multi-sector workforce, the Obama Administration initiated a systematic effort to develop policy and guidance for managing a workforce that consists of both federal employees and government contractors. Office of Federal Procurement Policy's Policy Letter 11-01

Another document that may aid agencies in managing their multi-sector workforces is OFPP's policy letter on inherently governmental and critical functions, which was published in the Federal Register on September 12, 2011. The policy letter
[ c]larifies what functions are inherently governmental and must always be performed by Federal employees … [e]xplains what agencies must do when work is "closely associated" with inherently governmental functions … [r]equi res agencies to ident ify their 'critical functions' in order to ensure they have sufficient internal capability to maintain control over functions that are core to the agency's mission and operations … [and] [o]utlines a series of agency management responsibilities to strengthen accountability for the effective implementation of these policies. "Overreliance on contractors" has been identified by the Obama Administration as an issue that warrants attention. (This section contains a definition of inherently governmental .)
Dating back to the 1950s, federal sourcing policy generally has focused on the premise that the government should rely on the private sector for the provision of certain goods and services. Additionally, it has centered around guidance for conducting public-private competitions to determine whether federal employees, or contractor employees, should be selected to perform certain agency functions. The Administration of President George W. Bush, in particular, emphasized subjecting eligible agency functions to public-private competitions. Branding this policy, and related guidance, as competitive sourcing, the Bush Administration included it as one component of the President's Management Agenda.
During the Administration of President Barack Obama, another strain, or facet, of sourcing policy surfaced. Labeled multi-sector workforce management by the Administration, it posits that federal agencies might be susceptible to overreliance on contractors, which could affect the ability of agencies to maintain control over their missions and operations. OMB's July 2009 memorandum provides guidance to agencies on how to manage their multi-sector workforces. The Office of Federal Procurement Policy's Policy Letter 11-01—by providing a single, consistent definition of inherently governmental and guidance for identifying and managing inherently governmental functions, functions closely associated with inherently governmental functions, and critical functions—complements the Administration's multi-sector workforce management policy. This letter was issued in September 2011.
Congressional interest in sourcing policy, generally, has been evident for some time. For example, in 1998, the Federal Activities Inventory Reform (FAIR) Act (P.L. 105-270) was signed into law. It requires certain federal agencies to compile, and submit annually to OMB, inventories of their commercial activities, which are activities that may be performed by federal employees or a government contractor. Recent signs of interest in sourcing policy include two substantively similar but identically titled bills that were introduced during the 112th Congress. H.R. 1474 and S. 785, the Freedom From Government Competition Act, contain provisions that would expand upon existing policies designed to encourage federal government reliance on the private sector for the provision of both goods and services.
This report provides an overview of the evolution of federal sourcing policy to date and identifies the major policy issues before Congress. It is not a legislation tracking report. This report will be updated as events warrant.