Functions that federal law and policy require to be performed by government personnel, not contractor employees, are known as "inherently governmental functions." Such functions have been a topic of interest in recent Congresses, in part, because of questions about sourcing policy (i.e., whether specific functions should be performed by government personnel or contractor employees). There have also been questions about the various definitions of inherently governmental function given in federal law and policy and, particularly, whether the existence of multiple definitions of this term may have resulted in contractor employees performing functions that should be performed by government personnel. Previously, the 110 th Congress had tasked the Office of Management and Budget (OMB) with
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"; 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; developing criteria for identifying "critical functions" that should be performed by government personnel; and 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. Partly in response to this charge, OMB, through the Office of Federal Procurement Policy (OFPP), issued Policy Letter 11-01 on September 12, 2011. As explained below, Policy Letter 11-01 adopts the definition of inherently governmental function given in the Federal Activities Inventory Reform (FAIR) Act of 1998, rather than creating a new definition. However, Policy Letter 11-01 does establish two tests for identifying inherently governmental functions, as well as 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." Its primary focus is upon government-wide statutes, regulations, and policy documents, not agency-specific ones. Some of these definitions mirror the definitions of the FAIR Act or Office of Management and Budget (OMB) Circular A-76, discussed below, while others incorporate the definitions of the FAIR Act or OMB Circular A-76 by reference. Policy-Based Definitions and Declarations

OMB Circular A-76 provides the other main definition of inherently governmental functions used in federal law and policy. Policy Letter 11-01 adopts the FAIR Act's definition of inherently governmental function , as well as the listings of inherently governmental functions and functions closely associated with the performance of inherently governmental functions given in the Federal Acquisition Regulation (FAR). The current version of OMB Circular A-76 says only that "[a]n inherently governmental activity is an activity that is so intimately related to the public interest as to mandate performance by government personnel." There are no exemptions. For example, rather than giving its own definition of "inherently governmental function," it adopts the FAIR Act's definition of an inherently governmental function as "one that is so intimately related to the public interest as to require performance by Federal Government employees." This definition is a policy determination, not a legal determination. However, a judicial declaration that a function is inherently governmental under a constitutional test would not necessarily preclude the executive branch from contracting out this function under the FAIR Act, OMB Circular A-76, the FAR, or OFPP Policy Letter 11-01.
Functions that federal law and policy require to be performed by government personnel, not contractor employees, are known as "inherently governmental functions." Such functions have been a topic of interest in recent Congresses, in part, because of questions about sourcing policy (i.e., whether specific functions should be performed by government personnel or contractor employees). There have also been questions about the various definitions of inherently governmental function given in federal law and policy and, particularly, whether the existence of multiple definitions of this term may have resulted in contractor employees performing functions that should be performed by government personnel.
Two primary definitions of inherently governmental function currently exist in federal law and policy. One is a statutory definition, enacted as part of the Federal Activities Inventory Reform (FAIR) Act of 1998. This definition states that an inherently governmental function is "a function so intimately related to the public interest as to require performance by Federal Government employees." The other is a policy-oriented definition contained in Office of Management and Budget (OMB) Circular A-76. This definition states that an inherently governmental activity is "an activity that is so intimately related to the public interest as to mandate performance by government personnel." These two definitions arguably do not differ significantly in and of themselves. However, both the FAIR Act and OMB Circular A-76 include further elaboration and expansion upon the meaning of inherently governmental function that differ in certain ways.
Other statutes, regulations, and guidance documents that define inherently governmental function do so either by reproducing the language of the FAIR Act or OMB Circular A-76, or by incorporating their definitions by reference. Most notably, the Federal Acquisition Regulation (FAR) incorporates by reference or otherwise adopts the definition of OMB Circular A-76, while Office of Federal Procurement Policy (OFPP) Policy Letter 11-01, discussed below, adopts the FAIR Act's definition. However, like the FAIR Act and OMB Circular A-76, both the FAR and Policy Letter 11-01 also include some unique elaboration and expansion upon the term.
In addition to these definitions, there are numerous statutory, regulatory, and policy provisions designating specific functions as inherently governmental or, alternatively, commercial. (A commercial function is one that could be performed by contractor employees, although there is generally no requirement that contractor employees perform commercial functions.) Such designations also help establish the meaning of inherently governmental function by specifying what is—and is not—included within this category. Similarly, while not offering their own definitions of inherently governmental function, the Government Accountability Office (GAO) and the federal courts have developed tests that they use in identifying specific functions as inherently governmental or commercial. However, a judicial declaration that a particular function is inherently governmental under a constitutional test would not necessarily preclude the executive branch from contracting out this function.
The 110th Congress tasked OMB with reviewing existing definitions of inherently governmental function and developing a "single consistent definition" of this term. Partly in response to this charge, OMB, though the OFPP, issued Policy Letter 11-01. Policy Letter 11-01 adopts the FAIR Act's definition of inherently governmental function, rather than establishing a new definition. However, Policy Letter 11-01 does establish two tests for identifying inherently governmental functions, as well as 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."