However, since 2008, the insourcing initiatives of recent Congresses and the Obama Administration have generated particular controversy. First, the 110 th Congress required that DOD guidelines and procedures also give consideration to using government employees to perform new functions, as well as those that had been contracted out. These and subsequent insourcing initiatives generated several lawsuits, discussed in more detail below, alleging that DOD failed to comply with its own policies and procedures when determining to insource specific functions. However, various provisions of federal law could constrain whether and how agencies may proceed with insourcing in particular circumstances, as well as limit the activities that former contractor employees may perform after being hired by the federal government. These provisions include (1) the Administrative Procedure Act, which could potentially preclude agencies from implementing insourcing determinations that were not made in accordance with any applicable statutes, regulations, or guidelines; (2) contract law, under which agencies could be found to have constructively terminated for convenience, or even breached, certain requirements contracts by augmenting their in-house capacity to perform services provided for in the contract; (3) civil service law, which would generally limit "direct hires" of contractor employees; and (4) ethics law, which could limit the involvement of former contractor employees who are hired by the government in certain agency actions. Administrative Procedure Act and Insourcing Guidelines

Assuming that the decision to insource particular functions is not "committed to agency discretion by law," as the government has recently asserted, the Administrative Procedure Act (APA) could potentially constrain such decisions by allowing challenges to agency actions that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." Majority View That the Court of Federal Claims Has Exclusive Jurisdiction

Most federal appellate and district courts that have considered the question have found that contractors' challenges to insourcing determinations fall within the exclusive jurisdiction of the Court of Federal Claims because at least some contractors are interested parties, and insourcing determinations are made in connection with proposed procurements. Prudential Standing

While the Court of Federal Claims has consistently found that it has jurisdiction over challenges to insourcing determinations, judges on the court have reached differing conclusions as to whether contractors who meet the statutory standing requirements (i.e., are "interested parties") must also meet prudential standing requirements and, if so, whether they are within the zone of interests protected by various statutes pertaining to insourcing. Expired Contracts and Mootness

Later decisions of the Court of Federal Claims have raised related questions about whether vendors whose contracts have expired have standing to challenge insourcing determinations, or whether such challenges are moot. The court disagreed. To date, the only court to address the issue has apparently assumed, without deciding, that DOD's guidance on "Estimating and Comparing the Full Costs of Civilian and Military Manpower and Contract Support," among other things, was legally binding. The 112 th Congress enacted legislation that calls for the Office of Management and Budget (OMB) to establish "procedures and methodologies" for use by agencies in deciding whether to insource functions performed by small businesses, including procedures for (1) identifying which contracts are considered for conversion; (2) determining whether particular functions are inherently governmental or critical functions; and (3) comparing the costs of performance by contractor personnel with the costs of performance by government personnel. However, questions about prudential standing could potentially remain, notwithstanding the enactment of this legislation, because prudential standing is a "judicially self-imposed limit[] on the exercise of federal jurisdiction."
Recent Congresses and the Obama Administration have taken numerous actions to promote "insourcing," or the use of government personnel to perform functions that contractors have performed on behalf of federal agencies. Among other things, the 109th through the 111th Congresses enacted statutes requiring the development of policies and guidelines to ensure that agencies "consider" using government employees to perform functions previously performed by contractors, as well as any new functions. The Obama Administration has similarly promoted insourcing, with officials calling for consideration of insourcing in various workforce management initiatives.
Certain insourcing initiatives of the Department of Defense (DOD), in particular, prompted legal challenges alleging that DOD failed to comply with applicable guidelines when insourcing specific functions. The only court to reach the issue assumed, without deciding, that certain guidelines were legally binding. However, other courts have not addressed this issue because of questions about jurisdiction and standing. The parties initially conceded that such suits were cognizable under the Administrative Procedure Act (APA), which permits challenges to agency actions that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law," although the government has recently asserted that insourcing determinations are committed to agency discretion by law and, thus, not reviewable by the courts.
At first, there was some uncertainty as to whether the U.S. Court of Federal Claims had jurisdiction over such suits under the Administrative Disputes Resolution Act of 1996, or whether the federal district courts had jurisdiction under the APA. However, most courts to address the issue have found that the Court of Federal Claims has exclusive jurisdiction over challenges to insourcing determinations because such determinations are made in connection with "proposed procurements" and at least some contractors are "interested parties." Later, questions arose about whether contractors who meet the statutory standing requirements (i.e., are "interested parties") must also meet prudential standing requirements. These judicially self-imposed limits on the exercise of jurisdiction ensure that plaintiffs are within the "zone of interests" to be protected by the statutes they seek to enforce. Initially, judges on the Court of Federal Claims reached differing conclusions as to whether prudential standing requirements applied, although later decisions may suggest that any prudential standing requirements that apply could potentially be easily met. Most recently, the court has had to determine whether vendors whose contracts have expired have standing to challenge insourcing determinations, or whether such challenges are moot.
Other provisions of law could also potentially constrain whether and how agencies may proceed with insourcing in specific circumstances, or limit the activities that former contractor employees may perform after being hired by the federal government. These include (1) contract law, under which agencies could be found to have constructively terminated certain requirements contracts by augmenting their in-house capacity to perform services provided for in the contract; (2) civil service law, which would generally limit "direct hires" of contractor employees; and (3) ethics law, which could limit the involvement of former contractor employees in certain agency actions.
Members of the 112th Congress enacted legislation (P.L. 112-239) that calls for the Office of Management and Budget to establish "procedures and methodologies" for use by agencies in deciding whether to insource functions performed by small businesses, including procedures for identifying which contracts are considered for conversion and for comparing the costs of performance by contractor personnel with the costs of performance by government personnel.