Inherently Governmental Functions and Department of Defense Operations: Background, Issues, and Options for Congress

John R. Luckey
Legislative Attorney

Valerie Bailey Grasso
Specialist in Defense Acquisition

Kate M. Manuel
Legislative Attorney

An "inherently governmental function" is one that, as a matter of law and policy, must be performed by federal government employees and cannot be contracted out because it is "intimately related to the public interest." Concerned that the existence of multiple or inconsistent definitions of "inherently governmental functions" might be partly responsible for the alleged contracting out of inherently governmental functions by the Department of Defense (DOD) and other agencies, the 110th Congress enacted legislation (P.L. 110-417) requiring the Office of Management and Budget (OMB) to develop a "single consistent definition" of "inherently governmental functions." This definition is to "ensure that the head of each ... agency is able to identify each position … that exercises an inherently governmental function." By statute, OMB was required to report on its definition by October 14, 2009, but had not as of January 2010. 

The current debate over which functions are inherently governmental is part of a larger debate about the proper role of the federal government vis-à-vis the private sector. This debate is as old as the Constitution, which prohibits privatization of certain functions (e.g., Congress's legislative function), a prohibition courts enforce under various judicial tests (e.g., nondelegation, functions "affected with the public interest," etc.). Since the 1920s, federal contracting has been a primary arena for the public/private debate, with the executive and legislative branches contesting (1) which functions the government must perform because they are inherently governmental; (2) which functions the government should perform because they are closely related to inherently governmental functions or for some policy reason; and (3) which functions should be left to the private sector. DOD functions are often central to debates over which functions are inherently governmental because of the specific functions DOD performs; its prominent role in federal contracting; and its unique workforce, which blends military and civilian personnel. 

Two main definitions of "inherently governmental functions" currently exist within 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 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." Other statutes and regulations that define inherently governmental functions do so either by reproducing the language of the FAIR Act or OMB Circular A-76, or by incorporating the definitions of the FAIR Act or OMB Circular A-76 by reference. 

Congress has several options if it is concerned that deficiencies in the existing definitions of inherently governmental functions may lead agencies to improperly contract out such functions. Options include (1) relying upon recent statutory changes and/or the policies of the Obama Administration, which proposes to limit contracting out generally, to effect desired changes in agency contracting; (2) changing the existing definition of "inherently governmental functions"; (3) placing limits on contracting out or use of appropriated funds; (4) addressing structural factors potentially prompting agencies to rely on contractors; (5) providing for more effective oversight of executive branch contracting decisions; and (6) focusing more on questions of contracting policy (i.e., what functions should the government perform?) than on contracting law (i.e., what functions must the government perform?). The 111th Congress has enacted or is considering several bills addressing inherently governmental functions, including P.L. 111-8, P.L. 111-84, P.L. 111-117, H.R. 1436, H.R. 2142, H.R. 2177, H.R. 2682, H.R. 2736, H.R. 2868, and S. 924.


Date of Report: February 1, 2010
Number of Pages: 62
Order Number: R40641
Price: $29.95

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