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Thursday, April 22, 2010

Inherently, self evidently and at its core ambiguous

This post has been stimulated by an opinion piece in the Guam Pacific Daily News today, Navy needs to 'in-source' more jobs.

The gist of the piece is that the Federal government on Guam, specifically the Navy, has failed to diligently implement the "inherently government" directives of recent legislation:
On April 6, 2009, while introducing the fiscal 2010 DOD budget, Secretary of Defense Robert Gates announced an initiative to rebalance the DOD work force and reduce the percentage of contracted services. This initiative is commonly referred to as "in-sourcing" and is consistent with the DOD's congressionally mandated statutory requirements under the fiscal 2008 National Defense Authorization Act, as well as Obama's call for contracting reform in his March 4, 2009, memorandum.

Section 324 of the fiscal 2008 NDAA directed DOD to consider using federal civilian employees to perform new functions and functions currently performed by contractors. As directed, special consideration was to be given to: using DOD employees at any time during the previous 10 years; a function clearly associated with the performance of an inherently governmental function....

It is high time for the DOD and the Navy to consider making amends to the people of Guam by seriously planning and making it possible for in-sourcing federal civil service workers in the Navy BOS contract and other related service contracts.

Why is the Navy on Guam not a bit interested in seeking out and hiring our former Navy and Air Force employees?
I have no knowledge whatsoever as to what is or is not being done to implement the directives, but I was intrigued enough by the concept of "inherently governmental" activities to look into that aspect.

There is a recurrent refrain when discussing this issue. In February 2010, the Congressional Research Service described it thusly:
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.).
In 1991 (during the George H.W. Bush administration), the General Accounting Office said something very similar:
Concern about which federal agency activities are inherently governmental functions is not new. It goes back as far as the early days of the nation, as evidenced, for example, by the discussions in the Federalist Papers among the framers of the Constitution over what functions are appropriate for the federal government to exercise.
The Executive regulatory basis for implementing the inherently governmental directives seems to be crystallized in Office of Management and Budget Circular No. A-76, adopted in 1966, and which thereafter went through a succession of revisions. See, for instance, this version from 1983 which repeals and replaces the 1979 version.

Pointedly, for purposes of highlighting the roots of the politically philosophical tug-of-war, Circular 76-A deals in the first instance with "commercial activities", as seen in the 1999 version:
This Circular establishes Federal policy regarding the performance of commercial activities and implements the statutory requirements of the Federal Activities Inventory Reform Act of 1998, Public Law 105-270. The Supplement to this Circular sets forth the procedures for determining whether commercial activities should be performed under contract with commercial sources or in-house using Government facilities and personnel.

In the process of governing, the Government should not compete with its citizens. The competitive enterprise system, characterized by individual freedom and initiative, is the primary source of national economic strength. In recognition of this principle, it has been and continues to be the general policy of the Government to rely on commercial sources to supply the products and services the Government needs.

This national policy was promulgated through Bureau of the Budget Bulletins issued in 1955, 1957 and 1960. OMB Circular No. A-76 was issued in 1966. The Circular was previously revised in 1967, 1979, and 1983.
The Circular's focus on "commercial activities" is described by contrasting such activities with "inherently governmental" activities, and includes separate lists of illustrative "commercial" and "inherently governmental" activities, respectively.
A commercial activity is one which is operated by a Federal executive agency and which provides a product or service that could be obtained from a commercial source. Activities that meet the definition of an inherently Governmental function provided below are not commercial activities.
Before Clinton was elected President in November 1992, the White House OMB issued Policy Letter 92-1 to describe the rationale for the "inherently governmental" activity directives:
This policy letter establishes Executive Branch policy relating to service contracting and inherently governmental functions. Its purpose is to assist Executive Branch officers and employees in avoiding an unacceptable transfer of official responsibility to Government contractors.

Contractors, when properly used, provide a wide variety of useful services that play an important part in helping agencies to accomplish their missions. Agencies use service contracts to acquire special knowledge and skills not available in the Government, obtain cost effective services, or obtain temporary or intermittent services, among other reasons.

Not all functions may be performed by contractors, however. Just as it is clear that certain functions, such as the command of combat troops, may not be contracted, it is also clear that other functions, such as building maintenance and food services, may be contracted. The difficulty is in determining which of these services that fall between these extremes may be acquired by contract.

Agencies have occasionally relied on contractors to perform certain functions in such a way as to raise questions about whether Government policy is being created by private persons. Also, from time to time questions have arisen regarding the extent to which de facto control over contract performance has been transferred to contractors.

This policy letter provides an illustrative list of functions, that are, as a matter of policy, inherently governmental (see Appendix A)(, and articulates the practical and policy considerations that underlie such determinations (see [[section]] 7).
In essence, the Policy Letter followed the prior instructive use of the dichotomy between commercial and inherently governmental activities. But that dichotomy continues to be merely illustrative and of no useful guidance in the gray areas where political dogma and polemic debate reigns supreme.

For instance, in 2001, during the administration of George W. Bush, OMB again revised Circular 76-A (OMB chief describes sweeping agenda for A-76 competitions) and the GAO constituted a new panel to "study" federal out-sourcing and public-private competition.

This latter action was described in this article in 2001: Definition of 'inherently governmental' could change
A high-level panel reviewing federal outsourcing policy is working to better define when and why federal jobs can be considered inherently governmental, Comptroller General David Walker said this week.

Current guidance on the definition of the term "inherently governmental" is included in the Federal Acquisition Regulation, Office of Federal Procurement Policy Letter 92-1 and the 1998 Federal Activities Inventory Reform (FAIR) Act. The FAIR Act defines an inherently governmental job as a "function that is so intimately related to the public interest as to require performance by federal government employees."

The Commercial Activities Panel is revisiting this definition, Walker said.

"One question that has to be on the table is what is a reasonable way to go about defining inherently governmental," he said. "It's not well-defined today, and arguably not being consistently applied [by agencies] today."

In his view, agencies should ask two questions to determine which jobs must, by law, be performed by federal employees: Which activities are inherently governmental, and what core functions are necessary to carry out those activities.

"If you have an inherently governmental activity, that's one dimension. Then you have to ask what kinds of functions need to be discharged to support that activity," said Walker. "You ought to consider both to determine what is a possible candidate for outsourcing."

Walker cited national defense and law enforcement as examples of inherently governmental activities. While soldiers perform a core function that is necessary to national defense--fighting wars--workers who provide support services to soldiers are "non-core" and could be candidates for outsourcing, he said.

"We're not going to contract out for mercenaries," he said. "On the other hand, there are a lot of support services that have to be provided, some of which may be core, and some of which may not be...government doesn't necessarily have to provide all support services tied to an inherently governmental activity."

Under Walker's approach, the concept of core functions would play a central role in defining what federal jobs are inherently governmental.

For mine, this notion of "core" is not more helpful than "inherent" or "commercial". It's just another descriptive term around which ideologues can split hairs. For instance, to use Walker's categorization of soldiers and support services, is a medic a support service? A tank driver? Calling something "core" does not provide any better bright line.

Meanwhile, the Bush administration continued to put its mark on "inherently governmental":

Inherently governmental functions: at a tipping point? (2008)
More than 15 years ago, the U.S. Office of Management and Budget (OMB) Office of Federal Procurement Policy issued Policy Letter 92-1, Subject: Inherently Governmental Functions. This 1992 document offered the first government-wide guidance to help executive branch officers and employees avoid making "an unacceptable transfer of official responsibility to government contractors." Implemented in Subpart 7.5 of the Federal Acquisition Regulation, the policy has remained relatively unchanged since its issuance. Even the comptroller general's 2003 Commercial Activities Panel proposed no significant adjustments to this guidance as the panel addressed the merits and procedures for contracting out government work.

Formulating an inherently governmental policy that includes a bright-line test for every activity for which the government may want to consider using contractors would be difficult.

Which brings us to 2010, while not directly addressing the issues raised in the PDN editorial that started this post. The "debate" over "inherently governmental" goes on in the muddy trenches between the obvious.

Word War III
Obama seems determined to break with previous administrations and chart a new course for federal contracting.

An activity defined as inherently governmental is supposed to be performed by a federal government employee, not a private contractor – in theory. In reality, the line separating activities that should and should not be outsourced has been blurred. As a result, contractors are performing or have performed a wide variety of services that are either inherently governmental or very close to it.

The problem is that the definition of inherently governmental function has been gradually watered down over the years. Once, functions were either classified as inherently governmental or commercial. Now, the agencies have a growing list of terms at their disposal that allow them to stretch the boundaries. Functions that once would have been classified as inherently governmental are now slapped with less-certain terms like “core,” “critical” or “mission-essential.” POGO is glad that the Senators called for a definition of inherently governmental function that is expansive enough to eliminate the need for agencies to use such questionable terms.

Agency pilots help cultivate 'inherently governmental' changes
The administration wants agencies to use only the definition of inherently governmental that comes from the Federal Activities Inventory Reform Act (FAIR Act) of 1998. The FAIR Act defines an activity as inherently governmental a job that is so intimately related to the public interest as to mandate performance by federal employees.

"The concern was that the 2003 changes to Circular A-76 in which the word 'substantial' was added to the word discretion and there are also other changes in tone," Gordon says. "In our view, there has been confusion, and the statute governs, which overrules any inconsistency in circular or policy letter. We want to go back to statute."

OFPP also highlighted 19 positions that could be considered closely associated with inherently government, such as supporting freedom of information act requests, evaluating the technical aspects of contract proposals, participating as technical advisors to a procurement review board and drafting legal advice and interpretations of regulations and statutes.

"Closely associated with inherently governmental means it's acceptable for the government to use contractors, but the focus needs to be on oversight of those contractors to make sure their work isn't bleeding into or spreading out into inherently governmental functions," Gordon says.

Under critical functions, it's also permissible to have contractors do the work, but the test we proposed in the draft policy is that federal employees need to be sure we have enough federal employee expertise and capabilities in house so that federal employees can maintain control of the mission and operations."

The Office of Management and Budget will use learned from 24 demonstration programs to influence the governmentwide implementation of the new policy letter that helps define what is inherently governmental, closely associated inherently governmental functions and critical functions.

Dan Gordon, the Office of Federal Procurement Policy administrator, says about 12 of the 24 agencies identified acquisition or technology positions that now were being done by contractors and actually may need to be done by federal employees.
OFPP defines 'inherently governmental'
OFPP says agencies should use the FAIR Act definition from 1998 in all current regulations and policies. OFPP says agencies were using multiple definitions, including one in Circular A-76 and one from the Federal Acquisition Regulations.

"The FAIR Act defines an activity as inherently governmental when it is so intimately related to the public interest as to mandate performance by federal employees," the letter states.

OFPP also provides 20 examples of inherently government positions, such as conducting criminal investigations, determining agency policy including content and application of regulations, participating on acquisition source selection teams and determining budget, policy and strategy.

For those functions that are not listed among the 20, OFPP says it will develop a test to analyze "whether a function is inherently governmental based on the nature of the function and the level of discretion to be exercised in performing the function."

OFPP says agencies on a case-by-case basis should look at the nature of the function if it's uniquely governmental function and whether the job commits the government to decisions that deal with overall policy discretion or approval, or oversight by federal officials.

The policy also defines closely associated with inherently governmental functions and provides 19 examples.

"Closely associated functions approach the status of inherently governmental work because of the nature of these functions and the risk that their performance, if not appropriately managed, may materially limit federal officials' performance of inherently governmental functions," the letter states.

Agencies must give special consideration to reserving these functions for federal employees, and determine if contractors already are performing these functions and/or is appropriate.

"These responsibilities include pre-establishing in the contract specified ranges of acceptable decisions, subjecting the contractor's discretionary decision to final approval by an agency official, assigning a sufficient number of qualified federal employees with appropriate expertise to administer the work, and taking steps to avoid or mitigate conflicts of interest," the letter states.

Finally OFPP defines critical functions that are considered core capabilities of agency employees.

"The proposed policy letter would define critical function to mean a function whose importance to the agency's mission and operation requires that at least a portion of the function must be reserved to federal employees in order to ensure the agency has sufficient internal capability to effectively perform and maintain control of its mission and operations," the letter states. "Agencies would be held responsible for ensuring a sufficient number of positions performing critical work are filled by federal employees with appropriate training, experience, and expertise to understand the agency's requirements, formulate alternatives, manage the work product, and manage any contractors used to support the federal workforce."
Administration puts its stamp on 'inherently governmental'
The 2009 Defense Authorization Act mandated the inherently governmental policy review. President Obama's March 2009 memorandum on government contracting also required the Office of Management and Budget to develop guidance on the appropriateness of outsourcing services.

To supplement its review, OMB held a public meeting last year and solicited comments from the public. Respondents generally favored the definition found in the FAIR Act, the memo said.

In particular, the Act states that the term includes activities that require the "exercise of discretion" in applying "federal government authority." Circular A-76 refers to the exercise of "substantial discretion" in applying "sovereign" federal government authority.

"These variations can create confusion and uncertainty," Gordon wrote.

For ongoing contracts, agencies should review how work is being performed "to ensure the scope of the work or the circumstances have not changed to the point that inherently governmental authority has been transferred to the contractor," the guidance said.

Once this threshold is met, the decision about whether to have contractors or federal employees perform will continue to be primarily a cost-based one, made at the agency level, the notice said.

In some cases, government control can be re-established through increased contract oversight, Gordon wrote. "In other cases, agencies may need to in-source work on an accelerated basis through the timely development and execution of a hiring plan timed, if possible, to permit the non-exercise of an option or the termination of that portion of the contract being used to fulfill inherently governmental responsibilities," he said.
Maybe this last point about how to deal with ongoing contracts may provide some answers to the writer of the PDN opinion piece.

Unless the opinion was intended as simple polemic rhetoric.

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