[Federal Register Volume 61, Number 18 (Friday, January 26, 1996)]
[Rules and Regulations]
[Pages 2627-2630]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1015]



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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 7, 11, and 37

[FAC 90-37; FAR Case 92-051 Item I]
RIN 9000-AF56


Federal Acquisition Regulation; Inherently Governmental Functions

AGENCIES: Department of Defense (DOD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council have agreed to revise the Federal 
Acquisition Regulation (FAR) to implement Office of Federal Procurement 
Policy (OFPP) Policy Letter 92-1, Inherently Governmental Functions. 
This rule provides a definition of, and internal Government 
responsibilities and procedures relating to, inherently governmental 
functions. This regulatory action was not subject to Office of 
Management and Budget review under Executive Order 12866, dated 
September 30, 1993.

EFFECTIVE DATE: March 26, 1996.

FOR FURTHER INFORMATION CONTACT:
Mr. Peter O'Such (202) 501-1759 in reference to this FAR case. For 
general information, contact the FAR Secretariat, Room 4037, GS 
Building, Washington, DC 20405 (202) 501-4755. Please cite FAC 90-37, 
FAR case 92-051.

SUPPLEMENTARY INFORMATION:

A. Background

    This final rule implements the requirements of the Office of 
Federal Procurement Policy (OFPP) Policy Letter 92-1, Inherently 
Governmental Functions. The OFPP published its proposed policy letter 
for public comment in the Federal Register at 56 FR 65279, December 16, 
1991. OFPP evaluated public comments and published the final policy 
letter in the Federal Register at 57 FR 45096, September 30, 1992.
    A FAR proposed rule to implement the policy letter was published in 
the Federal Register at 59 FAR 29696, June 8, 1994. Thirteen sources 
submitted public comments. Minor revisions were made to the rule as a 
result of those comments.

B. Regulatory Flexibility Act

    The Department of Defense, the General Services Administration, and 
the National Aeronautics and Space Administration certify that this 
final rule will not have a significant economic impact on a substantial 
number of small entities under the Regulatory Flexibility Act, 5 U.S.C. 
601, et seq., because the rule pertains to internal Government 
responsibilities and procedures relating to inherently governmental 
functions.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose recordkeeping or information collection 
requirements, or collections of information from offerors, 

[[Page 2628]]
contractors, or members of the public which require the approval of the 
Office of Management and Budget under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Part 7, 11, and 37

    Government procurement.

    Dated: January 11, 1996.
Edward C. Loeb,
Acting Director, Office of Federal Acquisition Policy.

    Therefore, 49 CFR parts 7, 11, and 37 are amended as set forth 
below:
    The authority citation for 48 CFR parts 7, 11, and 37 continues to 
read as follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 7--ACQUISITION PLANNING

    2. Section 7.000 is amended in paragraph (b) by removing the word 
``and''; in paragraph (c) by removing the period at the end of the 
sentence and inserting in its place ``; and''; and by adding paragraph 
(d) to read as follows:


Sec. 7.000  Scope of part.

* * * * *
    (d) Determining whether functions are inherently governmental.
    3. Section 7.103 is amended by adding paragraph (p) to read as 
follows:


7.103  Agency-head responsibilities.

* * * * *
    (p) Ensuring that no purchase request is initiated or contract 
entered into that would result in the performance of an inherently 
governmental function by a contractor and that all contracts are 
adequately managed so as to ensure effective official control over 
contract performance.
    4. Section 7.105 is amended by redesignating paragraphs (b)(9) 
through (b)(19) as (b)(10) through (b)(20) and adding a new (b)(9) to 
read as follows:


7.105  Contents of written acquisition plans.

* * * * *
    (b) * * *
    (9) Inherently governmental functions. Address the consideration 
given to OFPP Policy Letter 92-1 (see subpart 7.5).
    5. Subpart 7.5 is added to read as follows:
Subpart 7.5--Inherently Governmental Functions
Sec.
7.500  Scope of subpart.
7.501  Definition.
7.502  Applicability.
7.503  Policy.

Subpart 7.5--Inherently Governmental Functions


7.500  Scope of subpart.

    The purpose of this subpart is to prescribe policies and procedures 
to ensure that inherently governmental functions are not performed by 
contractors. It implements the policies of Office of Federal 
Procurement Policy (OFPP) Policy Letter 92-1, Inherently Governmental 
Functions.


7.501  Definition.

    Inherently governmental function means, as a matter of policy, a 
function that is so intimately related to the public interest as to 
mandate performance by Government employees. This definition is a 
policy determination, not a legal determination. An inherently 
governmental function includes activities that require either the 
exercise of discretion in applying Government authority, or the making 
of value judgments in making decisions for the Government. Governmental 
functions normally fall into two categories: the act of governing, 
i.e., the discretionary exercise of Government authority, and monetary 
transactions and entitlements.
    (a) An inherently governmental function involves, among other 
things, the interpretation and execution of the laws of the United 
States so as to--
    (1) Bind the United States to take or not to take some action by 
contract, policy, regulation, authorization, order, or otherwise;
    (2) Determine, protect, and advance United States economic, 
political, territorial, property, or other interests by military or 
diplomatic action, civil or criminal judicial proceedings, contract 
management, or otherwise;
    (3) Significantly affect the life, liberty, or property of private 
persons;
    (4) Commission, appoint, direct, or control officers or employees 
of the United States; or
    (5) Exert ultimate control over the acquisition, use, or 
disposition of the property, real or personal, tangible or intangible, 
of the United States, including the collection, control, or 
disbursement of Federal funds.
    (b) Inherently governmental functions do not normally include 
gathering information for or providing advice, opinions, 
recommendations, or ideas to Government officials. They also do not 
include functions that are primarily ministerial and internal in 
nature, such as building security, mail operations, operation of 
cafeterias, housekeeping, facilities operations and maintenance, 
warehouse operations, motor vehicle fleet management operations, or 
other routine electrical or mechanical services. The list of commercial 
activities included in the attachment to Office of Management and 
Budget (OMB) Circular No. A-76 is an authoritative, nonexclusive list 
of functions which are not inherently governmental functions.


7.502  Applicability.

    The requirements of this subpart apply to all contracts for 
services. This subpart does not apply to services obtained through 
either personnel appointments, advisory committees, or personal 
services contracts issued under statutory authority.


7.503  Policy.

    (a) Contracts shall not be used for the performance of inherently 
governmental functions.
    (b) Agency decisions which determine whether a function is or is 
not an inherently governmental function may be reviewed and modified by 
appropriate Office of Management and Budget officials.
    (c) The following is a list of examples of functions considered to 
be inherently governmental functions or which shall be treated as such. 
This list is not all inclusive:
    (1) The direct conduct of criminal investigations.
    (2) The control of prosecutions and performance of adjudicatory 
functions other than those relating to arbitration or other methods of 
alternative dispute resolution.
    (3) The command of military forces, especially the leadership of 
military personnel who are members of the combat, combat support, or 
combat service support role.
    (4) The conduct of foreign relations and the determination of 
foreign policy.
    (5) The determination of agency policy, such as determining the 
content and application of regulations, among other things.
    (6) The determination of Federal program priorities for budget 
requests.
    (7) The direction and control of Federal employees.
    (8) The direction and control of intelligence and counter-
intelligence operations.
    (9) The selection or non-selection of individuals for Federal 
Government employment, including the interviewing of individuals for 
employment.
    (10) The approval of position descriptions and performance 
standards for Federal employees.
    (11) The determination of what Government property is to be 
disposed of and on what terms (although an agency may give contractors 
authority to dispose of property at prices within 

[[Page 2629]]
specified ranges and subject to other reasonable conditions deemed 
appropriate by the agency).
    (12) In Federal procurement activities with respect to prime 
contracts--
    (i) Determining what supplies or services are to be acquired by the 
Government (although an agency may give contractors authority to 
acquire supplies at prices within specified ranges and subject to other 
reasonable conditions deemed appropriate by the agency);
    (ii) Participating as a voting member on any source selection 
boards;
    (iii) Approving any contractual documents, to include documents 
defining requirements, incentive plans, and evaluation criteria;
    (iv) Awarding contracts;
    (v) Administering contracts (including ordering changes in contract 
performance or contract quantities, taking action based on evaluations 
of contractor performance, and accepting or rejecting contractor 
products or services);
    (vi) Terminating contracts;
    (vii) Determining whether contract costs are reasonable, allocable, 
and allowable; and
    (viii) Participating as a voting member on performance evaluation 
boards.
    (13) The approval of agency responses to Freedom of Information Act 
requests (other than routine responses that, because of statute, 
regulation, or agency policy, do not require the exercise of judgment 
in determining whether documents are to be released or withheld), and 
the approval of agency responses to the administrative appeals of 
denials of Freedom of Information Act requests.
    (14) The conduct of Administrative hearings to determine the 
eligibility of any person for a security clearance, or involving 
actions that affect matters of personal reputation or eligibility to 
participate in Government programs.
    (15) The approval of Federal licensing actions and inspections.
    (16) The determination of budget policy, guidance, and strategy.
    (17) The collection, control, and disbursement of fees, royalties, 
duties, fines, taxes, and other public funds, unless authorized by 
statute, such as 31 U.S.C. 952 (relating to private collection 
contractors) and 31 U.S.C. 3718 (relating to private attorney 
collection services), but not including--
    (i) Collection of fees, fines, penalties, costs, or other charges 
from visitors to or patrons of mess halls, post or base exchange 
concessions, national parks, and similar entities or activities, or 
from other persons, where the amount to be collected is easily 
calculated or predetermined and the funds collected can be easily 
controlled using standard case management techniques; and
    (ii) Routine voucher and invoice examination.
    (18) The control of the treasury accounts.
    (19) The administration of public trusts.
    (20) The drafting of Congressional testimony, responses to 
Congressional correspondence, or agency responses to audit reports from 
the Inspector General, the General Accounting Office, or other Federal 
audit entity.
    (d) The following is a list of examples of functions generally not 
considered to be inherently governmental functions. However, certain 
services and actions that are not considered to be inherently 
governmental functions may approach being in that category because of 
the nature of the function, the manner in which the contractor performs 
the contract, or the manner in which the Government administers 
contractor performance. This list is not all inclusive:
    (1) Services that involve or relate to budget preparation, 
including workload modeling, fact finding, efficiency studies, and 
should-cost analyses, etc.
    (2) Services that involve or relate to reorganization and planning 
activities.
    (3) Services that involve or relate to analysis, feasibility 
studies, and strategy options to be used by agency personnel in 
developing policy.
    (4) Services that involve or relate to the development of 
regulations.
    (5) Services that involve or relate to the evaluation of another 
contractor's performance.
    (6) Services in support of acquisition planning.
    (7) Contractors providing assistance in contract management (such 
as where the contractor might influence official evaluations of other 
contractors).
    (8) Contractors providing technical evaluation of contract 
proposals.
    (9) Contractors providing assistance in the development of 
statements of work.
    (10) Contractors providing support in preparing responses to 
Freedom of Information Act requests.
    (11) Contractors working in any situation that permits or might 
permit them to gain access to confidential business information and/or 
any other sensitive information (other than situations covered by the 
Defense Industrial Security Program described in 4.402(b)).
    (12) Contractors providing information regarding agency policies or 
regulations, such as attending conferences on behalf of an agency, 
conducting community relations campaigns, or conducting agency training 
courses.
    (13) Contractors participating in any situation where it might be 
assumed that they are agency employees or representatives.
    (14) Contractors participating as technical advisors to a source 
selection board or participating as voting or nonvoting members of a 
source evaluation board.
    (15) Contractors serving as arbitrators or providing alternative 
methods of dispute resolution.
    (16) Contractors constructing buildings or structures intended to 
be secure from electronic eavesdropping or other penetration by foreign 
governments.
    (17) Contractors providing inspection services.
    (18) Contractors providing legal advice and interpretations of 
regulations and statutes to Government officials.
    (19) Contractors providing special non-law enforcement, security 
activities that do not directly involve criminal investigations, such 
as prisoner detention or transport and non-military national security 
details.
    (e) Agency implementation shall include procedures requiring the 
agency head or designated requirements official to provide the 
contracting officer, concurrent with transmittal of the statement of 
work (or any modification thereof), a written determination that none 
of the functions to be performed are inherently governmental. This 
assessment should place emphasis on the degree to which conditions and 
facts restrict the discretionary authority, decision-making 
responsibility, or accountability of Government officials using 
contractor services or work products. Disagreements regarding the 
determination will be resolved in accordance with agency procedures 
before issuance of a solicitation.

PART 11--DESCRIBING AGENCY NEEDS

    6. Section 11.105 is added to read as follows:


11.105  Purchase descriptions for service contracts.

    In drafting purchase descriptions for service contracts, agency 
requiring activities shall ensure that inherently governmental 
functions (see subpart 7.5) are not assigned to a contractor. These 
purchase descriptions shall
    (a) Reserve final determination for Government officials;
    (b) Require proper identification of contractor personnel who 
attend meetings, answer Government telephones, or work in situations 
where 

[[Page 2630]]
their actions could be construed as acts of Government officials 
unless, in the judgment of the agency, no harm can come from failing to 
identify themselves; and
    (c) Require suitable marking of all documents or reports produced 
by contractors.

PART 37--SERVICE CONTRACTING

    7. Section 37.102 is revised to read as follows:


37.102  Policy.

    (a) Agencies shall generally rely on the private sector for 
commercial services (see OMB Circular No. A-76, Performance of 
Commercial Activities and subpart 7.3).
    (b) Agencies shall not award a contract for the performance of an 
inherently governmental function (see subpart 7.5).
    (c) Non-personal service contracts are proper under general 
contracting authority.
    8. Section 37.114 is added to read as follows:


37.114  Special acquisition requirements.

    Contracts for services which require the contractor to provide 
advice, opinions, recommendations, ideas, reports, analyses, or other 
work products have the potential for influencing the authority, 
accountability, and responsibilities of Government officials. These 
contracts require special management attention to ensure that they do 
not result in performance of inherently governmental functions by the 
contractor and that Government officials properly exercise their 
authority. Agencies must ensure that--
    (a) A sufficient number of qualified Government employees are 
assigned to oversee contractor activities, especially those that 
involve support of government policy or decision making. During 
performance of service contracts, the functions being performed shall 
not be changed or expanded to become inherently governmental.
    (b) A greater scrutiny and an appropriate enhanced degree of 
management oversight is exercised when contracting for functions that 
are not inherently governmental but closely support the performance of 
inherently governmental functions (see 7.503(c)).
    (c) All contractor personnel attending meetings, answering 
Government telephones, and working in other situations where their 
contractor status is not obvious to third parties are required to 
identify themselves as such to avoid creating an impression in the 
minds of members of the public or Congress that they are Government 
officials, unless, in the judgment of the agency, no harm can come from 
failing to identify themselves. They must also ensure that all 
documents or reports produced by contractors are suitably marked as 
contractor products or that contractor participation is appropriately 
disclosed.

[FR Doc. 96-1015 Filed 1-25-96; 8:45 am]
BILLING CODE 6820-EP-M