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Testimony before the Subcommittee on Oversight of Government 
Management, the Federal Workforce, and the District of Columbia, 
Committee on Homeland Security and Governmental Affairs, U.S. Senate: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 2:30 p.m. EDT:
Thursday, May 20, 2010: 

Sourcing Policy: 

Initial Agency Efforts to Balance the Government to Contractor Mix in 
the Multisector Workforce: 

Statement of John K. Needham: 
Director, Acquisition and Sourcing Management: 

GAO-10-744T: 

GAO Highlights: 

Highlights of GAO-10-744T, a testimony before the Subcommittee on 
Oversight of Government Management, the Federal Workforce, and the 
District of Columbia, Committee on Homeland Security and Governmental 
Affairs, U.S. Senate. 

Why GAO Did This Study: 

Federal agencies face a complicated set of decisions in finding the 
right mix of government and contractor personnel to conduct their 
missions. While contractors, when properly used, can play an important 
role in helping agencies accomplish their missions, GAO has found that 
agencies face challenges with increased reliance on contractors to 
perform core agency missions. Congress and the Executive branch also 
have expressed concern as to whether federal agencies have become over-
reliant on contractors and have appropriately outsourced services. A 
March 2009 Presidential memorandum tasked the Office of Management and 
Budget (OMB) to take several actions in response to this concern. 

Based on GAO’s prior work, this statement discusses (1) civilian 
agencies’ development and implementation of guidelines to consider 
whether contracted functions should be brought in-house —a process 
known as insourcing; (2) OMB’s proposed policy on work reserved for 
federal employees; (3) challenges agencies face in managing the 
federal workforce; and (4) key tools available for insourcing and 
related efforts. 

What GAO Found: 

GAO reviewed the status of civilian agencies efforts to develop and 
implement insourcing guidance and reported in October 2009 that none 
of the nine civilian agencies with whom we met had met the statutory 
deadline to produce insourcing guidance. Primarily, they were waiting 
to ensure their guidance was consistent with or receive additional OMB 
guidance, and to use the results, best practices, and lessons learned 
from their multisector workforce pilots to better inform their 
insourcing guidelines. Since the time of our review, OMB reported in 
December 2009 that 24 agencies had launched pilots to address overuse 
of contractors in one or more of their organizations. Agencies were 
due to report the results of their pilots to OMB by May 1, 2010. 

In response to a congressional mandate, OMB recently issued a public 
notice that provides proposed policy for determining when work must be 
performed by federal employees. Comments on the policy are due from 
federal agencies and the public by June 1, 2010. The proposed policy 
provides the following guidance to executive branch agencies: it 
adopts a single, governmentwide definition of inherently governmental 
functions in accordance with the definition in the Federal Activities 
Inventory Reform Act of 1998, which classifies an activity as 
inherently governmental when it is so intimately related to the public 
interest that it must be performed by federal employees; it provides 
guidance for determining functions “closely associated with inherently 
governmental;” and it introduces the category of “critical functions,” 
as work that must be reserved for federal employees in order to ensure 
the agency has the internal capability to maintain control of its 
missions and operations. 

Agency efforts to effectively insource functions performed by 
contractors will in large part depend on the ability to assess mission 
and human capital requirements and develop and execute plans to 
fulfill those requirements so agencies have a workforce that possesses 
the necessary knowledge, skills, and competencies to accomplish their 
mission. Furthermore, GAO’s 2009 review of civilian agency insourcing 
efforts identified operational and administrative challenges agencies 
face with respect to implementing the conversion of contractor 
personnel to government positions. For example, agencies face 
difficulties in gathering and analyzing certain types of service 
contracting data needed for making insourcing decisions. 

Agency implementation of insourcing efforts could be facilitated by 
tools that GAO has previously identified, including: 

* Inventories to identify inherently governmental functions; 

* Business case analysis to facilitate agency decisions in determining 
whether insourcing a particular function has potential to achieve 
mission requirements; and; 

* Human-capital flexibilities to efficiently fill positions that 
should be brought in-house. 

What GAO Recommends: 

GAO has made numerous recommendations in recent years to help ensure 
better management of the multisector workforce, and agencies are in 
the process of addressing them. 

View [hyperlink, http://www.gao.gov/products/GAO-10-744T] or key 
components. For more information, contact John Needham at (202) 512-
4841 or needhamjk1@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here to discuss current insourcing efforts, 
consideration of work that should be performed only by federal 
employees, and related workforce planning challenges--all issues 
needing consideration from the broader perspective of managing the 
multisector workforce. To carry out their missions agencies rely on an 
increasing complex workforce composed of federal employees, contractor 
personnel, and in the case of the Department of Defense (DOD), 
military personnel. Determining whether to obtain services with 
current or new federal employees, private sector contractors, or a 
combination of the two is an important economic and strategic decision 
critical to the federal government's effective and efficient use of 
taxpayer dollars. Such decisions may have critical implications for 
government control and accountability for policy and program decisions. 

The executive branch has encouraged federal agencies since the mid- 
1950s to obtain commercially available services from the private 
sector when doing so is cost-effective. However, federal agencies face 
a complicated set of decisions in finding the right mix of government 
and contractor personnel to conduct their missions. While contractors, 
when properly used, can play an important role in helping agencies 
accomplish their missions, our prior work has shown that agencies face 
challenges with increased reliance on contractors to perform core 
agency missions[Footnote 1]. Congress and the Executive branch also 
expressed concern as to whether federal agencies have become 
overreliant on contractors and have appropriately outsourced services. 
A March 2009 Presidential memorandum tasked the Office of Management 
and Budget (OMB) with issuing guidance in a number of areas related to 
addressing challenges in the federal contracting environment, 
including when it is appropriate for the government to outsource 
services and when it is not.[Footnote 2] 

Over the years, we have found that in choosing to use contractors, the 
decisions agencies need to make involve determining which functions 
and activities should be contracted out and which should not to ensure 
institutional capacity, as well as identifying and distinguishing the 
roles and responsibilities of contractors and civilian and military 
personnel. In addition, they must develop a total workforce strategy 
to address the extent of contractor use and the appropriate mix of 
contractor and government personnel. In response to your interest in 
the government's use of contractors and related workforce issues, I 
will draw primarily on our prior work to discuss (1) civilian 
agencies' development and implementation of insourcing guidelines; (2) 
the proposed policy on work that should be performed only by, or 
reserved for, federal employees; (3) challenges agencies face in 
managing the federal workforce; and (4) key tools available for 
insourcing and related efforts. The reports which form the basis for 
this statement were prepared in accordance with generally accepted 
government auditing standards. Those standards require that we plan 
and perform the audit to obtain sufficient, appropriate evidence to 
provide a reasonable basis for our findings and conclusions based on 
our audit objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit 
objectives. 

Background: 

Since 1955, the executive branch has encouraged federal agencies to 
obtain commercially available goods and services from the private 
sector when the agency determines it is cost-effective. However, in 
the past, both the private and public sectors expressed concern about 
the fairness with which these sourcing decisions were made. In 
response, Congress in 2000 mandated a study of government sourcing 
conducted by the Commercial Activities Panel and chaired by the 
Comptroller General.[Footnote 3] In April 2002, the panel released its 
report with recommendations that stressed the importance of linking 
sourcing policy with agency missions, promoting sourcing decisions 
that provide value to the taxpayer regardless of the service provider 
selected, and ensuring greater accountability for performance. For 
example, the panel found that federal sourcing policy should: 

* support agency missions, goals, and objectives; 

* be consistent with human-capital practices designed to attract, 
motivate, retain, and reward a high-performing federal workforce; 

* recognize that inherently governmental functions and certain others 
should be performed by federal workers; 

* avoid arbitrary full-time equivalent or other arbitrary numerical 
goals; and: 

* provide for accountability in all sourcing decisions. 

Government contracting has more than doubled to reach over $500 
billion annually since the panel issued its report. This increased 
reliance on contractors to perform agency missions increases the risk 
that government decisions can be influenced by contractor employees, 
which can result in a loss of control and accountability. Agencies buy 
services that range from basic operational support, such as custodial 
and landscaping, to more complex professional and management support 
services, which may closely support inherently governmental functions. 
Such services include acquisition support, budget preparation, and 
intelligence services. Our work at DOD and the Department of Homeland 
Security (DHS) has found that it is now commonplace for agencies to 
use contractors to perform activities historically performed by 
government employees.[Footnote 4] Inherently governmental functions 
require discretion in applying government authority or value judgments 
in making decisions for the government, and as such they should be 
performed by government employees, not private contractors. The closer 
contractor services come to supporting inherently governmental 
functions, the greater this risk of influencing the government's 
control over and accountability for decisions that may be based, in 
part, on contractor work. 

In part to address the increased reliance on contractors, the Fiscal 
Year 2008 National Defense Authorization Act[Footnote 5] required DOD 
to develop and implement insourcing guidelines. In April 2008, DOD 
issued its initial insourcing guidelines, and on May 28, 2009, DOD 
issued implementing guidance for the insourcing of contracted 
services.[Footnote 6] The guidance is designed to assist DOD 
components as they develop and execute plans to decrease funding for 
contractor support and increase funding for new civilian manpower 
authorizations. 

Similarly, the Omnibus Appropriations Act of 2009,[Footnote 7] 
required the heads of executive branch agencies to devise and 
implement insourcing guidelines and procedures. The guidelines and 
procedures were to ensure that "consideration" was given to using, on 
a regular basis, federal employees to perform new functions and 
functions that are performed by contractors and could be performed by 
federal employees. 

In July 2009, OMB issued guidance for agencies to begin the process of 
developing and implementing policies, practices, and tools for 
managing the multisector workforce.[Footnote 8] This guidance included 
insourcing criteria intended to provide the civilian agencies with a 
framework for consistent and sound application of insourcing guidance, 
in accordance with statutory requirements. The criteria consisted of 
four sections: (1) general management responsibilities; (2) general 
consideration of federal employee performance; (3) special 
consideration of federal employee performance; and (4) restriction on 
the use of public-private competition. Each criterion addresses 
different aspects of the mandate for insourcing guidelines and 
procedures and describes circumstances and factors agencies should 
consider when identifying opportunities for insourcing. (See app. I 
for a more detailed description of OMB's insourcing criteria.) 
Additionally, the guidance, as part of a planning pilot, requires each 
agency to conduct a multisector human-capital analysis of an 
organization, program, project, or activity where there are concerns 
about reliance on contractors and report on the pilot by May 1, 2010. 

Civilian Agencies' Efforts to Develop Insourcing Requirements: 

In response to the mandate in the 2009 Omnibus Appropriations Act, we 
reviewed the status of civilian agencies' efforts to develop and 
implement insourcing guidance. We reported in October 2009 that none 
of the nine civilian agencies we met with between July and October 
2009 had met the statutory deadline to produce insourcing guidance. 
[Footnote 9] One agency had issued preliminary guidelines, and two 
others had drafted but not issued their guidelines as of our review, 
but most of the agencies' efforts were still in the early stages. 
[Footnote 10] For example, two of the nine agencies reviewed at the 
time had designated the offices responsible for leading the effort to 
develop the guidelines and were in the process of deciding what 
approach they would take. In contrast, two other agencies had drafted 
guidelines, with one waiting on management approval to issue them and 
the other planning to finalize its guidelines once OMB issued 
additional guidance regarding outsourcing and inherently governmental 
functions. Agency officials cited a number of reasons as to why they 
did not meet the statutory deadline and had not issued final 
insourcing guidelines. The reasons included, but were not limited to 
the following: 

* Wanting to ensure their guidelines were consistent with OMB's 
guidance, issued in July 2009, which caused them to delay finalizing 
or drafting their guidelines. 

* Waiting for additional OMB guidance and clarification regarding 
outsourcing and inherently governmental functions. Several officials 
stated that they anticipated this guidance would have a significant 
effect on their development and implementation of insourcing 
guidelines. Similarly, OMB indicated when it provided the insourcing 
criteria in July 2009 that it expected to refine the criteria as it 
developed guidance on when outsourcing is and is not appropriate. 

* Intending to use the results, best practices, and lessons learned 
from the multisector workforce planning pilots to better inform their 
insourcing guidelines and procedures. For example, one agency told us 
it planned to use its experience with its planning pilot as the basis 
for its final guidelines, while another planned to issue initial 
guidelines to be used during the pilot and then revise the guidelines 
as appropriate based on the experiences during the pilot. 

* Stressing that developing effective insourcing guidelines is complex 
and involves many agency functions, including human capital, 
acquisition, and finance and budget, all of which requires a great 
deal of coordination and takes time. They added that their ability to 
focus on the development of the guidelines has been constrained by 
their capacity to deal with multiple management initiatives in 
addition to their regular core duties. 

Although OMB and agencies have yet to issue insourcing guidance, OMB 
reported in December 2009 that 24 agencies had launched planning 
pilots to address the use of contractors in one or more of their 
organizations. Agencies were due to report the results of their pilots 
to OMB by May 1, 2010. 

Proposed OMB Policy on Work Reserved for Federal Employees: 

Following the initiative of the March 2009 Presidential memo on 
government contracting and in response to a congressional mandate, 
OMB's Office of Federal Procurement Policy issued a public notice on 
March 31, 2010 that provides proposed policy for determining when work 
must be performed by, or reserved for, federal employees.[Footnote 11] 
The proposal provides the following guidance to executive branch 
agencies: 

* Adopts the statutory definition in the Federal Activities Inventory 
Reform (FAIR) Act of 1998 as a single, governmentwide definition of 
inherently governmental functions. This definition classifies an 
activity as inherently governmental when it is so intimately related 
to the public interest that it must be performed by federal employees. 
Such activities include determining budget priorities and awarding and 
administering contracts, which are reserved exclusively for federal 
employees. 

* Retains the illustrative list of examples of "closely associated 
with inherently governmental functions" from the Federal Acquisition 
Regulation, such as preparing budgets and developing agency 
regulations, and provides guidance to help agencies decide whether to 
use contractors to perform these functions. Unlike inherently 
governmental functions, agencies can determine whether contractor 
performance of these functions is appropriate. The proposed policy 
lays out the responsibilities agencies must perform, such as ensuring 
sufficient government capacity for oversight during the contract award 
and administration process, if they decide to use a contractor for 
these services. 

* Introduces the category of "critical functions," as functions whose 
importance to the agency's mission and operation requires that at 
least a portion of the function must be reserved for federal employees 
to ensure the agency has sufficient internal capability to effectively 
perform and maintain control. 

* Outlines a number of new management determinations and actions that 
federal agencies should employ to avoid allowing contractor 
performance of inherently governmental functions, including developing 
agency procedures, providing training and designating senior officials 
responsible for implementation of the proposed policy. Comments from 
agencies and the public on the proposed policy are due to OMB by June 
1, 2010. 

Effective Implementation of Insourcing Policies Will Depend on 
Agencies' Ability to Address Workforce Planning and Other Challenges: 

Agency efforts to effectively insource certain functions now performed 
by contractors will in large part depend on their ability to assess 
their human-capital and mission requirements and develop and execute 
plans to fulfill those requirements so they have a workforce that 
possesses the necessary education, knowledge, skills, and competencies 
to accomplish their mission. We and others have shown that successful 
public and private organizations use strategic management approaches 
to prepare their workforces to meet present and future mission 
requirements. Strategic human-capital management--which includes 
workforce planning--helps ensure that agencies have the talent and 
skill mix they need to address their current and emerging human-
capital and other challenges, such as long-term fiscal constraints and 
changing demographics.[Footnote 12] 

A strategic human-capital plan helps agency managers and stakeholders 
to systematically consider what is to be done, how it will be done, 
and how to gauge progress and results. Our prior work has identified 
workforce planning challenges that can affect an agency's ability to 
obtain the right mix of federal employees and contractor personnel. 
Strategic workforce planning is an iterative, systematic process that 
addresses two critical needs: (1) aligning an organization's human- 
capital program with its current and emerging mission and programmatic 
goals and (2) developing long-term strategies for acquiring, 
developing, and retaining an organization's workforce to achieve 
programmatic goals.[Footnote 13] These strategies should include 
contractor as well as federal personnel and link to the knowledge, 
skills, and abilities agencies need. As agencies develop workforce 
strategies, they also need to consider the extent to which contractors 
should be used and the appropriate mix of contractor and federal 
personnel. With the increased reliance on contractors, there has been 
an increased concern about the ability of agencies to ensure 
sufficient numbers of staff to perform some functions that should only 
be performed by government employees. Strategic workforce planning can 
position federal agencies to meet such workforce challenges. However, 
our prior work has found that the increased reliance on contractors to 
perform the work of government is in part attributed to difficulties 
in hiring for certain hard-to-staff positions, training and retaining 
government employees. For example, we have previously reported that 
federal agencies have relied increasingly on contractors to support 
the acquisition function due to the fact that the capacity and the 
capability of the federal government's acquisition workforce to 
oversee and manage contracts have not kept pace with increased 
spending for increasingly complex purchases.[Footnote 14] This pattern 
can also be found in other functions such as information technology 
and intelligence activities. Importantly, federal agencies also face 
competition in hiring and retaining government employees as 
contractors can offer higher salaries in some cases.[Footnote 15] 

In 2001, we first identified strategic human-capital management as a 
high-risk area because of the federal government's long-standing lack 
of a consistent approach to human-capital management. In 2010, while 
agencies and Congress have taken steps to address the federal 
government's human-capital shortfalls, strategic human-capital 
management remains a high-risk area because of the continuing need for 
a governmentwide framework to advance human-capital reform. We have 
reported that federal agencies have used varying approaches to develop 
their strategic workforce plans, depending on their particular 
circumstances.[Footnote 16] For example, an agency with a future 
workload that could rise or fall sharply may focus on identifying 
skills to manage a combined workforce of federal employees and 
contractors. We and the Office of Personnel Management (OPM) have 
identified the following six leading principles that agencies should 
incorporate in their workforce planning efforts:[Footnote 17] 

* Align workforce planning with strategic planning and budget 
formulation; 

* Involve managers, employees, and other stakeholders in planning; 

* Identify critical occupations, skills, and competencies and analyze 
workforce gaps; 

* Develop strategies to address workforce gaps; 

* Build capability to support workforce strategies; and: 

* Monitor and evaluate progress. 

Furthermore agencies face other operational and administrative 
challenges as our 2009 review of civilian agency insourcing efforts 
[Footnote 18] identified with respect to implementing guidance to 
facilitate the conversion of contractor personnel to government 
positions, including the following: 

* Infrastructure. The complex nature of insourcing and the many 
functional parts of an agency involved in the hiring process require 
managers to share responsibility and coordinate activities. The 
various functions involved in an agency's insourcing efforts--such as 
human capital, acquisition, finance and budget--must be identified, as 
well as the roles each will play. 

* Culture. Insourcing represents a major shift in the focus and 
culture of the multisector workforce. Established processes and 
procedures are geared toward outsourcing and shifting to insourcing 
and a "total workforce" approach--that considers both contractors and 
federal employees--will take time and requires flexibility to meet the 
needs of an agency within an ever-changing environment. 

* Data. Agencies face difficulties in gathering and analyzing certain 
types of service contracting data needed for making insourcing 
decisions. For example, information on the type of service contracts 
and the number of contractor-equivalent personnel may not be readily 
available, even though some officials indicated that such information 
may be needed to review contracted-out services and make insourcing 
decisions. The lack of reliable data on contractors has been a 
recurrent theme in our work over the past several years. For example, 
we have reported that agencies faced challenges with developing 
workforce inventories under the FAIR Act of 1998, especially as it 
relates to the classification of positions as inherently governmental 
or commercial.[Footnote 19] Our work on the acquisition workforces at 
DHS and DOD reported that the departments lacked sufficient data to 
fully assess total acquisition workforce needs including the use of 
contractors. And, more recently, our review of DOD service contractor 
inventories for fiscal year 2008 found that each of the military 
departments used different approaches and data sources to compile 
their inventory data and, as a result, DOD data on service contracts 
are inconsistent and incomplete.[Footnote 20] 

* Resources. Limited budgets and resources may constrain insourcing 
efforts. For example, if after applying its guidelines, an agency 
determines that a function should be insourced and additional 
government employees need to be hired, the agency must ensure the 
funds are available to pay for them. 

Tools Available for Agencies' Insourcing Efforts: 

Agency implementation of insourcing efforts could be facilitated by 
tools that we identified in prior work. These tools will allow 
agencies to capture information, make strategic decisions and 
implement those decisions for their multisector workforce. They 
include: inventories, business case analysis, and human capital 
flexibilities. 

* Inventories. The inventories that federal agencies are required to 
develop under congressional mandate will be used to inform a variety 
of workforce decisions.[Footnote 21] For example, at DOD, the 
inventories are to contain a number of different elements for service 
contracts, including information on the functions and missions 
performed by the contractor, the funding source for the contract, and 
the number of contractor full-time equivalents working under the 
contract. Once compiled, the inventories may be used to inform a 
variety of workforce decisions, including how various agency functions 
should be sourced.[Footnote 22] 

* Business Case Analysis. A balanced analytical approach, used by some 
agencies when deciding to outsource functions, could facilitate agency 
decisions in determining whether insourcing a particular function has 
the potential to achieve mission requirements. Such an analysis may 
consider questions such as the following: 

- How critical is the function's role in relationship to the agency's 
mission? 

- What is the risk to program integrity and control of sensitive 
information if the function is not insourced? 

- What is the long-term trend of demand for the function; is there 
periodic fluctuation in demand for the function (i.e. stability of 
demand)? 

- What is the current state of technology used by the function and 
what is the likelihood of the agency being able to acquire and sustain 
the technology if the function is brought in-house? 

- What are the number of staff and skill level of staff needed to 
perform the function? 

- What is the ability of the agency to recruit the workforce with the 
appropriate skills to continue to provide services the contractor 
currently provides? 

- What is the likelihood of contractor staff in the function applying 
to work for the agency? 

* What is the estimated cost to maintain an acceptable level of 
performance if the function is brought in-house? 

* Human Capital Flexibilities. Once agencies determine which functions 
they want to have provided by federal employees, taking advantage of 
the variety of human-capital flexibilities is crucial to making 
improvements in agencies' efforts to recruit, hire, and manage their 
workforces. For example, monetary recruitment and retention incentives 
and special hiring authorities provide agencies with flexibility in 
helping them manage their human-capital strategically to fulfill 
insourcing needs.[Footnote 23] 

Concluding Observations: 

OMB's criteria for insourcing decisions provide a basis for agencies 
in establishing their insourcing plans and can be used to facilitate 
balancing the mix of federal employees and contractors to better 
assure government control over critical functions. However, it will be 
in the implementation of agency plans and in the individual sourcing 
decisions that federal agencies make that will determine the ultimate 
success of this effort. Making use of the full range of information 
and human-capital tools available to implement these plans will be 
important to assuring effective government control of critical 
functions, mitigating risks, and providing value to the taxpayer. 

Mr. Chairman, this concludes my prepared statement. I would be happy 
to respond to any questions you or the other members of the 
subcommittee may have at this time. 

Contacts and Staff Acknowledgments: 

For further information regarding this testimony, please contact John 
Needham at (202) 512-4841 or needhamjk1@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this product. Staff making key contributions to 
this statement were Amelia Shachoy, Assistant Director; Brendan 
Culley; Noah Bleicher; Erin Carson; Lauren Heft; and John Krump. 

[End of section] 

Appendix I: 

Table 1: OMB's Criteria for Insourcing under Section 736: 

Key sections: General Management Responsibilities; 
Agency responsibilities/actions and factors to consider: 
* review contractor performance on an ongoing basis and where a 
determination is made that contractors are performing inherently 
governmental responsibilities, insource such work on an accelerated 
basis; 
* monitor internal human-capital capacity to minimize the risks 
associated with overreliance or improper reliance on contractors; 
* ensure that there are sufficient resources to manage and oversee 
contractors. 

Key sections: General Consideration of Federal Employee Performance; 
Agency responsibilities/actions and factors to consider: 
* augment existing management reviews when appropriate, to consider 
and evaluate opportunities to improve performance with the use of 
federal employees; 
evaluations should: 
- consider opportunities for new and already-contracted work; 
- generally include a cost analysis that addresses the full cost of 
performance and provides "like comparisons" of relevant costs to 
determine the most cost-effective source of support; 
* situations when insourcing may be justified without a full cost 
analysis: 
- to establish or build internal capacity or maintain control of an 
agency's mission and operations; 
- to perform a function that is closely associated with an inherently 
governmental function and in-house performance is necessary for an 
agency to maintain control of its mission and operations; or; 
- to avoid the compromise of a critical agency or administration 
policy. 

Key sections: Special Consideration of Federal Employee; 
Agency responsibilities/actions and factors to consider: 
* go beyond existing agency management reviews and evaluate the 
specific function to be performed prior to the pursuit or nonpursuit 
of a contract action; 
Key issues and actions for evaluations: 
* if an agency determines that contractor performance causes the 
agency to lack sufficient internal expertise to maintain control of 
its mission and operations, then the agency is to take actions to 
obtain needed in-house capacity; 
* if a preliminary analysis suggests that public-sector performance is 
more cost-effective and it is feasible to hire federal employees for a 
particular function, the agency is to initiate a more-detailed 
analysis of insourcing options: 
- extent of analysis should generally be commensurate with the size 
and complexity of the function in question and its importance to the 
agency's mission; 
- cost analysis should address the full costs of government and 
private-sector performance; 
- insourcing should not be used unless performance and risk 
considerations in favor of federal employee performance will clearly 
outweigh cost considerations. 

Key sections: Competition Restrictions; 
Agency responsibilities/actions and factors to consider: 
* reiterates restriction in section 736 from conducting public-private 
competitions under OMB Circular A-76 as a prerequisite to federal 
performance of certain functions. 

Source: OMB. 

[End of table] 

[End of section] 

Footnotes: 

[1] See for example, GAO, Department of Homeland Security: Improved 
Assessment and Oversight Needed to Manage Risk of Contracting for 
Selected Services, [hyperlink, http://www.gao.gov/products/GAO-07-990] 
(Washington, D.C.: Sep. 17, 2007), and GAO, Defense Management: DOD 
Needs to Reexamine Its Extensive Reliance on Contractors and Continue 
to Improve Management and Oversight, [hyperlink, 
http://www.gao.gov/products/GAO-08-572T] (Washington, D.C.: Mar. 11, 
2008). 

[2] 74 Fed. Reg. 9755 (Mar. 6, 2009). 

[3] The panel included representatives from OMB, DOD, the Office of 
Personnel Management, private industry, academia, a trade association, 
and unions. 

[4] GAO, Department of Homeland Security: Improved Assessment and 
Oversight Needed to Manage Risk of Contracting for Selected Services, 
[hyperlink, http://www.gao.gov/products/GAO-07-990] (Washington, D.C.: 
Sep. 17, 2007); GAO, Defense Management: DOD Needs to Reexamine Its 
Extensive Reliance on Contractors and Continue to Improve Management 
and Oversight, [hyperlink, http://www.gao.gov/products/GAO-08-572T] 
(Washington, D.C.: Mar. 11, 2008); and GAO, Intelligence Reform: GAO 
Can Assist the Congress and the Intelligence Community on Management 
Reform Initiatives, [hyperlink, 
http://www.gao.gov/products/GAO-08-413T] (Washington, D.C.: Feb. 29, 
2008). 

[5] National Defense Authorization Act for Fiscal Year 2008, Pub. L. 
No. 110-181 § 324. See also 10 U.S.C. § 2463. 

[6] DOD Memorandum, In-sourcing Contracted Services - Implementation 
Guidance (May 28, 2009). 

[7] Omnibus Appropriations Act, 2009, Pub. L. No. 111-8, Div. D, § 736. 

[8] Office of Management and Budget, M-09-26, Managing the Multi-
Sector Workforce (Jul. 29, 2009). 

[9] DOD, however, issued implementation guidance for insourcing 
efforts on May 28, 2009. The guidance explains that it is designed to 
assist DOD components as the develop and execute plans to decrease 
funding for contract support and increase funding for approximately 
33,400 new civilian manpower authorizations. Among other matters, the 
guidance provides a process components are to follow in prioritizing 
and reviewing contracted services for possible insourcing and the 
steps they are to follow once the decision is made to insource a 
function. 

[10] GAO, Civilian Agencies' Development and Implementation of 
Insourcing Guidelines, [hyperlink, 
http://www.gao.gov/products/GAO-10-58R] (Washington, D.C.: Oct. 6, 
2009). 

[11] 75 Fed. Reg. 16188 (Mar. 31 2010). 

[12] GAO, Workforce Planning: Interior, EPA, and the Forest Service 
Should Strengthen Linkages to Their Strategic Plans and Improves 
Evaluation, [hyperlink, http://www.gao.gov/products/GAO-10-413] 
(Washington, D.C.: Mar. 31, 2010). 

[13] GAO, Human Capital: Key Principles for Effective Strategic 
Workforce Planning, [hyperlink, http://www.gao.gov/products/GAO-04-39] 
(Washington, D.C.: Dec. 11, 2003). 

[14] GAO, The Office of Management and Budget's Acquisition Workforce 
Development Strategic Plan for Civilian Agencies, [hyperlink, 
http://www.gao.gov/products/GAO-10-459R] (Washington, D.C.: Apr. 23, 
2010); Acquisition Workforce: DOD Can Improve Its Management and 
Oversight by Tracking Data on Contractor Personnel and Taking 
Additional Actions, [hyperlink, 
http://www.gao.gov/products/GAO-09-616T] (Washington, D.C.: Apr. 28, 
2009); Department of Homeland Security: A Strategic Approach Is Needed 
to Better Ensure the Acquisition Workforce Can Meet Mission Needs, 
[hyperlink, http://www.gao.gov/products/GAO-09-30] (Washington, D.C.: 
Nov. 19, 2008); and Defense Management: DOD Needs to Reexamine Its 
Extensive Reliance on Contractors and Continue to Improve Management 
Oversight, [hyperlink, http://www.gao.gov/products/GAO-08-572T] 
(Washington, D.C.: Mar. 11, 2008). 

[15] GAO, DOD's High Risk Areas: Actions Needed to Reduce 
Vulnerabilities and Improve Business Outcomes, [hyperlink, 
http://www.gao.gov/products/GAO-09-460T] (Washington, D.C.: Mar. 12, 
2009). 

[16] [hyperlink, http://www.gao.gov/products/GAO-10-413] 

[17] GAO, Human Capital: Key Principles for Effective Strategic 
Workforce Planning, [hyperlink, http://www.gao.gov/products/GAO-04-39] 
(Washington, D.C.: Dec. 11, 2003). OPM, which developed its Human 
Capital Assessment and Accountability Framework in conjunction with 
the Office of Management and Budget and GAO, issued the final 
regulations for this framework in April 2008. 73 Fed. Reg. 23012 (Apr. 
28, 2008). 

[18] [hyperlink, http://www.gao.gov/products/GAO-10-58R] 

[19] GAO, Competitive Sourcing: Greater Emphasis Needed on Increasing 
Efficiency and Improving Performance, [hyperlink, 
http://www.gao.gov/products/GAO-04-367] (Washington, D.C.: Feb. 27, 
2004). 

[20] GAO, Defense Acquisitions: Observations on the Department of 
Defense Service Contract Inventories for Fiscal Year 2008, [hyperlink, 
http://www.gao.gov/products/GAO-10-350R] (Washington, D.C.: Jan. 29, 
2010). 

[21] Pub. L. No. 111-117, Division C, Title VII, Section 743 contains 
civilian agency requirement. Pub. L. No. 110-181, Division A, Title 
VIII, Section 803 contains the requirement for DOD. 

[22] GAO has been congressionally mandated to review the status of 
development of inventories at executive branch agencies. 

[23] GAO, Human Capital: Transforming Federal Recruiting and Hiring 
Efforts, [hyperlink, http://www.gao.gov/products/GAO-08-762T] 
(Washington, D.C.: May 8, 2008). 

[End of section] 

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