Government Contractors:

Are Service Contractors Performing Inherently Governmental Functions?

GGD-92-11: Published: Nov 18, 1991. Publicly Released: Dec 23, 1991.

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Pursuant to a congressional request, GAO reviewed the government's increasing reliance on consultants to administer its basic work.

GAO found that: (1) the Office of Management and Budget (OMB) guidance generally indicates that the government should not use consultants to administer work of a policy, decisionmaking, or managerial nature; (2) although most of the contracts reviewed seemed appropriate for contractors to administer on the basis of existing OMB and agency policy guidance, the Department of Transportation, the Department of Energy, and the Environmental Protection Agency contracted for some activities that might have involved governmental functions, but because of the difficulty in defining governmental functions, GAO was unable to conclude that those activities involved such functions; (3) in addition to the difficulty in defining governmental functions and providing related guidance to agencies, agency officials stated that the major reasons they use contractors to administer some functions that may be governmental in nature are the lack of authorized federal positions or employees and the lack of experienced federal employees to do the work; (4) Congress has authorized agencies to contract for inherently governmental functions; and (5) legislation authorizes agency inspectors general to contract for audit services.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: OMB issued Policy Letter 92-1 addressing this recommendation. Senator Pryor introduced S. 2928 addressing this recommendation (among other matters). This bill will be reintroduced during this legislative session.

    Matter: Given the difficulty in defining governmental functions, agencies need improved guidance to use when deciding which functions should be handled by federal employees and which functions may be appropriately handled by contractors. OMB is planning to develop new guidance for this purpose. Because of Congress' interest in this issue, the Senate Committee on Governmental Affairs should hold hearings once OMB develops the revised guidance to ensure that the guidance is consistent with congressional views on this subject. If the Committee is still concerned about the revised guidance, it may want to consider legislation specifying which activities are not to be administered by contractors.

  2. Status: Closed - Not Implemented

    Comments: Because the administration and Congress are attempting to downsize the government due to the present budgetary constraints, this recommendation is no longer appropriate or practicable.

    Matter: Federal agency officials generally believed that contracting for governmental functions is largely the result of staff shortages, the lack of staff with sufficient expertise, and the fact that contract money is more available than staff. If the government is to administer activities that may involve governmental functions without having to rely on contractors, the Senate Committee on Governmental Affairs should consider providing agencies with the authority and flexibility to use government employees for such activities. To do this, the Committee may want to explore with OMB allowing civilian agencies to manage their activities within an authorized budget without regard to personnel ceilings.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: OMB disagreed with this recommendation and believes that the promulgation of Policy Letter 92-1 should be sufficient. Some agencies adapted further guidance voluntarily (DOE and EPA). GAO agrees that the OMB guidance is sufficient.

    Recommendation: The Director, OMB, should require implementing policies from each agency. Because each agency's mission is unique, OMB should require each agency head to examine his or her agency's activities, take into consideration the agency's role and responsibilities, and identify those specific functions that should appropriately be administered only by government employees. Each agency head should submit this list to OMB for informational purposes and should consider making revisions to the guidance in instances in which OMB believes the guidance may be inconsistent: (1) with governmentwide policies or (2) among agencies, unless there is good reason.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  2. Status: Closed - Implemented

    Comments: OMB issued Policy Letter 92-1 addressing this recommmendation. An accomplishment report will be prepared.

    Recommendation: The Director, OMB, should compile a short generic list of functions that could be applied throughout the government, which, as a matter of policy, should never be contracted out. Care must be exercised in developing such a list, however, so that a distinction is made between assistance and administration of a task. Activities that should not be done by contractors could include: (1) developing and presenting testimony; (2) holding hearings; (3) signing agency correspondence; (4) representing an agency before the public as if the contractor's staff were federal employees; and (5) supervising federal employees.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  3. Status: Closed - Implemented

    Comments: OMB issued Policy Letter 92-1 addressing this recommendation. An accomplishment report will be prepared.

    Recommendation: The Director, OMB, should clarify OMB guidance to agencies on contracting for consulting services. Because the identification of governmental functions requires consideration of the particular circumstances involved, the type of function, as well as the relationship that will exist between the agency and the contractor, the OMB guidance should articulate the basic principles on which such judgments should be made and also provide guidelines to assist agencies in making their determinations.

    Agency Affected: Executive Office of the President: Office of Management and Budget

 

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