Outsourcing: The 'critical function' controversy

“Critical function” is now the controversial term as agency officials interpret new regulations on what work only federal employees should be doing, one expert said.

“Inherently governmental function isn’t the big problem,” said Robert Burton, former deputy administrator of the Office of Federal Procurement Policy (OFPP). “It’s the broad category called ‘critical function.’”

A new policy letter from OFPP defines "critical function" as work that is “necessary to the agency being able to effectively perform and maintain control of its mission and operations.” Beyond that, the letter tells agency officials to decide case-by-case if work should be done by their own employees, not contractors.


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If a contractor is doing the work, agencies must have employees who know the job and who would be able to manage the contractor who is doing the work, according to the policy letter, which was released officially on Sept. 12.

The policy holds an agency responsible for making sure it has an adequate number of positions filled by federal employees with appropriate expertise and experience. Those employees need to understand the agency’s requirements and be able to formulate alternative options, if needed, while also monitoring any contractors supporting the federal workforce, the letter said.

“The more important the function, the more important that the agency have internal capability to maintain control of its mission and operations,” the letter stated.

However, Burton said officials can argue that any job is critical to meeting their agency’s mission and also decide the adequate number of federal employees they need to do it, under this policy.

“We’re missing the elephant in the room,” said Burton, now a partner at the Venable law firm. “What this policy letter does is institutionalize insourcing in the federal government.”

He said these critical functions are the jobs agencies are already insourcing, often to the detriment of small businesses.

The policy letter's instructions go into effect on Oct. 12, and, because it came from the OFPP, it is more than guidance. It will be added to the Federal Acquisition Regulation.

The term "critical function" came from the fiscal 2009 National Defense Authorization Act, which told the administration to draw up a single definition of "inherently governmental function" and also lay out criteria for a critical function. OFPP drafted the definition in a 75-page document.

As deputy administrator from 2001 to 2008, Burton said the issue isn’t necessarily with writing the policy, but how the agency officials apply it.

“The challenge of so much of this is the interpretation,” he said.

Stan Soloway, president of the Professional Services Council, said the policy must have clear guidance for interpreting the intent correctly. He has raised concerns in the past about making agencies show that their choice to insource work is a good deal.

“As such, it is vital that clear guidance be given to the agencies on how to conduct their cost comparisons to ensure the right outcomes for the American taxpayer,” he said Sept. 9 in a statement.

Burton also said the OFPP missed two important points in the policy. It should have required agency officials to talk with small businesses about the effects that insourcing would have on the company, he said. It also should have required agencies to share their cost comparison data with, at least, the company who faces the loss of its work, he added.

It’s often too late to use the Freedom of Information Act to get the data, Burton said. By then, the insourcing is completed.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Wed, Sep 14, 2011 dp dc

Paul, I agree with your description of how Feds and contractors could be better used. Very well stated. However, I disagree that small business should not be a part of the discussion. Given that Federal contracting is a monopoly and the tremendous complexity of Federal contracting, there are tremendous disincentives to Federal acquisition people to look at small business for solutions. When a monopoly exists, protections need to be built in. Having said that, I believe small business, when given the chance, has proven again and again that it meets the very standard you endorse, effectiveness and efficiency.

Tue, Sep 13, 2011 Top220911 Fort Hood, Texas

The Federal Government should have Federal employees. Contract out short term projects as needed. All long term projects should be allocated and resourced by the department that requires it. Hire more term employees as needed and release them when the term is completed if the project is completed.

Tue, Sep 13, 2011 Paul

I know I don't understand the full scope of the issue but a lot of it seems fairly straitforward, regardless of critical function. If the work is something that will always need to be done, such as law enforcement and public health, then by default it will be always be more cost efficient and practical to rely heavily on civilians. If it's transitory, like building a new system or some other short term project, then is probably best to use contractors. Manpower requirements often fluctuate so I don't think any organization should only hire civilians but you need to determine what your core requirements are and use contractors as an agile source of additional support. Contractors are unreliable in the sense that a contract could be lost or changed at a moment's notice and suddenly you lose all those experienced folks that came with it. I've seen it happen and it would have been devastating if we didn't have a large corps of civilians to train up the new contractors. This article also highlights another problem when it states that insourcing is detrimental to small business. That is completely irrelevent to the conversation. The only concern should be what makes the organization run effectively while minimizing the cost to the taxpayer. Anything else is a distraction that only costs us more of our tax dollars.

Tue, Sep 13, 2011 dp dc

MPH_Man: FDA budget has gone up because FDA has taken on more work from Congress, not because it uses contractors. And as for the constraint of contracts, FDA COs, as all COs in the Federal Govt, can stop a contract tomorrow and get rid of all contractor employees on that contract. It is far easier to stop a contract than to stop a program w/ Federal employees attached. The true issue is to identify what the Govt does better w/ its employees and what the Govt does better w/ contractors and its employees.

Tue, Sep 13, 2011

The pendulum swings. The previous FAIR act was grossly wasteful of agency time and required outsourcing that preventing agencies from carrying out critical missions. Now, perhaps not enough outsourcing, too easily. Let's hope it swings less far each time and finally settles on a good result.

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