(1) an executive department as defined by sec-
tion 101 of title 5, United States Code; 
(2) a military department as defined by section 
102 of such title; and 
(3) an independent establishment as defined by 
section 104(l) of such title. 
SEC. 4. PROCUREMENT FROM PRIVATE SOURCES. 
(a) POLICY.—In the process of governing, the Fed-
eral 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 Federal 
Government— 
(1) to rely on commercial sources to supply the 
products and services the Government needs; 
(2) to refrain from providing a product or serv-
ice if the product or service can be procured more 
economically from a commercial source; and 
(3) to utilize Federal employees to perform in-
herently governmental functions (as that term is de-
fined in section 5 of the Federal Activities Inventory 
Reform Act of 1998 (Public Law 105–270; 112 
Stat. 2384)). 
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(b) GENERAL RULE.—Except as provided in sub-
section (c) and notwithstanding any other provision of law, 
each agency shall obtain all goods and services necessary 
for or beneficial to the accomplishment of its authorized 
functions by procurement from private sources. 
(c) EXEMPTIONS.—Subsection (b) shall not apply to 
an agency with respect to goods or services if— 
(1) the goods or services are required by law to 
be produced or performed, respectively, by the agen-
cy; or 
(2) the head of the agency determines and cer-
tifies to Congress in accordance with regulations 
promulgated by the Director of the Office of Man-
agement and Budget that— 
(A) Federal Government production, man-
ufacture, or provision of a good or service is 
necessary for the national defense or homeland 
security; 
(B) a good or service is so critical to the 
mission of the agency or so inherently govern-
mental in nature that it is in the public interest 
to require production or performance, respec-
tively, by Government employees; or 
(C) there is no private source capable of 
providing the good or service. 
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(d) METHOD OF PROCUREMENT.—The provision of 
goods and services not exempt by subsection (c)(1) or 
(c)(2) shall be performed by an entity in the private sector 
through— 
(1) the divestiture of Federal involvement in the 
provision of a good or service; 
(2) the award of a contract to an entity in the 
private sector, using competitive procedures, as de-
fined in section 152 of title 41, United States Code, 
and section 2302 of title 10, United States Code; or 
(3) conducting a public-private competitive 
sourcing analysis in accordance with the procedures 
established by the Office of Management and Budg-
et and determining that using the assets, facilities, 
and performance of the private sector is in the best 
interest of the United States and that production or 
performance, respectively, by the private sector pro-
vides the best value to the taxpayer. 
(e) CONTRACTED ACTIVITIES.—The head of an agen-
cy may utilize Federal employees to provide goods or serv-
ices previously provided by an entity in the private sector 
upon completion of a public-private competitive sourcing 
analysis described in subsection (d)(3), and after making 
a determination that the provision of such goods or serv-
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ices by Federal employees provides the best value to the 
taxpayer. 
(f) REGULATIONS.—The Director of the Office of 
Management and Budget shall promulgate such regula-
tions as the Director considers necessary to carry out this 
section. In promulgating such regulations, the Director 
shall assure that any State or territory, or political sub-
division of a State or territory, complies with the policy 
and implements the requirements of this section when ex-
pending Federal funds. 
SEC. 5. STUDY AND REPORT. 
The Director of the Office of Management and Budg-
et, after consultation with the Comptroller General of the 
United States, shall carry out a study to evaluate the ac-
tivities carried out in each agency, including those identi-
fied as commercial and inherently governmental in nature 
in the inventory prepared pursuant to the Federal Activi-
ties Inventory Reform Act of 1998 (Public Law 105–270; 
31 U.S.C. 501 note) and shall transmit a report to the 
Congress prior to June 30 of each year. The report shall 
include— 
(1) an evaluation of the justification for ex-
empting activities pursuant to section 4(c); and 
(2) a schedule for the transfer of commercial 
activities to the private sector, pursuant to section 
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4(d), to be completed within 5 years after the date 
on which such report is transmitted to the Congress. 
Æ 
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