Sourcing policy refers, generally, to determining which sector—public (government) or private—will perform an agency's function(s). Both federal employees and contractor employees have valid roles to play in performing the work of the federal government. This combined workforce is known as a blended workforce. Determining which sector will perform which functions, including determining when federal employee performance is, or should be, required can be challenging, however. Efforts to address this issue, and related questions, have been the subject of the federal government's sourcing policy since at least the 1950s. Sourcing policy is not so much a product of coordinated planning and implementation as it is an amalgamation of statutory provisions, policy letters, administrative directives, and guidance issued by various presidential administrations. Sourcing policy has been at the root of contentious debates, which may complicate the somewhat murky picture. This brief overview of the report is provided to assist in navigating the subject of sourcing policy. Sourcing policy encompasses two major strains. Delving into the history of sourcing policy is necessary for understanding the strain that emerged in the 1950s, and for providing context for the strain that emerged during President Barack Obama's Administration. The latter strain has not necessarily displaced, or replaced, the former strain, though it might not always be clear to outside observers what actions agencies are taking, or are expected to take. The complexity might be due, at least in part, to the ad hoc fashion in which sourcing policy has evolved and the mix of government documents involved. The strain that emerged first, with the issuance of three Bureau of the Budget (BOB) bulletins in the 1950s, emphasizes governmental reliance on the private sector for the provision of goods and services. An unwritten corollary of this strain of sourcing policy has been that certain functions performed by federal employees may be subjected to public-private competition. A competition determines whether the incumbent workforce would continue to perform the work, or the agency would award a contract to a private company to perform the work. Circular A-76, which was issued initially in 1966, continued this policy of governmental reliance on the private sector and provides guidance and procedures for carrying out public-private competitions. The Office of Management and Budget has published five revisions to the circular. The current circular (or revision) was released in May 2003. Generally, the term introduced by the Administration of President George W. Bush—competitive sourcing—is associated with this strain of sourcing policy. Throughout the history of sourcing policy, only certain functions have been eligible for public-private competitions. Beginning with the Bureau of the Budget bulletins published during the Eisenhower Administration, only agency functions identified as commercial may be subjected to public-private competitions. Any agency function designated as governmental (or, later, inherently governmental ) must be performed by federal employees. With the continued emphasis on governmental reliance on the private sector finding expression in a "[g]overnment policy [that] has favored contracting for goods and services rather than providing them in-house," the commercial/inherently governmental dichotomy and the focus on public-private competitions sufficed for a number of years. As the needs of the government expanded over the years, however, contracting for services grew, both in terms of the amount spent on contracts and the types of services provided by contractors. Notably, the federal government's short-term and long-term responses to the terrorist attacks of September 11, 2001, involved a significant growth in service contracting. The federal government invaded Afghanistan and then Iraq; added a new department tasked with safeguarding the homeland; and embarked upon a raft of new initiatives and programs involving, for example, intelligence, transportation security, and cybersecurity. Determining who should do the work of the federal government became more challenging as, for example, certain practices were called into question (e.g., using companies to conduct passenger screening at airports); controversy swirled around some events that involved private security contractors (e.g., private security guards reportedly shot Iraqi civilians in 2007 ); and concerns surfaced that, in the rush to expand its capabilities, the federal government was at risk of having contractor employees perform inherently governmental work. Thus, the second strain of sourcing policy that has emerged focuses on ensuring that the federal government has the best, or most appropriate, mix of federal employees and contractor employees. The Obama Administration, through guidance issued by the Office of Management and Budget, refers to this strain as multi-sector workforce management. Unlike competitive sourcing, the multisector workforce management strain relies chiefly (though not entirely) on an expanded typology of functions and associated guidance to determine who—federal employees or contractor employees—should perform which agency functions. Additions to the existing typology (commercial functions and inherently governmental functions) are critical functions and functions closely associated with inherently governmental functions . According to the Obama Administration's guidance, multi-sector workforce management was devised to ensure that agencies' reliance on contractors is not excessive. Restated, this strain focuses on ensuring that agencies, not contractors, perform inherently governmental functions, and that agencies retain control over their mission and operations. This report begins with a history of sourcing policy that focuses on the terms commercial and inherently governmental , and the policy of government reliance on the private sector. The following section examines the two strains of sourcing policy: competitive sourcing and multi-sector workforce management. The juxtaposition of the Bush Administration's competitive sourcing initiative and the Obama Administration's multi-sector workforce management effort aids in understanding different, yet potentially complementary, facets of sourcing policy. Policy issues that may be of interest to the 112 th Congress are also discussed. Familiarity with the terms commercial and inherently governmental is integral to understanding the federal government's sourcing policy and related issues. A commercial activity may be performed by a contractor employee or a federal employee. An inherently governmental function may be performed only by federal employees. Although, at times or under certain circumstances, other terms have been used, such as core functions , government-wide sourcing policy, generally, has relied on this dichotomy: a government function (or activity) is either commercial or inherently governmental. An agency may choose to subject a commercial activity to a public-private competition. The competition is held to determine who will perform the work in the future: the incumbent workforce (usually federal employees) or the competitor (usually a contractor). Office of Management and Budget (OMB) Circular A-76 provides the policy and guidance governing public-private competitions. As discussed below, a description of commercial activity appeared initially in a 1955 Bureau of the Budget (BOB) bulletin and a definition was published in 1966. A written definition of inherently governmental was first published in 1979. Bureau of the Budget Bulletin 55-4 may have been the first policy document that addressed the idea that a government activity may be commercial in nature. The relevant passage is as follows: In determining whether an activity is "commercial" in nature and "could be procured … through ordinary business channels," reference may be made to the Standard Industrial Classification Manual and to ordinary business practice with respect to procurement of services or products. The inclusion of an activity in the manual will be generally considered indicative that it may be procured commercially. There will be excluded from coverage as noncommercial, however, those functions which are a part of the normal management responsibilities of a Government agency or a private business of comparable size (such as accounting, personnel work, and the like). Eleven years later, the Bureau of the Budget provided a definition of commercial activity . The definition, which was included in the original Circular A-76, reads as follows: A Government commercial or industrial activity is one which is operated and managed by an executive agency and which provides for the Government's own use a product or service that is obtainable from a private source. The word industrial was dropped with the publication of the 1983 revision to Circular A-76. The current definition of commercial activity , which features the term recurring service , may be found in the 2003 version of Circular A-76. [A commercial activity is a] recurring service that could be performed by the private sector. This recurring service is an agency requirement that is funded and controlled through a contract, fee-for-service agreement, or performance by government personnel. Commercial activities may be found within, or throughout, organizations that perform inherently governmental activities or classified work. Under the Federal Activities Inventory Reform (FAIR) Act ( P.L. 105-270 ), agencies are required to submit inventories of their commercial activities to OMB by June 30 of each year. An agency's inventory is to include, for each activity listed, the "number of full-time employees [FTEs] (or its equivalent)" needed for government performance. A definition of the term governmental function did not appear in a sourcing policy document until 1979, 24 years after the term commercial was introduced. The definition of governmental function , which was included in the 1979 revision to Circular A-76, was as follows: A "Governmental function" is a function which must be performed in-house due to a special relationship in executing governmental responsibilities. Such governmental functions can fall into several categories: (1) Discretionary application of Government authority …. (2) Monetary transactions and entitlements …. (3) In-house core capabilities …. The term commonly used today, inherently governmental function , appeared initially in the Office of Federal Procurement Policy's (OFPP's) Policy Letter 92-1, which was issued in September 1992. (The letter was superseded by the 2003 revision to Circular A-76.) Policy Letter 92-1 provided the following definition: As a matter of policy, an "inherently governmental function" is a function that is so intimately related to the public interest as to mandate performance by Government employees. These functions include those activities that require either the exercise of discretion in applying Government authority or the making of value judgments in making decisions for the Government.