While agencies are prohibited by federal law and policy from contracting out functions that are "inherently governmental," other functions could potentially be contracted out. There has long been debate over both general government policies promoting the use of the private sector to perform "commercial functions," and whether specific functions should be performed by government personnel or contractors. However, since 2008, the insourcing initiatives of recent Congresses and the Obama Administration have generated particular controversy. Several lawsuits have been filed challenging agencies' determinations to insource particular functions, and broader questions have been raised as to whether agencies' implementation of insourcing runs afoul of civil service, ethics, or small business laws. This report provides a brief overview of key legal issues related to recent insourcing initiatives. It will be updated as developments occur. Since January 1955, the federal government has consistently had policies promoting the use of the private sector to produce commercial products and perform commercial services, although the wording of such policies and, particularly, the degree to which they have been implemented by the executive branch have varied over time. The George W. Bush Administration, for example, promoted this policy vigorously under the name of "competitive sourcing" (later "commercial services management"), which was a key component of the President's Management Agenda. Its doing so prompted concern among some commentators, who asserted that competitive sourcing represented a concerted effort to shift work to the private sector and resulted in contractors performing functions that should have been performed by government employees. Responding, in part, to such concerns, the 109 th Congress enacted legislation directing the Secretary of Defense to "prescribe guidelines and procedures for ensuring that consideration is given to using Federal Government employees for work that is currently performed or would otherwise be performed under Department of Defense [DOD] contracts." These guidelines and procedures are to ensure that "special consideration" is given to using government personnel to perform functions that had been performed by government employees at any time on or after October 1, 1980; are closely associated with the performance of inherently governmental functions; are performed under contracts that were not competitively awarded; or have been performed poorly by a contractor due to excessive costs or inferior quality. Subsequent Congresses expanded upon these requirements. First, the 110 th Congress required that DOD guidelines and procedures also give consideration to using government employees to perform new functions, as well as those that had been contracted out. Then, the 111 th Congress imposed similar requirements upon civilian agencies. When President Obama took office, these and related legislative actions were supplemented by a number of executive branch initiatives that also promoted insourcing of at least certain functions. President Obama himself paved the way for such initiatives with a March 4, 2009, memorandum on government contracting, which suggested that "contractors may be performing inherently governmental functions." Although explicitly focused on impermissible and inappropriate outsourcing of inherently governmental functions, this memorandum implied that at least certain functions that have been outsourced should be returned to government performance (i.e., insourced). DOD and the Office of Management and Budget (OMB) both subsequently issued additional guidance regarding insourcing. For example, in a May 28, 2009, memorandum, the Deputy Secretary for Defense called for the development of insourcing plans and stated that insourcing should be part of a "total force approach to workforce management and strategic human capital planning." OMB took a similar approach in its July 29, 2009, memorandum on "Managing the Multi-sector Workforce," directing agencies to conduct pilot human capital analyses of programs where the agency has concerns about reliance on contractors. The President's FY2011 budget submissions later reiterated the call for agencies to "be alert for situations in which excessive reliance on contractors undermines the ability of the Federal Government to control its own operations and accomplish its missions for the American people." DOD, in particular, heeded this call, with the Secretary of the Army testifying in February 2010 that the Army intended to insource 7,162 positions in FY2010 and 11,084 positions in FY2011 through FY2015. Such announcements prompted some commentators to object that DOD's insourcing initiatives had become a "quota driven exercise." These and subsequent insourcing initiatives generated several lawsuits, discussed in more detail below, alleging that DOD failed to comply with its own policies and procedures when determining to insource specific functions. Because federal agencies have broad discretion in determining their own requirements and how they will meet these requirements, whether with their own employees or by contracting out, there do not appear to be any legal barriers to insourcing per se. However, various provisions of federal law could constrain whether and how agencies may proceed with insourcing in particular circumstances, as well as limit the activities that former contractor employees may perform after being hired by the federal government. These provisions include (1) the Administrative Procedure Act, which could potentially preclude agencies from implementing insourcing determinations that were not made in accordance with any applicable statutes, regulations, or guidelines; (2) contract law, under which agencies could be found to have constructively terminated for convenience, or even breached, certain requirements contracts by augmenting their in-house capacity to perform services provided for in the contract; (3) civil service law, which would generally limit "direct hires" of contractor employees; and (4) ethics law, which could limit the involvement of former contractor employees who are hired by the government in certain agency actions. No issues of small business law would appear to be implicated, even though small businesses are generally given special consideration under federal law, and some commentators have expressed concern that insourcing, at least as implemented to date, has disproportionately affected small businesses. However, the Obama Administration has provided that, as a matter of policy, agencies should place a lower priority on reviewing certain functions performed by small businesses when determining which functions should be insourced, as well as give small businesses preference when determining who performs work that remains in the private sector after related functions are insourced. The report does not address any limits on insourcing that may be imposed by agency personnel ceilings or caps, largely because such ceilings or caps pertain to agency personnel, not agency functions. While personnel and functions are obviously related, and there could potentially be instances where agencies experience difficulties in insourcing particular functions due to a lack of personnel, agencies could return functions to in-house performance without hiring new personnel. In addition, such caps or ceilings typically do not raise legal issues like those discussed herein. Assuming that the decision to insource particular functions is not "committed to agency discretion by law," as the government has recently asserted, the Administrative Procedure Act (APA) could potentially constrain such decisions by allowing challenges to agency actions that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." Where insourcing is concerned, applicable laws could include various statutes requiring DOD to "use the least costly form of personnel consistent with military requirements and other needs of the Department," or to ensure that the difference in the cost of performing functions with DOD civilian employees, instead of contractors, exceeds certain thresholds when determining whether a function should be insourced. It could also potentially include various guidelines, such as DOD's directive on "Estimating and Comparing the Full Costs of Civilian and Military Manpower and Contract Support." Guidelines not based in statutes or regulations are not necessarily enforceable in the same way that statutes and regulations are. However, they could potentially be found to be legally binding if the agency intended to be bound, or has employed the guidelines in such a way that they are binding as a practical matter. To date, no court appears to have directly addressed whether the non-statutory guidelines utilized in the Obama Administration's insourcing initiatives are legally binding, although one court seems to have assumed, without deciding, that certain guidelines were binding. Rather, the litigation has focused, first, upon whether the U.S. Court of Federal Claims or the federal district courts have jurisdiction over challenges to insourcing determinations and, more recently, upon whether contractors who meet certain statutory standing requirements (i.e., are "interested parties") must also meet prudential standing requirements, as well as whether challenges to insourcing determinations are moot after the vendor's contract expires. In the earliest cases challenging DOD's insourcing initiatives, the parties generally agreed that insourcing determinations were reviewable under the APA, but contested whether the Court of Federal Claims or the federal district courts had jurisdiction over such challenges. This question arose because the APA's waiver of the government's sovereign immunity as to suits brought against it in the federal district courts is limited, and does not apply if "any other statute that grants consent to suit expressly or impliedly forbids the relief which is sought." Among the other statutes waiving the government's sovereign immunity is the Tucker Act, as amended by the Administrative Dispute Resolution Act (ADRA) of 1996, which provides that, effective January 1, 2001, the U.S. Court of Federal Claims has exclusive trial-level jurisdiction over any action by an interested party objecting to a solicitation by a Federal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement. The key questions in the initial cases were, thus, (1) whether plaintiffs challenging insourcing determinations are "interested parties," and (2) whether insourcing determinations are made "in connection with a procurement or a proposed procurement." If the plaintiffs were interested parties and insourcing determinations were made in connection with procurements or proposed procurements, then the Court of Federal Claims would have exclusive jurisdiction over such challenges pursuant to the Tucker Act, as amended by ADRA. However, if insourcing determinations were not made in connection with procurements or proposed procurements, then the federal district courts would have jurisdiction under the APA.