On March 31, 2010, the Office of Federal Procurement Policy (OFPP) in the Office of Management and Budget (OMB) issued a proposed policy letter on inherently governmental functions and other "work reserved for performance by federal government employees." While not final, the policy letter represents the Obama Administration's proposed guidance for agencies determining (1) whether particular functions are inherently governmental and (2) when functions closely associated with the performance of inherently governmental functions and critical functions should be performed by government personnel. The proposed policy letter was, in part, issued under the authority of the Duncan Hunter National Defense Authorization Act for FY2009 (NDAA'09) and President Obama's memorandum of March 4, 2009, on government contracting. Section 321 of NDAA'09 tasked OMB with (1) reviewing existing definitions of "inherently governmental function" to determine whether such definitions are "sufficiently focused" to ensure that only government personnel perform inherently governmental functions or "other critical functions necessary for the mission of a Federal department or agency;" (2) developing a "single consistent definition" of "inherently governmental function" that would address any deficiencies in the existing definitions, reasonably apply to all agencies, and ensure that agency personnel can identify positions that perform inherently governmental functions; (3) developing criteria for identifying "critical functions" that should be performed by government personnel; and (4) developing criteria for identifying positions that government personnel should perform in order to ensure that agencies develop and maintain "sufficient organic expertise and technical capacity" to perform their missions and oversee contractors' work. President Obama's March 4, 2009, memorandum similarly charged OMB with clarifying when outsourcing is "appropriate." The Office of Federal Procurement Policy has reportedly indicated that a final policy letter will be released "in early 2011." Depending upon their views regarding the desirability and potential efficacy of the provisions of the final policy letter, Members of the 112 th Congress could hold hearings or introduce legislation like that enacted or introduced in the 111 th Congress (e.g., P.L. 111-8 , P.L. 111-84 , P.L. 111-117 ). Under existing law, inherently governmental functions cannot be contracted out. However, agencies generally have considerable discretion in determining whether particular functions are inherently governmental, and some Members of Congress and commentators have alleged that certain functions that have been contracted out should have been classified as inherently governmental (e.g., provision of personal security). There has been particular concern that the existence of multiple or inconsistent definitions of "inherently governmental function" may have facilitated improper contracting out, prompting the 110 th Congress to task OMB with reviewing the existing definitions of "inherently governmental function" and developing a single consistent one. Four definitions of "inherently governmental function" currently exist in law, with one additional definition in a government-wide policy document that lacks the force of law. These definitions arguably do not differ significantly in themselves. However, they are often accompanied by additional guidance, such as descriptions or listings of the types of functions included in or excluded from the category of inherently governmental functions, which differ in ways that some commentators view as significant. There are also numerous statutes classifying specific functions, or work performed by specific entities, as inherently governmental. Agencies are also required by law to give "special consideration" to using federal employees to perform functions closely associated with the performance of inherently governmental functions. However, they are not prohibited from contracting out such functions. According to the Federal Acquisition Regulation (FAR), functions that are not themselves inherently governmental nonetheless can "approach being [inherently governmental] because of the nature of the function, the manner in which the contractor performs the contract, or the manner in which the Government administers contract performance." The FAR lists 19 functions that "approach being" inherently governmental, but this list is not all-inclusive. Critical functions are not presently defined for purposes of federal law, and there are no limitations upon contracting them out. Legislation was introduced in the 111 th Congress that would have created a category of "mission essential functions" that must be performed by government employees, and some commentators consider mission-essential functions to be critical ones. However, this legislation was not enacted. Agencies are also not currently prohibited from contracting out functions when doing so could potentially lead to a loss of "organic expertise and technical capacity." While not final, the policy letter represents the Obama Administration's proposed guidance for agencies determining (1) whether particular functions are inherently governmental and (2) when functions closely associated with the performance of inherently governmental functions and critical functions should be performed by government personnel. It articulates that "[i]t is the policy of the Executive branch to ensure that government action is taken as a result of informed, independent judgments made by government officials." However, it also states the following: Nothing in this guidance is intended to discourage the appropriate use of contractors. Contractors can provide expertise, innovation, and cost-effective support to federal agencies for a wide range of services. Reliance on contractors is not, by itself, a cause for concern, provided that the work they perform is not work that should be reserved for federal employees and that federal officials are appropriately managing contractor performance. In its guidance on inherently governmental functions, the proposed policy letter can be seen as a successor to OFPP Policy Letter 92-1, which established executive branch policy regarding "service contracting and inherently governmental functions" and was designed to assist agencies in "avoiding an unacceptable transfer of official responsibility to Government contractors." Policy Letter 92-1 expressly prohibited contracting out inherently governmental functions, which it defined as "[functions] that [are] so intimately related to the public interest as to mandate performance by Government employees." Although Policy Letter 92-1 is still occasionally cited as an authority on the definition of inherently governmental functions, the 2003 revision of OMB Circular A-76 incorporated some of its contents and superseded it. In contrast, the proposed policy letter's guidance on when functions closely associated with the performance of inherently governmental functions and critical functions should be performed by government personnel would arguably be unprecedented. There is nothing like it in Policy Letter 92-1 or OMB Circular A-76. OMB Circular A-76 provides guidance for agencies in determining whether government personnel or private contractors can more efficiently perform commercial activities on behalf of the government. It notes the existence of—but does not define or otherwise address—a category of activities that are commercial but "not appropriate for private sector performance." In keeping with Section 321 of the Duncan Hunter National Defense Authorization Act for FY2009, which tasked OMB with developing a "single consistent definition" of "inherently governmental function," the proposed policy letter adopts the definition of "inherently governmental function" in the Federal Activities Inventory Reform (FAIR) Act. The FAIR Act defines an "inherently governmental function" as one that is "so intimately related to the public interest as to require performance by Federal Government employees." However, neither the proposed policy letter nor the introductory comments on it indicates what, if any, changes the Obama Administration would make to other regulations or policy documents that also define "inherently governmental function" (e.g., the FAR, OMB Circular A-76). In addition to defining "inherently governmental function," the policy letter requires that agencies take certain steps to ensure that they do not contract out such functions. Before issuing a solicitation, agencies would be required to determine that none of the requirements are (1) designated as inherently governmental in statute, (2) listed among the functions included in Appendix A of the proposed letter, which corresponds to Subpart 7.5 of the FAR, or (3) qualify as such under one of several tests proposed in the letter. The first of these tests focuses on the nature of the function and requires that functions involving the exercise of sovereign powers, or "powers that are uniquely governmental," be classified as inherently governmental regardless of the "type or level of discretion associated with the function." The second test focuses on the exercise of discretion and prohibits agencies from contracting out functions involving an exercise of discretion that would commit[] the government to a course of action where two or more alternative courses of action exist and decision making is not already limited or guided by existing policies, procedures, directions, orders, and other guidance that: (A) [i]dentify specified ranges of acceptable decisions or conduct concerning the overall policy or direction of the action; and (B) [s]ubject the discretionary authority to final approval or regular oversight by agency officials. The notice of the proposed policy letter also requests comments on a third possible test, the principal-agent test, that would require agencies to identify functions as inherently governmental "where serious risks could be created by the performance of these functions by those outside the government, because of the difficulty of ensuring sufficient control over such performance." Written determinations that functions to be contracted out are not inherently governmental would have to be included in the contract file, along with the analysis that supports this determination. Agencies would also be required to monitor the functions currently being performed by contractors to ensure that contractor performance of functions closely associated with the performance of inherently governmental functions, in particular, "does not expand to include performance of inherently governmental functions or otherwise interfere with federal employees' ability to carry out their inherently governmental responsibilities." If they find that contractors are performing inherently governmental functions, agencies are instructed to reestablish control over these responsibilities by strengthening oversight, insourcing the work through the timely development and execution of hiring plans, refraining from exercising options under the contract, or terminating all or part of the contract. The proposed policy letter does not address the definition of "functions closely associated with the performance of an inherently governmental function." However, given that its Appendix B lists the same functions that the FAR lists as "approaching being" inherently governmental, the proposed policy letter appears to rely on the FAR's definition of such functions.