Crowell & Moring

The Department of Defense (“DoD”) continues to contract out work that should be handled by federal employees, according to a new Government Accountability Office (“GAO”) study, which finds shortcomings in DoD’s tracking and management of such “inherently governmental” tasks.

The study urges DoD to better police its inventory of contracts—and bring in-house those functions too sensitive or policy-oriented for private contractors. DoD has agreed with the findings and has pledged to carry out GAO’s recommendations within the next year.

Inherently governmental functions are tasks intimately related to the public interest and that require discretion or value judgments in making decisions for the federal government. FAR § 7.503(c) contains a lengthy list of examples: criminal investigations, determinations of budget priorities, and setting agency policy, among many others. In addition, some functions not inherently governmental may still have to be brought in-house. FAR § 7.503(d) contains examples: budget preparations, evaluation of contractors, and inspection services, among others.

Congress, in section 803(c) of the National Defense Authorization Act for Fiscal Year 2010, directed GAO to report annually for three years on DoD’s inventory of contractor activity. In its first report, in January 2011, GAO found numerous holes in DoD’s inventory protocols and recommended the agency establish a plan for achieving goals and a time frame for reform. The new GAO study, however, finds only “limited progress” by DoD in meeting those goals.

The Army’s FY2009 inventory review found 1,935 instances where inherently governmental tasks were contracted out. The Air Force review found 91. The tasks included engineering and technical services, program management, and support services.  In the new study, GAO examined 12 of these improperly contracted-out tasks in-depth and found eight of them were still in the hands of private contractors despite GAO and Congress’s prior warnings.  In general, the GAO study concludes DoD needs  “greater accountability and management attention” in managing its contractor inventory.

With GAO slated to revisit the issue again in a year, DoD will likely increase its efforts to bring certain contracts in-house. Federal contractors would be wise to evaluate whether their work falls into the inherently governmental category and thus possibly work the federal government will soon seek to reclaim.