I delivered this presentation to federal government HR staffs in June 2012.

1. Insourcing Basics
Thomas F. Kaplan
June 7, 2012

2. Notices
The basis for information in this presentation is U.S. Public Law
and U.S. Office of Management and Budget policy. You should
check with your agency to learn how it implements insourcing.
Some of the information contained in this presentation is
protected under U.S. Copyright Law.
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3. Topics
• What is Insourcing?
• Why Insourcing Now?
• When is Insourcing Required?
• Who is Responsible for Insourcing?
• What is an Inherently Governmental Function?
• What is a Closely Associated with Inherently Governmental
Function?
• What is a Critical Function?
• What are Some of the HR Roles in Insourcing?
• Resources
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4. What is Insourcing?
• Insourcing is the act or result in changing
performance of functions from non-federal
employees (e.g., contractors) to federal
employees.
• The opposite of outsourcing or contracting out
of functions.
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5. Why Insourcing Now?
• Insourcing
– Returns inherently governmental and closely
associated with inherently governmental functions to
federal performance, and
– reduces overreliance on contractors generally due to
• the growth of the contractor workforce, and
• lack of adequate government contractor oversight.
– Ensures critical functions have sufficient internal
capability to maintain control over functions that are
core to the agency’s mission and operations.
Source: OMB Memorandum M-09-26, Managing the Multi-Sector Workforce, July 29, 2009
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6. When is Insourcing Required?
• SPECIAL CONSIDERATION FOR CERTAIN FUNCTIONS
– The guidelines and procedures required … shall provide for special consideration to be
given to using Federal employees to perform any function that is performed by a
contractor and
• has been performed by Federal employees at any time during the
previous 10 years;
• is a function closely associated with the performance of an
inherently governmental function;
• has been performed pursuant to a contract awarded on a
non-competitive basis; or
• has been performed poorly, as determined by a contracting officer
during the five year period preceding the date of such
determination, because of excessive costs or inferior quality; or
– is a new requirement, with particular emphasis given to a new requirement that is
similar to a function previously performed by Federal employees or is a function closely
associated with the performance of an inherently governmental function.
Source: PL 110-161, Section 736, Guidelines on
Insourcing New and Contracted Out Functions
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7. Who is Responsible for Insourcing?
• GUIDELINES REQUIRED
– The heads of executive agencies subject to the Federal Activities Inventory
Reform Act of 1998 shall devise and implement guidelines and procedures
to ensure that consideration is given to using, on a regular basis, Federal
employees to perform new functions and functions that are performed by
contractors and could be performed by Federal employees.
– The guidelines and procedures required … may not include any specific
limitation or restriction on the number of functions or activities that may be
converted to performance by Federal employees.
Source: PL 110-161, Section 736, Guidelines on
Insourcing New and Contracted Out Functions
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8. What is an Inherently Governmental Function?
• A function that is so intimately related to the public interest as to require
performance by Federal Government employees.
– The term includes functions that require either the exercise of discretion in
applying Federal Government authority or the making of value judgments in
making decisions for the Federal Government, including judgments relating to
monetary transactions and entitlements.
– The term does not normally include—
• gathering information for or providing advice, opinions,
recommendations, or ideas to Federal Government officials; or
• any function that is primarily ministerial and internal in nature (such as
building security, mail operations, operation of cafeterias, housekeeping,
facilities operations and maintenance, warehouse operations, motor
vehicle fleet management operations, or other routine electrical or
mechanical services).
Source: Office of Federal Procurement Policy (OFPP) Policy Letter 11–01,
Performance of Inherently Governmental and Critical Functions
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9. What is a Closely Associated with Inherently
Governmental Function?
• Services in support of inherently governmental functions, including, but not
limited to the following:
– Performing budget preparation activities, such as workload modeling, fact
finding, efficiency studies, and should-cost analyses.
– Undertaking activities to support agency planning and reorganization.
– Providing support for developing policies, including drafting documents, and
conducting analyses, feasibility studies, and strategy options.
– Others.
Source: Office of Federal Procurement Policy (OFPP) Policy Letter 11–01,
Performance of Inherently Governmental and Critical Functions
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10. What is a Critical Function?
• The policy letter requires agencies to identify their ‘‘critical functions’’ in order to
ensure they have sufficient internal capability to maintain control over functions
that are core to the agency’s mission and operations.
• While contractor performance of critical functions is common, if the agency
determines that internal control of its mission and operations is at risk due to
overreliance on contractors to perform critical functions, requiring activities should
work with their human capital office to develop and execute a hiring and/or
development plan.
• Typically, critical functions are recurring and long-term in duration.
Source: Office of Federal Procurement Policy (OFPP) Policy Letter 11–01,
Performance of Inherently Governmental and Critical Functions
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11. What are Some of the HR Roles?
• OMB Memorandum M-09-26, Managing the Multi-Sector Workforce, July
29, 2009 states under “An Initial Framework for Managing the Multi-Sector
Workforce”
– Workforce Planning
• Derive workforce needs from organizational goals, and
• Determine skill mix and total labor requirements.
– Sourcing Determination
• Determine if work must be performed only by federal employees or may be
performed by either federal employees or private sector contractors, and
• Perform a cost analysis if both sectors are being considered for performance
of a function.
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12. What are Some of the HR Roles? (ctd)
• Additional roles may include
– Identifying inherently governmental and critical
functions
– Conducting labor market analysis to determine
feasibility and timing for potential insourcing
actions
– Evaluating and adjusting competency models in
cases where contractors were utilized in lieu of
Federal employees to ensure adequacy and
availability of skills
Copyright, 2012, Thomas F. Kaplan
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13. Summary
• The agency Chief Acquisition Officer and Chief Human Capital
Officer have specific responsibilities for implementing
insourcing
• Agencies must have published insourcing policies and
guidelines (since 2009)
• Inherently governmental functions must (always) be
performed by federal employees
• HR has an important role in implementing insourcing through
workforce planning and executing sourcing decisions
Copyright, 2012, Thomas F. Kaplan
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14. Resources
• Public Law
– 110-181, Section 324, Guidelines on Insourcing New and Contracted Out Functions (DoD) http://www.gpo.gov/fdsys/pkg/PLAW-110publ181/html/PLAW-
110publ181.htm
– 110-161, Section 736, Guidelines on Insourcing New and Contracted Out Functions http://thomas.loc.gov/cgi-bin/query/C?c111:./temp/~c111T6TWtc
– 111-117, Section 743. (a) Service Contract Inventory Requirement http://www.gpo.gov/fdsys/pkg/PLAW-111publ117/pdf/PLAW-111publ117.pdf
– 105-270, The Federal Activities Inventory Reform Act http://www.whitehouse.gov/omb/procurement_fairact/
• U.S. Office of Management and Budget/Office of Federal Procurement Policy
– OMB Memorandum M-09-26, Managing the Multi-Sector Workforce, July 29, 2009
http://www.whitehouse.gov/sites/default/files/omb/assets/memoranda_fy2009/m-09-26.pdf
– Office of Federal Procurement Policy (OFPP) Policy Letter 11–01, Performance of Inherently Governmental and Critical Functions
http://www.gpo.gov/fdsys/pkg/FR-2011-09-12/pdf/2011-23165.pdf
• U.S. Office of Personnel Management Chief Human Capital Officer’s Training Academy
– Multi-Sector Workforce Analysis Pilot Project: Early Lessons Learned and Emerging Best Practices, by Thomas F. Kaplan
www.chcoc.gov/Meetings/DownloadFile.aspx?MeetingFileID=160
• U.S. Governmental Accountability Office
– Army Case Study Delineates Concerns with Use of Contractors as Contract Specialists http://www.gao.gov/products/GAO-08-360
– Civilian Agencies' Development and Implementation of Insourcing Guidelines http://www.gao.gov/products/GAO-10-58R
– Initial Agency Efforts to Balance the Government to Contractor Mix in the Multisector Workforce http://www.gao.gov/products/GAO-10-744T
• Congressional Research Service
– Insourcing Functions Performed by Federal Contractors: An Overview of the Legal Issues http://www.fas.org/sgp/crs/misc/R41810.pdf
• U.S. Department of Defense
– DoD Insourcing Initiative Clearinghouse http://prhome.defense.gov/RSI/REQUIREMENTS/INSOURCE/
• U.S. Department of Energy
– Multi-Sector Workforce Management Operating Guidelines http://energy.gov/sites/prod/files/maprod/documents/MSWF_Op_Gd_Link_1.pdf
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15. Thomas F. Kaplan
Thomas (Tom) retired from federal service in April 2012. His most recent positions was as the Research and Development
Program Management Officer for the U.S. Office of Personnel Management Human Resources Solutions Group at their
Washington, D.C. headquarters. Tom has 28 years of civilian and military headquarters and field activity and private sector
technical experience in human capital and human resources, financial management, procurement, and organizational change
disciplines. Tom’s practical, hands-on experience spans every phase of developing and executing organizational change,
strategic human capital plans, and multi-sector workforce management efforts to help transform the government into a
performance-oriented, cost-effective workplace.
Tom is the principle author of “The Human Resources Role in Managing Organization Change,” FPMI, 1999 and 2003.
Tom’s copyrighted works include:
• The Human Resources Role in Managing Organization Change, 2007
• Blended Workforce Management Model, 2008 https://acc.dau.mil/CommunityBrowser.aspx?id=240581&lang=en-US
• Analyzing and Balancing the Federal Blended Workforce, 2008
• Multi-Sector Workforce Management Analysis and Insourcing Implementation Model, 2011
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