Kate M. Manuel
Legislative Attorney
Jack Maskell
Legislative Attorney
Recent Congresses and the Obama Administration have taken numerous actions to promote “insourcing,” or the use of government personnel to perform functions that contractors have performed on behalf of federal agencies. Among other things, the 109th through the 111th Congresses enacted statutes requiring the development of policies and guidelines to ensure that agencies “consider” using government employees to perform functions previously performed by contractors, as well as any new functions. The Obama Administration has similarly promoted insourcing. For example, in February 2010, the Secretary of the Army testified that the Army intended to insource 7,162 positions in FY2010 and 11,084 positions in FY2011 through FY2015.
Certain insourcing initiatives of the Department of Defense (DOD) in 2009-2010 prompted legal challenges alleging that DOD failed to comply with applicable guidelines when insourcing particular functions. The only court to reach the issue assumed, without deciding, that certain guidelines were legally binding. However, other courts have not addressed this issue because of questions about jurisdiction and standing. The parties initially conceded that such suits were cognizable under the Administrative Procedure Act (APA), which permits challenges to agency actions that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law,” although the government has recently asserted that insourcing determinations are committed to agency discretion by law and, thus, not reviewable by the courts. At first, there was some uncertainty as to whether the U.S. Court of Federal Claims had jurisdiction over such suits under the Administrative Disputes Resolution Act of 1996, or whether the federal district courts had jurisdiction under the APA. However, most courts to address the issue have found that the Court of Federal Claims has exclusive jurisdiction over challenges to insourcing determinations because such determinations are made in connection with “proposed procurements” and at least some contractors are “interested parties.” More recently, questions have arisen as to whether vendors whose contracts have expired have standing to challenge insourcing determinations, as well as whether contractors who are “interested parties” must also meet prudential standing requirements. These judicially self-imposed limits on the exercise of jurisdiction ensure that plaintiffs are within the “zone of interests” to be protected by the statutes they seek to enforce.
Other provisions of law could also potentially constrain whether and how agencies may proceed with insourcing in particular circumstances, or limit the activities that former contractor employees may perform after being hired by the federal government. These include (1) contract law, under which agencies could be found to have constructively terminated certain requirements contracts by augmenting their in-house capacity to perform services provided for in the contract; (2) civil service law, which would generally limit “direct hires” of contractor employees; and (3) ethics law, which could limit the involvement of former contractor employees in certain agency actions.
Members of the 112th Congress have introduced several measures which seek to ensure that certain contractors have standing to challenge insourcing determinations (H.R. 3893); provide for additional review of certain insourcing determinations (H.R. 3851, H.R. 3980, H.R. 4310); require certain agencies to publicly disclose the procedures and methodologies they use in making insourcing determinations (H.R. 4310); or could otherwise constrain insourcing initiatives (H.R. 1474, S. 785).
Date of Report: July 15, 2012
Number of Pages: 23
Order Number: R41810
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