Defence Reform Bill

Written Evidence from Professor Trevor Taylor & Dr John Louth (DR 09)

Royal United Service Institute

We are grateful that the Committee, in addition to our oral evidence, is willing to receive written material from us. We have not sought to address the full gamut of issues associated with the GOCO section of the Defence Reform Bill but have restricted ourselves here to two areas.

1. The national identity of the GOCO company/participating companies

We were asked Q.23 if we had concerns about the national ownership of any GOCO lead contractor. We responded that it was the clearance arrangements for (and implicitly national identities of) the staff involved which should provide the main protection for the sensitive information received by the GOCO.

On reflection we would add that the governance arrangements which the US imposes on foreign owned defence companies operating in the US would perhaps be a reasonable model to consider: it would at least provide a clear sense of what another country regards as a satisfactorily arrangement to protect intellectual property. 

2. The US concept of the Inherently Governmental Function

We assume that the Government is aware of the precise US stance but nonetheless wish to bring some particular wording to the Committee’s attention.

President Obama decided that the precise meaning of Inherently Government Functions should be studied and clarified and, as a consequence, after a period of consultation with a preliminary document in 2010, the Office of Federal Procurement Policy issued a definitive Policy Letter in June 2011. [1]

The Letter identified three areas of concern

· Inherently governmental functions

o ‘a function that is so intimately related to the public interest as to mandate performance by public employees’: these were words used in the Federal Activities Inventory Reform Act of 1998.

· Functions ‘closely associated’ with the inherently governmental

o These were mainly concerned with information provision and advice roles

· Critical functions

o These were roles and associated capabilities necessary to an agency (ministry) being able effectively to perform and maintain control of its mission and operations

On the Inherently Governmental, the Letter said that ‘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’. In addition, ‘an inherently governmental function ... involves, among other things, the interpretation and execution of the laws of the United States so as

(5) to exert ultimate control over the acquisition, use, or disposition of the property, real or personal, tangible or intangible, of the United States, including the collection, control, or disbursement of appropriations and other Federal funds.

The Letter went on to define what this meant in practice and provided an extensive list of examples of functions that fell into the inherently governmental category. We quote:

‘15. in Federal procurement activities with respect to prime contracts

a) determining what supplies or services are to be acquired by the government ....

b) participating as a voting member on any source selection boards

c) approving of any contractual documents, including documents defining requirements, incentive plans, and evaluation of criteria;

d) determining that prices are fair and reasonable;

e) awarding contracts;

f) administering contracts (including awarding changes in contract performance or contract quantities, making final determination about a contractor’s performance, including award fee determinations or past performance evaluations and taking action based on those evaluations, and accepting or rejecting contractor products and services;

g) terminating contracts;

h) determining whether contract costs are reasonable, allocable and allowable; and

i) participating as a voting member on performance evaluation boards.’

The ‘closely associated’ roles with regard to procurement related mainly to areas of information generation and advice. The Letter notes concern that, when contractors are used in these closely associated functions, it could impinge on officials’ capability to do inherently governmental work, and so departments are required to take special care when using contractors in such roles. The Department of Defense is singled out as needing particular wariness and ‘is further required, to the maximum extent practicable, to minimise reliance on contractors performing functions closely associated with inherently governmental functions’. Moreover, ‘when contractors are used in this area, agencies must give special management attention to preventing contractors’ expansion into the inherently governmental area’. Other relevant commandments are that: ‘Agency managers are required to ensure institutional knowledge is maintained by sufficient personnel with the requisite training, experience and expertise to oversee contractor effort’; and ‘Agencies must maintain internal capability to keep control over their core functions’.


[1] Office of Management & Budget: Office of Federal Procurement Policy, Publication of the Office of federal Procurement Policy (OFPP) Policy letter 11-01, Performance of Inherently Governmental and Critical Functions, Federal register, Vol.76, No.176, 12 September 2011, p.56227-56242. See also Office of Management & Budget, Office of Federal Procurement Policy, Publication of the Office of Federal Procurement Policy, letter 11-01, Performance of Inherently Governmental Functions, http://www.willis.com/Documents/Publications/Industries/Government_Contractors/Letter_11-01_Performance_of_Inherently_Governmental_and_Critical_Functions.pdf .

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[1] September 2013

Prepared 9th October 2013