FAR 17.603—Limitations.
Plain-English Summary
FAR 17.603 sets the limits on when a management and operating (M&O) contract may be used. It identifies five categories of functions that may not be authorized under an M&O arrangement: directing, supervising, or controlling Government personnel (except incidental training supervision); exercising police or regulatory powers in the Government’s name (other than guard or plant protection services); determining basic Government policy; performing day-to-day staff or management functions of the agency or its elements; and functions that should instead be handled under FAR subpart 45.3 on authorizing the use and rental of Government property. The section also explains that if an authorization has already been issued under FAR 17.602(a), that authorization is treated as sufficient proof that these limitations were satisfied, and paragraph (a) does not undermine the validity or legality of that authorization. Finally, it points readers to FAR subpart 22.5 for project labor agreements. In practice, this section is a guardrail: it helps agencies avoid using M&O contracts for inherently governmental or internal management functions, while preserving the legal effect of properly issued authorizations and directing users to the correct labor-relations rules when project labor agreements are involved.
Key Rules
No control of Government personnel
An M&O contract may not be used for functions that direct, supervise, or control Government employees. The only exception is supervision that is merely incidental to training.
No police or regulatory powers
The contract may not cover functions that exercise police or regulatory authority in the Government’s name. Guard or plant protection services are specifically excepted and may still be permissible.
No basic policy decisions
M&O contracts cannot be used for determining basic Government policies. Policy-setting remains a Government function and cannot be delegated through this contract type.
No day-to-day agency management
The contract may not cover routine staff or management functions of the agency or its components. This prevents M&O contracts from replacing the agency’s own internal management structure.
Use property rules when appropriate
If a function is better handled under FAR subpart 45.3, the M&O contract should not be used for that purpose. The rule directs agencies to the Government property authorization and rental framework instead.
Prior authorization remains valid
If an authorization was issued under FAR 17.602(a), that authorization is deemed sufficient proof of compliance with these limitations. Paragraph (a) does not invalidate an authorization already properly issued.
Project labor agreements are separate
Questions about project labor agreements are not resolved here; users must look to FAR subpart 22.5. This section simply cross-references the labor rules that may apply.
Responsibilities
Contracting Officer
Ensure the contemplated M&O contract does not include prohibited functions, and confirm that any authorization under FAR 17.602(a) is properly supported. The contracting officer must also route property-related issues to FAR subpart 45.3 and labor-agreement issues to FAR subpart 22.5.
Agency Officials
Identify the agency’s true policy, management, and inherently governmental functions and avoid structuring M&O contracts to transfer those responsibilities to a contractor. They must also distinguish internal management work from permissible contract support.
Contractor
Perform only the functions authorized under the M&O contract and avoid assuming control over Government personnel, policy, or regulatory authority. The contractor should also recognize when property-use or labor requirements are governed by other FAR parts.
Acquisition/Legal Review Staff
Review proposed M&O arrangements for compliance with the listed prohibitions and confirm that the authorization record supports the agency’s decision. They should also help ensure the authorization is not legally vulnerable because of a misclassified function.
Practical Implications
This section is a screening tool for acquisition planning: before using an M&O contract, the agency must check whether any part of the work crosses into inherently governmental or internal management territory.
A common pitfall is describing work broadly enough that it appears operational, when in fact it includes supervision of Government employees, policy formulation, or regulatory authority.
Another frequent issue is trying to use an M&O contract for work that is really a property-use or property-rental matter; those situations should be analyzed under FAR subpart 45.3 instead.
The cross-reference to project labor agreements means contracting teams should not assume labor requirements are covered here; they must separately evaluate FAR subpart 22.5.
If an authorization under FAR 17.602(a) has already been issued, parties should not treat this section as a basis to retroactively challenge the authorization solely because of paragraph (a); instead, they should focus on whether the authorization process itself was properly completed.
Official Regulatory Text
(a) Management and operating contracts shall not be authorized for- (1) Functions involving the direction, supervision, or control of Government personnel, except for supervision incidental to training; (2) Functions involving the exercise of police or regulatory powers in the name of the Government, other than guard or plant protection services; (3) Functions of determining basic Government policies; (4) Day-to-day staff or management functions of the agency or of any of its elements; or (5) Functions that can more properly be accomplished in accordance with subpart 45.3 , Authorizing the Use and Rental of Government Property. (b) Since issuance of an authorization under 17.602 (a) is deemed sufficient proof of compliance with paragraph (a) immediately above, nothing in paragraph (a) immediately above shall affect the validity or legality of such an authorization. (c) For use of project labor agreements, see subpart 22.5 .