FAR 7.302—Policy.
Plain-English Summary
FAR 7.302 states the Government’s basic policy for deciding what work must stay in-house and what work may be competed with private-sector performance. It covers two central ideas: first, inherently governmental activities must be performed by Government personnel; second, commercial activities should be exposed to competition rather than automatically assigned to either agency staff or contractors. The section also explains how agencies must conduct public-private competitions under OMB Circular A-76 and, where applicable, the FAR, including how to weigh cost in performance decisions, how to treat the Agency Tender Official in GAO protest practice, and how to handle contests under the Circular. Finally, it adds a special rule for sealed bidding in A-76 competitions: contracting officers may not use discussions to cure deficiencies. In practice, this section is the policy foundation for sourcing decisions, competition procedures, protest rights, and the limits on contractor involvement in governmental functions.
Key Rules
Inherently governmental work stays in-house
The Government must perform inherently governmental activities with Government personnel. Agencies may not use contractors to carry out functions that are so closely tied to the public interest that they must be reserved to federal employees.
Commercial work should be competed
Commercial activities are to be subjected to the forces of competition. The policy is to use competition, not default assignment, to decide whether the Government or a contractor should perform the work.
No contractors for inherently governmental functions
Agencies are prohibited from using contractors to perform inherently governmental activities. This is a mandatory restriction, not a preference, and it applies regardless of cost or convenience.
Public-private competitions required
When agencies compare in-house and contractor performance, they must conduct public-private competitions in accordance with OMB Circular A-76 and, where applicable, the FAR. The competition process must follow the prescribed procedures, not ad hoc agency methods.
Cost must be considered appropriately
Agencies must give appropriate consideration to cost when deciding between agency and contractor performance in a public-private competition. Cost is a required factor, but the rule does not say cost alone controls every decision.
Agency Tender Official may protest
For GAO protest purposes under 31 U.S.C. 3551-3553, the Agency Tender Official is treated as an interested party. This gives the official standing to file a protest in the competition context.
Contests must follow A-76 procedures
Agencies must hear contests in accordance with OMB Circular A-76, Attachment B, Paragraph F. This means disputes over the competition are handled through the specific contest process established by the Circular.
No discussions in sealed-bid A-76 competitions
When sealed bidding is used in a public-private competition under OMB Circular A-76, contracting officers may not hold discussions to correct deficiencies. The sealed-bid rules remain strict, and deficiencies cannot be cured through negotiation-style exchanges.
Responsibilities
Agency
Identify inherently governmental activities and ensure they are performed by Government personnel. For commercial activities, use the required public-private competition procedures, consider cost appropriately in performance decisions, recognize the Agency Tender Official’s protest rights, and process contests under the A-76 contest procedures.
Contracting Officer
Apply the correct competition method under OMB Circular A-76 and the FAR, ensure sealed-bid competitions do not include discussions to correct deficiencies, and follow the prescribed procedures for public-private competitions rather than informal or inconsistent evaluation methods.
Agency Tender Official
Act as the Government-side representative for the agency tender in a public-private competition and, for GAO protest purposes, may file a protest as an interested party under 31 U.S.C. 3551-3553.
Contractor
Compete for commercial work through the public-private competition process when eligible, but do not perform inherently governmental activities. Contractors must also understand that sealed-bid A-76 competitions do not permit discussions to cure deficiencies.
OMB Circular A-76 framework
Provide the governing procedures for public-private competitions, contests, and the treatment of performance decisions between agency and contractor performance.
Practical Implications
This section is the starting point for sourcing decisions: before deciding whether to contract out work, agencies must determine whether the function is inherently governmental or commercial.
Public-private competitions are procedural and documentation-heavy; failing to follow A-76 and applicable FAR requirements can invalidate the decision or trigger protests.
Cost comparisons matter, but agencies should not treat cost as the only consideration unless the governing competition rules specifically allow that approach; the required methodology must be followed exactly.
In sealed-bid A-76 competitions, contracting officers cannot use discussions to fix deficiencies, so offerors and agency tenders must submit complete, compliant bids the first time.
A common pitfall is misclassifying work or using contractors in roles that cross into inherently governmental functions, which can create legal, performance, and oversight problems.
Official Regulatory Text
(a) The Circular provides that it is the policy of the Government to- (1) Perform inherently governmental activities with Government personnel; and (2) Subject commercial activities to the forces of competition. (b) As provided in the Circular, agencies shall- (1) Not use contractors to perform inherently governmental activities; (2) Conduct public-private competitions in accordance with the provisions of the Circular and, as applicable, these regulations; (3) Give appropriate consideration relative to cost when making performance decisions between agency and contractor performance in public-private competitions; (4) Consider the Agency Tender Official an interested party in accordance with 31 U.S.C. 3551 to 3553 for purposes of filing a protest at the Government Accountability Office; and (5) Hear contests in accordance with OMB Circular A-76, Attachment B, Paragraph F. (c) When using sealed bidding in public-private competitions under OMB Circular A-76, contracting officers shall not hold discussions to correct deficiencies.