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October 25, 2023 Feature

Personal Services Contracts Under 5 U.S.C. § 3109

Michael J. Davidson

Within the federal government, personal services contracts are generally disfavored. The Federal Acquisition Regulation (FAR) cautions that procuring personal services, rather than hiring federal employees, “circumvents [the civil service laws] unless Congress has specifically authorized acquisition of the services by contract.”1 Although several statutes exist providing for personal services contracts, one frequently cited statutory authorization is 5 U.S.C. § 3109, Employment of Experts and Consultants; Temporary or Intermittent. The statute is oftentimes difficult to implement, particularly when distinguishing between individual personal service contractors, nonpersonal/independent service contractors, and appointees; and the FAR provides little helpful guidance. This article examines that statute, providing helpful guidance to government agencies awarding personal services contracts.

An Overview of Personal Services Contracts

“Personal Services” Defined

FAR 2.101 defines a personal services contract as “a contract that, by its express terms or as administered, makes the contractor personnel appear to be, in effect, Government employees. . . .” The FAR further notes that a personal services contract “is characterized by the employer-employee relationship it creates between the Government and the contractor’s personnel.”2 FAR 37.104(d) provides several descriptive characteristics of a personal services contract, but the primary focus is “whether the contractor’s personnel are subject to the relatively continuous supervision and control of government personnel.”3

In contrast, FAR 37.101 defines a nonpersonal services contract as “a contract under which the personnel rendering the services are not subject, either by the contract’s terms or by the manner of its administration, to the supervision and control usually prevailing in relationships between the Government and its employees.” For example, the Government Accountability Office (GAO) has determined that when a contractor, such as a law firm that provides independent legal analysis of an entity’s authority or an arbitrator who renders an independent determination, is required to produce an end product largely free of government supervision and control, the services are nonpersonal.4

Federal agencies must be careful in this area. The dividing line between nonpersonal and personal services is not always easy to ascertain and a nonpersonal services contract can evolve into a personal services contract over time. As FAR 37.104(c)(1) notes, a personal services contract may be established through the terms of a contract or through “the manner of its administration during performance.” Further, the GAO has cautioned that agency administration of nonpersonal services contracts, particularly increased supervision of contractors in the federal workspace, can result in unauthorized personal services contracts.5

Although characterized by the employer-employee relationship created, personal services contractors are not actual federal civil service employees, lacking the requisite appointment required by 5 U.S.C. § 2105(a)(1).6 As noted by the U.S. Court of Appeals for the Federal Circuit in Watts v. OPM, “the requirement that the ‘employee’ be ‘appointed’ excludes one whose services are retained merely by contract.”7

Further, FAR 37.104(f) states that “[p]ersonal services contracts for the services of individual experts or consultants are limited by the Classification Act.” The Classification Act system, also known as the General Schedule system, is located in 5 U.S.C. chapters 51 and 53.8 The FAR aligns with section 3109(b)(2), which states that “[s]ervices procured under this section are without regard to . . . chapter 51 and subchapter III of chapter 53 of [Title 5].” Chapter 51 provides for the classification of federal positions by grades to determine a basic rate of pay and chapter 53, subchapter III, discusses General Schedule pay rates.

Not subject to most civil service laws, a personal services contractor may, however, be considered an employee for purposes of other statutes. The Office of Special Counsel (OSC) opined that an individual personal services contractor may fall within the definition of “employee” for purposes of Hatch Act (5 U.S.C. §§ 7321–7326) application.9 The Hatch Act restricts the political activities of federal employees. Because of the Act’s broad definition of “employee” and the government’s ability to control and supervise the performance and day-to-day activities of the contractor, the scope of the Act may extend to individual personal services contractors, unless another statute provides to the contrary.10 For similar reasons, personal services contractors may be considered a federal employee for purposes of Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e et seq.11

May Perform Inherently Governmental Functions

Inherently governmental functions, such as determining agency policy, directing the activities of federal employees, approving contractual documents, and awarding and administering contracts, are to be performed by federal employees rather than by contractors.12 Personal services contractors, however, are not subject to the restriction on performing inherently governmental functions. Specifically, FAR 7.502 provides that subpart 7.5, which contains this restriction, “does not apply to . . . personal services contracts issued under statutory authority.”13

Section 3109 as Statutory Authority

FAR 37.104(b) admonishes that “[a]gencies shall not award personal services contracts unless specifically authorized by statute (e.g., 5 U.S.C. 3109) to do so.”14 Both the FAR and GAO cite 5 U.S.C. § 3109, Employment of Experts and Consultants; Temporary or Intermittent, as an example of statutory authority for personal services contracts for federal agencies.15

Originally enacted as the Administrative Expenses Act of 1946,16 section 3109 is currently divided into two major sections. Section 3109(b) provides authority to “procure by contract” the services of experts or consultants, whereas section 3109(d) authorizes the Office of Personnel Management (OPM) to prescribe regulations to “employ” an expert or consultant. In this context, the term “employ” appears to be synonymous with “appoint.”17 This division of section 3109 is consistent with FAR 37.104, which recognizes only two ways in which the government may obtain personal services: (1) via a contract or (2) via “direct hire under competitive appointment or other procedures required by the civil service laws.”18 An individual hired as an expert or consultant must either be a contractor or appointed as a federal employee because the relationships are mutually exclusive.19

The FAR governs the procurement of services from experts and consultants.20 The OPM regulations, promulgated in 1995 and located at 5 C.F.R. part 304, govern the employment or appointment of experts and consultants as federal employees.21 Significantly, the OPM regulations do not control the procurement of experts and consultants.22 Indeed, 5 C.F.R. § 304.101 specifically notes that the regulations “do not apply . . . to the procurement of services by contracts under the procurement laws.”

Under the authority of section 3109 and 5 C.F.R. part 304, experts and consultants may be temporarily appointed as federal employees, including as Special Government Employees (SGE).23 A SGE is a federal employee who is “retained, designated, appointed, or employed” to perform temporary duties for less than 130 days during a 365-day period.24 Unlike a personal services contractor, a SGE is a type of federal employee, albeit not subject to competitive service hiring requirements and subject to fewer ethical rules.25

Although it serves as a basic authority to procure personal services, section 3109(b) is insufficient authority by itself to obtain such services. The statute requires that section 3109’s procurement authority be used “[w]hen authorized by an appropriation or other statute.”26 To illustrate, the Department of Defense couples its 3109(b) authority with 10 U.S.C. § 129b, Authority to Procure Personal Services.27 The GAO determined that the Bureau of Engraving and Printing’s revolving fund, by itself, provided the requisite statutory authority.28 The Department of Homeland Security (DHS) similarly may rely on 6 U.S.C. § 392, Personal Services, or 6 U.S.C. § 391(b), Research and Development Projects—Procurement of Temporary and Intermittent Services and section 505 of the DHS Appropriations Act, Fiscal Year 2004.29

Contracts with Organizations or Individuals

Under the authority of section 3109(b), a personal services contract for experts and consultants may be entered into with either an individual or an entity. The GAO has posited that personal services contracts may be awarded to entities.30 Other statutes, coupled with section 3109, also envision awards to entities.31

Unwarranted GAO Concerns Regarding Contracts with Individuals

In a 2009 report, GAO stated that it viewed the law as “unsettled” as to whether section “3109 permits agencies to award procurement contracts in accordance with the FAR when they obtain the personal services of individual experts.”32 Although viewing FAR 13.003(d)’s authority to use simplified acquisition procedures for personal services contracts as applying to contracts for individual experts, the GAO was concerned that the language of section 3109(d) authorizing OPM to develop regulations establishing the criteria to employ an expert or consultant “may imply that these services should be obtained through appointment.”33

Further, earlier opinions articulating GAO’s longstanding policy position that personal services should not be obtained by contract, but rather be performed by federal employees, have further clouded this issue.34 To illustrate, as late as 1995, in Mr. Jeffrey H. Smith, GAO noted that if services were “‘personal,’ then the relationship that exists between the government and the ‘contractor’ is governed not by the procurement laws and regulations, but the employment and compensation laws.”35 In an earlier opinion, Lynn Francis Jones, because of the employer-employee relationship of what was clearly an individual personal services contract, the GAO elected to “consider” the contractor an appointee for purposes of travel expense reimbursement.36

To the extent GAO’s hesitancy still exists, it is at a minimum outdated. The plain language of section 3109(b), which discusses procurement, authorizes both individual and organizational personal services contracts: “experts or consultants or an organization thereof.” Further, statutes used in conjunction with 3109(b) clearly envision that the authority extends to individual personal services contractors. For example, enacted in 2002, 6 U.S.C. § 392 provides authority for both individual and entity contracts, stating that the Secretary of Homeland Security “may procure the temporary or intermittent services of experts or consultants (or organizations thereof) in accordance with section 3109 of title 5” and provides that the Secretary may procure such “personal services” without regard to section 3109’s pay cap when justified by an “urgent homeland security need.”

In addition, two separate regulatory regimes have developed implementing section 3109. The FAR controls procurements, and the OPM regulations control appointments and specifically note that they do not apply to procurements. Also, modern agency practice reflects the use of section 3109(b) for individual personal services contracts. That agencies use section 3109 for individual personal services contracts was evidenced by GAO’s 2009 report itself, which noted that the agency GAO examined—the National Institute of Standards and Technology (NIST)—had used its section 3109 authority to award individual personal services contracts.37 Further, language found in the advisory opinions issued by various agencies evidences a shared understanding that section 3109 authorizes the procurement of individual personal services experts and consultants.38

Reportedly, in the past, agencies “actually temporarily appointed the person into the civil service, notwithstanding the provisions of civil service appointment procedures.”39 Developments in the law discussing the formalities required for federal civil service appointments undercut the validity of past agency practices involving both the procurement and appointment of individuals. As noted earlier, modern case law has made clear that an individual providing personal services to the government must either be procured by contract or appointed as a federal employee; the two relationships “are mutually exclusive.”40

Time and Salary Limitations

Personal services contracts are time limited. Section 3109(b) permits the procurement of “temporary (not in excess of 1 year) or intermittent services of experts or consultants or an organization thereof…” These terms are not defined in the FAR. Although they do not govern the procurement of personal services, the OPM regulations, which define the terms for the same statute, albeit under the authority of section 3109(d), should be available as guidance when defining these terms for procurement purposes, in the absence of future FAR guidance.

The OPM regulations define “temporary” to include “a full-time, part-time, seasonal, or intermittent work schedule.”41 Further, the OPM regulations define “Intermittent” as “without a regularly scheduled tour of duty,”42 which appears to be the key distinction between the two types of employment. An intermittent employee may work occasionally or irregularly “on programs, projects or problems.”43 This approach is consistent with at least one GAO opinion addressing personal services contracts. In Lynn Francis Jones,44 the GAO determined that a personal services contractor with a “regularly scheduled tour of duty” could not be characterized as having been employed on an intermittent basis.

Some authorities limit intermittent personal services contracts to not more than 130 days cumulatively in a year.45 However, this restriction is compelled neither by section 3109 nor the FAR. Further, the OPM regulations place no time limit on initial intermittent appointments but do limit reappointments to perform the same duties to 130 days in some circumstances.46 The 130-day restriction appears to reflect 18 U.S.C. § 202’s limitation on persons appointed Special Government Employees or limitations imposed by the former Civil Service Commission (now OPM) on the intermittent hiring of experts and consultants.47

Unless otherwise authorized by statute, section 3109(b) limits the compensation of personal services contractors to “the daily equivalent of the highest rate payable under section 5332 of [title 5],” which refers to the General Schedule (GS)—the pay schedule for most federal employees. In other words, the statute imposes a pay cap of GS-15, step 10.48 The statute permits an agency to exceed this pay cap “when specifically authorized by the appropriation or other statute authorizing the procurement of the services.” The Department of Homeland Security, for example, possesses statutory authority to exceed the pay cap “due to an urgent homeland security need.”49 The GS-15, step 10 pay cap does not apply to experts and consultants procured under section 3109, however, if the contractual relationship is that of an independent contractor, rather than an employer-employee-like relationship.50

Gratuitous Services

Finally, experts and consultants procured, or appointed, under section 3109 may serve without pay if they agree in writing, in advance of performance, to waive all compensation. The Antideficieny Act (ADA), 31 U.S.C. § 1342, prohibits “an officer or employee of the United States Government” from accepting “voluntary services” for the United States, “or employ personal services exceeding that authorized by law except under emergency circumstances involving the safety of human life or the protection of property.” The purpose of the ADA’s prohibition is to preclude claims for future compensation.51 Free services are considered to be permissible “gratuitous” services, rather than impermissible “voluntary” services, if the service provider “executes an advance written agreement that (1) states that the services are offered without expectation of payment, and (2) expressly waives any future pay claims against the government.”52 This may also be accomplished through no-cost contracts in which it is clear that the agency incurs no financial obligation and the contractor is not entitled to any agency payment.53

One caveat to the acceptance of gratuitous services is that the agency may not accept such services if the service provider is statutorily entitled to a rate of pay because the statutory entitlement cannot be waived.54 Experts and consultants procured under section 3109(b) may provide gratuitous services. Although their salary is statutorily capped at a GS-15, step 10 rate, there is no statutory minimum entitlement to compensation.55

Conclusion

When coupled with another authorizing statute or appropriation, section 3109(b) authorizes agencies to procure the personal services of experts and consultants. Further, section 3109(b) applies to both organizational and individual personal services expert and consultant contracts, notwithstanding that such services are characterized by an employer-employee relationship. Although appearing to be government employees, individual personal services contractors lack the appointment required to be actual civil service employees. The clear language of relevant statutes and regulations, coupled with modern case law, suggests agencies have greater latitude in the procurement of personal services contracts than widely believed. This article has attempted to illuminate this hazy area of procurement law.

Endnotes

1. FAR 37.104(a).

2. Id.

3. U.S. Gov’t Accountability Office, GAO-17-610, Federal Contracting: Improvements Needed in How Some Agencies Report Personal Services Contracts, at 4 (July 2017) [hereinafter GAO-17-610]; see also Burke v. HHS, CBCA 7492, at 13 (Mar. 10, 2023) (noting that supervision and control are the “key question”).

4. See U.S. Advisory Comm’n on Pub. Diplomacy, B-202159, 61 Comp. Gen. 69 (Nov. 6, 1981) (law firm); To the Sec’y of Labor, B-150596, 42 Comp. Gen. 395 (Jan. 24, 1963) (arbitrator; interpreting an earlier version of the Administrative Expenses Act of 1946 (5 U.S.C. § 55A)).

5. GAO-17-610, supra note 3, at 10–11.

6. 5 U.S.C. § 2105(a) (defining an employee for purposes of Title 5); Lambro v. United States, 162 Fed. Cl. 344, 351–52 (2022) (federal civil service employee must be appointed), appeal pending, No. 22-2249 (Fed. Cir.); see also Lees v. Evans, 31 F. App’x 680, 682 (Fed. Cir. 2002) (to be a federal civil service employee, the criteria of 5 U.S.C. § 2105 must be satisfied, including “being appointed to a civil service position by a designated official”).

7. 814 F.2d 1576, 1578 (Fed. Cir. 1987) (denying entitlement to civil service retirement benefits).

8. U.S. Gov’t Accountability Off., Off. of Gen. Counsel, GAO/OGC-91-6, Civilian Personnel Law Manual, Title I—Compensation, at 1-1 (3d ed. 1991).

9. U.S. Office of Special Counsel, OSC File No. [Redacted] (Aug. 8, 2013). Independent contractors are not subject to the Act. Id. at 1.

10. Id. at 2–3. The OSC applies common law when interpreting the definition of “employee” contained at 5 U.S.C. § 7321(1). Id. at 2.

11. See Spiridies v. Reinhardt, 613 F.2d 826, 831 (D.C. Cir. 1979) (applying a multifactor, common law test that examines the “‘economic realities’ of the work relationship,” with the most important factor being “the extent of the employer’s right to control the ‘means and manner’ of the worker’s performance . . .”).

12. See FAR 7.503.

13. See also GAO-17-610, supra note 3, at 15 (“The FAR’s general prohibition on the use of contractors to perform inherently governmental tasks does not apply to personal services contracts issued under statutory authority.”).

14. Emphasis added. See also U.S. Gov’t Accountability Office, GAO-09-789, America Competes Act: NIST Applied Some Safeguards in Obtaining Expert Services, but Additional Direction from Congress Is Needed 5 (Aug. 2009) [hereafter GAO-09-789] (“Obtaining personal services from individuals or organizations by contract, rather than appointment, is generally prohibited unless specifically authorized by statute, such as 5 U.S.C. § 3109.”).

15. GAO-09-789, supra note 14, at 19 n.8 (“At least 130 other federal agencies are authorized by statute to obtain temporary or intermittent services of experts and consultants under 5 U.S.C. § 3109.”).

16. Administrative Expenses Act of 1946, Pub. L. No. 600, § 15, 60 Stat. 806, 810 (Aug. 2, 1946). Section 3109(d) was added in 1992. Technical and Miscellaneous Civil Service Amendments Act, Pub. L. No. 102-378, § 2, 106 Stat. 1346, 1347 (Oct. 2, 1992).

17. Lovoy v. HHS, 94 M.S.P.R. 571, 575 (2003) (3109(d) authorizes OPM “to regulate appointments”); see also note 21, infra, and accompanying text.

18. See also Lees v. Evans, 31 F. App’x 680, 681 (Fed. Cir. 2002).

19. Solano v. United States, 164 Fed. Cl. 792, 800 (Feb. 28, 2023).

20. See GAO-09-789, supra note 14, at 5 (“apply FAR procedures, rather than OPM regulations, when awarding contracts to procure personal services from organizations”).

21. 5 C.F.R. § 304.101 (“These regulations apply to the appointment of experts and consultants as Federal employees under 5 U.S.C. 3109.”); see GAO-09-789, supra note 14, at 5 (“may use 5 U.S.C. § 3109 to appoint individual experts or consultants as temporary federal employees in accordance with OPM regulations”) and 19 (OPM officials posited that its regulations “were limited to the use of [§ 3109] as an authority to appoint experts and consultants as federal employees . . .”).

22. 5 C.F.R. § 301.101 (“They do not apply . . . to the procurement of services by contracts under the procurement laws.”).

23. See U.S. Gov’t Accountability Off., GAO-16-548, Federal Workforce: Opportunities Exist to Improve Data on Selected Groups of Special Government Employees, at 17 & 19 n.31 (July 2016) [hereinafter GAO-16-548].

24. Id. at 1; see also 18 U.S.C. § 202.

25. GAO-16-548, supra note 23, at 1, 4–7, 17.

26. 5 U.S.C. § 3109(b).

27. Subject to various conditions, “the Secretary of Defense and the Secretaries of the military departments may . . . procure the services of experts or consultants (or of organizations of experts or consultants) in accordance with section 3109 of title 5. . . .” 10 U.S.C. § 129b(a)(1); see also DFARS 237.104(b)(i)(B)(6). Accord 49 U.S.C. § 1113(b)(1)(A) (National Transportation Board may “procure the temporary or intermittent services of experts or consultants under section 3109 of title 5”); 5 U.S.C. § 406(a)(8) (the Inspector General may “obtain services as authorized by section 3109”).

28. U.S. Gov’t Accountability Off., III Principles of Federal Appropriations Law, at 12-110 (3d ed., Sept. 2008) [hereinafter GAO Red Book] (citing B-122562 (May 26, 1955)).

29. DHS Appropriations Act, 2004, Pub. L. No. 108-90, 117 Stat. 1137, 1153 (Oct. 1, 2003).

30. GAO-09-789, supra note 14, at 5 (“organizations”); see also U.S. Advisory Comm’n on Pub. Diplomacy, B-202159, 61 Comp. Gen. 69 (Nov. 6, 1981) (law firm).

31. See, e.g., 6 U.S.C. § 392(1) (“or organizations thereof”).

32. GAO-09-789, supra note 14, at 5.

33. Id. at 5 & n.6 (emphasis in original). But cf. Arthur E. Lees, ASBCA No. 52040, 01-1 BCA ¶ 31360, at 12 n.3 (Mar. 26, 2001) (disagreeing with GAO’s position, that use of the term “employment” in a statute requires an appointment rather than a procurement, affirmed, 31 F. App’x 680 (2002)).

34. See generally LTC Russell N. Fairbanks, Personal Service Contracts, 6 Mil. L. Rev. 1 (Oct. 1959). The author posits that GAO’s objection is based in policy rather than in law. Id. at 10 & 13 (citing B-48675, 24 Comp. Gen. 924 (1945)); see Roy B. Hogg, B-174726, 51 Comp. Gen. 561 (Mar. 6, 1972) (policy).

35. B-259499 (Comp. Gen. Aug. 22, 1995), at 4 n.1. But cf. Arthur E. Lees, 01-1 BCA No. 31360, at 12 n.3 (disagreeing with GAO opinions citing Smith as authority).

36. B-214432, 63 Comp. Gen. 507, 512 (July 25, 1984).

37. GAO-09-789, supra note 14, at 5.

38. Letter to a Designated Agency Ethics Official, OGE Informal Advisory Letter 07 X 9 (O.G.E. June 28, 2007), at 3, n.4 (“5 U.S.C. § 3109, contemplate that an agency may contract either with individuals or with organizations to acquire personal services”). Cf. Consultants-Employment to Assist Presidential Nominee at His Confirmation Hearing, 2 U.S. Op. Off. Legal Counsel 376 (Sept. 27, 1977) (discussing the procurement of “an attorney”); Lynn Francis Jones, 63 Comp. Gen. at 508 (discussing an Army individual personal services contract); Charles R. Hobbs Corp., B-191865 (Comp. Gen. Nov. 13, 1978) (noting application of 3109 to procurement of individual experts and consultants).

39. Report of the Acquisition Advisory Panel to the Office of Federal Procurement Policy and the United States Congress 404 (Jan. 2007); see also Letter to a Designated Agency Ethics Official, OGE Informal Advisory Letter 07 X 9, at 5 (“Where agencies have procured such services directly from an individual (as opposed to an organization)—for example, pursuant to 5 U.S.C. § 3109—agencies often have given the PSC a personnel appointment”).

40. Solano v. United States, 164 Fed. Cl. 792, 800 (Feb. 28, 2023); see also Collier v. United States, 56 Fed. Cl. 354, 357 (2003); see Lees v. Evans, 31 F. App’x 680, 681 (Fed. Cir. 2002) (only two methods to obtain personal services).

41. 5 C.F.R. § 304.102(g).

42. Id. § 304.102(f); see id. § 340.401(b).

43. Dep’t of Energy Consultants, B-216708 (Comp. Gen. Mar. 29, 1985); see also 5 C.F.R. § 340.403(a) (“when the nature of the work is sporadic and unpredictable”).

44. B-214432, 63 Comp. Gen. 507, 512 (July 25, 1984) (resolving reimbursement of travel and relocation expenses).

45. See, e.g., DFARS 237.106(1)(ii).

46. 5 C.F.R. § 304.103(a)(2), (c)(2)(i).

47. See To the Sec’y of Com., B-123282, 35 Comp. Gen. (Aug. 12, 1955).

48. GAO-09-789, supra note 14, at 14 (“GS-15, step 10, pay ceiling imposed by 5 U.S.C. § 3109(b)”); see DFARS 237.104(f)(i).

49. 6 U.S.C. § 392(2).

50. Mr. Jeffrey H. Smith, B-259499, at 4 n.3 (Comp. Gen. Aug. 22, 1995); see also Honorable Jack Brooks, B-210518, 1998 WL 194496, at *3 (Comp. Gen. Jan. 28, 1984).

51. Dep’t of the Treasury—Acceptance of Voluntary Services, B-324214, at 2 (Comp. Gen. Jan. 7, 2014).

52. Id. at 3 (this “precludes the possibility of such future claims”).

53. Id. at 3, n.4. Although a no-cost contract would not violate the ADA, to be a valid contract there must be some form of mutual consideration. GSA: Real Estate Brokers’ Comm’n, B-291947, at 2, n.1 (Comp. Gen. Aug. 15, 2003).

54. Dep’t of the Treasury, B-324214, at 3.

55. GAO Red Book, supra note 28, at 6-100 (citing Comp. Gen. Warren to the Director, Bureau of the Budget, B-69907, 27 Comp. Gen. 194 (Oct. 9, 1947)).

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Michael J. Davidson

Federal Attorney

Michael Davidson currently serves as a federal attorney and is a retired Army Judge Advocate. The opinions contained in this article are those of the author and do not reflect the position of any federal agency.