Personal services contracts

Overview

FAR 37.104 defines personal services contracts as those that create an employer-employee relationship between the government and contractor personnel, which is generally prohibited unless specifically authorized by statute. The section establishes the criteria for identifying such relationships to ensure agencies do not circumvent civil service laws.

Key Rules

• General Prohibition: Agencies are prohibited from awarding personal services contracts unless they have specific statutory authority (e.g., 5 U.S.C. 3109).
• The "Supervision and Control" Test: An employer-employee relationship is characterized by the government exercising "relatively continuous supervision and control" over contractor personnel.
• Product vs. Person: Simply ordering a specific service or article and retaining the right to reject the final result does not constitute a personal services relationship.
• Evaluation Criteria: Contracting officers must use six descriptive elements to assess if a contract is personal in nature:
  1. Performance on a government site.
  2. Use of government-furnished tools and equipment.
  3. Services applied directly to the agency's integral mission/function.
  4. Comparable services are performed by civil service employees.
  5. The requirement is expected to last beyond one year.
  6. The nature of the service requires government direction to protect the government's interest or retain control of the function.
• Mandatory Coordination: If statutory authority is used, legal counsel must provide a review. For expert or consultant services, the Contracting Officer must coordinate with the civilian personnel office.

Practical Implications

• Management Boundaries: Contracting Officer’s Representatives (CORs) must avoid the "de facto" creation of personal services contracts by refraining from directing a contractor employee's daily tasks, approving their leave, or managing their internal personnel matters.
• Acquisition Planning Risk: If a requirement meets several of the six descriptive elements (such as long-term on-site support), the government must carefully structure the Performance Work Statement (PWS) to focus on measurable outcomes rather than the direct supervision of individuals to avoid legal and audit risks.