For closed-shell systems, a particular parametrization of coefficients in a configuration interaction (CI) expansion provides a convenient formulation for the search over electronic wave functions constrained by a set of natural orbitals (NOs) and the corresponding occupation numbers that are invoked in every variational construction of the density matrix functional (DMF) V-ee(Gamma) for the electron-electron repulsion energy. It produces an explicit expression for V-ee in terms of the Coulomb and exchange integrals over NOs, and an idempotent matrix omega, diagonal elements of which equal the occupation numbers. At the same time, it reveals a very serious bottleneck affecting any rigorous approach to the DMF theory, namely the phase dilemma that stems from the necessity to carry out minimization over a large number of possible combinations of CI coefficient signs. While underscoring its lack of variational nature, a simple approximation for the phase factor products provides a strict derivation for the recently proposed Kollmar-Hess functional. (C) 2004 American Institute of Physics.