Industry has something to say about that rewrite of the buying rules

Tom Temin: I’m sure industry is watching this intently. Is there any signs yet that industry will be brought into this process?

Stephanie Kostro: Thanks for having me, Tom, particularly on this very long-anticipated, highly popular topic of the rewrite of the Federal Acquisition Regulations and their supplements. As you pointed out, it’s over 2,000 pages — lots and lots of provisions in there that directly affect contractors. And we have gotten so many questions at PSC regarding what impact will this have on contractors, and exactly the question you’re asking: What role will contractors play in providing insider input into this?

Stephanie Kostro: One thing I’d like to point out, Tom, is that we have seen a flurry of executive orders and presidential memoranda regarding Federal Acquisition Regulations. And so it goes back to early days of this second term of President Trump regarding deregulation. And he’s often touted as saying they’re going to cut something like 10 regulations for every one they might add or every one they might keep.

Stephanie Kostro: This executive order that came out last week, Restoring Common Sense to Federal Procurement, is a Herculean task really about rewriting the FAR. And there is, in the executive order, not a direct reference to having public commentary. But, as I mentioned, there’s been a flurry of documents and many of them do mention the importance of reaching out not just to industry, but to the American public across the board.

Tom Temin: And how clear is it what they want from this? Is it more flexibility for the government? Does that mean more OTA, less competition? Do they want to restore full competition and get rid of some of the provisions for disadvantaged or Alaska Native — that kind of thing? Not all that crystal clear yet, is it?

Stephanie Kostro: Not at all, but I will say there are some common threads that are woven throughout all of these documents. The first common thread is that they’d like the FAR to be simplified, they want it to be usable, and they want it to have a preference for commercial solutions. So those are some of the themes that are woven throughout.

Stephanie Kostro: The current administration seems to have the position that commercial solutions are more efficient, more effective, etc. And this runs up against directly what happens in the FAR, because the FAR started out smaller than it is currently. It is now well over 2,000 pages. Each agency has its own supplement where they have their own specific regulations for their requirements. And one reason why it is so expensive at times to work with the federal government, from a contractor perspective, is because every time you layer on a new regulation, there are compliance costs. And so simplifying that, making it more usable, understandable to small businesses, etc., will be helpful in that regard. But there’s no guarantee that that’s going to happen.

Stephanie Kostro: This process is long and drawn out. And I will say the executive order we referenced before — Restoring Common Sense to Federal Procurement — has in it a deadline of 180 days for the agencies to come back. The White House and the FAR Council agencies — that’s NASA, Department of Defense and General Services Administration — to come with amendments. And so this process we’re going to see play out over the next six months.

Tom Temin: Yeah, and there’s a practical issue here in that a lot of what is in the FAR now is the result of formal rulemaking. And if you want to be really a stickler for administrative procedure, then you have to have rulemaking to undo rulemaking.

Stephanie Kostro: That’s true, and oftentimes that’s a 30-day comment period or a 60-day comment period, and sometimes there are extensions. One other common thread, Tom, that’s worth mentioning throughout all of these documents is this idea that regulations should come directly from what’s in the law — should come directly from what is in statute.

Stephanie Kostro: And this goes back to a Supreme Court decision last year in Loper Bright Enterprises v. Raimondo, where they talked about if it’s not explicitly stated in statute, there should not be a regulation that goes beyond what the statute says. And so that is another common theme.

Stephanie Kostro: In some cases, Tom, if they try to get rid of some of these regulations, they’re going to have to go to Congress and ask for a change in the underlying statute as well. That is going to take a very long time.

Tom Temin: We are speaking with Stephanie Kostro, executive vice president for policy at the Professional Services Council. And you see this all over. There’s been the deregulation memo that was back a few weeks ago in April. There was the Department of Treasury final rule on eliminating unnecessary regulations. I think it’s a one-for-five or whatever they were trying to do there. So, this is of a piece, really, this FAR rewrite.

Stephanie Kostro: It really is. As I mentioned, there are a couple of other executive orders out there — things entitled Ensuring Commercial Cost-Effective Solutions in Federal Contracts, talking about the DOJ and its deregulation or deregulatory initiative, things like an executive order on Reducing Anti-Competitive Regulatory Barriers.

Stephanie Kostro: And so we at PSC are busily trying to put together a calendar of when all of these due dates are, when the tasks are due, who’s assigned within the executive branch, etc. But we’re also looking for opportunities for industry to comment. And you mentioned earlier, to undo a regulation would require a comment period if you are in line with the Administrative Procedures Act. We are looking for every opportunity to weigh in — to say, “Here’s a regulation that’s helpful to industry, here’s a regulation that poses an undue burden to industry,” etc. So we’re really hoping to have a voice here.

Stephanie Kostro: If I could also add, Tom, one of the questions that we get from a lot of our member companies is: What happens in that transition period? You have contracts right now that contain lots of references to what we might consider now legacy FAR regulations. Those regulations may be rescinded, revoked, repealed or modified, and new contracts won’t reflect that. So how does a company navigate dealing with the legacy regulations as well as this new FAR rewrite that’s coming down the pike?

Tom Temin: Well, the issue also, too, is people think, well, if the worm turns again and there’s a different administration from the Democratic Party the next time around, then will they undo all the undoing that was the undo of the prior administration before that? And you could find yourself kind of out there having complied with one ideological norm, and now you’re being prosecuted by a new ideological norm.

Stephanie Kostro: This is particularly gnarly, Tom, for small businesses that don’t necessarily have counsel within their own companies. They have contract compliance folks, but they may not have the legal element to be watching all of this play out and see where the worm turns, as you put it.

Stephanie Kostro: It’s very, very complicated. And I think also if the basis for these regulations in this FAR 2.0 — as it’s being called — is statute, you can at least go back to the statute and say what might be required of us here. And that could be your touchstone. But again, if the administration is going to go to Congress and say, “We’d like to change the underlying statute,” again, it’s going to be very, very messy.

Tom Temin: Well, yes, statutory change is seemingly something impossible right now on anything important, especially in the contracting area.

Stephanie Kostro: That’s true. And so if the statute requires regulations in certain areas, it may be very, very hard to revoke or rescind or repeal those.

Tom Temin: And I think industry probably has a hard time knowing who to talk to if you want to try to — I don’t know who you lobby these days in the administration. Tim Cook can call up the secretary of the treasury or something, or the secretary of commerce, and say, “This tariff is killing the iPhone.” And well, OK, so iPhones and smartphones — no more tariff on those. But the average company doesn’t have that kind of walk-in red carpet, you might say.

Stephanie Kostro: To be honest, the FAR 2.0 — the rewrite — is solidly assigned now to the Office of Federal Procurement Policy. And I don’t know many companies who really have a direct line into OFPP or necessarily the FAR Council agencies — again, NASA, Defense and General Services Administration. And so as we go through this, we at PSC are collecting input from our member companies to advocate on their behalf.

Tom Temin: Where’s Leslie Fields when you need her?

Stephanie Kostro: No one deserved retirement more than Leslie. She’s been busy over the last few years.