President Trump’s Executive Orders have been front page news for the past week, many of which have been quite controversial. Yesterday the President issued another Executive Order that, although unlikely to garner major media buzz, may be the most impactful yet for government contractors. The Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs, which some have referred to as the “Two-for-One” Order, is aimed at reducing the number of regulations across the federal government. The gist of the Order is that for every one new regulation that an executive branch agency proposes, it must repeal two existing regulations. In addition, the agency’s estimated cost of any new regulations must be offset by reductions in cost by repeal of existing regulations.
The Order makes exceptions for regulations pertaining to the “military, national security, or foreign affairs function of the United States,” “regulations related to agency organization, management, or personnel,” and any other category of regulations exempted by the Director of the Office of Management and Budget (“OMB”).
The problem with this Order is that its terms are vague, and the person charged with providing additional guidance on the Order has yet to be confirmed by the Senate.
For instance, it is unclear how broadly the “military, national security, or foreign affairs” exception applies. Would it apply to all regulations issued by the Department of Defense, the Department of State, and the Department of Homeland Security? Or would it apply only to a narrow subset of those regulations?
Could an agency avoid the repeal requirement of this executive order by adding new language into sections of existing regulations, rather than proposing a newly numbered regulation?
Does an agency need to make regulatory changes cost-neutral to the government and to government contractors?
Fortunately, the executive order requires the OMB Director to issue guidance to implement the order (including guidance on “processes for standardizing the measurement and estimation of regulatory costs; standards for determining what qualifies as new and offsetting regulations; standards for determining the costs of existing regulations that are considered for elimination; processes for accounting for costs in different fiscal years; methods to oversee the issuance of rules with costs offset by savings at different times or different agencies; and emergencies and other circumstances that might justify individual waivers of the requirements”). The OMB Director’s guidance will certainly resolve some of these uncertainties.
Unfortunately, President Trump’s nominee for OMB Director, Rep. Mick Mulvaney, R-S.C., has yet to even be confirmed by the Senate. And, once Mulvaney is confirmed, it could take weeks or months before his office issues detailed guidance to the executive branch agencies on the “Two-for-One” Order. In the meantime, agencies are left with much uncertainty on how to comply with this new executive order.
Why does this matter to contractors? Every year there are dozens of proposed regulatory changes directly impacting government contractors. While some add additional administrative burden on contractors, others are very beneficial to the majority of contractors. For example, even though SBA’s regulations concerning the creation of its new All Small Business Mentor-Protégé program may add some administrative burden on contractors, the new regulations are arguably beneficial to many contractors, both large and small. Due to the uncertainty imposed by the “Two-for-One” Order, it is likely that new regulatory action will slow to a trickle in the coming months. While this may be good news for some contractors, it also means that positive regulatory changes for contractors will also be delayed.