Through a duo of Executive Orders (EOs), issued on April 15 and 16 respectively, President Trump announced “a first-of-its-kind overhaul of Federal procurement policy.” The rewrite represents a once-in-a-generation opportunity to make an incredibly complex system more efficient and user friendly. With that said, while the president positions the changes as an effort of “increase[ing] competition and efficiency while decreasing costs,” the devil is in the details. Below we discuss areas of emphasis for the Trump administration, the short-term implications of the Federal Acquisition Regulations (FAR) rewrite, and explore important considerations that could inform what the final version of “FAR 2.0” looks like.
Breadth of the Rewrite
The rewrite of FAR rules is more than a tune-up as the federal contracting community is bracing for a major overhaul of the rules of the road that govern over $1 trillion in annual government spending.
The April 16 EO instructs the Office of Federal Procurement Policy (OFPP) within the Office of Management and Budget (OMB) to “eliminate non-statutory and duplicative regulations, remove DEI and wokeness, and add buyer guides in place of burdensome and outdated requirements.” It continues, the federal government “will focus on results above all else—the best products and services at the best cost.” The EO also emphasizes problems with the long durations of transactions, the number of “complex and costly directives,” and “rigid compliance.” The Trump administration hopes the “Revolutionary FAR Overhaul (RFO) will ensure a faster acquisition cycle, lower barriers to entry for small businesses, startups, and other new entrants, and eliminate wasteful bureaucratic bloat.”
The April 15 EO also directs the OFPP Administrator and FAR Council to review and identify FAR provisions not required by statute and consider amending them to include a “sunset provision” whereby the provisions would expire four years after the effective date of the final rule. The EO also directs the administrator to consider whether any “any new FAR provision not required by statute that is promulgated after the effective date of the final rule [] should include a provision stating that it will expire 4 years after its effective date unless renewed by the FAR Council.”
The timeline for the extensive revamp is relatively short. The April 15 EO requires each agency to designate a senior acquisition or procurement official to work with the OFPP Administrator on any necessary “agency-specific supplemental regulations to the FAR.” Further, the EO gives the OFPP Administrator 180 days to amend the FAR to ensure statutory requirements remain and inefficient provisions are eliminated.
FAR Founded on Statutes, Agency Practices, and Executive Orders
The EO states that the remade FAR will only include “provisions required by statute or essential to sound procurement, and any FAR provisions that do not advance these objectives should be removed.” The FAR is not the result of one piece of legislation, but a patchwork of statutes including the Competition in Contracting Act, Service Contract Act, Davis-Bacon Act, Buy American Act, and various provisions from a variety of National Defense Authorization Acts (NDAA). These statutes have been incorporated into the FAR as agencies interpret and implement them. Over the years, this has created an operational framework which creates certain expectations on the part of agency procurement officials and contractors. As the FAR is rewritten, it may result in different interpretations of existing statutes which procurement attorneys will quickly jump to interpret. Notably, agency interpretations of ambiguous statutes are no longer afforded deference lending to the notion that litigation will increase.
In addition, large portions of the FAR were developed through agency practice and EOs which creates uncertainty as to what non-statutorily based requirements will remain. For example, even though it is thoroughly ingrained in procurement law so much so that it is typically read into contracts via the Christian doctrine, Termination for Convenience clauses are not required by statute. Similarly, best value procurements are not statutorily required or preferred over lowest price technically acceptable evaluation methods. This will create a good amount of grey area. In addition, President Johnson issued EO 11246 which prohibited federal contractors from discriminating on the basis of race, sex and national origin. That directive was subsequently incorporated into the FAR through agency action. Notably, President Trump revoked the affirmative action EO and the requirements were later removed from the procurement regulations by some agencies through the use of class deviations. While the administration attempts to increase the amount of flexibility given to procurement officers, it could result in increased litigation and uncertainty, at least in the near term.
Regulatory Limbo
The Trump administration’s EO notes that OFPP will lead the “review and rewrite” of the FAR. This process bypasses the FAR Council—composed of representatives from the General Services Administration (GSA), Department of Defense (DoD), National Aeronautical and Space Administration, and OFPP—which typically issues updates to the FAR. The FAR is a complex system of regulations and the FAR Council knows it best.
Similarly, as the rewrite process unfolds, it creates uncertainty for contractors which may influence investment decisions and stimy M&A activity. Indeed, it is difficult to make business decisions when you are unsure what the rules governing procurement will be in the future. It will be important to finish the process quickly.
In addition, the EO does not delineate a process for contractors to offer feedback or advice. So far, the process seems largely internally driven. It is crucial that contractors are provided an opportunity to provide feedback and support the OFPP’s effort to realize a more efficient system.
Going Forward
A rewrite of the FAR is an ambitious, yet important, undertaking. While a rewrite could yield substantial efficiencies and cost benefits, it also brings uncertainty as to how federal procurement will operate in the future. While some FAR requirements are here to stay as they are statutorily mandated, other requirements resulting from established agency practices are likely to be eliminated or substantially changed. This opportunity to bring about an improved system does not come often. The Trump administration would be wise to ensure the FAR Council plays an important role in the revisions and contractors have a seat at the table to propose updates.
If you have questions about the FAR rewrite and how it may affect your business, please contact the authors.