Regulatory reform is a goal of the new administration. This objective is reflected in the president’s January 30, 2017, Executive Order (EO) on Reducing Regulation and Controlling Regulatory Costs.

This EO, which was immediately effective, requires executive agencies to repeal at least two existing regulations before issuing a new regulation, which is the reason why this EO is referred to as “one in and two out.” Furthermore, during fiscal year (FY) 2017, executive agencies must achieve a “net zero” increase in costs of new regulations. Then, in FY 2018 and later FYs, the executive agencies will have a “cost budget” for regulatory changes.

On February 8, the EO became the subject of a federal court challenge alleging the EO exceeds the president’s constitutional authority, violates the president’s duty under the take care clause of the US Constitution, and directs federal agencies to engage in actions that will harm countless Americans. The lawsuit also alleges the EO would force the repeal of regulations needed to protect health, safety, and the environment.

What Will Happen Now?

Even without the pending district court lawsuit, there are significant questions regarding implementation of the EO, and government contractors are not likely to see immediate changes to regulations relating to government procurements and contracts. The reasons:

  • The EO directs the Office of Management and Budget (OMB) to issue guidance on implementation of the EO and that guidance has yet to be developed.
  • The EO also exempts regulations related to “military,” “national security,” and “foreign service.” OMB guidance will be important in order to provide an understanding of how broadly this exemption will be applied.
  • Finally, the EO exempts rulemaking that is “otherwise required by law” and many government contract regulations are required by law.

In addition to the EO, the White House Chief of Staff also issued a Regulatory Freeze Pending Review Memorandum on January 20. That memorandum delays new regulations with the exception of health, safety, financial, or national security matters allowed by the Director of OMB.

The EO and Regulatory Freeze Memorandum are actions that further the new administration’s desire to reduce regulations. Issues must be addressed in implementing guidance and it appears changes to procurement regulations may not be imminent. However, contractors should monitor developments in this effort at regulatory “reform.”