Government Contracts Monitor

President Trump Wastes No Time Moving to Cut Regulatory Burdens and Costs

January 30, 2017

President Trump is moving quickly to implement his various campaign pledges, including his commitment to reduce federal regulation and the resulting huge burdens and costs on both large and small businesses. Specifically, within hours of the President's inauguration, his Chief of Staff, Reince Priebus, issued a Presidential Memorandum (the “Freeze Memo”) imposing a broad freeze on all new and pending regulations (except for emergency situations or other circumstances relating to health, safety, financial or national security matters, as approved by the Office of Management and Budget (OMB)), broadly defined, pending review and approval by the new Administration. Then, on Monday, January 30, 2017, President Trump issued a new Executive Order, requiring all agencies, in accordance with guidance to be issued by OMB, and subject to certain exceptions, to determine the costs of all new regulations, and, to the extent permitted by law, offset such costs by the elimination of existing costs associated with at least two current regulations identified for elimination. The Executive Order establishes a goal of “no greater than zero” net incremental cost for all new regulations, including repealed regulations, for Fiscal Year 2017 (FY17), which started October 1, 2016 and is already four months underway.

The Freeze Memo directed the Heads of all Executive Departments and Agencies (collectively, “Agencies”) (1) not to send any new regulations to the Office of the Federal Register (OFR) until an Agency head appointed by President Trump reviews and approves the same, (2) to withdraw any regulations previously sent to OFR but not yet published, and (3) to temporarily postpone for at least 60 days from January 20, 2017, the effective date of any regulation already published, but not yet effective, and to consider potentially proposing further notice-and-comment rulemaking, where appropriate, to review questions of fact, law or policy. The Memo broadly defines “regulation” to include “‘any substantive action by an agency (normally published in the Federal Register) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking,’ and also covers any agency statement of general applicability and future effect ‘that sets forth a policy on a statutory, regulatory, or technical issue or an interpretation of a statutory or regulatory issue.’” The Memo excludes any regulations subject to statutory or judicial deadlines, and directs Agencies to notify OMB as to such exclusions, as well as any other regulations that should be excluded due to their effect on “critical health, safety, financial, or national security matters, or for some other reason.” The Memo states that the regulatory review is to be implemented by OMB, and that all communications relating thereto should be addressed to OMB.

In order to provide guidance as to implementing the Freeze Memo, OMB issued Memorandum M-17-16 on January 24, 2017. OMB directed each Agency to coordinate all contacts through the cognizant Office of Information and Regulatory Affairs (OIRA) Desk Officer. Importantly, each Agency is to withdraw all regulations currently at OIRA in order to ensure the proper prior review by the appropriate Agency person before OIRA commences any review. With respect to any pending, not yet effective, regulations, OMB directed Agencies to consider postponing the effective date beyond 60 days where appropriate, and to consider inviting comments on the regulation itself, including as to questions of fact, law and policy that the Agency should recognize as it considers whether the regulation raises any substantial questions.

The new Executive Order sets forth President Trump’s policy to control and reduce the burdens and costs of regulation. To this end, the Order requires that, for FY17, any agency proposing for notice and comment, or otherwise promulgating, a new regulation must identify at least two existing regulations to be repealed, unless prohibited by law. The Order further requires any new incremental costs associated with new regulations must, to the extent permitted by law and consistent with Administrative Procedures Act (APA) requirements, be offset by eliminating existing costs associated with at least two prior regulations. OMB is to establish guidance as to the processes for standardizing the measurement and estimation of regulatory costs, as well as what qualifies as new and offsetting regulations, among other things. OMB also is to provide guidance on phasing in and updating these new requirements.

Looking further down the road, beginning with the regulatory plans for FY18, and for each fiscal year thereafter, each Agency will be required to identify the total costs or savings associated with each new regulation or repealed regulation, and must identify, for each regulation that increases incremental cost, the offsetting regulations to be eliminated. Each regulation approved by OMB is to be included in the Unified Regulatory Agenda (URA), and no regulation may be issued that is not in the most recent version or update of the published URA. During the Presidential budget process, OMB is to identify to Agencies a total amount of incremental costs allowed for each Agency in issuing new regulations and repealing regulations for the next fiscal year, and no regulation exceeding the Agency’s allowance will be permitted in that fiscal year, unless required by law or approved in writing by OMB.

None of these steps actually reduces current regulations or regulatory burdens and costs, and none has any direct impact on current contracting rules and regulations. However, these steps evidence President Trump’s determination to reduce regulations and their burdens on business, and take an important first step by freezing the rulemaking process as to all regulations that were not final as of President Trump’s inauguration, so as to permit reasoned review thereof by his Administration. Moreover, the Executive Order establishes a clear policy to reduce regulations and imposes new processes, subject to implementing guidance by OMB, to govern rulemaking going forward, including specific consideration to containing and reducing the incremental costs of new regulations.

Hopefully, these steps, as further clarified and defined by OMB, will lead to a substantial reduction in the number of regulations and their attendant burdens and costs, particularly on small business.