There’s broad bipartisan agreement that the federal government pays too much for goods and services yet procurement timelines remain far too slow. Over the past year, the Trump administration has been working on the “Revolutionary FAR Overhaul” (RFO), described in an executive order as an effort to “create the most agile, effective, and efficient procurement system possible.” To achieve this, the EO directs an overhaul of the Federal Acquisition Regulation (FAR) and agency supplements so that they contain “only provisions required by statute or essential to sound procurement.” So far, the administration has succeeded in making provisional changes to the FAR, which many agencies have adopted. Over the next year, the administration intends to implement feedback and finalize official changes to the FAR. GSA, DoD, HHS, and other agencies have also started amending their supplementary regulations. Beyond just streamlining regulations, part of the RFO is producing guidance materials — a FAR companion guide and practitioner albums, for example — to clarify the acquisition process for both the government and industry.
Despite the grand ambition in its name, the RFO’s goals are quite similar to those that led to the creation of the Federal Acquisition Regulation in the first place: deregulation, simplicity, and flexibility. However, the FAR was also heavily motivated by a desire to promote greater uniformity in the procurement process, a goal that is almost entirely absent in the RFO. Uniformity was so important because prior to the FAR, the system was much more fragmented; hundreds of offices, even several within the same agency, were developing their own rules and processes. The result was a system that Senator Henry M. Jackson described in 1967 as “a highly escalating battle of paperwork… often as baffling to the suppliers of goods and services as it [was] expensive to the Federal Government.”
This time, however, the RFO presumes that a shorter FAR is a better FAR — that by reducing procurement regulations and pushing as much discretion as feasible to procurement officers, we’ll get better products faster and cheaper. This can be true to a point: The FAR really is in desperate need of some streamlining, but taking the logic too far risks a major refragmentation. As one public commenter on the RFO noted, it’s important to have “enough flexibility to streamline acquisitions while preserving certain standardized elements that help contractors navigate and respond quickly and effectively to government solicitations.” Effective and lasting reform will require understanding the history of how acquisition rules have gotten so complex and why past efforts similar to the RFO haven’t solved the problem.
Pre-WW I to 1937: Purchasing increasingly complex products leads to increasing regulatory complexity
Before World War I, federal contracting was relatively simple. While the scale of government work could be large, the actual items, and thus the contract terms, tended to be straightforward, leading to less intrusive regulations. With a few exceptions such as shipbuilding, it was pretty easy to predict what the government would want in the near future, whether it be a specific amount of potted meat or the transfer of a certain volume of mail from one city to another via stagecoach. To minimize costs, statute required most items to be procured through the slow process of formal advertising (precursor to today’s sealed bidding), wherein contractors submitted sealed bids based on a prespecified set of requirements. This worked just fine for pencils, paper, furniture, and the various other things required to manage an early 20th century bureaucracy.
As is often the case in government, military necessity upset this status quo. During World War I, capitalizing on what H.G. Wells called “man’s increasing power of destruction” meant that the military needed products on the rapidly evolving edge of technological progress and the procurement system could not keep up. The problems of the old model were most visible in the nascent airplane market where prespecifying requirements meant missing out on rapidly evolving technology, necessitating workarounds for the duration of the war. After Armistice Day, the military could no longer use a patchwork of emergency exemptions to formal advertising. The military and industry quickly found that formal advertising’s focus on cost reduction over quality and an inability to favor a plane’s designers for manufacturing contracts were harming industry incentives and hampering technological progress.
Faced with these issues, the military used a loophole to again circumvent formal advertising. The Army Air Corps Act of 1926 partially addressed these constraints, but congressional distrust of “negotiation” (essentially defined as any procurement method other than formal advertising) remained strong. War profiteering scandals only deepened this distrust, leading Congress to impose new rules and bureaucracy to control costs. As military technology grew increasingly sophisticated, the regulations governing its production needed to evolve accordingly.
1937 to 1969: Trying (and failing) to bring order and efficiency to procurement at modern scale and complexity
The massive military buildup for World War II also saw massive shifts to the procurement infrastructure. Once again, military exigencies demanded more contracting pathways, which required an expanding set of rules to manage. After the war, drawing on lessons from WWII and decades of airplane procurement, the 1948 Armed Services Procurement Act (ASPA) allowed the military and the National Advisory Committee for Aeronautics (precursor to NASA) to negotiate under a long list of circumstances and enabled the newly created Department of Defense to issue military-wide procurement regulations.
With the federal government having undergone dramatic and disorganized growth from both the New Deal and the war effort, Congress also used the immediate postwar years to bring some order to the civilian bureaucracy. It handed the task to a commission led by former president Herbert Hoover. In its 1949 reports, the commission found a procurement system “concentrated in most places on price only” in which “the more basic and fundamental principle of value is completely overshadowed.” A big part of the reason? A statutory framework that “[b]y its brevity and generality … has encouraged copious interpretations by the office of the Comptroller General [when ruling on bid protests] and by policy-determining officials in the various agencies.” Fixing this required more than clearing out old rules and legal rulings. It also required writing new rules that explicitly gave contracting officers leeway to negotiate and to focus on more than just price when using formal advertising.
Congress implemented those recommendations and others through the Federal Procurement and Administrative Services Act of 1949. The law mostly copied ASPA’s armed services framework to civilian agencies and created the General Services Administration (GSA) to both centralize procurement and regulate acquisition under the newly liberalized system.
Notably, the GSA didn’t immediately use its authority to promulgate civilian procurement regulations. It only issued the first Federal Procurement Regulation (FPR) in 1959, after a 1956 report from President Eisenhower’s Cabinet Committee on Small Business. According to that report, “[v]ariations in procurement procedures from one agency to another, or from one division to another of the same agency, are often confusing to small businessmen.” Once again, a lack of detailed central regulation had made the system harder to navigate.
While it had similar goals, the FPR was a shadow of what the Federal Acquisition Regulation would be. It was mostly a less-than-comprehensive collection of various rules from the Armed Services Procurement Regulation, sometimes with GSA’s own twist on them. Due to the breadth of agencies it applied to, the FPR often chose to use general policy statements rather than prescribing specifics. It didn’t apply to the Defense Department or NASA at all, two major sources of government procurement activity. In short, the FPR was more of a stripped-down restatement of military procurement rules applied to civilian agencies than a thoughtful, comprehensive system designed intentionally for the world and government it was supposed to support.
As we will see, the FPR was ultimately an unsuccessful attempt to manage the growing regulatory thicket, one whose failure carries lessons for the RFO.
1969 to 1972: Realizing the scale of the regulatory fragmentation
By 1969, there was broad agreement that major reform was needed. The weakness and incompleteness of the FPR, the creation and reorganization of various agencies, and the divergent evolution of procurement regulations among agencies had led to a tangled mess of a system — one filled with loopholes, inconsistent regulations, and varying practices.
In recognition of the need to study and reform the system, Congress created the Commission on Government Procurement in 1969. The commission’s 1972 report may be the most comprehensive study of government procurement in history — and its high-level conclusions read a lot like complaints about the current procurement system. It critiques overly burdensome, inflexible, and unreadable regulations, including repeated references to an Army contracting officer’s five-foot shelf of regulations and guidance. It also laments a lack of sufficient personnel training, decries frequent cost overruns, and bemoans the difficulty small businesses have navigating the process.
Where the report differs from the RFO’s motivations is in its substantial focus on uniformity. In the view of midcentury policymakers, one of the biggest problems with the procurement system of the era was the lack of centralized guidance. As seen in early efforts to govern aircraft procurement, many agencies had rules that were created for specific problems that may not have come up for other agencies. When they encountered similar problems, different agencies sometimes developed divergent solutions. Even different offices in the same agency might have different rules.
The result was a system that left contractors “bewildered by the variety of requirements.” Producing the same product for two different agencies might involve implementing two different quality assurance programs. Contractors would need to spend time and money familiarizing themselves with the different subcontractor approval requirements for different agencies they worked with. If a single subcontractor was doing work on contracts for multiple agencies, the prime contractor would often need to satisfy multiple unique approval processes rather than just one. Interagency differences could be dramatic. In one agency, vouchers for interim payments were directly submitted to the finance office, while in another there were four separate layers of review. A business planning its operations around payments for work performed needed to account not just for its own performance, but also for the myriad ways and timelines for that performance to be compensated.
1972 to 1984: The FAR attempts to impose uniformity
To address the lack of uniformity, Congress followed the commission’s recommendation and created the Office of Federal Procurement Policy (OFPP) in 1974 with a mandate to develop “a system of coordinated, and to the extent feasible, uniform procurement regulations.” In 1978, OFPP, DoD, GSA, and NASA began working on the FAR. The FAR was intended to “replace the present proliferation of redundant and sometimes conflicting regulations with a single regulation which is uniform, clear, and understandable.” It was an objective that was made all the more pressing in 1979 when, as part of its efforts to produce the FAR, OFPP found that there were over 64,600 pages of procurement regulations in force, with over 485 different offices throughout the government regularly issuing new procurement rules, and creating or revising roughly 21,900 pages of regulation each year.
Actually writing the FAR was mostly left to DoD, GSA, and NASA with guidance from OFPP. The work consisted of pulling together, reconciling, and simplifying the ASPR and the FPR while implementing some other Commission on Government Procurement recommendations. Thus, the FAR was “not fundamentally a new policy.” While there were efforts at legislative change, the FAR was ultimately “constrained by existing statutes and generally follow[ed] existing acquisition policy and procedures.”
In part due to the conservative approach to its drafting, the FAR didn’t actually usher in a truly uniform procurement system. To Congress’s dismay, over 20 FAR supplements quickly cropped up, adding around 1,200 pages to the FAR’s initial 700. Part of the problem was additional statutory requirements imposed solely on DoD that required implementing regulations. Even if the regulation were rebuilt from the ground up, it could have only gone so far. That being said, the FAR did make for a system that was more standardized in the complexities that officials and businesses had to navigate, much to their appreciation.
Lessons for the RFO
It would be a mistake to view the pre-FAR experience as merely illustrating the pitfalls of an overly flexible system. Despite the focus on the harms of a decentralized system, the Commission on Government Procurement also advocated for greater flexibility for contracting officers. This may seem contradictory but it’s not. There’s a very big difference between a system in which unmanaged flexibility has led to entrenched interagency differences and one in which agencies are all going off the same playbook, but officers are able to innovate and the playbook is quickly updated as new problems and ideas emerge. The former leads to unnavigable bureaucratic fragmentation, the latter permits and effectively distributes innovation without permitting excessive refragmentation.
Delivering on the RFO’s goals of an agile, efficient, and effective procurement system will mean enabling the right flexibility. It will mean leveraging a streamlined FAR and the new buying guides alongside robust interagency training and exchange to promote and distribute innovative ideas while cutting off needless variations. To that end, there are a couple of key considerations that OFPP and others implementing the RFO should keep in mind:
First, statutory minimums are not uniform so an excessive focus on them can easily lead to needless interagency variation. Part of what the FAR did was extend statutory rules that apply to some agencies to other agencies so businesses don’t need to learn different sets of rules. This, of course, can be solved by going through Congress and the administration is trying to work with them. However, in doing so they should be mindful that even when a rule is really only important for a couple agencies, the best solution may be to extend a statutory rule to all agencies rather than have varying practices which business and programs need to varyingly navigate.
Second, maintaining uniformity requires rules against the proliferation of rules. Prior to the FAR, most procurement rulemaking happened below the agency headquarters level. This is part of why deviating from the FAR for more than a single contract couldn’t be delegated below agency acquisition leadership.
Fortunately, the RFO appears to be taking this concern seriously: It calls for all nonstatutorily required rules to sunset after four years if they are not renewed. Unfortunately, this fix would raise its own complexities if managed improperly. Having everything sunset after four years sounds great until businesses start needing to track numerous different provisions’ expiration dates and guess at whether they’ll be renewed or not. Clear and early communication about whether provisions will be renewed and potentially grouping together sunset dates rather than defaulting to four years after individual implementation dates could do much to address this concern.
Third and perhaps most importantly, managing variation through effective and at times specific rules, guidance, and cross-agency training will be critical to success. Reducing rules while promoting flexibility means increasing office and officer discretion, which naturally leads to more interoffice and intraoffice variation in practices. Of course, such variation isn’t always a bad thing. NASA procuring rocket components should look different from GSA procuring pencils. However, the pre-FAR experience illustrates how unmanaged variation can easily go too far. Even if agencies manage to refrain from issuing new regulations to deal with the problems they encounter, practices will still evolve with experience. There may not be the same shelves full of regulations, but that could just make the practical differences harder to track. As the FPR’s failures illustrated, preventing this sort of excessive fragmentation will require more of the FAR than a brief and streamlined regulation. It requires real and at times detailed guidance on how the system should work.
Additionally, between the reduction in regulations and the RFO pushing decision-making to the lowest level, the quality of the procurement workforce will become all the more important. While workforce training is not a focus of the RFO, the administration fortunately hasn’t entirely neglected it. The planned nonregulatory buying guides could also help alleviate these concerns, but they’ll need to walk the tightrope between becoming de facto regulations and effective standardizing guidance.
While the RFO may be the latest procurement reform effort, its goals are not novel. Cutting through the red tape has long been a goal of procurement reform advocates, and rightfully so. However, there is more to making an effective procurement system than mere deregulation and we shouldn’t let our tape-cutting zeal blind us to which pieces might just be holding the system together.
