Contractors in Rulemaking | The regulatory review

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ACUS guidelines are designed to help agencies create policies that guide their use of contractors in the rulemaking process.

Government regulation can be a lengthy and resource-intensive process, and government agencies sometimes turn to contractors for assistance. Some agencies use contractors, for example, to conduct research to support a regulation, to prepare regulatory impact assessments, to facilitate meetings with interested parties, or to process public comments that the agency receives.

By outsourcing certain rulemaking-related functions, agencies can realize benefits such as reduced administrative costs, greater flexibility in allocating limited human resources, and access to subject-specific expertise or alternative perspectives.

Because rulemaking is a form of agency decision-making, however, agencies must ensure that they do not delegate responsibility for deciding policy matters, making value judgments, or exercising discretion on behalf of the federal government. Such responsibilities are considered inherently governmental under federal law.

Authorities should also exercise increased caution before subcontracting other tasks that are closely related to an inherently governmental function. Care must be taken to ensure that contractors support, not replace, agency decision-making.

The Federal Acquisition Regulation, along with documents issued by the Office of Management and Budget (OMB) and its Office of Federal Procurement Policy, provides general guidance on what constitutes an inherently governmental function or duties closely related to it. However, these guidelines are opaque and it can be difficult for authorities to determine which rulemaking functions fall into these legal categories. Government agencies must also address thorny ethical and practical issues related to the use of contractors for rulemaking-related functions.

To address these issues and improve the effective use and transparency of contractors in rulemaking, the United States Administrative Conference (ACUS) recently adopted Recommendation 2022-1, contractors in rulemakingidentifying best practices for agencies.

Authorities should first identify which rulemaking-related tasks are inherently government functions – such as approving a final rule – and which tasks are closely related to government functions – such as conducting impact assessments, providing feasibility studies, or drafting the regulation text or preamble . Agencies should adopt policies to ensure agency staff do not outsource inherently governmental functions and to ensure increased scrutiny when outsourcing tasks closely related to such functions.

Authorities should then evaluate how they manage contractors to prevent the outsourcing of inherently government functions. Government agencies should also clearly delineate responsibilities between contractors and government employees and take steps to mitigate organizational and personal conflicts of interest. Just as OMB’s guidance on identifying a task closely related to an inherently governmental function is opaque, there are no clear guidelines addressing the specific concerns of contractors’ personal or organizational conflicts of interest in rulemaking.

In the interests of promoting transparency and efficiency, public authorities should develop and disseminate guidelines describing the mechanisms they have in place to avoid inherently contracting out governmental functions. These policies should include requirements for disclosure of potential conflicts of interest and remedial actions that the agency will take to address conflicts when they arise. When a contractor performs a rulemaking function that is closely related to an inherently governmental function, the agency should also disclose the role and identity of that contractor, unless prohibited by law.

By implementing these guidelines, agencies can ensure that the use of contractors in the rule-making process does not cross the inherent government functional line and that ethical standards to avoid conflicts of interest are adhered to.

In addition to providing agencies with best practices, the ACUS recommendation also suggests that the OMB consider an assessment of procurement practices across the federal government, and then produce additional guidance on contractor-performed functions in the rulemaking process.

In the meantime, it’s up to the agencies themselves – or the US Congress – to determine where stricter guidelines on the use of contractors in the rulemaking process may be needed. The recent ACUS Recommendation highlights best practices to help government agencies act responsibly when using rulemaking contractors.

Kazia Nowacki is Counsel at the United States Administrative Conference.

The views expressed in this post are those of the author and do not necessarily reflect the views of the administrative conference or the federal government.

This paper is part of a three-part series on the United States Administrative Conference entitled Use of technology and contractors in the administrative state.

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