Administration's use of interim rules upsets industry

Business groups are questioning the Obama administration’s frequent use of interim rules that put regulations into effect before the final language is settled. That means that companies can spend money to comply only to have the requirements change again.

“We believe that the ever increasing reliance upon the use of an interim rule violates the spirit of the Office of Federal Procurement Policy Act, at a minimum, and misuses the ‘urgent and compelling’ exception,” said a letter from the Council on Defense and Space Industry Associations.

The letter was sent to the Defense Department’s defense procurement and acquisition policy office May 26 and six business groups signed it. A source close to the council said leaders are drafting a similar letter for the Office of Federal Procurement Policy.

The Federal Acquisition Regulations allow for officials to set up a rule immediately. The council complained to DOD that many times interim rules are not under "urgent and compelling circumstances" to warrant such an action, and regulators sometimes don’t give a reason for why a rule needs to go into effect immediately.

However, the council said the pressure to implement often isn’t there. For example, a statutory deadline does not put a proposed regulation under any pressing circumstances in most cases, it said.

The council pointed to a recent case that amends the Defense Federal Acquisition Regulation Supplement regarding companies’ business systems for accounting, purchasing, and other areas. The regulation clarifies policies about the definition and administration of the systems used to help with DOD auditors’ oversight. (Read the regulation.)

The rule was published May 18 and immediately took effect.

The rule on business systems has been issued twice under different proposals. Now the fiscal 2011 National Defense Authorization Act requires more revisions to business systems regulations.

The council contended the cost of compliance goes up if a rule goes into effect immediately and then is changed. The government often pays more in the end, and the contractor has to deal with more risk.

“The nature of the change imposed on the procurement system by a new regulation should be given more weight,” the letter states.