Commentary: Regulations are killing innovation in government

Recently I spoke with a number of federal CIOs about the challenges they face. One salient point from the discussion was how federal acquisition regulations and hiring rules make their lives incredibly difficult. One executive complained that his agency is paying way too much for employee smartphones. Another is adding more data centers instead of reducing them and moving to more efficient cloud services. Another is trying to find creative ways to pass off the agency’s “deadwood” employees to other agencies, even while paying those workers’ salaries. And in one particularly depressing example, the CIO was trying to hire a Java programmer but the top three OPM candidates had no Java experience. Of course, CIOs are not the only federal managers facing these problems.

So I floated an idea that many seemed to really like: Why not have the House and Senate Government Reform Committees pass a law that would allow one federal agency to be completely exempt from all of these rules, including civil service and procurement rules, for a period of three years? The agency would be bound only by civil laws. And then at the end of three years, the Government Accountability Office could do a soup to nuts evaluation of how it worked. Ideally, Congress should pick a small agency, like the Federal Housing Finance Board or a federal lab. Or alternatively, agency heads could apply to be the test case; so that the flexibility of these rules is matched with an agency leader who wants the increased freedom. Given how onerous federal agency regulations are, there could be a long line of applicants for relief.

The idea would be to free the agency from all of the hiring practices, acquisition rules and other restrictions that make federal operations so inefficient. In other words, they could more easily fire employees who deserve to be fired, hire the right employees faster, and do other things in the most efficient and innovative ways.

Some experimentation in this area has already taken place. For example, in 1970, Congress passed the Postal Reorganization Act and exempted USPS from federal acquisition requirements to give it more flexibility in its procurement practices (although, as I’ve noted before, Congress has hamstrung the Postal Service in other ways). More recently, Congress initially exempted TSA from FAR requirements, in part so it could rapidly focus on its mission without getting bogged down by government contracting requirements. One of the major differences between FAR and the Acquisition Management System used by TSA at the outset is that AMS allowed “managed competition.” As explained by Rick Gunderson, Assistant Administrator for Acquisition at TSA at the time, “Whereas the FAR requires full and open competition, AMS is based on managed competition. This is consistent with how industry conducts its own purchasing and supply chain management. As a result, government resources are not spent on firms that have no chance of receiving award, and industry maximizes the impact of their bid and proposal costs.” Nevertheless, Congress took away this exemption in 2008, even as TSA agency leaders protested the change.

The acquisition rules do have some purpose. They were designed to minimize fraud, increase competition, and ensure accountability of public funds. But perhaps there are more efficient ways to achieve some of the same outcomes. As my colleague Daniel Castro argued earlier this year, perhaps we can use technology to increase transparency and promote accountability by, for example, making information about all expenses (including salaries) of federal agencies publicly available online.

The acquisition rules were designed to be the same across all agencies so that it is easier for businesses to provide services to the federal government. Using one set of rules makes it easier to provide services and creates more competition. But the acquisition rules are a barrier to competition because they are so complicated. This same barrier does not exist in the private sector.

While it might make sense to retain some rules, such as those to protect whistleblowers, many of the regulations seem unnecessary. Some regulations are thinly-veiled attempts to set social policy. For example, FAR Subpart 23.5 outlines the requirements to create a drug-free awareness program that a government contractor must create for all its employees. Why should government have a different policy than the private sector? And notably, many of the rules are designed to benefit specific groups, such as small business, women, minorities or veterans, which increases federal costs.

This may be a sledgehammer when what we need is a scalpel. Or maybe acquisition rules, civil service protections and other regulations have grown too unwieldy for the knife and only radical surgery can restore effectiveness. Either way, given the huge costs involved, policymakers should give more thought to creating a more flexible government bureaucracy.

Robert D. Atkinson is president of the Information Technology and Innovation Foundation and co-author with Stephen J. Ezell of “Innovation Economics: The Race for Global Advantage” (Yale University Press, 2012).