“President Trump is seen above all else as a disruptor hell-bent on upsetting the established ways of governing. However, even disruption itself has to follow a process in Washington.” — Howard Schweitzer, CEO, Cozen O’Connor Public Strategies

The Cozen Lens

·       President Trump launched a rollback of Biden-era regulations on day one of his second term, but following through on his campaign trail deregulatory promises will take a matter of years, not just days, weeks, or months.

·       Even though all the attention is on the coming reconciliation push, don’t ignore the possibility of bipartisan measures passing through Congress.

·       President Trump is nothing if not a disruptor, and his second administration could disrupt the federal government’s traditional contracting processes.

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Deregulation is a Marathon, Not a Sprint

A Regulatory High-Water Mark. Amidst promises to cut 10 regulations for every one new one issued over the next four years, the Trump administration has made clear that the actions of the former Biden administration will serve as a regulatory high-water mark.

·       President Trump campaigned on a promise to usher in the “most aggressive regulatory reduction” in modern history, a promise he began to follow through on only hours after his election. Trump’s Department of Government Efficiency (DOGE) began work in late November to identify regulations and mandatory spending to cut with plans to work closely with Office of Management and Budget Director-designate, Russell Vought, to reduce the size of the federal government. Vought himself promised last year to “dismantle the bureaucracy.”

·       Much of the deregulatory work over the next four years will be concentrated in the independent agencies where Trump appointees have promised to target Biden-era overreach. In a move reminiscent of 2017 and 2021, incoming agency leaders plan to pause and review outstanding rulemakings, enforcement actions, and even hiring efforts as they are confirmed to their new positions. Trump himself has sought to speed along agency actions with a flurry of executive orders yesterday afternoon directing regulators to eliminate Biden-era rules.

Process Trumps Rhetoric. Although DOGE and Trump administration regulators plan to quickly begin the process of unwinding Biden-era rules, actually overturning or replacing them can take years depending on the legal avenues by which the regulation was established.

·       The lowest hanging fruit in the deregulatory process are agency directives or interpretations of existing law that weren’t established by formal rulemakings. Agency guidance and policy statements, such as the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 or the Consumer Financial Protection Bureau’s (CFPB) circular on fine print in contracts, can be immediately repealed. The direction and aggressiveness of agency enforcement actions are also subject to the discretion of agency leadership.

·       Deregulating won’t be so simple when it comes to formal rules. For final rules already published in the Federal Register, the suspension of the effective date of the rule, the withdrawal of the rule, or the reimposition of an earlier rule all require a formal notice and comment period, in effect making the withdrawal or suspension a rulemaking in and of itself. Major Biden-era regulations such as limits on vehicle tailpipe emissions, limits on the use of forever chemicals, or limits on the greenhouse gas emissions of power plants, will take significant time to overturn. Rules tied up in legal battles, such as the SEC’s greenhouse gas emissions disclosure rule, can be unwound by settling or losing the legal fight, although neither avenue guarantees immediate relief.

Congress Gets a Say. Trump administration officials will get a helping hand from Congress in at least a handful of deregulatory cases.

·       Utilizing a 1996 law known as the Congressional Review Act (CRA), a simple majority in both chambers of Congress can overturn a regulation within 60 days of its finalization if they both pass a resolution "disapproving" of the rule. The CRA includes a provision known as the “lookback” window which allows a new Congress to overturn rules issued within the last 60 legislative days of the prior Congress, something GOP lawmakers used to eliminate 16 Obama-era regulations in 2017. According to nonpartisan watchdog Public Citizen, the current lookback period extends to August 16th, 2024.

·       According to Axios, Senate Majority Leader John Thune (R-SD) recently told the American Petroleum Institute that Senate leadership is “scrubbing” Biden-era rules to determine which ones are eligible for CRA repeal. Early candidates include a Department of Energy rule on water heater efficiency, an Internal Revenue Service rule on cryptocurrency reporting requirements, the Federal Communications Commission’s wifi hotspot rule, and the CFPB’s overdraft and medical debt rules.

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Don't Dismiss the Prospects for Bipartisan Legislation

How Congress Actually Works. Major party-line bills are like the tip of an iceberg — attention-grabbing but hiding most of the picture.

·       It famously only takes a simple majority to pass a bill in the House of Representatives, as opposed to the necessity of beating the filibuster in the Senate. It may come as a surprise to learn that only about one in seven bills are brought to debate in the lower chamber under a traditional “rule,” permitting a majority vote. By contrast, three-quarters of measures are introduced via an expedited procedure requiring two-thirds support and the remaining number are by unanimous consent.

·       Granted, most of these bills are minor — naming post offices and the like. However, it also includes a number of more important bipartisan bills that have passed under the radar (e.g., the ADVANCE Act, which boosts nuclear power development). According to Matt Yglesias, who coined the term “Secret Congress,” this is the whole point: issues that dodge widespread news coverage create the space for lawmakers on both sides to come together to pass major reform.

·       Political capital is a finite resource. Despite all of the current focus on the prospect of a party-line reconciliation bill, this opportunity will eventually be fulfilled, and the only thing left will be the standard way things are done in Washington —across the aisle.

Hot Spots for Agreement. Tensions are high under the GOP trifecta. That doesn’t mean both sides can’t agree on some key areas.

·       The first issue to watch is immigration. President Trump has raised the policy area to the forefront of American politics. Needing to neutralize this critical weakness, the Democratic response has been to tack hard towards the center. Republicans are aiming for immigration reform as part of budget reconciliation but will be limited in what they can include as part of the process. Bills like the Laken Riley Act provide an opportunity for the GOP to hammer Democrats on a political albatross, perhaps creating the incentive for a more bipartisan deal.

·       Energy permitting is another perennial topic. Most recently, prospects collapsed with the failure of a bipartisan agreement with now-retired Senator Joe Manchin (I-WV) but permitting reform is known as the “zombie bill” for a reason: it just won’t stay dead. While the GOP is keen on deregulating the rules blocking many major projects from going forward, Democrats have their own reason to go along. The green energy transition of new wind and solar is currently being hamstrung by these same rules. While Democrats remain hesitant to roll back environmental protections, one can never rule out the slim chance of a major change.

·       Last Congress, both sides had come to an agreement on a healthcare package extending telehealth coverage under Medicare and regulating pharmacy benefit managers. At the last moment, this bill was sunk by a conservative backlash in favor of a slimmed-down version with the deal absent. Although Republicans may try to implement some of this left-over reform via their reconciliation deal, the appetite among lawmakers to finish what they started last Congress is high —as are the chances of the healthcare package passing in some form this term.

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Disrupting the Government Contracting Process

Disruptors at the Top. President Trump’s picks for high-level executive branch roles indicate an appetite for change, and that could include federal government contracting.

·       Trump’s political ethos is defined by disruption. His first and second campaigns promised to change business as usual in Washington. Eight years after the start of his first term, Trump has built a roster of like-minded individuals to staff his second administration.

·       There’s a pattern of Trump selecting outsider figures for the top leadership roles at agencies who can disrupt the status quo. These picks have little traditional government experience but personal loyalty to the president. Trump then taps someone from the business community as deputy to that person. For example, he selected former independent presidential candidate Robert F. Kennedy Jr. as secretary of Health and Human Services and biotech investor Jim O’Neill as deputy secretary. At the Pentagon, Trump named veteran and Fox News host Pete Hegseth as secretary of Defense and investor Stephen Feinberg as deputy secretary. His choices for secretary of the Army and secretary of the Navy, Dan Driscoll and John Phelan, respectively, also have investing backgrounds.

·       Trump’s Cabinet members may enter office with a vision of disruption, but it’s often deputies who handle day-to-day tasks of running the agencies. This makes them key figures to watch for the future of government contracting.

The Pentagon Under Trump 2.0. The Department of Defense (DOD) provides a case study of potential changes to federal contracting.

·       Trump’s appointment of individuals from the investing world to top DOD roles gives some reasons for optimism to smaller defense tech companies. Their background may make them more open to considering alternatives to legacy programs.

·       Department of Government Efficiency (DOGE) co-leader Elon Musk has called for reforms to national security acquisition processes. Depending on how much influence the DOGE ultimately has over the federal government, this could allow Musk to reshape traditional Pentagon procedures that serve as a barrier to smaller companies. Feinberg and his other fellow former investors could provide a connection point between the Pentagon and DOGE.

The Trump team faces challenges to changing business as usual at the Pentagon. Coming from the private sector, Trump’s personnel picks lack experience in the complex world of government contracting. Executing major policy changes in a large bureaucracy and changing the DOD’s longstanding organizational culture is not easy. Moreover, it’s not just up to DOD officials. Members of Congress will have a say, and lawmakers will seek to protect jobs in their states and districts.