Super-short summary: the collusion risk amendment approach will work even if OMB refuses to back down.

Plan A for the collusion risk amendment approach is that if OMB is offered a face-saving way to back down from the embarrassingly wrong FCRA Criteria, they’ll take it. Much good can come of that, most importantly as the basis of a broader rapprochement with CWIFP.

Okay — but what if OMB goes full Captain Ahab and rejects the approach by indicating that they will not revise the Criteria? Their justification for doing so might be incoherent, but that’s been the case for everything about the FCRA Criteria all along. Is the collusion risk amendment approach still worth developing?

The answer is yes. The potential effectiveness of the collusion risk approach is not contingent on OMB co-operation — in fact, I assumed their initial, and perhaps permanent, intransigence. The approach lays the groundwork to force a solution, if necessary.

Here are the operative factors for Plan B:

• The immediate tactical challenge for an amendment to fix the FCRA issue is CBO scoring, as most recently outlined here. Even if, for some inexplicable reason, CBO is also intransigent about the validity of the current Criteria, they can’t use them as the basis for a scoring analysis, as they did for prior amendments. A collusion risk amendment is only tangentially related to FCRA budgeting — how could CBO claim that requiring additional due diligence will suddenly raise the cost of a loan program? More likely, CBO will be only too happy to see a collusion risk amendment as consistent with their own ideas about federal sovereign power and simply conclude there’s no budget impact at all — they’ve got plenty else to deal with.

• Most substantively, the additional due diligence required to qualify as a ‘non-federal borrower’ demonstrates, beyond doubt, that the cost-share is a non-federal asset. The borrower is showing that, regardless of how complex, intangible or intertwined in a bigger project the cost share might be, they’re getting their own non-federal value from it, and decided to pay for it in accordance with their own non-federal procedures. With that explicit demonstration, the current FCRA Criteria (which treat cost-shares as ‘federal assets’) become even more glaringly incoherent and divorced from reality.

• On what possible basis could OMB oppose additional due diligence requirements at a federal loan program? It’s one thing for OMB to spin a narrative about mysterious budgetary standards, but the collusion risk amendments are about things in the real world that everyone is familiar with. What exclusive authority does OMB have to comment on that? None — if they oppose commonsense amendments, they’ll just look insane.

• If the collusion risk amendments are enacted, a qualified ‘non-federal borrower’ under WIFIA law is now also a ‘non-federal borrower’ under FCRA law. FCRA treatment is not optional — loans to non-federal borrowers must be recorded using FCRA methodology (recall that FCRA was enacted to prevent budget games). The current FCRA Criteria are not law — they’re not even federal rules, only the subject of a Federal Register Notice. Even without a Congressional directive to force a revision, how can a mere ‘Notice’ based (such as it was) on prior law override current law?

• Of course, a Congressional directive to require a revision of the FCRA Criteria simultaneously with enacting the amendments would be definitive. Here, a collusion risk amendment story is easier to sell politically — the directive doesn’t have to question OMB’s authority on technical budgeting matters or even imply that the current Criteria are wrong. The directive can simply note that WIFIA law is being changed with respect to due diligence in a way that might affect the applicability of the 2020 Criteria Notice. That benign rationale can be sold by also quietly making it clear that OMB was being offered face-saving solutions and exit ramps throughout the whole process — that while addressing collusion risk might be a good thing in itself, the amendments were designed from the start to make it easy for OMB to agree. If they continue to resist, well, what choice is there? The Criteria were created by a Congressional directive after all — they can be revised the same way.