AbstractThe costs and benefits of procedural rules governing federal agencies who make complex decisions are examined, focusing primarily on complex procurement decisions, particularly federal computer procurement. Like previous literature, the analysis emphasizes the importance of procedural rules for resolving principal/agent conflicts between Congress and federal agencies. In contrast, it provides a deeper understanding of the consequences of rules that cannot be fine-tuned for all situations. Procedural rules prevent biased decisions in some situations and produce undesirable distortions in others. The agent, and ultimately the principal, pay a cost for distortions that result in sub-par agency performance. Exceptions to rules are desirable (and likely) when the costs of distortions outweigh the benefits from preventing biased agency decisions.