June 1999
The Clinton Administration has fulfilled its promise to organized labor to take steps to ensure government contractors have "satisfactory labor relations." On May 28, 1999, the Office of Federal Procurement Policy proposed regulations to amend Federal Acquisition Regulation (FAR) standards that would significantly alter the "responsibility" criteria on which government contracts are awarded.
The proposed regulations would adversely affect government contractors in a number of ways.
First, the draft FAR proposal seeks to amend the definition of an "unsatisfactory record of integrity and business ethics." It provides as examples of an "unsatisfactory" record, evidence of the prospective contractor’s lack of compliance with tax laws or "substantial noncompliance" with labor and employment, environmental and antitrust laws.
Second, the proposal provides that to be "responsible," a prospective contractor must have "the necessary workplace practices for addressing matters such as training, worker retention and legal compliance to ensure a skilled and productive work force." No other guidance is given.
Third, the proposal gives government compliance officers too much latitude in making disqualifying decisions -- with no due process guarantees. It indicates that responsibility determinations will be made on a case-by-case basis and that such decisions need not rest on a final adjudication by a court or administrative agency. Rather, the compliance officer will be able to make an adverse responsibility determination simply based on "persuasive evidence of substantial non-compliance with a law or regulation."
Fourth, the proposal would disallow the costs "relating to attempts to influence employee decisions respecting unionization." In short, it supports a position of "neutrality" in union organizing campaigns. The proposal is vague in terms of the unallowable costs under this standard.
Fifth and finally, the FAR proposal would disallow costs relating to legal and other proceedings "where the outcome is a finding that a contractor has violated a law or regulation or where the proceeding was settled by consent or compromise." The Administration rationalizes that the government should only be doing business with companies that are "good citizens." Disallowance would apparently apply regardless of why and under what circumstances settlement was achieved.
The Administration has estimated that these proposed rules will be published in the Federal Register in "several weeks." There will be a 120-day notice and comment period on these proposed regulations instead of the normal 60-day period associated with FAR regulations.
Morgan Lewis has been following this issue closely for the past two years. These proposed regulations have the potential to unnecessarily complicate federal procurement and to potentially subject contractors to "blacklisting" and unfair harassment.
Government contractors and those who intend to bid in the government arena should consider making their views known. Please contact us if you would like to receive a copy of the proposed regulations or would if you would like assistance in filing comments after their publication in the Federal Register.
This article is published to inform clients and friends of Morgan Lewis and should not be construed as providing advice on any specific matter.