New procurement rule draws fire

A revision to federal government buying rules says companies that repeatedly violate federal tax, labor, safety, environment and antitrust laws shouldn't be awarded government contracts.

That policy was written into the Federal Acquisition Regulation on Wednesday and has touched off a furious effort by business lobbyists — including information technology organizations — to kill it.

A coalition of business groups said it plans to battle the new rule in federal court.

"We will work hard to show that it is unnecessary," said Tom Stohler, a spokesman for AeA, formerly the American Electronics Association.

AeA and other business organizations have set up a lobbying group to try to sink the new rule. The group argues that it unfairly requires government contracting officers to consider companies' compliance with "nonprocurement-related laws" when deciding whether to award contracts.

"And it's not just violations, it's accusations of violations," Stohler said. For example, he said, one company was accused of 800 violations of labor law during a dispute with a labor union. Ultimately, the accusations were dismissed, but under the new rule, those accusations could cause the company to lose federal contracts, he said.

IT companies are especially apprehensive because the federal government is their largest customer, Stohler said. Federal agencies buy about $28 billion worth of IT equipment each year.

The lobbying group, which calls itself the National Alliance Against Blacklisting, contends that denying companies contracts because they violate federal laws unrelated to the contracts amounts to "blacklisting" them.

"We will not stand by idly while the last days of the [Clinton] administration are used to issue unsupported, politically motivated rules that would have a devastating effect on American businesses and workers," said Thomas Donohue, president of the U.S. Chamber of Commerce.

But supporters of the new regulation cheered its debut.

"Why should businesses that break the law be rewarded with federal contracts?" asked Reece Rushing, a policy analyst for OMB Watch, a government watchdog organization.

For five decades, federal acquisition regulations have required contracting officers to consider contractors' integrity and business ethics, but until now, standards for integrity have been so vague that they have rarely been enforced, he said.

The claim that new rules amount to blacklisting companies is absurd, Rushing said. "No list is compiled. To us it's pretty simple — procurement officers should be able to take into consideration whether a company has violated laws and regulations when deciding whether to award that company federal contracts," he said.

The need for the new rules was made clear when studies by the General Accounting Office showed that contracts are being issued too often to companies with histories of significant violations of federal laws, Rushing said.

But Stohler dismissed the GAO findings as old and insubstantial. "The federal government has never proven there is a problem to begin with," he said.