Vendors rail against proposed FAR changes

Federal contractors and labor unions are gearing up for a fight over a proposed procurement regulation that would allow contracting officers to deny vendors business if they violate federal laws.

The proposed amendment to the Federal Acquisition Regulation aims to clarify a rule that lets contracting officials consider the "integrity and business ethics" of a company when deciding whether that vendor is responsible enough to be hired. Such decisions, called "responsibility determinations," are routine and most often are based on whether a firm is staffed and managed appropriately for the work it wants to perform.

The AFL-CIO has pushed the provision for several years and says that under current rules, vendors who break the law can still get government contracts. Vendors argue that the proposal is not necessary and would result in companies being "blacklisted" without due process.

Contractors think the move is a political maneuver by the Clinton administration to gain labor support for Vice President Al Gore in next year's presidential election, a charge the unions dispute. Senate Republicans are expected to try to block the proposal with legislation later this summer.

Linda Ricci, a spokeswoman for the Office of Management and Budget, said the proposed rule "clarifies our commitment to doing business with law-abiding companies. There's no reason why American taxpayer dollars should be used in contracts between the federal government and institutions or companies that fail to meet health and safety regulations, respect environmental laws or pay their taxes."

The proposal would add to the FAR examples of what could be considered an "unsatisfactory" record of corporate ethics, including violations of tax, labor, civil rights, environmental, antitrust or consumer-protection laws.

An explanation of the proposal indicated that contracting officers could base their decisions on "persuasive evidence" of "repeated and substantial violations," even if a court has not found a company guilty of breaking the law.

"It's too general," said Olga Grkavac, executive vice president of the Information Technology Association of America's Enterprise Solutions Division, adding that vendors fear individual contracting officers could be pressured by unions to deny contracts. "If you have a series of employees that are alleging some kind of complaints that aren't true, is that a pattern?"

Wilsie Adams, a partner with the lobbying firm Manatt, Phelps&Philips, said existing debarment and suspension proceedings are a more fair way to punish unscrupulous vendors because officials deciding these cases must consider whether firms have taken steps to reform. "If [they're] going to say you've got a bad labor history so you can't make cars or airplanes, that's debarment and you ought to get a hearing on that," Adams said.

Vendors can challenge adverse responsibility determinations through bid protests, but Adams said such fights are hard to win. "The contracting officer can today find a contractor not responsible, [and] those determinations are upheld because there's an awful lot of discretion for the contracting officer," Adams said.

But Jay Power, legislative representative with the AFL-CIO, said he thinks the proposed rule is less vague than the existing provision, which does not define what constitutes bad behavior.

"By having more specificity, it will actually make for a better procurement system and will help to weed out bad actors," he said.

Power said the proposed rule is more fair to vendors than debarment because it gives them the "opportunity to be engaged in remedial activity," he said.