Regulation would bar disreputable vendors from fed pacts

A proposed regulation that aims to protect the government from unreliable contractors is too vague and would hurt small businesses, senior government leaders told Congress last week.

The proposed rule, issued by the Office of Management and Budget July 9, would amend the Federal Acquisition Regulation so that contractors that fail to comply with certain laws, including criminal and tax laws, could be barred from receiving federal contracts.

"What we hope to do is protect the public's interest by having greater assurance that the firms we deal with are responsible citizens," said Deidre Lee, administrator of the Office of Federal Procurement Policy at OMB. Lee made the comment last week at a hearing held by the House Small Business Committee.

Under the proposed rule, contracting officers would be able to determine whether a company is "responsible" based on "persuasive evidence" or "lack of compliance" with tax laws or "substantial noncompliance" with other laws such as employment and environmental laws, said Rep. Jim Talent (R-Mo.). This leaves too much open to interpretation and could disqualify a small business solely based on a technical violation, he said.

"A small business could be prevented from contracting with the government for what is the regulatory equivalent of a combination of parking and moving violations," Talent said in his opening statement at the hearing. "I find that problematic and distressing."

Rep. Jim Moran (D-Va.) in his written testimony called the proposed rule "a solution in search of a problem" and asked the administration to withdraw it. The rule makes the contracting process more arbitrary, Moran said, because there are no clear-cut standards. "One could easily see how such a lack of standards might be manipulated to serve political purposes, thus favoring or harming particular types of contractors that might otherwise be equal."

Numerous organizations that represent federal contractors, such as the Contract Services Association of America and the American Electronics Association, also oppose the proposed rule.

However, Lee said OMB does not expect the rule to impact small businesses negatively because "we believe that this rule clarifies an existing regulatory authority." She added that contracting officers would handle each situation on a case-by-case basis.