Alert
Alert
By Julia E. Judish, Rebecca Carr Rizzo, John E. Jensen, Richard B. Oliver,
08.30.16
On August 25, 2016, the Federal Acquisition Regulatory Council issued final rules and the Department of Labor (DOL) published final guidance implementing President Obama’s 2014 “Fair Pay and Safe Workplaces” Executive Order (E.O.) 13673. The Executive Order requires covered federal contractors and subcontractors to report adverse determinations under federal and state labor laws to federal agencies as part of the procurement process, and these violations can be used to find a contractor or subcontractor “nonresponsible,” preventing the contractor or subcontractor from receiving the contract. As a result, the Executive Order has been highly controversial and has become known in the contractor community as the “blacklisting” rule.
As addressed in our previous client alert on June 23, 2015, the far-reaching changes to the Federal Acquisition Regulation (FAR) and DOL guidance may have a profound impact on federal contractors and subcontractors. Secretary of Labor Thomas Perez touted the final rule and guidance as benefiting “the responsible contractors—the vast majority of them—who are doing the right thing, so that they no longer have to compete for contracts with companies that do not.” Writing in support of the new requirements, Secretary Perez stated that “[c]ontracting with the government is a privilege, not an entitlement” and argued that “low-road contractors who break [labor and employment] laws” should not benefit from taxpayer money.1 While few may take issue with that sentiment, criticism of the final rule and guidance has focused on how the expansive definition of adverse labor determinations may label many responsible businesses as bad actors. In addition, in order to avoid even a small risk of an adverse determination that could cost them critical federal business, many contractors may feel compelled to settle unmeritorious claims.
The core of the final rule and guidance, when fully implemented, is the requirement that federal contractors seeking or holding federal procurement contracts for goods and services, including construction contracts, valued at $500,000 or more will have to report to contracting officers whether there has been any administrative merits determination, civil judgment, or arbitral award or decision rendered against them during the preceding three-year period for violations of any of 14 identified federal employment laws and executive orders or equivalent State laws (“Labor Law decisions”)—regardless of whether the adverse determination is still under appeal or otherwise subject to further review and challenge. Contractors may also report mitigating factors, remedial measures, and other steps taken to correct the violations. Based on this information, contracting officers, in consultation with their Agency Labor Compliance Advisor (ALCA), will evaluate the information to determine “if a contractor is a responsible source with a satisfactory record of integrity and business ethics” eligible for a contract award. These disclosures must be made when the contractor first submits a bid, at the pre-award stage, and semi-annually during the performance of the covered procurement contract. The 14 identified federal laws for which reports must be made are:
Covered subcontractors will also be subject to this requirement, and contractors will need to consider the DOL’s analysis and advice as they make their own responsibility determinations on their prospective subcontractors. The DOL estimates that “10 percent of covered contractors and subcontractors will have labor violations involving enforcement-agency action that require disclosure” with “an additional small number” required to disclose “violations involving private litigation or arbitration proceedings.”2 Contractors and subcontractors without adverse Labor Law decisions in the applicable period will have to certify that they have no covered Labor Law decisions to disclose.
Contractors will use the “System for Award Management” (SAM), already used for other disclosures in the federal contracting process, to certify whether there have been any adverse Labor Law decisions against the contractor in the relevant period. An example of the new disclosure questions that a prospective contractor will have to answer starting October 25, 2016, can be found here. If a contracting officer initiates a responsibility determination, a contractor that has reported the existence of adverse Labor Law decisions during the reporting period will have to provide additional information: the labor law violated, identification of the case or decision and the decisional body (e.g., case or docket number, as well as the name of the court, arbitrator, or agency), and the date of the decision. The contractor may also provide additional information about mitigating factors, remedial measures, and other steps taken to achieve compliance with labor laws.
Download: Final Rules and Guidance Issued on “Blacklisting” Executive Order