Contractors fear being blacklisted under new defense bill

Federal contractors are asking Congress to remove a provision in the fiscal 2012 National Defense Authorization Act that they allege would create secret blacklists of prohibited contractors without due process.

The provision, described in Section 815(c) of the bill, would allow defense agency heads to eliminate certain companies from procurements based on supply chain security concerns.

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TechAmerica and the Professional Services Council joined five other industry groups in the Acquisition Reform Working Group to submit comments to Congress on July 28 opposing the Section 815(c) measure and alleging it would create “de facto debarments” for some contractors.

“Some of this language would focus the government on excluding companies from competition rather than substantively addressing any specific security vulnerabilities,” TechAmerica President Phil Bond said in a statement today. “Without a doubt, it would have disastrous, if unintended, consequences.”

The proposal could result in “secret blacklists” of contractors circulated among various federal agencies but not divulged to the companies affected, according to a statement released today by TechAmerica on behalf of the industry coalition. “Such a ban, once made known to other agencies, would become a de facto debarment, the prospect of which would discourage companies from serving federal departments and agencies at all.”

The industry groups are asking for input into the process of how the supply chain security concerns will be vetted.

The Acquisition Reform Working Group “is very strongly opposed to the exclusion authority found in the proposal,” the group said in a statement. “Because exclusions will become public, government exclusion from a competition envisioned by Section 815 would be tantamount to a de facto debarment without any due process for the affected firm. Indeed, the cascading blacklisting effect associated with the government’s direction to a contractor to avoid a source of supply without prior notice to the affected firm may lead to the failure of the company resulting from the stigma of supply chain risk associated with such an exclusion.”

The working group and Professional Services Council also said the bill should:

• Inject an analysis of cost savings and small-business impacts into insourcing decisions.
• Eliminate provisions that would require DOD to make cost at least 50 percent of contract proposal evaluations.
• Improve provisions that address the responsibilities of the Defense Contract Audit Agency and contractors in resolving business system deficiencies.
• Significantly modify or eliminate provisions that mandate contractors adopt supply chain security procedures and restrict contractors from competing for certain opportunities if they don’t implement protections.