Blacklisting Rules Take Effect Amid Mounting Opposition

Industry Opposes Contracting Officers' New Authority

Rep. Tom Davis

By Gail Repsher Emery, Staff Writer

New rules that require contracting officers to review bidders' business ethics and integrity before awarding federal contracts went into effect Jan. 19, despite a legal challenge from business groups and complaints from some lawmakers and federal agencies.

It is uncertain how the so-called blacklisting rules will be implemented or enforced, or if they will last. But amid the mounting backlash are indications that the Bush administration is open to softening the rules, or even retreating from them entirely.

"This regulation requires contracting officers to review contractors in a number of new and different ways, and we have heard from officials within the government that their contracting officers don't have the training to do that," said David Marin, spokesman for Rep. Tom Davis, R-Va.

Davis and other opponents were unsuccessful in efforts to get the Clinton administration to delay implementation of the rules.

The rules ? changes to the Federal Acquisition Regulation ? were published in the Federal Register Dec. 20, 2000, and became enforceable Jan. 19, one day before the Bush administration issued a temporary stay on implementing new regulations.

The rules require contracting officers to take into account bidders' compliance with labor, tax, employment, antitrust, environmental and consumer protection laws when determining their "responsibility," and therefore eligibility to win contracts. They are directed to look for evidence of repeated, pervasive or significant violations before disqualifying a company.

Officers already must make sure contractors are not debarred or suspended from federal work, have sufficient resources to perform the work, and do not have a record of unsatisfactory performance for reasons within their control.

The Federal Acquisition Regulation Council, which issues the FAR, may be reconsidering the rules, Marin said.

"We understand that the FAR Council is in the process of drafting a stay on the regulations until July 19, and during that time they would invite comments on revoking the rule," he said.

Council members are the General Services Administration, NASA, the Defense Department and the Office of Federal Procurement Policy in the Office of Management and Budget.

GSA and NASA officials have opposed the rules, and the GSA recently took action to delay their impact.

GSA official David Drabkin wrote in a memo to contracting staff: "To help ensure that our contracting personnel are provided information to properly implement the changes in new solicitations, we recommend that all GSA contracting activities place a temporary moratorium on the issuance of all solicitations as of Jan. 19, 2001."

The moratorium would last about seven business days, wrote Drabkin, deputy associate administrator for acquisition policy.

The White House and OMB did not return calls seeking comment for this story. GSA officials declined to comment.

Defense Department spokesman Glenn Flood said: "There's been talk that the new administration might take some action to repeal or reverse it. We want to step back to see what the new administration is going to do."

The FAR Council, Flood said, is "leaning toward" a new rule-making process that could change or revoke the rules "unless there is some other direction from the administration."

Mitchell Daniels Jr., new director of the Office of Management and Budget, expressed reservations about the new rules in a statement submitted to the Senate Committee on Governmental Affairs before his nomination hearing Jan. 19.

"My limited review of this issue leads me to have serious concerns about the possible impact of this regulation," Daniels said. The Senate confirmed him Jan. 23.

The rules say contracting officers must consider violations ranging from fraud to adverse decisions by an administrative law judge, board or commission. Contractors must indicate in bids whether they have committed any violations within three years.

Supporters, including the AFL-CIO labor organization and civil rights and environmental groups, say the rules give contracting officers guidance in determining responsibility and protect the government from unscrupulous vendors.

"All these new rules say is that one aspect of [responsibility] is your record of complying with the law," said Lynn Rhinehart, associate general counsel at the AFL-CIO. "We would oppose efforts to undermine these regulations."

Renato DiPentima, president of consulting and systems integration at SRA International Inc. of Fairfax, Va., said he's not concerned about the rules, but larger IT firms might be. SRA had $312 million in sales last year.

The rules "sound like good management ... [but] the devil is in the details," he said.

Companies that do billions of dollars a year in sales and get complaints on less than 1 percent of jobs "should have a significant number of dissatisfied customers," and might have difficulty tracking violations across nations and lines of business, he said.

Information technology industry groups and other business associations oppose the rules, calling them arbitrary and unclear. They say the rules place an undue burden on contracting officers, who presumably must be familiar with many new areas of law.

They say the rules will lengthen and politicize the contracting process. Because the rules require contracting officers to consider all "relevant, credible information," contractors could bring allegations of misconduct against each other, they say.

"The potential for abuse is just enormous," said Thom Stohler, director of human resources policy for Santa Clara, Calif.-based AeA, the nation's largest high-tech trade association.

A coalition of business groups, including the Business Roundtable, whose members include TRW Inc. of Cleveland and the Boeing Co. of Seattle, are protesting the rules in a lawsuit filed Dec. 22, 2000, in the U.S. District Court for the District of Columbia.

The suit says the rules would create arbitrary and subjective standards for the awarding of contracts, which would be applied inconsistently across the government.

"There has been no consideration given to the type of training, infrastructure and resources that, at a minimum, contracting officers would be required to receive in order to determine satisfactory legal compliance with federal, state and foreign laws," said Harold Coxson, a lobbyist and partner with the Ogletree, Deakins law firm in Washington. Coxson is executive director of the National Alliance Against Blacklisting, a business coalition whose members include AeA.

If contractors indicate they have no violations, but later find they do, "now you've got a situation of lying to the government, and you have something real serious," said Washington lawyer Tom Williamson, a partner with Morgan, Lewis & Bockius LLP.

The firm's lawyers advise clients who have a violation to "be sure they have their story ready, and they present it in the best light and work with [the contracting officer], so he will understand whether it does or doesn't have anything to do with [performing] that contract," Williamson said.

If the rules stand, lawsuits may provide clarification, lawyers and IT industry executives said.

"The first large contractor that feels they have been harmed by this [regulation] will challenge this in court," DiPentima said.

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