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NRCA's comments the suspension of the blacklisting regulations, May 2001

On May 9, NRCA submitted comments to the General Services Administration, the federal agency that creates and enforces procurement policies for federal agencies, regarding the revocation of the blacklisting rule. The administration opened a comment period in April when the regulation was proposed.

NRCA's comments follow.



May 9, 2001

Ms. Laurie Duarte
General Services Administration
FAR Secretariat (MVR)
1800 F Street, NW, Room 4035
Washington, D.C. 20405


Re: FAR case 1999-010 (stay), FAR case 2001-014

Dear Ms. Duarte:

On Nov. 2, 1999 and on Aug. 29, 2000, the National Roofing Contractors Association (NRCA) submitted comments opposing changes to the Federal Acquisition Regulation (FAR) as proposed in FAR Case 99-010. Much to our dismay, former President Clinton published the proposal as a final rule in the Federal Register on Dec. 20, 2000. The contractor responsibility (or blacklisting) rule became effective during President Clinton's final day in office, Jan. 19.

FAR case 1999-011 (stay):

In the April 3 Federal Register, the Bush administration announced its suspension of the blacklisting rule. The rule is suspended for 270 days or until the rule is repealed, whichever is sooner, replacing it with an interim rule that is, in fact, the procedure by which the federal government determined contractor responsibility before implementation of the blacklisting rule. NRCA supports suspending the rule for 270 days and, as explained in comments addressing FAR case 2001-014, its revocation. Fully implementing the blacklisting rule would dramatically disrupt the reinstated system of federal procurement and government contracting by denying contract awards on the basis of factors unrelated to the prospective contractor's ability to perform the contract.

The suspended regulations were developed to empower agency contracting officers to blacklist (temporarily or permanently debar) federal contractors based on alleged "unsatisfactory" business practices regarding labor and employment laws, including the National Labor Relations Act, the Occupational Safety and Health Act, and those statutes governing wage- and hour-requirements and employment discrimination. The regulations also factored in "unsatisfactory" business practices regarding environment, tax, antitrust and other consumer protections as categories to determine if the bidder is a responsible contractor.

FAR case 2001-014:

Blacklisting would disproportionately affect the small-business community.

NRCA is an association of roofing, roof deck and waterproofing contractors. Founded in 1886, it is one of the oldest associations in the construction industry and has 5,000 members throughout the United States. NRCA contractors are small, privately held companies; the average NRCA member employs 35 people in peak season, with sales of just over $3 million per year. Small businesses would be one of the most severely injured by the blacklisting rule.

Unlike major corporations, many small businesses depend entirely on the revenues from current and future government contracts for continued growth. If a small business were to be debarred (blacklisted) from federal contracts because of some alleged offense created by subjective interpretations, it could be put out of business. These changes to the FAR would deny fair competition for many small-business owners for contracts.

The subjective nature of the blacklisting standards would make it impossible for contractors to comply.

Under the rule, federal contracting officers would individually decide the criteria for which a contracting company could be debarred. While general guidelines could be devised, this still introduces an inordinate amount of subjectivity into the process. Essentially, this creates an unfair environment subject to changing standards for each and every bid submission and intolerable aggravation and expense. The new rule exposes employers to unfair denial of federal contracts based on any violation without consideration as to the type, severity or number of violations over the three years preceding the contract. It would be impossible for contractors to determine how individual government contracting agents would apply these standards. Furthermore, denials would be based on a government contracting officer's untrained interpretation of technical provisions of labor and employment, environmental, antitrust, tax and/or consumer protection laws.

This rule would significantly complicate and burden the administration of current laws.

Current regulations already allow federal agencies to debar contractors found guilty of defrauding the government, rendering the new blacklisting regulations redundant and unnecessary. In fact, identifying and debarring contractors is already a time-consuming and labor-intensive task for federal agency contracting officials and will be all the more so if they are to ensure that every potential contractor have satisfactory compliance with federal laws, including tax, labor and employment, environment, antitrust and consumer protections laws. Sen. Tom Harkin (D-Iowa) admitted that this rule would unduly burden federal agencies saying, "we don't have the resources to do something like that (blacklisting)."

Blacklisting regulations have not complied with the Small Business Regulatory Enforcement Fairness Act as required by law.

NRCA worked with other small-business associations in the 104th Congress to help pass the Small Business Regulatory Enforcement Fairness Act (SBREFA) enacted in 1996. SBREFA provided judicial review to the 1980 Regulatory Flexibility Act, which requires that federal agencies study the potential adverse consequences of proposed regulations on small businesses. There can be no doubt that the proposed blacklisting rule would impact the small-business community given that small businesses, including NRCA members, were awarded federal government procurements with a value of $33 billion in FY98.

However, in the July 9, 1999, Federal Register notice soliciting comments, General Services Administration (GSA), Department of Defense (DoD) and NASA certified, "This proposed rule is not expected to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because most contracts awarded to small entities do not involve use of formal responsibility surveys." This erroneous conclusion was slightly remedied with the reissued proposed blacklisting regulation published in Federal Register on June 30, 2000, which stated that the FAR Council concedes that the rule will affect at least 171, 000 small entities.

The rule is too broad and would hold small businesses accountable for alleged violations, potentially putting them out of business, and no consideration has been given to the net effect of these rules on subcontractors. It would appear that GSA, DoD, NASA and the Office of Federal Procurement Policy have not complied with requirements under SBREFA and the Regulatory Flexibility Act insofar as the blacklisting rule will likely have a significant impact on a substantial number of small businesses.

Conclusion

Under the FAR blacklisting rule that is currently suspended until next January or until the rule is revoked, all current and future federal contractors, regardless of company or contract size, could be blacklisted. The federal procurement system, which awards approximately $200 billion in federal contracts per year, would be subject to coercive whims and become highly politicized. This puts in jeopardy the process of full, fair and open competition heretofore stipulated by the U.S. government as one of the most important ingredients of the federal procurement process. Procurement officials would have subjective power, akin to being judge and jury, which is at odds with the U.S. legal system. These regulations would distort the federal procurement process through vague and subjective findings of unsatisfactory business practices aimed against both union and open-shop contractors.

The potential for mischief under such regulations against all federal contractors would be limitless and would especially impact small businesses because many depend entirely on revenues from government contracts for growth. In sum, this rule provides a recipe for disaster. NRCA supports the revocation of the Contractor Responsibility, Labor Relations Cost, and Costs Relating to Legal and Other Proceeds rule, the blacklisting rule, as published in the Federal Register on December 20, 2000.

Sincerely,

Jennifer Gehring
Director of federal affairs


Click here to read NRCA's Nov. 1999 or Aug. 2000 comments regarding proposed blacklisting regulations.





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