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NRCA's comments regarding proposed ammendments to "blacklisting" regulations, August 2000

On Aug. 29, NRCA submitted comments to the General Services Administration, the federal agency that creates and enforces procurement policies for federal agencies, regarding the administration's proposed amendments to the Federal Acquisition Regulation-a proposed rule related to contractor responsibility and costs. When the regulation was proposed in July 1999, the administration opened a comment period.

In its comments, NRCA argues that the proposed amendments to the regulation are the same as the "blacklisting" rule and will allow federal agency contracting officers to blacklist (temporarily or permanently debar) federal contractors if there is "persuasive evidence" of alleged "unsatisfactory" business practices. Unsatisfactory business practices can relate to violations of the National Labor Relations Act and Occupational Safety and Health Act, among others.

NRCA's comments follow.



Aug. 29, 2000

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


Re: FAR case 1999-010


Dear Ms. Duarte:

On Nov. 2, 1999, the National Roofing Contractors Association (NRCA) submitted comments opposing changes to the Federal Acquisition Regulation as proposed in FAR Case 99-010. That proposal was reissued on June 30th with modifications.

Despite the issuance of a new proposal to amend the Federal Acquisition Regulation on June 30, NRCA remains opposed to these efforts. The revised "blacklisting rule" essentially is the same as the rule the administration originally proposed nearly a year earlier (July 9, 1999; 64 FR 37360). It still would dramatically disrupt the current 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 proposed regulations were developed to empower agency contracting officers to blacklist (temporarily or permanently debar) federal contractors if there is "persuasive evidence" of 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 proposed regulations further expand this list to include environment, tax, antitrust and "other consumer protections" as categories to determine if the bidder is a "responsible contractor." Although the June 30 proposal seems to take into account the criticisms and complaints that were lodged against the original proposal, it did absolutely nothing to address or remedy them.

Some of NRCA's objections to the proposal include:

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 more than 4,700 members. NRCA contractors are small, privately held companies; the average NRCA member employs 35 people in peak season with sales of just more than $3 million per year. Small businesses would be one of the most severely injured by the blacklisting proposal. 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 from federal contracts due to some "alleged" offense created by subjective interpretations, it could be put out of business. These proposed changes to the FAR would, therefore, 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 proposed rule, federal contracting officers would decide individually the criteria for which a contracting company could be debarred. Although 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 during the three years preceding the contract. It would be impossible for contractors to determine how individual federal contracting agents would apply these standards. Furthermore, denials would be based on a federal contracting agent'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 has satisfactory compliance with federal laws, including: tax, labor, employment, environment, antitrust and consumer protections laws. As recently related in the Washington Post, many federal agencies cannot even keep convicted, fraudulent companies from receiving new grants, not to mention having to expand their criteria for turning away potential contractors. Sen. Tom Harkin (D-Iowa) admitted this rule would unduly burden federal agencies and said "[W]e 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), which was enacted in 1995. SBREFA provided judicial review to the 1980 Regulatory Flexibility Act, which requires 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 during FY98.

However, in the July 9, 1999 Federal Register notice soliciting comments, GSA, DoD and NASA certified "[T]his 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 has not been remedied by the issuance of the new proposal on June 30. In fact, the Initial Regulatory Flexibility Analysis (IRFA) remains inadequate, and certification of conducting a thorough analysis is not justified. The proposed rule is too broad and would hold small businesses accountable for alleged violations potentially putting them out of business. Furthermore, no consideration has been given to the net effect of these rules on subcontractors, which makes this most recent IRFA invalid.

It would appear, therefore, that GSA, DoD, NASA and the Office of Federal Procurement Policy have not complied with requirements under SBREFA and the Regulatory Flexibility Act.

Conclusion

Under the revised proposed changes to the FAR, all federal contractors, regardless of current and future 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 the process of full, fair and open competition—heretofore stipulated by the U.S. government as the most important ingredients of the federal procurement process—in jeopardy. 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 affect small businesses since many depend entirely on revenues from government contracts for growth. In sum, these changes provide a recipe for disaster, and NRCA oppose the advancement of these regulations.

Sincerely,

Danielle I. Doane
Director of federal affairs





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