Administration unveils pro-labor ethics rules for contractors

A conclusion may finally be in sight for an oft-delayed change in federal contracting rules sought by labor unions and derided by vendors as a "blacklisting" effort.

The proposed reforms are slated to appear in Friday's Federal Register-three and a half years after they were first proposed by Vice President Al Gore in an address to the AFL-CIO. If all goes according to schedule, federal officials could start enforcing the new rules in September-30 days after the close of a required 60-day comment period.

In a statement released Thursday, the Office of Management and Budget said that the new rules are needed because current law forces federal contracting officers to "take into account a company's record of integrity and business ethics before rewarding a contract. However, there is little current guidance to help them make these distinctions." The new rules, the statement said, "should help."

Specifically, the proposed regulations mandate that federal contractors "have a satsifactory record of integrity and business ethics including satisfactory compliance with federal laws, including tax laws, labor and employment laws, environmental laws, antitrust laws and consumer-protection laws."

Labor leaders have long supported the proposal, arguing that it legitimately targets companies with poor labor-relations records.

"We're very pleased that the administration is moving forward with this initiative," AFL-CIO associate general counsel Lynn Rhinehart told GovExec.com. "We have supported this initiative since it was first proposed, because we think this initiative stands for, and reinforces, a very important principle-that government shouldn't be rewarding chronic lawbreakers."

However, business groups-including the National Alliance Against Blacklisting, a coalition that represents roughly 1,000 federal contractors and business groups-have complained that the regulations allow unelected procurement officers in federal agencies to hand down significant penalties for violations that may or may not be serious.

"We all acknowledge that the best-intentioned employer can be found to violate some law or regulation," said Randy Johnson, the U.S. Chamber of Commerce's vice president for labor and employee benefits. "The rules governing employers are incredibly complicated. Even the Clinton administration has had a long list of problems under the National Labor Relations Act and equal-opportunity laws. Given that, how will a contracting officer separate out what kinds of violations put you over the edge?"

Business critics also noted that the rule happens to help a key Democratic constituency during the waning days of the Clinton administration. "This was payback to organized labor," one business executive fumed. "It's bad policy and has political overtones."

This marks the second time that the contracting proposal has been printed in the Federal Register. The rule to be published Friday supersedes and slightly revises a proposal published in the Register last July.

Modifications in the rules since their previous release address some-but hardly all-of the critics' concerns. For instance, the revised regulations make it clear that only violations validated administratively or judicially can be counted against prospective contractors. But although critics consider this an improvement, they add that actions by administrative law judges and other relatively low-ranking officials could be enough to make a violation stick.

Another concession made to critics is a requirement that potential vendors be notified of a finding of non-compliance before a contract is awarded. A business official called this "no big deal." The more significant features of the proposal, business lobbyists said, still allow too much latitude.

"This is the sort of thing that Congress ought to be doing," Johnson said. "We will participate in the comment period by submitting comments again, but if the administration goes forward with this proposal, we will see them in court." Johnson said that the Chamber of Commerce's litigation center would be a likely plaintiff in that scenario.

The proposed changes affect Federal Acquisition Regulation Parts 9 and 31. The change to the latter section would prevent reimbursement of companies for costs they incurred defending themselves from unfair labor practice complaints or for actions that opposed union organizing efforts.

Late Thursday, House Education and Workforce Committee Chairman Bill Goodling, R-Pa., released a statement calling the proposed regulation "unfair, unnecessary, and without technical merit. The regulation upsets the federal government's expressed procurement policy of remaining neutral in labor-management disputes, a policy plainly spelled out in the Federal Acquisition Regulation. This is an attempt to get the federal government to take sides."