Administration’s ‘Blacklisting’ Rules Drive up Costs, Burdens in Federal Contracting | Business Roundtable


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Administration’s ‘Blacklisting’ Rules Drive up Costs, Burdens in Federal Contracting

Aug 31, 2016

A new “blacklisting” rule from the Department of Labor represents yet another regulatory overreach by the executive branch, bypassing Congress to multiply paperwork and costs for federal contractors – and by extension, the U.S. taxpayer.

The Department and the Federal Acquisition Regulatory Council issued the final rule on Aug. 24 to put into effect President Obama’s 2014 executive order, the Fair Pay and Safe Workplaces Executive Order. The presidential order requires federal contractors to report violation of any one of 14 federal labor and employment laws (and their state equivalents), applying to tens of thousands of companies and an estimated 25 million employees nationwide. Federal contractors are subject to various measures under the order and regulations, including debarment, if their record of compliance is deemed insufficient by government officials.

Business Roundtable has raised numerous objections to the order and the subsequent regulations, notably: What exactly is the pressing need that justifies the administration bypassing the legislative branch of government, Congress, to impose a massive new reporting regime on a major part of the U.S. economy? The federal government already has a well-established process for collecting information on contractors' compliance records and related debarment process.

As BRT President John Engler summarized in an August 2015 comment letter:

Business Roundtable supports the principles of compliance reflected in the Executive Order (Order) and its overarching goal: to ensure that companies receiving federal contracts comply with applicable labor laws. However, we note that, as the Administration itself has observed, “the vast majority of federal contractors play by the rules.” As a consequence, we question the need for the Order and, more importantly, have serious concerns about the new, complex, overly broad and burdensome reporting scheme …

Despite the comments submitted by BRT and numerous other organizations, the final rule made very few changes to the original proposal. As such, the Roundtable’s continues to have of the same concerns:

Represented significant executive overreach while undermining rule of law. For example, guidance accompanying the rule reclassifies the term “violation,” effectively rewriting federal law – the authority which correctly belongs to Congress – by creating new penalties based solely on allegations of a labor law violations.

Creates duplicative and costly regulatory requirements. Contrary to the executive order and rule’s stated purpose, to increase efficiency and cost savings in federal contracts, the administration actions would create “massive overreporting and duplication of reporting, while imposing enormous cost burdens upon contractors and subcontractors.”

Business Roundtable considers the government’s $87 million cost estimate to be vastly understated, failing to recognize the amount of work that would go into collecting and reporting the required information. The new burdens also serve to erect barriers to entry into the contracting market, actually adding to costs and inefficiencies.

Equally concerning is the new regulations start to apply on Oct. 25. It is not clear how business and subcontractors are expected to create a new reporting system within just two months.

Fortunately, several Congressional leaders are considering a variety of actions in response to the administration’s overreach, in particular, the potential impact on defense contractors and what it could mean in terms of our nation’s defense. It’s a critical question: Could these new regulations effect the nation’s ability to defend itself? Litigation by contractors or business associations remains an option, as well.

Ultimately, if the administration believes that the abuses in federal contracting are so extensive and egregious that they demand action, then the proper course of action was to make this case and, if necessary, work with Congress to rewrite federal law. The option remains. Let’s hope the administration takes it.