Finalized Federal 'Blacklisting' Rule Sparks Industry Backlash

'New rule allows federal officials to punish firms at will and impose arbitrary consequences, making it hard for many firms to continue federal work," says AGC

The Hill/Associated Builders and Contractors/Associated General Contractors of America

On October 25, a new rule from the Federal Acquisition Regulatory Council goes into effect requiring firms that are seeking to do business with the federal government for contracts worth more than $500,000 must report past labor law violations. The Fair Pay and Safe Workplaces Executive Order, commonly referred to as the "Blacklisting" rule has received a lot of backlash from the construction industry. The rule will be implemented in phases to provide construction contractors time to understand the new requirements.

The rule will force prospective federal contractors to disclose any violation of the 14 basic workplace protections — including wage and hour, safety and health, collective bargaining, family and medical leave, and civil rights protections — they or their subcontractors have had in the last three years.

According to the Labor Department, the new rule was designed to increase efficiency and cost savings by ensuring federal contractors are responsible and provide basic workplace protections.

The White House originally issued the Fair Pay and Safe Workplaces Executive Order 13673 two years ago on July 31, 2014.

(more on the finalized Fair Pay and Safe Workplaces Executive Order...)

But businesses and associations in the construction industry completely disagree and are crying foul over the new rule.

“This regulation is akin to a bizarre ‘guilty until proven innocent’ policy that significantly burdens manufacturers who will have to expend countless hours and resources to ensure they do not run afoul of a fundamentally unfair regulation," said National Association of Manufacturers President and CEO Jay Timmons.
According to the Associated Builders and Contractors (ABC), the new rule "will increase costs for taxpayers, threaten the livelihood of millions of Americans who work for responsible federal contractors and cripple the federal procurement process with needless uncertainty, delays and litigation."
“FAR’s flawed blacklisting final rule will create a murky and needlessly subjective procurement process that will result in fewer qualified and responsible contractors bidding on federal contracts,” said ABC Vice President of Regulatory, Labor & State Affairs Ben Brubeck. “Upon initial review, it appears that rather than working toward improving the federal government’s existing suspension and debarment system, the administration has finalized a proposal that is duplicative and cumbersome and will result in less competition for taxpayer-funded contracts. The final rule fails to address key concerns raised by ABC and other stakeholders during the comment period that would boost small business participation and promote awarding contracts based on merit to responsible firms that can deliver the highest quality product at the best price.”
“ABC supports a level and transparent playing field for federal contractors and believes unethical firms should be held accountable,” said Brubeck. “However, our initial concerns regarding the proposal’s stripping of due process rights while also adding unwarranted uncertainty by empowering bureaucrats to subjectively pick winners and losers in the federal contracting marketplace remain. ABC will continue to explore every available avenue, including the judicial system, to protect taxpayers, contractors and their employees, whose livelihoods rely on a fair procurement system, from this overreaching policy.”

The Associated General Contractors of America (AGC) echoes ABC's criticism of the new rule.

The chief executive officer of the Associated General Contractors of America issued the following statement in response to the release of a final federal regulation that would allow unelected federal officials to blacklist firms who run afoul of vague guidelines:

“Few other organizations have fought harder, for longer, or more successfully than the Associated General Contractors of America to make sure honest firms aren’t forced to compete with bad firms. The last thing any of our members want is to compete against a firm that cuts corners on safety or fails to properly compensate hard working craft people. That is one reason we have worked so hard to make sure the federal government has a robust, clear-cut and fairly-administered suspension and debarment program to deal with the extremely small number of federal contractors that do not operate in good faith. 

“Unfortunately this new Obama administration rule is a step in the wrong direction when it comes to weeding out the very few unfair and unscrupulous federal contractors. In addition to the already substantial consequences firms currently face, this new measure permits unelected federal bureaucrats to make arbitrary decisions about which other firms will be singled out for punishment. Even worse, this new rule gives those same federal officials broad latitude to impose separate and inconsistent consequences on those firms.  

“While there are many flaws with this new measure, one of its biggest is that it gives federal officials enormous discretion to decide which firms should be singled out for punishment. For example, it allows a federal contracting official to give greater weight to the same safety violations depending on which firm was accused of committing them. Such subjective criteria opens the door to punishing federal contractors based on which political, social or labor causes they support, instead of their safety performance or treatment of workers.

“This new rule will make it extremely difficult for many firms, particularly smaller ones, to continue working with the federal government. While all federal contractors will face difficulties finding ways to deal with the added new compliance and risk costs, smaller firms especially will likely decide the risks far outweigh the reward. As a result, an administration that frequently claims to champion the cause of smaller business will have yet again made it difficult for them to perform federal work.

“Needless to say, we will explore all possible legislative and legal measures for undoing this deeply troubling and unnecessary new federal mandate.”