WASHINGTON- Today, the House Committee on Small Business Subcommittee on Contracting and Workforce and Subcommittee on Investigations, Oversight, and Regulations held a joint hearing to examine the ramifications of Executive Order 13,673, commonly known as the Administration’s blacklisting proposal. The United States Department of Labor and Federal Acquisition Regulatory Council’s implementation of this order threatens to “blacklist” small businesses from competing for federal contracts.
While the Administration justifies this proposal as a way to bring companies into compliance, in reality it is, as Angela Styles, chair at Crowell & Moring LLP, described it, an opportunity to “extort settlements out of small businesses.”
“The Administration itself acknowledges that ‘the vast majority of federal contractors play by the rules,’” said Styles. “But if this EO is aimed at only a small number of bad actors, then surely there is a more efficient way to accomplish this goal than imposing requirements that will lead to procurement delays, the blacklisting of ethical companies, and reduced competition in the federal marketplace.”
Since 2013, more than 100,000 companies have stopped doing business with the federal government. Testimony today revealed that the mere cost of complying with the blacklisting proposal -- it is estimated that compliance with government regulations costs almost 30 cents of every contract dollar -- would force many small businesses out of the marketplace.
“One fact is crystal clear: compliance with the new requirements will be incredibly expensive and burdensome,” said Styles. “These costs hit small contractors especially hard as they have limited resources to build new compliance infrastructure, track legal allegations, or even challenge frivolous claims. All of this comes at a time when the government is attempting to encourage more innovative small businesses and commercial item contractors to enter the government marketplace.”
Theron Peacock, Senior Principal/President of Woods-Peacock Engineering Consultant, Inc. in Alexandria, Virginia, who testified on behalf of the American Council of Engineering Companies said that, “[r]ecent contracting changes, like the implementation of Fair Pay and Safe Workplaces executive order, issued by the current Administration threaten small business participation in the Federal market.”
Furthermore, Ms. Debbie Norris, Vice President of Human Resources for Merrick & Company located in Greenwood Village, Colorado, testifying on behalf of the Society for Human Resource Management, said “[T]he proposals create a vague and unworkable system that will harm the federal contracting process and impose requirements on contractors and subcontractors that are impractical and hugely expensive. For these reasons, we believe the Executive Order should be withdrawn or substantially modified.”
“In the last three years, the Department of Labor hasn’t referred a single ‘bad actor’ to the existing adjudication system – not one,” said Small Business Committee Chairman Steve Chabot (R-OH). “Instead of improving the current system or using it at all, the Administration has set out to create a duplicative framework with an agreeable name. What it really means for small contractors is new costs and new burdens. The Small Business Committee will continue its investigation and stand up for these small companies who are threatened by this unworkable blacklisting proposal.”
“This is an executive order in search of a problem.” said Small Business Subcommittee on Contracting and Workforce Chairman Richard Hanna. “As a former small business owner, I support the idea of fair pay and safe workplaces – I’m sure we all do. Companies with labor law violations that affect their performance of contracts should be suspended or debarred. However, the executive order and resulting proposed regulation and guidance go far beyond that – instead, it seems to punish companies for unproven allegations.”
“This Executive Order is another example of overreach that has become a hallmark of the Obama Administration,” Small Business Subcommittee on Oversight, Investigations, and Regulations Chairman Cresent Hardy said. “Bad actors should never receive a federal contract, but we already have a fair and transparent process in place to weed them out. Instead of using this process, the Administration is imposing significant new burdens on all small federal contractors.”
Industry partners have issued serious concerns with the Administration’s actions. The National Association of Manufacturers described the blacklisting proposal as an “unlawful, unfair, and unworkable” framework, which will not “enhance the efficiency or efficacy of the nation’s federal procurement processes.”
The Associated Builders and Contractors, whose members perform a substantial portion of federal government construction contracts, surveyed its members and found that 57% believe that the proposals, “will compel them to abandon the pursuit of federal contracts” and that 94 percent are “less likely to pursue federal contracts”
Since 2009, President Obama has issued 13 executive orders that relate to government contracting, which have resulted in 16 new regulations so far.