Federal contractor ‘blacklisting’ framework winds through White House, agencies

The Department of Labor has submitted to the White House Office of Management and Budget (OMB) a proposed rule enacting President Obama’s July 2014 Fair Pay and Safe Workplaces Executive Order (E.O.), provisions in which can bar participation in federal projects if contractors or their subcontractors have violated labor laws in the past three years.


Contractors or subcontractors bidding on projects exceeding $500,000 must disclose any labor law violations committed within the past three years, and certify that their major subcontractors meet the E.O.’s new “responsibility standards,” according to labor management counsel Littler Mendelson P.C. Federal agency contracting officers will determine whether the contractor is a “responsible” entity with a satisfactory record of “integrity and business ethics,” and therefore eligible to bid. Critics of the White House action note that contractors may be blacklisted a) based on alleged labor law violations that are later found to lack merit, or b) if they fail to disclose even inadvertent and technical violations.

The E.O. requires each federal agency to designate a senior official to serve as a labor compliance advisor who, with significant discretionary powers, will provide guidance on whether a contract bidder’s mandatory disclosures indicate it is an entity that lacks integrity or business ethics. In advance of the proposed rule’s publication, OMB officials issued a memorandum to federal agency heads outlining the responsibilities, skills, and knowledge the future labor compliance advisors should have. The proposed rule supporting the Fair Pay and Safe Workplaces Executive Order is set for publication in the Federal Register, triggering a 45-day public comment period.

“This order dramatically changes the enforcement mechanisms carefully put in place by Congress and needlessly adds uncertainty, subjectivity and onerous and costly new data collection and reporting requirements for federal contractors,” Associated Builders & Contractors Vice President of Government Affairs Geoff Burr noted in late 2014, as ABC joined a coalition of business groups imploring the White House to withdraw the E.O. “While the Obama administration seeks to add these compliance burdens to federal contractors, it is seemingly ignoring the fact that its own Department of Labor and other federal agencies have violated these same complex and frequently changing federal labor laws.”

“Given its highly subjective enforcement requirements, the Executive Order will inevitably lead to delays in award evaluations, limitations on competition, and a greater number of contract award protests,” a coalition letter to the Department of Labor and White House staff states. “Coupled with the other [orders] targeting federal contractors, the recordkeeping and reporting requirements in this E.O. significantly increase the cost and administrative burden of contracting with the federal government. Ultimately, this will result in fewer companies and organizations that are willing or able to compete for federal contracts. These results directly conflict with the administration’s stated goals of increasing competition, driving efficiencies and savings, reducing barriers to entry for small and innovative employers, and improving the federal acquisition ecosystem in general.”

“The president does not have the legal authority to make the regulatory changes that will follow from this E.O.,” the coalition contends. “By directing the Department of Labor to develop guidance that will establish degrees of violations not included in the underlying statutes, the E.O. significantly amends the enforcement mechanisms Congress established for these laws. Simply put, the president is not authorized to change enforcement mechanisms in a statute without specific Congressional approval.”