Rumor Has It

Forget burden of proof. A new proposal says allegations alone should prevent businesses from receiving federal contracts.
Magazine Contributor
3 min read

This story appears in the November 1999 issue of Business Start-Ups magazine. Subscribe »

Federal procurement officials may soon be able to prevent companies from receiving federal contracts simply because of whispers that a company has broken labor, occupational-safety or other federal laws. The three big federal procurement agencies (the Department of Defense, the General Services Administration and NASA)--who together control the Federal Acquisition Regulation (FAR)--proposed that change in July.

Currently, FAR says a federal procurement officer can keep a company from receiving a contract only if the company has an unsatisfactory record of compliance with laws and regulations.

In theory, that means a state or federal court or a federal agency has to have found the company guilty of violating a federal law in order to deny it a federal contract. In practice, however, contracting officers also take into account alleged violations when deciding whether to award a contract, according to Lynn Rhinehart, associate general counsel for the AFL-CIO. In some circumstances, she says, it may be appropriate for procurement officers to base their decisions on alleged violations, or "persuasive evidence of substantial [and repeated] noncompliance with a law or regulation."

Enter the procurement agencies' proposal, which formally puts the alleged violations standard into FAR. It also enumerates the broad range of federal violations that are of concern, a listing that's not included in the present FAR. If the proposal becomes final, a company could be barred from receiving a contract as a result of mere allegations that it has repeatedly violated federal law and established a pattern of such violations.

Rhinehart calls the proposal a clarification and affirmation of current practice. "It's not breaking any radical new ground," she insists. Proponents add that the proposal will help ensure the federal government does business only with those companies that work to maintain a clean record of compliance with federal laws and regulations.

Others, however, see a potential danger in passing such a proposal. Felix Martinez, director of procurement and federal markets for the American Consulting Engineers Council, notes that a union trying to organize a company could flood a federal regulatory agency--be it the EPA, the Equal Employment Opportunity Commission, the National Labor Relations Board or OSHA--with unsubstantiated complaints about the company. That might be enough to meet the new "persuasive evidence of substantial noncompliance" standard. Says Martinez, "Any lawyer worth his salt could slide something in there."

Trade associations that are members of the National Alliance Against Blacklisting, such as Food Distributors International (FDI), have also criticized the proposal. "The creation of such a sweeping blacklist of penalized or even debarred federal contractors and subcontractors is a blatant reward to the AFL-CIO," says John Block, president of FDI. "The president has given the unions the power to blackmail companies into accepting union-organizing and collective-bargaining demands. [These companies] face the possibility of losing all federal contracts."

Stephen Barlas is a business reporter who covers the Washington beat for 15 magazines.

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