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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


November 2016
Vol. XVII, No. 11
[pdf version]

CONTENTS


Executive Order 13673, Fair Pay and Safe Workplaces, Put on Hold by Court
DOD Finalizes Network Penetration Reporting Rule
DHS Requests Invoices for Over-Age Contracts
NASA Removes Engineering Change Proposals Clause



Executive Order 13673, Fair Pay and Safe Workplaces, Put on Hold by Court

The District Court for the Eastern District of Texas has granted a preliminary injunction suspending implementation of the parts of Executive Order 13673, Fair Pay and Safe Workplaces, and its corresponding Federal Acquisition Regulation (FAR) rule in Federal Acquisition Circular (FAC) 2005-90 and Department of Labor (DOL) guidance that impose new reporting requirements regarding labor law violations until a final decision on the merits is issued. “Agencies are hereby directed to take all steps necessary with their workforces to comply with the court order and ensure the enjoined sections, provisions, and clauses of FAR Case 2014-025 are not implemented unless and until receiving further direction."

On July 31, 2014, President Obama issued Executive Order 13673, which requires federal contractors with contracts and subcontracts that exceed $500,000 to disclose labor law violations of 14 labor laws and executive orders (and “equivalent state laws”). In addition, the executive order gives agencies more guidance on how to consider labor violations when awarding federal contracts. The executive order directed the FAR Council to amend the FAR accordingly, and DOL to issue guidance on complying with the executive order and the FAR changes. On August 25, 2016, FAC 2005-90 containing the required FAR changes was issued, and DOL issued the corresponding guidance. The FAR changes and DOL guidance were to go into effect October 25, 2016.

On October 7, 2016, the Associated Builders and Contractors of Southeast Texas, and the National Association of Security Companies filed a lawsuit in the United States District Court for the Eastern District of Texas, seeking to overturn the final rule and guidance, and on October 13, 2016, filed an Emergency Motion for Temporary Restraining Order and Preliminary Injunction.

The plaintiffs argued that the executive order requires that “for procurement contracts for goods and services, including construction, where the estimated value of the supplies acquired and services required exceeds $500,000, each agency shall ensure that provisions in solicitations require that the offeror represent...whether there has been any administrative merits determination, arbitral award or decision, or civil judgment, as defined in guidance issued by the Department of Labor, rendered against the offeror within the preceding 3-year period for violations of any of the [14] labor laws and executive orders (labor laws).” Further, the plaintiffs argued that the executive order requires contracting officers to consider the information provided by the offeror in determining “whether an offeror is a responsible source that has a satisfactory record of integrity and business ethics, after reviewing the guidelines set forth by the DOL and consistent with any final rules issued by the Federal Acquisition Regulatory (FAR) Council.”

The problem arises with the definitions in the DOL guidance:

In other words, offerors must report “violations” that may not be the product of final decisions or determinations and/or have not been preceded by a hearing or been made subject to judicial review.

In addition, the FAR rule and DOL guidance require contractors to disclose labor law decisions that were issued even when the contractors were not performing or bidding on a covered contract at the time of the decision.

On October 24, 2016, the day before the FAR rule and DOL guidance were to go into effect, the court issued a preliminary injunction (Civil Action No. 1:16-CV-425) to prevent certain sections, provisions, and clauses of the rule from taking effect while the lawsuit is pending. Specifically, the court preliminarily enjoined implementation of “any portion of the FAR rule or DOL guidance relating to the new reporting and disclosure requirements regarding labor law violations as described in Executive Order 13673 and implemented in the FAR rule and DOL guidance.”

Judge Marcia Crone, who issued the injuction, noted “the FAR rule and DOL guidance require federal contractors and subcontractors for the first time to report for public disclosure on the FAPIIS [Federal Awardee Performance and Integrity Information System – https://www.fapiis.gov/fapiis/index.action] any ‘violations’ of the federal labor laws set forth in the executive order prior to any procurement for federal government contracts/subcontracts exceeding $500,000, in addition to requiring updated disclosures of labor law violations every six months while performing covered government contracts. The FAR rule and DOL guidance make clear that the required disclosures, unlike previous reporting requirements under the FAPIIS disclosure requirements...include non-final administrative merits determinations, regardless of the severity of the alleged violation, or whether a government contract was involved, and without regard to whether a hearing has been held or an enforceable decision issued.”

Judge Crone pointed out that each of the 14 labor laws specify debarment procedures, after full hearings and final adjudications, for contractors that violate the requirements specifically directed at government contractors. “It defies reason that Congress gave explicit instructions to suspend or debar government contractors who violate these government-specific labor laws only after a full hearing and final decision, but intended to leave the door open to government agencies to disqualify contractors from individual contract awards without any of these procedural protections. The DOL guidance does not offer any support for its overbroad claims in this regard...The [executive] order and [FAR] rule appear to conflict directly with every one of the labor laws they purport to invoke by permitting disqualification based solely upon ‘administrative merits determinations’ that are nothing more than allegations of fault asserted by agency employees and do not constitute final agency findings of any violation at all...Agency employees who are assigned to administer these labor laws issue thousands of complaints, cause findings, wage notices, and citations each year, many of which are dismissed or significantly reduced after they are contested, often after lengthy proceedings. There is no statutory basis to treat these ‘administrative merits determinations’ as final and binding while they are still being contested or when they are settled without admission of fault. Thus, it appears to be a denial of fundamental statutory and constitutional rights for the executive order and FAR rule to so act...These and other non-final determinations by a single agency official do not constitute reportable ‘violations’ under any reasonable definition and should not be considered in contracting decisions.”

To ensure compliance with the court order, the Office of Federal Procurement Policy (OFPP) and the FAR Council issued a joint memorandum to all agency chief acquisition officers directing them to “take all steps necessary to ensure the enjoined sections, provisions, and clauses of the final rule are not implemented until further notice.” OFPP and the FAR Council directed that the following actions be taken:

  1. “Ensure new solicitations do not include representations or clauses that the enjoined coverage of the rule would have required – i.e., the representation at [FAR] 52.222-57 [Representation Regarding Compliance with Labor Laws (Executive Order 13673)] and its commercial items version at paragraph (s) of 52.212-3 [Offeror Representations and Certifications – Commercial Items.], and 52.222-58 [Subcontractor Responsibility Matters Regarding Compliance with Labor Laws (Executive Order 13673)] and the clause at 52.222-59 [Compliance with Labor Laws (Executive Order 13673)], to direct disclosure of labor law violation decisions by offerors or contractors, or clause 52.222-61 [Arbitration of Contractor Employee Claims (Executive Order 13673)], that would require an offeror or contractor to agree to restrict use of mandatory pre-dispute arbitration agreements.”

  2. “If a solicitation has been issued with representations or clauses listed in paragraph 1, amend those solicitations immediately to remove those representations and clauses. Additionally, agencies shall not take any action on information, if any, submitted in response to those representations and clauses.”

  3. “Ensure contracting officers do not implement the procedures in [FAR] 22.2004-2 [Preaward Assessment of an Offeror's Labor Law Violations], [FAR] 22.2004-3 [Postaward Assessment of a Prime Contractor’s Labor Law Violations], [FAR] 22.2004-4 [Contractor Preaward and Postaward Assessment of a Subcontractor’s Labor Law Violations], or associated changes in FAR parts 9 [Contractor Qualifications] and 42 [Contract Administration and Audit Services].”

The court did not issue an injunction against the “paycheck transparency” portion of the FAR rule and DOL guidance (such as FAR 22.2005, Paycheck Transparency, and FAR 52.222-60, Paycheck Transparency (Executive Order 13673)) because it is not scheduled to take effect until January 1, 2017.

For more on Executive Order 13673, see the September 2014 Federal Contracts Perspective article “Obama Issues Order Requiring That Contractors Provide ‘Fair Pay and Safe Workplaces’.” For more on the FAR rule and the DOL guidance, see the September 2016 Federal Contracts Perspective article “FAC 2005-90 Establishes ‘Fair Pay and Safe Workplaces’ Representation.”

DOD Finalizes Network Penetration Reporting Rule

The Department of Defense (DOD) took a break and conducted some cleaning up of the Defense FAR Supplement (DFARS), most significantly finalizing two interim rules that addressed network penetration reporting and cloud computing. In addition, DOD issued a final rule on the consolidation of multiple hotline posters, proposed rules on undefinitized contract actions and the government property clause, a class deviation on non-profit organization competition for religious-related services, a memorandum on the use of “M” in procurement instrument identifiers, and an announcement of the establishment of an advisory panel on streamlining and codifying acquisition regulations.



DHS Requests Invoices for Over-Age Contracts

The Department of Homeland Security (DHS) has a backlog of contracts that are considered over-age in that the period of performance or final delivery date has passed and the time allowed for contract file closeout has elapsed. To help clear this backlog, DHS identified all contracts that met the following criteria: (1) the contract is firm-fixed-price; (2) the contract expired and the additional time allowed for contract file closeout under paragraph (a) of FAR 4.804-1, Closeout by the Office Administering the Contract, has elapsed; and (iii) the contract had no invoice or payment activity within the past 12 months. These contracts are listed at https://dhs.gov/publication/low-risk-closeout.

To facilitate the closeout of these actions, DHS is requesting that contractors with contracts identified on the list submit any outstanding invoices to the appropriate DHS contracting activities by December 2, 2016.



NASA Removes Engineering Change Proposals Clause

The National Aeronautics and Space Administration (NASA) is removing NASA FAR Supplement (NFS) 1852.243-70, Engineering Change Proposals, and its Alternates I and II, because NASA contracting offices are no longer using it. Instead, the NASA contracting offices are using the FAR Changes clauses (FAR 52.243-1, Changes – Fixed-Price; FAR 52.243-2, Changes – Cost-Reimbursement; FAR 52.243-3, Changes – Time-and-Materials or Labor-Hours; FAR 52.243-4, Changes; and FAR 52.243-5, Changes and Changed Conditions) to process engineering change proposals. Therefore, NFS 1852.243-70 is removed, along with its prescription in NFS 1843.205-70, NASA Contract Clauses.





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