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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: December 20, 2000

FROM: Barry McVay, CPCM

SUBJECT: Federal Acquisition Circular (FAC) 97-21; Contractor Responsibility, Labor Relations Costs, and Costs Relating to Legal and Other Proceedings

SOURCE: Federal Register, December 20, 2000, Vol. 65, No. 245, page 80255

AGENCIES: Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA)

ACTION: Final Rule

SYNOPSIS: The Federal Acquisition Regulatory Council is issuing FAC 97-21 to amend Federal Acquisition Regulation (FAR) Part 9, Contractor Qualifications, to clarify what constitutes a "satisfactory record of integrity and business ethics" in making contractor responsibility determinations, and certain cost principles under FAR Part 31, Contract Cost Principles and Procedures, related to labor relations and legal and other proceedings.

EDITOR'S NOTE: For more on the proposed rule, see the June 30, 2000, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Contractor Responsibility, Labor Relations Costs, and Costs Relating to Legal and Other Proceedings."

EFFECTIVE DATE: January 19, 2001.

FOR FURTHER INFORMATION CONTACT: Mr. Ralph De Stefano, Procurement Analyst, 202-501-1758.

SUPPLEMENTAL INFORMATION: FAC 97-21 is a product of Vice President Al Gore's September 21, 1997, promise to the AFL-CIO in Pittsburgh that the Clinton administration would require contracting officers to consider contractor compliance with labor laws when making responsibility determinations. "We want to make sure that companies that bust unions don't get or keep federal contracts," the vice president was reported to have said. "We're working very closely with your leadership on this and I'm confident we'll make it a reality very soon." Many contractors and business organizations have called this the "blacklisting" regulation.

On July 9, 1999, a proposed FAR change was published which would amend FAR Part 9, Contractor Qualifications, to clarify coverage and give examples of suitable contractor responsibility considerations. Also, the proposed rule would amend FAR Part 31, Contract Cost Principles and Procedures, to make unallowable the costs of attempting to influence employee decisions regarding unionization, and legal expenses related to the defense of judicial or administrative proceedings brought by the federal government when a contractor is found to have violated a law or regulation, or the proceeding is settled by consent or compromise.

Over 1,500 comments were submitted. Many of the comments said the proposed rule was vague and subjective. Among the commenters against the proposed rule were DOD and GSA. Therefore, on June 30, 2000, a revised proposed rule was published which would provide additional guidance on the evaluation of a contractor's responsibility and would provide additional procedural protections to make sure contracting officers would not misuse their discretion.

About 300 comments were submitted in response to the June 30, 2000, proposed rule. Based on the comments, the FAR Council has decided to finalize the proposed rule with changes (the changes between the June 30, 2000, proposed rule and this final rule are in brackets ("[ ]"):

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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