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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: April 3, 2001

FROM: Barry McVay, CPCM

SUBJECT: Federal Acquisition Circular (FAC) 97-24, Suspension of FAC 97-21, Contractor Responsibility, Labor Relations Costs, and Costs Relating to Legal and Other Proceedings

SOURCE: Federal Register, April 3, 2001, Vol. 66, No. 64, pages 17753 and 17758

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

ACTION: Interim Rule and Proposed Rule

SYNOPSIS: FAC 97-24 is being issued to suspend the effectivity FAC 97-21 for 270 days, until December 29, 2001, or until finalization of the proposed rule that would repeal FAC 97-21 (which is being published concurrently with this interim rule), whichever occurs first.

EDITOR'S NOTE: For more on FAC 97-21, see the December 20, 2000, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 97-21; Contractor Responsibility, Labor Relations Costs, and Costs Relating to Legal and Other Proceedings."

For more on the 6 month class deviation from FAC 97-21 approved by the Civilian Agency Acquisition Council (CAAC), see the January 26, 2001, FEDERAL CONTRACTS DISPATCH "Civilian Agency Acquisition Council; Class Deviation from Federal Acquisition Circular (FAC) 97-21."

DATES: The interim rule suspending FAC 97-21 for 270 days is effective April 3, 2001, but all solicitations issued on or after the January 19, 2001, effective date of FAC 97-21 must be amended to delete the certification provision(s) added by FAC 97-21.

Comments on the proposed rule that would permanently repeal FAC 97-21 should be submitted on or before June 4, 2001.

ADDRESSES: Submit comments to General Services Administration, FAR Secretariat (MVP), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405. Submit e-mail comments to farcase.1999-010@gsa.gov. Cite FAR case 1999-010 (stay) in all correspondence related to the proposed rule.

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

For general information, contact the FAR Secretariat, Room 4035, GS Building, Washington, DC 20405, 202-501-4755.

SUPPLEMENTAL INFORMATION: FAC 97-21, the so-called "blacklisting" regulation, added language to Federal Acquisition Regulation (FAR) 9.104-1, General Standards, stating that a satisfactory record of integrity and business ethics includes satisfactory compliance with the law including tax, labor and employment, environmental, antitrust, and consumer protection laws. Also, it amended FAR 31.205-21, Labor Relations Costs, to make unallowable those costs incurred for activities that assist, promote, or deter unionization; FAR 31.205-47, Costs Related to Legal and Other Proceedings, to make unallowable those costs incurred in civil or administrative proceedings brought by a government where the contractor violated, or failed to comply with a law or regulation; and amended the previous certification in FAR 52.209-5, Certification Regarding Debarment, Suspension, Proposed Debarment, and Other Responsibility Matters, and FAR 52.212-3, Offeror Representations and Certifications -- Commercial Items (one of which is required to be included in each solicitation in excess of the $100,000 simplified acquisition threshold), to require offerors to certify to additional violations (violations of tax, labor and employment, environmental, antitrust, or consumer protection laws) adjudicated within the last three years.

On January 26, 2001, the CAAC authorized all civilian agencies to postpone the effective date of FAC 97-21 for six months, from January 19, 2001, to July 19, 2001. The CAAC cited the lawsuit filed by the Business Roundtable, Chamber of Commerce of the United States, the National Association of Manufacturers, the Associated General Contractors of America, Inc., and the Associated Builders and Contractors, Inc., in the United States District Court for the District of Columbia on December 22, 2000, seeking to overturn the final rule as the reason for the postponement, stating that "the Administrative Procedure Act, 5 U.S.C. 705, gives authority for a stay of the final rule: 'When an agency finds that justice so requires, it may postpone the effective date of action taken by it, pending judicial review.'"

Citing the same lawsuit and the 1,800 comments submitted in response to the proposed rule, the FAR Council says it has decided to suspend FAC 97-21 for 270 days because it is "reassessing the advantages and disadvantages of the changes made by the December 20, 2000, final rule, to determine if the benefits of the rule are outweighed by the burdens imposed by the rule. In this regard, it is not clear to the FAR Council that there is a justification for including the added categories of covered laws in the rule and its implementing certification, that the rule provides contracting officers with sufficient guidelines to prevent arbitrary or otherwise abusive implementation, or that the final rule is justified from a cost benefit perspective...the FAR Council has determined that the 30-day effective date did not give contractors, and the government, sufficient time to meet the new obligations and responsibilities imposed by the final rule. Government contracting officers have not had sufficient training. Offerors have not had sufficient time to establish a system to track compliance with applicable laws and keep it current, in order to be able to properly fill out the certification...The FAR Council now recognizes that it will take more time than it anticipated for businesses to put the systems in place."

In addition, the FAR Council is requesting comments on a proposed rule that would permanently repeal FAC 97-21.

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2001 by Panoptic Enterprises. All Rights Reserved.

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