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The New Fair Pay Rules: Increasing procurement complexity, burdens and costs for government and industry

On May 28th, the Department of Labor (DOL) published the proposed guidance implementing Executive Order 13673, Fair Pay and Safe Workplaces (the E O).  On the same day, the FAR Council issued a proposed rule that would amend the Federal Acquisition Regulation (FAR) to include new clauses and directives implementing the EO.  Notwithstanding the laudable intentions motivating this regulatory action, the duplicative nature of the EO and it corresponding implementing regime appear to be inconsistent with OFPP’s efforts to improve the procurement system[1] and risk adding duplicative compliance burdens to the procurement system.

The EO requires federal contractors and subcontractors, as part of the proposal submission process, to report whether, during the preceding three-year period, there have been any administrative merits determinations, civil judgements, or arbitral awards or decisions rendered against them for violations of any of 14 identified federal labor laws and executive orders or equivalent state laws.  The reporting requirement continues throughout the life of any subsequent contract.  The EO also establishes a new position, Labor Compliance Advisors (LCAs), at each agency.  Contracting officers will consult with LCAs to assess any reported violations in determining whether a contractor/offeror has a satisfactory record of integrity and business ethics for purposes of the responsibility determination requirement. According to the DOL Guidance, the new labor law compliance reporting requirements will help enhance productivity and the delivery of goods and services to the Federal government in a “timely, predictable and satisfactory manner.”

No reasonable person can object to ensuring compliance with our nation’s labor laws and enhancing productivity in the procurement system.  The connection between the new compliance reporting requirement and improved outcomes in the procurement system, however, is tenuous at best.  The EO, DOL guidance, and proposed FAR rule provide little empirical data supporting the projection of improved procurement outcomes.  In fact, the reporting requirements seem to duplicate the underlying statutes and existing reporting regimes that are the focus of the guidance.  Such duplication adds unnecessary costs to the acquisition system, including the unintended consequence of increasing the amount of funding and resources dedicated to overhead reporting and compliance functions, rather than to direct contract performance.   Equally as problematic, these additional burdens, although costly for all, could weigh more heavily on the small business community.  Ultimately, this regime risks lower efficiency, reduced innovation, and increased costs for government and industry in meeting agency missions on behalf of the American people.

The DOL guidance contains 106 pages and seeks to rationalize and explain the new reporting requirements. Again, it runs counter to the vision enunciated by OFPP, specifically, to improve efficiency, reduce red tape, and provide greater benefit for taxpayers’ dollars.  Instead the DOL guidance:

  • Establishes new reporting requirements for contractors and subcontractors;
  • Includes definitions/terminology relevant to labor laws and unrelated to acquisition—these concepts will have to be understood and applied by both industry and a federal acquisition workforce that is already tasked with implementing complex procurement requirements;
  • Creates a new bureaucracy at an unspecified cost that includes advisors to counsel contracting offices, contractors, and subcontractors on the intricacies of the new rules;
  • Sets forth the prospect of further guidance addressing state law compliance reporting.

The Coalition is concerned that implementation of this guidance will create contract administration issues for commercial item contractors that hold long term IDIQ contracts.  In addition, many questions exist with respect to how various dollar thresholds established by the guidance would be applied and how subcontracting reporting could be rationally implemented.  The Coalition will continue to monitor this guidance on behalf of members.

[1] Administrator Rung specifically recognized, “The overwhelming feedback from industry and other stakeholders is that the complexity of the Federal contracting space leads to higher costs, slower procurements, and less innovation.  Stakeholders cited as problems, among other things, 100 page request for proposals with overly prescriptive, Government-unique requirements, significant contract duplication across Government, and very little sharing of pricing and other contract information between agencies and industry.”  Transforming the Marketplace: Simplifying Federal Procurement to Improve Performance, Drive Innovation, and Increase Savings, Memorandum for Chief Acquisitions Officers and Senior Procurement Executives, Dec. 4, 2014.

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