Blacklisting Fears Haunt Small Businesses

By Kutner, Joshua A. | National Defense, December 1999 | Go to article overview

Blacklisting Fears Haunt Small Businesses


Kutner, Joshua A., National Defense


Smail businesses are up in arms over potential language designed to clarify the Federal Acquisition Regulation (FAR) regarding contractors compliance with various laws. The new rule, which would be part of FAR 9, would require the government to investigate a contractor's background to determine whether that company has a "satisfactory record" of abiding by the law and whether it is a "responsible contractor." Small firms are concerned that minor violations, or what one legislator called "the equivalent of a parking ticket," will hinder their opportunities to receive federal contracts. Such infringements could be related to employment, labor, tax, environmental, antitrust, worker safety or consumer protection noncompliance.

The prospect of small businesses being barred from government contracts as a result of the new rule, also known as "blacklisting," was the subject of an October hearing by the House Committee on Small Business.

Procurement Process

The Clinton administration said it proposed the rule to simplify the federal procurement process.

"The fundamental purpose of this proposal is to protect the federal government," said Deidre A- Lee, administrator for federal procurement policy, office of management and budget. "Like any private citizen doing business in the commercial marketplace, we want to be assured that the government is doing business with individuals and entities who can be relied upon."

Lee added that the proposed rule is designed to deter contract officers from awarding contracts to firms that specifically have a record of "repeated serious legal violations."

Many others, however, do not believe the administration@s actions are justified.

"What federal agencies view as a clarification, small businesses may view as a trap preventing them from being awarded federal government contracts," said Rep. Jim Talent, R-Mo., House Small Business Committee chairman. "In 1998, small businesses were awarded nearly three-quarters of all federal procurements with a total value of more than $33 billion. Little doubt exists in my mind that this could result in small businesses being prevented from contracting from the government for what is regulatory equivalent of a combination of moving and parking violations. I find that both problematic and distressing."

Many small businesses, additionally, do not have the financial resources to pay for the litigation and red tape expenses that result from a government investigation, representatives from government and industry affirmed.

Others questioned the criteria that contracting officers will use to determine if a contractor fits the bill under the new regulations.

"The terms 'integrity and 'business ethics seem to come into play in this matter," said Harry Alford, president of the African-American Chamber of Commerce. "These terms are purely subjective and in the eyes of the beholder."

Among the groups that presented their views to the committee was the National Defense Industrial Association (NDIA). NDIA President Lawrence E Skibbie said, "There is no question that the proposed regulations have significant implications for small business ... The fact that the proposed FAR 9 regulation allows third party allegations to destroy a firm's opportunity to compete for a federal contract award is very troubling. This double jeopardy approach places a small business, which has limited resources to counter or mitigate such allegations, at a decided disadvantage.

NDIA represents about 900 corporations, most of which are small businesses. …

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