New Rule Makes It Harder to Win Federal Contracts

The Clinton administration will issue a new rule today to make it harder for companies that have violated labor, tax or other federal laws to win government contracts, the Office of Management and Budget said Tuesday.

The regulation, dubbed the “blacklisting” rule by industry critics, will take effect Jan. 19, one day before President Clinton’s administration turns over the White House to Republican President-elect George W. Bush.

Business groups fought the proposal, which will cover the $200-billion-a-year market for government contracts. The Employment Policy Foundation, a business-backed think tank, said 23 of the top 25 government contractors--among them Boeing Co., Raytheon Co., General Electric Co., and Halliburton Co.--could lose federal work under the new rule.

Business groups say it will be difficult for agencies to apply the law fairly.

“It was ludicrous to begin with to assume that federal contracting officers could bring themselves up to speed in all federal laws to apply these regulations objectively,” said Jeffrey C. McGuiness, president of the Labor Policy Assn., a business group.

The rule, which OMB sent for publication in today’s edition of the Federal Register, has come under fire from Republicans in Congress.

“It’s unconscionable that this administration, in its last dying breath, would push through a blacklisting rule that three of its own agencies oppose,” said Sen. Tim Hutchinson, an Arkansas Republican, in a written statement, referring to comments from the Environmental Protection Agency, the General Services Administration and the Defense Department.

“An incredibly wide range of industries, including high tech, defense, construction and education, will be negatively impacted by this rule,” Hutchinson said.

To overturn the rule, the Bush administration would have to follow a lengthy process that includes publishing its intentions and allowing time for public comment.

Opponents can file lawsuits to attempt to block the rule.

The administration refers to the regulation as the “contractor integrity” rule and says it would help the government avoid fraud and abuse in its contracts.

“The new guidelines reinforce the fundamental and long-standing principle that companies who want to do business with the federal government need to be law-abiding,” said an OMB statement.

Under current rules, federal contractors can be denied a bid if they violate federal laws governing labor relations, employment discrimination and workplace safety. Rejection isn’t automatic because companies first can exhaust all appeals in the courts or before an agency’s administrative law judges.

Under the new rule, an agency could make a company ineligible if there’s “pervasive evidence”--short of a formal ruling--that it violated federal law.

The new proposal also says agencies should take into account compliance with other areas of law, including environmental rules, tax laws, consumer protections and antitrust law.