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Obama's Federal Contractor Order Invites Chaos

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The Obama administration's second-term frustrations are getting the better of common sense. On July 31, President Obama issued an executive order to "crack down on federal contractors who put workers' safety and hard-earned pay at risk," requiring them to self-report recent violations. The goal is to make federal construction contractors safer and more law-abiding, but it may simply overwhelm contracting officers with a surge of new data and saddle federal contractors with burdensome requirements. The Associated Builders and Contractors is already talking lawsuit, earning the open-shop group a scolding from The New York Times, which asked if ABC seeks a "right to cheat and maim?"

When implemented, the order will fall heavily on a sector that is only a small part of the problem. Underpinning the order is research conducted last year by the U.S. Senate Health, Education, Labor and Pensions Committee that showed federal contractors account for a big chunk of the federal safety and wage penalties levied in recent years. Significantly, of all the firms cited, only two engineering and construction contractors, URS Corp. and Insituform Technologies, ranked among the committee's top violators, from 2007 to 2012, of the Fair Labor Standards Act or safety rules.

Divulging Recent Violations

Repeat violators shouldn't be awarded new contracts, the committee reasoned. The problem is that federal databases aren't much good at making the violations transparent and easy for contracting officers to spot. So picking up on the Senate committee's reasoning, the White House agreed that government contractors seeking work worth $500,000 or more must voluntarily divulge to contracting officers recent past federal or state-equivalent safety and labor-related penalties.

One immediate problem is that the White House wants to make prime contractors responsible for reporting federal and state violations for their subcontractors, too, and updating the information every six months. How many violations will disqualify a contractor from a project? Must a suddenly noncompliant subcontractor be dismissed in the middle of a multi-year project? The implementing regulations will determine much. When the Obama administration's regulation writers take public comments, it will be the industry's first formal chance to weigh in.

While there is nothing wrong with barring repeat violators from winning contracts, the flaws and limitations of the existing database make it hard for federal contracting officers to reach an informed decision; a contractor's full record should be accessible. The order opens the door to all kinds of mistakes and misinterpretations. A lawsuit may indeed be justified to slow or stop this misguided order.

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