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Just months after the swift reversal of workplace ergonomics regulations, another controversial Clinton-era reform may soon be history. The so-called blacklisting rule — which would bar companies with patterns of legal violations from receiving lucrative government contracts — will almost assuredly be wiped from the books, perhaps as soon as this month. The rule, which was pushed heavily by the labor unions and backed by former Vice President Al Gore, took effect Jan. 19, but has not been enforced. Instead, a government decision to reconsider the rule has set off a quiet round of intense lobbying by the business community. After the close of a public comment period July 6, the four-member body charged with directing government wide procurement policies — known as the Federal Acquisition Regulation Council, or FAR Council — will most likely revoke the rule. “There is no constituency in the Bush White House that would want to keep this rule on the books. There is no one in the private bar that supports it. The votes on the FAR Council are all against it. Basically, it’s already dead,” says Steven Schooner, a government contracts professor at George Washington University Law School and a former lawyer in the Office of Federal Procurement Policy during the Clinton years. If the blacklisting rule is killed, it will end a four-year saga marked by high-stakes lobbying, heated propaganda, and friction between regulators and the White House. Companies dependent on multimillion-dollar federal contracts feared the vagueness of the rule might allow relatively minor infractions to bar them from doing business with the government. Some also worried that such a rule would be abused by organized labor to force concessions from management in contract negotiations. But those who support reform say the measure would ensure that companies with chronic and serious violations of the law don’t benefit from taxpayer dollars. “I think this is such a modest, common-sense measure,” says Lynn Rhinehart, associate general counsel to the AFL-CIO. “Frankly, I think if you ask the public they’d be shocked to know that this wasn’t the case already.” Rhinehart also questions the legality of revoking a rule that was finalized before President George W. Bush took office. “These rules were developed over two years in a public rule-making process and were in final effective form. To reverse them essentially with the stroke of a pen is at odds with our entire rule-making system,” she says, adding that the AFL-CIO is not ready to concede defeat yet. “We’re taking this one step at a time. When there is a final decision, we’ll review our options.” GORE’S INITIATIVE The Clinton administration’s effort to more strictly enforce contractor integrity began in 1997. At an AFL-CIO convention, Vice President Gore pledged that the federal government would no longer do business with companies that violate labor and employment laws. After two rule proposals, two rounds of public comment, and numerous congressional hearings, the final rule came out Dec. 20, 2000. Formally known as the contractor responsibility rule, the initiative states that in order to qualify for a federal contract a company must demonstrate “satisfactory” compliance with tax, labor and employment, environmental, antitrust, and consumer protection laws. Government contracting officers are instructed to consider “all relevant credible information” in determining eligibility. Opposition to the initiative mobilized immediately after Gore’s 1997 pronouncement. Since the first rule proposal came out in July 1999, the FAR Council has been flooded by more than 1,800 comments — 100 times the usual response to a procurement rule making. BEGINNING OF THE END The recent unwinding of the blacklisting rule began so quickly after President Bush took office that even those keeping a close eye on the matter were caught off-guard. On Jan. 31, the Civilian Agency Acquisition Council authorized all civilian agencies to immediately defer — without public comment — implementation of the rule. Rhinehart says AFL-CIO officials did not learn of the deferment — technically known as a deviation — until days later when a reporter called seeking comment. AFL-CIO President John Sweeney called the move “a secret and outrageous assault,” and Sens. Joseph Lieberman, D-Conn., Edward Kennedy, D-Mass., and Richard Durbin, D-Ill., sent a letter to Office of Management and Budget Director Mitchell Daniels Jr. questioning whether the deviation was even legal. A Congressional Research Service opinion requested by Lieberman concludes that “it is likely that a reviewing court could find the suspension legally deficient.” According to a spokeswoman for Lieberman, the civilian acquisition council has promised to reply to the concerns raised by the report. In his Jan. 31 memo, Council Chairman Al Matera cites a lawsuit challenging the rule as justification for issuing a stay under the Administrative Procedure Act. The suit was brought by the Business Roundtable, the U.S. Chamber of Commerce, the National Association of Manufacturers, and other business groups in December and was voluntarily dismissed in April. “People who criticized the move don’t understand the FAR process,” says Rand Allen, a partner at Washington, D.C.-based Wiley, Rein & Fielding, who filed the suit on behalf of the coalition. Adds Allen: “We certainly did not discuss the suit with anyone in the government. It wasn’t filed specifically to serve as a prop for the deviation.” Whether or not the maneuver was legal, government contract lawyers agree that putting the controversial rule on hold without notice or comment was highly unusual. “The concept of a deviation exists in the FAR, but it’s rarely exercised and even more rarely exercised on a class basis,” says Gregory Smith, chairman of the American Bar Association’s public contract law section. MOMENTUM BUILDS Since January, momentum has continued to build for repeal of the blacklisting rule. On April 3, the FAR Council — the very entity that imposed the rules during the Clinton administration — issued a formal proposal to reverse the contractor responsibility rule. Critics say the FAR Council’s flip-flop demonstrates that the blacklisting initiative was driven by Gore to win union support and was never supported by agency procurement officials. Indeed, the General Services Administration, one of four government entities represented on the FAR Council, filed comments attacking the rule in August 2000. “This rule was dictated from the top down, and the folks supposedly in charge of promulgating the rule actually had very little latitude,” says Stan Soloway, president of the Professional Services Council, a trade association for government contractors in the services industry. Soloway served as deputy undersecretary of defense for acquisition reform under President Clinton and participated in the development of the blacklisting rule. “There was no support for this rule among those involved in the regulatory process. … The problem with the rule is you’re asking a procurement official in the field to make a very complex legal determination as to who is in violation of the law and what amounts to a pattern of abuse. The rule sets up no process or standards.” For many businesses, the rule’s potential impact on their relationship with union employees is also a concern. In a June 18 public meeting, a U.S. Chamber of Commerce spokesman warned that “unions will use the regulation to pressure employers into accepting organizing or bargaining demands through the filing of charges and lawsuits, thus clouding a contractor’s compliance record and reducing the chance of receiving federal contracts.” Over the course of the blacklisting debate, the union-management clash played out within the legal community as well. On two occasions, the ABA public contract law section prepared comments opposing the proposed reforms on the grounds that they were vague and burdensome. ABA sections are authorized to independently comment on regulatory proposals, but any single ABA entity can object to their submission. In both instances, the labor and employment law section refused to allow the comments to be submitted. The public contract section did not prepare comments on the current proposal, but instead encouraged members to submit individual comments. QUIET REVERSAL While the political wrangling over ergonomics, environmental protections, and other last-minute Clinton initiatives has been intense and high-profile, the reversal of the contractor responsibility rule has taken place largely behind the scenes. Remarkably, the about-face has been pushed most aggressively, not by Bush appointees or conservative members of Congress, but by career regulators themselves. In a system where government agencies and contractors are often in conflict, the unity between industry and its regulators is unusual. Federal procurement officials have been rallying those opposed to the rule to issue comments before the July 6 deadline, say several members of the local government contracts bar. “This is one of those rare instances where the career people don’t like the regulation,” says Randel Johnson, U.S. Chamber of Commerce vice president for labor and employee benefits. “Normally the agency people like the regulation, and you’re fighting them.” Having the support of agency insiders has allowed business groups to wage their war on blacklisting without having to expend political capital with legislators. “You can only go to the well so many times,” says the Chamber’s Johnson, referring to business’ successful campaign earlier this year on Capitol Hill to revoke workplace ergonomics rules. “We viewed the chances of overturning the rule during the normal agency rule-making process as very good.” Even supporters of the blacklisting rule are beginning to sense defeat. “We can give our opinions, but ultimately it’s up to the administration, and they’ve indicated their direction,” says Reece Rushing, policy analyst for OMB Watch, a nonprofit watchdog group. “We’d love to see some sort of compromise, but we’re not holding our breath.”

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