Likely changes for weighing contractor qualifications

A contractor asked the following question: I read that the Federal Acquisition Regulation may be changed to give contracting officers more say over companies' compliance with environmental and other laws. What is this about? How much of a change is this going to be?

This question relates to the recent proposal by the Federal Acquisition Regulation Council to amend FAR Part 9, "Contractor Qualifications." It was published in the Federal Register on July 9 as a proposed rule and request for comments. (See 64 Fed. Reg. 37359.) Comments are due on or before Nov. 8. A final rule cannot be issued until the comments have been received and analyzed, and the final rule may differ somewhat from the proposed rule.

Since the FAR Council published the proposal, a number of commentators have been arguing that a change would constitute a substantial alteration in the way the government has been conducting business. However, the proposed changes would have little or no legal significance. But the proposal serves to focus attention on some important policy issues.

For many years, the government has followed a policy of awarding contracts only to those offerors who are found "responsible" by the contracting officer prior to contract award. (See FAR 9.103, "Policy.") To be found responsible, an offeror must have:

* Adequate financial resources.

* The ability to meet the required performance schedule.

* A satisfactory record of performance on other contracts.

* A satisfactory record of integrity and business ethics.

* The necessary organization, experience, accounting and operational controls.

* The necessary production, construction, and technical equipment and facilities.

* Any other required qualifications. (See FAR 9.104-1.)

The proposed change would add examples of what might constitute an unsatisfactory record of integrity and business ethics. These would include "persuasive evidence of the prospective contractor's lack of compliance with tax laws or substantial noncompliance with environmental laws, antitrust laws or consumer protection laws." It also would add a statement that the prospective contractor must have "the necessary workplace practices addressing matters such as training, worker retention, and legal compliance to assure a skilled, stable and productive workplace."

For the most part, the proposed changes merely reflect current law. The issue of contractor responsibility has been broad enough to encompass most of those considerations from the beginning.

Thus, an offeror's compliance with tax laws always has been treated as a responsibility issue. (See, for example, Ameriko Maintenance Co., B-250786, Feb. 16, 1993, 93-1 CPD : 145, in which it considered whether a company that has paid its outstanding tax liens was an issue of responsibility.

Similarly, an offeror's compliance with labor laws has been considered a matter of responsibility for some time. (See, for example, Son's Quality Food Co., B-251304.3, Aug. 9, 1993, 93-2 CPD : 86, in which it considered whether an offeror that is likely to pay wages to its employees that comply with local country requirements is an issue of responsibility.)

The same is true for employment laws. (See, for example, Hughes Georgia Inc., B-244936, Nov. 13, 1991, 91-2 CPD : 457, in which it was ruled that proposal information submitted in connection with Equal Employment Opportunity requirements relates to matters of responsibility.)

An offeror's responsibility also encompasses its compliance with environmental laws. (See, for example, Standard Tank Cleaning Corp., B-245364, Jan. 2, 1992, 92-1 CPD : 3, in which a contracting agency reasonably determined that a company was not responsible, based on information showing a history of environmental violations.)

Moreover, an offeror's compliance with antitrust laws has long been considered a responsibility issue. (See, for example, Kahn's Bakery Inc., B-185025, Aug. 2, 1976, in which a contracting officer properly found an offeror not responsible based on a plea of "no contest" to charges of antitrust violations.)

The only area in which the amendment might seem to change existing law is the proposed treatment of compliance with consumer protection laws as a responsibility issue.

Digging up the Past

Historically, agencies have not considered an offeror's compliance with consumer protection laws in their responsibility determinations. But consumer protection would appear to fit easily within the consideration of an offeror's integrity and business ethics, even without the proposed amendment.

Integrity is a broad term, synonymous with probity, honesty and general "uprightness." (See Domco Chemical Corp., 48 Comp. Gen. 769, 1969). A business can be found to lack integrity for any reasonable cause, even without reference to specific regulatory examples. (See, for example, Priority I Construction of Brevard Inc., B-255721, Nov. 16, 1993, 93-2 CPD : 285, in which it considered a medical prescription misdemeanor by a company's vice president.)

Adding the proposed examples to the FAR would not change existing law in any appreciable way. However, the proposal does remind prospective offerors and agency contracting officials that they are supposed to take responsibility issues seriously.

--Peckinpaugh is a member of the government contracts section of the law firm Winston & Strawn, Washington, D.C. Readers are encouraged to submit topics by e-mail to carl@carl.com.

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