Contract considerations to include treatment of other companies

Everybody knows the Golden Rule: Do unto others as you would have them do unto you. Now it might become a factor in contract awards.

Obama administration officials say they are keeping an eye on contractors to make sure they pay their small subcontractors promptly. If they don’t, it could count against them on upcoming contract awards.

“How they pay their subcontractors will be factored into who the future prime contractors are in that contract selection process,” said Jeffrey Zients, acting director of the Office of Management and Budget, during a conference call about the new policy.

In a memo released July 11, Zients directed agencies to make payments faster to all their prime contractors with the understanding that the companies would, in turn, accelerate their payments to small-business subcontractors. The government launched a program in 2011, called Quick Pay, to have agencies pay contractors in 15 days instead of 30. Now OMB is directing agencies to encourage prime contractors to pass along that faster payment cycle for the next year under a temporary, transitional policy.

“We have full expectations that this will be passed along and this will be part of the system going forward,” Zients said.

The goal is to help businesses in a tough economic climate. Karen Mills, administrator of the Small Business Administration, said small subcontractors could benefit from a better cash flow so they can build a solid financial base and invest in new projects.

However, the memo applies to Washington offices only, and therefore the policy won’t have much of an impact beyond headquarters, said Larry Allen, president of Allen Federal Business Partners. “It won’t show up on the radar screen in the field,” he added.

Republican leaders weren’t impressed by the announcement either, the Washington Post reported July 11.

“The White House has so little to offer small businesses they’ve resorted to recycling, reusing and repackaging,” Brendan Buck, spokesman for House Speaker John Boehner (R-Ohio) told the Post.

The announcement was a reaction to criticism that the president has done little to help small businesses, Buck added.

“It also seems similar to the re-election tactics undertaken by many of the elected officials in Congress who wait until ‘prime time’ to act like they actually care about helping the small-business segment of their constituency,” wrote Guy Timberlake, co-founder and chief visionary officer at the American Small Business Coalition, in a July 11 blog post.

Beyond small subcontractors, White House officials are also keeping tabs on how companies treat service workers who could lose their jobs when a government contract changes hands.

Officials want to amend the Federal Acquisition Regulation with a rule about displaced service workers that is based on President Barack Obama’s 2009 executive order on the Nondisplacement of Qualified Workers Under Service Contracts. The new rule would require a company to offer any jobs first to employees who might otherwise lose their jobs as a result of the transition between contractors involved in an agency program.

Under the proposed rule, the Labor Department could suspend or debar companies from government contracting opportunities if they don’t treat their service workers appropriately.

However, the Professional Services Council said agencies can suspend or debar a company only to protect the government, not to punish companies, and Venable law firm cautioned the government against hastily suspending or debarring contractors.

According to an article in the law firm’s newsletter, “A balance needs to be restored between fairness to contractors and the government’s interest in ensuring that companies receiving contracts act responsibly and with integrity.”

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.


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