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A two-year onslaught of Obama administration executive actions and regulations targeting federal contractors has left businesses scrambling to assess current compliance procedures and develop strategies to accommodate new requirements.

Recently enacted directives impacting federal contractors in the construction industry include an expansion of equal employment protections, increased pay transparency requirements and a higher minimum wage for employees of contracting firms employed on federal contracts.

In addition, proposed regulations requiring federal contractors to report summary data on employee compensation to the U.S. Department of Labor’s (DOL) Office of Federal Contract Compliance Programs is listed on the regulatory agenda as being finalized in November.

This summer, Associated Builders and Contractors (ABC) submitted comments on two controversial proposals issued by the DOL: the overtime rule and the blacklisting rule. The proposed overtime rule changes federal overtime exemptions for white collar workers employed by both private and federal contractors that are covered by the Fair Labor Standards Act. The other set of ABC comments urge the withdrawal of a DOL guidance memo and Federal Acquisition Regulatory (FAR) Council proposed rule implementing President Obama’s “Fair Pay and Safe Workplaces” blacklisting Executive Order 13673 instructing federal agencies to determine whether businesses seeking federal contracts are “responsible” enough to be awarded a contract based on a subjective review of its three-year compliance history with 14 federal and equivalent state labor, employment and safety laws.

On Labor Day, President Obama unveiled the latest executive branch action taking aim at federal contractors. Executive Order 13706 requires that certain federal contractors provide employees with up to seven days of paid sick leave per year on federal contracts entered into after Jan. 1, 2017. ABC is awaiting proposed regulations for the paid sick leave executive order, but it closely mirrors provisions in legislation (the “Healthy Families Act”) that has failed to advance in Congress.

Executive actions targeting federal contractors are opportunities for President Obama to flex his political muscles and promote his party’s political agenda, which is otherwise stymied by a GOP-controlled Congress. The White House hopes these initiatives will bleed into business practices beyond the federal contracting universe and lead to changes in state, local and private contracting markets.

Unfortunately, these executive actions have the potential to needlessly increase regulatory burdens on businesses, restrain competition, increase taxpayer costs, stifle job creation, and delay the delivery of goods and services to the government and its customers.

The constant flow of new regulations targeting federal contractors may force firms to abandon the pursuit of federal contracts, if they haven’t done so already. For example, the House Small Business Committee reports the number of companies registered to do business with the federal government has dropped by more than 100,000 since 2012. Likewise, a recent ABC survey of its federal contractor members on the administration’s blacklisting proposal found that more than 57 percent of respondents believe the proposal, if finalized, will compel them to abandon the pursuit of federal contracts. Ninety-four percent of respondents believe the proposal would make them less likely to pursue federal contracts, and almost 98 percent of respondents believe the new proposals will make the federal contracting process less efficient and more expensive.

In a recent ABC membership survey, a prominent federal contractor stated: “Even though we support some of the concepts and policies behind recent White House actions targeting federal contractors, the regulatory environment has become so burdensome and costly that our business and competitors are seriously considering abandoning the pursuit of federal contracts. If it were not for ABC providing compliance resources and fighting excessive regulations, we would have left the marketplace a long time ago.”

If this trend continues, the federal government and taxpayers stand to lose experienced and qualified competitors, as ABC members performed more than 56 percent ($35.8 billion) of all federal government prime construction contracts exceeding $25 million from fiscal year 2009 to fiscal year 2014.

ABC has long encouraged ABC member federal contractors to participate in the regulatory process to:
  • limit the unintended negative consequences on stakeholders; 
  • resist politically motivated over-regulation; and 
  • promote sensible and balanced alternatives. 
ABC has helped businesses respond to administration requests for feedback on new proposals; led coalitions attacking problematic regulations through legal, legislative and regulatory tactics; and provided educational and compliance materials to help contractors understand new rules.

The federal contracting community must make its voice heard and participate in the regulatory process today, as it is possible more executive actions impacting federal contractors are on the way and won’t stop until the end of President Obama’s second term.

Ben Brubeck is director of federal procurement and labor affairs for Associated Builders and Contractors. For more information, email brubeck@abc.org or visit abc.org/procurement.

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