The Contractor Responsibility Regulation: Needed Clarification or a Potential Blacklist? (CRS Report for Congress)
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| Release Date |
Nov. 6, 2002 |
| Report Number |
RL30715 |
| Report Type |
Report |
| Authors |
Nye Stevens, Government and Finance Division |
| Source Agency |
Congressional Research Service |
Summary:
This report analyzes the controversy, for the most part now concluded, surrounding a Clinton
Administration revision of the Federal Acquisition Regulation to clarify the meaning and application
of a statutory requirement that federal contracting officers must determine that a prospective
contractor has "a satisfactory record of integrity and business ethics." The new rule issued in the
Clinton Administration's final days, instructed contracting officers to consider compliance with a
wide range of tax, employment, environmental, antitrust, and consumer protection laws in deciding
whether a contractor is "responsible," and thus eligible for a contract award.
During a drafting and comment period lasting more than 2 years, the proposed rule came under
unprecedentedly heavy criticism from business and contracting groups, academic institutions, and
two federal agencies. They said the proposed regulation was unnecessary and could lead to a
"blacklist" of contractors who run afoul of myriad federal laws in the normal course of business.
The Clinton Administration, supported by environmental, union, civil rights, and consumer
watchdog groups, defended the proposal as needed to clarify the application of existing law and
weed out contractors who may discredit the government.
One of the reasons the rule was so controversial was that it offered (to proponents) or
threatened
(to opponents) an opportunity to affect the behavior of contractors outside the realm of competition
for government contracts. Labor, environmental, and corporate watchdog groups believed it would
provide a positive incentive to improve business ethics and promote voluntary compliance with a
broad range of tax, environmental, labor, civil rights, and consumer laws. Business groups, however,
warned that it would upset a delicate balance in regulatory and litigation arenas, by adding the threat
of federal contract losses to current penalties arising from common disputes with government,
employees, and watchdog organizations.
On December 20, 2000, the contractor responsibility regulation was published as a final rule
to become effective January 19, 2001. Business and contracting groups voiced their objections to
the incoming Bush Administration. On January 31, 2001, the Civilian Agency Acquisition Council
authorized agencies to use an unusual "class deviation" procedure to suspend application of the rule.
On April 3, 2001, the Bush Administration took more definitive action to stay the Clinton
Administration's rule for 270 days. Exactly 268 days later, on December 27, 2001, the rule was
revoked in its entirety in a new rule-making procedure.
Representative Albert Wynn introduced H.R. 4081 on March 20, 2002. The bill
would put the provisions of the contractor responsibility rule into legislation. No action was taken
on the bill. Nevertheless, GSA barred both Enron and Arthur Andersen, LLP from federal contracts
by invoking the underlying statutory provision.
This report is no longer being maintained but remains available to Congress as a record of the
controversy.
