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23–766 2017

THE CUMULATIVE BURDEN OF PRESIDENT 

OBAMA’S EXECUTIVE ORDERS ON SMALL 

CONTRACTORS 

HEARING 

BEFORE THE

SUBCOMMITTEES ON INVESTIGATIONS, OVERSIGHT, 

AND REGULATIONS AND CONTRACTING AND 

WORKFORCE 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

SEPTEMBER 13, 2016 

Small Business Committee Document Number 114–071 

Available via the GPO Website: www.fdsys.gov 

SBREP-219A with DISTILLER


Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

STEVE CHABOT, Ohio, Chairman 

STEVE KING, Iowa 

BLAINE LUETKEMEYER, Missouri 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

CHRIS GIBSON, New York 

DAVE BRAT, Virginia 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa 

STEVE KNIGHT, California 

CARLOS CURBELO, Florida 

CRESENT HARDY, Nevada 

WARREN DAVIDSON, Ohio 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

YVETTE CLARK, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, JR., New Jersey 

GRACE MENG, New York 

BRENDA LAWRENCE, Michigan 

ALMA ADAMS, North Carolina 

SETH MOULTON, Massachusetts 

KEVIN FITZPATRICK, Staff Director 

JAN OLIVER, Chief Counsel 

ADAM MINEHARDT, Minority Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Cresent Hardy ................................................................................................. 1 

Hon. Alma Adams .................................................................................................... 2 

WITNESSES 

Mr. James P. Hoffman, P.E., President, Summer Consultants, Inc., McLean, 

VA, testifying on behalf of the American Council of Engineering Companies 5 

Ms. Donna S. Huneycutt, Co-Owner and Chief Operating Officer, WWC, 

LLC, Tampa, FL, testifying on behalf of the National Defense Industrial 

Association ............................................................................................................ 7 

Mr. Jimmy Christianson, Regulatory Counsel, Associated General Contractors 

of America, Arlington, VA ................................................................................... 8 

David Madland, Ph.D., Senior Fellow & Senior Advisor to the American 

Worker Project, Center for American Progress, Washington, DC .................... 10 

APPENDIX 

Prepared Statements: 

Mr. James P. Hoffman, P.E., President, Summer Consultants, Inc., 

McLean, VA, testifying on behalf of the American Council of Engineering Companies ............................................................................................... 25 

Ms. Donna S. Huneycutt, Co-Owner and Chief Operating Officer, WWC, 

LLC, Tampa, FL, testifying on behalf of the National Defense Industrial Association ............................................................................................ 34 

Mr. Jimmy Christianson, Regulatory Counsel, Associated General Contractors of America, Arlington, VA .............................................................. 39 

David Madland, Ph.D., Senior Fellow & Senior Advisor to the American 

Worker Project, Center for American Progress, Washington, DC ............ 54 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

Statement of Chairman Richard Hanna ......................................................... 65 

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SBREP-219A with DISTILLER

(1) 

THE CUMULATIVE BURDEN OF PRESIDENT 

OBAMA’S EXECUTIVE ORDERS ON SMALL 

CONTRACTORS 

TUESDAY, SEPTEMBER 13, 2016 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON INVESTIGATIONS, OVERSIGHT, 

AND REGULATIONS, 

JOINT WITH THE

SUBCOMMITTEE ON CONTRACTING AND WORKFORCE, 

Washington, DC. 

The Subcommittees met, pursuant to call, at 10:00 a.m., in Room 

2360, Rayburn House Office Building, Hon. Cresent Hardy [chairman of the Subcommittee on Investigations, Oversight, and Regulations] presiding. 

Present: Representatives Hardy, Knight, Hanna, Kelly, Adams, 

and Lawrence. 

Chairman HARDY. Good morning. I would like to call this hearing to order. 

I would like to start by thanking our witnesses, especially the 

small business owners who have traveled from different parts of 

the country, for being here. 

Today, we are going to take a look back at all the executive actions President Obama has taken throughout his presidency that 

have a direct effect on the Federal contractors. More specifically, 

we want to examine how these actions have affected small firms 

that do business with the Federal Government. 

Throughout this Congress, our full Committee, as well as several 

of our Subcommittees, including mine and Mr. Hanna’s, have held 

hearings highlighting the negative outcomes of several of these actions, doing our best to defend the small business community. Regrettably, President Obama either was not listening, or worse, he 

simply ignored our appeals. 

For example, last September, Mr. Hanna and I held a joint hearing discussing the negative outcomes small businesses would have 

faced should Executive Order 13673, commonly referred to as ‘‘the 

Blacklisting rule,’’ become final. We received testimony at that 

hearing that would undermine the government’s longstanding policy of maximizing contracting opportunities for small businesses 

and that it was an opportunity to extort settlements out of small 

businesses. These pleas were ignored by the Department of Labor, 

and the Blacklisting rule became final on August 24th. 

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2 

The Blacklisting rule is one of many new Federal regulations 

that have been spawned by the President’s decree hampering economic growth in our small business communities. 

Aside from the circumventing of the Congress’ legislative authority, I am particularly concerned that these executive actions will 

lead to fewer small businesses participating in the Federal marketplace. 

We need a healthy industrial base with many small businesses 

working to provide the government with innovative goods and costeffective services. When fewer small businesses compete for federal 

contracts, the outcome will be less innovation and a higher cost to 

taxpayers. 

Regrettably, this exodus has already started. We currently have 

100,000 fewer small businesses registered to do business with the 

Federal Government than we did just 4 years ago. This is not good 

for the United States. 

In meeting after meeting with my constituents back home in Nevada, and listening to small business after small business testify 

before this Subcommittee, I have come to the conclusion that 

Washington regulators, and particularly those appointed in the 

Obama administration, do not understand how much their actions 

affect the day-to-day operations of small firms. 

This is unfortunate, and I hope to work with this administration 

to make them understand just how difficult they are making it for 

small Federal contractors. 

We have an outstanding panel here today with us this morning, 

and I am very interested in hearing how bad it is getting out there 

for our small federal contractors. We will keep yelling, and maybe 

the President will finally hear us. 

Now I yield to the Ranking Member, Ms. Adams, for her opening 

statement. 

Ms. ADAMS. Thank you, Mr. Chairman, for holding this important meeting. To our panelists today, our witnesses, for your presence and your participation, I thank you as well. 

Each year, the Federal Government spends over $400 billion in 

taxpayer dollars to pay private companies for goods and services. 

In the past, Congress has used this significant financial might to 

help drive forward a number of policy goals. One such policy goal 

that is a priority for this Committee and for Congress is the participation of small businesses in the federal marketplace. As such, 

we have passed legislation aimed at ensuring all small businesses 

get a fair shot at these projects. Likewise, this Committee has 

worked in a bipartisan manner to help women- and minority-owned 

businesses navigate the procurement process, recognizing that as 

the country’s largest consumer of goods and services, the Federal 

Government has the ability to use its buying power to advance priorities important to our Nation. 

President Obama signed several executive orders and presidential memorandum setting standards for contractors doing good 

work for the government, and while funds received from Federal 

contracts boost local economies and allow firms to hire more employees, some firms play by their own set of rules to win these lucrative dollars. As a result, law-abiding businesses are disadvantaged and pushed out of the marketplace. Therefore, these execuSBREP-219A with DISTILLER

3 

tive actions are aimed at leveling the playing field for all contractors. From ensuring that contracting officers are looking at labor 

law violations when evaluating a firm’s responsibility to protecting 

employees from discrimination on the basis of sexual orientation 

and providing sick leave and a higher minimum wage, these executive actions cover a wide range of areas to not only protect employees, but also protect the government from undue risk. So we should 

be clear of the businesses that perform work for the government. 

The overwhelming majority comply with laws and do right by their 

employees while providing excellent goods and services at competitive prices. 

However, this Committee has heard of a number of bad actors 

that skirt the law and continue to receive Federal contract work. 

For instance, according to one report, almost half of the total initial 

penalty dollars assessed for Occupational Safety and Health Administration violations in 2012 were against companies holding 

Federal contracts. However, these businesses were rarely debarred 

or suspended from the federal marketplace as a result of their unsafe working environments. 

Labor laws are crucial to a healthy economy. Allowing habitual 

violators to continue working with the federal government without 

requiring remedies puts employees at risk of injury and the government at risk of delays and additional costs. 

So with regards to the executive orders on increasing wages and 

protecting employees seeking equal pay, studies have shown that 

higher wages lead to better quality of services, lower employee 

turnover, and more robust bidding by high-road employers, all of 

which improve the efficiency and the economy of federally contracted work. 

While these executive actions have resulted or will result in new 

processes and procedures for Federal contractors, many of the 

changes will fit into the existing procurement process with the contracting officer using additional criteria to consider. Yet, as we hear 

today, many small firms are concerned with the cumulative impact 

impacting all executive orders will have on their businesses. Small 

businesses provide quality goods and services at affordable prices, 

meaning a better deal for the government and the taxpayer, yet 

they have smaller margins, and new regulations can be harder for 

them to absorb. With small businesses creating over two-thirds of 

new jobs, our economy needs both small businesses and sufficient 

employee protections to properly operate. Accordingly, it is important that we find the balance in which small businesses are not 

overly burdened by complying with the guidelines, while not diluting the protections afforded to law-abiding contractors through 

these executive orders. 

With that, I look forward to hearing the witnesses’ perspective on 

these important topics, and I yield back. Thank you, Mr. Chair. 

Chairman HARDY. Thank you, Ms. Adams. 

I would like to turn some time over to the chairman of the Subcommittee on Contracting and Workforce, Chairman Hanna. 

Chairman HANNA. Thank you, Chairman. I appreciate it. 

I am going to forego my statement today. So much of this is selfevident and it is often mostly, most of the time it is the case that 

witnesses have much more insight, and I do not want to take up 

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4 

any time to read my statement because I have a lot of questions 

and I want to get some feedback and want to take the time to do 

it. So thank you, Chairman. 

Chairman HARDY. Thank you, Mr. Chairman. 

If the Committee members have any opening statements prepared, I would like to ask that they submit them for the record. 

Now, I would like to explain how things kind of work around 

here, which many of you probably already know. 

You will have 5 minutes to deliver your testimony. The light will 

start out as green. When you have 1 minute remaining, the light 

will turn yellow, and finally, when your 5 minutes is up, it will 

turn red. I ask you to adhere to this time limit if you could, please. 

Now, I would like to introduce our witnesses. 

Our first witness is Mr. James Hoffman, president of Summer 

Consultants, Inc., a small mechanical, electrical, and plumbing engineering firm in McLean, Virginia, testifying on behalf of the 

American Council of Engineering Companies. He possesses 24 

years of experience preparing studies and designs of federal historic and institutional facilities and complex renovation projects. 

Mr. Hoffman is a Project Manager for indefinite delivery, indefinite 

quantity contracts with Baltimore District of the Army Corps of 

Engineers Naval Facilities, Engineering Command Washington, 

and the National Institute of Standards and Technology. Other 

past and current federal experience includes work with the Architect of the Capitol, the 11th Wing of the Department of the Air 

Force, and the General Services Administration. Thank you for 

being here, Mr. Hoffman. 

Up next we have Ms. Donna Huneycutt, Chief Operating Officer 

and Co-owner of the Wittenberg Weiner Consulting, testifying on 

behalf of the National Defense Industrial Association, or the NDIA. 

Prior to joining the WWC, she practiced business immigration law 

representing Fleet Boston Financial and Vertex Pharmaceuticals. 

Previously, Ms. Huneycutt practiced corporate law in New York, focusing on private placement startups and structured finance. She 

holds a B.A. from the University of California-Berkeley, and a J.D. 

from Columbia University. She is an active member of the Committee on Acquisition Management and Small Business Division 

Legislative Affairs and Policy Team of the NDIA. She co-chaired 

the Small Business Committee on Pathways to Transformation, Response on Acquisition Reform prepared by the NDIA at the request 

of the Senate Arms Service Committee and the House Arms Service Committee. Thank you for being here, Ms. Huneycutt. 

Next, we have Jimmy Christianson, Regulatory Counsel for the 

Associated General Contractors, or the AGC. Working with AGC 

for nearly 6 years, Mr. Christianson lobbies Congress and federal 

agencies on transportation authorizations and appropriations, procurement, public-private partnership, labor, and environmental 

bills. He has success in this which he has led the enactment of favorable provisions in the National Defense Authorization Act for 

the fiscal years 2014, 2105, and 2016; the Water Resources Reform 

and Development Act of 2014; and various appropriation bills. He 

also works with the association members from CEOs of multibillion-dollar companies to middle managers and business owners to 

identify, prioritize, and advance industries’ legislative and reguSBREP-219A with DISTILLER

5 

latory agencies. He received his B.A. from the University of Pennsylvania and his J.D. from the University of Maine. Thank you for 

your participation, and we look forward to hearing from you, Mr. 

Christiansen. 

Now, I would like to yield to Ms. Adams to introduce our next 

witness. 

Ms. ADAMS. Thank you, Mr. Chair. 

It is my pleasure to introduce Dr. David Madland. Dr. Madland 

is a Senior Fellow and a Senior Advisor to the American Worker 

Project at the Center for American Progress. He has written extensively about the economy, including the middle class, economic inequality, retirement policy, labor unions, and workplace standards, 

such as the minimum wage. He has appeared frequently on television shows, including PBS NewsHour, and has been cited in publications such as The New York Times, The Wall Street Journal, 

and The Washington Post. Dr. Madland has a doctorate in government from Georgetown University and received his bachelor’s degree from the University of California-Berkeley. Welcome, Dr. 

Madland. 

Chairman HARDY. Again, I would like to thank you all for being 

here. 

Mr. Hoffman, we will start with you. You have 5 minutes. 

STATEMENTS OF JAMES P. HOFFMAN, P.E., PRESIDENT, SUMMER CONSULTANTS, INC.; DONNA S. HUNEYCUTT, CO-OWNER 

AND CHIEF OPERATING OFFICER, WITTENBERG WEINER 

CONSULTING, LLC; JIMMY CHRISTIANSON, REGULATORY 

COUNSEL, ASSOCIATED GENERAL CONTRACTORS OF AMERICA; DAVID MADLAND, PH.D.,SENIOR FELLOW & SENIOR ADVISOR, AMERICAN WORKER PROJECT CENTER FOR AMERICAN PROGRESS 

STATEMENT OF JAMES P. HOFFMAN 

Mr. HOFFMAN. Subcommittee Chairman Hanna, Chairman 

Hardy, Ranking Member Adams, and members of this Committee, 

I appreciate the opportunity to testify before you today about the 

issues surrounding the cumulative burden of President Obama’s executive orders on small contractors. 

My name is James Hoffman, and I am the President of Summer 

Consulting, a mechanical, electrical, and plumbing engineering 

firm, headquartered in McLean, Virginia. Summer Consultants is 

a small business with 36 people, and we have been in the federal 

marketplace for over 50 years. 

My firm is an active member of the American Council of Engineering Companies, the voice of America’s engineering industry. 

ACEC’s over 5,000 member firms represent hundreds of thousands 

engineers and other specialists throughout the country that are engaged in a wide range of engineering work that propel the Nation’s 

economy and enhance and safeguard America’s quality of life. Almost 85 percent of these firms are small businesses. ACEC appreciates the efforts that the Department of Labor and the FAR Council play to ensure compliance with labor laws. The industry is committed to following the rules, but the Federal Government must 

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6 

understand the burdens on the private sector and that the cost is 

passed on to the government with duplicative requirements. 

The blacklisting rule creates burdens for engineering firms and 

other contractors working for federal agencies. While we understand the rationale behind the order, it should be noted that the 

bad actors are less than 0.01 percent of the total contracting workforce. Let me repeat that, less than 0.01 percent of the total contracting workforce. 

The Sick Leave Executive Order also creates unnecessary administrative and financial burdens on contractors. While the Council 

supports paid sick leave, the amount of reporting and the changes 

required to implement the rule create more expense for contractors 

and the government. Most of the Council’s firms offer equivalent 

paid sick leave, so the requirement is repetitive. 

These orders create a more burdensome and expensive process 

for federal contractors, which drives up taxpayer costs while driving businesses out of the Federal market. For example, my firm is 

a prime contractor and manages many subcontractors. Under the 

blacklisting rule, I will have to preclear my subcontractors before 

I develop a response. Developing a response takes time and focus 

away from other business as I develop the full scope of the requirements to make sure that the subcontractors have the business and 

ethical credentials to help me win the work. I question that I will 

be able to consult with both the contracting officer and the agency 

labor compliance advisor to find out if these subcontractors are 

okay, and I am concerned about the alleged labor violations, or violations that are beyond the 3-year period will be held against my 

firm or any subcontractors during the solicitation and within the 

context of the contract. 

My firm already reports compliance with the required rules and 

orders up to the applicable agency. Adding another set of reporting 

that is duplicative increases my overhead. Engineering firms across 

the Nation complain that contracting officers are looking to reduce 

firm overhead and expenses in this tight budget environment. 

Under the Sick Time rule, engineering firms also face increased 

overhead by mandating employee weekly sick time reports. This requires new systems and potentially adds employees to implement 

the changes, and generally, firms are typically paid on a monthly 

or biweekly cycle and report sick leave and other time off with each 

pay period. Member firms respond that implementation costs in the 

first year are estimated to be in excess of $50,000, with additional 

costs in the subsequent years. 

Both these rules will add to the overhead that the government 

is already trying to limit. Implementation of these rules will further add to those overhead expenses, putting firms in a difficult situation of possibly leaving the federal marketplace, which dilutes 

competition for critical services as taxpayers or adding costs to the 

agency if the expenses are accepted. 

I ask that the Committee consider asking the FAR Council and 

the Department of Labor to withdraw the proposed sick time guidance and the final blacklisting guidance, to redraft it to better align 

with the current contracting process. I also ask that the members 

of this Committee support either the House or Senate NDAA language to limit implementation of the FAR rule and DOL guidance. 

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7 

Thank you for the opportunity to participate in today’s hearing, 

and I will be happy to respond to any questions from the Committee members. 

Chairman HARDY. Thank you for your testimony. 

Ms. Huneycutt? 

STATEMENT OF DONNA S. HUNEYCUTT 

Ms. HUNEYCUTT. Thank you. Good morning. 

Subcommittee Chairman Hanna and Chairman Hardy, Ranking 

Member Adams, and members of the Committee, thank you for the 

opportunity to appear before you this morning. 

I am here on behalf of the National Defense Industrial Association, the Nation’s oldest and largest defense industry association, 

comprised of nearly 1,600 corporate and 90,000 individual members. 

Small businesses are a critical component of the U.S. economy, 

serving as a catalyst for economic development, providing employment opportunities, and as the engine of new ideas and innovations. Accordingly, the federal government has established programs to ensure participation opportunities to small businesses to 

fulfill the public policy objectives of the Federal Acquisition Regulation, and access a source of innovative products and services for 

federal government customers. Explicit and implicit in the desired 

outcomes for small business programs is achieving effective competition by maximizing small business participation and enabling 

small businesses to grow through diversification of the goods and 

services they provide and expansion into the nongovernmental 

marketplace. 

As outlined at the onset of the FAR, the guiding principles of the 

federal acquisition system are to satisfy government customers by 

maximizing use of commercial products and services, utilizing contractors with superior past performance, and promoting competition. At the same time, the federal acquisition system shall minimize operation costs, conduct business with fairness and integrity, 

and fulfill policy objectives. The EOs attempt to fulfill the latter 

two guiding principles, but in the process, undermine each of the 

others. 

The rationale for the procurement-related EOs have been to ‘‘promote economy and efficiency in procurement’’ through their intended outcomes. Industry does not necessarily disagree with the 

logic, but rather, how that efficiency and economy is achieved. Supporting documentation for the EO on Fair Pay and Safe Workplaces states, ‘‘The vast majority of federal contractors play by the 

rules.’’ However, the implementation approach to each of the EOs 

punishes that vast majority of good actors through costly, government-unique compliance requirements, a particularly inefficient 

means to promote efficiency. 

The most efficient and economic means to fulfill the policy objectives of the EOs is to alter government buying practices. For example, the rationale for the Fair Pay and Safe Workplace EO is, ‘‘Contractors that consistently adhere to labor laws are more likely to 

have workplace practices that enhance productivity and increase 

the likelihood of timely, predictable, and satisfactory delivery of 

goods and services to the federal government.’’ Thus, if the governSBREP-219A with DISTILLER

8 

ment makes contract awards based on the offeror that provides a 

good or service for the best value, it would have already chosen an 

offeror that adheres to existing labor laws and has workplace practices that enhance productivity. Unfortunately, as industry has 

long pointed out, the government has poor buying habits that have 

equated ‘‘best value’’ with ‘‘lowest cost,’’ and valued compliance to 

government-unique requirements over actual performance in delivering goods and services, creating a perverse incentive to ‘‘race to 

the bottom’’ to win contracts. 

Congress has already passed sufficient legislation to ensure protections of federal contractor employees and to ensure that the government only contracts with responsible sources. The federal government should focus on enforcing the objectives of existing laws, 

rather than using EOs to prescribe in excessive detail how to comply. 

A major frustration for small businesses is that in many cases 

they agree with the intended outcome of an EO, such as providing 

for the well-being of federal contractor employees or making sure 

that competitors play by the rules, but object to the process by 

which the EOs have been developed and implemented. 

Small businesses are not only concerned with the collective impacts of the EOs on their bottom line, but also the detrimental impacts they will have on government customers and their ability to 

carry out missions, the most consequential of which is national security. In recent years, the Department of Defense, the federal government’s biggest spender by a substantial margin, has placed a renewed emphasis on an innovation and acquisition reform, led by 

top officials in the Office of the Secretary of Defense and the Services. 

Unfortunately, the EOs undermine these initiatives. The resultant accumulation of government-unique requirements and their 

compliance costs will continue to deter new suppliers from entering 

the government marketplace and drive exits by firms already selling to the government, restricting competition. 

In closing, several of the recent EOs have, through flawed processes, installed burdensome, unnecessary, inefficient, and in many 

cases duplicative and overlapping regulatory regimes that have the 

cumulative effect of dramatically increasing the cost of doing business with the federal government. Over time, these will decrease 

efficiency and economy in federal procurement, while undermining 

small business growth and development, and limiting the federal 

government’s access to innovative products and services to fulfill 

their needs. 

Thank you again for the opportunity to appear before you this 

morning, and I am happy to answer any questions you may have. 

Chairman HARDY. Thank you, Ms. Huneycutt. 

Mr. Christianson? 

STATEMENT OF JIMMY CHRISTIANSON 

Mr. CHRISTIANSON. Chairman Hanna, Chairman Hardy, 

Ranking Member Adams, and members of the Committee, thank 

you for inviting the Associated General Contractors of America to 

testify today on this important topic. My name is Jimmy 

Christianson. I am Regulatory Counsel for AGC, which represents 

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more than 26,000 union and open-shop commercial construction 

companies throughout the Nation. 

The construction industry has historically supported and provided opportunities for small businesses. It includes more than 

660,000 firms throughout the United States, of which 93 percent 

have fewer than 20 employees. Generally speaking, those employees may include cost estimators, proposal managers, superintendents, craft labor, equipment operators, and other staff whose primary purpose is construction work. 

The business of a construction small business is construction. 

When it comes to compliance issues, many small businesses may 

have one or two employees that handle safety, labor, human resources, and environmental compliance for the entire company. In 

many companies, the safety director is also the environmental compliance director. The human resource director is also the accountant and the general office manager. The reality is that small business employees are often working ‘‘double duty’’ because small 

businesses have extremely limited resources. 

That stated, abiding by laws and regulations is part of the cost 

of doing business. The requirements of the statutes and regulations 

imposed, however, can also represent barriers to entry for small 

emerging businesses and barriers of growth to existing ones. Laws 

and regulations are necessary to help maintain a level and competitive playing field. Nevertheless, not all laws are necessarily 

good laws, and similarly, not all regulations are necessarily good 

regulations or practical. Laws and regulations enacted and finalized, even with the best intentions, can have unintended consequences and needlessly duplicate or confuse existing legal frameworks. 

Of the more than 400 executive orders and presidential memoranda issued by President Obama, AGC has identified 22 that impact the construction contracting industry and its small businesses. 

Several of those actions, which I am happy to discuss in detail during the question-and-answer period, will individually and cumulatively expose small business construction contractors to significant 

legal costs, legal liabilities, and other risks. Small business contractors will have to consider these executive actions in the context of 

the potential risks versus rewards of participating in the federal 

construction market. 

Given the overall state of the economy today, as we experience 

a workforce shortage, more than two-thirds of our members say 

they are looking for workers. The private market, other markets 

out there are more competitive. They will have to consider whether 

they will continue to work in the federal market or, as they have 

told me, plan to or strongly consider walking away. The administration probably did not intend to drive small businesses out of the 

Federal market in implementing these actions; nevertheless, it appears to be a realistic impact. 

AGC looks forward to working with this Committee on ways to 

prevent small businesses from leaving the Federal market and addressing the problems with several of these executive actions. I 

hope today that we can talk about the practical realities that these 

executive orders place on small businesses. I hope we can talk 

about the reality that many small businesses already in the conSBREP-219A with DISTILLER

10 

struction industry have Davis-Bacon requirements that require 

them to pay prevailing wage rates. How will these different executive orders on paid sick leave take into account, because many of 

them do not, existing statutory requirements that are already in 

there? We will also remember that most small businesses, veteranowned small businesses, minority-owned small businesses, the 

small businesses we represent, consider their workers in many 

cases to be part of their family, just as many of you consider your 

employees and your congressional staff to be part of your family, 

and it is hard when rules and regulations come down that make 

them have to make decisions that have to say we have to let go 

of some members of our family. 

I look forward to your questions. Thank you. 

Chairman HARDY. Thank you, Mr. Christianson. 

Dr. Madland? 

STATEMENT OF DAVID MADLAND 

Dr. MADLAND. Thank you, Chairman Hardy and Chairman 

Hanna, Ranking Member Adams, and members of the Subcommittee. I very much appreciate the opportunity to be here. 

My name is David Madland. I am a Senior Fellow at the Center 

for American Progress Action Fund. CAP Action is an independent, 

nonpartisan, and progressive education and advocacy organization 

dedicated to improving the lives of Americans through ideas and 

actions. 

The President’s executive actions that are the subject of today’s 

hearing draw widespread support from a broad coalition of supporters. Not only do organizations representing workers, veterans, 

women, the elderly, and taxpayers support many of these actions, 

but so, too, do a number of small businesses. Many small businesses feel that these executive actions will help them compete on 

a level playing field and make the contracting process more welcoming to businesses like theirs. Indeed, in 2015, small business 

contracting, as a percentage of total government contracting, was 

at record high levels. 

Though I think the general points I make could be applied to 

most, if not all, of the President’s contracting reforms, I will focus 

my remarks on those that address minimum wage, require paid 

sick, ban discrimination based on sexual orientation and gender 

identity, and ensure companies comply with workplace laws before 

getting new government contracts. 

The federal government has a long and successful history of 

starting important social changes with federal contractors. For example, President Lyndon Johnson prevented companies that contract with the federal government from discrimination on the basis 

of race, color, religion, sex, or national origin. Actions by President 

Richard Nixon furthered these protections. Ronald Reagan sought 

to promote minority contractors. Bill Clinton encouraged contractors in economically distressed areas. George W. Bush sought to ensure contractors employed only American citizens or legal residents. 

President Obama’s efforts to raise standards for workers on federal contracts build on this history and are an important part of 

making the economy work for everyone, not just the wealthy few. 

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In the United States today, wages have been stagnant for decades, 

while economic inequality is near record levels. Too many people 

are struggling to pay bills, especially those working in low-wage industries where wage theft is rampant as employers pay workers 

less than they are legally required. Many Americans cannot take 

time off if they get sick, and people often face discrimination because of their sexual orientation and gender identity. Discrimination based on race and gender still occurs, despite previous federal 

actions. 

At the same time these executive actions address important economic and social challenges, they also promote economy and efficiency in government contracting. The basic idea is that treating 

workers fairly leads to better results for taxpayers. Human capital 

is the core input into many federal contracts, and taxpayers receive 

the most efficient and effective utilization of all available manpower when workers are treated fairly. 

Not surprisingly, giving these benefits to taxpayers, businesses, 

and workers, many state and local governments have already implemented similar policies, and evidence shows that these policies 

tend to work pretty well. A study of New York City’s paid sick 

leave found that after 1-1/2 years after the law went into effect, 86 

percent of employers supported the policy. 

Studies examining LGBT contracting policies in state and local 

governments found that in almost all localities, any resistance to 

these policies was minimal and short-lived. The State of Maryland’s living wage law conducted by the state found that the number of bids increased after the State adopted the policy by nearly 

30 percent. Statements from officials in San Francisco and Los Angeles indicate that their responsible contracting systems have increased the pool of experienced firms willing to bid for their work. 

Private companies are also adopting similar wage and responsibility review processes. 

That is why there are a number of small businesses that support 

these kinds of policies. Indeed, a Maryland state contractor who 

first decided to bid only after the living wage was enacted said 

without these standards, ‘‘the bids are a race to the bottom. That 

is not a relationship we want to have with our employees. Living 

wage puts all bidders on the same footing.’’ 

The president of American Small Business Chamber of Commerce explained that the President’s executive order on the minimum wage will ‘‘help level the playing field.’’ A poll from the small 

business majority found that nearly 80 percent of small business 

owners support a law to ban discrimination against LGBT employees, and a hearing at this very Committee, construction contractor 

Bill Albanesi stated that the Fair Pay and Safe Workplace Executive Order ‘‘makes good business sense.’’ It makes good sense to vet 

the contractor before he gets a job. It is common in our industry. 

We do it all the time and we do not see it as being a burden to 

any legitimate fair contractor that is playing by the rules. 

In summary, executive actions help address problems in the 

economy and they are supported and help workers, businesses, and 

taxpayers. Thank you. 

Chairman HARDY. Thank you, Dr. Madland. 

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12 

I would like to begin our first round of questioning. I am going 

to yield myself along with everybody else as we go through. 

Mr. Hoffman, I would like to start with you. You know, a bad 

rule is a bad rule. But do you think some of these concerns that 

could have been alleviated by the DOL if they followed the Regulatory Flexibility Act and actually allowed small business firms to 

be part of that conversation to maybe come up with a better outcome. What are your thoughts on that? 

Mr. HOFFMAN. Yes, sir. Having a greater voice in these regulations is important, and the Office of Advocacy does an excellent job 

in listening to small businesses. We feel that greater input from 

the small and large business community into this far-reaching regulation is necessary to make it workable. 

Chairman HARDY. Thank you. 

Ms. Huneycutt, it is stated that there are about 100,000 small 

businesses that have left the federal marketplace in just the last 

4 years. Do you think any of these actions would make any of those 

small business firms ever want to come back doing business with 

the federal government with some of those actions that have been 

put in place? 

Ms. HUNEYCUTT. Well, I can tell you that there is a continuum 

along which each different firm is going to opt out of something. 

It might be with increasing layers of regulation which often conflict 

with each other or are hard to make work with state regulations 

or other agency regulations and require additional investments in, 

for example, recordkeeping systems and lawyers at 400- to $700 an 

hour. I can tell you that we recently spent $10,000 to implement 

a human resources information system that was totally compliant 

and is a commercial system, and now with the sick leave recordkeeping that will be required by the new EO, we will be required 

to potentially opt out of it or pay for special coding to have that 

work for us. So some firms are going to opt out, and my firm at 

this time does not engage in service contract work because the very 

prescriptive ways that the recordkeeping has to be done and things 

need to be structured are simply too pricey for us to implement and 

continue to run our business, although we actually do meet all of 

those objectives. So we have sick leave. We do not have any claims 

against us. And even still they are a barrier to entry to the SCA. 

Along that same continuum, unfortunately, what we are seeing 

is that there are a lot of firms that are opting out of compliance, 

and sinning first and asking forgiveness later. The contracting officers who are already so burdened with so many different pieces 

that they need to evaluate in a proposal really do not have the 

bandwidth or the autonomy to ensure compliance with those, especially in a lowest price, technically acceptable environment where 

costs are continually being driven down. So unfortunately, what we 

are seeing is that oftentimes the government is getting exactly the 

opposite of what it wants because it is rewarding the actors that 

are noncompliant without knowing it and driving compliant firms 

out of business. 

Chairman HARDY. Thank you. 

Mr. Christianson, in your testimony, you mentioned the use of 

project labor agreements for federal construction projects, executive 

order or your written testimony. Can you talk a little bit about how 

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13 

this might affect the open shop contractor or even those who are 

located in the right-to-work states? 

Mr. CHRISTIANSON. Sure. The fact is that the agency’s position 

is that we leave it up to—we believe it is the decision of the contractor and laborer to come to a collectively bargained agreement, 

project labor agreement, and that government mandating those 

agreements is not a good idea because they do not have the expertise necessarily to do so. They do not have the parties in the construction industry to do so. But when you are dealing with open 

shop, take for example a very open shop area maybe in the middle 

of Nevada where there are not many union contractors, if you are 

all of a sudden mandating that there has to be some sort of union 

work in an area that is predominately open shop, you are going to 

have these companies basically change the way that they do work 

to do a project and they are probably just not going to fit the 

project. 

Chairman HARDY. Thank you. 

My time is expired. I would like to turn the time over to Ms. 

Adams. 

Ms. ADAMS. Thank you, Mr. Chair. 

Before we address the topic, I wanted to just get the panel’s reaction to comments made by the CEO of Science Applications International Corporation, SAIC, last week in which the CEO indicated 

that small business set-asides and contract unbundling were making it harder for his company to get contracts. Do you feel like 

these comments are representative of what is going on in the federal marketplace? Anyone who would like to answer it? 

Mr. HOFFMAN. I will start. There are opportunities for large 

firms to participate with small firms in the federal market, there 

was recently passed legislation for mentor-prot ́ege. There are also 

other agreements, and recently there is the new Small Business 

Multi-Tier rule that is allowing prime contractors to count small 

business subcontracts to their goal. Ultimately, this is helping the 

agency to meet their small business goals. I think there is still opportunity for large firms to partner with small firms to get work 

done. 

Ms. ADAMS. Dr. Madland, do you have a comment? 

Dr. MADLAND. Yes. As I said in my opening statement, the 

share of government contract dollars that are going to small businesses is at record highs, which indicates that the President’s efforts to focus on small business are working. Yet I think there is 

significant room for large contractors to do quite well because the 

scope of government dollars going to government contracts over the 

past several decades has increased significantly, so there is more 

total work out there even if a significant percentage now is going 

to small businesses. 

Ms. ADAMS. Okay. Thank you. 

Would anybody else like to comment? Yes, ma’am? 

Ms. HUNEYCUTT. I would agree as a small business that we 

are the beneficiaries of set-asides. I think that has been working 

increasingly well in the last couple of years. I wonder whether 

some of the reasons SAIC is having trouble competing is because 

a lot of the statutes that currently exist that were passed by Congress are not being enforced and small businesses have an easier 

SBREP-219A with DISTILLER

14 

time staying under the radar, thereby lowering their prices and becoming more price competitive. If they choose, or not knowingly, if 

they do not comply. 

Ms. ADAMS. Thank you, ma’am. 

Okay, Mr. Christianson, with many construction firms doing 

business in the millions, why is it so difficult for these firms to 

keep track of their legal infractions over a 3-year period? 

Mr. CHRISTIANSON. Construction is an inherently regional 

business. In many states, different coasts, you have different 

projects in different areas. You are working out of trailers. Especially in small businesses, you may not have the technology that 

a multibillion-dollar company has to track these things. I think the 

more fundamental question is why do the agencies that actually 

charge these contractors with infractions not have these records? 

They are the ones that are ultimately bringing these actions. Why 

are they asking contractors to do this? Should they not already 

have this information? 

Ms. ADAMS. Okay. Let me follow up. There has been a lot of discussion about the negative impact that these executive orders will 

have on small businesses. However, are there any welcomed 

changes that help those in your industry or are there areas where 

you feel more action is needed? 

Mr. CHRISTIANSON. I do not think so, what is going on here 

is there is more problems that are created. I think many of these 

are solutions looking for problems in the sense that, for example, 

with paid sick leave, most of our union contractors as we found out, 

do not really provide paid sick leave, because through collective 

bargaining, they collectively bargain for higher wages than even 

Davis-Bacon wages to take into account things like you are not 

working. It is a seasonal industry, so you are not working all the 

time. If you have paid sick leave during the time that people 

should be on the job, you are going to change construction schedules. You are going to delay projects, you are going to add to costs. 

We had one company, for example, that said take off the entire 

month of December. But now, because of the paid sick leave executive order, they are not going to be able to do that. Take off extra 

time for the holidays, they are not going to be able to do it. 

The other thing is, in certain states and cities, you have state 

paid sick leave rules. You have city paid sick leave rules and now 

federal paid sick leave rules. So if you are on a federal contract, 

some of your employees may have federal paid sick leave requirements. If you have a state contract, you have state paid sick leave 

requirements. And then local, what do you follow? That is really 

the problem. 

Ms. ADAMS. Thank you, sir. I am out of time. 

Mr. Chair, I yield back. 

Chairman HARDY. Thank you. I would like to turn the time over 

to Chairman Hanna. 

Chairman HANNA. You know, it is pretty clear we are in slow 

growth. Very slow growth. Historically slow growth. It is also true, 

Dr. Madland, that real wages have not gone up in a very, very long 

time, which nobody can be happy about. 

I have got 25 years in the Operating Engineers Union. I believe 

you are earnest in your perspective, but what bothers me about it, 

SBREP-219A with DISTILLER

15 

Dr. Madland, is so much of it is conjecture and subjective in its nature. I wonder, when you hear three other individuals say that 

these rules are burdensome and overcomplicated and are discouraging people from entering the marketplace—and of course, what 

you said is true, that there are more small businesses as a percentage of total government contracts, but it is also true that the number of distinct small businesses’ actions has declined, and it is true 

that there are 100,000 less people. 

You do not believe these other three panelists? Do you think they 

are wrong or they are somehow saying something that is completely designed for their own self-interests? Because I hear this 

every day from business that it is not just the fact that these regulations are out there but that they are not considered in the process. It is the cumulative effect of it all. I do not see people out there 

trying to—I mean, one-tenth of 1 percent, sure they are bad actors, 

but why should you hold Mr. Hoffman responsible for every general 

contractor or subcontractor beneath him which he may or may not 

have any control over? Frankly, as you said, I think Mr. Hoffman 

mentioned that those are known people that it is the government’s 

job to keep track of. 

This is not meant to be personal, but it is surprising to me that 

you can speak in such general terms about people and have very 

specific notions about overtime and new overtime rules and the 30- 

hour work week rule that even the Congressional Budget Office 

has said will cause up to 2 million people to leave their jobs. I am 

just interested. 

Dr. MADLAND. Sure. I think most of my testimony comes based 

on the experience when state and local governments implement 

similar policies. While I am by no means discounting the concerns 

that the panelists here have stated, you often find, before the policies get enacted, significant concerns, but after they go into a place 

they are less significant. 

Just to read one very small quote. This was San Francisco. The 

Vice President of the local Chamber of Commerce, which led the 

fight against the city’s paid sick leave before it passed, reported 

that the law’s impact was ‘‘minimal,’’ and that ‘‘by and large paid 

sick days has not been much of an issue.’’ We have actual evidence 

from, for example, I cited the Maryland study of the living wage 

where the first and only State to pass a living wage, much higher 

wages for government contracts, and they actually found that the 

number of bidders for state projects increased after they implemented the law. 

Chairman HANNA. I do not disagree that that person said that 

about that, and I do not know of the Maryland study. I will take 

your word for it. But do you think that really that is generally the 

preponderance of regulations and rules that—I mean, I was in 

business for 35 years. Mr. Hardy was. There is a point that people 

who have been successful in their lives say it is not worth it anymore. It is just too damn much work to keep up with the government. I am going to walk away. We have a lot of evidence to that, 

anecdotal and real, 100,000 businesses fewer. They are not sitting 

here whining at you. They are saying to you we want to do business with the federal government. We appreciate the opportunity, 

SBREP-219A with DISTILLER

16 

but at some point you are breaking our back and it is not worth 

it. 

I think that is the difference between the value system that you 

lay out which, one can prove individually yes or no, but that is 

what I hear, that we just kind of cannot take it anymore. Particularly, it strikes me that there is a point for a lot of people where 

they say, you know, I am out. It is not worth it. You are not worth 

it. The federal government is too complicated and too much in our 

face. I think that is a real concern. 

My time is up. Thanks. 

Chairman HARDY. Thank you. 

I would like to turn the time over to Congressman Kelly. 

Mr. KELLY. Thank you, Mr. Chairman and Chairman Hanna. 

Thank you both and Ranking Member. Thank all you witnesses for 

being here. 

Just as a follow-up, more in a comment than a question with 

Chairman Hanna. Having been a small business owner, throughout 

my August I spent almost every day at town halls and those type 

of things with local folk and small businesses, veterans, being a 

member of the Mississippi National Guard and serving for over 30 

years. I just left the National Guard Conference where I was there 

as a participant, not as a congressman. 

It confuses me that we have think tank people in here, and I am 

not just talking about this panel, but I am talking about the entirety of the panels that have been here in 14 months. We have 

think tank panels. We have government employees. We have academia people who say that these rules have no effect on small businesses, but I have yet to have a small business person sit at that 

table and say that they felt that we did not have any effect. Most 

of the people that we have in front are just like you, three small 

business owners who actually own small businesses who say it has 

a tremendous impact on how we do business and whether we do 

business. 

So I ask you to continue to fight as small businesses and continue to keep up the dialogue to let them know that these things 

impact because I, as you, and I think Mr. Christianson said this, 

as a small business owner, I know we pay our employers all that 

we can and we are going to preserve and keep and pay as well as 

we can, all small business employees because they are part of our 

family. They are. We want to see them do well. 

That being said, this week I had Kopis Mobile, which is an app 

business that does a lot with DOD, and they are anchored in 

Flowood, Mississippi. Aside from keeping small businesses from 

being created and putting small businesses out of business, I am 

also concerned about the negative impact these regulations are 

having on innovation. 

Ms. Huneycutt, can you talk a little more about how these actions will affect technological innovation? 

Ms. HUNEYCUTT. I have been following very closely the efforts 

to get Silicon Valley and more R&D-oriented commercial firms to 

participate in the bidding process for government work. I think it 

is something that is critical for maintaining our technological edge, 

particularly at DOD. They move at the speed of business. 

SBREP-219A with DISTILLER

17 

As an anecdote, I can tell you that we tried to team with a firm 

that provides a platform by which to—and we were looking at the 

State Department—by which to communicate through social media 

through a centralized hub that would send the same messaging out 

through Twitter and Facebook and all of these. They were 

flummoxed at the way that the process worked. They were 

flummoxed at all of the different ways that they would need to 

change their business model in order to be compliant, and the 

hoops, the time that it took. This is not how they are used to doing 

business. 

I would suggest, especially if you want to increase the participation of commercial firms in bidding for government work, you do 

not—either these regulations and these new requirements should 

be passed as comprehensive legislation. It is not unique to the government, so that everybody needs to engage in it. I would suggest 

that there be more enforcement of the way companies are characterizing the way they engage people, because oftentimes they will 

mischaracterize them as 1099 subcontractors, have them sign a 

contract that says they are complying with everything, and then 

they get everything cheaper and there is not any real compliance 

there. 

I would suggest that you be aware that this puts commercial 

companies in a position where now they need to treat their government contract employees differently than their commercial contract 

employees, and they cannot treat them differently. That keeps 

them out of the government. 

Mr. KELLY. Mr. Hoffman, just briefly, have about 45 seconds 

left. What impact do all these new requirements have on the procurement process for small companies like yours? 

Mr. HOFFMAN. My question is how are we going to, for example, vet our subcontractors? I just had the opportunity to negotiate 

overhead rates with a government agency and they were pointing 

to one of the consultants as to having low overhead or lower rates 

on a different contract. I asked, well, what contract or what is the 

name of that firm so I can reference it? While they gave me the 

last four, they were not even willing to give me the name of the 

contractor. If they will not give me the name of the contractor in 

a straightforward environment, when will the government give me 

the name of a contractor which potentially is negative and they are 

worried about backlash or something like that? So I am concerned 

myself. 

Mr. KELLY. Thank you, Mr. Chairman. I yield back. 

Chairman HARDY. Thank you, Mr. Kelly. We will turn the time 

over to Mr. Knight. 

Mr. KNIGHT. Thank you, Mr. Chair. 

Just a couple of questions. I was reading through some articles 

and watching what government is doing and what business is trying to adhere to, and some of the comments by all of the panel 

today. It begs the question that if government does something, or 

they say they are going to do something and people rebel against 

it, but then it happens anyway, people just have to adhere to it and 

that is just the way it is. That is what I look at when we start talking about the overtime rule and we start talking about $15 an hour 

going across the country and what is happening in cities like SeSBREP-219A with DISTILLER

18 

attle since they have seen the biggest decline in jobs in restaurants 

since 2009 since they have done the $15 an hour ordinance. So 

when government gets involved, too heavy-handed, then we tend to 

see a problem. 

But my questions are about something recently our Vice President said. He said, ‘‘Because of the administration’s efforts to rebuild the basic bargain, the economy has gone from crisis to recovery to resurgence. Today’s expansion of overtime protections will 

build on this momentum.’’ 

Do any one of you or do all of you agree with this? 

Yes, sir? 

Dr. MADLAND. Yes. I think the overtime regulations are an important step forward to ensuring that workers, when they work 

more than 40 hours a week when they are lower income, will receive time and a half, which is the basic bargain of overtime. As 

you know, the standard had been eroded over decades so that very 

few salaried workers were receiving overtime. It used to be that the 

majority of salaried workers received overtime and the new regs 

will do that, which is part of how you ensure that workers have 

wages to spend that can go into the pockets of small business owners. 

Mr. CHRISTIANSON. We do not disagree necessarily that it has 

been a long time since the overtime wages have been increased or 

the thresholds have been increased. But the issue is the practicality of more than doubling that threshold and making small businesses have to adhere to that in under a year’s time. To have to 

plan for that is really just not—— 

Mr. KNIGHT. Before everyone continues I will put the second 

question on that, and maybe you can answer, too. Would any of 

your members be opposed to talking about an increase? We went 

from a little over 23,000 to almost 51,000. Would any of your members be opposed to talking about an increase that would probably 

put us into a more acceptable for small business, acceptable for 

continuing our economy to move forward? I am not trying to—— 

Mr. CHRISTIANSON. We are always interested in talking. We 

did not really have the opportunity to talk. That is what happened 

here is we had an opportunity to talk about the impacts but it does 

not seem like the administration did any listening. 

Mr. KNIGHT. Okay. And again, I will say the flip side, too. It 

has been a long time since that has been changed. We do not keep 

minimum wage at 25 cents an hour. It moves and it ends up trying 

to be at a wage that is commensurate to the timeframe. Some people think that that is too low and some people think that the jumps 

are too high. But, when we talk about the overtime rule, and moving it, I think it is a 113 percent jump. That seems to me to be 

a jump that small business is going to not just push back on, but 

have a very difficult time adhering to. 

Mr. CHRISTIANSON. You know, you cannot get something from 

nothing. Small businesses are not all of a sudden going to be able 

to pay everyone overtime that are under this threshold. Some people are now going to be hourly workers. They basically feel like 

they have been demoted, which is not necessarily true, but just the 

reality if they want to stay on the job, the company has the same 

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19 

address what level certain people are paid, how many hours people 

work, so that they can adjust accordingly. 

Mr. KNIGHT. In my last 20 seconds, do you think that that 

takes away some of the flexibility for small businesses? Because 

like you say, now we are going to turn some of them into hourly 

wages. In California, we have done some things that have taken 

away the ability for employers and employees to have a conversation, and say you have to have certain breaks at certain times, and 

if you do not have these certain breaks, then you are in violation. 

It takes away the flexibility. Then it turns it into, I am the employer, you are the employee, and that is the way it is and we do 

not talk and you follow the rules and I have to fill these forms out, 

and have a nice day. 

Yes, ma’am? 

Ms. HUNEYCUTT. My response is to what was discussed a little 

bit earlier. With the exempt rules referencing a higher salary point, 

I can tell you the practical impact that that has had on us where, 

actually, we have very few people that were below that point to 

begin with, but those that were near that point got pay raises because the cost of giving them another couple of thousand dollars 

raise was nothing compared to the cost of having to change our recordkeeping systems. But what that also means is that we are very 

hesitant to hire at that lower salary level or that lower wage level 

because, again, the cost of the recordkeeping, the cost of changing 

our payroll system. A lot of commercial payroll companies do not— 

actually, if that is global they will be abiding by that. If it is a government-specific thing, a lot of commercial payroll companies, 

human resources information systems companies, will not accommodate that. So you are back to square one having to look for another service or having to pay to customize their recordkeeping. 

Particularly, a lot of the work that is done at the lower wage levels, a lot of it can be automated. I do think that some firms will 

be looking to automation or noncompliance or other ways to—from 

my point of view, for my company only, it is really the recordkeeping and changing. If you have 15 different categories of employees, it is very hard to keep track of what the rules are. The 

employees say, well, he is getting this, why can I not get that? It 

sows some havoc. 

Mr. KNIGHT. Thank you. My time is well expired. Thank you, 

Mr. Chair. 

Chairman HARDY. Thank you. There is a desire to go around 

with another round of questions, so I am going to start off with Ms. 

Adams if she would like. 

Ms. ADAMS. Thank you, Mr. Chair. 

Mr. Christianson, I wanted to follow up on something. You hinted about the lack of consistency between federal and state laws regarding regulations. If there were better consistencies between the 

federal and state statutes, would you be open to an executive order 

that promotes paid leave and other similar measures? 

Mr. CHRISTIANSON. The fact is an executive order cannot do 

that. It is not lawful. They cannot change state law by executive 

fiat. So the question itself is one that I do not think is even realistic. 

SBREP-219A with DISTILLER

20 

Ms. ADAMS. Well, not so much lawful, but what about consistency? 

Mr. CHRISTIANSON. If the federal government contracts were 

to fall in line with other requirements, that would be, beneficial assuming that requirement in itself is beneficial. 

Ms. ADAMS. Okay, Mr. Hoffman, much of the objections to the 

Fair Pay and Safe Workplace Executive Order center on blacklisting, the idea that contracting officers are spoiling to disqualify 

firms for superfluous reasons. Do you feel that these concerns have 

been addressed in the final rules that the Department of Labor has 

issued? 

Mr. HOFFMAN. Right now, it is not clear to me the concept of, 

first of all, that something is going to occur in 3 days. Our experience with contracting officers is things do not happen that quickly. 

If it is an issue of an allegation, perhaps there should be an investigation. Is that adequate time to do that? Are we going to provide 

records or provide information to the private sector so that we can 

select our teammates correctly? I gave an example earlier as to 

whether that actually happens. I gave a very simple example, we 

cannot even identify who is the prime contract on a contract number, though at some point I will figure it out. So, I have some 

doubts. 

Ultimately, it seems to me, Ms. Adams, that we have these different reports and the government collects them. If we could take 

the information that we already have and act upon that and put 

in a secure deposit repository, collect all the information that we 

are already collecting, that would be a good idea. It strikes me that 

the government has fantastic intentions, but we have a significant 

amount of regulation, and not all regulation is good. We would 

really like to go ahead and design innovative solutions for our clients and not looking back at forms and annual reports and this 

and that. Potentially hiring people to do administrative compliance 

is not growing the business. 

Ms. ADAMS. Thank you, sir. 

Dr. Madland, while we recognize the concerns that some small 

firms have expressed regarding the new overtime rules, as well as 

the increase in minimum wage, can you discuss some of the benefits for employers and the economy as a result of the changes? 

Dr. MADLAND. Sure. The basic story, as I said, wages have 

been stagnant for quite some time. They are just starting to tick 

up. That has caused a lack of overall demand in the economy, 

which has reduced new hiring by small businesses and all businesses because there is not enough new consumers out there. Raising people’s wages through the minimum wage and through overtime will help boost overall demand in the economy, which can help 

create a virtuous cycle and grow the larger economy. 

Ms. ADAMS. Thank you. I yield back, Mr. Chair. 

Chairman HARDY. Thank you. I turn some time over to Mr. 

Hanna. 

Chairman HANNA. Thank you, Chairman. 

What I hear here is people who fundamentally agree with one 

another, but it is the preponderance and the lack of input that is 

given that is not adequate. In a national debate, it is really discouraging to hear both parties vilify small business in one way or 

SBREP-219A with DISTILLER

21 

another, because we both know the business of America is business 

and that is really where all the jobs come from and all the growth, 

the growth that we are not seeing right now. 

You had a phrase, Dr. Madland, that you used, and I am not taking a position on it. I am wondering what you mean by the term 

‘‘wage theft.’’ I can imagine what you mean by it, but I think what 

I see out there is people who feel put upon that in order to run a 

business well, you cannot have every outcome perfect. A lot of time 

in the government’s pursuit of a perfect outcome, it actually does 

what that common phrase is, it kills the goose. That a certain 

amount of slippage, which you may regard as something wrong or 

illegal or immoral or unethical, is really part of, not that anyone 

on any case would approve it, but the ability of business to do business in an environment that is welcoming and not punitive, where 

they are not always feeling like they are probably, likely, on every 

given day doing something wrong, is also important. Businesses 

need to be let to do what it is they do best and government does 

not always have the best answer for that. It has the outcome it 

likes, but it does not get there necessarily in the right way. 

The overtime rule. I have talked to a lot of people who have no 

problem with what the President has done other than they doubled 

it. I have spoken to a lot of businesses that say if you went to 

35,000, we get it. I would be the first person to admit that there 

are companies out there that take advantage of that, just like Ms. 

Huneycutt talked about 1099s. There are companies that take advantage of the 1099 rule. You see that playing out in court, and 

I agree that is wrong because it denies benefits and keeps people 

out of a system that provides them with a decent lifestyle and hope 

for a decent—but what do you mean by ‘‘wage theft?’’ Do you feel 

as though businesses are bad somehow? I know you are going to 

say no, but what do you mean? 

Dr. MADLAND. Wage theft is when companies do not pay the 

legally required wages. That typically means they are paying less 

than, for example, the minimum wage. One of the key examples actually in support of the Fair Pay and Safe Workplace Executive 

Order was a worker named Helen Avalos, who worked up at Walter Reed as a contractor janitor. Her company just stopped paying 

her, stopped paying her and all the other workers. She has got 

rent, got kids. Does not have, you know, low income. What is she 

going to do? The company continued to receive new government 

contracts. That is kind of what I mean by wage theft. It is breaking 

the law by failing to pay legally required wages. The independent 

contractors—— 

Chairman HANNA. But are there not laws that cover that in the 

State of Virginia? I mean, the minimum wage laws? 

Dr. MADLAND. Yes. But if they are not doing it, that is wage 

theft. That is what wage theft is, is breaking—— 

Chairman HANNA. I mean, she has recourse without the federal 

government getting involved in it. 

Dr. MADLAND. She was working as a federal contractor and, no, 

she actually did not really have much recourse. She and her coworkers protested outside and said what is going on? It was weeks 

of not getting paid. 

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Chairman HANNA. Okay. I accept that. I am sure it is true. I 

have no reason to believe otherwise. But how about the notion that 

one incident or a bunch of incidents would give you cause to react 

to affect thousands, if not millions, of businesses around the country so that the actual—and this is the common complaint—that the 

benefits of what you have done are real and positive, but yet they 

cost much, much more than they are worth and that the government does not really look at that? 

Dr. MADLAND. I think you are talking about the Fair Pay and 

Safe Workplaces. For most companies without legal violations, they 

will simply check a box certifying they do not have legal violations, 

akin to what is done for tax violations. For those that do, there will 

be some additional reporting requirements. However, again, the 

goal of those reporting—— 

Chairman HANNA. I am sorry. Go ahead. I do not mean to interrupt you. 

Dr. MADLAND. The goal of those reporting requirements is to 

provide sort of a warning to have further review of the company’s 

larger—— 

Chairman HANNA. But you heard what Ms. Huneycutt said, 

that these recording requirements, which you say are a few hours, 

other people say are tens if not hundreds of hours, you do not have 

a good perspective on what it actually costs these businesses going 

forward, and that you are placing a disproportionate cost on tens 

of thousands of businesses without regard to that cost because of 

the outcome you desire, that perhaps that should be taken into account. 

Dr. MADLAND. Yes. Obviously, you need to weigh the cost and 

the benefits and the time that is required. 

Chairman HANNA. It does not feel like you do. 

Dr. MADLAND. Well, as I said, most of the time, most companies will have a very simple process. There will be a more involved 

process for companies with legal violations. But again, the goal is 

to get those companies into compliance with the law, that seems 

like a worthy goal. Also, the studies of the cost estimates suggest 

it is going to be less than a cent for every hundred dollars of federal contracts of the additional cost, and that is a burden, but also, 

you are helping draw in more law-abiding companies that then will 

want to contract with the government that are familiar with similar processes. Lots of private companies—— 

Chairman HANNA. Losing a hundred thousand companies does 

not support that and does not support that notion. Also, the cost 

that we—excuse me, Mr. Hardy, just 1 second. Do you mind? The 

cost associated with it, I have never heard of anybody who would 

say to you it is 1 penny on a dollar. But with that I yield back. 

Thank you, Dr. Madland. 

Chairman HARDY. Thank you. And I would like to go ahead and 

let Ms. Huneycutt, she had the desire to address that question, and 

yield my time to it. 

Ms. HUNEYCUTT. Sure. It sounds to me like that situation is 

already addressed by DOL regulations, which do not permit an employer to have somebody work and then not pay them. There are 

very specific regulations regarding the timeliness of payment, so 

that already exists. Again, my concern remains the same, which is 

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23 

that if we diffuse the responsibility for enforcement to the contracting officers, then they really do not have the bandwidth to do 

this or the autonomy. They are going to say, well, that is really 

DOL’s enforcement issue and I am not going to worry about it until 

DOL tells me something. DOL is going to say that is the contracting officer’s responsibility and I am not going to enforce it 

until the contracting officer tells me something. My concern is that 

with the increasing layers or duplicative regulations there will be 

less accountability and more bad actors invited to leverage that. 

Chairman HARDY. Thank you. 

One quick question I would like to address, and of these 100,000 

contractors we have lost in the last 4 years, Mr. Christianson, 

being a small business owner myself in the past, and going from 

two or three employees and working your way up to 350 over time, 

when you step into the contracting world with the government 

agencies, do you believe that other small businesses that are say 

50 and under will have the ability to step into this field? Because 

now you have grown your internal staff or office staff to two or 

three times the size that you would have had at a normal site. Do 

you believe these contractors, are you hearing that as some of the 

challenges? Would you like to elaborate on that? Anybody else who 

would like to? 

Mr. CHRISTIANSON. First of all, Mr. Kelly mentioned or acknowledged that I am a small business owner. I am not. I am a 

regulatory counsel. I do not have that honor of being a small business owner, I represent them. 

Chairman HARDY. But you work with many small businesses? 

Mr. CHRISTIANSON. Work with many, and I have my job in 

many thanks to the regulations and the confusion that the President has put forth. AGC created this position recently for me as a 

result of all the questions small businesses were asking. So I, in 

part, am part of the job growth lawyers as a result of this. I do not 

think that is what you all think of job growth when you think of 

small businesses. 

But on your question, in the commercial construction industry, 

small businesses could be $36.5 million or below. If you have a contractor that is $5 million versus $30 million, and you are going 

after the same set-aside work and now you have to comply with 

equally confusing and burdensome regulations, your overhead costs 

as a percentage if you are that $5 million company is going to be 

way higher than that one for that $30 million company. So you are 

now at a competitive disadvantage completely. You are going to 

have to hire, not me as the association lawyer, me as the outside 

counsel because I can tell you that I talked to our general counsel 

before coming. He does not know of any commercial construction 

company that had their own in-house lawyers or attorney below 

$100 million. They hire outside counsel at $400 an hour and hire 

consultants to do this. 

Chairman HARDY. Thank you. 

Anybody else care to elaborate on that? 

With that, that is the final question. Again, I want to thank each 

of you [our panelists] for being here today and testifying. 

Small businesses play a critical role in our federal marketplace. 

A vibrant, competitive, and robust small business sector lowers 

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24 

prices, spurs innovation, and creates jobs. As all of us here at our 

Committee, Democrat and Republican alike, recognize the importance of having worked in a bipartisan fashion throughout the 

114th Congress, passing numerous pieces of legislation designed to 

help small firms compete in the federal marketplace. 

Unfortunately, our President is either unable to understand how 

hard it is complying with these executive actions for small businesses, or worse, unwilling to listen. We here on the Small Business Committee, will continue to speak up and fight so that the 

folks have a seat at the table. 

I ask unanimous consent that members have 5 legislative days 

to submit statements and supporting materials for the record. 

Without objection, so ordered. 

We are adjourned. 

[Whereupon, at 11:21 a.m., the Subcommittees were adjourned.] 

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A P P E N D I X 

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Street, N\V, gth Floor 

\V <lshm~;ton, D.C. 20005-2605 

T 898-0068 

www .acec.org 
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Introduction 

Subcommittee Chaim1en Hanua and Hardy, Ranking Member Adams, and members of the 

committee, 

The American Council of Engineering Companies (ACEC) appreciates the opportunity to testify 

before you today about the issues surrounding the federal government's regulatory burden on 

small businesses. The Council would like to use two Executive Orders; Fair Pay and Safe 

Workplaces Executive Order, (E.O. 13, 673) and the Establishing Paid Sick Leave for Federal 

Contractors Executive Order, (E.O. 13, 706) to examine the impact federal regulations on 

contractors. ACEC appreciates the efforts that the Department of Labor (DOL) and the FAR 

Council play to ensure compliance with labor laws. The industry is committed to following the 

rules, but the federal govemment must understand the burden on the private sector and the cost 

that is passed onto the government with duplicative requirements. ACEC's small, medium and 

large firms believe that small businesses can flourish in the federal market, but there must be 

continued oversight by this and other committees to reduce regulatory barriers to market entry. 

The Fair Pay and Safe Workplaces E.O. (Blacklisting) will create burdens for engineering firms 

and other contractors working for federal agencies. While we understand the rationale behind the 

order, it should be noted that bad actors are less than .01 percent of the total contracting force. 1 

Even President Obama has said that '"the vast majority of the companies that contract with our 

government, ... play by the rules. They live up to the right workplace standards."2 The Chairn1en 

of the House Education and Workforce, Oversight and Government Reform and Small Business 

Committees have previously stated that the order is "fixing a problem that does not exist."3 

The Establishing Paid Sick Leave for Federal Contractors (Sick Leave) E.O. also creates 

unnecessary administrative and financial burdens on contractors. While the Council supports 

paid sick leave, the amount of reporting and the changes required to implement the rule create 

more expense for both the contractors and government. Most of the Council's finns offer 

equivalent paid sick leave, so the requirement is duplicative. 

My name is James Hoffman and I am President of Summer Consultants, a consulting 

mechanical, electrical, and plumbing engineering firn1located in McLean, Virginia. Summer 

1 Karla Walter and David Madland, Center for American Progress, At Our Expense: Federal Contractors that Harm 

Workers Also Shortchange (2013), available at 

Barak Obama, Remarks by 

(Jul. 31, 2014) 1 Press Release, House Small Business Committee, House Commitlee Chairmen Call for Withdrawal of 

Administration's Harmful. Unnecessary Blacklisting Proposal (July 15, 20 15) (on lile with author). 

ACEC Hoffman Testimony 2 
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Consultants is a Small Business with 36 employees. We are committed to providing our clients 

sound engineering designs for various sized projects. Our practice focuses on the federal market 

and we have worked on many federal projects in the past 50 years. 

My firm is an active member of ACEC- the voice of America's engineering industry. ACEC's 

over 5,000 member firms employ more than 500,000 engineers, architects, land surveyors, and 

other professionals, responsible for more than $500 billion of private and public works annually. 

Almost 85% of these finns arc small businesses. Our industry has significant impact on the 

performance and costs of our nation's infrastructure and facilities. 

The engineering industry, which suffered significantly during the recent recession, is finally 

coming back to fiscal health. Unfortunately, these and other regulatory actions could put that 

recovery at risk and create disincentives for engineering fi1ms of all sizes to participate in the 

federal market. 

Blacklisting Rule: 

I. Process 

The process as outlined by the Guidance requires two-steps. First, the prime contractor must 

disclose labor violations for awards greater than $500,000 for "goods and services including 

construction,''4 and any violations or allegations of violations oflabor laws within the preceding 

three years once the Guidance is fully implemented in 2018. This is done through an initial 

check-the-box representation at the beginning of the process. 5 If there is a labor violation, then 

tl1e contracting officer, prior to making an award, must allow for the finn to provide mitigating 

infonnation about the violation. Then, the contracting officer, in consultation with Agency Labor 

Compliance Advisor (ALCA)6 shall determine if the prime or any related subcontractors are a 

"responsible source with a satisfactory record of integrity and business ethics."7 Finally, even 

after a contract has been awarded, the Guidance requires semiannual reporting of any new 

violations. 

The Guidance also applies to subcontracts at every tier, so subcontractors, whether they have a 

direct contract with the prime or not, must submit this information. If the contract has been 

executed and there is an accusation of a labor violation, the contracting officer has four potential 

courses of action; require remedial measures; decline to exercise an option; terminate the 

contract; or refer for suspension and debarment. 8 

The Council has three broad areas of concem with the Guidance. First, the reporting is overly 

burdensome. It requires both prime and subcontractors to fumish information that the 

Govemment already receives. Second, the reporting burdens the business relationship between 

the contractor and subcontractor by creating a blacklist of allegedly "unqualified" contractors 

"Depa11mcnt of Labor Guidance 81 FRat 58663. 5 !d at 58663. 6 The Labor Compliance Advisor is a senior official designated within each agency to provide "guidance on whether 

(a) contractors' actions rise to the level of a lack of integrity or business ethics." Id at 30577. 7 ld at 58718. 8 ld at 30577. 

ACEC Hoffman Testimony 3 
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and subcontractors. Third, non-final judgments or complaints and allegations of non-compliance 

with labor laws are required to be reported to the contracting officer. This mandate could allow 

for contracts to be tetminated on claims that may be proven invalid, raising very selious due 

process concems. All of these concerns could have the effect of prompting well-qualified fim1s 

to withdraw from the federal market altogether. 

II. Reporting 

There are tlu·ee problems with the reporting requirement in the proposed Guidance. First it is 

duplicative and burdensome where both small and large subcontractors will have to report to 

prime contractors. Second, the process envisions a seamless transfer of information between the 

ALCA and the responsible contracting officer, which is inconsistent with current practice. Third, 

with the amount of data that DOL requires to be shared between primes and subcontractors, there 

are unintended market consequences for those participants not addressed by the Guidance. 

A. Burdensome 

DOL's Guidance identified 14 federal labor laws and executive orders or equivalent State laws 

th J' bl h . . 9 at are app tca e to t e reportmg reqmrement. 

The Fair Labor Standards Act (FLSA) The Occupational Safety and Health 

Act of 1970 (OSH Act) 

Migrant and Seasonal Agricultural Worker National Labor Relations Act (NLRA) 

Protection Act (MSPA) 

Davis-Bacon Act Service Contract Act 

Equal Employment Opportunity Executive Section 503 of the Rehabilitation Act 

Order (EEOC) ofl973 

Vietnam Era Veterans' readjustment Family and Medical Leave Act 

Assistance Act of 1972 and the Vietnam Era (FMLA) 

Veterans' Readjustment Assistance Act of 

1974 

Title VII of the Civil Rights Act of 1964 Americans with Disabilities Act of 

1990(ADA) 

Age Discrimination in Employment Act of Establishing a Minimum Wage for 

1967 (ADEA) Contractors Executive Order 

However, the Guidance proposes fi.niher review of applicable equivalent state laws, which makes 

the rule still subject to further amendment and growth. This failure to include applicable state 

laws at the current time prec.ludes for a thorough review of consequences. It creates instability 

for fi1ms to accurately assess the burdensome scope of the Guidance and FAR regulations, even 

as the Order is implemented. 

The broad scope of this change has massive implications for the engineering community. These 

laws and executive orders already require reporting and/or judicial hearings. For example, firms 

are required to report annually on compliance with the EEOC, the Vietnam Era Veterans· Act, 

OSHA and the Rehabilitation Act. Under Davis-Bacon, weekly submissions are sent to the DOL. 

In addition, the fi1m must submit annual repo11s to the federal System for Award Management 

9 ld at 58718. 

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(SAM) database to maintain their eligibility for government work, which also reports on their 

subcontractor's compliance with the Service Contractor Act. Between existing weekly and 

annual reporting, asking business to resubmit this information is duplicative and wastefuL 

Given that almost 85 percent of ACEC finns qualify as small-businesses, these additional 

requirements create new hurdles tor small finns participating in government work. Not only will 

the fin11s have to comply with the data gathering, but many will need to hire additional legal and 

human resources employees or consultants to review their files for the past three years. This data 

gathering will entail additional overhead on finns. As the margins on engineering work are quite 

small, typically 3 percent, new overhead requirements may preclude firms, including many small 

tinns, from participating in this market. As many prime contractors work to meet admirable 

small business subcontracting requirements, fewer small businesses will be able to afford to 

participate in this market. The cost of compliance will hurt their margins even more than larger 

finns which have greater resources. This reporting burden will reduce innovation and 

competition on govemment contracts that are integral to best perfon11ance while ultimately 

increasing the cost of the project to the government. 

B, Transition Issues Between the ALCA and the Contracting Officer 

The envisioned process requires that the ALCA and the contracting officer review all Labor 

violations within a three day window. The contracting officer will make the dete1mination 

regarding the prime or subcontractor's status as a responsible source if the window lapses. This 

paradigm is deeply Hawed by the nature of federal contracting. Federal contracting takes timeand the GAO has reported "services acquisitions have been plagued by inadequate acquisition 

planning" 10 ACEC members report that acquisition planning can take over 18 months, and that is 

before these new regulations are implemented. This requirement adds an additional and 

unnecessary layer to an already overburdened system. The flawed assumption that decisions will 

be made in three days will prove to further slow the system. 

C. Data Sharing with Competitors 

Within the engineering industry, primes and subcontractors often change roles in difterent 

projects. There is a disincentive for subcontractors to share sensitive labor infonnation with the 

prime when there is the potential that the fi1m will compete against that prime in another 

solicitation. Data sharing of confidential business infonnation could eliminate a competitive 

advantage between two companies. While this problem might be mitigated if the government 

received information from subcontractors directly, fundamental concems over how the process 

will work linger within the Guidance. There are no guarantees that infonnation sharing will be 

prohibited given that it is cutTently an optional enforcement mechanism within the FAR 

comments. Firms face a level of insecurity between small margins and the potential that 

competitors could force them out of the federal market due to labor violations that include 

valuable business intelligence. Even though subcontractors submit their violations to DOL, there 

must be a level of disclosure to the Prime contractor. Otherwise, the Prime cannot make a 

reasonable risk assessment of the subcontractor. There needs to be a way for the industry to work 

reasonably with these guidelines, and the cmTent Guidance does not advance that effort. 

10 U.S. Government Accountability Oflice, GA0-11-672, Acquisition Planning: Opportunities to Build Strong 

Foundations for Better Services Contracts. Report to Congressional Requesters (20 11 ), available at 

http://www.gao.gov/new.items/d ll672.pdf. 

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II. Contractor -Subcontractor Relationship 

The FAR Council requires that the subcontractors report their own labor violations to DOL, 

which would then assess the violations and submit a written report to the contracting officer. 

Under this scenario, the prime would have to check with the contracting officer or with the DOL 

to see if the proposed subcontractors in the contract would qualify to work for the government. 

This raises a difficult choice for prime contractors. Before they sign the contract, they must in 

effect "pre-clear" their subcontractors. This may sound like a simple situation, but many 

subcontracts are signed hours before the prime submits their contracts. This creates a further 

tension as the contracting officer must clear all potential subcontractors prior to the contractor 

awarding the work. The requirement incorporates an additional step in an already lengthy 

process. 

The unintended consequence would be the creation of a "blacklist" for subcontractors, triggering 

claims by subcontractors against the prime contractor and/or the federal government for 

improper disqualification for award of a subcontract. The proposed blacklist could further 

entrench the encumbered process while eliminating new talent from the federal labor market. 

This situation is particularly problematic for engineering firms as these entities subcontract up to 

50 percent of their contract. This is required due to the level of technical specifications in 

engineering contracts, from geotechnical to HV AC to mapping, requiring multiple specialty 

firms to meet these needs. The new requirements proposed under the Guidance would simply 

multiply existing burdens on the tean1 while failing to recognize the realities of providing design 

services to the public. 

The current relationship between the prime and the subcontractor will be damaged under this 

proposed regulation. Given that prime contractors seek to select subcontractors on the basis of 

qualifications, adding a further element to the selection process is extremely burdensome. Design 

and construction is a highly complicated business. Engineers design buildings to meet myriad 

requirements including safety, energy efficiency, functionality, and rigorous standards for 

homeland and national security. Firm employees must be able to meet the federal security 

clearance requirements in many instances, which serves to limit market participation. If the 

subcontractors must now also be pre-approved by the government, the contractor is further 

limited to an ever narrowing pool of subcontractors. The end result of the government's 

'·blacklist'' policy will be to limit the participation of both small and large firms in the federal 

market; and, once again, many finns will just choose not to patticipate. 

Ill. Due Process Implications 

Primes and subcontractors must repmt violations of Labor laws that include administrative 

melits dcte1minations; civil judgements, and arbitral awards or decisions that have occurred 

within the past three years stmting in October 25, 2018. 11 The contractors and subcontractors 

must report even if underlying violation occurred more than three years prior to the reporting 

"Jd at 58719. 

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date. 12 Moreover, these groups must repo11 even if the violation is outside of the scope of any 

federal procurement. 

The scope of this requirement is too broad. Administrative merits determinations encompasses 

any complaint from the following· 

DOL Wage and Hour division DOL's OSHA or any state agency designated 

to administer an OSHA-approved State Plan 

DOL's Office of Federal Contract Compliance EEOC 

Program 

NLRB federal or state court complaint alleging that 

the contractor violated any Labor Law I provision 

Any order or finding by an administrative To be dete1mined at a later date-violations of 

judge, administrative law judge, or DOL equivalent State labor laws. 13 

Administrative Review Board, the OSHRC or 

state equivalent, or NLRB which states that 

contractor or sub has a violation of Labor laws 

These determinations are not limited to "notices or findings issued following adversarial or 

adjudicative proceedings ... nor limited to notices and findings that are final and unappealable." 14 

Instead, these arc notices of complaint without the firm having the benefit of a response to a third 

party. This provision forces companies to report on complaints that have not been fully 

investigated nor had any judicial oversight. The fifth Amendment guarantees that no person 

shall "be deprived of life, liberty or properly, without the due process oflaw" 15 by the federal 

government. By allowing federal contracts to be terminated without full judicial proceedings, the 

Guidance does exactly what the Fifth Amendment prohibits. 

While the Department of Labor could counter that the contractors and subcontractors "may 

submit any additional inforn1ation that they believe may be helpful in assessing the violations at 

issue (including the fact that the determination has been challenged),'" 6 this argument ignores the 

fact that the ALCA has three days to return their dete1mination. In this situation, there may not 

be enough time to fully document or investigate claims by either the company or the accusing 

agency, or for the ALCA or the contracting officer to tnake a fair assesstnent of whether the 

violation meets the standards to break a contract. Essentially, the contracting officer, if in the 

likely event the ALCA cmmot meet the three day threshold for a determination, must become the 

judge on this labor matter. The contracting officer is not suited to this position. They are 

specialists in Federal contracting law, not labor Jaw. There is a concern that it will incentivize the 

contracting officer to disqualify the contractor or subcontractor rather than take the risk of 

censure. This reporting requirement has the potential to cause work slow-downs or stoppage as 

these investigations compound upon one another through protests and review. 

12 Jd at 58719. 

IJ 58665. 

Id ai5872l. 

U.S. CONST. amend. IV. 

"Proposed Guidance a! 30579. 

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DOL's Sick Time Rule 

The Department of Labor's proposal would require all engineering firms working for a federal 

agency- as well as subcontractors at all tiers -- to provide their employees with 56 hours of 

annual sick leave. The proposal would also expand reporting requirements on those firms. While 

well intentioned, the Council is concerned that the proposal will result in increased costs and 

administrative burdens on firms working for federal clients, as well as increased costs to the 

federal government. 

Engineering fitms typically pay on a monthly or biweekly cycle, and report sick leave and other 

paid time off with each pay period. The reporting requirement included in DOL's proposal 

would disrupt this process, mandating that employees receive weekly reports of aecmed time off, 

requiring new systems and potentially adding employees to implement these changes. In 

circulating the proposed mle to member fin11S for comment, implementation costs in the first 

year are estimated to be in excess of $50,000, with additional costs in subsequent years. 

As noted earlier, engineering firms working in the federal marketplace already operate under 

very tight margins, and this latest proposal from DOL- together with other initiatives that have 

come from the agency over the last year- will put further financial pressures on finns. In 

addition, the industry is also experiencing increased pressure from federal agencies demanding 

arbitrary reductions in overhead expenses. Implementation of DOL's sick leave proposal will 

fw1her add to those overhead expenses, putting fin11S in the difficult situation of possibly leaving 

the federal marketplace- which dilutes competition for critical services to the taxpayer- or 

adding costs to the agency if the expenses are accepted. 

Finally, while engineering firms frequently offer benefits that meet or exceed the DOL's 

proposal on sick leave, we are concerned that this initiative will limit the flexibility of firms to 

design benefit packages that will attract and retain employees. This is a particularly relevant 

concem at a time when there is a growing deficit of qualified professional engineers. By setting 

mandated levels of sick leave, which fails to allow for flexible benefits packages that reflect the 

locality and employee needs, firms will find it more difticult to retain key employees for their 

projects. 

Conclusions and Recommendations 

The engineering services industry is unique in bow finns are team, compete and are selected for 

work in the federal market. Most firms in the industry are small, specialized, and have a business 

plan to remain that way to assure perfonnance and reputation. Most do not have marketing 

departments, limited in-house HR functionality, and few if any, have in-house legal counsel. 

These factors result in the need for special considerations when trying to ensure appropriate 

small business participation in federal procurements. 

We ask that the committee consider the following actions for the DOL and FAR Council 

Guidance: 

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Ask the FAR Council and the Department of Labor to withdraw the proposed Sick Time 

Guidance and the final Blacklisting Guidance to redraft it to better align with the current 

contracting process. 

• Support the House or Senate 2017 NDAA language to limit the implementation of the 

FAR Rule and DOL Guidance. 

ACEC and I thank the Committee for the privilege and opportunity to address engineering and 

construction industry issues with current regulatory challenges and I am pleased to answer any 

questions. 

ACEC Hoffman Testimony 9 
34 

The Cumulative Burden of President Obama’s Executive Orders on 

Small Contractors 

Testimony before the Committee on Small Business 

United States House of Representatives 

Subcommittee on Investigations, Oversight and Regulations 

And 

Subcommittee on Contracting and Workforce 

Donna S. Huneycutt 

Co-Owner and Chief Operating Officer 

WWC, LLC 

On behalf of: 

National Defense Industrial Association 

10:00 AM 

Tuesday, September 13, 2016 

Rayburn House Office Building, Room 2360 

Chairman Chabot, Ranking Member Velazquez, and Members of 

the Subcommittees, thank you for the opportunity to appear before 

you this morning. I am here this morning on behalf of the National 

Defense Industrial Association, the nation’s oldest and largest defense industry association, comprised of nearly 1,600 corporate and 

90,000 individual members. While several Executive Orders (EOs) 

issued in recent years have, or will have, a detrimental impact on 

small businesses that contract with the federal government, such 

as the Department of Labor’s so-called ‘‘Overtime Rule’’, for the 

purposes of my testimony this morning I would like to focus on the 

EOs specific to government procurement or federal contractors. 

Small businesses are a critical component of the U.S. economy, 

serving as a catalyst for economic development, providing employment opportunities, and as the engine of new ideas and innovations. Accordingly, the Federal Government has established programs to ensure participation opportunities to small businesses to 

fulfill the public policy objectives of the Federal Acquisition Regulation (FAR), and access a source of innovative products and services 

for Federal Government customers. Explicit and implicit in the desired outcomes for small business programs is achieving effective 

competition by maximizing small business participation and enabling small businesses to grow through diversification of the goods 

and services they provide and expansion into the nongovernmental 

marketplace. 

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1See ‘‘FACT SHEET: Fair Pay and Safe Workplaces Executive Order.’’ Available at: https:// 

www.whitehouse.gov/the-press-office/2014/07/31/fact-sheet-fair-pay-and-safe-workplaces-executive-order. 

Several EOs and Presidential Memoranda specific to government 

procurement or federal contractors have overwhelmed small business contractors and undermined small business goals. Small businesses have borne the cost of having to understand not only additions and changes to the Federal Acquisition Regulation (FAR) and 

regulations of various Departments and agencies, but also how the 

agencies will implement those changes. This requires careful study 

of resulting agency procedures, guidance, and instructions, in addition to projecting workforce behaviors, which are largely driven by 

the actual or perceived interpretation of the original regulations by 

oversight actors (Government Accountability Office, agency Inspectors Generals, etc.). Once those are understood, small businesses 

must incur significant initial and reoccurring compliance costs. 

These costs place a burden on small business, and take the place 

of investments in research and development (R&D), human capital, 

and other means to grow businesses. 

As outlined at the onset of the FAR, the guiding principles of the 

Federal Acquisition System are to satisfy government customers by 

maximizing use of commercial products and services, utilizing contractors with superior past performance, and promoting competition. At the same time, the Federal Acquisition System is to minimize operation costs, conduct business with fairness and integrity 

and fulfill policy objectives. The EOs attempt to fulfill the latter 

two guiding principles, but in the process, undermine each of the 

others. 

The rationale for the procurement-related EOs have been to ‘‘promote economy and efficiency in procurement’’ through their intended outcomes. Industry does not necessarily disagree with the 

logic, but rather, how that efficiency and economy is achieved. Supporting documentation for the EO on Fair Pay and Safe Workplace 

states, ‘‘the vast majority of federal contractors play by the rules.’’ 1

However, the implementation approach to each of the EOs punishes that vast majority of good actors through costly, governmentunique compliance requirements—a particularly inefficient means 

to promote efficiency. In fact, the proliferation of governmentunique requirements imposed by the EOs undermines efficiency 

and economy by limiting the government to suppliers that are willing and able to comply. Their neither promotes competition, innovation, nor does it maximize the use of commercial products and 

services. 

Further, the most efficient and economic means to fulfill the public policy objectives of the EOs is to alter government buying practices. For example, the rationale for the Fair Pay and Safe Workplaces EO is ‘‘Contractors that consistently adhere to labor laws 

are more likely to have workplace practices that enhance productivity and increase the likelihood of timely, predictable, and satisfactory delivery of goods and services to the Federal Government.’’ 

Thus, if the government makes contract awards based on the offeror that provides a good or service for the best value, or in other 

words, the offeror most likely to deliver or perform on time, predictSBREP-219A with DISTILLER

36 

2 Regulatory comments by the SBA Office of Advocacy can be found here: https://www.sba.gov/ 

category/advocacy-navigation-structure/legislative-actions/regulatory-comment-letters. 

ably, and with satisfactory performance, it would have chosen an 

offeror that adheres to existing labor laws and has workplace practices that enhance productivity. Unfortunately as industry has long 

pointed out, the government has poor buying habits that have 

equated ‘‘best value’’ with ‘‘lowest cost’’ and valued compliance to 

government-unique requirements over actual performance in delivering goods and services, creating a perverse incentive to ‘‘race to 

the bottom’’ to win contracts. 

Congress has already passed sufficient legislation to ensure protections of federal contractor employees, and to ensure that the 

government only contracts with responsible sources. Rather than 

using EOs to alter the enforcement or interpretation of legislation, 

the Federal Government should ensure that they are enforcing existing laws to ensure protections for workers, and then alter buying 

practices to reward best value. 

A major frustration for small businesses is that in many cases 

they agree with the intended outcome of an EO such as, providing 

for the well being of federal contractor employees, or making sure 

that competitors play by the rules, but object to the process by 

which the EOs have been developed and implemented and the resulting burdens. This starts with the Federal Government’s assessment of burdens on small entities. The Small Business Administration’s (SBA) independent Office of the Advocate 2 has commented 

that the Federal Government underestimated the compliance costs 

and entities affected in implementing regulations for Fair Pay and 

Safe Workplaces, Paid Sick Leave for Federal Contractors, and Establishing a Minimum Wage for Federal Contractors EOs. Unfortunately, since the EOs are published without the public vetting inherent in the legislative process, the public has no means of providing input, or accountability, on the likely burdens prior to publication. 

This lack of engagement with small businesses prior to development of the EO, or their implementing regulations, has resulted in 

unnecessarily burdensome requirements. For instance, the proposed rule to implement EO 13706, ‘‘Establishing Paid Sick Leave 

for Federal Contractors,’’ requires federal contractors to ‘‘calculate 

an employee’s accrual of paid sick leave no less frequently than at 

the conclusion of each workweek,’’ and provide an employee in writing their accrued sick leave at the employee’s request. However, 

most companies have internal business systems calibrated for biweekly or semi-monthly pay periods, which is the same frequently 

for employees to input hours worked or taken for leave. Forcing 

small businesses to invest in customized business systems or man 

hours to adjust to these intervals, while accommodating the various 

standard and nonstandard employee schedules within their business, is unnecessary, and does not ‘‘increase efficiency and cost savings in the work performed by parties that contract with the Federal Government,’’ as the EO intends. Or in the case of the ‘‘Fair 

Pay and Safe Workplaces’’ EO, the implementing ‘‘guidance,’’ was 

not subjected to the rulemaking process, despite its ‘‘regulatory naSBREP-219A with DISTILLER

37 

ture,’’ as pointed out by the SBA Office of the Advocate. Further, 

implementation of the EOs have not provided adequate compliance 

support for small businesses. For example, the FAR rules implementing EO 13627, ‘‘Strengthening Protections Against Trafficking 

In Persons In Federal Contracts,’’ was made effective without Congressionally-mandated guidance to help contractors comply with 

new requirements, severely limiting the ability of small business to 

comply most effectively with new regulations. 

One EO in particular, Fair Pay and Safe Workplaces, is simply 

unfair to businesses of all sizes. Under this EO, small businesses 

would have to disclose alleged and adjudicated violations of 14 Federal laws and EOs in addition to yet-to-be fully-determined equivalent state laws in the preceding three years to either government 

contracting officers (COs), or the Department of Labor (DoL). Once 

disclosed, the DoL or CO (with help from agency labor compliance 

advisors [ALCAs]) would determine, based on the details of the alleged or adjudicated violations and any mitigating factors, whether 

they are serious, repeated, willful, and/or pervasive in making a responsibility determination. 

Aside from the enormous associated compliance burden, the EO 

unfairly places these subjective determinations in the hands of COs 

who are incredibly risk averse and untrained in labor law. Although they are able to seek the advice of an ALCA, DoD alone for 

instance, has nearly 24,000 contracting officers (COs) that enter 

into contracts worth billions of dollars annually, with only one DoD 

ALCA and a handful of representatives. Common sense indicates 

that the small-dollar contracts that SBs compete for as primes 

would at the bottom of the list of priorities for ALCAs, leaving the 

onus on COs to assess and interpret actual and alleged violations 

and a range of mitigating factors, and leaving scarce resources for 

the government to engage with small business to develop and implement labor compliance plans. This aligns with industry’s longstated contention that this EO is punitive-based, with the intent of 

blacklisting businesses, rather than the supposed intent of ‘‘helping 

companies improve.’’ 

Small businesses are not only concerned with the collective impacts of the EOs on their bottom-line, but also the detrimental impacts they will have on government customers and their ability to 

carry out missions, the most consequential of which is national security. In recent years, the Department of Defense (DoD), Federal 

Government’s biggest spender by a substantial margin, has placed 

a renewed emphasis on innovation and acquisition reform, led by 

top officials in the Office of the Secretary of Defense and the Services. These efforts have been initiated as a result of the current 

state of the acquisition process, which is unable to keep up with 

the rapid pace of technological innovation and security threats, and 

the reality that innovation is driven by private sector R&D, requiring DoD to access nontraditional and commercial suppliers that 

have historically been deterred from the government marketplace 

by procurement policies, to stay at the forefront of technological innovation. 

SBREP-219A with DISTILLER

38 

Unfortunately, the EOs undermine these initiatives. The resultant accumulation of government-unique requirements and their 

compliance costs will continue to deter new suppliers from entering 

the government marketplace and drive exits by firms already selling to the government, restricting competition. Further, Fair Pay 

and Safe Workplaces, alone, figures to drive a substantial increase 

in bid protests, slowing down the acquisition process even more. 

In closing, several of the recent EOs have, through flawed processes, installed burdensome, unnecessary, inefficient, and in many 

cases duplicative and overlapping regulatory regimes that have the 

cumulative effect of dramatically increasing the cost of doing businesses with the federal government. Over time, these will decrease 

efficiency and economy in federal procurement, while undermining 

small business growth and development, and limiting the Federal 

Government’s access to innovative products and services to fulfill 

their needs, in direct contradiction of ongoing initiatives. 

Thank you again for the opportunity to appear before you this 

morning and I am happy to answer any questions you may have. 

SBREP-219A with DISTILLER

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Statement of 

Jimmy Christianson 

Regulatory Counsel 

For 

The Associated General Contractors of America 

to the 

U.S. House of Representatives 

Committee on Small Business Subcommittees on 

Investigations, Oversight, and Regulations and 

Contracting and Workforce 

For a hearing on 

"The Cumulative Burden of President Obama's Executive 

Orders on Small Contractors" 

September 13, 2016 

AGC of America 

THE ASSOCIATED CENEKAL CONTRACTORS OF AMERIU, 

Quality People. Quality Projects. 

The Associated General Contractors of America (AGC) is the largest and oldest national 

construction trade association in the United States. AGC represents more than 26,000 firms, 

including America's leading general contractors and specialty-contracting firms. Many of the 

nation's service providers and suppliers are associated with AGC through a nationwide network of 

chapters. AGC contractors are engaged in the construction of the nation's commercial buildings, 

shopping centers, factories, warehouses, highways, bridges, tunnels, airports, waterworks 

facilities, waste treatment facilities, dams, water conservation projects, defense facilities, multifamily housing projects, site preparation/utilities installation for housing development, and more. 

2300 Wilson Boulevard, Suite 300 • Arlington, VA 22201 • Phone: (703) 548-3118 
40 

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Statement of Jimmy Christianson 

Associated General Contractors of America, Arlington, Virginia 

Subcommittees on Investigations, Oversight, and Regulations and 

Contracting and Workforce 

Committee on Small Business 

United States House of Representatives 

September 13, 2016 

Chainnen Hanna and Hardy, Ranking Member Adams and members of the committee, thank you for 

inviting AGC to testify on these important topics concerning small business contractors. My name is 

Jimmy Christianson. I am ret,>ulatory counsel for the Associated General Contractors of America 

("AGC''). where ! focus on analyzing executive agency actions and informing construction contractors 

on how they may comply with those actions. 

In this testimony, I will discuss: 

I. The consttnction industry, its small business construction contractors and regulatory 

compliance in general; 

II. Recent executive actions and their impact on small business construction contractors; and 

Ill. The cumulative impacts of new regulatory mandates on small business construction 

contractors. 

I. THE CONSTRUCTION 1:'1/DUSTRY, ITS SMALL BUSINESS CONSTRUCTION 

CONTRACTORS & REGULATORY CO:YIPLIANCE I"' GENERAL 

A. Small Businesses Represent the Vast Majority of Construction Firms 

The construction industry has historically supported and provided opportunities for small businesses, as it 

accounts for nearly live percent of total nonfarm payroll employ1nent and more than 660,000 !inns 

throughout the United States, of which 93 percent have fewer than 20 employees.' As such, federal 

agencies generally rely heavily upon the construction industry to meet their annual small business prime 

contracting and subcontracting goals. 

B. Small Businesses are an Essential Component of Construction Projects 

Constmction is usually accomplished under the leadership of a general, or prime, contractor. It is the job 

of the general contractor to integrate the work of the numerous trade and specialty contractors-acting as 

subcontractors-to complete the project. A significant constmction project (like a $50 million office 

building) may have anywhere from 20 to 50-and in some instances more--trade and specialty 

contractors. These subcontractors are organized within the project delivery team in tiers so that each 

subcontractor can deliver its services in a highly integrated process. Small business subcontractors, 

operating at the appropriate tiers, are critical and essential to the success of construction projects and the 

construction industry as a whole. The subcontractors typically perfonn 60 to 90 percent of the work on a 

1 Most recent year of available data online at 

~.~~~~~~U..:1b .... ~:l_-~l\.:ll___:c_~b_~:;.D..!L.,g~L\utlll 111cd:um l..'ll1dil.._'\:utm "\'lii<..'C c_:,)\d~:l!.~::J..l· 

2 
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construction project.' As such, the industry cannot succeed without a large pool of qualified small 

business trade aud specialty subcontractors. 

C. Small Business Construction Contractors Have Limited Resources 

Like any small business, small business construction contractors have limited resources. To be successful, 

they must manage those precious resources in an effective and efficient manner. The most valuable and 

expensive resources for small business construction companies are their employees. 

As noted above, the vast majority of construction companies across the industry have fewer than 20 

employees. Generally speaking, those employees may include cost estimators, proposal managers, project 

managers/superintendents, skilled (craft) labor, laborers, equipment operators, and other staff. When it 

comes to compliance issues, many small businesses may have one or two employees that handle the 

safety, labor, human resources and environmental compliance for the entire company. In many 

companies, the safety director is also the environmental compliance director and the human resources 

director is also an accountant and general office manager. The reality is that these small business 

employees are often working "double duty." 

Small business construction contracting companies-which generally include prime contractors with 

$36.5 million or less in gross annual revenues and subcontractors with $15 million or less in gross annual 

revenues--do not have in-house counsel. They do not have teams of attorneys on staff. In fact, AGC is 

unaware of any construction contracting company-small business or otherwise--with gross annual 

revenues below $100 million that has in·house legal counsel or staff. As a result, these small businesses 

pay outside counsel or other compliance experts in the range of about $400 an hour or more to establish 

and audit company compliance programs; to routinely train their employees; and to rectify compliance 

issues as they arise. 

D. Regulatory Compliance is Part of the Cost of Operating a Small Construction Contracting 

Business, But Regulatory Compliance Does Not Grow that Business. 

Small construction contractor businesses seck federal constmction contracts-building levees to protect 

our cities from floods, hospitals and clinics for our veterans, and barracks for the troops and schools of 

their children-in an effort to !,'fOw their companies, and even as a means to serve their nation. Building 

infrastructure and facilities is the lifeblood of their business. And, ultimately, building that infrastructure 

and those facilities is why federal agencies awarded them the contracts. 

Abiding by laws and regulations is part of the cost of doing business. However, the requirements those 

statutes and regulations impose can also represent barriers to entry for emerging small businesses and 

barriers to !,'fOWth for existing ones. Laws and regulations are necessary to help maintain a level, 

competitive playing field, among other things. Nevertheless, not all laws are necessarily good laws, and, 

similarly, not all regulations are necessarily good regulations. Laws and regulations enacted and finalized, 

even with the best intentions, can have unintended and deleterious consequences or duplicate other 

statutory and regulatory measures It is with that point in mind that, that I now turn to a number of 

executive orders and presidential memoranda put forth by the current administration. 

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II. RECENT EXECUTIVE ACTIONS & THEIR IMP ACTS ON SMALL BUSINESS 

CONSTRUCTION CONTRACTORS 

During his tenure in office, President Obama has issued more than 240 executive orders and over 200 

presidential memoranda3 Of these various executive actions, AGC identified 22 that impact, directly or 

indirectly, the construction contracting industry. Some of these 22 executive orders and presidential 

memoranda help coordinate govenunent responses to and resources for rebuilding after Hurricane Sandy 

and the Deepwater Horizon oil spill; and others seek to improve federal permitting and review of 

infrastructure projects. AGC generally supports the president's taking such actions within the confines of 

his constitutionally enumerated powers to coordinate the federal government response to disasters and 

streamline bureaucratic processes across federal agencies. However, AGC is deeply troubled by the 

executive actions this administration has taken that go beyond simply managing federal agencies' 

responses to disasters and reducing their internal review processes. 

For the purpose of this testimony today, AGC identified and will discuss its concems with just three 

executive orders and only two presidential memorandum, which include the: 

A. Fair Pay and Safe Workplaces Executive Order 13673 

B. Use of Project Labor Agreements for Federal Construction Projects 13502 

C. Establishing Paid Sick Leave for Federal Contractors Executive Order 13 706 

D. Updating and Modernizing Overtime Regulations Presidential Memorandum 

E. Advancing Pay Equality Through Compensation Data Collection Presidential Memorandum 

These executive actions individually and cumulatively will expose small business construction 

contractors to significant costs, legal liabilities and other risks that can serve as deterrents to small 

business entry into the construction marketplace and impediments to small business growth. 

A. Fair Pay and Safe Workplaces Executive Order 13673 

On July 31, 2014, President Obama issued Executive Order 13673, entitled Fair Pay and Safe 

Workplaces, under which federal prime and subcontractors must report violations of 14 federal labor laws 

before contract award and again every six months after contract award on federal contracts exceeding 

$500,000. Prime contractors would also be responsible for evaluating the labor law violations of 

subcontractors at all tiers. On August 25,2016, the Federal Acquisition Regulation (FAR) Council and 

U.S. Department of Labor issued more than 850 pages of text for the final rule and guidance 

implementing the executive order. 

AGC submitted extensive comments outlining its concerns with this unfounded, unnecessary, unworkable 

and unlawful executive action• The association supports provisions in the House and Senate versions of 

the National Defense Authorization Act for Fiscal Year 2017 (NOAA), H.R. 4909 and S. 2943, which 

limit the applicability of the executive order and its implementing regulations. As such, we urge members 

of this committee to encourage conferees of the NOAA bill to include the strongest possible language 

prohibiting implementation or enforcement of this executive order. AGC also supports legislative efforts 

to prohibit funding to carry out the executive order through the appropriations process. 

3 https:i/cei.org!l OKC/Chapter-3 4 haos I iwww.agc.org/ne"v::,/ 2015/0R/28/ agc-::.ubr"r>1t ... ~comments-oooosrn2_black i:,t:m: executrve-o: dfr 

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i. The Executive Order and Implementing Regulations Will Drive Up Risk to Small Business, 

Ultimately Leading Some Small Businesses (And Large Businesses as Well) to Leave the 

Federal Marketplace 

The executive order and its regulations impose siguificant risks for small business contractors in the fonn 

of new legal liabilities. Under this executive order, small business contractors will: 

Make responsibility detcnninations for their subcontractors; 

Subject themselves to the possibility of suspension and debanncnt; 

Subject themselves to the possibility of"negotiating" labor law compliance agreements with 

enforcement agencies; and 

Subject themselves to making public disclosures of their labor law violations. 

There is no level of certainty concerning the possible recourse a subcontractor would have when a prime 

contractor denies the subcontractor a potential subcontract based on the subcontractor's record of labor 

law compliance. When the contracting ot1iccr denies the prime contractor the ability to compete for a 

prime contract based on similar circumstances, a prime contractor's ability to seriously challenge that 

decision is very limited. The legal threshold for overturning a contracting officer's responsibility 

determination is high. However, when the prime contractor takes the contracting officer's role in making 

such determinations in relation to its subcontractors, there is no legal certainty as to the deference of the 

prime contractor's evaluation or what legal avenues may be available to the subcontractor. 

Just as prime contractors are unclear of the legal ramifications of denying a subcontractor a potential 

subcontract before contract award under the proposed rule, prime contractors are also uncertain about the 

legal ramifications for tern1inating a subcontractor-at the instruction of a contracting officer-during 

contract performance as a result of its labor record. Arguably, such a termination would provide a greater 

risk oflegal action by the subcontractor, as an actual-not potential-subcontract will have been 

breached. There is no guidance in the regulations as to whom would be responsible---the government or 

prime contractor-for the delay and costs associated with subcontractor termination. 

The executive order and its implementing regulations create a significant possibility that a small business 

contractor with labor law violations may either have to enter into a labor law compliance agreemcnt 5 or 

face possible suspension or debarment proceedings. While bad actors should not be considered for or 

awarded federal contracts, AGC is concerned about those contractors that have taken remedial steps to 

correct their violations that could fall subject to overzealous actors. The issue here rests with the 

subjectivity of the regulations. While not all labor law violations may be considered serious, pervasive, 

5 A labor compliance advisor can recommend and a contracting officer can request that a prime contractor enter into 

·'labor compliance agreements" to enable that contractor to b~ considered for contract award, A contractor may 

enter into such an agreement with one or more enforcement agencies to address appropriate remedial measures, 

compliance assistance, steps to resolve issues to increase compliance \Vith labor laws, or "other related matters.'' 

AGC is very concerned that such nebulous agreements place contractors in a difficult place when negotiating with 

enforcement agencies--completely disinterested in the procurement or delivery of a federal construction contracts~· 

in order to be considered for contract award. There appears to be no limitation on: 

The duration of such agreements; 

The frequency of such agreements; 

The depth of training, mitigation or remedial action required; 

The frequency or depth of any recordkeeping or reporting they might require; 

The circumstances under which enforcement agencies might require a firm to go so far as to engage a thirdparty monitor; or 

The ''related matters'' enforcement agencies might require a firm to address. 

5 
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repeated or willful that give rise to considerations for either of these options, those considerations will be 

Jell up to individual labor compliance advisors to advice contracting officers, who ultimately make such 

dctem1inations. The reality is that AGC small business contractors already face situations where 

contracting officers within the same office disaf,'J'ee with one another or take different approaches to 

interpreting the FAR that can have damaging results. Given the subjective detennination framework 

within this rule and the realistic possibility to encounter overzealous contracting officers, small businesses 

that may otherwise be responsible may begin to walk away from the federal marketplace for fear of 

having to enter into one of these agreements, or worse, being recommended for suspension or debannent. 

Lastly, no business likes to publicly air its mistakes. Under this executive order, federal contractors will 

be required to do just that through the Federal Awardee Perfonnance and Integrity lnfonnation System 

for their labor law violations. Small businesses that want to grow in the construction market may avoid or 

leave the federal market to avoid any potential stigma created by this system. They will be punished over 

and over for any inadvertent mistakes in the complex world of federal contracting. 

ii. The Executive Order and Implementing Regulations Will Drive Up Small Business Costs, 

Ultimately Leading Some Small Businesses to Leave the Federall!Jarketplace 

As previously noted, small business construction companies do not have in-house lawyers. As such, they 

often rely on outside counsel and other consultants to assist with their compliance efforts. Unfortunately, 

the reality is that most small business federal contractors do not yet fully appreciate the magnitude of this 

rule making. The reality and breadth of this executive order will lead to these small businesses to (1) hire 

these expensive outside experts; or (2) leave the federal construction market. 

A small business construction company would need up to two days of about 15 hours of orientation for 

understanding these new requirements, the effect on the bidding and contract pcrfonnance of work and 

the needed revision to contract forms and the subcontract and purchase order bid procedures. The 

preparation of this type of program would easily require 50 hours of work including the analysis of the 

contractor's current bid/subcontracting documents and procedures. An experienced labor attorney would 

be required to participate in this process. According to a well-respected construction law firm, legal 

advice from an experienced labor law attorney is likely to run from $350 to $450 per hour. At $400 per 

hour, the costs of preparation would easily reach $20,000. Additionally, the costs of modifications to 

fonns and procedures would easily cost $10,000 to $15,000 per finn as the change is far more complex 

than simply adding another certification requirement. The risk of a "quick and simple" revision is too 

great 

The realistic, ongoing legal cost data involved with maintaining a compliance program for this execntive 

order would also be significant 6 Given the risks and potential cost associated with an erroneous 

responsibility detcnnination, experienced counsel will invest at least 15 to 20 hours in reviewing a 

disclosure from a subcontractor and advising the client on the responsibility determination. The risks 

involve the effect on the bid price of rejecting an attractive ofTer or the risks of the government later 

pressing for a tennination of a subcontractor. Using a figure of $400 hourly rate for 15 hours results in a 

6 Under the regulations, subcontractors are required to disclose their labor law violation information to DOL, not the 

prime contractor, for an assessment of its record. The subcontractor then relates that information to the prime 

contractor, as the prime contractor must ultimately make the final responsibility determination, not DOL. However, 

in the event that DOL docs not respond to the subcontractor after three business days, the prime contractor must use 

its business judgment to make a determination based on either publical!y available records or what the subcontractor 

is willing to share. AGC is highly skeptical that the DOL will be able to provide timely assessments and notes thatno matter what-the liability for the determination ultimately rests with the prime contractor, not DOL. 

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cost of at least $6,000 for outside counsel's involvement to comply with this one rule. This docs not 

include the time invested by the contractor. 

Furthennore, prospective subcontractors will bid to almost every prime contractor that it can identify. 

These regulations impose the same obligation on each prospective prime, as well as lower-tier potential 

subcontractors. As noted above, building construction projects may require the hiring of 50 or more 

subcontractors on a project. Imagine on a $10 million building project a prime contractor has 10 

subcontracts valued at $500,001. If there arc six prospective subcontractors per subcontract, this task and 

its associated costs will be incurred six times per subcontract, this process could cost as much as $360,000 

before the prime contractor submits its bid7 

Small business contractors do not win every contract on which they bid. And, small business contractors 

often do not receive any money from the federal government for submitting a proposal that does not win 

the contract. In an environment where the cost of submitting a proposal dramatically increases and the 

odds of winning the contract do not, at least some small business construction contractors will seek its 

work outside the federal construction marketplace. 

B. Use of Project Labor Agreements for Federal Construction Projects Executive Order 13502 

On February 6, 2009, President Obama issued Executive Order 13502, entitled Use of Project Labor 

Agreements for Federal Con'strUction Projects, which encourages federal government agencies to usc 

project labor agreements (PLAs) for large-scale federal construction projects where the total cost to the 

government is $25 million or more. To address these perceived challenges, Executive Order 13502 

encourages, but does not mandate, the use of PLAs on large-scale construction projects. Rather, agencies 

may on a project-by-project basis, require the use of a PLA by a contractor. The Administration issued the 

final rule in the Federal Register on Aprill3, 2010, amending the Federal Acquisition Regulation (FAR) 

to implement the Executive Order. 

AGC submitted comments on the proposed rule and has sent well over I 00 letters in response to federal 

agency inquiries regarding the use of govenunent-mandatcd PLAs on specific projccts.8 AGC urges 

Congress and members of this committee to support and pass the Government Neutrality in Contracting 

Act, H.R. 1671. 

i. AGC Opposition to Government-Mandated Project Labor Agreements 

AGC neither supports nor opposes contractors' voluntary use ofPLAs. but strongly opposes any 

government mandate for contractors' use of PLAs. AGC is committed to free and open competition for 

publicly funded work, and believes that the lawful labor relations policies and practices of private 

construction contractors should not be a factor in a government agency's selection process. AGC believes 

that neither a public project owner nor its representative should compel any finn to change its lawful 

labor policies or practices to compete for or perform public work, as PLAs effectively do. AGC also 

believes that government mandates for PLAs can restrain competition, drive up costs, cause delays, and 

lead to jobsite disputes. If a PLA would benefit the construction of a particular project, the contractors 

otherwise qualified to perfonn the work would be the first to recognize that fact, and they would be the 

most qualified to negotiate such an agreement. 

7 $6,000 per legal review of subcontractor labor law record multiplied by 60 subcontractors (6 per subcontract and 

10 total subcontracts). 8 For AGC's comments, letters and more information, 

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ii. The Executive Order Encourages Agencies to Mandate PLAs That will Have the Effect of 

Limiting Small Business Competition for anti Participation on Federal Construction 

Contracts 

Government mandates for PLAs-even when competition, on its face, is open to all contractors-can 

have the effect of limiting the number of competitors, including small business construction contractors, 

on a project, increasing costs to the government and, ultimately, the taxpayers. This is because 

government mandates for PLAs typically require contractors to make fundamental, often costly changes 

in the way they do business. For example: 

PLAs typically limit open shop contractors' rights to use their current employees to perform work 

covered by the agreement. Such PLAs usually permit open shop contractors to use only a small 

"core" of their current craft workers, while the remaining workers needed on the job must be 

referred from the appropriate union hiring halL While such hiring halls are legally required to 

treat union nonmembers in a nondiscriminatory manner, they may, and typically do, maintain 

referral procedures and priority standards that operate to the disadvantage of nonmembers. 

• PLAs frequently require contractors to change the way they would otherwise assign workers, 

requiring contractors to make sharp distinctions between crafts based on union jurisdictional 

boundaries. This imposes significant complications and inefficiencies for open-shop contractors, 

which typically employ workers competent in more than one skill and perform tasks that cross 

such boundaries. It can also burden union contractors by requiring them to hire workers from the 

hiring halls of different unions from their nonn and to assign work differently from their nonn. 

PLAs typically require contractors to subcontract work only to subcontractors that adopt the PLA. 

This may prevent a contractor (whether union or open shop) from using on the project highly 

qualified subcontractors that it normally uses and trusts and that might be the most cost-effective. 

!'LAs typically require open-shop contractors to make contributions to union-sponsored tnnge 

benefit funds from which their regular employees will never receive benefits due to time-based 

vesting and qualification requirements. To continue providing benefits for such employees, such 

contractors must contribute to both the union benefit funds and to their own benefit plans. This 

''double contribution" effect significantly increases costs. 

!'LAs typically require contractors to pay union-scale wages, which may be higher than the wage 

rates required by the Secretary of Labor pursuant to the Davis-Bacon Act. They often also 

require extra pay for overtime work, travel, subsistence. shift work, holidays, "show-up," and 

various other premiums beyond what is required by law. 

Such changes are impractical for many potential small business contractors and subcontractors, 

particularly those not histmically signatory to collective bargaining agreements (CBAs). 

iii. Federal Agencies are not Equipped for Deuling with Construction Labor Negations, W1zich 

Could Lead to Inappropriate, Unfair or Unrepresentative Terms in the PLA !hut Drive 

Away Small Businesses 

Another way that govemment mandates for !'LAs can drive up costs and create inefficiencies is related to 

who negotiated the tenus of the PLA and when the PLA must be submitted to the agency. With regard to 

who negotiates the PLA, the FAR Rule implementing executive order allows (but does not require or 

even encourage) agencies to include in the contract solicitation specific PLA tenus and conditions. 

Exercising that option, though, can lead to added costs, particularly when the agency representatives 

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selecting the PLA tenus lack sufficient experience and expertise in constmction-industry collective 

bargaining. 

AGC strongly believes that, if a PLA is to be used, its tenus and conditions should be negotiated by the 

employers that will employ workers covered by the agreement and the labor organizations representing 

workers covered by the agreement, since those are the parties that fonn the basis for the employeremployee relationship, that have a vested interest in forging a stable employment relationship and 

ensuring that the project is complete in an economic and efficient manner, that are authorized to enter into 

such an agreement under the National Labor Relations Act (""NLRA "), and that typically have the 

appropriate experience and expertise to conduct such negotiations. Under no circumstances should a 

contracting agency require contractors to adopt a PLA that was unilaterally written by a labor 

organization or negotiated by the agency or by a contractor (or group of contractors) not employing 

covered workers on the project. It do so places small business contractors in a precarious position if they 

so choose to bid. 

C. Establishing Paid Sick Leave for Federal Contractors Executive Order 13706 

On September 7, 2015, President Obama signed Executive Order 13706 that requires federal prime 

contractors and subcontractors to provide employees up to seven days of paid leave for sickness and other 

purposes annually. On Febmary 25, 2016, the Wage and Hour Division of the U.S. Depmiment of Labor 

issued an 81-page notice of proposed mlemaking. 

AGC submitted extensive comments on April 12, 20169 A final mle is expected by September 30, 2016. 

AGC highlights some of its primary concerns below. AGC urges Congress and members of this 

committee to support legislative efforts to prohibit implementation and application of this executive 

action. 

i, The Scope of Workers Entitled to Paid Leave Under the Executive Order and Proposed 

Rule Do Not Address the Unique Nature of the Construction Industry 

Requiring federal contractors to provide paid leave to employees who arc considered "laborers and 

mechanics" under the Davis-Bacon Act ("DBA .. )- commonly referred to as construction craft workers 

presents significant practical, economic, and legal problems for both contractors and the government. The 

proposed coverage of constmction craft workers is not workable. It threatens to tum practical, longestablished compensation practices of the industry upside-down and replace them with impractical, illfitting and difficult to manage obligations. 

Work in the commercial constmction industry is typically project-based, transitory and seasonal. Most 

craft workers move from project to project and from employer to employer, often within short periods of 

time. They may cam fluctuating rates of pay due to changes in project type and location, or changes in 

assigned tasks, that call for different rates of pay under applicable wage detenninations or because no 

wage detennination applies (when moving to work not covered by the DBA). They may have days with 

no work to do, when their skills are not needed on a job at that time or when the daily weather prevents 

work. Likewise, they may experience longer periods of layoff due to seasonal weather or a downturn in 

the demand for constmction. This is the unique, immutable nature of the work and is well-known to those 

employed in the industry. 

The administrative difficulty for contractors employing transient, intennittently employed craft workers is 

just too heavy. As one typical contractor told us, "We have hundreds of employees per year who come 

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and go and may work for us for varying short periods. Keeping track of sick pay eligibility and hours 

would be a nightmare ... Given the nature of the work. crali workers traditionally have been paid only for 

time actually worked. 10 

ii. The Scope of Workers Entltled to Paid Leave Under the Executive Order and Proposed 

Rule Exceed and Cot!flict with the Requirements of the Davis-Bacon Act 

The executive order and proposed rule impose compensation mandates that not only exceed the statutory 

provisions of the DBA, but also conflict with them. First, the statute provides that wages (defined in 

Section 3141(2)(B) as including the basic hourly rate of pay plus bona tide fringe benefits) shall be paid 

based on the prevailing rate in the geographic area for the type of project involved. The executive order 

and proposed rule require contractors to pay wages for sick leave that have absolutely no correlation to 

prevailing practices in the area, for the type of project involved, or, as discussed above, even in the 

industry overall. Second, the statute provides that contractors may meet their obligations by making 

contributions to bona fide tiinge benefit trust funds, assuming a commitment to bear the costs of a bona 

fide fringe benefit plan or program, or doing either or both in combination with paying cash wages. The 

Executive Order and proposed rule apparently require contractors to pay wages for sick leave in the fonn 

of cash with no option for meeting their paid leave obligations through contributions to fringe benefit 

trust funds or commitments to bear the costs of a fringe benefit plan or program. 

iii. The Scope of Workers Efllitled to Paid Leave Under the Ewcutive Order and Proposed 

Rule will Further Burden Small Business Construction Contractors 

Coverage of construction ''laborers and mechanics" will also lead to serious consequences for small 

business construction contractors and their federal construction costs and schedules. It will hinder 

economy and efficiency in federal procurement, rather than promote it as stated in the executive order and 

proposed rule. 

Contractors that do not already provide paid leave benefits will incur substantial costs in compliance with 

the new mandate. First, they must pay the individual using paid leave for time not worked while, in many 

cases, also pay a substitute worker for time worked in place of the worker on leave. Those contractors 

already providing paid leave benefits would sec their expenses rise under the rule as proposed as well, 

since they would no longer be pennittcd to take credit for the benefit toward meeting prevailing wage 

obligations and will have to make up that cost through payment in cash or other benefits. All covered 

contractors whether they currently offer paid leave benefits or not- will also incur substantial costs in 

preparing for and administering compliance with the new rule. Numerous AGC member contractors 

subject to state and local paid leave mandates have told us of the considerable costs that they have 

incurred in complying with such mandates. These include costs related to: 

Staff time to create a paid leave policy or revise current policy; 

Hiring outside counsel or a consultant to develop, draft, and/or review a new paid leave policy; 

10 Payment specifically for sick time is quite rare and likely only provided by those open shop contractors employing 

less-transitory workforces. A recent AGC survey of commercial construction contractors indicates that only 32 

percent of contractors operating on an open-shop basis outside any state or local mandate to provide paid sick leave 

actually provide such a benefit. In the union sector, the percentage is much lower. In fact, AGC is unaware of any 

collective bargaining agreement ("CBA") in the commercial construction industry that specifically provides for paid 

sick leave. Contractors and organized labor have always negotiated compensation on the assumption that wages 

must be high to compensate for days when the employee is not needed or cannot come to work and will not be paid. 

These high wages have carried over into the open-shop sector as well, as market forces call for above-average pay to 

compensation workers for the inconvenience of irregular work and other challenging conditions. 

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Training office, managerial, and/or supervisory staff on administering the new policy; 

Educating nonsupervisory employees about the new policy; 

Revising subcontract documents; 

Educating subcontractors about their new obligations; 

Purchase of new hours-tracking, payToll, accounting, and/or other software, or upgrading and 

implementing current software; 

Revising manual systems for tracking hours, computing payroll, and the like; and 

Ongoing tracking, recordkecping, and reporting of! eave accruals, canyovcr, and use. 

Contractors that work in multiple jurisdictions have also decried the added complexities and costs 

associated with having to comply with different rules, with varying specifications, in different states and 

cities. 

In addition to the direct costs of compliance with the rule, federal construction costs- and schedulesalso will be harmed by the secondary effect of lost productivity. It seems self-evident, and research 11 

supports the premise, that the availability of paid leave leads to increased absenteeism. Of course, 

absenteeism may be a good or a bad thing depending on the circumstances, but increased absenteeism 

surely encompasses increased abuses of the benefit as well as legitimate uses. In fact, AGC-mcmber 

contractors working in Massachusetts, where a paid leave mandate took effect last July, report facing 

mass numbers of employees calling in sick the day before Lahar Day weekend tor the first time. They 

have also experienced a noticeable uptick in workers calling in sick as projects wind down and when the 

construction season wound down before winter's seasonal layoffs. 

Increased absenteeism is particularly problematic in the construction industry, where cost and schedule 

concerns are critical and highly dependent on labor productivity. As researcher Seungjun Ahn put it, 

"Even today, many tasks in construction have to be manually performed by construction workers on job 

sites, which is indicated by [sic] that labor costs typically range from 33% to 50% of the total construction 

cost (Hanna 200 I). Therefore, workers· timely attendance and operation at the site is crucial to the 

success of a construction project:'" 

11 See, e.g., Ahn, T. & Yclowitz, A. Paid Sick Leave and Absenteeism: The First Evidence from the U.S, 2016. 

Retrieved Aprilll, 2016, from .b.u~~~-:~.IJJ.,~l_!.D._o!h:~!I,ll't ~-:-' ..+(l';hf:. 

Ahn, Seguin. "Construction Workers· Absence Behavior Under Social influence." Ph.D diss .. University of 

Michigan, 2014. Retrieved April 11, 2016, from iJlUL.-~:.:\'!1l .. :J.!:~:-tr<-lt'l ~-:- 4~~0. Ahn examined the implications 

of construction worker absenteeism on productivity and construction costs, reporting: 

Researchers have attempted to estimate the cost impact of missed work in construction. Nicholson et al. 

(2006) have used economic models to estimate that when a carpenter in construction is absent, the cost of 

lhe absence is 50% greater than his/her daily wage, and when a laborer in construction is absent. the cost 

is 9% greater than his/her daily wage. Researchers have also investigated the impact of absenteeism on 

overall productivity in construction. Hanna et al. (2005) looked at electrical construction projects and 

revealed that productivity decreased by 24.4% when the absence rate on a job site was between 6% and 

10%, whereas productivity increased by 3.8% when the absence rate was between 0% and 5%. They also 

reported that 9.13% of productivity loss on average was measured in electrical construction projects. 

These analyses imply that the costs of absenteeism increase nonlinearly in the level of absenteeism. For 

example, 10% absenteeism is not just a 10% decrease in productivity, and if absenteeism increases from 

5% to 10%, the decrease in productivity caused by absenteeism might more than double. The decrease in 

productivity is one of the main causes of cost overruns in construction projects. Therefore\ maintaining a 

low absence rate is critical to cost~effective construction. 

The Business Roundtable reported similar findings when it studied the most quantifiable direct effects of 

absenteeism in construction, namely: time spent by crew members waiting for replacements; time spent moving 

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iv. The E-..:ecutive Order and Proposed Rule Extends Liability to Prime and Upper-Tier 

Contractors for Subcontractor Violations about Which these Contractors Could not Know 

The executive order and proposed rule places liability upon prime and upper-tier contractors f()f violations 

by their subcontractors. However, detennining whether a subcontractor is abiding by this order is 

impossible for prime and upper-tier contractors. A prime contractor has no available means to detenninc 

whether or not a subcontractor happens to be working for that prime contractor at the time of the paid 

leave request. Given the can·yover provisions of this order, subcontractor violations can occur years after 

the relationship between subcontractor and prime contractor has ended. 

v. The Executive Order and Proposed Rule will Punish Innocent, Compliant Contractors for 

Violations of Bad Actors 

Under the executive order and proposed rule, a federal agency contracting officer can \Vithhold payments 

to the prime contractor as necessary to pay employees the full amount owed. However, the prime 

contractor may not be the violator. Rather, a subcontractor could be. So, when a contracting officer 

withholds payment to a prime contractor for one subcontractor's violation on a project involving 100 

subcontractors, the compliant prime contractor and 99 compliant subcontractors will not receive payment 

for work they completed and their employees may not be paid. 

For all of the above reasons, AGC, again, urges Congress and members of this committee to support 

legislative efforts to prohibit implementation and application of this executive action. 

D. Updating and Modernizing Overtime Regulations Presidential Memorandum 

On March 13,2014, President Obama issued a presidential memorandum entitled Updating and 

Modemizing Overtime Regulations, to implement changes to the Fair Labor Standards Act (FLSA) in 

regards to employee overtime payment. On May 18. 2016. the U.S. Department of Labor's Wage and 

Hour Division (WHD) issued a final rule implementing changes to the FLSA overtime regulations, 

scheduled to go into effect on December 1, 2016. The most significant change is a doubling off the 

standard salary threshold for exempt employccs-fmm S455 per week ($23,660 per year) to $913 per 

week ($47,476 per year). 

AGC submitted individual comments 13 to WHD on its proposed rule and signed onto joint coalition 

comments 14 as well. AGC urges Conl,'fcss and members of this committee to support the Protecting 

Workplace Advancement and Opportunity Act, H.R. 4773, which would require DOL to perfonn a deeper 

analysis of the rule's impact on employer costs, employee f1exibility and career advancement before it 

goes into effect. Congress and members of the committee should also consider supporting the Overtime 

Reform and Enhancement Act, H.R. 5813, which takes a commonsense approach to raising and 

implementing the final overtime rule by phasing in the salary threshold over three years. AGC also 

replacements to and from other work locations; and lost time by supervisory personnel in reassignment of work 

activities and locating replacements. The study team concluded that "each 1% increase in daily absenteeism 

produces a lWYo increase in labor costs. a 15~'0 increase in direct labor cost for 10~/o absenteeism.'' ''Absenteeism 

and Turnover," Construction Industry Cost Effectiveness Project (Report C-6), Business Roundtable, 1982 

1993). 

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supports efforts and encourages members to prohibit funds for implementation, administration and 

enforcement of this effort through the appropriations process. 

i. The Presidential Memorandum anti its Implementing Regulations will Impose Significant 

New Costs For Small Businesses to Absorb in Too Short 1!{ a Time 

WHO's final rule to implement the changes required under the presidential memorandum represents an 

overtime threshold increase that is too much to absorb all at once. To impose such a large and immediate 

increase as proposed will result in unintended consequences. particularly for small construction 

companies, construction employers in lower-wage regions, and construction personnel. 

The final rule increases the minimum weekly salary threshold for white collar exemptions by more than 

100 percent. To understand the full impact of this change on the construction industry, AGC surveyed its 

members. AGC was not surprised to learn that nearly 70 percent of the companies that participated in the 

survey have employees who arc currently and lawfully classified as exempt under the FLSA and earn an 

annual salary was less than the proposed $50,440. Most of those impacted were in areas where the cost of 

living and, consequently, wages are lower than in other areas of the country. 

While the administration may believe that a simple solution to this problem is to raise the salaries of the 

impacted workers to the proposed threshold amount, it is in fact not a practical one. Construction 

contractors operate at a very slim profit margin and cannot afford to increase salaries of all affected 

employees up to 100 percent overnight. 

The impracticality of this solution is reflected in AGC's survey results, which show that an increase in the 

salary threshold will force construction employers to take drastic measures to maintain the integrity of 

their compensation budgets. When asked how their companies would comply with a new salary threshold 

at the proposed level, 74 percent of AGC-surveyed construction contractors responded that they would 

likely reclassify some or all of the impacted exempt workers to a non-exempt hourly status at their cun·ent 

salaries. The survey results also show that: over 60 percent of respondents expect the rule to result in the 

institution of policies and practices to ensure that affected employees do not work over 40 hours a week, 

40 percent expect affected employees to lose some fringe benefits (like flex time, paid leave, work from 

home options), 33 percent expect some positions to be eliminated, and 23 percent expect to exchange 

some fulltime positions for more part-time positions. Furthennore, about 80 percent of respondents expect 

employee morale to be damaged because employees who are reclassified to hourly, non-exempt status 

will feel as if they have been demoted despite eligibility for overtime pay. 

E. Advancing l'ay Equality Through Compensation Data Collection !'residential Memorandum 

On April 8, 2014, President Obama issued a presidential memorandum entitled "Advancing Pay Equality 

through Compensation Data Collection," which requires federal contractors and subcontractors to disclose 

to the DOL summary data on the compensation paid their employees, including data by sex and race. The 

U.S. Equal Employment Opportunity Commission (EEOC) issued a proposed rule on February 1, 2016, 

to incorporate the presidential memorandum's requirements in a revised version of the Employer 

Information Report (EE0-1 ). Based on public comments received, the EEOC issued a revised EE0-1 

report for public comment on July 14,2016. 

All employers with I 00 or more employees would have to submit the revised EE0-1 report. Prime and 

first-tier subcontractors who perform work directly for the federal government and have 50 or more 

employees would be required to submit the currently used EEO-l report that does not include 

compensation and hours-worked data. 

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AGC submitted comments to the EEOC on both of its proposals. 15 AGC urges Congress and members of 

this committee to prohibit funds for implementation, administration and enforcement of this executive 

action through the appropriations process. In addition, AGC supports and urges members of this 

committee to consider introducing and passing legislation like the EEOC Relonn Act, S. 2693, which 

would require the EEOC to collect information, consistent with the proposed revisions to the EE0-1 

report, from federal agencies and the Executive Branch before the proposed data collection mandates are 

imposed on private employers. 

i. The Presidential Memorandum Initiative and the EEOC's Proposed Revisions are 

Unnecessary Given Existing Statutes Governing Compensation in Construction 

and other Commercially Available Compensation Data Reports on the Industry 

The EEOC's proposal notes that it and DOL's Office of Federal Contract Compliance Program (OFCCP) 

plan to ·'compare the firm's or establishment's data to aggregate industry data or metropolitan-area data:· 

For the construction indnstry, such collection and analysis of compensation data for benchmarking 

purposes is not necessary because resources establishing such standards already exist. For example, wage 

detenninations issued by the DOL pursuant to the Davis-Bacon and Service Contract Acts ostensibly 

manifest the prevailing wages paid for many job classifications in a particular area. The Department's 

Bureau of Labor Statistics also provides compensation data useful for identifying industry standards. 

In addition, various private sector resot1rces offer compensation benchmarking data. For example, in the 

construction industry, the nonprofit Construction Labor Research Council and consulting finns such as 

PAS, Inc. and FMI, Inc. publish snch data. Many of these resources segment the data by geographic 

location, company size, industry sector, and other useful factors. 

Given all of the compensation data resources already available, AGC believes that it is unnecessary for 

the EEOC or OFCCP to subject contractors to the proposed new compensation data reporting 

requirement. 

ii. The Collection ofHours-Jf'orked Data is Overly Burdensome for Construction Employers 

and Should not be Required, Regardless of Worker FLSA Status 

According to a survey of AGC members, 88 percent of respondents stated that the reporting of hoursworked data by pay band would be burdensome with nearly 40 percent stating it would be extremely 

burdensome to track hours-worked for non-exempt employees, particularly due to the unique nature of the 

construction industry. 

As previously mentioned, the construction industry is project based, transitory and often seasonal, which 

makes it difficult to collect and track hours-worked data in the way the EEOC suggests. Unlike work 

perfonned in other industries, once a construction project is complete, workers often relocate to another 

project for the same or different employer, depending upon labor needs. This alone would make it 

extremely difficult for construction contractors to track hours-worked data and ensure the accuracy of 

such data. In addition, construction contractors could collect such data, but the data may significantly 

change as early as the next day because workers often move around to other projects or when workers are 

provided by union hiring halls, the workforce itself may change. 

15 http::,_; /www. Agc.or g/sites/ def au!t/fil es/Revi sed');,20E EO- 1 %20Reoort'!'o20-'}b20Final7·o20Con1 rnent:).pdf 

h ttps./ /vvww .agc.org/si tes/ default/files !Grlllerie<:>/!abor rnen1ber ftle<;,/OM B'~620Revl ew'\,20of <)20ReyJ::,ed; ,2QE EO 

·l '!.";20Repo(t'>:)20 (Jo20Fina! O.pdt 

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III. THE CL:MIJLATIVE IMPACT 01' NEW REGULATORY MANDATES ON SMALL 

BUSINESS CONSTRUCTION COi'ITRACTORS 

The collective impact of the aforementioned executive orders and presidential memorandum on small 

business construction contractors will be significant in tenns of financial cost, liability, risk and loss of 

work opportunities. From a cost perspective, at a minimum, these contractors will have to: 

Hire outside counsel and/or consultants to help educate and train existing employees as well as 

establish new compliance programs for employees to follow; 

Hire outside counsel to adjust contractual documents accordingly; 

Hire outside counsel or consultants to adjust employee staffing arrangements to account for new 

overtime requirements; 

Consider existing staff resources for implementing and monitoring compliance programs and 

detem1ine whether additional staff is needed or if existing staff can effectively handle these new 

burdens; and 

Consider purchasing new or updated compliance software programs as a means for collecting 

previously unmonitored or documented data. 

The costs to small businesses to undertake could easily amount in the tens, if not, hundreds of thousands 

of dollars in new costs. The initial cost of establishing such new compliance regimes will place a heavy 

burden on all small business contractors, especially emerging small businesses and those planning on 

entering the construction market. The routine costs of maintaining these compliance systems and meeting 

these new mandates will additionally place new, fixed financial constraints on small businesses. 

Conceming liabilities, small business construction contractors, particularly in the federal market, will 

have to consider the liability of: 

Agreeing to undefined mandates included in labor compliance agreements "negotiated" with 

federal compliance agencies as a means to avert suspension or debannent proceedings; 

Giving the competition their labor compliance records; 

Being deemed "not responsible" based on their labor compliance records; 

Deeming any subcontractors as "not responsible'' based on their labor compliance records; 

Publically disclosing labor law violations for which they have paid fines, taken remedial actions 

and resolved; 

Abiding by federal paid sick leave requirements in addition to other state and local paid sick leave 

requirements; 

Being shut out of work because the govemment mandates a project labor agreement; and 

Providing unrepresentative compensation data according to one-size fit all standards that opens 

them up to increased risks of government audit. 

Lastly, small business contractors will have t~· consider these executive action 16 in context of risk versus 

reward of pmticipating in the construction market, and again, particularly the federal construction market. 

Given the overall state of the constmction economy today, several small business contractors have 

expressed to AGC that they are strongly considering or plan to walk away from the federal construction 

market. The result of these new requirements may, therefore, include reduced competition and, in tum, 

higher prices to the federal government and taxpayers. Thank you for inviting AGC to participate in this 

worthwhile hearing. 

16 ln addition to the executive actions discussed, it is important to note that we have not addressed new mandates of 

the Environmental Protection Agency and Occupationalllealth and Safety Administration that will also impose new 

burdens upon small business construction contractors. 

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Testimony before the House Committee on Small Business Subcommittees on Investigations, Oversight, 

and Regulations and Contracting and Workforce 

David Madland, PhD 

Senior Fellow 

Center for American Progress Action Fund 

September 13, 2016 

Thank you Chairmen Hardy and Hanna, Ranking Member Adams, and Members of the Subcommittees 

for the invitation to appear before you today. 

My name is David Mad land and I am a Senior Fellow at the Center for American Progress Action Fund. 

CAP Action is an independent, nonpartisan, and progressive education and advocacy organization 

dedicated to improving the lives of Americans through ideas and actions. 

Today's hearing is focused on the impact of President Obama's contracting executive actions. While the 

title of this hearing implies that the Presidents' actions are a burden, his actions will benefit workers, 

taxpayers and businesses. 

The President's executive actions draw widespread support from a broad coalition of supporters. Not 

only do organizations representing workers, veterans, women, the elderly, and taxpayers support a 

number of these contracting actions, but so too do a number of small businesses' Many small 

businesses feel that these executive actions will help them compete on a level playing field and make 

the contracting process more welcoming to businesses like theirs. Indeed, in 2015 small business 

contracting as a percentage of total government contracting was at record high levels2 

Though I think the general points I make could be applied to most if not all of the President's contracting 

reforms, I will focus my remarks on contracting executive actions that establish a minimum wage, 

require paid sick leave, ban discrimination based on sexual orientation and gender identity and ensure 

companies comply with workplace laws before receiving new government contracts. 

Government can be a leader setting standards 

Because President Obama's executive actions are part of a tradition of presidential actions involving 

federal contractors, I think it is important to provide some history on similar executive actions before 

discussing the policies that are the focus of today's hearing. The federal government has a long and 

successful history of starting important social changes with federal contractors. And these kinds of 

actions have been taken by presidents of both parties. 

For example, Executive Order 11246, signed in 1965 by President Lyndon Johnson, prevented companies 

that contract with the federal government from discrimination on the basis of race, color, religion, sex, 

or national origin. The executive order helped to significantly increase the percentage of women and 

minority managers at firms that contract with the federal government. Employment increased 6 percent 

faster for black males working for government contractors than those in non-contractor establishments, 

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12 percent faster for other minority males, 3 percent faster for white females, and 11 percent faster for 

black females 3 

Actions by President Richard Nixon furthered the protections articulated by President Johnson. Under 

his administration, the Department of Labor issued "Order No.4," which required contractors to analyze 

their workforce and determine if they were hiring fewer minority workers than would be expected 

based on the local labor market.4 If contractors found that this was the case, they were to set goals to 

remedy this underrepresentation. 5 

Virtually every recent president has used their power over federal procurement to pursue social goals. 

Ronald Reagan sought to promote minority contractors. 6 Bill Clinton encouraged contractors in 

economically distressed areas.' George W. Bush sought to ensure contractors employed only American 

citizens or legal residents. 8 

President Obama's Executive Actions Address Significant Problems 

President Obama's efforts to raise standards for workers on federal contracts build on this history and 

are an important part of making the economy work for everyone not just the wealthy few. In the United 

States today, wages have been nearly stagnant for decades, while economic inequality is near record 

levels? Too many people are struggling to pay bills, especially those working in low-wage industries 

where wage theft is rampant as employers pay workers less than legally required. Many Americans 

cannot take time off if they get sick, and people often face discrimination because of their sexual 

orientation and gender identity. And discrimination based on race and gender still occurs, despite 

advances made in part because of previous federal actions. 

The President's executive actions address significant problems with today's economy. For example: 

Low minimum wage: The federal minimum wage today remains at $7.25 per hour and has not been 

increased since 2009. That means someone working full time can still be in poverty- they would earn 

just $15,080 annually, which is below the federal poverty line for a family of two10 If the minimum wage 

had merely kept pace with inflation since 1968 it would be worth $11.06." And if the minimum wage 

had kept up with productivity, it would be even higher. We are a much richer and more productive 

nation than we were in the 1960s, and yet the minimum wage is worth less today than it was fifty years 

ago. 

Lack of paid sick leave: Currently, 36 percent of private sector workers lack paid sick leave'' Without 

this vital protection, workers can be forced to choose between caring for themselves or a family 

member and keeping their job. This not only harms workers, but the economy as a whole, as workers 

without access to paid sick leave are more likely to spread contagious diseases like the flu." 

Absence of protections for LGBT Americans: Today, there are no explicit protections under federal law 

to prevent workers from being fired based on their sexual orientation or gender identity. Unfortunately, 

LGBT Americans often face discrimination and harassment in the workplace. Up to 43 percent of gay, 

lesbian, and bisexual workers have been discriminated against or harassed at work, as have up to 90 

percent of transgender workers. 14 

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Weak review of contractors' records: Despite the fact that federal law requires the government to 

award contracts only to companies with a satisfactory record of performance, integrity, and business 

ethics our current system fails to actually achieve this in practice, nor does it adequately impose 

conditions on violators to encourage them to improve their practices. 15 

As a result, billions of federal dollars flow to companies that break the law. According to a 2013 report 

from the Senate Health, Education, Labor, and Pensions Committee, 30 percent of the top violators of 

workplace safety and wage laws between fiscal years 2007 and 2012 continued to receive federal 

contracts despite their violations." And these violations can have deadly consequences. During these 

years, at least 42 people died from workplace accidents and injuries at the companies with the highest 

penalties.17 1n fiscal year 2012, the government awarded $81 billion in contracts to companies with large 

violations of labor law nearly 16 percent of all spending on federal contracts." The Government 

Accountability Office has come to similar conclusions, finding that one-third of companies with the 

largest penalties for violations of wage and hour and workplace safety laws went on to receive a 

government contract. 19 

Ideally, policies such as a higher minimum wage, paid sick days, and respect for LGBT rights should be 

applied to all workers. But until Congress acts, executive actions can produce important improvements 

for a large number of workers, high road businesses and taxpayers. 

Executive actions also promote economy and efficiency 

At the same time these executive actions address important economic and social challenges, they also 

promote economy and efficiency in government contracting. 

The basic idea is that treating workers fairly leads to better results for taxpayers. Human capital is the 

core input into many federal contracts and taxpayers receive "the most efficient and effective utilization 

of all available manpower" when workers are treated fairly. 20 When workers are adequately paid, have 

safe workplaces, do not need to fear losing their job because they or their children get sick, and are not 

discriminated against, they can efficiently produce high quality work. In contrast, when basic standards 

are not upheld, contracting becomes a race to the bottom that does not deliver for workers or 

taxpayers. 

There is a large body of academic research backing up these basic ideas. For example, paying higher 

wages has been shown to decrease absenteeism and turnover. 21 Higher wages can also lead to higher 

performance from employees. Often called the efficiency wage theory, this body of research finds that 

wages and working environment can affect productivity, through effects on morale." Paid sick leave can 

increase efficiency by allowing workers to stay home when sick instead of spreading their illness to their 

coworkers and customers and letting them take time off to get necessary preventative health caren 

And a more diverse workforce can lead to less discrimination and more openness, greater job 

commitment, improved workplace relationships, and increased productivity." 

Moreover, there is also a body of research showing that when contractors cut corners with their 

workers, they often do so with taxpayers. A CAP Action report analyzing the businesses that received 

federal contracts despite having committed the worst workplace violations between FY 2005 and 2009 

found that 25 percent of them had significant performance problems. 25 According to the report, these 

problems ranged from: 

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" ... contractors submitting fraudulent billing statements to the federal government; to cost 

overruns, performance problems, and schedule delays during the development of major 

weapons systems that cost taxpayers billions of dollars; ... to an oil rig explosion that spilled 

millions of barrels of oil into the Gulf of Mexico."26 

This connection has been known for decades. The U.S. Department of Housing and Urban Development 

found a "direct correlation between labor law violations and poor quality construction" on HUD projects 

thirty years ago, also finding that this poor performance led to increase maintenance costs." According 

to a 2003 study, construction contractors in New York with workplace law violations were more than 

five times more likely to have low performance than contractors without workplace law violations. 28 

Similarly, a 2008 CAP Action report found that labor law violations by contracting companies were 

associated with wasteful practices. 29 

State and Local Governments and Many Businesses Already Have 

Sirnilar Policies 

Not surprisingly, given the benefits to taxpayers, businesses and workers, many state and local 

government have already implemented policies similar to these federal actions. And the evidence from 

these policies shows that they work well and that opponents' concerns are often overblown. 

A number of states and local governments have policies similar to the Fair Pay and Safe Workplaces 

executive order and require companies to report on their workplace records. California30, Connecticut", 

Jllinois32, Massachusetts33, Minnesota34, and New York35-as well as the District of Columbia36 and other 

major cities, such as Los Angeles31 and New York City38- all have responsible bidder programs that use 

self-reporting to improve contractor quality by identifying companies with long track records of 

committing fraud, wasting taxpayer funds, and violating workplace laws. 

Similarly, since Baltimore passed the country's first living wage law for contractors in 1994, more than 

100 municipalities and one state- Maryland- have instituted living wage laws that require contractors 

to pay a higher minimum wage. 39 Requirements to provide paid sick leave are not uncommon. Five 

states and many municipalities set paid sick leave standards for area employers40 Local governments 

have also used their contracting power to protect LGBT workers from discrimination. As of 2012, 61 

localities prohibited local contractors from discriminating based on sexual orientation, with 42 also 

banning discrimination due to gender identity.41 

The experience from state and local governments and private businesses with these kinds of policies has 

been quite positive. 

After the implementation of San Francisco's paid sick leave ordinance, a majority of employersincluding a majority of firms with fewer than 10 employees- reported that they supported the 

ordinance'' Similarly, a study of New York City's paid sick leave policy found that one and a half years 

after the Jaw went into effect, 86 percent of employers supported the policy. 43 The study also found 

that 85 percent of employers reported that the new law had no effect on their overall business costs, 

and a two percent actually reported a decline in overall costs. 44 A study examining LBGT contracting 

policies found that that businesses were generally willing to adopt and comply with local ordinances to 

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protect LGBT workers, noting that "in almost all localities that responded, any resistance to these 

policies was minimal and short-lived."45 

A study of Maryland's living wage conducted by the state's Department of Legislative Services found 

that the number of bids actually increased after the state adopted the policy. The study found that the 

average number of bidder per contract increased from 3.7 to 4.7, a nearly 30 percent increase46 What's 

more, of the contracting companies interviewed by the state of Maryland, nearly half indicated that the 

higher standards made them more likely to bid because it leveled the playing field." 

Similar results have been found by a number of studies of local efforts to raise contracting labor 

standards. According to a study of the Boston, Hartford and New Haven living wage laws, "competitive 

bidding remains strong under living wage ordinances, and ... such laws may even boost the number of 

bidders on city contracts." 48 And statements from officials in San Francisco and Los Angeles indicate that 

their responsible contracting "prequalification" system has increased the pool of highly experienced 

firms willing to bid for its work and created an environment in which firms of similar caliber compete 

against one other for agency contracts." As Russell Strazzella, a chief construction inspector for the Los 

Angeles Bureau of Contract Administration explained, with strong responsibility reviews, "you get a level 

playing field and a pool of good contractors." 

Private sector companies are also increasingly adopting similar policies to help their bottom line. 

Companies that hire contractors in the private sector are finding that reviewing potential contractors' 

workplace safety records is a cost effective way to ensure future compliance. Raytheon Company, for 

example, requires that companies it contracts with follow safety requirements and report any safety 

citations "from any U.S. Government, city, or local entity for the past ten years." 50 So too do smaller 

companies. Family-owned construction contractor Lawrence Building Corp. requires bidders to report if 

they have had any Occupational Safety and Health Administration citations in the past 3 years. 51 And 

industry associations-such as the Construction Users Roundtable", the American National Standards 

lnstitute53, and FM Global-recommend evaluating the safety record of companies bidding for 

contracts. 54 

Similarly, many companies already provide high wages, paid leave and respect LGBT rights. About 60 

percent of U.S. workers currently have access to paid sick leave.55 One in three small business owners 

have a policy in place protecting LGBT employees, with many noting that it improves their ability to 

attract and retain talented employees. 56 And of course, many companies pay their workers well above 

the minimum wage. 

Small Businesses Often Support These Policies 

Finally, there are a number of small businesses that support these kinds of contracting policies. When 

low standards prevail in government contracting, many high-road companies stay away. But when 

higher standards become the norm, high road companies feel that the competition is fair and want to do 

business with the government. 

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As previously mentioned, the state of Maryland found that more companies wanted to do business with 

the state after they raised standards. According to the official state report on the impact of the living 

wage, several companies commented that in the future they will only bid on living wage contracts 

because of the leveling effect it has on competition. One contractor noted that her contract was the first 

state procurement for which her firm had submitted a bid. She explained that without strong labor 

standards, "the bids are a race to the bottom. That's not the relationship that we want to have with our 

employees. [The living wage] puts all bidders on the same footing." 57 

Raising the minimum wage is also popular among small business owners. As the president of the 

American Small Business Chamber of Commerce explained, the president's executive order will "help 

level the playing field," making sure that companies that pay their workers good wages are not undercut 

by low-road employers. 58 A poll from Small Business Majority finds that 60 percent of U.S. small 

businesses support raising the minimum wage to $12 by 2020. 59 And leaked polling by Republican 

pollster Frank Luntz for the Chamber of Commerce found that 80 percent of business executives 

supported increasing the minimum wage in their state. 60 That same poll found that 73 percent of 

respondents supported requiring paid sick leave. 61 

A poll from Small Business Majority and CAP found that a majority of small business owners believe that 

owners should not be allowed to fire or. refuse to hire LGBT employees based on their religious beliefs. 52 

That same poll found roughly 80 percent of small business owners support a federal law to ban 

discrimination against LGBT employees in the workplace. 63 

In localities that have mandated paid sick leave, companies' often find that the law is less disruptive 

than anticipated. As one San Francisco business owner explained about their city's paid leave policy: "A 

lot of small business owners were really freaked out when this first went into effect, especially smaller 

retail stores and restaurants. I don't hear too many griping about it any longer. .. lt's made a highly 

positive impact on staff morale. I think it's a win/win situation for employees and employers." 64 

Experiences like these are why the Main Street Alliance, a national network of small business coalitions 

strongly supports the paid sick leave executive order. 55 As Main Street Alliance explained in their 

comments supporting the paid sick leave executive order: "Preventing the spread of illness in the 

workplace saves money; healthy employees are more productive. Further, providing earned sick time 

improves morale and keeps turnover low."66 Indeed, the Main Street Alliance found that 65 percent of 

the over 1,000 small businesses they questioned would support a national sick time standard67 

Similarly, many small businesses support responsible contractor policies. High-road businesses have 

reported that they are more likely to bid on contracts since Washington DC enacted its enhanced 

responsibility review process. Allen Sander, chief operating officer of Olympus Building Services Inc. 

wrote that:68 

"Too often, we are forced to compete against companies that lower costs by short-changing 

their workers out of wages that are legally owed to them. The District of Columbia's contractor 

responsibility requirements haven't made the contracting review process too burdensome. And 

now we are more likely to bid on contracts because we know that we are not at a competitive 

disadvantage against law-breaking companies." 

That's why many law-abiding businesses are supporting the Fair Pay and Safe Workplaces Executive 

Order: because they believe it will help them compete on an even playing field without representing an 

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undue burden on their company. 69 Indeed, in 2015 at a hearing in this very committee, construction 

contractor Bill Albanese stated, "It makes good business sense to vet the contractor before he gets the 

job. It's common in our industry; we do it all the time, and we don't see it as being a burden to any 

legitimate fair contractor that's playing by the rules." 70 

Conclusion 

President Obama's contractor executive actions can help address significant problems in the economy, 

benefiting not only workers, but also businesses and taxpayers. The President's actions often build upon 

similar policies at the state and local level that have proven quite successful. What's more, many private 

companies already employ similar practices. 

Not surprisingly, these executive orders draw a wide range of support. Organizations ranging from civil 

rights groups to good government groups, worker organizations, people with disabilities, veterans 

groups, women's organizations, and a number of businesses have expressed support for many of these 

executive actions." In short, these executive actions represent good policy. 

1 Below is a partial list of supporters of some of the executive actions. For example, the NAACP, AFl·CIO, National 

Women's Law Center, and National Disability Rights Network have supported Executive Order 13658 to increase 

the minimum wage for federal contractors. The Leadership Conference on Civil and Human Rights, NAACP, 

Notional Women's Law Center, and National Employment law Project, support Executive Order 13706 to extend 

paid sick leave to federal contractors. The Human Rights Campaign, Anti-Defamation League, American Civil 

Liberties Union, and NCAAP have supported an executive order to ban federal contractors from discriminating 

against LGBT employees. The Leadership Conference on Civil Rights the Project on Government Oversight, AARP, 

SEIU, the Consortium for Citizens with Disabilities, Paralyzed Veterans of America, and the Campaign for Quality 

Construction, a coalition of 20,000 employers, have supported the Fair Pay and Safe Workplaces Executive Order. 

NAACP, "NAACP Statement on Increasing the Minimum Wage of Employees of Federal Contractors," available at 

http :1/www. naacp. org/press/ en try/na acp-s tate ment-on ·increasing· the-minimum ·Wage-of-employees -of· fed era I· 

cont (last accessed September 2016); U.S. Department of Labor, "Establishing a Minimum Wage for Contractors: 

Final Rule," available at https://www.federalregister.gov /articles/2014/10/07/2014-23533/establish mg·a. 

minimum-wage-for-contractors; leadership Conference on Civil and Human Rights, "Comments Re: Paid Sick 

Leave for Federal Contractors," available at http://www.civilrights.org/advocacy/letters/2016/proposed-rule· 

regarding·paid-sick·leave.html (last accessed September 2016); Anti-Defamation League and others, "Comments 

on an executive order that would bar discrimination by federal contractors on the basis of sexual orientation and 

gender identity," July 15, 2014, available at http://www.adl.org/assets/pdf/civil· 

rights/ rei igious freedom/related rna ts/lgbt ·eo ·sign .. on ·president ·oba m a·le tte r · 20 14·07 ·15. pdf (I ast accessed 

September 2016); leadership Conference on Civil and Human Rights, "The Fair Pay and Safe Workplaces Executive 

Order," available at http://www.civilrights.org/advocacy/letters/2014/the-fair-pay-and-safe.html (last accessed 

September 2016); Project on Government Overreach, "POGO Supports Government Access to Contractor Labor 

Violations to Improve Compliance, Avoid Bad Actors, and Level the Playing Field," available at 

http. 1/www. pogo .org/ our ·work/1 etters/20 1 S/pogo ·sup ports-government ·access. h tm I (I ast accessed September 

2016); Consortium for Citizens with Disabilities, "Concerned About NDAA language on VEVRAA and Section 503," 

avai Ia ble at http:/( www. c -c -d. org/ fich i ers/ CCD· Concerned-About. N DAA·La ngauge-on. V EVRAA -and· Section. 

503.pdf (last accessed September 2016); Campaign for Quality Construction, "Comments on Executive Order 

13673: Fair Pay and Safe Workplaces," August 2015, available at http://src.bna.com/vU (last accessed September 

2016). 

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2 Maria Contreras-Sweet,"FY15 Federal Small Business Contracting Announcement," (Small Business 

Administration, 2016) 

3 Jonathan S. Leonard, "The Impact of Affirmative Action on Employment," Journal of Labor Economics 2 

(4) (1984): 439-463. 4 United States Department of labor, "OFCCP SO" Anniversary Timeline," available at 

bll&!.l.Y:~'L9Q!J?m!ili.lli~i.LQ:W;@lli.!E!1!£~~2QD.JI.tr!§:llil~l!Il I last accessed September 20 16) 

Richard 0. Parry and Treen a Gillespie Finney, "Affirmative Action: A Schizophrenic History," Southern Law Journal, 

24 (2014): 237-265. 

6 Executive Order no. 12,432, "Minority business enterprise development," available at 

http://www .archives.gov /federal- register /codification/ executive-order /12432.html (last accessed September 

2016) 

7 Executive Order no. 13,005, "Empowerment Contracting," available at b.!!Q.s:l/www.gpo.gov/fdsys/pkg/FR-1996-

05-24/pdf/96-13306.pdf (last accessed September 2016) 

8 Executive Order no. 13,46S, "Amending Executive Order 12989, as Amended," available at 

http:l/www.presidency.ucsb.edu/ws/?pid=77501 (last accessed September 2016) 

9 Carmel Martin, Andy Green, and Brendan Duke, eds.,"Raising Wages and Rebuilding Wealth" (Washington: The 

Center for American Progress, 2016); Chad Stone and others, "A Guide to Statistics on Historical Trends in Income 

Inequality" (Washington: Center on Budget and Policy Priorities, 2015), available at 

http://www .cbp p .o rg/ research /poverty -and ··in eq ua n ty/ a-guIde-to-s ta tis tics-on-hi storlcal-trends-in-i n comeineguality. 

10 U.S. Census Bureau, "Poverty Thresholds," available at http:!/www.census.gov/data/tables/timeseries/demo/income-poverty/historical -poverty-thresholds.html (last accessed September 2016). 

11 Authors Calculation using Consumer Price Index and United States Department of Labor, "History of Federal 

Minimum Wage Rates Under the Fair Labor Standards Act, 1938- 2009," available at 

https://www.dol.gov/whd/minwage/chart.htm (last accessed September 2016) 

12 Bureau of Labor Statistics, "Selected paid leave benefits: Access, March 2016," available at 

http://www.bls.gov/news.release/ebs2.t06.hlm (last accessed September 2016). 

13 Shayndi Raice, "Paid Sick Leave Reduces the Flu Rate 'Significantly,' Paper Says," The Wall Street Journal, August 

23, 2016, available at http:/(blogs.wsj.com/economics/2016/08/23/paid sick-leave-reduces-the-flu-ratesignificantly-paper-says/ (last accessed September 2016) 

14 Crosby Burns and Jeff Krehely, "Gay and Transgender People Face High Rates of Workplace Discrimination and 

Harassment" (Washington: Center for American Progress, 2011). See also Sarah McBride, Laura Durso, Hannah 

Hussey, Sharita Gruberg, and Bishop Gene Robinson, "We the People" (Washington: Center for American Progress, 

2014). 

15 48 C.F.R § 9.104(a)-(b) 

16 Senate Health, Education, Labor, and Pensions Committee, "Acting Responsibly? Federal Contractors Frequently 

Put Workers' Lives and livelihoods at Risk," Majority Committee Staff Report, December 2013, available at 

http://www.help.senate.gov/imo/media/doc/Labor%20law%20Violations%20by%20Contractors%20Report.odf 

(last accessed September 2016) 17 1bid. 

18 Ibid. 

15 Government Accountability Office, "Federal Contracting: Assessments and Citations of Federal labor Law 

Violations by Selected Federal Contractors," Report to Congressional Requesters, September 2010. Note that this 

GAO report built upon a previous GAO report that also found companies with poor health and safety records also 

continue to receive federal contracts (U.S. Government Accountability Office, "Service Contract Act: Wage 

Determination Process Could Benefit from Greater Transparency, and Better Use of Violation Data Could Improve 

Enforcement," Report to the Subcommittee on Labor, Health and Human Services, Education and Related 

Agencies, Committee on Appropriations, U.S. Senate, December 2005, available at 

http://www.gao.gov/assets/250/2482Q2.jljJ (last accessed September 2016) 20 Executive Order 10925, "Establishing the President's Committee on Equal Employment Opportunity," available 

at https:[/www eeoc.gov/eeoc/history/35ti}Lthelaw/eo-10925.html (last accessed September 2016). 

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21 Christian Pfeifer, "Impact of wages and job levels on worker absenteeism," International Journal of Manpower 

31 (1) (2010): 59-72; Arindrajit Dube, T. William Lester, Michael Reich, "Do Frictions Matter in the Labor Market? 

Accessions, Separations, and Minimum Wage Effects," IZA discussion paper, June 2011, available at 

http:/ /ftp.iza.org/dp5811.pdf; 

22 Andrew Weiss, Efficiency Wages: Models of Unemployment, Layoffs, and Wage Dispersion: Models of 

Unemployment, Layoffs, and Wage Dispersion, (Princeton: Princeton University Press, 2014); George Akerlof, "Gift 

Exchange and Efficiency Wage Theory: Four Views," The American Economic Review 74 (2) (1984): 79-83. 

23 Claudia Calderon Machicado, "The Business Case for Paid Leave and Paid Sick Days," (Washington: Center for 

American Progress, 2015) available at 

https: (fwww. a me ricanprog ress. org/i s su es/1 a bor In ews/20 14/04 I 17/882 43/the-busi ness-case-for-paid -leave- and· 

paid-sick-days/; National Partnership for Women and Families, "Paid Sick Days Lead to Cost Savings for All," 

(Washington, 2015), available at http://www.nationalpartnership.org/research-library/work-family/psd/paid-sickdays-lead-to-cost-savings-savings-for-all.pdf. 

24 http: 1/wi II iamsi n s tit u te .law. ucla. ed u/wp-content/ uploads/Business-1m pact- L G BT -Pol lei es-F u 11-M a y-2013. pdf 

25 Karla Walter and David Madland, "At Our Expense: Federal Contractors that Harm Workers Also Shortchange 

Taxpayers" (Washington: Center for American Progress, 2013), available at 

https:/ /www .american p rogressaction .org/issu es/la bar I report/2013/ 12/11/80799 I at -au r -expense/. 

26 1bid. 

27 U.S. Department of Housing and Urban Development, Office of Inspector General, "Audit Report on Monitoring 

and Enforcing Labor Standards," 1983. 

28 Moshe Adler, "Prequalification of Contractors: The Importance of Responsible Contracting on Public Works 

Projects" (New York: Fiscal Policy Institute, 2003). 

29 David Madland and Michael Paarlberg, "Making Contracting Work for the United States: Government Spending 

Must Lead to Good Jobs" (Washington: Center for American Progress, 2008). 

3

° California Department of Industrial Relations, "Pre-Qualification of Contractors Se~king to Bid on Public Works 

Projects: The 199 State Legislation and the Model Forms Created by the Department of Industrial Relations," 

available at http://www.dir.ca.gov/od pub/orequai/PubWksPreQuaiModel.pdf (last accessed September 2016) 

31 58 Connecticut Code §4a-101 

32 Public Act 097-0369, Illinois General Assembly, August 2011 

33 21 Massachusetts General Laws §149A.8 

34 H.F. 1984, Minnesota House of Representatives, 88 sess., May 2014 

"Office of the New York State Comptroller, "Vendor Responsibility Forms," available at 

http://www.osc.state.ny.us/vendrep/forms vendor.htm (last accessed September 2016) 

36 Procurement Practices Reform Act of 2010, Council of the District of Columbia, Codification District of Columbia 

Official Code, 2011 Summer Supplement to the 2001 Edition. 

37 Ordinance 173677, Council of the City of Los Angeles, November 2000, available at 

http :1/bca .I a city .a rg/si te /pdf I era/ CR 0%20Con tractor%2 OResponsi b i I iy%2 OOrd in a nee. PDF (I ast accessed 

September 2016) 

38 New York City Administrative Code §6-116.2 (2001) 

39 Jeff Thompson and Jeff Chapman, "The economic impact of local living wages" (Washington: Economic Policy 

Institute, 2006), available at http://www.epi.org/publication/bp170/: National Employment Law Project, "Local 

Living Wage Laws and Coverage" (Washington: 2011), available at 

http://www .nel p.org/content/uploads/2015/03/LocaiL WLawsCoverageFINAL.pdPnocdn= 1; "Living Wage for State 

Service Contracts- Division of Labor and Industry," Maryland Department of Labor, Licensing, and Regulation, 

available at https://www.dllr.state.rnd.us/labor/prev/livingwage.shtrnl (last accessed September 2016). 

40 A Better Balance, "Overview of Paid Sick Time Laws in the United States," 2016, available at 

http :1/www. a betterba Ian ce. o rg/w eb/i mages/stories/Documents/ sickd ays/factsheet/PSDch art. pdf (I ast accessed 

September 2016). 

41 Christy Mallory and Brad Sears, "An Evaluation of Local Laws Requiring Government Contractors to Adopt LGBTRelated Workplace Policies," Albany Government Law Review 5 (2012): 478-551. 

9 
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42 Robert Drago and Vicky Lovell, "San Francisco's Paid Sick Leave Ordinance: Outcomes for Employers and 

Employees." (Washington: Institute for Women's Policy Research, 2011) available at 

http://www.iwpr.org/publications/pubs/San-Fran-PSD (last accessed September 2016) 

43 Eileen Appelbaum and Ruth Milkman, "No Big Deal: The Impact of New York City's Paid Sick Days Law on 

Employers." (Washington: Center for Economic and Policy Research, 2016) available at 

http: /1 cepr. net/ pu bli cations/reports/no-big -deal-the-1m pact -of-new-york -city-s-paid -sick-days-law -on -em p! oyers 

(last accessed September 2016) 44 1bid. 

"Ibid. 

46 Maryland Department of Legislative Services, "Impact of the Maryland Living Wage," 2008, available at 

http:/ldlslibrary.state.md.us/publicatlons/OPA/1/IML W 2008.pdf (last accessed September 2016) 

''Ibid. 

48 Mark D. Brenner and Stephanie Luce, "Living Wage Laws in Practice: The Boston, New Haven and Hartford 

Experiences," (Amherst: University of Massachusetts, Political Economy Research Institute, 2005), available at 

http: 1/www. peri. u mass. ed u/fi I e ad min /pdf I research brief I RR8. pdf. 

49 Sonn and Gebreselassie, "The Road to Responsible Contracting." 

50 Raytheon, "Environmental, Health and Safety Requirements for Purchase Orders and Subcontracts," September 

2013, available at 

http://www.raytheon.com/suppliers/rtnwcm/groups/gallery/documents/content/rtn 156823.pdf (last accessed 

September 2016) 

51 Lawrence Building Corp., "New Subcontractor Questionnaire," available at 

http: /lwww .lawrence b u i I ding. com/document ·view I new-subcontractor ·q ues ti on n a ire (last accessed September 

2016) 

52 Construction Users Roundtable, "Construction Owners' Safety Blueprint," April 2012, available at 

http://www. curt. org/ uploads/docs/ Aw ards%20%28 Sofety%29 /R · 

807%200SB%20United%20States%20%282012Apr%29.pdf (last accessed September 2016) 

53 Scott Schneider, "New ANSI Standard Tells Employers To Plan for Safety," Laborers' Health & Safety Fund of 

North America, January 2012, available at http://www.lhsfna.org/index.cfm/lifelines/january·2012/new-ansi· 

.ill,illl;~::J:g!~~Pl9.ITI:i:.\:Q:lll.ill:J..:.[Q~~~ (last accessed September 2016) 

FM Global, "Holding to a Hire Standard," 2012, available at http://www.fmglobalreason.com/article/holdlng· 

hire-standard (last accessed September 2016) 

55 Bureau of Labor Statistics, "Employee Benefits Survey: Table 32," March 2015, available at 

http://www. bls.gov/ncs/ ebs/benefits/2015/ownership/private/table32a.pdf (last accessed September 2016) 

56 Small Business Majority, "Opinion Poll: Small Business Owners Oppose Denying Services to LGBT Customers 

Based on Religious Beliefs." (Washington, 2015), available at https://cdn.americanprogress.org/wp· 

""-='-"'""""""""-'~'-k""-'-""'-'-"±!..=""-"'"-1-"L======ll±""-" (last accessed September 2016) 

Maryland Department of Legislative Services, "Impact of the Maryland Living Wage," 2008, available at 

http:l/d!sl;brary.state.md.us/publ;cations/OPA/1/IMLW 2008.pdf (last accessed September 2016) 58 Roger Runningen and Kathleen Mll!er, "Obama to Raise Minimum Wage for Contractors to $10.10/' Bloomberg, 

January 28, 2014, available at http.//www.bloomberg.com/news/art;cles/2014-01-28/obama·to·ra;se-m;nimumwage-for-contractors·to-10-10 (last accessed September 2016) 

59 Small Business Majority, "Opinion Poll: Small Businesses Support Increasing Minimum Wage," available at 

https: //www, sma I I business m a 1 ori ty .org/ our-research/ workforce/opinion -pol 1-sma II-busi n esse s-s uppo rt-

'D..I:IS~'&IfJliJ!.!JJ!J.Ill::Y:!.iill,g (last accessed September 2016) 

Hirsch, "Leaked Poll for Chambers of Commerce Shows Business Execs Overwhelmingly Support Raising 

the Minimum Wage," The Huffington Post, Aprill2, 2016, available at http://www.huffingtonpost.com/mitchell· 

hirsch/leaked-poll-chamber-of-commerce·minimum-wage b 9672136.html (last accessed September 2016); 

PRWatch, "Markup of January, 5, 2016 State Chambers Topline Poll," available at 

h!J:.DlL"""!';!J,prwatch.org/files/cmd~atch mark~ 01·05·16 state chamb~rLtQP!iD.£_QQ)]Jl<:if (last 

accessed September 2016) 

51 Ibid. 

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62 Small Business Majority, "Opinion Poll: Small Business Owners Oppose Denying Services to lGBT Customers 

Based on Religious Beliefs." (Washington, 2015). available at https:(/cdn.americanprogress.org/wpcontent/uploads/2015/07/071315-Nationai-RFRA-and-ND-poll.pdf (last accessed September 2016) 

63 /bid. 

64 Daniel B. Wood, "Mandatory paid sick leave: How has it worked in San Fransisco?" The Christian Science 

Monitor, February 11, 2011, available at http://www.csmonitor.com/USA/2011/0211/Mandatory-paid-sick-leave-

.lli!!!Y::.billdt:Y:Jl;!Ii:;!cc:I.::J~@l::f.cillflliQ (last accessed September 2016). 

Main Street Alliance, "Comment Re: Proposed Department of Labor (Wage and Hour Division) Rule on 

Establishing Paid Sick leave for Federal Contractors," April 5, 2016, available at 

https://www.regulations.gov/document?D=WHD-2016-0001-0135 (last accessed September 2016) 

56 Ibid. 

67 The Main Street Alliance, "Voices of Main Street," October 2015, available at 

httgs:/ld3n8a8pro7vhmx.cloudfront.net/mainstreetalliance/pages/9/attachments/originai/1445897235/VOICES 

OF MAIN STREET.pdf71445897235. (last accessed September 2016) 

68 Karla Walter and David Mad/and, "Executive Order Protects Workers and Supports law-Abiding Contractors" 

(Washington: Center for American Progress Action Fund, 2014). available at 

h ttps: //www .ameri canorogressacti on. org/issues/labor I news/2014 /07/31/949 2 3/ executive-order ·protectsworke rs-and-suppo rts-la w-ab i ding -contractors/. 

69 Campaign for Quality Construction, "Comments on Executive Order 13673: Fair Pay and Safe Workplaces," 

August 2015, available at http://src.bna.com/vU (last accessed September 2016) 

70 William Albanese, Testimony before the House Small Business Subcommittees on Contracting and the Workforce 

and Investigations, Oversight and Regulations, "The Blacklist: Are Small Businesses Guilty Until Proven Innocent?" 

September 29, 201S, available at http://smallbusiness.house.gov/calendar/eventsingle.aspx?EventiD=398448 (last 

accessed September 2016) 

71 See Note 1. 

11 
65 

Opening Statement of 

Chairman Richard Hanna 

House Committee on Small Business 

Subcommittee on Contracting and the Workforce 

Hearing: ‘‘The Cumulative Burden of President Obama’s Executive Actions 

on Small Contractors’’ 

September 13, 2016 

Thank you, Chairman Hardy. I, too, would like to start by thanking the witnesses for taking time from their busy schedules to be 

with us. We really do appreciate it. 

Most of the issues we will examine today are not new. As Chairman Hardy mentioned in his opening statement, the Small Business Committee has done extensive work over the past two years 

to improve how small businesses work with the federal government. During the 114th Congress, our Committee has reported 

nearly 40 pieces of bipartisan legislation aimed at making it easier 

for small firms to do business with the federal government. Nearly 

20 of these bills became law as part of last year’s National Defense 

Authorization—and nearly 20 more are still in play in this year’s 

NDAA. 

The bipartisan work we have done here in the Small Business 

Committee is stark contrast to what President Obama has done 

during his time in office. Since 2009, the President has issued 15 

Executive Orders and presidential memoranda that specifically relate to government contracting. While these mandates may be wellintentioned, too often the cost significantly outweigh the benefits. 

In fact, it is estimated that compliance with unique government 

regulations costs almost 30 cents of every contract dollar—a figure 

sure to increase as more of these executive actions are fully implemented. 

To make matters worse, we have seen time and time again that 

the proposed regulations stemming from these executive actions 

consistently fail to comply with the Regulatory Flexibility Act, or 

RFA. At its most basic, the RFA is a simple, yet critical law that 

mandates that federal agencies give small businesses a seat at the 

table when they are developing both proposed and final rules. 

In recent years, agencies’ inability to comply with the RFA has 

created further difficulties for small businesses. For example, agencies frequently publish regulations that have significant flaws in 

their economic impact analyses or lack a discussion of significant 

alternatives that reduce impacts on small businesses. 

Agencies also certify rules as not having a significant economic 

impact on a substantial number of small businesses but fail to provide a factual basis for this conclusion as the law requires. Sometimes agencies do not conduct the kind of affirmative outreach that 

is required under the RFA and accordingly limit the opportunity 

SBREP-219A with DISTILLER

66 

for small businesses to provide adequate input in the rulemaking 

process. Unfortunately, the regulations that have come out of these 

presidential actions are no different in their lack of small business 

input. These issues cannot persist or we will continue to see innovative small firms exiting the federal marketplace, leaving taxpayers on the hook for more expensive products purchased by our 

federal agencies. 

We have an excellent panel with us today and I look forward to 

hearing their testimony. Again, thank you all for being here. 

Æ 

SBREP-219A with DISTILLER