Fair Pay and Safe Workplaces Executive Order: Questions and Answers
Released: 2015-07-15T00:00:00

On July 31, 2014, President Obama issued Executive Order 13673, Fair Pay and Safe Workplaces, with the stated intent of "increas[ing] efficiency and cost savings in the work performed by parties who contract with the Federal Government by ensuring that they understand and comply with labor laws." The order requires that executive branch procurement contractors disclose information about their compliance with 14 specified federal labor laws and their state equivalents as part of the award process. It also requires that agency contracting officers take these disclosures into consideration when assessing whether prospective vendors have a "satisfactory record of integrity and business ethics" as part of the responsibility determination process. Agencies generally cannot award a procurement contract without determining that the prospective vendor is "affirmatively responsible" for purposes of the contract. In addition, the order imposes certain requirements intended to promote "paycheck transparency" for contractor employees and limit mandatory arbitration of employee claims.

Subsequently, on March 6, 2015, the Department of Labor (DOL) issued guidance regarding the roles and responsibilities of the labor compliance advisors whom the order requires to be appointed within procuring agencies. Then, on May 28, 2015, DOL issued proposed guidance regarding the specific labor law violations to be considered when assessing vendors' responsibility, and the Federal Acquisition Regulatory Council (FAR Council) proposed amendments to the Federal Acquisition Regulation (FAR) to implement Executive Order 13673.

Executive Order 13673 and its proposed implementing guidance and regulations have prompted debate about both the specific labor and employment policies they seek to promote, as well as the general practice of using the federal procurement process to further social and economic objectives that some have described as "only indirectly related to conventional procurement considerations." In particular, there have been questions about the President's authority to impose the requirements of Executive Order 13673; how the requirements of the order compare to preexisting law; and whether the order will result in blacklisting or the de facto debarment of government contractors. The term blacklisting is sometimes used to describe a practice of formally or informally identifying—sometimes through the compilation of lists—disfavored vendors with whom the government will not do business. The term de facto debarment describes the effective exclusion of vendors from the procurement process without the procedural protections afforded to them in formal debarment and suspension proceedings. Depending upon the facts and circumstances of the case, both blacklisting and de facto debarment could, if they occur, be found to have deprived contractors of due process in violation of the Fifth Amendment to the U.S. Constitution.

This report provides the answers to these and other questions about Executive Order 13673 and its proposed implementing guidance and regulations. The questions and answers are organized into three sections. The first provides an overview of the executive order and related materials; the second discusses the order's relationship to existing law; and the third addresses other questions, including the President's authority to issue the order. In considering these questions and answers, note that certain DOL guidance and the proposed FAR amendments have not been finalized, and the order is not scheduled to be implemented until 2016, at the earliest.

For a two-page overview of materials discussed in this report, see CRS Report IF10258, Fair Pay and Safe Workplaces Order: Answers to Questions , by [author name scrubbed] and [author name scrubbed].

Overview of the Order and Related Materials

The questions and answers in this section provide an overview of Executive Order 13673 and related guidance and regulations, including (1) the basic requirements of the order; (2) the 14 federal labor laws to be considered in assessing vendors' responsibility; (3) what state laws are to be seen as equivalent to the specified federal laws; and (4) the responsibilities of the labor compliance advisors whom the order requires to be appointed within procuring agencies.

What does the executive order require?

Executive Order 13673 imposes three obligations on federal contractors and subcontractors. First, the order requires contractors and subcontractors to disclose to the government certain violations of federal and state labor laws. Second, the order obligates contractors to take steps to increase paycheck transparency. Finally, the order limits contractors' ability to require arbitration to resolve certain employment disputes. Note, however, that these obligations have not yet been applied to contractors and subcontractors. The order itself was effective immediately as of the date of its issuance (i.e., July 31, 2014), but implementing guidance and regulations are still being developed. In a written statement also issued on July 31, 2014, the White House indicated that it anticipates that the order's requirements will be implemented as to new contracts "in stages," beginning in 2016.

Disclosure Obligations

Perhaps most notably, Executive Order 13673 contains disclosure requirements for contractors and subcontractors. These requirements will obligate contractors bidding or offering on contracts valued over $500,000 to certify, to the best of their knowledge and belief, whether there has been any administrative merits determination, arbitral award or decision, or civil judgment against them within the past three years resulting from violations of federal or state labor laws. (Contractors who make false certifications could be subject to certain penalties, as discussed below. See " What would happen if a contractor falsely certifies as to its labor law violations? "). Agency contracting officers will then have to consider any such violations when considering whether a contractor is eligible for a contract award. More specifically, agency contracting officers must affirmatively determine that a contractor is "responsible" before the contractor can receive a contract, and Executive Order 13673 will require contracting officers to consider labor law violations when making this responsibility determination. The order will further require contractors to certify that they will have subcontractors with contracts exceeding $500,000 to disclose labor violations from the past three years. Contractors will then have to consider such disclosures in determining subcontractor responsibility.

After contract award (i.e., during contract performance), contractors and subcontractors that are required to make pre-award disclosures will have to provide, at six-month intervals, updated information on new labor violations. These post-award disclosures could lead to, among other things, remedial measures, compliance assistance, or contract termination.

Paycheck Transparency Requirements

Executive Order 13673 requires, for work under a contract that is subject to the disclosure requirements discussed above, that contractors provide employees with documentation of "hours worked, overtime hours, pay, and additions to or deductions from pay" in each pay period. This requirement will apply only to contractors that are required to maintain wage records under the Fair Labor Standards Act, Service Contract Act, or equivalent state laws. Further, this requirement will be deemed met if a contractor complies with state or local laws that are substantially similar to the order's requirements, as determined by the Secretary of Labor.

Mandatory Arbitration Prohibition

Executive Order 13673 prohibits mandatory arbitration of claims under Title VII of the Civil Rights Act of 1964 (Title VII) and any torts arising from sexual assault or harassment. The order will require government contracts and subcontracts valued over $1 million to incorporate clauses providing that employees must voluntarily consent to arbitration of such claims. However, the order contains three exceptions to this prohibition on mandatory arbitration. First, the prohibitory contract clause will not be included in contracts for acquisition of commercially available off-the-shelf items. Second, the prohibition will not extend to employees who are covered by a collective bargaining agreement. Finally, the prohibition generally will not apply to contractor employees who entered mandatory arbitration agreements before their employers bid on contracts covered by the prohibition.

What federal labor laws are covered?

Executive Order 13673 requires covered contractors and subcontractors to disclose violations of the following 14 federal labor laws (although this requirement has yet to be implemented):

The Fair Labor Standards Act (FLSA). The FLSA contains minimum wage, overtime pay, and child labor standards applicable to most public and private employers. The Department of Labor's Wage and Hour Division (WHD) is tasked with enforcing the FLSA, which it does through, for example, investigations, actions to recover back wages, injunctions to prevent FLSA violations, and civil penalties. The act also provides employees with a private right of action to recover back wages. Additionally, willful or repeated violations of the act can result in criminal prosecution.

The Occupational Safety and Health Act of 1970 (OSH Act). Congress enacted the OSH Act to protect worker safety. The OSH Act contains two primary enforcement provisions, each of which places a unique obligation upon employers. First, Section 5(a)(1) of the act—the so-called "General Duty Clause"—requires all employers to provide workplaces that are free of potentially harmful hazards. Second, the act mandates employer compliance with the Occupational Safety and Health Administration's (OSHA's) workplace safety standards. OSHA is responsible for enforcing the OSH Act, which it does by promulgating such workplace safety standards, conducting workplace inspections, and issuing citations to employers found to have violated the act.

The Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The MSPA generally protects migrant and seasonal workers in their dealings with agricultural employers, agricultural associations, and farm labor contractors. These protections include, for example, requiring payment of worker wages when due, requiring that workers receive itemized statements of earnings and deductions, and ensuring that any housing provided to workers complies with safety standards. The WHD administers and enforces the MSPA. Enforcement occurs through investigations, penalties, and petitions in district courts for injunctive relief. Additionally, the MSPA creates a private right of action for those aggrieved by violations of the act. Willful and knowing violations of the MSPA can lead to criminal penalties.

The National Labor Relations Act (NLRA). The NLRA provides private sector employees the right to unionize and engage in collective bargaining. The act is enforced by the National Labor Relations Board, which can, among other things, investigate charges of violations of the act, decide cases through orders, and seek enforcement of such orders in the appropriate U.S. Courts of Appeal.

The Davis-Bacon Act. The Davis-Bacon Act generally requires those who have contracts with the federal government or District of Columbia valued in excess of $2,000 for the construction of public buildings or public works to pay locally prevailing minimum wages and fringe benefits. Both the WHD and the relevant contracting agency are responsible for enforcing the Davis-Bacon Act. Enforcement can occur through investigations, withholding or suspending contract payments, or contract termination.

The Service Contract Act. The Service Contract Act generally applies to service contracts valued over $2,500 with the federal government or District of Columbia. The act requires covered contractors to pay service employees locally prevailing wages and fringe benefits, and to provide workplaces that are sanitary and free of hazards. As with the Davis-Bacon Act, both the WHD and the contracting agency enforce the Service Contract Act. Enforcement occurs through investigations, withholding of contract payments, or contract termination.

Executive Order 11246 on Equal Employment Opportunity. Executive Order 11246 prohibits covered contractors from discriminating in employment decisions based on race, color, religion, sex, sexual orientation, gender identity, or national origin. Regulations implementing the order also require contractors with 50 or more employees and $50,000 or more in contracts to have affirmative action plans to recruit and advance qualified minority and women workers. The Office of Federal Contract Compliance Programs (OFCCP) enforces Executive Order 11246 through compliance reviews, complaint investigations, and administrative or judicial proceedings.

Section 503 of the Rehabilitation Act of 1973 (Rehab Act). The Rehab Act requires covered contractors and subcontractors to take affirmative action to employ and advance qualified individuals with disabilities. The act also prohibits covered contractors and subcontractors from discriminating in employment decisions based on disability. OFCCP enforces the Rehab Act through compliance reviews, complaint investigations, and administrative or judicial proceedings.

The Vietnam Era Veterans' Readjustment Assistance Act of 1974 (VEVRA). VEVRA requires covered contractors and subcontractors to take affirmative action to employ and advance qualified veterans and prohibits these contractors and subcontractors from discriminating against veterans in employment decisions. OFCCP enforces VEVRA through compliance reviews, complaint investigations, and administrative or judicial proceedings.

The Family Medical Leave Act (FMLA). The FMLA generally entitles eligible employees to take 12 workweeks of job-protected, unpaid leave during a 12-month period for specified family and medical reasons with continued group health insurance. WHD is responsible for enforcing the FMLA, which it does by, for example, investigating complaints or bringing actions against employers to ensure compliance and recover damages. The FMLA also provides employees a private cause of action against employers that violate the FMLA.

Title VII of the Civil Rights Act of 1964 (Title VII). Title VII makes it illegal for an employer to discriminate against an employee on the basis of race, color, religion, national origin, or sex. The Equal Employment Opportunity Commission (EEOC) generally enforces Title VII, which it does through investigating complaints, seeking settlement, and, where appropriate, civil action in federal courts.

The Americans with Disabilities Act of 1990 (ADA). The ADA prohibits discrimination against individuals with disabilities in a range of activities, including transportation, public accommodations, communications, employment, and government services. Four agencies enforce the ADA. The EEOC enforces the provisions on employment, the Department of Transportation enforces provisions related to transit, the Federal Communications Commission enforces provisions covering telecommunication services, and the Department of Justice enforces the act's protections against discrimination in public accommodations and state and local government services.

The Age Discrimination in Employment Act of 1967 (ADEA). The ADEA prohibits age discrimination in employment against individuals who are at least 40 years old. The ADEA refers to FLSA's enforcement provisions, discussed above, and the two are enforced in similar ways—through investigations of complaints, actions to recover back wages, and injunctions to prevent additional violations. The act also provides employees with a private right of action.

Executive Order 13658 Establishing a Minimum Wage for Contractors. Executive Order 13658 requires that employees working under a service or construction contract or subcontract be paid a minimum wage of at least $10.10 per hour. The WHD is responsible for enforcing Executive Order 13658.

What state laws are to be seen as equivalent to covered federal laws?

Executive Order 13673 also calls for covered contractors and subcontractors to disclose violations of state laws that are equivalent to the 14 federal laws discussed above. The order does not identify state laws that are equivalent to these federal laws. The recently issued guidance and regulations partially implementing the order provide no additional clarity other than observing that OSHA-approved state health and safety regulatory plans are equivalent state laws. Both the order and the recently issued Department of Labor guidance anticipate future guidance identifying the state laws that are equivalent to the 14 earlier-mentioned federal laws.

What are labor compliance advisors (LCAs)?

Executive Order 13673 directs agencies to create a new senior position within each agency—the labor compliance advisor, or LCA. The order seems to anticipate LCAs having knowledge of labor laws that contracting officers and contractors may not have and using this knowledge to assist agency contracting personnel and contractors in complying with the order. LCAs will have two primary responsibilities: (1) they will guide agency contracting officers on proper courses of action after pre- and post-award disclosures of labor law violations; and (2) they will consult with contractors on compliance with labor laws and proper handling of subcontractor labor violations. These responsibilities relate entirely to the order's disclosure requirements, and have nothing to do with the order's paycheck transparency or arbitration requirements.

As mentioned previously in this report, prior to contract award, agency contracting officers will have to consider any disclosed labor law violations when determining contractor responsibility. Once the order is implemented, LCAs will advise contracting officers in evaluating whether these labor law violations render a contractor nonresponsible or warrant any other action (e.g., remedial measures, compliance assistance, action to prevent further violations, or referral to agency suspending and debarring officials). During contract performance, LCAs will similarly advise contracting officers of appropriate courses of action when contractors disclose violations of labor laws to the agency through their biannual updates. These courses of action can include appropriate remedial measures, compliance assistance, resolving issues to avoid further violations, contract termination, non-exercise of contract options, and referral to agency suspending and debarring officials.

In addition to aiding agency contracting officers, LCAs will be available to assist contractors in meeting their obligations under Executive Order 13673. Unlike agency contracting personnel, who generally will be required to consult with LCAs under the order, contractors will have no obligation to solicit LCA guidance. Rather, LCAs will be available to contractors who wish to use them. LCAs can "coordinate assistance" between contractors that want help in addressing and preventing violations of labor laws and relevant enforcement agencies, and, along with agency contracting officers and the Department of Labor, can assist contractors in handling subcontractor disclosures of labor violations.

The Order in Comparison to Existing Law

The questions and answers in this section examine how the requirements of Executive Order 13673 compare to current law and what, if any, changes the order may make to the implementation of federal procurement law. They address (1) agencies' authority to consider violations of labor law in the procurement process prior to Executive Order 13673; (2) the factors agencies have historically considered when assessing vendors' integrity and business ethics in the responsibility determination process; (3) whether labor law violations will factor directly into source selection when Executive Order 13673 is implemented; (4) whether the order will result in prequalification of vendors; (5) whether vendors who disclose labor law violations will be debarred or suspended from government contracts; and (6) whether the order will result in any changes to the Certificate of Competency (COC) process used in determining the responsibility of small businesses.

Did agencies have the authority to consider labor law violations in the procurement process prior to Executive Order 13673?

As previously noted, Executive Order 13673 requires contractors to disclose information regarding their compliance with 14 federal labor laws and their state equivalents, which procuring agencies are then required to consider when making responsibility determinations. (See " What does the executive order require? "). Neither the disclosure of labor law violations, per se , nor the consideration of such violations in the responsibility determination process was required prior to the issuance of the executive order. However, the absence of such requirements does not mean that agencies lacked the authority to consider contractors' compliance with labor laws before the order was issued. Rather, as discussed below, agencies could have considered at least certain labor law violations pursuant to their authority to (1) make responsibility determinations; (2) establish qualification requirements and evaluation factors; and (3) debar and suspend contractors. Any consideration given to labor law violations was, however, generally within agency officials' discretion prior to the issuance of Executive Order 13673, rather than required, as it is under the order. Also, the types of violations considered prior to the order tended to be more limited than those to be considered under the order.

Responsibility Determinations

Prior to Executive Order 13673, agencies had discretion to consider labor law violations while making contractor responsibility determinations during the procurement process. As previously noted, agency contracting officers are generally required to determine that prospective vendors are "affirmatively responsible" for purposes of each individual contract prior to contract award. Vendors who are not seen as affirmatively responsible are "nonresponsible," and are ineligible to be awarded a contract. Responsibility has historically been determined by considering seven "general standards" prescribed in statute and the Federal Acquisition Regulation (FAR), which assess whether the vendor has the requisite facilities, personnel, experience, financial resources, and personal attributes to perform the contract. Depending upon the facts and circumstances of the case, labor law violations could be relevant to any of these factors. Most commonly, though, labor law violations appear to have been considered in determining whether contractors satisfied the general standard of having a "satisfactory record of integrity and business ethics." This is because, as discussed below, in assessing this standard, agency contracting officers historically considered whether the contractor, or its principals, officers, or employees, had been convicted or indicted for criminal offenses. (See " What has historically been considered in assessing integrity in the responsibility determination process? "). Such offenses could have involved labor laws; however, contracting officers were generally seen to have broad discretion as to whether they considered criminal offenses, indictments, or other violations involving labor laws in the responsibility determination process prior to 2008. They were not required to consider this information, as they are under Executive Order 13673.

In 2008, Congress established the Federal Awardee Performance and Integrity Information System (FAPIIS) and required contracting officers to consult the information contained in it when making responsibility determinations. FAPIIS includes, among other things, information on convictions and certain findings of fault or liability involving federal contractors or grantees holding awards valued in excess of $10 million (total), or their principal officers, within the past five years "in connection with the award ... or performance ... of a Federal contract or grant." While the creation of FAPIIS may have made it more likely that contracting officers would consider certain labor law violations, FAPIIS's information is more limited than the information that would be considered under Executive Order 13673. FAPIIS includes only convictions and certain findings of fault or liability involving "larger" contractors and grantees within the past five years "in connection with" the award or performance of a federal contract or grant. The labor law violations to be disclosed under Executive Order 13673, in contrast, are not limited to ones "in connection with" a federal contract or grant. Executive Order 13673's disclosure requirements also apply to vendors that do not have contracts or grants valued in excess of $10 million, so long as the vendor has one contract whose value exceeds $500,000.

Specifications and Evaluation Factors

Other authorities that agencies could potentially have relied upon to consider labor law violations prior to Executive Order 13673 are those regarding agency specifications and evaluation factors. Specifications are descriptions of agencies' technical requirements for supplies or services that include criteria for determining whether those requirements are met , while evaluation factors are factors used by agencies in so-called "negotiated procurement" to determine which proposal represents the "best value" for the government. Prior to Executive Order 13673, agencies could have drafted specifications that took vendors' compliance with labor laws into account, which, in turn, could have resulted in the bids or offers of vendors who had committed certain violations being found to be nonresponsive and thus ineligible for selection. Agencies could similarly have drafted evaluation factors that gave certain weight in the selection process to vendors' compliance with labor laws, making vendors with poor records of compliance less likely to be selected for award.

In practice, however, consideration of labor law violations in these contexts appears to have been limited, in part, because of certain legal requirements regarding specifications and evaluation factors. Specifically, the Competition in Contracting Act (CICA) of 1984, as amended, generally requires agencies to "develop specifications in the manner necessary to obtain full and open competition with due regard to the nature of the property or services to be acquired." The regulations implementing CICA further require that the evaluation factors developed by procuring agencies represent "key areas of importance and emphasis to be considered in the source selection decision" and "support meaningful comparison and discrimination between and among competing proposals." In other words, agencies' use of specifications or evaluation factors taking into consideration labor law violations could generally withstand legal challenges only if such consideration was seen as reasonably related to the agency's minimum needs, and not an attempt to "prefer" one vendor or group of vendors over others for reasons unrelated to the agency's specific needs.

Debarment and Suspension

Certain labor law violations could also have been considered in the procurement process prior to Executive Order 13673 pursuant to agencies' authority to debar or suspend (collectively known as "exclude") contractors. The FAR expressly authorizes debarment from government contracting—or exclusion for a prescribed period of time (often three years)—for "any ... cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor," as well as for other grounds discussed below. (See " Will contractors who disclose violations be debarred or suspended? "). It similarly authorizes suspension—or temporary exclusion pending the outcome of an investigation of the vendor's conduct or legal proceedings—on this ground. These grounds could have resulted in the exclusion of contractors who committed certain violations of labor laws prior to Executive Order 13673. In addition, some federal labor laws—including the Davis-Bacon, Service Contract, Walsh-Healy, and Drug-Free Workplace Acts—specifically require or authorize exclusion from government contracts for convictions or other violations. However, whether any labor law violations are considered in exclusion proceedings is generally seen to be within agency officials' discretion. Agency officials generally also have discretion as to whether vendors are debarred or suspended.

What has historically been considered in assessing integrity in the responsibility determination process?

Federal statutes and regulations do not define what is meant by "integrity" in the responsibility determination process. Instead, the term has been interpreted by judicial and administrative tribunals to have "its generally accepted connotation of uprightness of character, moral soundness, honesty, probity, and freedom from corrupting influence or practice." Consistent with this interpretation, one prominent treatise on government procurement has noted that "most cases" in which a contractor was determined to be nonresponsible based on lack of integrity have involved criminal offenses by the contractor or the contractor's employees. For example, in one early decision, Domco Chemical Corporation , the Government Accountability Office (GAO) denied a protest of a nonresponsibility determination based on lack of integrity where a contractor employee had been convicted for criminal offenses, income tax evasion, and fraud, and an officer had been indicted. Subsequently, in Traffic Moving Systems, Inc. , GAO similarly denied a protest of a nonresponsibility determination based on the criminal conviction of the corporation's president.

In other cases, nonresponsibility determinations based on lack of integrity have resulted where an agency finds grounds for suspension, typically involving violations of criminal statutes; or criminal investigation reports suggest wrongdoing. Additional grounds have been raised in specific cases, although non-criminal-related grounds seem to have resulted in determinations of nonresponsibility based on lack of integrity less frequently than criminal-related grounds have.

Will labor violations factor directly into source selection?

Executive Order 13673 and its proposed implementing guidance and regulations do not contemplate that contractors' labor violations (or lack thereof) will factor directly into the source selection process in the sense that the vendor with the better record as to labor violations necessarily wins. Instead, under the proposed FAR amendments implementing the order, prospective vendors would be required to represent, as part of their bid or offer, and semiannually thereafter, whether

any administrative merits determination, arbitral award or decision, or civil judgment [was] rendered against [them] within the three-year period prior to the date of [their] offer for violations of labor laws.

Any contractors that fail to make the requisite representation would apparently be ineligible for an award insofar as their bids or offers would be nonresponsive to the terms of the solicitation.

The contracting officer would then review the bids or offers to determine which one is the lowest priced or represents the "best value" for the government. It is at this point that the contracting officer would assess the responsibility of the vendor(s) in line for the proposed award and, in the case of contractors who had represented that they had been implicated in covered labor violations, the contracting officer would request or review information regarding the law(s) violated. The contracting officer would also invite the vendor to submit any additional information that it deems necessary to establish its responsibility (e.g., mitigating circumstances, remedial measures). The contracting officer would consider all this information in determining whether the vendor is to be seen as responsible for purposes of the contract award. If the vendor were deemed nonresponsible, the contracting officer would turn to the next lowest priced bidder, in the case of procurements conducted via sealed bidding, or the next most highly rated offeror, in the case of negotiated procurements, and assess that vendor's responsibility. (The contracting officer could also refer the vendor to agency suspending and debarring officials for exclusion, as discussed below. See " Will contractors who disclose violations be debarred or suspended? ").

At no point in this process would the contracting officer weigh Vendor A's record of compliance with labor laws against Vendor B's record in determining which bid is the lowest priced, or which offer represents the "best value." Some commentators have called for vendors' record of compliance with labor and employment laws to be utilized in this way. However, to date, this is not the approach the Obama Administration has adopted.

Will the executive order result in prequalification of contractors?

Executive Order 13673 does not appear to contemplate the prequalification of vendors, or the development of a qualified bidders list, based on contractors' disclosures. Prequalification involves the determination of a vendor's responsibility prior to any solicitation; that is, the "determination of an offeror's eligibility to compete for a government contract." Some states that currently require consideration of contractors' labor law violations in the award of contracts, as Executive Order 13673 does through the responsibility determination process, also rely upon prequalification of vendors. For example, Connecticut bars the award of contracts to persons who have "been cited for three or more willful or serious violations of any occupational safety or health [(OSH)] act" or meet certain other criteria. It also generally provides for persons to apply for prequalification for state contracts, a process that includes consideration of whether the applicant is disqualified for OSH violations, among other things.

Federal law, however, arguably calls for a different approach, particularly when the executive acts without express statutory authority requiring or permitting the use of prequalification. This is because the Competition in Contracting Act of 1984, as amended, generally constrains agencies' use of qualification requirements , or "requirements for testing or other quality assurance demonstration that must be completed by an offeror before award of a contract." Among other things, CICA prescribes that agencies take specified steps prior to enforcing any qualification requirement. These steps include (1) preparing a written justification stating the necessity for the requirement and why the requirement must be demonstrated before award; and (2) specifying in writing all requirements that offerors (or products) must satisfy to become qualified, with these "requirements to be limited to those least restrictive to meet the purposes necessitating the establishment of the ... requirement." CICA's provisions here have generally been seen to limit (although not prohibit) the use of prequalification by federal agencies.

Will contractors who disclose violations be debarred or suspended?

Contractors who disclose violations of labor laws pursuant to Executive Order 13673 could potentially face debarment or suspension (collectively known as exclusion) as a result of their disclosures, but would not necessarily be excluded as a consequence of disclosing one or more violations. ( Debarment is an exclusion from government contracting for a prescribed period of time (often three years), while suspension is a temporary exclusion, pending an investigation of the vendor's conduct or legal proceedings involving the vendor.) Executive Order 13673 contemplates agency contracting officers and labor compliance advisors referring matters disclosed to them by contractors to agency suspending and debarring officials for consideration "in accordance with agency procedure." However, it does not purport to require such referral in every case, or in any specific case or cases. Instead, it leaves contracting officers and labor compliance advisors with discretion to determine if and when particular disclosures should be referred to the suspending and debarring officials.

Once a referral is made, suspending and debarring officials would consider whether the disclosed information involves a ground for exclusion under the FAR. As previously noted, these grounds encompass "any ... cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor," as well as other grounds noted in Table 1 below. One or more of these grounds could potentially be found to apply depending upon the facts and circumstances of the case. However, any debarment or suspension proceeding that is conducted would have to comport with the requirements of the FAR, which generally provides for contractors to receive notice and an opportunity for a hearing regarding their exclusion. Such hearings are to take place before any debarment, although they could potentially take place after a suspension. These procedural requirements are intended to protect contractors' due process rights in the exclusion process.

Where the facts and circumstances of the case are such that multiple determinations of nonresponsibility might be made over time based on the same information, agency officials could potentially be inclined toward exclusion in order to avoid the allegations of impermissible de facto debarment that could follow from repeated determinations of nonresponsibility, as discussed below. (See "" What is de facto debarment, and will implementation of the order result in de facto debarment of contractors? ""). In other cases, however, agency officials may be more likely to encourage contractors whose disclosed violations could constitute grounds for exclusion to enter into labor compliance agreements than they are to debar or suspend them. Several provisions in the proposed materials implementing Executive Order 13673 could be read to suggest a preference for such agreements, rather than for exclusion.

Will there be changes in the Certificate of Competency process used in determining the responsibility of small businesses?

The standard responsibility determination process, previously noted (see " Did agencies have the authority to consider labor law violations in the procurement process prior to Executive Order 13673? "), is somewhat different in cases involving "small businesses." While the contracting officers of the procuring agencies are the arbiters of whether other-than-small businesses are seen to be responsible sources, Section 8(b)(7) of the Small Business Act of 1958, as amended, provides that the Small Business Administration (SBA)—not the contracting officer—is to determine whether small businesses constitute responsible sources. In particular, Section 8(b)(7) requires that agency contracting officers refer the cases of any "otherwise qualified" small businesses that may be seen as nonresponsible to the SBA, which is to investigate the matter and may then certify to the procuring agency as to "all elements of [the firm's] responsibility, including, but not limited to, capability, competency, capacity, credit, integrity , perseverance, and tenacity." If the SBA issues such a certification, known as a Certificate of Competency, the procuring agency is required to accept the SBA's judgment, and may not require the small business to meet "any other requirements of responsibility."

Neither Executive Order 13673 nor its proposed implementing materials, to date, appear to contemplate any changes in the Certificate of Competency process. This process could potentially serve to lessen somewhat any adverse effects of the order on small businesses—a topic of concern to some commentators —by providing a check upon agency contracting officers and labor compliance advisors and protecting small businesses from nonresponsibility determinations in borderline cases. However, it seems likely that the SBA would continue to base its determinations as to whether to grant certificates of competency upon the same general standards of responsibility used by the procuring agencies and, thus, would also take any reported violations of labor law into consideration when determining whether to issue a certificate of competency.

Other Questions

The questions and answers in this section address the President's authority to impose the requirements of Executive Order 13673, as well as de facto debarment, challenges to responsibility determinations, contractor representations and disclosures on other matters, and penalties for false certifications. This section also addresses the relationship between Executive Order 13673 and certain amendments made to the FAR by the Clinton Administration and subsequently revoked, and potential congressional responses to the executive order.

What is the President's authority to impose these requirements?

When issuing Executive Order 13673, President Obama expressly noted the authority of 40 U.S.C. §121 and the promotion of "economy and efficiency" in federal contracting. In so doing, he referenced the specific citation to and general language of provisions of the Federal Property and Administrative Services Act of 1949 (FPASA), as amended, which authorize the President to "prescribe policies and directives that [he] considers necessary" to provide the "Federal Government with an economical and efficient system for ... [p]rocuring and supplying property and ... services," among other things. This is the same authority that President Obama and other Presidents have previously relied upon when imposing requirements upon the procurement process, as Table 2 illustrates.

Many requirements imposed by Presidents under the authority of FPASA have been seen to involve "housekeeping" matters, and have not been subject to legal challenge. However, certain requirements have been challenged on the grounds that they exceed the President's authority. Such challenges have generally failed where a "sufficiently close nexus" between the challenged requirements and economy and efficiency in federal procurement is seen to exist. In applying this "nexus test" in AFL-CIO v. Kahn , the U.S. Court of Appeals for the District of Columbia Circuit expressly noted that economy and efficiency are "not narrow terms," and can encompass factors such as "price, quality, suitability, and availability of goods or services." Subsequent courts have taken a similarly broad view, finding that challenged requirements have the requisite nexus if they can be said to have an "attenuated link" to economy and efficiency in procurement, or if the President's explanation for how an order promotes efficiency and economy is "reasonable and rational."

Only those requirements which are seen to have too attenuated a link to economy and efficiency, or which are specifically barred by a federal statute, will generally be invalidated. Neither seems likely here under current precedents, at least as to the labor violation provisions that are generally the focus of discussions of Executive Order 13673. President Obama, the Department of Labor, and the FAR Council have all proffered explanations of how disclosure of contractors' labor law violations will promote economy and efficiency in procurement. For example, in issuing its proposed guidance regarding what violations are to be considered in implementing the order, DOL emphasized that contractors' labor law violations

create risks to the timely, predictable, and satisfactory delivery of goods and services to the Federal Government, and federal agencies risk poor performance by awarding contracts to companies with histories of labor law violations. Poor workplace conditions lead to lower productivity and creativity, increased workplace disruptions, and increased workforce turnover. For contracting agencies, this means receipt of lower quality products and services, and increased risk of project delays and cost overruns.

Given such statements, the link between the labor law disclosure requirements and economy and efficiency appears unlikely to be seen as too attenuated—or unreasonable or irrational—under current precedents, which have opined that an alleged link to procurement is not to be seen as too attenuated just because "one can with a straight face advance an argument claiming opposite effects or no effects at all." The Kahn court similarly noted that economy and efficiency can be said to result even if challenged requirements could result in higher prices. Also, no conflicts between specific statutory requirements and the disclosure or consideration of labor law violations in the responsibility determination process have been noted to date.

What is de facto debarment, and will implementation of the order result in de facto debarment of contractors?

The term de facto debarment generally refers to exclusion outside of the formal suspension and debarment process. It can be seen as improper on this basis alone, because it involves agency action that is not in compliance with the law. In addition, conduct that constitutes de facto debarment can be seen to violate contractors' rights to due process by depriving them of protected liberty interests in being able to challenge allegations about their integrity that could deprive them of their livelihood without notice or an opportunity for a hearing. As was previously discussed, notice and an opportunity for a hearing are provided in exclusion proceedings. (See " Will contractors who disclose violations be debarred or suspended? "). However, they are generally not provided in the responsibility determination process. Repeated determinations of nonresponsibility made upon the same basis have been found to constitute impermissible de facto debarment, as have agency statements or conduct evidencing a refusal to do business with a contractor without formally excluding the contractor.

Some commentators have expressed concern that implementation of Executive Order 13673 will result in the de facto debarment of contractors who disclose labor law violations. Others disagree, arguing that vendors will receive more procedural protections under the executive order than under current law, which, as previously noted, generally does not provide for vendors to receive notice or an opportunity for a hearing before being determined to be nonresponsible. Which of these two views proves to be correct seems likely to depend upon how Executive Order 13673 is implemented by the procuring agencies.

The potential for impermissible de facto debarment could be said to exist, particularly insofar as the order can be seen as an attempt to standardize agencies' consideration of labor law violations in the responsibility determination process. Standardization could make it more likely for multiple contracting officers to make the same determination as to responsibility based on the same information. Multiple determinations of nonresponsibility based on the same information are not necessarily impermissible, particularly if that information is the most recent information available. However, the order expressly calls for contracting officers to consider labor law violations over the past three years when making responsibility determinations, and determinations based on the same older information could be more likely to be seen as a systematic attempt to exclude a vendor outside the formal exclusion process, than as the result of individual contracting officers independently reaching the same conclusion.

On the other hand, agencies could potentially develop practices or procedures whereby they routinely pursue exclusion or labor compliance agreements in situations where there could be multiple determinations of nonresponsibility based on the same older information. If that were the case, de facto debarment could potentially be avoided, although labor rights activists and competing vendors might then raise concerns about the award of contracts to entities that they believe ought to have been found nonresponsible based on their labor law violations. (See below " Can nonresponsibility determinations be challenged? ").

Can nonresponsibility determinations be challenged?

As previously noted, contractors are generally not entitled to notice and an opportunity for a hearing prior to being found nonresponsible for the award of a federal contract (see " What is de facto debarment, and will implementation of the order result in de facto debarment of contractors? "). The cases of any "otherwise qualified" small business contractors who might be found nonresponsible must be referred to the SBA, which may certify as to the firm's responsibility (see " Will there be changes in the Certificate of Competency process used in determining the responsibility of small businesses? "). Outside of the SBA Certificate of Competency process, however, the FAR does not make any provisions for review or appeal of contracting officers' determinations as to responsibility within (or outside) the procuring agency.

These determinations could, however, potentially be challenged in the course of a bid protest before the procuring agency, the Government Accountability Office, or the U.S. Court of Federal Claims, the three forums with jurisdiction over bid protests. In such a protest, a vendor that was denied an award because it was found to be nonresponsible could contest that determination on the grounds that the determination is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Alternatively, a vendor that lost an award to a competitor which was found to be affirmatively responsible could seek to challenge that determination, although GAO regulations, in particular, permit challenges to affirmative determinations of responsibility only in narrow circumstances.

Prevailing in such bid protests could be difficult, though, because the reviewing tribunals afford substantial deference to the contracting officers' determinations as to responsibility on the grounds these determinations are committed to agency discretion by law, and the procuring agencies "must bear the brunt of any difficulties experienced during performance." This generally means that the protester must show that the contracting officer's determination lacked "any reasonable basis," or was arbitrary or made in bad faith. Moreover, in cases of nonresponsibility determinations, review is generally limited to the information available to the contracting officer at the time of the determination. The review could potentially encompass information not considered by the contracting officer in cases where the contracting officer has made an affirmative determination of responsibility. However, affirmative determinations of responsibility are not necessarily seen as invalid just because information exists that is adverse to the contractor, so long as this information was known to and not ignored by the contracting officer when making the determination. Limitations on jurisdiction and standing could also effectively limit vendors' ability to challenge responsibility determinations in certain cases, since the protest forums will generally only hear protests that are seen to be timely. The protester may also be required to show that any alleged violations of the law are prejudicial to it, in the sense that the protester would be in line for the award but for the alleged violation.

Are government contractors required to make other representations or disclosures?

The proposed FAR amendments implementing Executive Order 13673 call for contractors to represent whether there has been any "administrative merits determination, arbitral award or decision, or civil judgment, rendered against [them] within the three-year period preceding the date of the offer for violations of labor laws." In addition, in cases where a contractor which has represented that there has been such a determination or judgment is the subject of a responsibility determination because the contractor is line for an award, that contractor must disclose "[t]he labor law violated" and other information to the contracting officer.

If these proposed requirements are implemented, the representations and disclosures as to labor law violations would not be the only representations or disclosures that federal contractors are required to make in responding to solicitations or as terms of their contracts. Currently, contractors are required to make representations or certifications regarding whether, among other things, they (1) are inverted domestic corporations; (2) have delinquent federal taxes in an amount greater than $3,000; or (3) have been convicted of or subject to a civil judgment for specified offenses, including fraud or a criminal offense in obtaining a government contract or subcontract. Federal contractors are also required to disclose certain information, including

information "sufficient" to identify the nature and extent of any human trafficking offense and the individual(s) responsible for the conduct; any personal conflict-of-interest violation by a contractor employee performing acquisition functions closely associated with inherently governmental functions; and "credible evidence" that a principal, employee, agent, or subcontractor of the contractor has committed a violation of federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code, a violation of the civil False Claims Act, or significant overpayments in connection with the award, performance, or closeout of the contract or any subcontract thereunder.

What would happen if a contractor falsely certifies as to its labor law violations?

The government has a number of potential avenues of recourse if a contractor were to falsely represents that "[t]here has been no administrative merits determination, arbitral award or decision, or civil judgment, rendered against [it] within the three-year period preceding the date of the offer for violations of labor laws," as is required under the proposed FAR clause. This proposed clause expressly states that

If it is later determined that the Offeror knowingly rendered an erroneous representation, in addition to other remedies available to the Government, the Contracting Officer may [but is not required to] terminate the contract resulting from this solicitation in accordance with the procedures set forth in [the FAR].

Depending upon the facts and circumstances of the case, "other remedies" could include, but are not limited to, liquidated damages, equitable reductions in price or other consideration, reprocurement at the contractor's expense, and reduction or withholding of award or incentive fees. The contractor could also be subject to negative performance evaluations or debarment or suspension. Monetary damages for fraud are also possible, under the civil False Claims Act, the Contract Disputes Act, or the Program Fraud Civil Remedies Act, as discussed in CRS Report R43460, Contractor Fraud Against the Federal Government: Selected Federal Civil Remedies , by [author name scrubbed].

How does Executive Order 13673 compare to the Clinton Administration's contractor responsibility regulation?

Commentators have noted similarities between the Fair Pay and Safe Workplaces order and certain amendments that were made to the FAR by the Clinton Administration and subsequently revoked by the George W. Bush Administration. The Clinton Administration's amendments could be said to resemble the Fair Pay and Safe Workplaces order in that they called for contracting officers to consider prospective vendors' "compliance" with legal requirements in determining whether vendors have a satisfactory record of integrity and business ethics, as Executive Order 13673 does (see " What does the executive order require? "). The Clinton-era amendments also called for vendors to make certain representations and disclosures about whether they have been subject to specified legal actions related to violations of covered laws, as the FAR amendments proposed by the Obama Administration would do.

On the other hand, there are some notable differences between the Clinton Administration's amendments to the FAR and the FAR amendments proposed, to date, by the Obama Administration to implement the Fair Pay and Safe Workplaces order. For example, the Clinton Administration considered compliance with the broad categories of "tax laws, labor and employment laws, environmental laws, antitrust laws, and consumer protection laws," while the Obama Administration focuses upon compliance with 14 specific federal labor and employment laws and their state equivalents. The Clinton Administration also amended the "general standards" of responsibility in Section 9.104-1 of the FAR to prescribe that vendors

[h]ave a satisfactory record of integrity and business ethics including satisfactory compliance with the law including tax laws, labor and employment laws, antitrust laws, and consumer protection laws.

The Obama Administration, in contrast, does not propose to amend these standards, but instead would address compliance with labor laws primarily in a new Subpart 22.20 of the FAR, one provision of which would specify that

[t]he contracting officer['s] duty to consider labor violations under this paragraph [which addresses pre-award evaluation of an offeror's labor violations] is in addition to the contracting officer['s] duties under 9.104-5 and 9.104-6 [which are among the FAR provisions addressing responsibility determinations generally].

In addition, the Clinton Administration amended the FAR provisions regarding the rejection of bids and notifications to unsuccessful offerors to require that contracting officers promptly notify vendors of nonresponsibility determinations and the basis for such determinations. The Obama Administration has not proposed any such changes to date, instead leaving in place the preexisting rules regarding notifications of nonresponsibility determinations (i.e., such notifications are generally not made).

The Clinton Administration's amendments were revoked by the George W. Bush Administration shortly after their effective date, making it difficult to assess what their effects on the procurement process would have been. Subsequently, on December 1, 2011, the Department of Agriculture promulgated regulations calling for the incorporation into its contracts of standard terms regarding "labor law violations," which would have specified that,

In accepting this contract award, the contractor certifies that it is in compliance with all applicable labor laws and that, to the best of its knowledge, its subcontractors of any tier, and suppliers, are also in compliance with all applicable labor laws.

Under these terms, the contractor would also have agreed to "promptly report" to the contracting officer any "formal allegations" or "formal findings" of "non-compliance" with labor laws. However, like the Clinton Administration's FAR amendments, these regulations were withdrawn prior to their effective date.

What are Congress's options in response to the order?

Congress could potentially take various actions—or no action—in response to Executive Order 13673, depending upon its policy preferences. If opposition to the order and its requirements is sufficiently widespread, Congress could enact legislation that would bar implementation of the order. Such legislation could take the form of an appropriations rider, barring the use of appropriated funds to promulgate the proposed FAR amendments or to implement any FAR provisions requiring that contractors disclose violations of labor laws. Alternatively, Congress could amend existing procurement or other statutes in such a way that these statutes would be contrary to the requirements of the executive order, as Congress did in 2011 in response to a draft executive order reportedly being considered by the Obama Administration that would have required contractors to disclose their political contributions. As previously discussed, the President's authority under FPASA has not been seen to permit the President to impose requirements upon the procurement process that conflict with statutory enactments. (See " What is the President's authority to impose these requirements? ").

On the other hand, if Congress were to favor the disclosure requirements, it could enact legislation to codify these requirements, thereby ensuring that they are not repealed by a subsequent administration. Certain procurement-related executive orders issued by prior Presidents have been revoked by later Presidents. Supporters of the policies underlying the executive order could also enact legislation to make any desired expansions, clarifications, or refinements of the labor violation disclosure or other requirements. For example, in 2008, Congress enacted legislation that extended the so-called "mandatory disclosure rule," which requires contractors to disclose "credible evidence" of certain criminal violations, among other things, then being developed by the executive, to encompass contracts for commercial items or performed overseas. Such contracts had been excluded by the executive in earlier versions of the rule.