Piliero, Mazza & Pargament, PLLC   Vol. 3, Issue 1    January/February 2001

An Update for Federal Contractors and Commercial Businesses


GOVERNMENT CONTRACTS Competition Under GSA Schedules Criticized by GAO

BUSINESS New OSHA Ergonomic Regulations – What is Required of Companies?

GOVERNMENT CONTRACTS New Responsibility Regulations to Take Effect January 19, 2001



Competition Under GSA Schedules Criticized by GAO

The General Accounting Office (GAO) recently issued a report which concludes that Department of Defense (DoD) contracting officials are often failing to obtain competitive quotes before placing orders for services through the General Service Administration's Federal Supply Schedules (FSS). According to the GAO, this is undermining DoD's ability to ensure it is getting the best services at the best prices.

The report, entitled "Contracting Management: Not Following Procedures Undermines Best Pricing Under GSA's Schedule," November 28, 2000, was the result of a nine month review. The GAO reviewed 22 orders valued at $112.7 million.

According to special ordering procedures implemented by the GSA in 1998 for "services," agencies are required to: (i) prepare a request for quotes; (ii) send the request to at least three FSS contractors based on an initial evaluation of catalogs and price lists; and (iii) evaluate the quotes and select the contractor to receive the order based on factors identified in the request. These procedures also require the ordering office to consider the level of effort and labor mix proposed to perform specific tasks.

The GAO found, however, that in 17 of the 22 orders that were placed (totaling $60.5 million) contracting officers failed to request quotes from multiple FSS contractors, mostly because they were unaware of the GSA's requirement that they do so. Instead, the contracting officers simply compared the labor rates of various contractors. This frequently resulted in making awards to incumbent contractors. The GAO criticized this practice because labor rates alone do not reflect the full cost of the order or other important aspects of the service (e.g., number of hours, mix of labor skill categories).

The report also identified the lack of clear guidance in the Federal Acquisition Regulation (FAR) as a contributing factor to this problem. The FAR does not distinguish between services and products, nor does it disclose that special "service" ordering procedures exist. Not surprisingly, the GAO recommends that the FAR be revised to incorporate the GSA's special ordering procedures. The GAO also recommends that the FAR clearly describe procedures to be used for ordering various types of services and when they should be used.

The GAO's review also revealed that four orders were placed on a "sole-source" basis. The GAO recognized that the GSA's 1998 special ordering procedures do not address sole-source orders, but noted that in 2000, the procedures were revised to include a statement that sole-source awards are not authorized. The GAO report recommends that the FAR be revised to state whether sole-source orders will be permitted, and if so, the steps that contracting officers must take to ensure that prices are fair and reasonable, and that the orders will result in the lowest overall cost alternative to meet the government's needs.



New OSHA Ergonomic Regulations – What is Required of Companies?

Ten years in the making, the Occupational Safety and Health Administration (OSHA) issued a final rule on ergonomic standards on November 14th, 2000. The standards seek to create a mechanism to lower rates of musculoskeletal disorders (MSDs) within the workplace. OSHA estimates that there are 1.8 million reports of work-related MSDs reported annually.

The final rule drew immediate criticism from much of the business industry, which deemed the regulations to be vague, costly and ineffective. Numerous lawsuits have been filed by a number of employer and insurance groups to prevent the regulation's implementation date of January 16, 2001. Supporters of the final rule respond that the new regulations will help decrease injuries such as carpal tunnel syndrome, back injuries and tendinitis that are caused by repetitive and other activities in the workplace.

Under OSHA's final rule, employers will have to prepare for compliance with the rule by October 15, 2001. On or before October 15, employers must distribute information about the new standards to employees. After October 15, all reporting requirements become applicable to qualified employers. OSHA estimates that 102 million workers at 6.1 million worksites are covered under the regulations. Those exempt from the regulations include employees that are covered by OSHA's agriculture, construction or maritime standards, as well as those employees employed in railroad operations. Additionally, a "grandfather clause" exists in the regulations for companies that have already implemented ergonomics programs if they meet certain conditions and include in their programs the provisions required by the new standard.

The rule outlines a multi-step process that must be followed by employers when examining and dealing with an employee's MSD. Upon the reporting of such an injury by an employee, an employer has 7 days to determine whether the employee's position has risk factors that meet an "action trigger" that requires an MSD prevention program for the position. To trigger the next step in the process, the injury must (1) meet the definition of a work-related MSD incident, and (2) the MSD must relate to the employee's job and must routinely involve exposures to risk such as repetition of activity, heavy lifting, awkward postures, contact stress and/or vibration. A MSD is defined as a "disorder of the muscles, nerves, tendons, ligaments, joints, cartilage, blood vessels, or spinal discs" in certain specified areas of the body. The MSD can be acute or chronic. If these two conditions are met, the "action trigger" designed to prevent further injuries is placed into effect.

Within seven days of the determination that further action is necessary, the injured employee must be granted access to a health care individual and any necessary work restrictions (including time off) must be implemented. Subsequently, within 90 days, the employer must train workers in setting up and managing an ergonomics program, conduct a job hazard analysis, and give further training once the program is implemented. After 90 days, the initial controls to prevent MSDs must be implemented. Three years after the program is implemented, the employer must evaluate the program to determine if MSDs have been reduced among employees.

Employers that have only had a few isolated MSD incidents can qualify for the "quick fix" mechanism in the regulations. Under this procedure, and employer can quickly identify and address concerns within 90 days without additional procedural requirements. An employer qualifies for this mechanism when there has been only one prior MSD incident in a particular job and only two MSD incidents in the business as a whole over the previous 18 months. OSHA designed this provision specifically as a means for small businesses to streamline regulations that could be potentially burdensome on them, although the "quick fix" option remains open to all businesses that qualify, regardless of size.

Critics of the program have attacked the regulation with numerous arguments as to why the new OSHA standards should be struck down. First, they argue that medical science does not adequately support the need for these standards. Furthermore, many of the lawsuits claim that the standards are too vague, and as a result, they neither meet constitutional standards nor those under the Administrative Procedure Act (APA), which governs agency procedural and substantive requirements. Finally, the argument has been made that OSHA's final standards are so far removed from the original 1999 proposal that, in essence, new and unforeseen standards were created. These critics contend that an additional notice and comment period should have been required. Without this notice and comment, they argue, the rule does not meet minimal APA procedural guidelines.

At this time, President-elect Bush and the incoming administration have only stated that they will review OSHA's new regulations carefully. Because the regulations were issued more than 60 days before the end of the Clinton administration, President-elect Bush cannot issue an executive order stopping the regulations from taking effect, although he can grant an administrative stay on the OSHA rule. Congress could also choose to become involved and invoke the as-of-yet unused Congressional Review Act, which became law in 1996. Under this Act, Congress can pass a joint resolution of disapproval on an agency rule within 60 legislative days of the rule's enactment. The joint resolution of disapproval would strike down the agency regulations in their entirety.



New Responsibility Regulations to Take Effect January 19, 2001

The Federal Acquisition Regulatory Council (FAR Council) issued a final rule on December 20, 2000, "clarifying what constitutes a 'satisfactory record of integrity and business ethics' for making contractor responsibility determinations. The final rule, which revises the responsibility regulations at FAR Part 9, requires federal contracting officers to consider a prospective contractor's record of compliance with non-procurement related laws when awarding federal contracts.

The new regulations have been the subject of much controversy. Opponents of the regulations contend that they will result in "blacklisting" contractors for violations of laws that are wholly unrelated to the contractor's ability to responsibly perform a government contract. The FAR Council contends that the new regulations are necessary because the current regulations do not provide sufficient guidance to contracting officers in determining whether a contractor has a satisfactory record of integrity and business ethics as required by FAR § 9.104-1. The FAR council maintains that this lack of guidance has resulted in contract awards to "firms that have violated procurement and other federal laws, sometimes repeatedly."

Under the new law, contracting officers will be required to consider whether prospective awardees have violated a variety of federal laws, including tax, labor and employment, environmental, antitrust and consumer protection laws. The new regulations are intended to provide guidance to contracting officers in determining whether a violation of these laws should render a contractor nonresponsible. Under the new regulations, contracting officers are instructed to give greatest weight to laws that have been violated within the three years preceding a contractor's submission of an offer or bid. The regulations caution that a single violation of law will not "normally" give rise to a determination of nonresponsibility. Rather, the focus should be on repeated, pervasive or significant violations of law. The final regulations require that contracting officers consider information regarding violations in the following descending order of importance:

  1. Convictions of and civil judgments entered against a prospective contractor for: (a) commissions of fraud or a criminal offense in connection with obtaining, attempting to obtain or performing a public (federal, state or local) contract or subcontract; (b) violation of federal and state antitrust statutes relating to the submission of offers; and (c) commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion or receiving stolen property;
  2. Indictments for the foregoing offenses; and
  3. Relative to tax, labor and employment, environmental, antitrust or consumer protection laws: (a) federal or state felony convictions; (b) adverse federal court judgments in civil cases brought by the United States; (c) adverse decisions by a federal administrative law judge, board, or commission indicating violations of law; and (d) federal or state felony indictments.

Under the new regulations, if nonresponsibility is the basis for rejection of the bidder or elimination of an offeror from competition, the contracting officer must provide the reasons for the nonresponsibility determination in the notification to the unsuccessful bidder or offeror.

The new law has already been the subject of much controversy and criticism by business groups who contend that the new rule will result in a "defacto debarment" of many contractors. In addition to the numerous business groups opposing the new laws, it has been reported that certain procurement officials at the Defense Department, the General Services Administration and the Environmental Protection Agency have opposed the new rules on the grounds that it will delay the procurement process and require contracting officials to make judgments outside their areas of expertise.

On December 22, 2000, a number of business groups, including the U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers, filed suit in the United States District Court for the District of Columbia requesting that the new law be overturned. The lawsuit requests a declaratory judgment and contends that "the final rule is arbitrary, capricious, an abuse of discretion and otherwise contrary to law" because it is "based on vague, discretionary standards, has no rational basis, and that there is no evidence that its benefits will offset the enormous costs." The complaint contends that small contractors will be particularly affected by the new rule because of the costs associated with challenging negative agency determinations.

The lawsuit requests that the court enjoin the implementation of the new law. However, unless an injunction is issued, the new regulations will go into effect January 19, 2001. We will keep our clients advised of any developments in this area.

PMP News

Piliero, Mazza & Pargament, PLLC is pleased to announce that Antonio R. Franco and Philip M. Dearborn have become partners in the firm. Mr. Franco's practice areas include general corporate counseling, commercial litigation and government contracting with emphasis on programs for women, minorities, Indian tribes and Alaska Native Corporations. Mr. Dearborn=s practice areas include general corporate counseling, employment law and government contracts with emphasis on investigative claims, bid protests and Federal Supply Schedules.

Spring Seminars 2001

We invite you to the Spring Seminars 2001 which will be held at The Tower Club in Tysons Corner, Virginia.

March 6, 2001 - Teaming Arrangements in 2001
This seminar will focus on the benefits of mentor-protege relationships, the HUBZone Program and regulations, and teaming under different preferential procurement programs, FSS Schedule contracts and A-76 contracting opportunities

April 3, 2001 - Effectively Handling Workplace Harassment
Recent court decisions have made profound changes in the law governing harassment in the workplace. This seminar will discuss recent legal developments, identify what constitutes unlawful harassment and how to implement preventive measures, including anti-harassment policies.

Please note that the seminars begin with a Continental breakfast and networking at 8:15 a.m., followed by the seminar from 8:45 a.m. to 11:00 a.m. For registration information, please contact Susan Brock at 202-857-1000, e-mail or visit our website at pmplawfirm.com.


888 17th Street, NW
Suite 1100
Washington DC 20006
202.857.0200 Fax


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