Piliero, Mazza & Pargament, PLLC   Vol. 3, Issue 2    March/April 2001

An Update for Federal Contractors and Commercial Businesses


SMALL BUSINESS SBA Proposes New Markets Venture Capital Program

LABOR LAW Senate, House Vote to OSHA Ergonomic Regulations

GOVERNMENT CONTRACTS GAO Sustains Protests Involving Conflict of Interest and Best Value Evaluation

EMPLOYMENT LAW U.S. District Court Dismisses Discrimination Suit Against Employer


SBA Proposes New Markets Venture Capital Program

On January 22, 2001, the Small Business Administration (SBA) issued an interim final rule containing regulations implementing the New Markets Venture Capital Program Act of 2000 (Act).   The Act was passed in an effort to provide increased entrepreneurial and employment opportunities in low-income geographic areas by creating an economic infrastructure in these areas and encouraging business growth through program-supported investment. This type of investing is commonly referred to as "double bottom line" investing, because the investments have potential financial returns as well as social impact.

The regulations set forth the requirements for participation in the New Markets Venture Capital Program (Program) which allow companies to make developmental venture capital investments in and provide operational assistance to smaller enterprises located in low-income geographic areas.  Pursuant to the regulations, the SBA will enter into participation agreements, guarantee debentures and make grants to companies to provide operational assistance to smaller companies in which they invest.  Additionally, the Program enhances the ability of existing Specialized Small Business Investment Companies to invest in smaller enterprises in low-income areas by giving them grants to provide operational assistance in connection with their investment.

Pursuant to the regulations, the SBA intends to enter into participation agreements with companies that have a solid business plan for making investments in the low-income geographic areas targeted by the Act and that have the greatest likelihood of expanding economic opportunities in such areas.

Comments on the interim final rule are due on or before March 23, 2001, and should be sent to Austin Belton, Investment Division, Office of New Markets Venture Capital, U.S. Small Business Administration, 409 3rd Street, S.W., Washington, D.C.  20416.



Senate, House Vote to Eliminate OSHA Ergonomic Regulations

On March 6th and 7th, Congress used a previously untested legislative weapon in an attempt to eliminate new OSHA rules on workplace injuries.  By a vote of 56 to 44, the Senate passed Senate Joint Resolution 6, which disapproves of these new regulations.  The House of Representatives followed suit, passing the same resolution by a vote of 223 to 206.  For the first time, Congress is attempting to invalidate an agency rule under the recently passed Congressional Review Act.  If successful, OSHA's controversial final rule on ergonomic standards will be invalidated.

OSHA issued their final rule on ergonomics on November 14, 2000, and the rule's new regulations took effect on January 16, 2001.  OSHA's final rule was the result of ten years of research and hearings on the causes and effects musculoskeletal disorders ("MSDs").  The new regulations seek to create a mechanism to lower rates of MSDs in the workplace.  OSHA estimates that there are 1.8 million reports of work-related MSDs reported annually. The rule sets forth reporting, evaluation, and benefit requirements for workers who suffer a MSD-related injury on the job.  Employers must be compliant with these new regulations by October 15, 2001.

The OSHA regulations have been criticized by many in the business community as vague and unnecessary.  Critics have also argued that the regulations will disproportionately hurt small businesses.  Many business groups estimate that the regulations could cost businesses $90 billion per year.  OSHA estimates the annual cost for businesses at $4.5 billion, but they also estimate that businesses will receive $9 billion in savings through the reduction of worker injuries and time away from work.

In attempting to eliminate the new OSHA rule, Congress has exercised authority under the Congressional Review Act, which was signed into law in 1996.  The act was passed as a means to give Congress a say in rules and regulations promulgated by federal agencies.  The act gives Congress 60 days to reject final rules issued by these agencies.  To invalidate a rule, both chambers must pass a joint resolution of disapproval by a majority vote in each chamber.  The procedure in both chambers is fairly expedited under the act.  Floor debate is limited, amendments cannot be offered, and filibusters in the Senate are not allowed.  After both chambers pass the joint resolution, the President must then sign the resolution for the particular rule to be invalidated.   If the President signs the resolution, the act prohibits the agency that passed the invalidated rule from issuing new regulations that are "substantially similar."

Senate Majority Whip Don Nickles (R-OK) introduced Senate Joint Resolution 6, which formally calls for disapproval of the OSHA ergonomics final rule.  The resolution's chief cosponsor is Sen. Kit Bond (R-MO), who chairs the Senate Small Business Committee.  The Senate moved quickly in passing the resolution, bypassing the committee process entirely.  More than 30 Senators signed a petition requesting that the resolution go straight to the Senate floor.

The House followed the Senate's lead and passed the joint resolution of disapproval less than 24 hours after the Senate vote.  The resolution will now go to President Bush, who has indicated that he will sign the resolution.  If President Bush signs the measure, it remains to be seen if OSHA will attempt to promulgate any new regulations relating to ergonomics.  The Legal Advisor will continue to follow this story as developments unfold.



GAO Sustains Protests Involving Conflict of Interest and Best Value Evaluation

In what may be viewed as a trend toward a more favorable atmosphere for government contract protests, the General Accounting Office (GAO) sustained two protests early this year involving issues relating to the evaluation of best value procurements and conflicts of interest.

On January 18, 2001, the GAO sustained a protest filed by Satellite Services, Inc. (SSI) relating to the Navy's award of a support services contract to NVT Technologies, Inc. (NVT).  In sustaining the protest, the GAO held that the Navy unreasonably awarded the contract without properly assessing the technical differences between NVT's lower-rated proposal and the SSI's higher-rated proposal.  The subject solicitation involved the consolidation of 13 different contracts involving multi-function facilities support services at three naval facilities in New Orleans.

At issue was the Navy's alleged failure to meaningfully evaluate SSI's and NVT's widely differing approaches to performing the work or the reasonableness of the rationales for the differing approaches.  Specifically, NVT and SSI proposed substantially different staffing levels and pricing for the contract.  The two approaches were evaluated for accuracy and completeness, however, there was no evaluation regarding the reasonableness of the two approaches.  Additionally, although the price evaluation team ("PET") stated that it used the pricing data from the current contract as a guide in evaluating the reasonableness of the proposed pricing schemes, no price comparisons were included in the PET's report.  The contract was eventually awarded to NVT, based upon a best value analysis that was completed by one member of the technical evaluation team.

The Navy argued that, although it did not conduct an independent analysis with regard to the proposed staffing plans, it assumed that because NVT's technical proposal was acceptable and its pricing proposal was consistent with the proposed staffing level, the overall proposal was therefore fair and reasonable.  However, the GAO found that because the Navy did not evaluate the reasonableness of NVT's proposed staffing levels, which were much lower than SSI's and largely accounted for the difference in SSI's and NVT's proposed prices, there was no meaningful overall best value evaluation.

On February 13, 2001, the GAO also sustained a protest by Johnson Controls World Services, Inc., involving an Army support services A-76 contract award at Fort Benning, Georgia.  The GAO's decision was based upon a finding that the awardee, IT Corporation ("IT") received information from its proposed subcontractor, Innovative Logistics Techniques, Inc. ("ILTI") that provided an unfair competitive advantage.  Specifically, through its performance of another Army contract, ILTI had access to a database containing information regarding maintenance activities at the Fort Benning facility.  The GAO found that this information was competitively useful because it provided IT with detailed information that was not available through the solicitation.  The availability of this information, especially when coupled with the fact that ILTI was intimately familiar with the management of installation support activities at Fort Benning as a result of its current contact, led the GAO to question what, if any, actions the Army took to enforce the organizational conflicts of interest clause in ILTI's current contract.  Because the Army had done essentially nothing with respect to the enforcement of this clause, and because the GAO found that ILTI did not have effective "firewall" procedures in place to prevent its contracting personnel from interacting with the personnel working on the IT proposal, the GAO found that IT had an unfair competitive advantage with respect to the solicitation.  The GAO recommended that the Army review the conflicts of interest posed by the teaming arrangement between IT and ILTI and take corrective action.  If corrective actions are not feasible, the GAO recommended that IT's contract be terminated and that it be disqualified from further competition for the contract.


U.S. District Court Dismisses Discrimination Suit Against Employer

Our firm recently succeeded in obtaining the dismissal of a discrimination suit brought in federal district Court against one of our clients (hereinafter "Employer") by a former employee of the company.

The plaintiff was employed with the Employer for less than three months.  During that period, she was absent 20% of her scheduled work days.  The plaintiff contended her absenteeism was due, in large part, to asthma attacks she suffered at work.  The plaintiff attributed the attacks to the ventilating system and dust in the Employer's offices.  Ultimately, the Employer terminated the plaintiff's employment for excessive absenteeism.  Under the Employer's policy, absenteeism in excess of 3% was considered excessive.

The plaintiff brought suit against the Employer in the U.S. District Court for the District of Maryland, alleging that the Employer wrongfully discharged her on the basis of her asthma in violation of the Americans with Disabilities Act (ADA).  The plaintiff also claimed that the Employer engaged in discrimination based on her race and national origin in violation of Title VII.  The plaintiff's final claim sought damages against the Employer for breach of  contract.

The Court granted the Employer's motion for summary judgment as to all of the plaintiff's claims.

The Court dismissed the claims alleging race and national origin discrimination because the plaintiff did not include these claims in her EEOC charge.  Accordingly, the Court held that the plaintiff failed to exhaust her administrative remedies with the EEOC prior to bringing these claims in federal court. 

With respect to the disability claim, the Court found that the Employer did not unlawfully discharge the plaintiff in violation of the ADA.  Although the Court recognized that asthma is a physical impairment, and that breathing qualifies as a "major life activity" under the ADA, the Court found that the plaintiff failed to demonstrate that her asthma qualified as a "disability" under the ADA.  Specifically, the Court determined that, although the plaintiff demonstrated that her asthma caused temporary breathing difficulties in extreme conditions, she failed to show that it "substantially limited" her ability to breath, as required under the ADA.  The Court also found that the plaintiff's asthma did not "substantially limit" her ability to work, because it can be controlled with proper medication.  Finally, the Court rejected the plaintiff's position that she was discharged due to an erroneous stereotype that her asthma substantially limited her ability to work, rather than excessive absenteeism.

The Court also dismissed the remaining breach of contract claim.  The plaintiff had alleged that the Employer's employee handbook constituted a contract with the plaintiff, and that the Employer breached the "no discrimination policy" contained in the handbook.  The Court concluded that this claim was not cognizable because the plaintiff signed an acknowledgment accompanying the handbook in which the Employer disclaimed contractual liability.  Accordingly, the Court ruled that the handbook could not form the basis of a claim for breach of contract.


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