Piliero Mazza &
Pargament, PLLC

Legal Advisor
Vol. V, Issue 9
November/December 2000

An Update for Federal Contractors and Commercial Businesses


Recent Court Decision Illustrates the Need to Adopt Comprehensive Anti-Harassment Policies

FAR Council Moves Forward with "Reverse Auctions"

TINA Threshold Raised

Executive Order Seeks to Increase Opportunities for Small and Minority-Owned Businesses

FAR Proposal Would Allow Electronic Signatures in Federal Contracting





Recent Court Decision Illustrates the Need to Adopt Comprehensive Anti-Harassment Policies

Recent decisions of the United States Supreme Court have made it absolutely essential that employers establish and disseminate effective workplace harassment policies. Such policies can insulate employers from liability for sexual harassment of employees by supervisors, and can also serve as a defense to punitive damages claims. However, to serve as effective defenses, anti-harassment policies, like all workplace policies, should be periodically reviewed and updated to ensure that they satisfy applicable legal standards.

The need to update anti-harassment policies was illustrated in a recent decision by the United States Court of Appeals for the Fourth Circuit, which governs the states of Virginia, Maryland, West Virginia and the Carolinas. In Smith v. First Union National Bank, the Court held that the employer's sexual harassment policy did not serve as a defense because it did not cover harassment which, though based on gender, was not in the form of "sexual advances." The following is a brief discussion of the facts of the case and the Court's decision.

The plaintiff in the First Union
case was a female supervisor who underwent two and one-half years of harassment at the hands of a male manager. Some of the harassment was in the form of sexual advances. However, the plaintiff also experienced harassment which was not overtly "sexual" in nature, but rather was based on gender. The manager made insulting statements to the plaintiff which reflected his "hostile view of women in general." Among other things, he stated that women were "too emotional" to be good managers, "should be barefoot and pregnant" and went through life looking only for a man to marry. The manager, who boasted of having killed people when he was in the military, also threatened the plaintiff.

The plaintiff failed to complain of this treatment. Thus, when she later filed a harassment suit against the bank, the defendant attempted to take advantage of the affirmative defense announced by the Supreme Court in the 1998 Faragher decision. Under that case, a defendant will not be liable for harassment by a supervisor where (1) the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior and (2) the employee-plaintiff unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer. The bank argued that it had a sexual harassment policy and complaint procedure which the plaintiff failed to utilize, and that it should therefore not be liable for the manager's conduct.

In response, the plaintiff argued that she did not complain of the harassment because she did not understand that she could complain of the conduct under the bank's sexual harassment policy. Specifically, she believed that sexual advances or propositions were needed before someone could charge sexual harassment under the policy. The Court agreed.

The policy at issue stated:

It is First Union's policy to prohibit sexual harassment of our employees. Sexual harassment includes any unwelcome offensive sexual advances, requests for sexual favors, and other verbal and physical conduct of a sexual nature. This policy applies to management employees, non-management employees, outsiders and customers.

The plaintiff argued that the policy made "it sound as though a sexual advance [was] required in order to be sexually harassed at First Union." The Fourth Circuit held that the policy was ineffective because it did not mention discrimination on the basis of gender. Rather, it merely prohibited unwanted sexual advances and other sexually provocative misconduct. Therefore, the Court held, the policy was not a sufficient means of preventing the harassment at issue.

To serve as an effective defense, the bank's policy should have covered gender-based harassment which created a hostile work environment but which did not necessarily consist of sexual advances. The policy also should have covered other forms of harassment based on race, color, religion, national origin, age, disability, and protected activity.

In light of the Court of Appeals' decision, employers should review and update their harassment policies to ensure that they cover all forms of unlawful harassment. Indeed, all workplace policies should be reviewed periodically. It should be noted that, to be deemed effective, a harassment policy must contain an effective complaint procedure. Employers should also consider conducting training sessions for all personnel, including supervisors and upper management, on unlawful harassment and complaint procedures.



FAR Council Moves Forward with "Reverse Auctions"

The use of "reverse auctions" is gaining increasing interest and popularity in the commercial market. This interest has now spread to many federal agencies, who are looking into the possibility of using reverse auctions as a means of saving agency funds. In response to this trend, the Federal Acquisition Regulatory Council, on October 31, 2000, invited commentary from the contracting community as to whether or not guidelines on the use of reverse auctions should be developed.

A reverse auction is an online bidding technique that operates in a largely similar fashion to a conventional online auction. However, the essential difference between a reverse auction and a conventional auction is that a reverse auction accepts the lowest bid available rather than the highest bid. This technique is of interest to many government agencies that are seeking to save money when price is the major criterion for a particular contract. Several agencies have already reported savings through their use of reverse auctions, such as the Naval Supply Command and the Army Communications Command.

The FAR Council's invitation for commentary specifically seeks to address three issues. First, they ask for commentary on the advantages and disadvantages of issuing guidelines at this time. Second, if guidance is found to be necessary, the form that the guidance should take would need to be determined. Examples of the type of oversight include a FAR rule, agency instructions, training, or best practice guides. Third, commentary is sought on the topics that should be addressed by the guidance. Some examples of topics cited by the FAR Council include: (i) the overall goals of a reverse auction, (ii) the ground rules that would govern the auction, (iii) strategies for giving small business incentives to participate, and (iv) what results an auction would yield.

Some question whether any FAR guidance is needed at this point. Because reverse auctions are in their infancy, some argue that the FAR cannot provide any useful guidance on the topic when conclusions cannot be drawn based on experience. Additionally, some wonder why the FAR Council even needs to set guidelines, as the FAR permits any technique that is not clearly prohibited, and there has been no suggestion that reverse auctions are prohibited. However, others counter that agencies' expansion into the reverse auction field will proliferate to the point where further guidance from the FAR Council will be required.

Contractors appear to have differing opinions on the merits of reverse auctions without guidelines. From one perspective, reverse auctions will provide a more level playing field for contractors to bid on projects without favoritism. However, another perspective holds that reverse auctions will be detrimental to contractors in the long term. Because bidding margins are so small, they argue, there will be little ability for contractors to invest in the future. This lack of investment will result in the government depriving itself of the best products and technology in the future.

While not all government contracts can be deemed suitable for a reverse auction, many federal agencies have expressed an interest in experimenting with this new online technique. It remains to be seen to what degree the FAR Council will insert their own opinion into this matter. No matter what the FAR Council decides after hearing commentary, its decision is bound to have an impact as to how this increasingly popular technique is handled by government agencies.



TINA Threshold Raised

The threshold for submitted cost of pricing data for contractual actions under the Truth in Negotiations Act ("TINA") has been increased from $500,000 to $550,000. The $50,000 increase accounts for the impact of inflation since 1994.

TINA requires government contracting officers to obtain cost or pricing data if the contracting officer determines that none of the statutory exceptions for obtaining such data (e.g., the existence of adequate price competition) applies. However, if the contracting officer has sufficient information to evaluate price reasonableness, he or she may request that the obligation to submit cost or pricing data be waived.

The increase in the TINA threshold took effect October 11, 2000.



Executive Order Seeks to Increase Opportunities for Small and Minority-Owned Businesses

On October 6, 2000, President Clinton signed Executive Order. No. 13,170 which is designed to increase contracting opportunities for small and minority-owned businesses.

The Order calls on agencies to take "aggressive and specific" affirmative actions to ensure that disadvantaged businesses are included in federal contracting, including information technology and telecommunications requirements.

The Order also requires federal agencies to:
  • establish minimum goals for contracting with 8(a) firms, small disadvantaged businesses ("SDBs") and minority business enterprises ("MBEs");

  • enforce prime contractor commitments to use disadvantaged businesses as subcontractors;

  • list the responsibilities of each agency to expand opportunities for 8(a) firms, SBDs and MBEs;

  • submit implementation plans and annual reports on the status of those plans;

  • broadly disseminate contract announcements, particularly for 8(a) sole source contracts;

  • aggressively use 8(a) firms, particularly in the developmental stage;

  • ensure that price evaluation preference mechanisms are used to the maximum extent permitted by law; and

  • take steps to ensure that prime contractors are meeting their subcontracting goals, including ensuring that prime contractors actively solicit bids from 8(a) firms and SDBs.

The Order also directs the Small Business Administration ("SBA") and the General Services Administration ("GSA") to expand inclusion of 8(a) firms and SDBs on GSA schedules, and provide greater opportunities for such firms to participate under such schedules. Significantly, the Order states that the GSA must allow agencies ordering from 8(a) firms off the schedule to include those orders toward 8(a) contracting goals.

Additionally, the Order requires agencies to submit opportunities proposed to be bundled to the SBA. Agencies must "carefully review" the SBA's views. In the event of an irreconcilable conflict, either agency would be entitled to seek assistance from the Office ofManagement and Budget.

The Order addresses many issues that have been of growing concern to the small and minority-owned business community in recent months. Many firms have complained that laws and regulations currently on the books are not being enforced (e.g., SDB subcontracting obligations). Although the Order seeks to fill some of those "cracks," its impact remains to be seen. By its own terms, the Order states that it shall not create rights or benefits enforceable at law, meaning that the Order will not give contractors the right to pursue litigation where agencies fail to implement the directives under the Order.



FAR Proposal Would Allow Electronic Signatures in Federal Contracting

Electronic signatures would possess the same legal significance as handwritten signatures in federal procurement under a proposed rule change to the FAR. The proposed change is in line with the Clinton Administration's policy of treating electronic documentation in the same manner as their printed counterparts. The proposed rule is also in line with the recently signed "Electronic Signatures in Global and National Commerce Act" (P.L. 106-229). The rule would allow agencies to use electronic signatures in their government contracting so that government contract officials could conduct their business in a manner that makes the most sense to them. While the proposal is not limited to technology, it does allow agencies to choose the electronic signature format that best suits their needs.


PMP News

Pamela Mazza, senior partner with Piliero, Mazza & Pargament, was recently appointed by the Administrator of the Small Business Administration to its Regulatory Fairness Board. The Board was created by Congress through enactment of the Small Business Regulatory Enforcement Fairness Act of 1996. The Board's mission is to facilitate the examination of ideas, interests, and concerns of small business to foster a fair and responsive federal regulatory enforcement environment to serve businesses that are responsibly attempting to follow the laws and regulations of our nation. For more information on the Regulatory Fairness Board call Pam Mazza or visit www.sba.gov/regfair.

Piliero, Mazza & Pargament, PLLC is proud to welcome Joseph Summerill to its practice. Prior to joining the firm, Mr. Summerill worked with the Federal Bureau of Prisons, where he was the Chief of the Commercial Law Branch. In addition to defending numerous protests and litigating multi-million dollar contract appeals, Mr. Summerill participated in the Department of Justice's effort to privatize federal prisons.

In October 2000, Piliero, Mazza & Pargament introduced the Corrections Contractor, a subscription newsletter written for businesses who provide federal and state detention-related services and supplies. The Corrections Contractor updates these contractors on legal developments and other events that may affect their businesses.

If you would like to receive a complimentary issue of the Corrections Contractor, contact Joseph Summerill or Susan Brock at 202-857-1000.


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

Legal Notice