In 2014, President Obama signed the Fair Pay and Safe Workplaces Executive Order that promised to change the face of federal contracting. On October 25, 2016, that order finally goes into effect and it has earned the nickname the “blacklisting rule” among construction industry insiders. The government says that this new rule will force contractors to focus on fair wages and safety. However, contractor groups say that this is just a way for the government to further control the bidding process.
What Is The Blacklisting Rule?
The “blacklisting rule” changes the contractor requirements for bidding on federal contracts. Contractors are now required to report violations as they apply to workplace safety, fair wages, civil rights laws, medical and family leave laws, and at least 10 other areas of compliance. The new rule sets thresholds that would prevent repeat offenders from being able to bid on contracts, even if those repeat offenders have been awarded similar contracts in the past.
What Do Contractors Need To Know?
This new executive order is not something contractors should ignore. To this point, contractors have had two years to get their compliance mechanisms in order, and there is a phase-in period with the new rule that will allow contractors to prepare their paperwork and bid on projects after October 25, 2016.
After September 12, 2016, the Department of Labor will allow contractors the opportunity to request a report outlining their compliance history for past federal projects. This will give contractors the opportunity to compare their own information with the information that the Department of Labor has on file.
Beginning on October 25, 2016, contractors bidding on federal contracts worth $50 million or more will be required to submit their compliance information as part of their bid package. On April 25, 2017, that threshold will drop to all contracts worth $500,000 or more.
The federal government understands that most contractors do not retain their violation information on file for more than a year at any given time. That is why the reporting period starting on October 25, 2016, will only go back to October 25, 2015. However, that reporting period will increase to two years by October 25, 2017, and finally to three years on October 25, 2018, where it will remain.
The new federal “blacklisting rule” applies to subcontractors as well as general contractors. However, subcontractors will be given an extra year to prepare their paperwork as they work with general contractors to submit federal contract bids. Subcontractors will be required to start submitting compliance reports with federal bid documents starting October 25, 2017.
There is a pay itemization requirement for this new rule that may not change the way that contractors report pay to their workers. Starting January 1, 2017, contractors must provide each worker with an itemized wage statement with each paycheck. In addition, general contractors need to give official notice to independent contractors that they are being treated as independent contractors. Both of these actions are common in the world of federal contracts and should not affect the way contractors do business.
Reaction From The Contracting Industry
Organizations such as the National Association of Manufacturers feel that these new rules will make it difficult for normally reliable federal contractors to get new work. Contractors are complaining that these new rules will significantly increase the costs of doing business for federal contractors as they will be required to research and report information that the Department of Labor should already have on hand.
Proponents of the rule say that this is a good way to force federal contractors to pay attention to labor, safety, and wage laws and get every contractor on a level playing field. Some contractors are complaining that this new rule will unfairly exclude contractors who have proven to be reliable for years from doing business.
Regardless of where a contractor stands on the new “blacklisting rule,” the changes are coming and the contractor requirements are changing as of October 25, 2016. Contractors planning on bidding on federal contracts will have to start working now to make sure that they are able to submit the necessary paperwork to meet all of the future bidding requirements and win new work.