Rescinding the Blacklisting Rule

By at 2 February, 2017, 9:06 am


President Barack Obama ranked as one of the most active presidencies in history in terms of regulation, and the predictable result was to raise costs for entrepreneurs and businesses of all sizes. The burden and uncertainty associated with new and excessive regulation across the board took a serious toll on U.S. economic growth, small business confidence and job creation. (See, for example, assorted SBE Council analyses on the U.S. GDP shortfall, the latest GDP numbers and trends, and the enormous jobs gap.

Indeed, it will take time and serious effort to roll back the damage that has been inflicted, and still is being inflicted. Congress and the Trump administration, to their credit, have begun this process.

Some early actions by President Trump on regulation were noted in a recent SBE Council analysis.

Congress Flexes its Muscle to Repeal Blacklisting Rule

This week, the U.S. House is using its review authority under the Congressional Review Act (CRA) to rescind five misguided regulations that were finalized during President’s Obama’s final stretch in office.  The blacklisting rule is one of them.

An executive order signed by President Obama in 2014 changed federal procurement procedures by requiring that businesses bidding on federal contracts disclose violations and alleged violations of 14 federal labor laws, as well as of similar state mandates, when bidding on a project, and continue such disclosures every six months while under contract. The “blacklisting rule,” finalized in August of 2016, amounts to gross abuse of governmental powers, particularly given that the mandated reporting of “alleged” violations – is a clear case of denial of due process.

Specifically, as described in a fact sheet from the House Education and the Workforce Committee:

“Prior to awarding a contract, each agency’s contracting officer and a newly created Labor Compliance Advisor are required to review the information and make subjective determinations on complex legal matters when deciding whether an employer should be awarded a federal contract.” Facing added costs and uncertainties, small businesses are placed at a disadvantage, and taxpayers suffer due to reduced competition.

Thankfully, the “blacklisting rule” has been blocked by a preliminary injunction. Now, under the CRA, congressional leaders in the House and Senate with jurisdiction over workforce protections, federal contracting and small business have introduced a joint resolution that would block its implementation.

Bad for Small Business and Taxpayers

As Rep. Steve Chabot (R-OH), Chairman of the House Committee on Small Business, stated about the blacklisting rule:

“When the federal government contracts with small businesses, the taxpayer saves and communities across the country benefit. That’s why the ‘blacklisting’ rule hurts everyone, especially our small business job creators who have played by the rules. At the Small Business Committee, we’ve heard specific, first-hand accounts of how this rule has killed jobs. It’s for the sake of these small contractors and their employees that I’m dedicated to working with my colleagues across our jurisdictions to undo the damage of the blacklisting rule.”

And Senator Lamar Alexander (R-TN), chairman of the Senate Committee on Health, Education, Labor, and Pensions, noted: “Today’s resolution to overturn the harmful Obama Administration ‘blacklisting’ regulation is good news for our nation’s federal contractors and subcontractors, who could be blocked from receiving a federal contract for an alleged labor violation before any wrongdoing has been proven. I look forward to voting on this resolution and sending it to President Trump’s desk for his signature to prevent politically motivated bias and favoritism, preserving a level playing field for federal contractors.”

As pointed out by the House Small Business Committee, there are 100,000 fewer small businesses competing for federal contracts than in 2012. If our federal procurement process is going to be smart, efficient and provide the best value to taxpayers, the government needs more small businesses competing and winning contracts, not fewer.  Rescinding the “blacklisting rule” would be good news for small businesses and U.S. taxpayers, and all Members of Congress should support the CRA that would make that happen.

Raymond J. Keating, Chief Economist


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