Congress imposes new hurdles for contractors.

• Author: Lewis, Robert E., Jr.
• Position: WashingtonINSIGHTS - US Congress

Several statutes directly relevant to government contractors became law recently, and companies doing business with the federal government should worry about these new laws for a number of reasons.

First, Congress wants to place work now performed by contractors into the hands of federal employees through a "contracting-in" process. Second, Congress is tightening the use of the "commercial item" exemption for certain procurements, and imposing tougher limitations on organizational conflicts of interest restrictions. Moreover, Congress continues its attack on contractor recovery of indirect costs and profit for subcontractor effort.

Finally, Congress has opened the door for increased contractor liability, as agents of the government, for mistreatment of any individual "in the custody or under the physical control" of the government.

In Section 343 of the FY 06 DOD Authorization Act, Congress ordered the Department of Defense to "prescribe guidelines and procedures" to facilitate reviews for migrating work from contractors to the federal government. In effect, Congress instructed DOD to give "special consideration" to contracts that have been performed by federal government employees at any time since Oct. 1, 1980; are associated with inherently governmental functions; were not awarded on a competitive basis; or have been determined "to be poorly performed due to excessive costs or inferior quality."

Congress passed a similar provision in Section 842(b) of the FY 06 Transportation, Treasury and HUD Appropriations Act. There, Congress ordered that OMB Circular A-76 "shall provide procedures and policies for these [public-private] competitions [to convert work from contract to federal employee performance] that are similar to those" that would allow conversion of work from federal employees to a contractor.

The language in these provisions is problematic because it is so broad. For example, under the criteria in the DOD Authorization Act, any work that federal employees performed at any time in the last quarter-century, that contractors now perform, must be given "special consideration" for conversion to federal employee performance. Similarly, contract work "associated" with inherently governmental functions must be given such special consideration, along with any contract not competitively bid or determined to have excessive costs or inferior quality. Congress provided no measures to indicate how "excessive" or "inferior" costs and quality...