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Business groups fight Obama executive order on federal contractors

Business groups are fighting an executive order signed by President Barack Obama to crack down on federal contractors with histories of labor-law violations.

They say the measure signed by Obama in July is unfair, and will drive up costs for industry and the government.

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A coalition of organizations representing federal contractors wrote to the Department of Labor this month to urge the president to rescind the Fair Pay and Safe Workplaces Executive Order because, they write, it contains "fundamental flaws." The say the government already has sufficient power to address contractors who violate the law, and the order exceeds the president's authority.

"It's overreach," said Stan Soloway, president and CEO of the Professional Services Council, which represents government contractors.

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Supporters of the executive order say it will stop taxpayer dollars from going to companies with histories of flagrant abuse. They point to incidents such as the 2010 deaths of seven workers in an explosion at an Anacortes, Wash., refinery owned by Tesoro. The oil giant received $463 million in federal contracts in 2012.

Contracted labor makes up a growing segment of the federal workplace. Federal service contracts grew by more than $200 billion since 2000, according to a 2013 report by the Senate Health, Education, Labor and Pensions Committee. Companies with federal contracts employ about 22 percent of the American workforce.

The federal government spends $500 billion each year on goods and services from the private sector, according to the report. It found that nearly 30 percent of firms with the highest penalties for federal labor law violations also get federal contracts.

The executive order, which is to take effect in stages beginning in 2016, lays out steps the administration says will help weed out companies that don't follow rules governing wages and workplace safety.

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Steps include requiring contractors to disclose violations of federal labor laws from the past three years before they can get a contract. Agencies will have to appoint a "labor compliance officer" to assess companies' track records.

The order is to apply only to contracts of $500,000 or more.

"Taxpayer dollars shouldn't be used by unscrupulous employers to drive down living standards for our families, neighbors, and communities," the administration said.

Donald Cohen, executive director of the watchdog group In the Public Interest, said the size of the federal government makes it difficult for agencies to discover patterns of abuse among contractors, he said.

"You would have to do a lot of research to find out if these are good guys or bad guys," Cohen said.

Soloway says there already are enough mechanisms to ensure that "crooked contractors" don't get federal contracts. For example, he said, the government can launch suspension and debarment proceedings.

The business groups that signed the Nov. 6 letter to Labor Secretary Thomas Perez and Domestic Policy Council Director Cecilia Munoz — including the National Association of Manufacturers, the U.S. Chamber of Commerce and Associated Builders and Contractors Inc. — contend that the order oversteps the president's legal authority.

The critics say the order "will create widespread disruptions in the federal procurement process and significantly increase costs for both government and industry."

"Given its highly subjective enforcement requirements, the E.O. will inevitably lead to delays in award evaluations, limitations on competition, and a greater number of contract award protests," they wrote. "Ultimately, this will result in fewer companies and organizations, especially smaller ones, that are willing or able to compete for federal contracts."

Cohen said ensuring worker safety outweighs costs.

"Let's say it does cost a little bit more to provide a safe workplace," Cohen said. "OK — we don't have to make everything as cheap as possible. … I would put the question back to them: What standards of safety on the job do you want to not do?"

Cohen said some businesses simply "don't want rules."

Details of how the government will carry out the order are yet to be determined. Soloway said he does not think that trade groups will be happy with the outcome.

"I don't believe there's anything [the government] can do to make it palatable, because of the language of the executive order," he said.

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