USDA proposes ‘bad boy’ clauses in new acquisition regulation

Without fanfare, the U.S. Department of Agriculture (USDA) published a proposed acquisition rule that raises the prospect of government “blacklisting” of contractors.

In the proposed rule, issued February 17, 2022, the USDA has included two unique clauses that will require contractors to certify they are in compliance with all federal and state labor and employment laws and in compliance with all “previously required corrective actions” for “adjudicated” labor and employment law “violations.” In the past, these “bad boy” clauses have been proposed to bar bidders from winning contracts.

The stated rationale for requiring these disclosures is “to determine whether a contractor is a responsible source that has a satisfactory record of integrity and business ethics.” The USDA, however, may assess the record of the bidding contractors based on the disclosures and determine whether the bidders qualify as satisfactory contractors. What constitutes “satisfactory” or the criteria for such a determination are not spelled out in the proposed regulation.

Under the first proposed disclosure rule, contractors and their subcontractors are also required to self-report any future adjudications of noncompliance to the appropriate contracting officer. The USDA, borrowing elements from the Office of Federal Contract Compliance Programs’ (OFCCP) verification portal, makes clear that it will consider certification under this clause to be made under penalty of perjury under the False Claims Act.