FASA does away with Walsh-Healy vendor certifications

In a previous column I pointed out an obsolete procurement statute, the Walsh-Healey
Public Contracts Act. Finally, Congress has done away with Walsh-Healey's antiquated
certification requirements.


In the 1930s Congress passed Walsh-Healey to establish a minimum wage for workers
manufacturing goods for the government. That role has since been taken over by the Fair
Labor Standards Act. The minimum wage set under the later act is the only minimum wage
applied under Walsh-Healey. Of course, Walsh-Healey applies exclusively to federal
contractors, but FLSA has almost universal coverage.


When Congress passed Walsh-Healey, it was concerned that a company paying substandard
wages might escape by bidding through a middleman. To prohibit this practice, the act
required that for contracts worth more than $10,000 contractors would have to prove they
were manufacturers or regular dealers of the goods being bought.


Definitions were left to the Labor Department. It proceeded to embroider these terms
with regulatory tests, administrative interpretations and a special protest process. One
of the strangest tests: A dealer needed to have substantial sales from inventory to the
general public, which was not an easy task in the case of military goods that might have
no commercial market. The end result of Labor's requirements was that the field of
government bidders narrowed and price competition suffered.


This might have been a reasonable price to pay for banning substandard wages. But the
later adoption of the Fair Labor Standards Act took care of that issue. So no worker was
paid any more or any less because of the Walsh-Healey Act or its certification
requirement.


This absurdity lingered on the books for years. Attempts to repeal it usually met with
unthinking objections from labor unions that feared any legislative incursion into
protective laws. One half-hearted defense of the certification was that brokers were too
small and unreliable to be government contractors. But a well-developed set of
requirements and procedures for contractor responsibility, including a pre-award survey of
plant and facilities, did a far better job of weeding out inept bidders than the arcane
definitions of manufacturer and regular dealer.


At last, Congress took action against this meaningless certification. The Federal
Acquisition Streamlining Act directed Labor to eliminate the requirement that contractors
must be either a manufacturer or regular dealer.


FASA was passed in October 1994 and required implementation by Oct. 1, 1995. But Labor
took no action at all until Sept. 7, 1995, when it issued proposed regulations.


Labor promulgated final official guidance that recognized the certification requirement
had expired on Oct. 1. But it did so in the form of an obscure memorandum, dated Nov. 1,
1995. Not all contracting officers know of this memo, and so some solicitations still
require Walsh-Healey certification.


Oddly, a recent protest decision by the General Services Administration Board of
Contract Appeals indicated that the Walsh-Healey certification might even now be with us.
In that case, two of the three judges held that the contracting officer would have to
enforce the certification if it was in the solicitation at closing. None of the judges
found that this issue had merit, so the protest was denied.


A note: In my column for the Feb. 5 issue of GCN, the headline for the continuation
read, "Avenue of protest is a dead end, now that GSBCA is doomed." This was not
meant to imply that other protest routes are no longer available.


Joseph J. Petrillo is an attorney with the Washington law firm of Petrillo &
Associates.



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