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WASHINGTON (FNS) -- Food-industry officials have vowed to defeat a White House regulatory proposal they allege could be used to blackball companies seeking to do business with the government, based on unsubstantiated allegations of wrongdoing.The proposal is particularly worrisome for wholesalers and food-service firms, many of which sell a considerable volume of products to veterans hospitals and

WASHINGTON (FNS) -- Food-industry officials have vowed to defeat a White House regulatory proposal they allege could be used to blackball companies seeking to do business with the government, based on unsubstantiated allegations of wrongdoing.

The proposal is particularly worrisome for wholesalers and food-service firms, many of which sell a considerable volume of products to veterans hospitals and the Defense Department's commissary system, whose annual sales would place it among the nation's Top 10 food retail chains if it were a private business.

The proposal would make contract awards hinge on compliance with a diverse range of federal laws. Opponents claim the regulation directing procurement officers to more closely scrutinize all operations of a company before granting contracts puts too much power in their hands. It makes the businesses subject to indiscriminate or deliberate allegations of infractions, which could come from competitors, disgruntled workers or unions attempting to organize the company, the opponents charge.

Specifically, the proposal would mandate that procurement officers, who control about $170 billion in federal contracts annually, review companies' compliance with federal regulations and labor, environmental, securities, consumer, tax, antitrust and business laws.

"There is real concern about a plan that gives government contracting officers the power to arbitrarily blacklist companies that, in their judgment, don't meet certain standards for labor, the environment or other things. It's just plain un-American," asserted John Block, president of Food Distributors International, Falls Church, Va.

Block joins business leaders from various industrial sectors, as well as the U.S. Chamber of Commerce, in blasting the proposal to revamp U.S. procurement regulations that govern the awarding of federal contracts.

Given the Clinton administration's move to streamline government procurement, industry officials and companies with military sales portfolios fret that allegations of wrongdoing would bar them from selling to Uncle Sam for years -- putting them out of business.

Even retailers, who do little federal contracting business, view the proposal as a threat. "There always has been a fine balance between labor and management within our government agencies and Congress, and for the Executive Branch to do something that, in our opinion is beyond the law, throws the whole thing out of balance, in an adverse way," said John Motley, government relations senior vice president at the Food Marketing Institute here.

Block avers the initiative is a thinly disguised political ploy by Vice President Al Gore, as he revs up his White House bid.

The FDI president, like other business leaders, claims that Gore promised the AFL-CIO two years ago he would deliver on this high-priority item for the union. The proposal will benefit unions, Block said, since "it will give contracting officers a lot more power to deny contacts to a company."

Gore, in a 1997 address to the union, said, "If you want to do business with the federal government, you had better maintain a safe workplace and respect for civil, human and union rights." The White House backed off from issuing it then, however, after Senate Majority Leader Trent Lott, R-Miss., said he would put a "hold" on Alexis Herman's nomination to be Labor Secretary.

Asked about allegations that Gore is pushing the proposal now to fulfill promises he made to the AFL-CIO, Gore's spokesman told SN: "The vice president talked in the past about it and he, and this administration, believe by now it's a good policy for America." The spokesman added: "This administration has helped steer the country into the most successful economic times in its history and has a good record of helping business and the economy."

Officials with the Office of Federal Procurement Policy dismissed allegations the proposal is politically motivated. It was issued, according to a July 9 Federal Register notice, merely to give federal contracting officers "guidance" to ensure the United States "does business only with high-performing and successful companies that work to maintain a good record of compliance with applicable laws."

Elaborating, Dierdre Lee, administrator of the procurement office, a unit of the Executive Office of the President, told SN the proposal seeks "to focus [contracting officers] to pay more attention to ensure that we are not dealing with firms that have a record or pattern of legal violations.

"In almost all cases," Lee said, "a contracting officer will continue to base an adverse responsibility determination premised on 'integrity and business ethics' on the findings of a court or legally empowered administrative agency." The proposal's "almost all" loophole gives the officers discretion to bar a firm from U.S. contracts if they decide there is "persuasive evidence of substantial noncompliance with a law or regulation."

Lee also denied the proposal is a sop to unions, noting that one provision prohibiting bidders to figure into their "allowable cost(s) those activities designed to influence employees with regard to unionization decisions" is standard in other programs like Medicare. "Simple equity dictates that this principle be extended to government contracts, too."

Block doesn't buy it. "We are very concerned that this regulation would permit the government to arbitrarily chose contractors based on labor considerations and recommendations, and that it could be used as a lever to coerce companies into unionizing" to avoid being barred from federal contracts, he said.

The regulation, if enacted, would remain in place regardless of which party controls the White House, unless it were amended, or rescinded.

But the FMI's Motley maintains enactment of this contracting revision not only "is part of a union package this administration has been trying to accomplish for years," but is also part of the Democrats' plan to shift the balance of labor-management power to unions.

The proposal raises immediate concerns that should a company be barred from bidding it could be years before another bid is let, given other Clinton-era changes that stress fixed-price, multi-year contracts. Smaller firms, in particular, are concerned that being barred from one bid could cause them to go under.

Nor are many businesses satisfied with Lee's assurances that "full due-process rights will be accorded to contractors who are proposed for debarment or suspension," noting this process would drag out long after the contract award had been made.

Perhaps even more troubling than the proposal itself, say food-industry officials, is the perceived shift by the United States in favor of organized labor. Both Motley and Block contend Congress never gave the Executive Branch the authority to ban a business from doing federal contracting due to a determination that the firm engaged in a pattern of practices.

"Clearly, this proposal allows the Executive Branch to penalize companies and that is why everyone is concerned," the FMI's Motley said. "When the power of the federal government can come down on one side of the labor issue, we've got to ask, to worry, 'what's next?"'

This is not a food-industry fight alone. Nonfood retail groups, such as the International Mass Retail Association, Arlington, Va., have joined the fray in opposing the proposal. "It gives the U.S. the power to disbar your company from contracting based solely on allegations and is an invitation for anyone with a grievance, or a union that's been unable to organize you, to come after your business with this huge hammer," said Morrison Cain, the IMRA's government relations senior vice president.

This is worrisome to retailers, Cain said, explaining "many of our suppliers would be subject to this pressure and so we'll feel the impact as well in higher costs.

"The temptation for many retailers is to ignore this, but they do so at their own peril, for, if adopted, it will completely reshape the balance of power in contractor-labor relations," he warned.

Moreover, Peter Eide, the U.S. Chamber of Commerce's labor law policy manager, explained that any company seeking federal work would have to ensure that its suppliers meet the new contracting standards. Eide, as other business advocates, alleges the proposal's labor provisions unconstitutionally usurp congressional power.

With an eye toward defeating the proposal, leaders of several industries have joined the Chamber of Commerce-sponsored National Alliance Against Blacklisting. This coalition, and individual members such as the FDI, have launched grassroots letter-writing campaigns to swamp both the United States with comments seeking the proposal's defeat, and Congress, asking members to request the administration to reconsider -- tantamount to killing the plan.

Privately, business leaders in several industries warn that if the proposal is adopted after the comment period closes Nov. 9, they will seek congressional intervention. They also may challenge it in the courts as unconstitutional, just as they did, successfully, to block another Clinton proposal that would have barred firms from hiring striker-replacement employees.