New Congress may have contractors in its sights.

The recent mid-term elections, which returned both houses of Congress to the Democratic Party, will change the Congressional agenda in many ways, both large and small. The tax-writing committees, for example, will likely turn their attention to the oil and gas companies, levying "windfall profit" taxes on them or ending their federal subsidies.

Similarly, the financial services committees may begin exploring ways to cap executive compensation. The incoming chairmen of the labor and employment committees have already discussed raising the minimum wage in legislation likely to be considered very shortly after the new Congress convenes.

The federal contracting arena will likely see rather significant changes as well, and most of those changes will not be welcomed by the contracting community. Federal contractors--more specifically, defense and aerospace contractors--have been out of favor in Washington for some time.

Excess 'War Profits' Tax Eyed

A perusal of some of the reform bills introduced in recent years proves the point: Members have introduced bills that would limit the federal government's ability to outsource work to the private sector. They have also proposed legislation that would redefine employment standards for companies doing business with the government. One recent bill proposed levying an "excess war profits" tax on private companies doing work in Afghanistan and/or Iraq.

The coming Congress may prove the most challenging in recent memory for federal contractors. Rep. Henry Waxman (D-Calif.), the incoming chairman of the House Governmental Affairs Committee, has long advocated the need for contracting reform. His counterpart, Sen. Joseph Lieberman (D-Conn.), the incoming chair of the Senate Homeland Security and Governmental Affairs Committee, has also voiced some concerns over federal contracting procedures. These two chairmen, more than any others in Congress, will drive the reform agenda for at least the next two years.

Rep. Waxman has wasted little time, promising to reintroduce his "Clean Contracting Act" shortly after the new Congress convenes. Congressional insiders expect this legislation to be the centerpiece for contracting reform initiatives in the 110th Congress. If enacted, the legislation would create a new class of contracts, known as "monopoly contracts," which would be defined as any contract with a single contractor that exceeds $10 million.

The legislation would prohibit such contracts, with limited exceptions. The bill would also direct contractors' relations with their subcontractors, mandating that contractors perform at least 65 percent of the work on a given contract. Furthermore, the legislation would vest Congressional committees with the authority to request unredacted copies of any procurement documents from agency heads.

Accountability Bill Offered

In a similar vein, Rep. Carolyn Maloney (D-N.Y.) has introduced the "Contractors Accountability Act of 2006." The legislation directs the General Services Administration to create and maintain a database of information tracking government contractor integrity and performance. The bill would mandate the suspension and/or debarment of contractors deemed repeated violators or poor performers.

As drafted, the bill takes a very broad view of integrity issues, permitting disciplinary action to be taken against contractors for any ethical lapses, even if unrelated to contract performance. Recent happenings with Hewlett-Packard's board of directors are illustrative. If Northrop Grumman's board had engaged in such behavior, it would almost certainly have triggered the database tracking requirements.

It's not just Democrats who have adopted what might be viewed as anti-contractor legislative proposals. Congressional Republicans, stung by recent criticisms regarding their oversight of federal contracts in Afghanistan and Iraq, have also joined the fray. The recently-enacted Senate Appropriations bill for the armed services includes a provision mandating the creation of a panel on contracting integrity. The panel's mission is to "eliminate areas of vulnerability" in the federal contracting system. Of concern to contractors, there are no industry representatives serving on the panel.

Similarly, the Department of Justice recently established a national procurement fraud task force. Its stated mission is to promote early detection, prevention and prosecution of procurement fraud. Again, the goals behind the initiative are worthwhile, and will likely be applauded by the government contracting community at large.

However, the establishment of such a task force when Congress is simultaneously pursuing more aggressive action against the contracting community would suggest that the pendulum in Washington is swinging against federal contractors. The next few years will be very interesting indeed.

Mark Prysock ([e-mail]) is FEI's Director of Public Affairs and General Counsel and works in the Washington, D.C., office.