CRS Report for Congress
Prepared for Members and Committees of Congress
Presidential Authority to Impose
Requirements on Federal Contractors
Vanessa K. Burrows
Legislative Attorney
Kate M. Manuel
Legislative Attorney
June 14, 2011
Congressional Research Service
7-5700
www.crs.gov
R41866
Presidential Authority to Impose Requirements on Federal Contractors
Congressional Research Service
Summary
Executive orders requiring agencies to impose certain conditions on federal contractors as terms
of their contracts have raised questions about presidential authority to issue such orders. Recently,
the Obama Administration circulated, but did not issue, a draft executive order directing “every
contracting department and agency” to require contractors to “disclose certain political
contributions and expenditures.” The draft order cites the President’s constitutional authority, as
well as his authority pursuant to the Federal Property and Administrative Services Act of 1949
(FPASA), which authorizes the President to prescribe any policies or directives that he considers
necessary to promote “economy” or “efficiency” in federal procurement. The draft executive
order refers to FPASA’s goals in that it directs actions “to ensure the integrity of the federal
contracting system in order to produce the most economical and efficient results for the American
people.” The draft order has been characterized by some as an “abuse of executive branch
authority” because it resembles the Democracy is Strengthened by Casting Light on Spending in
Elections (DISCLOSE) Act that the 111th Congress considered, but did not pass. If issued, the
draft order may face legal challenge.
The outcome of legal challenges to particular executive orders pertaining to federal contractors
generally depends upon the authority under which the order was issued and whether the order is
consistent with or conflicts with other statutes. Courts will generally uphold orders issued under
the authority of FPASA so long as the requisite nexus exists between the challenged executive
branch actions and FPASA’s goals of economy and efficiency in procurement. Such a nexus may
be present when there is an “attenuated link” between the requirements and economy and
efficiency, or when the President offers a “reasonable and rational” explanation for how the
executive order at issue relates to economy and efficiency in procurement. However, particular
applications of presidential authority under the FPASA have been found to be beyond what
Congress contemplated when it granted the President authority to prescribe policies and directives
that promote economy and efficiency in federal procurement.
Some courts and commentators also have suggested that Presidents have inherent constitutional
authority over procurement. A President’s reliance on his constitutional authority, as opposed to
the congressional grant of authority under the FPASA, is more likely to raise separation of powers
questions.
In the event that Congress seeks to enlarge or cabin presidential exercises of authority over
federal contractors, Congress could amend FPASA to clarify congressional intent to grant the
President broader authority over procurement, or limit presidential authority to more narrow
“housekeeping” aspects of procurement. Congress also could pass legislation directed at
particular requirements of contracting executive orders. For example, in the 112th Congress,
legislation has been introduced in response to the draft executive order (e.g., H.R. 1906; H.R.
1540, § 847; H.R. 2017, § 713).
Presidential Authority to Impose Requirements on Federal Contractors
Congressional Research Service
Contents
Introduction................................................................................................................................1
Background ................................................................................................................................2
Challenges to Executive Orders on Federal Contracting ........................................................4
Developments in the Case Law ...................................................................................................7
Farmer v. Philadelphia Electric Co. (1964); Farkas v. Texas Instruments, Inc. (1967)...........7
Contractors Association of Eastern Pennsylvania v. Secretary of Labor (1971);
United States v. East Texas Motor Freight Systems, Inc. (1977); United States v.
Trucking Management Inc. (1981)......................................................................................8
Chrysler Corporation v. Brown (1979) ................................................................................11
AFL-CIO v. Kahn (1979).....................................................................................................13
Liberty Mutual Insurance Co. v. Friedman (1981)...............................................................15
Chamber of Commerce of the United States v. Reich (1996).................................................17
Building and Construction Trades Department, AFL-CIO v. Allbaugh (2002); UAW-
Labor Employment and Training Corp. v. Chao (2003).....................................................19
Chamber of Commerce v. Napolitano (2009).......................................................................20
Conclusions ..............................................................................................................................22
Contacts
Author Contact Information ......................................................................................................24
Presidential Authority to Impose Requirements on Federal Contractors
Congressional Research Service 1
Introduction
Executive orders requiring agencies to impose certain conditions on federal contractors as terms
of their contracts have raised questions about presidential authority to issue such orders.
1
Recently, the Obama Administration has circulated a draft executive order directing “every
contracting department and agency” to require contractors to “disclose certain political
contributions and expenditures.”
2
The draft order cites the President’s constitutional authority, as
well as his authority pursuant to the Federal Property and Administrative Services Act (FPASA).
3
The draft directive has been characterized by some commentators as an “abuse of executive
branch authority”
4
because it resembles disclosure requirements in legislation that the 111th
Congress considered, but did not pass.
5
The executive branch’s authority to place requirements on federal contractors via executive orders
recently has been litigated, such as with executive orders (1) encouraging the use of project labor
agreements (PLAs);
6
(2) requiring that certain contracts include provisions obligating contractors
to post notices informing employees of their rights not to be required “to join a union or to pay
mandatory dues for costs unrelated to representational activities”;
7
and (3) directing departments
1
For purposes of this discussion, the term “federal contractor” does not necessarily mean a corporation. It includes any
natural or juridical person that supplies goods or services for the government’s use and is paid using appropriated
funds. Corporations, unions, and individuals may all qualify as contractors under this definition, depending upon their
dealings with the federal government. However, the term “federal contractor” does not include persons that receive
federal grants or cooperative agreements, or any contractor or subcontractor hired by a federal grantee or cooperative
agreement recipient. See, e.g., 48 C.F.R. § 2.101 (definition of “acquisition”).
2
Executive Order, Disclosure of Political Spending by Government Contractors, Draft, Apr. 13, 2011,
http://op.bna.com/der.nsf/id/rtar-8g4pmx/$File/Draft_EO_Govt_Contr_Disclosure.pdf.
3
P.L. 81-152, 63 Stat. 377 (June 30, 1949) (codified in scattered sections of Titles 40 and 41 of the United States
Code). It is important to note that while the provisions of FPASA codified in Title 41 of the United States Code
generally only apply to the procurements of civilian agencies, those codified in Title 40 (including the provision
authorizing the President to prescribe polices and directives) apply government-wide.
4
See, e.g., Obama May Order Contractors to Reveal Donations, Apr. 20, 2011,
http://news.yahoo.com/s/afp/20110420/pl_afp/usvotepoliticsmoney (quoting Senate Minority Leader Mitch
McConnell).
5
Democracy is Strengthened by Casting Light on Spending in Elections (DISCLOSE) Act, H.R. 5175, S. 3295, S.
3628, 111
th
Cong. (2010). See generally CRS Report R41264, The DISCLOSE Act: Overview and Analysis, by R. Sam
Garrett, L. Paige Whitaker, and Erika K. Lunder.
6
Project labor agreements (PLAs) are “multi-employer, multi-union pre-hire agreement[s] designed to systemize labor
relations at a construction site.” Bldg. & Constr. Trades Dep’t, AFL-CIO v. Allbaugh, 295 F.3d 28, 30 (D.C. Cir.
2002). For example, President Obama issued an executive order “encourag[ing] executive agencies to consider
requiring the use of [PLAs] in connection with large-scale construction projects.” Executive Order 13502, 74 Fed. Reg.
6985 (Feb. 11, 2009); see also 48 C.F.R. §§ 22.501-22.505. A Department of Labor solicitation requiring a PLA, issued
under the authority of Executive Order 13502, was challenged as violating the Small Business and Competition in
Contracting Acts, among other things. See ABC Member Files Protest against U.S. Department of Labor Project Labor
Agreement, Oct. 6, 2009, http://vlex.com/vid/abc-member-files-protest-u-labor-67827389. This challenge was
ultimately dismissed after the agency withdrew the solicitation. Executive Order 13502 also revoked Executive Order
13202, issued by President George W. Bush, which provided that the government would “neither require nor prohibit
the use of” PLAs on federally funded contracts. See 66 Fed. Reg. 11225 (Feb. 22, 2001). Bush’s order was challenged
as beyond his authority and as preempted by the National Labor Relations Act (NLRA). See Allbaugh, 295 F.3d at 29.
7
See UAW-Labor Employment & Training Corp. v. Chao, 325 F.3d 360, 362 (D.C. Cir. 2003); Executive Order
13201, 66 Fed. Reg. 11221 (Feb. 22, 2001).
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and agencies to require their contractors to use E-Verify to check the work authorization of their
employees.
8
The issuance of executive orders requiring agencies to impose certain conditions on federal
contractors and subcontractors has practical as well as legal significance given the scope of
federal procurement activities. Spending on federal contracts totaled $541.1 billion, or
approximately four percent of U.S. gross domestic product, in FY2010,
9
and approximately 22%
of U.S. workers are employed by entities subject to requirements placed on certain federal and
federally funded contractors and subcontractors pursuant to executive orders.
10
Thus, some
commentators have expressed concern that, if presidential authority to issue directives imposing
requirements on federal contractors is construed broadly, the executive branch effectively could
regulate significant segments of the U.S. economy.
11
This report provides background on the authorities under which Presidents have historically
issued executive orders pertaining to federal contractors and the legal issues potentially raised by
the exercise of these authorities. It also surveys key cases challenging executive orders pertaining
to federal contractors, which typically were issued under the authority granted to the President
under the FPASA. The report concludes by addressing potential limitations on and congressional
responses to presidential exercises of authority regarding federal contractors.
Background
Broadly speaking, executive orders are directives issued by the President.
12
Such directives may
have the force and effect of law if they are based on express or implied constitutional or statutory
authority.
13
Executive orders are “generally directed to, and govern actions by, Government
officials and agencies” and are sometimes characterized as “affect[ing] private individuals only
indirectly.”
14
However, they can effectively reach private conduct, such as when an executive
order requires agencies to incorporate particular terms in their contracts, or prohibits them from
entering contracts with persons who do not comply with certain conditions.
8
See Chamber of Commerce v. Napolitano, 648 F. Supp. 2d 726 (S.D.Md. 2009); Executive Order 13465, 73 Fed. Reg.
33285 (June 11, 2008).
9
USASpending.gov, Prime Award Spending Data, Federal Spending FY2010,
http://usaspending.gov/explore?fiscal_year=2010&tab=By+Agency&fromfiscal=yes&carryfilters=on&Submit=Go;
Statistical Abstract of the United States, 2011, Table 666 (“Gross Domestic Product in Current and Chained (2005)
Dollars: 1970 to 2009”), http://www.census.gov/compendia/statab.
10
E-mail from Michelle Rose, Department of Labor, to Jared Nagel, Congressional Research Service, May 31, 2011
(copy on file with the authors).
11
See, e.g., J. Frederick Clarke, AFL-CIO v. Kahn Exaggerates Presidential Power under the Procurement Act, 68
C
AL. L. REV. 1044, 1044 (1980) (characterizing the court’s decision in Kahn as giving the President “majestic powers
to regulate the economy under the guise of formulating procurement policy”); Michael H. LeRoy, Presidential
Regulation of Private Employment: Constitutionality of Executive Order 12,954 Debarment of Contractors Who Hire
Permanent Striker Replacements, 37 B.C.
L. REV. 229, 232 (1996) (“The stakes are high because virtually all presidents
since Franklin Roosevelt have used their general power over procurement to place conditions on private actors who do
business with the United States government.”). The order at issue in Kahn, for example, applied to all wages and prices
of federal contractors, not just those applicable to their government contracts.
12
Staff of House Comm. on Government Operations, 85th Cong., 1st Sess., Executive Orders and Proclamations: A
Study of a Use of Presidential Powers (Comm. Print 1957).
13
Id.
14
Id.
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Presidents from Franklin D. Roosevelt through Barack Obama have issued orders that seek to
leverage the government’s procurement spending to promote socio-economic policies that some
commentators would characterize as extraneous to contractors’ provision of goods or services to
the government.
15
The issuance of such orders has been controversial, partly because of disputes
regarding the desirability of the underlying socio-economic policies to be promoted through the
procurement process and partly because some commentators characterize such presidential
actions as trespassing upon congressional prerogatives.
16
Presidential power to issue executive orders must derive from the Constitution or from an act of
Congress.
17
Contractor-related executive orders historically have been issued based upon the
President’s powers under Article II of the Constitution or the powers delegated to the President by
FPASA. The earliest orders using the procurement process to further socio-economic policies of
the President appear to have been issued during World War II, and were based upon the
President’s constitutional authority as commander-in-chief.
18
Later, during the 1960s, several
orders were issued under the authority of prior executive orders or other provisions of federal
law.
19
More recently, orders have been issued based on presidential authority under FPASA.
20
FPASA states that its purpose is to “provide the Federal Government with an economical and
efficient system for … [p]rocuring and supplying property and nonpersonal services”
21
and
authorizes the President to prescribe any “policies and directives” consistent with the act that he
“considers necessary to carry out” the act’s goals of efficiency and economy.
22
Courts and
commentators have disagreed as to whether Congress intended to delegate to the President broad
authority over procurement or authority only over narrow “housekeeping” aspects of
procurement, and FPASA’s legislative history is arguably inconclusive.
23
While a few courts have
15
See, e.g., 14 Weekly Compilation of Presidential Documents 1839, 1843 (1979) (President Carter noting a desire to
“use our buying power more effectively to make price restraint and competition a reality” when issuing Executive
Order 12092); see also Rossetti Constr. Co. v. Brennan, 508 F.2d 1036, 1045 n.18 (7th Cir. 1975) (“It is well
established that the procurement process, once exclusively concerned with price and quality of goods and services, has
been increasingly utilized to achieve social and economic objectives only indirectly related to conventional
procurement considerations.”). However, while some commentators suggest that procurement decisions once focused
exclusively upon price and quality, Congress, in particular, has long sought to leverage procurement spending to
promote particular socio-economic goals. See, e.g., James F. Nagle, A
HISTORY OF GOVERNMENT CONTRACTING 57-58
(2d ed., 1999) (describing how the Continental Congress used contracts for the mail to promote the development of
passenger transportation between the states).
16
See, e.g., LeRoy, supra note 111, at 266 (noting that every employment discrimination law followed, rather than
preceded, executive orders, and that these orders were generally issued at times when Congress would not have enacted
legislation on these issues).
17
Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 585 (1952).
18
See, e.g., Executive Order 8802, 3 C.F.R. 957 (1938-43 Compilation) (1941) (citing no specific statutory authority);
Executive Order 9346, 3 C.F.R. 1280 (1938-43 Compilation) (1943) (apparently premised on the President’s War
Powers); see also Contractors Ass’n v. Secretary of Labor, 442 F.2d 159, 169-70 (1971) (noting the lack of a reference
to a statutory authority in two Eisenhower executive orders, but finding that “they would seem to be authorized by the
broad grant of procurement authority with respect to” FPASA).
19
See, e.g., United States v. New Orleans Public Serv., Inc., 553 F.2d 459, 465-68 (5th Cir. 1977), vacated on other
grounds, 436 U.S. 942 (1978) (noting that Executive Order 11246 was based, in part, on Executive Order 10925, as
well as Title VII of the Civil Rights Act).
20
See, e.g AFL-CIO v. Kahn, 618 F.2d 784, 790 n.29 (D.C. Cir. 1979) (en banc) (noting that for the first three years of
its operation, Executive Order 11141 “was apparently based on only the FPASA”).
21
40 U.S.C. § 101(a) (emphasis added).
22
40 U.S.C. § 121(a).
23
Compare Kahn, 618 F.2d at 789 (construing the legislative history of FPASA as evidencing an intention to give the
(continued...)
Presidential Authority to Impose Requirements on Federal Contractors
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found that the President has “inherent authority” over procurement,
24
questions have arisen about
whether such authority survived the enactment of FPASA.
25
Some commentators have suggested
that the authority delegated to the President under FPASA is so broad that Presidents do not need
to assert inherent authority over procurement.
26
Challenges to Executive Orders on Federal Contracting
Parties challenging procurement-related executive orders and actions taken pursuant to such
orders may raise different legal issues depending upon whether the President issues the executive
order pursuant to the statutory authority granted to him by FPASA or under his constitutional
authority. When the President relies upon the authority delegated by FPASA, courts may treat
challenges alleging that presidential actions exceed statutory authority under FPASA as questions
of statutory interpretation.
27
Such courts have focused upon the text and legislative history of
FPASA, as well as prior uses of presidential authority under FPASA, in determining whether
Congress contemplated the President taking the challenged actions when it delegated authority to
prescribe policies and procedures “necessary” to promote “economy” and “efficiency” in federal
procurement.
28
In a few cases, parties have unsuccessfully challenged a contractor-related executive order by
asserting that FPASA itself, or a particular action taken under it, runs afoul of the nondelegation
doctrine, which concerns the delegation of legislative power to the executive branch.
29
The
(...continued)
President “direct and broad-ranging authority” in order to “achieve a flexible management system capable of making
sophisticated judgments in pursuit of economy and efficiency” with id. at 800 (McKinnon, J., dissenting) (viewing
FPASA as intended to give the President “comparatively narrow authority to manage the procurement of federal
government property, supplies, and services”). See Peter E. Quint, The Separation of Powers under Carter, 62 T
EX. L.
REV. 785, 792 (1984) (“[FPASA] easily could be read as authorizing the President to do little more than issue relatively
modest housekeeping regulations relating to procurement practice.”).
24
See, e.g., Savannah Printing Specialties Local 604 v. Union Camp Corp., 350 F. Supp. 632, 635 (S.D. Ga. 1972);
Southern Ill. Builders Ass’n v. Ogilvie, 327 F. Supp. 1154, 1160-61 (S.D. Ill. 1971), aff’d, 471 F.2d 680 (7th Cir.
1972); Joyce v. McCrane, 320 F. Supp. 1284, 1290 (D.N.J. 1970). Some commentators have asserted that these cases
misread early Supreme Court decisions, such as Perkins v. Lukens Steel Co., 310 U.S. 113, 127 (1940), which several
of the cases here cite when discussing the “voluntary” nature of government contracting (i.e., that contractors are not
required to do business with the federal government). Such commentators note that while Perkins speaks of the
government’s “unrestricted power … to determine those with whom it will deal, and to fix the terms and conditions
upon which it will make needed purchases,” it does not specifically mention presidential power. See, e.g., Clarke,
supra note 11, at 1050. But see United States v. Tingey, 30 U.S. (5 Pet.) 115 (1831) (suggesting independent
presidential power to contract).
25
See, e.g., Kahn, 618 F.2d at 791-92 n.40 (“[A]doption of the comprehensive scheme of legislation embodied in the
[FPASA] has negated the historical antecedents that engendered the doctrine of an inherent presidential proprietorship
power.”). In fact, some commentators have read Kahn as removing the need to assert the President’s inherent authority
over procurement. See, e.g., Quint, supra note 23, at 794.
26
See, e.g., Clarke, supra note 11, at 1050.
27
See, e.g., Kahn, 618 F.2d at 787 (explicitly declining to analyze the issue under the Youngstown framework because
the President issuing the order had “relied entirely upon authority said to be delegated by statute, and makes no appeal
to constitutional powers of the Executive that have not been confirmed by legislation”).
28
See, e.g., Chrysler Corp. v. Brown, 441 U.S. 281, 308 (1979) (“This is not to say that any grant of legislative
authority to a federal agency by Congress must be specific before regulations promulgated pursuant to it can be binding
on courts in a manner akin to statutes. What is important is that the reviewing court reasonably be able to conclude that
the grant of authority contemplates the regulations issued.”).
29
Such challenges have not been successful. See, e.g., Kahn, 618 F.2d at 793 n.51 (finding no violation of the
(continued...)
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premise of the nondelegation doctrine is that Article I of the Constitution vests legislative power
in Congress to make the laws that are necessary and proper,
30
and “the legislative power of
Congress cannot be delegated” to other branches of government.
31
A congressional delegation of
legislative authority will be sustained, according to the Supreme Court, whenever Congress
provides an “intelligible principle” that executive branch officials must follow and against which
their actions may be evaluated.
32
Today, the nondelegation doctrine constitutes only a “shadowy
limitation on congressional power,” as the Court has not struck down a congressional delegation
since 1935.
33
Parties challenging contractor-related executive orders and/or courts reviewing such challenges
have sometimes also articulated constitutional arguments based on the three-part scheme for
analyzing the validity of presidential actions set forth in Justice Jackson’s concurring opinion in
Youngstown Sheet & Tube Company v. Sawyer.
34
This analysis has appeared when presidential
action has been taken pursuant to the President’s express statutory authority under FPASA,
35
when presidential action has been viewed as conflicting with an existing statute,
36
and when
presidential action has been based on the President’s constitutional authority.
37
In Youngstown, the
Supreme Court struck down President Truman’s executive order directing the seizure of the steel
mills during the Korean War.
38
It did so, in part, because the majority deemed the order to be an
unconstitutional violation of the separation of powers doctrine given that it was, in essence, a
legislative act, and no constitutional provision or statute authorized such presidential action.
39
To
the contrary, Congress had expressly rejected seizure as a means to settle labor disputes during
consideration of the Taft-Hartley Act.
40
(...continued)
delegation doctrine because the goals of economy and efficiency in federal procurement provided sufficient standards
to judge whether the President’s actions were within the legislative delegation); Napolitano, 648 F. Supp. 2d at 739
(plaintiffs conceding they were not raising a violation of the nondelegation doctrine); Liberty Mutual Insurance Co. v.
Friedman, 639 F.2d 164, 166 (4th Cir. 1981).
30
“All legislative Powers [granted by the Constitution] shall be vested in a Congress of the United States.” U.S. CONST.
art. I, § 1.
31
United States v. Shreveport Grain & Elevator Co., 287 U.S. 77, 85 (1932); see also Marshall Field & Co. v. Clark,
143 U.S. 649, 692 (1892); A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 537-38 (1934).
32
J.W. Hampton & Co., 276 U.S. 394, 409 (1928); see also A.L.A. Schechter Poultry Corp. v. United States, 295 U.S.
495, 530 (1935); Panama Refining Co. v. Ryan, 293 U.S. 388, 421 (1935).
33
Chamber of Commerce v. Reich, 74 F.3d 1322, 1326 (D.C. Cir. 1996). See Whitman v. American Trucking Ass’n,
531 U.S. at 472-76 (reviewing the Supreme Court’s nondelegation decisions since 1935 and concluding “In short, we
have ‘almost never felt qualified to second guess Congress regarding the permissible degree of policy judgment that
can be left to those executing or applying the law.’ Mistretta v. United States, 488 U.S. 361, 416 (1999) (Scalia, J.,
dissenting); see id. at 373 (majority opinion).”). In Whitman, the author of the opinion, Justice Scalia, who was the lone
dissenter in a prior nondelegation doctrine case, Mistretta v. United States, modified his position on the doctrine.
34
For example, the district court in Kahn found that President Carter’s issuance of Executive Order 12092 exceeded his
authority under Youngstown. AFL-CIO v. Kahn, 472 F. Supp. 88, 102 (D.D.C. 1979). However, on appeal, both the
majority and the dissent rejected this conclusion. Kahn, 618 F.2d at 787, 797.
35
Contractors Ass’n of Eastern Pennsylvania v. Sec’y of Labor, 442 F.2d 159, 170 (3d Cir. 1971).
36
United States v. East Texas Motor Freight System, Inc., 564 F.2d 179, 185 (5th Cir. 1977); Kahn, 472 F. Supp. at
100. But see Kahn, 618 F.2d at 786 n.10, 787.
37
Allbaugh, 295 F.3d at 32-33 (D.C. Cir. 2002).
38
343 U.S. 579 (1952).
39
Id. at 586-89.
40
Id.
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The concurring opinion of Justice Jackson in Youngstown, which has come to be regarded as
more influential than the majority opinion, set forth three types of circumstances in which
presidential authority may be asserted and established a scheme for analyzing the validity of
presidential actions in relation to constitutional and congressional authority.
41
First, if the
President has acted according to an express or implied grant of congressional authority,
presidential “authority is at its maximum, for it includes all that he possesses in his own right plus
all that Congress can delegate,” and such action is “supported by the strongest of presumptions
and the widest latitude of judicial interpretation.”
42
Second, in situations where Congress has
neither granted nor denied authority to the President, the President acts in reliance only “upon his
own independent powers, but there is a zone of twilight in which he and Congress may have
concurrent authority, or in which its distribution is uncertain.”
43
Third, in instances where
presidential action is “incompatible with the express or implied will of Congress,” the power of
the President is at its minimum, and any such action may be supported pursuant only to the
President’s “own constitutional powers minus any constitutional powers of Congress over the
matter.”
44
In such circumstances, presidential actions must rest upon an exclusive power, and the
courts can uphold the measure “only by disabling the Congress from acting upon the subject.”
45
Because Congress had passed three statutes on seizure of private property in particular
circumstances and had considered, but not granted, the President general seizure authority for use
in emergencies, Justice Jackson’s taxonomy supported the majority’s holding that the President
lacked the authority to seize the steel mills in Youngstown.
46
Some commentators have proposed that this taxonomy ought to serve to invalidate at least certain
contractor-related executive orders.
47
Such arguments are most common when the executive order
requires agencies to impose requirements similar to those previously considered, but not passed
by Congress.
48
However, separation of powers arguments generally have been unavailing so long
as the executive order is also based on authority delegated to the President under the FPASA.
49
When acting under the FPASA, the President arguably is acting according to an express grant of
congressional authority, and, under Youngstown’s first category, such actions are “supported by
the strongest of presumptions and the widest latitude of judicial interpretation.”
50
41
Id. at 635-38.
42
Id. at 635, 637.
43
Id. at 637.
44
Id.
45
Id. at 637-38.
46
Id. at 602-03, 637.
47
See, e.g., Clarke, supra note 11, at 1055 (arguing that it would fundamentally violate the separation of powers
principle from Youngstown if FPASA can be used to impose general economic controls contrary to Congress’s intent).
48
See, e.g., id. (asserting that issuance of Executive Order 12954 ought to have been barred under Youngstown, given
that Congress had considered, but failed to pass, legislation prohibiting the employment of permanent replacements for
striking workers). But see Reich, 74 F.3d at 1325 (finding Executive Order 12954 invalid because it conflicted with the
NLRA). Some commentators have asserted that such procurement-related executive orders do not address the same
issues considered by Congress if the proposed legislation would have amended other provisions of law, not
procurement laws. See, e.g., Justice Department Memo on Executive Order 12,954, reprinted in 48
DAILY LAB. REP., at
D-28 (Mar. 13, 1995) (asserting that Executive Order 12954 differed from the legislation considered by Congress
because Congress would have amended the NLRA to prohibit employers from hiring permanent replacements).
49
See, e.g., Kahn, 618 F.2d at 787, 797.
50
343 U.S. at 635, 637; see Contractors Ass’n, 442 F.2d at 170.
Presidential Authority to Impose Requirements on Federal Contractors
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Developments in the Case Law
Cases alleging that particular executive orders are beyond the President’s authority may be
broadly divided into two types based upon the arguments raised in these cases and the courts’
treatment thereof: (1) cases challenging one of several executive orders directing executive
branch agencies to require certain federal and federally funded contractors to adhere to anti-
discrimination or affirmative action requirements,
51
and (2) cases challenging other contractor-
related executive orders. Some executive orders regarding contractors’ anti-discrimination and
affirmative action obligations were issued prior to the enactment of FPASA,
52
and, in part because
they rely upon constitutional authority,
53
they can raise somewhat different legal issues than cases
challenging orders issued under the authority of the FPASA.
The following discussion of key cases regarding contractor-related executive orders is arranged
chronologically, so as to highlight developments in the case law over time. In a few instances,
cases addressing similar issues have been grouped together, rather than treated individually.
Farmer v. Philadelphia Electric Co. (1964); Farkas v. Texas
Instruments, Inc. (1967)
Although Presidents began issuing executive orders in 1941 requiring agencies to impose on
federal contractors contract terms promoting particular socio-economic policies,
54
their authority
to do so apparently was not subject to legal challenge for several decades.
55
The first case to
address whether a particular executive order was within the President’s authority seems to have
been Farmer v. Philadelphia Electric Co., a 1964 decision by the U.S. Court of Appeals for the
Third Circuit (Third Circuit) holding that employees could not bring an action in district court to
recover damages for alleged discrimination on the basis of color and race in violation of
Executive Order 10925 prior to exhausting their administrative remedies.
56
Executive Order
10925 had directed agencies to include in their contracts provisions obligating the contractor not
to discriminate against “any employee or applicant for employment because of race, creed, color,
or national origin.”
57
The plaintiff in Farmer asserted he was a third party beneficiary entitled to
enforce these provisions against a contractor who allegedly terminated his employment because
of race.
58
In finding that Executive Order 10925 did not authorize a private cause of action prior
51
While federal contractors are the most common target of procurement-related executive orders, some early orders
targeted federally funded contractors and/or unions. See, e.g., Exec. Order No. 8803, 6 Fed. Reg. 3109 (June 27, 1941).
52
President Franklin Roosevelt’s Executive Order 8803, for example, was issued several years prior to FPASA’s
enactment.
53
See, e.g., Executive Order 9346, 3 C.F.R. 1280 (1938-43 Compilation) (1943).
54
See 6 Fed. Reg. at 3109.
55
Cf. Cheralynn M. Gregoire, AFL-CIO v. Allbaugh: The D.C. Circuit Limits the President’s Authority to Influence
Labor Relations, 19 G
A. ST. U.L. REV. 1167, 1177 (2003).
56
329 F.2d 3, 10 (3d Cir. 1964).
57
See 26 Fed. Reg. 1977 (Mar. 8, 1961).
58
329 F.3d at 4. Third party beneficiaries are persons who are entitled to enforce contracts to which they are not
parties. Third party beneficiary status is an “exceptional privilege,” which courts generally will not grant unless the
plaintiff can demonstrate that the contract “not only reflects the express or implied intention to benefit the party, but
[also] reflects an intention to benefit the party directly.” German Alliance Ins. Co. v. Home Water Supply Co., 226 U.S.
220, 230 (1912); Glass v. United States, 258 F.3d 1349, 1354 (Fed. Cir. 2001).
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Congressional Research Service 8
to the exhaustion of administrative remedies, the court indicated its view that Executive Order
10925 had “the force of law.”
59
While Farmer sometimes has been construed as holding that Executive Order 10925 is within the
President’s authority,
60
other courts and commentators have noted that the defendant did not
challenge the validity of the order, and the Third Circuit’s statement was made in dicta.
61
Similarly, in Farkas v. Texas Instruments, Inc., a 1967 decision by the U.S. Court of Appeals for
the Fifth Circuit (Fifth Circuit), the defendants did not challenge the validity of the executive
order.
62
The Farkas court also held that Executive Order 10925 does not authorize a private right
of action and that the refusal of relief by an administrative body was final, leading to the
dismissal of the claims for “breach of contractual nondiscrimination provisions” for “failure to
state a cause of action.”
63
In Farkas, as in Farmer, the court arguably assumed, rather than held,
that the issuance of Executive Order 10925 was within the President’s authority.
64
The Farkas court did not mention Youngstown, while the Farmer court mentioned it only in
passing, citing Youngstown to support its statement that the “[d]efendant does not contend that the
requiring of non-discrimination provisions in government contracts is beyond the power of
Congress.”
65
Contractors Association of Eastern Pennsylvania v. Secretary of
Labor (1971); United States v. East Texas Motor Freight Systems, Inc.
(1977); United States v. Trucking Management Inc. (1981)
While the defendants in Farmer and Farkas did not question the validity of the executive order
requiring agencies to impose anti-discrimination requirements on federal contractors, the
plaintiffs in Contractors Association of Eastern Pennsylvania v. Secretary of Labor directly
challenged the validity of certain orders issued under the authority of Executive Order 11246,
superseded Executive Order 10925.
66
It imposed similar anti-discrimination requirements on
federal contractors and federally funded construction contractors, as well as required them to
“take affirmative action to ensure that applicants are employed, and that employees are treated
during employment, without regard to their race, color, religion, sex or national origin.”
67
Under
59
329 F.2d at 8. Although the court found that the executive order and regulations had the force of law, in a footnote,
the court referenced a counterargument—advocated by individuals other than the parties—that the issuance of the
executive order was “an (invalid) attempt to legislate when Congress has refused to do so” because “Congress has
expressly refused to continue the [Fair Employment Practices Commission] and has declined to enact anti-
discriminatory legislation.” Id. at 8 n.9.
60
Cf. Contractors Ass’n, 442 F.2d at 167 (discussing assertions that Farmers and Farkas involved holdings, as opposed
to dicta).
61
Liberty Mutual, 639 F.2d at 169; see also Clarke, supra note 11, at 1059.
62
375 F.2d 629, 632 n.1 (5th Cir. 1967).
63
375 F.2d at 633.
64
Id. at 632 n.1 (“We would be hesitant to say that the antidiscrimination provisions of Executive Order No. 10925 are
so unrelated to the establishment of ‘an economical and efficient system for … the procurement supply’ of property and
services … that the order should be treated as issued without statutory authority. Indeed, appellees make no such
challenge to its validity.”).
65
329 F.2d at 8.
66
442 F.2d 159, 162 (3d Cir. 1971), aff’g, 311 F. Supp. 1002 (E.D. Pa.).
67
30 Fed. Reg. 12319 (Sept. 28, 1965).
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Congressional Research Service 9
the authority of Executive Order 11246, officials of the Department of Labor issued two orders
commonly know as the Philadelphia Plan.
68
The Philadelphia Plan required bidders for federal
and federally funded construction contracts in the Philadelphia area valued in excess of $500,000
to submit “acceptable affirmative action program[s],” including “specific goals” for “minority
manpower utilization” in six construction trades prior to contract award.
69
Several contractor
groups challenged the plan, asserting, among other things, that it was without a constitutional or
statutory basis.
70
The Third Circuit upheld the validity of the Philadelphia Plan.
71
Citing Youngstown, the court
found that “[i]n the area of Government procurement[,] Executive authority to impose non-
discrimination contract provisions falls in Justice Jackson’s first category: action pursuant to the
express or implied authorization of Congress.”
72
It reached this conclusion after reviewing the
various anti-discrimination and affirmative action executive orders issued by Presidents from
Franklin Roosevelt to Lyndon Johnson and noting that Congress continued to authorize
appropriations for programs subject to these executive orders.
73
According to the court, given
these continuing appropriations and absent specific statutory restrictions, Congress “must be
deemed to have granted to the President a general authority to act for the protection of federal
interests.”
74
The court further found that the President had exercised this general congressionally
granted authority in issuing Executive Order 11246. It specifically viewed the President as issuing
the order to address “one area in which discrimination in employment was most likely to affect
the cost and the progress of projects in which the federal government had both financial and
completion interests,” rather than to impose the President’s “notions of desirable social legislation
on the states wholesale.”
75
Thus, the court stated that the inclusion of the plan “as a pre-condition
for federal assistance was within the implied authority of the President and his designees,” unless
it was “prohibited by some other congressional enactment.”
76
The court added that the President
has “implied contracting authority,” under which the various anti-discrimination and affirmative
action requirements imposed on federal contractors were valid.
77
However, it also suggested that
these orders were within the President’s authority under the FPASA,
78
and later courts have
68
442 F.2d at 162.
69
Id. at 163-64.
70
Id. at 165. The Association also argued that the Philadelphia Plan “imposes on the successful bidder on a project of
the Commonwealth of Pennsylvania record keeping and hiring practices which violate Pennsylvania law.” Id. at 166.
The court found that the Philadelphia Plan would control if “adopted pursuant to a valid exercise of presidential
power.” Id.
71
Id. at 167-68. It is important to note that the court in Contractors Association only addressed orders pertaining to
federally funded contracts issued under the authority of Executive Order 11246. It did not address procurement
contracts or subcontracts.
72
Id. at 170. The court also suggested, in the alternative, that if the issuance of Executive Order 11246 did not fall
within the first of Justice Jackson’s categories from Youngstown, it would fall within the second, since “no
congressional enactments prohibit what has been done.” Id. at 171.
73
Id. at 168-71.
74
Id.
75
Id.
76
Id. at 171.
77
Id. at 174.
78
Id. at 170.
Presidential Authority to Impose Requirements on Federal Contractors
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generally emphasized this aspect of the Third Circuit’s decision, as opposed to its statements
about the President’s implied contracting authority.
79
The Third Circuit rejected challenges to the executive order under the National Labor Relations
Act (NLRA), which the court said does not “place any limitation upon the contracting power of
the government,”
80
and to the Department of Labor’s interpretation of the affirmative action
provision of the executive order.
81
The Third Circuit also rebuffed plaintiffs’ allegation that the Philadelphia Plan was invalid
because Executive Order 11246 “requires action by employers which violates” Title VII of the
Civil Rights Act.
82
In particular, the plaintiffs asserted that the plan violated Title VII by
establishing “specific goals for the utilization of available minority manpower in six trades,”
while Title VII states that employers cannot be required to grant preferential treatment on account
of workforce imbalances.
83
The plaintiffs further asserted that the Philadelphia Plan interfered
with a bona fide seniority system, contrary to Title VII, by imposing quotas on whom may be
hired.
84
The court rejected both arguments. It found the first argument unavailing because Title
VII stated only that “preferential treatment” (e.g., specific goals) based on workforce imbalances
could not be required under Title VII.
85
According to the court, Title VII did not prohibit agencies
from requiring preferential treatment under other authority, such as Executive Order 11246’s
required contract provision.
86
The court relied upon similar logic as to the alleged interference
with the bona fide seniority system, stating that Title VII only prohibited interference with the
seniority system under Title VII and did not prevent interference through the executive order or
the Philadelphia Plan.
87
This later holding regarding the bona fide seniority system was, however, effectively overturned
by the Supreme Court in International Brotherhood of Teamsters v. United States,
88
which
rejected the government’s assertion that a seniority system “adopted and maintained without
discriminatory intent” and exempted from Title VII, violated Title VII because it perpetuated
discrimination.
89
Based upon Teamsters, the Fifth Circuit held in United States v. East Texas
79
See, e.g., Kahn, 618 F.2d at 792 (quoting Contractors Association, 442 F.2d at 170).
80
442 F.2d at 174.
81
Id. at 175.
82
442 F.2d at 172.
83
Id. Title VII states that “[n]othing contained in this subchapter shall be interpreted to require any employer … [or]
labor organization to grant preferential treatment to any individual or to any group because of the race … of such
individual or groups on account of an imbalance which may exist with respect to the total number or percentage of
persons of any race … employed … in comparison with the total number or percentage of persons of such race … in
the available work force in any community … or other area.” Id. (quoting § 703(j) of the Civil Rights Act).
84
Id. at 172.
85
Id. at 172-73.
86
Id. at 172.
87
Id. at 172-73.
88
431 U.S. 324 (1977). It should be noted that the Teamsters Court did not address the validity of Executive Order
11246.
89
See also United States v. Trucking Mgmt. Inc., 662 F.2d 36, 37, 43 n.56 (D.C. Cir. 1981) (noting (1) that Contractors
Association was “decided before Teamsters when no court or legislator had focused on any distinction between Title
VII and the Executive Order;”(2) that Contractors Association was “based on the affirmative action obligations of the
Executive Order which have only prospective application,” as opposed the retroactive seniority relief sought in
Trucking Management, and (3) that, as “the court in Contractors [Association] evaluated the seniority system discussed
(continued...)
Presidential Authority to Impose Requirements on Federal Contractors
Congressional Research Service 11
Motor Freight Systems, Inc. that a bona fide seniority system cannot be prohibited by Executive
Order 11246, which “imposes obligations on government contractors and subcontractors designed
to eliminate employment discrimination of the same sort to which Title VII is directed,” because
Congress explicitly exempted the seniority system from Title VII.
90
In so holding, the court noted
that the President could not make unlawful in an executive order a bona fide seniority system that
“Congress has declared ... shall be lawful.”
91
The Fifth Circuit cited Youngstown in support of this
statement, suggesting that the order may not have the force of law to the extent that the order
conflicted with the statute (i.e., Title VII) regarding the seniority system.
92
However, the court
commented that the executive order “is authorized by the broad grant of procurement authority.”
93
In United States v. Trucking Management, Inc., the U.S. Court of Appeals for the District of
Columbia Circuit (D.C. Circuit) also considered whether a bona fide seniority system that was
lawful under Title VII could be unlawful under Executive Order 11246.
94
The court found the
Fifth Circuit’s reasoning in East Texas to be persuasive, and dismissed the government’s
arguments regarding the statutory language and legislative history of Title VII.
95
The D.C. Circuit
echoed the Fifth Circuit’s statement noting that the government had failed to argue, prior to the
Supreme Court’s decision in Teamsters, that Congress intended the executive order to extend
beyond the limits of Title VII with regard to discrimination potentially perpetuated by seniority
systems.
96
The court did not cite to Youngstown, although it noted that the government did not
argue whether the President has inherent authority to issue the executive order “to override the
expressed or implied will of Congress.”
97
Chrysler Corporation v. Brown (1979)
Like Contractors Association, Chrysler Corporation v. Brown involved a challenge to actions
taken under the authority of Executive Order 11246, as amended.
98
The litigation in Chrysler
arose because of regulations that the Department of Labor promulgated under the authority of
Executive Order 11246 and a Department of Labor disclosure regulation.
99
These regulations
provided for the public disclosure of information filed with or maintained by the Office of
Federal Contract Compliance Programs (OFCCP) and other agencies about contractors’
compliance with their contractual anti-discrimination and affirmative action requirements.
100
The
(...continued)
there under pre-Teamsters standards, there was no finding as here that the seniority systems at issue were protected by
§ 703(h)” of Title VII).
90
United States v. East Texas Motor Freight Sys., Inc., 564 F.2d 179, 185 (5th Cir. 1977).
91
Id.; see also Trucking Mgmt., 662 F.2d 36 (holding that Executive Order 11246 could not make unlawful the
negotiation or maintenance of a seniority system that was lawful under Title VII).
92
East Texas Motor Freight, 564 F.2d at 185.
93
Id. at 184.
94
662 F.2d at 38.
95
Id. at 38, 42.
96
Id. at 43-44.
97
Id. at 42.
98
441 U.S. 281 (1979).
99
Id. at 286, 303. Also issued by President Johnson, Executive Order 11375 extended Executive Order 11246 to
prohibit discrimination on the basis of sex. See 3 C.F.R. 684 (1966-1970 Comp.).
100
441 U.S. at 287.
Presidential Authority to Impose Requirements on Federal Contractors
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regulations stated that, despite being exempt from mandatory disclosure under the Freedom of
Information Act (FOIA):
records obtained or generated pursuant to Executive Order 11246 (as amended) … shall be
made available for inspection and copying … if it is determined that the requested inspection
or copying furthers the public interest and does not impede any of the functions of the
[OFCCP] or the Compliance Agencies.
101
Chrysler objected to the proposed release of the annual affirmative action program and complaint
investigation report for an assembly plant.
102
Chrysler asserted, among other things, that
disclosure was not “authorized by law” within the meaning of the Trade Secrets Act because the
OFCCP regulations that purported to authorize such disclosure did not have the force and effect
of law.
103
The Supreme Court considered whether the OFCCP regulations provided the “[authorization] by
law” required under the Trade Secrets Act.
104
The Court stated that agency regulations, as an
“exercise of quasi-legislative authority,” must be based on a congressional grant of authority.
105
As mentioned above, the Department of Labor regulations were issued under the authority of
Executive Order 11246, which authorized the Secretary of Labor to adopt regulations to achieve
its purposes, and an existing disclosure regulation.
106
The Court determined that the regulations
lacked the required nexus to congressionally delegated authority, as the legislative grants of
authority relied on for the disclosure regulations were not contemplated in “any of the arguable
statutory grants of authority” for Executive Order 11246.
107
The Court further noted that “[t]he
relationship between any grant of legislative authority and the disclosure regulations becomes
more remote when one examines” the section of the order under which the challenged regulations
were promulgated, which authorizes regulations “necessary and appropriate” to end
discrimination in government contracting.
108
The Court then held that “the thread between these
regulations and any grant of authority by the Congress is so strained that it would do violence to
established principles of separation of powers” to find that the regulations had the force and effect
of law.
109
In finding the challenged regulations invalid, the Court articulated what has become the
prevailing test of the validity of presidential actions under the FPASA, requiring that there be a
101
Id.
102
Id.
103
Id. at 294-95.
104
Id. at 301.
105
Id. at 302.
106
Id. at 304.
107
Id. at 304, 306, 307. Again, as in Teamsters, the Court did not address the validity of Executive Order 11246. Id. at
305 (“For purposes of this case, it is not necessary to decide whether Executive Order 11246 as amended is authorized
by the [FPASA], Titles VI and VII of the Civil Rights Act of 1964, the Equal Employment Opportunity Act of 1972, or
some more general notion that the Executive can impose reasonable contractual requirements in the exercise of its
procurement authority.”). It is within this statement that the Court makes its only citation to Youngstown, although it
does separately discuss separation of powers issues. See id. at 306 n. 37, 308; see also 441 U.S. 201, 320-21 (1979)
(Marshall, J., concurring) (“Nor do we consider whether such an Executive Order must be founded on a legislative
enactment.”).
108
Id. at 304, 307.
109
Id. at 308.
Presidential Authority to Impose Requirements on Federal Contractors
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“nexus” between the challenged executive branch action and congressionally delegated authority
to promote economy and efficiency in federal procurement.
110
However, the Court emphasized:
This is not to say that any grant of legislative authority to a federal agency by Congress must
be specific before regulations promulgated pursuant to it can be binding on courts in a
manner akin to statutes. What is important is that the reviewing court reasonably be able to
conclude that the grant of authority contemplates the regulations issued.
111
AFL-CIO v. Kahn (1979)
Several months after the Supreme Court’s decision in Chrysler, the D.C. Circuit issued its
decision in AFL-CIO v. Kahn, apparently the first in a series of cases challenging procurement-
related executive orders that did not involve the anti-discrimination and affirmative action
requirements. In Kahn, several labor unions challenged the validity of Executive Order 12092,
which directed agencies to incorporate in their contracts clauses requiring compliance with
certain wage and price standards that were otherwise voluntary.
112
The unions alleged that the
executive order was beyond the President’s power under FPASA and contravened other
provisions of federal law.
113
The district court agreed, finding, among other things, that “[s]uch an
indirect and uncertain means of achieving economy in government was certainly not
contemplated nor would it appear that Congress would have desired such a result when it
enacted” FPASA.
114
To the contrary, the court noted that the order could result in the government
paying higher prices, as it would be “forced to pass over the low bidder to do business with an
adherent to the wage guidelines.”
115
The district court also found that the order was barred by the
Council on Wage and Price Stability Act (COWPSA), which expressly stated that it did not
“authorize[] the … imposition … of any mandatory economic controls with respect to prices,
rents, wages, salaries, corporate dividends, or any similar transfers.”
116
Further, it concluded that
“constitutional separation of powers issues cannot be ignored,” and that the order fell within
Justice Jackson’s third category and was incompatible with the expressed intent of Congress.
117
A majority of the en banc court of appeals reversed, finding that that the “terms of the FPASA, its
legislative history, and Executive practice since its enactment” all indicated that Executive Order
12092 was within the President’s power under FPASA.
118
In particular, the court noted that the
goals of FPASA—“economy” and “efficiency”—“are not narrow terms,” and can encompass
110
See id. at 305.
111
Id. at 308.
112
618 F.2d 784, 786 (D.C. Cir. 1979).
113
Id. at 786-87, 796.
114
472 F. Supp. 88, 95 (D.D.C. 1979). To the contrary, the court found that the language and legislative history of
FPASA “affirmatively indicate” that Congress intended that the executive branch not use the procurement system as a
means of price regulation or control. Id. at 94-95.
115
Id.
116
Id. at 100. The court explicitly rejected the government’s assertion that the wage and price controls required under
federal contracts are not “mandatory,” but rather “voluntary,” because one chooses to contract with the government. In
reaching this conclusion, the court focused on the fact that the “program imposes a real penalty” (i.e., debarment) upon
contractors that fail to comply with the wage and price controls, and “[i]f an offending company is actually debarred,
the penalty is a loss of sales and income, and for its workers a possible loss of jobs.” Id. at 102.
117
Id. at 100.
118
618 F.2d at 792.
Presidential Authority to Impose Requirements on Federal Contractors
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factors “like price, quality, suitability, and availability of goods or services.”
119
As such, the court
would not treat the executive order as lacking statutory authority, but rather held that the
President’s order was within his statutory authority under FPASA.
120
It also construed the
legislative history of FPASA as evidencing congressional intent to give the President “particularly
direct and broad-ranging authority over those larger administrative and management issues that
involve the Government as a whole.”
121
Further, the court noted that prior Presidents had
exercised their procurement power under the act to “impose[] additional considerations on the
procurement process.”
122
Given all this, the court found that there was a “sufficiently close nexus”
between the executive order and economy and efficiency in procurement, even if the order
resulted in temporary increases in prices on certain contracts.
123
The court further found that the
procurement compliance program authorized by the executive order was not barred under
COWPSA because COWPSA stated only that it did not “authorize” the imposition of mandatory
wage and price controls; it did not prohibit the imposition of such controls under FPASA.
124
The
court also suggested that the requirements of the procurement program were not “mandatory”
because only “[t]hose wishing to do business with the Government must meet the Government’s
terms; others need not.”
125
The majority emphasized that its decision did not “write a blank check for the President to fill in
at his will” and that the President must use his procurement authority in a manner “consistent[]
with the structure and purpose” of the FPASA.
126
The court suggested in a footnote that its
approach “might raise serious questions” about a hypothetical executive order suspending willful
violators of the NLRA from government contracts for three years.
127
Two concurring opinions
also emphasized the “narrowness” of the majority’s decision and the “close nexus” between the
executive order and the purposes of FPASA.
128
The dissent strongly disagreed, emphasizing both
119
Id. at 789 (referencing § 303(b) of FPASA).
120
Id. at 791, 793.
121
Id.; see also id. at n.24 (taking issue with the conclusions about the legislative history of FPASA given in testimony
by the Comptroller General that the district court relied heavily upon).
122
Id. at 790. In particular, the court noted that executive branch interpretations of statutes that have operated over time
without legislative reversal are to be given deference by the courts, and that Congress could have been said to have
impliedly ratified the executive branch’s interpretation of COWPSA and FPASA by failure to amend them after the
issuance of multiple executive orders. Id. at 790, 796 n.65.
123
Id. at 792. In rejecting the district court’s concern that implementation of the order could result in the government
paying higher prices when it awards contracts using sealed bidding, the appeals court noted the possibility of short-term
savings when the government uses negotiated procurement, as well as longer-term savings as inflation declined. Id. at
792-93. However, later courts have construed Kahn to say that presidential actions are permissible under FPASA even
if they lead to higher prices or inefficiency. See, e.g., Chamber of Commerce v. Reich, 74 F.3d 1322, 1337 (D.C. Cir.
1996); Chamber of Commerce v. Reich, 897 F. Supp. 570, 581 (D.D.C. 1995).
124
618 F.2d at 794-95.
125
Id. at 794 (citing Perkins v. Lukens Steel Co., 310 U.S. 113, 127 (1940), for the proposition that the “Government
enjoys the unrestricted power … to determine those with whom it will deal, and to fix the terms and conditions upon
which it will make needed purchases”). The court also found that there was no impingement upon free bargaining,
contrary to the NLRA and Railway Labor Act, because the executive order represented only “an important external
factor in the economic environment surrounding collective bargaining [and] does not subvert the integrity of that
process.” Id. at 795.
126
Id. at 793.
127
Id. at 793 n.50. The majority did not explain why its approach would raise serious questions about such an order.
See also Reich, 74 F.3d at 1335 n.7.
128
618 F.2d at 796-97 (Bazelon, J., concurring, and Tamm, J. concurring).
Presidential Authority to Impose Requirements on Federal Contractors
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that FPASA “contains no warrant for using the procurement process as a tool for controlling the
Nation’s economy,”
129
and that the majority’s reading of FPASA would:
permit[] the President to effect any social or economic goal he chooses, however related or
unrelated to the true purposes of the 1949 Act, as long as he can conceive of some residual
consequences of the order that might in the long run help the Nation’s economy and thereby
serve the ‘not narrow’ and undefined concepts of ‘economy’ and ‘efficiency’ in federal
government procurement.
130
The dissent also stated that, were the majority’s interpretation of FPASA correct, FPASA would
constitute an unconstitutional delegation of legislative authority to the executive branch because
“the close nexus test … cannot supply an adequate standard.”
131
The majority and the dissent agreed that the order raised no issues under Youngstown.
132
The
majority, in particular, stated that challenges to executive actions under FPASA entail primarily
questions of statutory interpretation, not broader questions of separation of powers under
Youngstown.
133
The majority said that the main question was “whether the FPASA indeed grants
to the President the powers he has asserted,” and answered that question in the affirmative.
134
Liberty Mutual Insurance Co. v. Friedman (1981)
Two years after Kahn, the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) found that
a Department of Labor (DOL) determination that insurance underwriters are subject to the
recordkeeping and affirmative action requirements of Executive Order 11246 was invalid under
the “reasonably close nexus” tests of Chrysler and Kahn.
135
The plaintiffs in Liberty Mutual
Insurance Co. v. Friedman underwrote workers’ compensation policies for many companies with
government contracts, but did not underwrite any insurance policies for federal agencies, or sign
any contracts or subcontracts containing the anti-discrimination or affirmative action clauses
required under Executive Order 11246.
136
When DOL informed the plaintiffs that they were
“subcontractors” for purposes of Executive Order 11246 because their services were “necessary”
to the performance of federal contracts, they filed suit.
137
The plaintiffs alleged that they were outside the definition of “subcontractor” provided in the
regulations implementing Executive Order 11246, or, alternatively, (1) that the regulations were
129
Id. at 800.
130
Id. at 805-06.
131
Id. at 811.
132
Id. at 787, 797.
133
Id. at 787, 793. The majority also faulted the district court for concluding that the present case was similar to the
case in Youngstown. Id. at 786 n.10.
134
Id. at 787.
135
639 F.2d at 168-71. The question of whether a particular entity that provides goods or services to a federal
contractor constitutes a “subcontractor” for purposes of federal law is a recurring one, which has recently arisen in the
context of oversight of hospitals by the OFCCP. See, e.g., OFCCP Expanding Jurisdiction over Hospitals, Health Care
Systems, 94 F
ED. CONT. REP. 132 (Aug. 3, 2010).
136
639 F.2d at 166.
137
Id. The court reached this conclusion, in part, because state laws require employers, including government
contractors, to provide workers’ compensation insurance. Id.
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outside the scope of the executive order or the legislative authority granted by Congress, or (2)
that the executive order constituted an invalid delegation of legislative authority.
138
The district
court rejected all these arguments, noting that the situation here corresponded to that in the first of
Justice Jackson’s categories (i.e., action pursuant to an express or implied grant of congressional
authority). It also distinguished this situation from Chrysler because “[t]he regulations here … are
not tangentially related to the express purpose of combating employment discrimination through
government procurement but rather are directly aimed at implementing civil rights programs by
requiring government contractors to submit specific affirmative action plans.”
139
The court further
found that the plaintiffs had a choice as to whether to deal with the government, and they would
not have to comply with the “requirements” if they did not deal with the government.
140
A majority of the Fourth Circuit reversed.
141
While agreeing with the district court that the
plaintiffs fell within the definition of “subcontractor” under the regulations, the court found that
the application of the executive order to the insurance company was outside the scope of any
legislative authority granted to the President.
142
In so finding, the court relied heavily on Chrysler,
which held that a disclosure rule issued pursuant to Executive Order 11246 was not within the
congressional grants of authority.
143
The court looked at the possible sources of congressional
grants of authority “to require Liberty to comply with” Executive Order 11246 and found that
none of them “reasonably contemplates that Liberty, as a provider of workers’ compensation
insurance to government contractors, may be required to comply with EO 11,246.”
144
The court
observed that FPASA did not “provide[] the necessary [congressional] authorization for
application of the [Executive] Order to Liberty.”
145
The court distinguished the instant case from
Contractors Association, in which that court found FPASA to be the congressional authority for
Executive Order 11246 and the Philadelphia Plan issued under that order which was being
challenged. Unlike the courts in Contractors Association and Kahn, the court in Liberty Mutual
held that the application of the executive order to Liberty failed the reasonably close nexus test
“between the efficiency and economy criteria of the” FPASA and the requirements imposed on
contractors under the executive order.
146
The court held that “[t]he connection between the cost of
workers’ compensation policies … and any increase in the cost of federal contracts that could be
138
Id.
139
485 F. Supp. 695, 715 (D. Md. 1979). In its willingness to find the challenged actions valid if they promote policies
consistent with any federal law, not just economy and efficiency in procurement, the opinion here resembles that in
New Orleans Public Service and related cases. See, e.g., New Orleans Public Serv., 553 F.2d at 466-67 (5th Cir. 1977),
vacated on other grounds, 436 U.S. 942 (1978..
140
485 F. Supp. at 715 (citing Perkins v. Lukens Steel Co).
141
639 F.2d at 168-71.
142
Id. at 167-68. But see id. at 173 (Butzner, J., dissenting) (finding that Executive Order 11246 and the implementing
regulations were not inconsistent with FPASA, and the President deemed them necessary).
143
Id. at 168.
144
Id. at 168-69. The court examined FPASA, Titles VI and VII of the Civil Rights Act of 1964, and congressional
“‘ratification’ or ‘negative authorization’” as sources of congressional authority. Id. at 169-72. The court held that “the
rejection in 1973 of several amendments intended to circumscribe the role of the Executive Order program” could not
be considered to be an affirmative grant of congressional authority to the President to apply the order to Liberty
Mutual. Id. at 172.
145
Id.
146
Id. at 170. The Contractors Association court did not use the term “nexus” to describe the relationship between the
executive order and FPASA, but the Liberty Mutual court saw Contractors Association as requiring that “any
application of the Order [] be reasonably related to the [FPASA’s] purpose of ensuring efficiency and economy in
government procurement ... in order to lie within the statutory grant.” Id.
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attributed to discrimination by these insurers is simply too attenuated to allow a reviewing court
to find the requisite connection between procurement costs and social objectives.”
147
In differentiating the instant case from Contractors Association, the Liberty Mutual court noted
that there had been administrative findings of serious underrepresentation of minority employees
in the six trades included in the Philadelphia Plan.
148
Here,
[b]y contrast, no such findings were made …. Liberty is not itself a federal contractor and
there is, therefore, no direct connection to federal procurement. … There are no findings that
suggest what percentage of the total price of federal contracts may be attributed to the cost of
this insurance. Further, there is no suggestion that insurers have practiced the deliberate
exclusion of minority employees found to have occurred in Contractors Association.
149
The court did not explicitly state why the existence of such findings was necessary for the
application of Executive Order 11246 to the insurance company to be valid. However, subsequent
courts generally have declined to follow Liberty Mutual in requiring that procurement-related
executive orders be based on presidential findings, although its holding that parties not within the
contemplation of a congressional grant of authority in the FPASA cannot be subjected to
requirements promulgated under the authority of the FPASA apparently remains valid.
150
The court mentioned Youngstown in a footnote, and cited the case as preventing consideration of
the argument that the authority for the executive order could be based upon the President’s
inherent constitutional powers, as there was a lack of congressionally authorized legislative
authority in both Youngstown and the instant case.
151
Chamber of Commerce of the United States v. Reich (1996)
After Liberty Mutual, the next significant challenge to a procurement-related executive order
came in 1996, when the U.S. Court of Appeals for the District of Columbia Circuit found that
Executive Order 12954 was invalid because it conflicted with the NLRA and was “regulatory in
nature.”
152
Executive Order 12954 directed the Secretary of Labor to promulgate regulations
providing for the debarment of contractors who hired permanent replacements for striking
workers,
153
and was issued after Congress debated, but failed to pass, amendments to the NLRA
that would have prohibited employers from hiring permanent replacements.
154
The Chamber and
several business groups challenged the order on the grounds that it was barred by the NLRA,
which “preserves to employers the right to permanently replace economic strikers as an offset to
the employees’ right to strike.”
155
They also alleged that the order was beyond the President’s
147
Id. at 171.
148
Id. at 170.
149
Id. at 171.
150
See id. at 172.
151
Id. at 172 n.13.
152
74 F.3d 1322, 1339 (D.C. Cir. 1996).
153
60 Fed. Reg. 13023 (Mar. 10, 1995).
154
74 F. 3d at 1325; see, e.g., H.R. 5, 103d Cong.; S. 55, 103d Cong.; Ronald Turner, Banning the Permanent
Replacement of Strikers by Executive Order: The Conflict between Executive Order 12945 and the NLRA, 12 J.L.
&
POL’Y 1 (1996).
155
74 F.3d at 1325, 1332.
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authority under FPASA because there were no findings demonstrating that its requirements would
lead to “savings in government procurement costs.”
156
The district court disagreed, finding that
the order was not reviewable under Dalton v. Specter,
157
and even if it were reviewable, was
within the President’s broad authority under FPASA.
158
In particular, it noted that the validity of
policies implemented under the authority of FPASA need not be established by empirical proof.
159
The appeals court reversed as to both the reviewability and validity of the order. In one of the few
decisions regarding procurement-related executive orders to focus extensively on this issue, the
court discussed the ability of the courts, in cases where Congress has not precluded non-statutory
judicial review, to review the legality of the President’s order and the actions of subordinate
executive officials acting pursuant to a presidential directive.
160
The court stated that it was
“untenable to conclude that there are no judicially enforceable limitations on presidential actions,
besides actions that run afoul of the Constitution or which contravene direct statutory
prohibitions, so long as the President claims that he is acting pursuant to the [FPASA] in pursuit
of governmental savings.”
161
Having determined that it had jurisdiction, the court then found that Executive Order 12954 was
invalid because it conflicted with NLRA provisions guaranteeing the right to hire permanent
replacements during strikes and that such a conflict with federal labor relations policy was
unacceptable under a body of Supreme Court case law known as the NLRA preemption
doctrine.
162
The court concluded that the order was “regulatory” in nature because it sought to
impose requirements upon contractors, rather than protect the government’s interests as a
purchaser, although preemption of other federal actions by the NLRA was “still relevant” when
the government acts as a purchaser instead of a regulator.
163
The court did not suggest that the
order exceeded the President’s authority under FPASA and even reaffirmed interpretations of the
President’s broad authority to issue executive orders in pursuit of FPASA goals of economy and
efficiency in procurement with the appropriate nexus between standards and government savings,
even those orders that “reach beyond any narrow concept of efficiency and economy in
procurement.”
164
However, the court noted the potential effects of the order’s policy upon
“thousands of American companies” and “millions of American workers,”
165
as well as the
156
Id. at 1331. The plaintiffs also alleged that the lack of findings meant there had been an unconstitutional delegation
of legislative power, but they did not claim that FPASA itself was an unconstitutional delegation. 74 F.3d at 1326 n.2.
157
See 511 U.S. 462 (1994) (holding that an executive order shutting down the Philadelphia Naval Base cannot be
subject to judicial review because the authorizing statute provided for non-constitutional remedies for statutory review).
158
897 F. Supp. 570, 580 (D.D.C. 1995); 74 F.3d at 1325. In particular, the district court noted that there was a
“reasonable relationship” between the requirements of the executive order and economy and efficiency in federal
procurement given the legislative history and case law.
159
897 F. Supp. at 580.
160
74 F.3d at 1328 (“That the ‘executive’s’ action here is essentially that of the President does not insulate the entire
executive branch from judicial review. … Even if the Secretary were acting at the behest of the President this ‘does not
leave the courts without power to review the legality [of the action], for courts have power to compel subordinate
executive officials to disobey illegal Presidential commands.’ ”) (quoting Soucie v. David, 448 F.2d 1067, 1072 n.12)
(D.C. Cir. 1971)); see also Reich, 74 F.3d at 1331 n.4.
161
74 F.3d at 1332 (emphasis in original).
162
Id. at 1332, 1334. In its discussion of the NLRA preemption doctrine, the court referenced two executive orders
issued by an earlier President and expressed doubts about their legality. Id. at 1337, 1337 n. 10.
163
Id. at 1330-31, 1334, 1336-37, 1339.
164
See id. at 1333, 1337.
165
Id. at 1337.
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implications of the broad authority that the President claimed under FPASA.
166
Finding that the
order affected labor policy, the court noted that if the government is correct that there are few
limits on presidential power under the FPASA, a future President could not only revoke the
executive order, but also impose a new one requiring government contractors to permanently
replace striking workers in the interests of economy and efficiency in federal procurement.
167
The
court did not mention Youngstown.
Building and Construction Trades Department, AFL-CIO v. Allbaugh
(2002); UAW-Labor Employment and Training Corp. v. Chao (2003)
Reich was followed by several decisions that highlighted the breadth of presidential power under
FPASA along the lines suggested by the appellate court in Reich. For example, in Building and
Construction Trades Department, AFL-CIO v. Allbaugh, the U.S. Court of Appeals for the District
of Columbia Circuit found that the Executive Order 13202, which provided that the government
would “neither require nor prohibit the use of” project labor agreements (PLAs) on federally
funded contracts, was within the President’s constitutional authority to issue and not preempted
by the NLRA.
168
Under the executive order, contractors and subcontractors were still free to enter
into PLAs, and in practice would potentially do so depending on the effect of a PLA on costs.
169
The D.C. Circuit reversed the district court’s decision finding the order invalid and enjoining its
enforcement, as well as criticized its Youngstown analysis.
170
Noting that Youngstown requires the
President to have statutory or constitutional authority for an executive order, the D.C. Circuit
found that the President possessed the necessary constitutional authority.
171
The court determined
that the order was “an exercise of [his] supervisory authority over the Executive Branch,” in that
it addressed the administration of federally funded projects “to the extent permitted by law.”
172
The court noted that the situation here was unlike that in Youngstown because the order to seize
the steel mills in Youngstown was self-executing, and Executive Order 13202 directed executive
branch employees “in their implementation of statutory authority.”
173
The D.C. Circuit also found that the executive order was not preempted by the NLRA because the
order was a proprietary, as opposed to a regulatory, action, in that the government was “acting as
a proprietor, ‘interacting with private participants in the marketplace.’”
174
The court distinguished
this case from Reich, in which it had held that the NLRA preempted the executive order at issue
because the order was regulatory. According to the court, the order in Reich was regulatory “not
because it decreed a policy of general application … but because it disqualified companies from
contracting with the Government on the basis of conduct [not hiring permanent replacements for
striking workers] unrelated to any work they were doing for the Government.”
175
In the instant
166
Id. at 1338.
167
Id. at 1337-38.
168
295 F.3d 28, 29-30, 36 (D.C. Cir. 2002).
169
Id. at 30.
170
Id. at 31-32.
171
Id. at 32.
172
Id. at 33 (citing CONST. art. II, § 1).
173
Id.
174
Id. at 34 (quoting Bldg. & Constr. Trades Council v. Associated Builders & Contractors, 507 U.S. 218, 227 (1993)).
175
Id. at 35.
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case, in contrast, the D.C. Circuit found that the executive order was proprietary because it did
“not address the use of PLAs on projects unrelated to those in which the Government has a
proprietary interest.”
176
Similarly, in UAW-Labor Employment and Training Corp. v. Chao, the D.C. Circuit found that
Executive Order 13201 was not preempted by the NLRA and that the President possessed
authority to issue the order under FPASA because the order had an adequate nexus to FPASA’s
goals of economy and efficiency in procurement.
177
The order required that all contracts valued in
excess of $100,000 include a provision obligating contractors to post notices informing
employees of their rights not to be required “to join a union or to pay mandatory dues for costs
unrelated to representational activities.”
178
The district court had found that the NLRA preempted
the order, but did not reach the question regarding FPASA.
179
The D.C. Circuit reversed, finding
that although the order was regulatory and not proprietary, because it “operates on government
procurement across the board,” the NLRA preemption doctrine did not apply since the order did
not cover a specific right that was “arguably protected by the NLRA” or conflict with the NLRA
such that the NLRA preempted it.
180
The court’s decision largely focused on the NLRA and did
not mention Youngstown. Turning to whether the order had a “sufficiently close nexus” to
FPASA’s requirements regarding economy and efficiency in procurement, the court held that
although “[t]he link may seem attenuated,” it was an adequate nexus, even if “one can with a
straight face advance an argument claiming opposite effects or no effects at all.”
181
Chamber of Commerce v. Napolitano (2009)
The most recent of these cases was Chamber of Commerce v. Napolitano, a 2009 decision by the
U.S. District Court for the Southern District of Maryland upholding Executive Order 13465 and
the regulations implementing it.
182
This order directed agencies to require their contractors to use
E-Verify to verify whether their hires are authorized to work in the United States.
183
The order
also required that the Federal Acquisition Regulation be amended to provide the requisite contract
clauses.
184
Several business groups challenged the order and the final rule, alleging that they were
barred by the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA),
176
Id. at 36; see also id. at 35 (“First, the Government unquestionably is the proprietor of its own funds, and when it
acts to ensure the most effective use of those funds, it is acting in a proprietary capacity. Second, that the Government
is a lender to or a benefactor of, rather than the owner of, a project is not inconsistent with its acting just as would a
private entity; a private lender or benefactor also would be concerned that its financial backing be used efficiently.”)
177
325 F.3d 360, 362, 366-67 (D.C. Cir. 2003).
178
Id. at 362. In National Labor Relations Board v. General Motors Corp. and Communications Workers v. Beck,
respectively, the Supreme Court held that employees in unionized workplaces cannot be required to become or remain
members of the union and, if the employer enters a union-security agreement requiring employees to pay uniform
periodic dues or fees, may obtain reductions in dues paid for union activities that are unrelated to unions’ duties as
bargaining agents. See 325 F.3d at 362. In UAW, the court stated that in Reich, it would have found the Beck executive
order to be regulatory in nature, and that it agreed with its sentiment in Reich. Id. at 366.
179
325 F.3d at 362.
180
Id. at 363, 365-66. The court also rejected the government’s argument that the “preemption analysis should be less
intrusive because the order only imposes a contract condition, and firms can choose to do business elsewhere.” Id. at
363.
181
Id. at 366-67.
182
648 F. Supp. 2d 726 (S.D. Md. 2009).
183
Id. at 730-31; 73 Fed. Reg. 33285 (June 11, 2008).
184
648 F. Supp. 2d at 730.
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beyond the President’s authority under FPASA, in excess of E-Verify’s statutory authority, and in
excess of the executive branch’s constitutional authority because they were legislative in
nature.
185
They also argued that the IIRIRA prohibited the Secretary of Homeland Security from
“requiring any person or other entity to participate” in E-Verify.
186
The court disagreed.
The court first found that the Secretary of Homeland Security did not “require” contractors to use
E-Verify, in violation of the IIRIRA, because the Secretary was acting in a ministerial manner
pursuant to the executive order in making the designation.
187
The court held that it was instead the
executive order itself and the final rule that mandated that government contracts require
contractors to use the E-Verify system designated by the Secretary.
188
The court emphasized that
entering into contracts with the government “is a voluntary choice.”
189
In responding to later
arguments that the executive order and the final rule violated IIRIRA because they “required”
contractors to use E-Verify, the court reiterated the holding in Kahn that the “decision to be a
government contractor is voluntary and … no one has a right to be a government contractor.”
190
It
specifically rejected the plaintiffs’ assertion that the “choice” to contract with the government is
not really voluntary for persons who make their living as government contractors,
191
an argument
that has been raised by courts and commentators who note the financial consequences that loss of
the government’s business could have for contractors.
192
Thus, the court held that the executive
order and the final rule directing agencies to require the use of E-Verify did not in fact “require
any person or entity to use E-Verfiy,” because such persons could choose not to contract with the
government.
193
In analyzing whether IIRIRA prohibited the executive order and the final rule, the court found
that the relevant text of the IIRIRA applied to the Secretary of Homeland Security, not the
President.
194
The court then noted that the President had acted under the statutory authority of
FPASA, not IIRIRA, when directing agencies to require that contractors use E-Verify.
195
Finding
that the executive order and the final rule were within the President’s authority under FPASA, the
court also held that the order had demonstrated a “reasonably close nexus” to the goals of
FPASA.
196
The court found that the President’s explanation regarding the requirement that
contractors use E-Verify met this “nexus test” because he found that “[c]ontractors that adopt
rigorous employment eligibility confirmation policies are much less likely to face immigration
enforcement actions … and they are therefore generally more efficient and dependable
185
Id. at 732-33.
186
Id. at 729, 732-33 (quoting IIRIRA § 402(a)). The plaintiffs also asserted that the order and regulations constituted
rulemaking for which the President lacks constitutional authority, but they did not assert a violation of the
nondelegation doctrine. See id. at 739.
187
Id. at 733.
188
Id.
189
Id.
190
Id.
191
Id. at 735.
192
See, e.g., Pan Am. World Airways, Inc. v. Marshall, 439 F. Supp. 487, 495 (S.D.N.Y. 1977) (“To be barred,
permanently or temporarily, from competition for government contracts can be a matter of fiscal life and death to
government contractors.”).
193
648 F. Supp. 2d at 736.
194
Id. at 734.
195
Id. at 735.
196
Id. at 738.
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procurement sources.”
197
In so doing, the court specifically noted that Presidents are not required
to base their findings regarding the promotion of economy and efficiency in procurement on
evidence in a record.
198
Rather, the court held that a “reasonably close nexus” exists so long as the
“President’s explanation for how an Executive Order promotes efficiency and economy [is]
reasonable and rational.”
199
Additionally, the court held that the executive order and final rule
were constitutional under FPASA.
200
The court did not cite Youngstown.
Conclusions
As the case law illustrates, Presidents have broad authority under FPASA to impose requirements
upon federal contractors.
201
However, this authority is not unlimited, and particular applications
of presidential authority under FPASA have been found to be beyond what Congress
contemplated when it granted the President authority to prescribe policies and directives that
promote economy and efficiency in federal procurement. For example, in Chrysler, regulations
promulgated under the authority of Executive Order 11246 were deemed to lack the required
nexus to congressionally delegated authority because the regulations were not contemplated in
statutory grants of authority such as the FPASA that may have been relied upon for Executive
Order 11246. A similar argument was made in Liberty Mutual, where attempts to subject
insurance underwriters to Executive Order 11246 failed the “reasonably close nexus” test
between the economy and efficiency in federal procurement and the recordkeeping and other
requirements imposed on contractors by the order.
197
Id. at 738-39.
198
Id. at 738.
199
Id.
200
Id. at 739 (noting that the plaintiffs conceded that they were not raising a claim that FPASA was in violation of the
nondelegation doctrine).
201
See, e.g., Chamber of Commerce v. Reich, 74 F.3d 1322, 1333, (D.C. Cir. 1996); AFL-CIO v. Kahn, 618 F.2d 784
(D.C. Cir. 1979); Contractors Ass’n v. Secretary of Labor, 442 F.2d 159, 169-70 (1971). Here, in particular, it may be
important to note that federal statutes governing competition in federal contracting have been amended since Kahn was
decided. 472 F. Supp. at 94 (noting that FPASA “contemplates a competitive procurement system with full and free
competition consistent with the nature of the property or services being procured. Any restriction against competition
must be consistent with the authorities for limiting competition specifically enumerated in the act”). Currently, the
Competition in Contracting Act (CICA) of 1984 generally requires that contracts be awarded via “full and open
competition through the use of competitive procedures” unless they are awarded by a specific procedure expressly
authorized by statute. 10 U.S.C. § 2304(a)(1)(A) (procurements of defense agencies); 41 U.S.C. § 253(a)(1)(A)
(procurements of civilian agencies). In particular, under CICA, a “full and open competition” means that “all
responsible sources are permitted to submit sealed bids or competitive proposals on the procurement.” 41 U.S.C. §
403(6). State competitive bidding statutes have been found to be violated by the imposition of any requirement that
could discourage at least some entities from submitting bids or offers. See, e.g., City of Cleveland v. Ohio, 508 F.3d
829 (6
th
Cir. 2007), aff’g 2006 U.S. Dist. LEXIS 1083 (S.D. Ohio Jan. 13, 2006) (finding that a municipal ordinance
requiring contractors who did not comply with certain “local hiring” provisions to post a surety bond equal to 20% of
the contract price for future contracts ran afoul of a federal regulation prohibiting procedures or requirements that “may
operate to restrict competition” because it “could discourage contractors who had once defaulted from submitting
subsequent bids because they uniquely would be required to provide a twenty percent bond.”); Associated Builders &
Contractors, Inc. v. City of Rochester, 492 N.E.2d 781 (N.Y. 1986) (local ordinance requiring bidders to have an
apprentice training program as a precondition of contract award inconsistent with state competitive bidding statute).
While there does not appear to be any precedent for construing CICA in this way, it seems possible that certain
requirements imposed on contractors via executive order could be so onerous to be tantamount to impermissible
restrictions upon competition.
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Additionally, the requirements of particular executive orders have been found invalid when they
conflict with other provisions of law. In Reich, the court found that debarment of contractors who
hired permanent replacements for striking workers was preempted by the NLRA.
202
In East Texas
and Truckers Mgmt., the courts found that Executive Order 11246, which addressed the use of
bona fide seniority systems by government contractors and subcontractors, conflicted with Title
VII of the Civil Rights Act, which exempted bona fide seniority systems.
Executive orders on federal contracting promulgated under authorities other than the FPASA
potentially could be found invalid under Youngstown, although it is unclear that Presidents would
rely solely on the Constitution for such authority given the breadth of presidential authority under
the FPASA. However, in Building and Construction Trades Department, AFL-CIO, an executive
order on the use of PLAs in federal contracting was upheld based, in part, on the President’s
constitutional authority.
Further developments in the case law are possible, given that recent Presidents have continued the
practice of their predecessors in terms of issuing executive orders on government contracting.
These orders may require agencies to incorporate in their contracts provisions obligating
contractors to take steps that some commentators would characterize as extraneous to contractors’
provision of goods or services to the government. As mentioned earlier, the Obama
Administration circulated a draft executive order on disclosure of campaign contributions and
expenditures. If issued, such an order, or a revised version of the draft order, may face legal
challenge.
203
Legislation in this area is also possible, as Congress may amend or repeal an executive order,
terminate the underlying authority upon which it is based, or use its appropriations authority to
limit its effect.
204
In the event that Congress sought to enlarge or cabin presidential exercises of
authority over federal contractors, Congress could amend FPASA to clarify congressional intent
to grant the President broader authority over procurement, or limit his authority to more narrow
“housekeeping” aspects of procurement.
205
Congress also could pass legislation directed at
particular requirements of contracting executive orders.
206
For example, in the 112th Congress,
H.R. 1906, the Fairness in Federal Contracting Act of 2011, was introduced in response to the
draft executive order. H.R. 1906 would amend FPASA to prohibit an executive agency from
requiring an entity submitting an offer for a federal contract or participating in acquisition of
property or services by the federal government to disclose certain political contributions,
expenditures, and disbursements of funds as a condition of submitting the offer or participation.
On May 25, 2011, the House passed an amendment, H.Amdt. 310, to the National Defense
Authorization Act for FY2012, H.R. 1540, which contains the same language as H.R. 1906. The
House has also passed an amendment to the Department of Homeland Security Appropriations
Act, 2012 (H.R. 2017) that would prohibit the use of funds appropriated under the act “to
202
However, in Building and Construction Trades Department, AFL-CIO and UAW-Labor Employment and Training
Corp., the NLRA has been held not to preempt requirements of other executive orders.
203
See Eric Lichtblau, Lobbyist Fires Warning Shot Over Donation Disclosure Plan, N.Y. TIMES, Apr. 27, 2011, at
A19.
204
See CRS Report RS20846, Executive Orders: Issuance and Revocation, by Vanessa K. Burrows.
205
See, e.g., LeRoy, supra note 11, at 284 (noting that when orders derive from a “broad delegation of legislative
power, Congress has the power to restrict that delegation or revoke an application of it”).
206
But see Kevin M. Stack, The Statutory President, 90 IOWA L. REV. 539, 542 (2005) (noting that between 1945 and
1998, Congress overturned only 4 of the more than 3,500 executive orders issued).
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Congressional Research Service 24
implement any rule, regulation, or executive order regarding the disclosure of political
contributions that takes effect on or after the date of enactment of this Act.”
Finally, it is worth noting that many courts have emphasized the voluntary nature of federal
contracting.
207
In sum, Congress appears to have granted the President wide latitude to issue
executive orders on federal procurement. Courts seeking to uphold such orders may use the
presidential findings in the executive order itself to determine that the requisite nexus exists
between an order issued under the authority of the FPASA, or executive branch actions taken
pursuant to that order, and the FPASA’s goals of economy and efficiency in procurement.
Author Contact Information
Vanessa K. Burrows
Legislative Attorney
vburrow[email protected], 7-0831
Kate M. Manuel
Legislative Attorney
kmanuel@crs.loc.gov, 7-4477
207
See, e.g., Perkins v. Lukens Steel Co., 310 U.S. 113, 127 (1940); Contractors Ass’n of Eastern Pennsylvania v.
Sec’y of Labor, 442 F.2d 159, 174 (3d Cir. 1971); AFL-CIO v. Kahn, 618 F.2d 784, 794 (D.C. Cir. 1979); Chamber of
Commerce v. Napolitano, 648 F. Supp. 2d 726, 733, 735-36 (S.D. Md. 2009); see also Liberty Mutual Insurance Co. v.
Friedman, 485 F. Supp. 695, 716-17 (D. Md. 1979).
