A Minimalist Opinion Comes Out in the Maximus Bid Protest Case

“We have met the enemy and he is us.”

--Pogo

I wrote  a blog back in July about what was happening on the 1-800-MEDICARE call center contract. See https://www.awrcounsel.com/blog/2024/7/8/when-the-service-contract-act-prevailing-wage-is-just-not-enough-1-800-medicare-becomes-1-800-gotmoney. The Department of health and Human Services (“HHS”) Center for Medicare Services (“CMS”) has terminated the contractor for convenience early in a multi-year contract, and was conducting a new procurement containing a new labor harmony agreement (“LHA”) clause requiring the successful offeror to negotiate a collective bargaining agreement with the Communications Workers Of America (“CWA”), even though the union apparently does not have the support of a majority of the workers performing the service contract.   

The contractor, Maximus Federal Services, Inc., filed a pre-award protest at the Government Accountability Office (“GAO”) challenging the LHA requirement. A decision on the protest recently came out and is now available. See https://www.gao.gov/assets/880/871620.pdf. Basically, with one small exception, GAO upheld the agency’s actions. See also https://www.gao.gov/press-release/gao-statement-protest-filed-maximus-federal-services%2C-inc.%2C-b-422676.

First, a disclosure -- I have represented the Medicare call center contractor, Maximus, from time to time and am not a disinterested party. However, I was not involved in the GAO bid protest.

I count myself as someone who is sympathetic to the workers. I do wage and hour law, and those laws already protect the workers. Of special note here is the Service Contact Act (“SCA”) which applies to this procurement. It specifies the prevailing wages and benefits for these call center workers. I think the LHA clause required by CMS conflicts directly with the section 4(c) of the Service Contract Act and the labor policies embodied therein. That provision defines when a union collective bargaining agreement becomes the prevailing wage and benefit. The SCA is a procurement law. Accordingly, Congress has spoken about the unionization rights of worker on these federal service contracts. Congress got here first back in the early 1970’s. They specified a successor contractor rule for CBA wages and benefits. But they didn’t specify that you had to sign a CBA or enter into a LHA. All they required was that the workers must be paid prevailing wages and benefits set by a wage determination issued by the US Department of Labor. Thus, the workers thus get the congressionally mandated scope of protection, with the added proviso that if they unionize, they get additional SCA section 4(c) protections for their union agreement. Maximus must comply with those wage and hour laws. It is a procurement requirement. But embodied in the SCA, along with these other labor laws, is a fundamental choice which belongs to the workers -- the choice is whether to unionize, and it is exercised by a signed card check and either recognition or a supervised election. Apparently, here the union doesn’t have the signed cards nor the votes. But CMS is going to force the workers to unionize whether they want to or not. That is a first.

My SCA concerns aside, GAO essentially punted on the principal protest grounds finding they were outside of its jurisdiction. While I think GAO’s view of its own jurisdiction is owed some deference, I have to note that the Comptroller General has hardly been a paragon of consistency on this subject. It is a hornbook rule that GAO’s authority is derived from its jurisdiction over the procurement process. GAO can’t resolve labor conflicts. The Labor Management Relations Act  (“LMRA”) and the National Labor Relations Act (“NLRA”) are not procurement laws. They have obvious private sector applications and different Government agencies enforce those laws. However, the refusal of GAO to resolve those issues doesn’t mean those claims are not good ones. They just need to be litigated by Maximus elsewhere. 

Meanwhile, GAO has not always been so reticent to rule on these kinds of overlapping subjects in the past. Where federal labor laws interact with the federal procurement process, historically GAO has stepped through that door to rule on similar subjects which impact the procurement process.  Only now have they suddenly decided to be modest or deferential. In proof of that I will just quote a section of my Federal Publications manual for a seminar I have taught since 1986. In the original a seminar manual, I added a section derived from what was then our Federal Labor Standards (GWU Press 1985) law school textbook which stated as follows:  

The Comptroller General has long taken the position that contract stipulations tending to restrict competition and to increase the cost of performance are unauthorized unless reasonably requisite to the accomplishment of the legislative purposes of the contract appropriation involved or unless such stipulations are expressly authorized by statute. When Congress has legislated on a subject, it is not open to administrative discretion to stipulate conditions beyond or at variance with those specifically directed by the statute. 42 Comp. Gen. 2 (1962). In this connection, the Comptroller General has held that compliance with the National Labor Relations Act may not be required as a condition of a contract, nor may noncompliance therewith be considered as a ground for rejection of a bid, 17 Comp. Gen. 37 (1937); construction contracts with the Farm Security Administration under the Emergency Relief Appropriation Act could not lawfully contain a provision that the contractor shall not interfere with the self-organization of his employees, or refuse to bargain collectively with employees’ representatives, 18 Comp. Gen. 285 (1938); minimum wage rates may not be included in a contract for less than $2,000, since such is not authorized by the 8-Hour Day law and the FLSA, 19 Comp. Gen. 748 (1940); a requirement of compliance with the FLSA would not be included in a Government contract (unless of course the Act otherwise applies), 20 Comp. Gen. 24 (1940); a low bid may not be rejected because the bidder does not employ union labor as there is no statute requiring Government contractors to employ union labor, 31 Comp. Gen. 561 (1952); and the contractor may not be required to provide wage, hour and other fringe benefits resulting from a labor-management agreement, as such benefits are not authorized by statute, 42 Comp. Gen. 1 (1962).

Practical Guide to the Davis Bacon Act at 60 (Fed. Pub. 2024). I can’t say what GAO else has done in the 38 years since this section was originally added to my manual, but I can say it certainly was nothing as transparently political  as the GAO’s ruling in Maximus. Suffice it to say, it was a long-established practice that GAO wasn’t afraid to step up and strike down additive labor-related contract terms, unless those additive requirements were expressly authorized by law. Notably, there is no statutory authorization for the LHA clause used here. In addition, while GAO hung their hat on the fact that NLRA, LMRA and the NPRM process were not “procurement statutes,” Maximus’ argument still stands regardless of whether it is a procurement statute or not. Maximus maintained that it was still within GAO’s purview to decide whether an Agency is crafting a solicitation in a manner that is “prohibited by law”. And Maximus argued that is exactly what CMS has done here. GAO’s refusal to address the merits, and examine whether the NLRA, LMRA or the NPRM process was violated by this solicitation, should now now be decided by the Court of Federal Claims. I understand Maximus is taking the dispute to the next stage.

In addition, I think the decision on the conflict between the LHA clause and FAR 22.101-1 is just wrong on its face. FAR 22.101-1 doesn’t allow for an LHA clause. I don’t see how a “fair reading” of the regulation can be squared with the GAO opinion. It is that simple. There is a plain conflict between the ”neutrality” mandate and the requirements CMS put in the LHA clause. The GAO argument doesn’t pass the straight face test.

My own view is that CMS is behaving poorly, siding with one party when federal labor and procurement policy policy for more than 80 years has been to remain “neutral”, and that doing this by contract clause on a single contract is wrongful. This is pandering to organized labor done right before the election. Again, I think unions are a force for good and can help workers on these service contracts achieve even better working conditions. Section 4(c) of the SCA embodies that by making the collective bargaining agreement into a wage determination and imposing those wages and benefits on any successor contractor. That is a statutory thumb on the scale already. We don’t need a contractual thumb too. I don’t think it right to make that decision paternalistically at the government agency and enforce it by special solicitation provisions.

Again, I think a dangerous example is being made of Maximus. GAO whiffed the ball with its decision. It is now up to the next tribunal to tell Humpty Dumpty to get down off the wall.