The election of Donald Trump will significantly affect companies that contract with the federal government. Trump’s business background and campaign promises suggest many upcoming changes in the way the federal government does business.
In his 1987 bestseller, Trump: The Art of the Deal, Trump wrote: “Deals are my art form. Other people paint beautifully on canvas or write poetry. I like making deals, preferably big deals. That’s how I get my kicks.” Federal contractors should realize that the Trump administration will negotiate deals that differ from those of the Obama administration.
President Obama issued many executive orders and presidential memoranda that imposed new restrictions and requirements on government contractors. Trump has taken a dim view of Obama’s executive orders. Trump’s “Contract with the American Voter” outlines a 100-day action plan to “Make America Great Again.” In the contract, Trump states that he will “cancel every unconstitutional executive action, memorandum and order issued by President Obama.” Trump’s campaign website promised to “[c]ancel immediately all illegal and overreaching executive orders.”
Trump’s statements indicate that he will roll back regulations with the goal of reducing government expenses and encouraging job growth. His frequent use of Twitter also suggests that soon-to-be-President Trump may personally negotiate with government contractors to create better deals and reduce costs.
Given these statements, Trump will likely lift numerous restrictions on government contractors as part of an overall deal for the federal government to get more for less. We believe these Obama executive orders will be among the “First Five to Dive” under a Trump administration:
- Executive Order 13495: “Nondisplacement of Qualified Workers Under Service Contracts.” This was one of President Obama’s first executive orders, signed January 30, 2009. It requires a new federal contractor to offer jobs to workers employed by the outgoing contractor. It effectively gives the workers a right of first refusal to obtain jobs with the new contractor. Opponents say that this order limits the efficiency of new contractors.
- Executive Order 13502: “Use of Project Labor Agreements for Federal Construction Projects.” A project labor agreement (PLA) is a pre-hire collective bargaining agreement with a union that establishes the terms and conditions of employment for a construction project. President Obama signed this order on February 6, 2009, to require the use of PLAs on all federal construction projects valued at $25 million or more. Critics say that the order increases federal construction costs and limits the competitiveness of non-union contractors.
- Executive Order 13673: “Fair Pay and Safe Workplaces.” This order, signed by President Obama on July 31, 2014, requires prospective federal contractors to disclose labor law violations. Government officials are then required to consider a prospective contractor’s violation history when awarding contracts. The order also bars contractors from imposing pre-dispute arbitration agreements on their employees. Several companies sued to block implementation of this order, and on October 24, 2016, a federal district court in Texas sided with the employers against the Obama administration.
- Executive Order 13706: “Establishing Paid Sick Leave for Federal Contractors.” President Obama signed this order on September 7, 2015. It mandates that federal contractors allow employees at least one hour of paid sick leave for every 30 hours worked. The House Freedom Caucus has notified Trump’s transition team that this order needs to be rescinded. The Freedom Caucus also wants Trump to rescind Executive Order 13658, “Establishing a Minimum Wage for Contractors,” which sets a $10.10 minimum wage for the employees of federal contractors.
- Executive Order 13665: “Non-Retaliation for Disclosure of Compensation Information.” This order prohibits federal contractors from taking adverse employment actions against employees who disclose compensation information to other employees. President Obama signed the order on April 8, 2014. Critics of the order say that it increases government costs because salary transparency increases the employee expense of federal contractors.
Federal agencies have adopted rules implementing many of Obama’s executive orders, including those listed above. As a result, the rulemaking process will have to be used to eliminate these restrictions, and that process won’t be completed on “day one.”
In The Art of the Deal, Trump wrote: “The best thing you can do is deal from strength, and leverage is the biggest strength you have. Leverage is having something the other guy wants. Or better yet, needs. Or best of all, simply can’t do without.”
Trump is not one to voluntarily give up his leverage in a business deal. If federal contractors want or need the removal of government restrictions like those outlined above, Trump will likely expect something in return. Contractors can expect Trump to negotiate for lower prices, faster turn-arounds and better deliverables.
President Obama limited government outsourcing, but a Trump administration will likely increase outsourcing. In his contract with the American voter, Trump promised a hiring freeze on all federal employees except those in the military, public safety or public health, with the goal of reducing the federal workforce through attrition. At the same time, Trump has promised increased spending on defense, immigration enforcement, infrastructure, prison privatization, energy, law enforcement, cybersecurity and school choice. Companies in these industries will likely have many new opportunities to obtain government contracts. On the other hand, spending on environmental enforcement and education regulations will likely decrease, and companies in these industries may have fewer opportunities.
Federal contractors should also be on the look-out for new regulations on hiring former government contracting officers. In a recent television interview, Trump said that “the people that are making these deals for the government, they should never be allowed to go to work for these companies.”