The decision to overrule Chevron will likely have impacts on government contracting. A vast array of government contracting regulations that control contracts, such as Davis-Bacon Act requirements, Service Contract Act provisions, and a variety of Federal Acquisition Regulations, are derived from broad statutory provisions that have been implemented via regulations.

For example, the Davis Bacon Act (DBA) states that certain federal contracts for construction and repair (1) “shall contain a provision stating the minimum wages to be paid various classes of laborers and mechanics;” (2) that the statutorily required minimum wages “shall be based on the wages the Secretary of Labor determines to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the civil subdivision of the State in which the work is to be performed, or in the District of Columbia if the work is to be performed there;” and (3) that “the contractor or subcontractor shall pay all mechanics and laborers employed directly on the site of the work … at wage rates not less than those stated in the advertised specifications.”

Based on such broad statutory language, the Department of Labor (DOL) has promulgated an extensive set of regulations to implement the DBA, including definitions of how to calculate minimum wages and what is “directly on the site of the work.” Under Chevron, the DOL’s interpretation and application of those statutory provisions have been afforded deference, such as in Nevada Chapter of Associated Gen. Contractors of Am., Inc. v. Walsh, No. 22-16544, (9th Cir. Feb. 27, 2024), in which the 9th Circuit Court of Appeals affirmed the rejection of a challenge to the DOL’s regulations that describe how to calculate prevailing wages, based on Chevron deference to the agency’s interpretation of the DBA. In the post-Chevron world, a court could independently determine what, for example, it means to be “employed directly on the site of the work” and to strike down portions of the DOL’s DBA regulations that are contrary to the court’s interpretation.

Similarly, the Executive Branch often uses federal government contracting—and its ability to impose contract provisions as part of federal contracts—to implement social or political goals, such as increasing the federal contractor minimum wage, requiring paid sick leave, or requiring a successor contractor to hire the employees of an incumbent contractor. These contracting provisions are often imposed via regulation or Executive Order based on Section 121(a) of the Procurement Act (40 U.S.C. § 121), which provides that “[t]he President may prescribe policies and directives that the President considers necessary” to economically and efficiently procure supplies, property, and services. In a post-Chevron legal landscape, courts are empowered to interpret the scope of this authority independently and without deference to the administration, which may lead to more successful challenges to the administration’s implementation of social and economic policies through contracting.

Finally, in the defense sector, changes to federal contracting programs are often implemented through the annual National Defense Authorization Act (NDAA), which sets the budget for the Department of Defense. For example, Section 865 of the 2024 NDAA requires the Department of Defense to amend the Defense Federal Acquisition Regulation Supplement to mandate that Department of Defense agencies consider the past performance information of affiliates. The specific language is:

Not later than July 1, 2024, the Secretary of Defense shall amend section 215.305 of the Defense Federal Acquisition Regulation Supplement (or any successor regulation) to require that when small business concerns bid on Department of Defense contracts, the past performance evaluation and source selection processes shall consider, if relevant, the past performance information of affiliate companies of the small business concerns.

The apparent intent of Congress was to expand the ability of small businesses to rely on affiliate past performance, and the Small Business Administration has suggested that Section 865 will not have a practical impact because only affiliate past performance information that is “relevant” must be considered. In the SBA’s view, an affiliate’s past performance is only relevant if that affiliate has a meaningful role in contract performance. Under Chevron, such an agency interpretation of Section 865 may have been given deference, but post-Chevron, small business contractors may have a better chance to challenge an overly constrained implementation of Section 865.

Section 865 is only one example of the type of statutory language that is often used by Congress to amend federal contracting programs—language that is subsequently interpreted and applied by federal agencies. Post-Chevron, federal contractors may face more successful legal challenges to agency implementation of such directives, in which contractors assert the agency is not properly interpreting or applying Congressional intent.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.

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