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New affirmative-action rule drives up costs and red tape, harms competition

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Does it make sense to require a campground operator that has a few hundred employees at 120 different locations in national forests and parks to come up with 120 separate affirmative-action plans, one for each site? Just because it also receives a measly $52,000 federal contract to clean bathrooms used by tourists (which it does very cheaply, at cost, in order to make its nearby concessions more attractive)?

To any economist, the answer would be “no.” But to the Obama Administration, the answer is “yes.” If a federal contractor gets $50,000 annually from the government, or “serves as a depository of Government funds in any amount” or has “government bills of lading” adding up to $50,000, it generally has to have a separate affirmative action plan for “each of its establishments,” under a regulation issued by the Department of Labor in March 2014.

Amusingly, the administration cites three executive orders for as “authorities” for this regulation, each of which was issued in the name of promoting efficiency in government contracts (as was another recent executive order that will radically drive up costs for federal contractors and wipe out jobs in some states). But as even a defender of Obama’s rule-by-decree executive orders concedes, “to be sustained under FPASA, a presidential directive must have a rational, nonarbitrary relationship to the goal of ‘an economical and efficient system’ of federal procurement.”

Even a diehard affirmative-action supporter couldn’t justify imposing a multitude of duplicative affirmative-action plans when one would suffice. (And that’s putting aside any constitutional objections to race or gender-based federal affirmative-action mandates, like those that succeeded in the Lamprecht, Lutheran Church-Missouri Synod, and Western States Paving decisions.)

As a result of the Obama Administration’s new “affirmative-action” rule, Recreation Resource Management, a campground operator that also had a small contract to keep National Forest and park bathrooms clean, was forced to drop that contract. The company made no profit on that contract (which was for $52,000 per year, and which it only performed to keep bathrooms near its own campground concessions clean so that more tourists would come to the area and visit its campgrounds, too). It couldn’t possibly afford to hire a lawyer to write, and annually update, 120 separate affirmative-action plans for its many sites, when the contract at issue only involved a few work-years worth of activity to begin with. As its CEO Warren Meyer noted, the regulation required the company not just to “go through an expensive affirmative action planning process for ALL of their locations, not just for the people involved in that particular contract (41 CFR 60-2.1 and 41 CFR 60-4.1),” but also “create 120 annual written plans and presumably get them approved by someone in the government.” (While the rule allows a more centralized company to apply one affirmative-action plan to multiple small “establishments” sharing the same manager, it apparently requires a separate plan even for very small establishments at a less centralized company like Recreation Resource Management.)

So now, either taxpayers will have to pay more for the contract (since no other contractor will perform it at cost), or tourists will experience dirtier bathrooms. Ironically, no purpose is even served by imposing the duplicative affirmative-action requirement on Recreation Resource Management, which has a disproportionate percentage of minority or protected-class employees (including hiring lots of seniors, who are a protected class under the ADEA and federal regulations).

The regulation that caused this is new, dating to the Obama administration. It enriches some lawyers (who tend to support the administration), because you need to hire a lawyer to come up with legal gobbledygook to put into an affirmative-action plan (even if it has no effect on your actual hiring).

Red tape of this sort also enriches certain high-cost government contractors that survive by gouging taxpayers, rather than selling goods on the free market. It helps them by driving out their competitors who don’t specialize in government contracts and thus are not familiar with red tape unique to the government procurement world.

It is conceivable that this burdensome new affirmative-action rule also caused McDonald’s to recently close “some contract-operated fast food outlets at military bases.” If McDonald’s had kept them open, this Obama administration rule would have been forced it to draft thousands of separate affirmative-action plans covering the 99 percent of restaurants that are not on military bases and do not accept a nickel in taxpayer money.

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