President Trump has signed Executive Order 13767 that directs a wall to be built on the Mexico-United States border. The Department of Homeland Security has sought proposals to design and build a prototype of the border wall, and many contractors have submitted offers. At the same time, several state and local governments (such as New York City, San Francisco, Berkeley, Oakland, New York, Illinois, and California) are considering or proposing legislation to prohibit contractors working on the border wall from contracting with that state/local government. These contractor “sanctions” are a complex, untested issue, and contractors bidding, or considering working, on the border wall project need to know that the issue is now in play. Such legislation, if adopted by a state/local government, will raise constitutional issues. Aside from due process and equal protection issues, there are at least two relevant U.S. Constitution clauses both of which may ultimately doom any proposed state/local legislation to sanction border wall contractors: the Supremacy Clause and the Dormant Commerce Clause.
Pursuant to the Supremacy Clause of the U.S. Constitution, Congress (through enactment of federal law) has the power to preempt state law. The Competition in Contracting Act (CICA) is a federal law with the Congressional purpose and effect of mandating “full and open” competition for federal contracts. A state/local sanction against federal contractors who bid on the border wall may be viewed as limiting competition on federal contracts, thereby constituting an obstacle to the Congressional intent of CICA. As a result, the Supremacy Clause may likely preclude such sanctions. Indeed, the U.S. Supreme Court in Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363 (2000) considered the application of a state statute imposing restrictions on state procurement contracts. The Court struck down a Massachusetts statute restricting its state entities from purchasing goods or services from any company doing business with Myanmar, formerly known as Burma. In a unanimous opinion, the Court held that the Massachusetts statute was invalid under the Supremacy Clause.
An even stronger extension of the Supremacy Clause is the non-discrimination rule, which provides: “A state regulation is invalid only if it regulates the United States directly or discriminates against the Federal Government or those with whom it deals.” It appears that almost any proposed state/local legislation would discriminate against a contractor working for the federal government on the border wall project, which would be in direct contravention of the non-discrimination rule under the Supremacy Clause, and therefore constitutionally prohibited.
Dormant Commerce Clause
Constitutional issues also exist due to the Dormant Commerce Clause, which prohibits a state from discriminating against interstate commerce. Should a state or locality seek to prohibit a contractor who worked or bid on the border wall project from seeking a state/local contract, this would go far beyond the state’s private market conduct, and therefore may be unconstitutional under the Dormant Commerce Clause.
There is a real possibility that any state/local legislation to prohibit a contractor from contracting with the state/local government, if that contractor is involved with the construction of the border wall, will ultimately be found unconstitutional. However, even though this legislation, once passed, may eventually be found unconstitutional, there is no certainty on when or if it will struck it down. As a result, contractors considering working on the border wall need to keep in mind that its possible such work will preclude them from working on government contracts in other jurisdictions. Likewise, border wall contractors seeking to bid on work in a state/locality that has such legislation in place, need to be prepared to take the state/locality to court to challenge the constitutionality of the legislation.