By Richard Arnholt
For any companies doing work for the federal government, whether as prime contractors or as subcontractors, it can be challenging to keep up with the perpetually changing requirements, particularly when the changes occur this quickly. That has been the case in recent months, with at least four developments impacting a large percentage of the government contracting community.
In Part 1of this series about these developments, we examined two new Executive Orders (EOs) issued by President Biden that (1) directed an almost 50% increase in the minimum wage government contractors must pay their employees under a number of types of contracts; and (2) mandated the use of union labor on large federal construction projects.
Part 2 of the serious continues our discussion of recent EOs, covering EO 14055, which reinstitutes the requirement that federal contractors offer the right of first refusal to qualified service personnel who worked on predecessor contracts. In this article we also cover the new affirmative action on-line tool developed by the Office of Federal Contractor Compliance Programs (OFCCP) at the Department of Labor (DOL) that contractors must now use to certify compliance with affirmative action requirements.
Non-Displacement of Qualified Workers is Back
Through yet another Executive Order (EO 14055) issued on November 18, 2021, President Biden revived an Obama-era rule that successor contractors hire their predecessor’s employees in an aim to prevent qualified workers from being replaced. EO 14055, which requires that agencies include a provision in contracts giving workers the right of first refusal for employment with a successor contractor if they would otherwise lose their jobs upon the contract’s expiration, only applies to contracts and subcontracts covered by the Service Contract Act (SCA). EO 14055 is effective immediately and applies to solicitations issued on or after the effective date of the final regulations issued by the Federal Acquisition Regulatory Council (FARC), which has not yet occurred.
Procedure Overview
Pursuant to EO 14055, predecessor contractors must provide a list of service employees, with their anniversary dates, to the contracting agency at least 30 days prior to the contract completion date. That list is then provided to the successor contractor, which must make a written employment offer to all covered incumbent employees to the extent there is a position available, who then have at least 10 business days to accept the offer.
Importantly, the successor contractor does not have to hire all of its predecessor’s employees. Instead, it is entitled to determine the number of employees necessary to perform on the contract and may choose to employ more or fewer people. In addition, offers of employment must be for positions for which the employees are “qualified,” which provides contractors with some autonomy. Specifically, successor contractors do not have to offer a right of first refusal to any employee for whom the contractor reasonably believes, based on reliable evidence of the particular employee’s past performance, that there would be just cause to discharge the employee if employed by the contractor.
In a notable departure from the Obama-era requirements, the EO 14055 does not exclude managerial or supervisory employees from this requirement. This makes little sense, as companies bidding on federal contractors are often required to identify and are evaluated on who will fill those managerial and supervisory roles. Further, if a contractor cannot replace the employees or the supervisors, there seems to be little reason to complete those requirements because award to a new contractor will have little, if any, effect on the performance of the work.
Exclusions from EO 14055
EO 14055 excludes SCA contracts that fall below the simplified acquisition threshold (currently $250,000 for most procurements). Nor does it apply to employees who were hired to work under a federal service contract and one or more nonfederal services contracts as part of a single job. In addition, under limited circumstances, agencies may apply for an exemption from the EO 14055’s requirements.
Begin Preparation Efforts Now
Until final regulations are issued, agencies are strongly encouraged to use the clause included in EO 14055. In addition, federal contractors whose contracts or subcontracts are covered by the SCA should be advised that agencies may seek to modify contracts to include the provision. As such, it would be prudent to begin planning now to abide by these requirements.
OFCCP’s Affirmative Action Contractor Portal
Since the 1970s, federal contractors with supply and services contracts of modest value (today $50,000 or more) have been required to have an affirmative action program. Covered contractors must take proactive steps to recruit and advance qualified minorities, women, individuals with disabilities, and protected veterans, including having and annually updating an Affirmative Action Plan (AAP).
While AAPs have long been mandatory, contractors have only had to produce them during audits by the Office of Federal Contractor Compliance Programs (OFCCP) and certify to their existence during the contracting process. OFCCP’s failure to monitor, collect, or evaluate AAPs has been the subject of recent criticism. Most recently, in 2016, the Government Accountability Office (GAO) found that OFCCP had no way to collect AAPs, and that it only audited around 2% of contractors annually.
Based on its findings, GAO made a series of recommendations, including that OFCCP “develop a mechanism to monitor AAPs from covered federal contractors on a regular basis. Such a mechanism could include electronically collecting AAPs and contractor certification of annual updates.” In what is a quick turn for the federal government, just six years after that report, OFCCP’s AAP certification system is fully operational.
OFCCP’s New AAP Certification System
After the GAO report, OFCCP issued Directive 2018-07, Affirmative Action Program Verification Initiative, the purpose of which was to implement a verification process to ensure contractors are meeting the “the most basic EEO regulatory requirement” – preparation and annual update of AAPs.
That online certification tool, creatively named the “Contractor Portal” – https://contractorportal.dol.gov, went live on February 1, 2022. On that date, supply and services contractors subject to the AAP requirement were able to begin registering (construction contractors are not currently required to register or certify). Interestingly, some fields in the Contractor Portal have been pre-populated using information from 2018 EEO-1 forms. During registration, contractors should confirm that the information is correct.
For those contractors for which OFCCP has email addresses, OFCCP sent registration invitations. But, whether or not a contractor received an email, all contractors and subcontractors subject to the requirements must register and can do so using their EIN. Beginning on March 31, contractors were able to certify their AAP compliance, and by June 30 contractors must certify whether they have developed and maintained an AAP for each establishment with 50 or more employees for each functional unit.
New contractors are also subject to these registration and certification requirements. After award, contractors have 120 days to develop an AAP. They then have 90 days after developing the AAP to register and certify compliance through the portal. In addition to the initial certification requirements, going forward, federal contractors and subcontractors will be required to certify annually whether they are meeting their AAP obligations.
For those with questions about the registration process, OFCCP has posted a lot of helpful information, including a Contractor Portal “Federal Contractor Guide” that is available here – https://www.dol.gov/sites/dolgov/files/OFCCP/Contractor%20Portal%20-%20User%20Guide%20-%20(Release%202-1)%20Registration-MultiUser%201-27-2022%20508c.pdf. OFCCP has also posted FAQs and held multiple webinars to educate contractors about these new obligations.
Impact of the Portal
The first and most obvious impact of the portal is that tens of thousands of companies across the country have to register with OFCCP and certify compliance with their AAP obligations. Contractors will have to ensure any representations made on the Contractor Portal are accurate because inaccurate or untruthful certifications may expose contractors to liability under the False Claims Act or the False Statements Act.
Also, this tool not only enables OFCCP to track compliance, it will also enable the agency to identify easily those companies that have failed to comply. While certifying AAP compliance will not exempt contractors from OFCCP compliance evaluations, it is likely that they will be further down the list than those contractors that do not certify at all.
While for now the portal is being used only to track certifications, if it is successful, it is unlikely to remain limited for very long. Some have speculated that this is the first step toward OFCCP collecting and reviewing AAPs. It is also likely that this tool will be expanded to collect other information about government contractors’ compliance with employment labor and obligations.
