Proposed Rule2022-14967
Nondisplacement of Qualified Workers Under Service Contracts
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Published
July 15, 2022
Issuing agencies
Labor DepartmentWage and Hour Division
Abstract
The Department of Labor (Department) proposes regulations to implement Executive Order 14055, Nondisplacement of Qualified Workers Under Service Contracts, signed by President Joseph R. Biden, Jr. on November 18, 2021. The order establishes a general policy of the Federal Government that service contracts which succeed contracts for the same or similar services, and solicitations for such contracts, shall include a non-displacement clause. The non-displacement clause requires the contractor and its subcontractors to offer qualified employees employed under the predecessor contract a right of first refusal of employment under the successor contract. The Executive order also directs the Secretary of Labor (Secretary) to issue regulations to implement the requirements of this order. The order further directs that within 60 days of the Secretary issuing final regulations, the Federal Acquisition Regulatory Council (FAR Council) shall amend the Federal Acquisition Regulation (FAR) to provide for inclusion of the clause in section 3 of the order. Finally, the order requires the Director of the Office of Management and Budget (OMB) to issue guidance to implement section 6(c) of this order.
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[Federal Register Volume 87, Number 135 (Friday, July 15, 2022)]
[Proposed Rules]
[Pages 42552-42596]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-14967]
[[Page 42551]]
Vol. 87
Friday,
No. 135
July 15, 2022
Part II
Department of Labor
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Wage and Hour Division
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29 CFR Part 9
Nondisplacement of Qualified Workers Under Service Contracts; Proposed
Rule
Federal Register / Vol. 87 , No. 135 / Friday, July 15, 2022 /
Proposed Rules
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DEPARTMENT OF LABOR
Wage and Hour Division
29 CFR Part 9
RIN 1235-AA42
Nondisplacement of Qualified Workers Under Service Contracts
AGENCY: Wage and Hour Division, Department of Labor.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Department of Labor (Department) proposes regulations to
implement Executive Order 14055, Nondisplacement of Qualified Workers
Under Service Contracts, signed by President Joseph R. Biden, Jr. on
November 18, 2021. The order establishes a general policy of the
Federal Government that service contracts which succeed contracts for
the same or similar services, and solicitations for such contracts,
shall include a non-displacement clause. The non-displacement clause
requires the contractor and its subcontractors to offer qualified
employees employed under the predecessor contract a right of first
refusal of employment under the successor contract. The Executive order
also directs the Secretary of Labor (Secretary) to issue regulations to
implement the requirements of this order. The order further directs
that within 60 days of the Secretary issuing final regulations, the
Federal Acquisition Regulatory Council (FAR Council) shall amend the
Federal Acquisition Regulation (FAR) to provide for inclusion of the
clause in section 3 of the order. Finally, the order requires the
Director of the Office of Management and Budget (OMB) to issue guidance
to implement section 6(c) of this order.
DATES: Interested persons are invited to submit written comments on
this notice of proposed rulemaking (NPRM) on or before August 15, 2022.
ADDRESSES: You may submit comments, identified by Regulatory
Information Number (RIN) 1235-AA42, by either of the following methods:
<bullet> Electronic Comments: Submit comments through the Federal
eRulemaking Portal at <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the
instructions for submitting comments.
<bullet> Mail: Address written submissions to: Division of
Regulations, Legislation, and Interpretation, Wage and Hour Division,
U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW,
Washington, DC 20210.
Instructions: Please submit only one copy of your comments by only
one method. Of the two methods, the Department strongly recommends that
commenters submit their comments electronically via <a href="https://www.regulations.gov">https://www.regulations.gov</a> to ensure timely receipt prior to the close of the
comment period, as the Department continues to experience delays in the
receipt of mail. All comments must be received by 11:59 p.m. ET on
August 15, 2022, for consideration in this rulemaking; comments
received after the comment period closes will not be considered.
Commenters submitting file attachments on <a href="https://www.regulations.gov">https://www.regulations.gov</a> are advised that uploading text-recognized
documents--i.e., documents in a native file format or documents which
have undergone optical character recognition (OCR)--enable staff at the
Department to more easily search and retrieve specific content included
in your comment for consideration. This recommendation applies
particularly to mass comment submissions, when a single sponsoring
individual or organization submits multiple comments on behalf of
members or other affiliated third parties. The Wage and Hour Division
(WHD) posts such comments as a group under a single document ID number
on <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Anyone who submits a comment (including duplicate comments) should
understand and expect that the comment will become a matter of public
record and will be posted without change to <a href="https://www.regulations.gov">https://www.regulations.gov</a>, including any personal information provided.
Accordingly, the Department requests that no business proprietary
information, copyrighted information, or personally identifiable
information be submitted in response to this NPRM.
Docket: For access to the docket to read background documents or
comments, go to the Federal eRulemaking Portal at <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT: Amy DeBisschop, Director, Division of
Regulations, Legislation, and Interpretation, Wage and Hour Division,
U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW,
Washington, DC 20210; telephone: (202) 693-0406 (this is not a toll-
free number). Alternative formats are available upon request by calling
1-866-487-9243. If you are deaf, hard of hearing, or have a speech
disability, please dial 7-1-1 to access telecommunications relay
services.
Questions of interpretation or enforcement of the agency's existing
regulations may be directed to the nearest WHD district office. Locate
the nearest office by calling the WHD's toll-free help line at (866)
4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time
zone, or log onto WHD's website at <a href="https://www.dol.gov////local-offices">https://www.dol.gov////local-offices</a>
for a nationwide listing of WHD district and area offices.
SUPPLEMENTARY INFORMATION:
I. Background
On November 18, 2021, President Joseph R. Biden, Jr. issued
Executive Order 14055, ``Nondisplacement of Qualified Workers Under
Service Contracts.'' 86 FR 66397 (Nov. 23, 2021). This order explains
that ``when a service contract expires and a follow-on contract is
awarded for the same or similar services, the Federal Government's
procurement interests in economy and efficiency are best served when
the successor contractor or subcontractor hires the predecessor's
employees, thus avoiding displacement of these employees.'' Id.
Accordingly, Executive Order 14055 provides that contractors and
subcontractors performing on covered Federal service contracts must in
good faith offer service employees employed under the predecessor
contract a right of first refusal of employment. Id.
Section 1 of Executive Order 14055 sets forth a general policy of
the Federal Government that when a service contract expires, and a
follow-on contract is awarded for the same or similar services, the
Federal Government's procurement interests in economy and efficiency
are best served when the successor contractor or subcontractor hires
the predecessor's employees, thus avoiding displacement of these
employees. 86 FR 66397. Using a carryover workforce reduces disruption
in the delivery of services during the period of transition between
contractors, maintains physical and information security, and provides
the Federal Government with the benefits of an experienced and well-
trained workforce that is familiar with the Federal Government's
personnel, facilities, and requirements. Id. Section 1 explains that
these same benefits are also often realized when a successor contractor
or subcontractor performs the same or similar contract work at the same
location where the predecessor contract was performed. Id.
Section 2 of Executive Order 14055 defines ``service contract'' or
``contract'' to mean any contract, contract-like instrument, or
subcontract for services entered into by the Federal Government or its
contractors that is covered by the Service Contract Act of 1965, as
amended, (SCA) and its implementing regulations. 86 FR 66397. Section 2
also
[[Page 42553]]
defines ``employee'' to mean a service employee as defined in the SCA,
41 U.S.C. 6701(3). See 86 FR 66397. Finally, section 2 defines
``agency'' to mean an executive department or agency, including an
independent establishment subject to the Federal Property and
Administrative Services Act (Procurement Act), 40 U.S.C. 101 et seq.
See 86 FR 66397 (citing 40 U.S.C. 102(4)(A)).
Section 3 of Executive Order 14055 provides the wording for a
required contract clause that each agency must, to the extent permitted
by law, include in solicitations for service contracts and subcontracts
that succeed a contract for performance of the same or similar work. 86
FR 66397-98. Specifically, the contract clause provides that the
contractor and its subcontractors must, except as otherwise provided in
the clause, in good faith offer service employees, as defined in the
SCA, employed under the predecessor contract and its subcontracts whose
employment would be terminated as a result of the award of the contract
or the expiration of the predecessor contract under which the employees
were hired, a right of first refusal of employment under the contract
in positions for which those employees are qualified. Id. at 66397. The
contractor and its subcontractors determine the number of employees
necessary for efficient performance of the contract and may elect to
employ more or fewer employees than the predecessor contractor employed
in connection with performance of the work. Id. Except as otherwise
provided by the contract clause, there is to be no employment opening
under the contract or subcontract, and the contractor and any
subcontractors may not offer employment under the contract to any
employee prior to having complied fully with the obligation to offer
employment to employees on the predecessor contract. Id. The contractor
and its subcontractors must make an express offer of employment to each
employee and must state the time within which the employee must accept
such offer, and an employee must be provided at least 10 business days
to accept the offer of employment. Id. at 66397-98.
The contract clause also provides that, notwithstanding the
obligation to offer employment to employees on the predecessor
contract, the contractor and any subcontractors (1) are not required to
offer a right of first refusal to any employee(s) of the predecessor
contractor who are not service employees within the meaning of the SCA
and (2) are not required to offer a right of first refusal to any
employee(s) of the predecessor contractor for whom the contractor or
any of its subcontractors reasonably believes, based on reliable
evidence of the particular employee's past performance, that there
would be just cause to discharge the employee(s). 86 FR 66398.
The contract clause also provides that a contractor must, not fewer
than 10 business days before the earlier of the completion of the
contract or of its work on the contract, furnish the contracting
officer a certified list of the names of all service employees working
under the contract and its subcontracts during the last month of
contract performance. 86 FR 66398. The list must also contain
anniversary dates of employment of each service employee under the
contract and its predecessor contracts either with the current or
predecessor contractors or their subcontractors. Id. The contracting
officer must provide the list to the successor contractor, and the list
must be provided on request to employees or their representatives,
consistent with the Privacy Act and other applicable law. Id. The
contract clause further provides that if it is determined, pursuant to
regulations issued by the Secretary of Labor, that the contractor or
its subcontractors are not in compliance with the requirements of the
contract clause or any regulation or order of the Secretary of Labor,
the Secretary may impose appropriate sanctions against the contractor
or its subcontractors, as provided in the Executive order, the
regulations, and relevant orders of the Secretary, or as otherwise
provided by law. Id.
The contract clause also provides that in every subcontract entered
into in order to perform services under the contract, the contractor
will include provisions that ensure that each subcontractor will honor
the requirements of the clause in the prime contract with respect to
the employees of a predecessor subcontractor or subcontractors working
under the contract, as well as of a predecessor contractor and its
subcontractors. Id. The subcontract must also include provisions to
ensure that the subcontractor will provide the contractor with the
information about the employees of the subcontractor needed by the
contractor to comply with the prime contractor's requirements. Id. The
contractor must also take action with respect to any such subcontract
as may be directed by the Secretary of Labor as a means of enforcing
these provisions, including the imposition of sanctions for
noncompliance. However, if the contractor, as a result of such
direction, becomes involved in litigation with a subcontractor, or is
threatened with such involvement, the contractor may request that the
United States enter into the litigation to protect the interests of the
United States. Id. Finally, the contract clause states that nothing in
the order must be construed to require or recommend that agencies,
contractors, or subcontractors pay the relocation costs of employees
who exercise their right to work for a successor contractor or
subcontractor pursuant to the Executive order. Id.
Section 4 of Executive Order 14055 provides that when an agency
prepares a solicitation for a service contract that succeeds a contract
for performance of the same or similar work, the agency will consider
whether performance of the work in the same locality or localities in
which the contract is currently being performed is reasonably necessary
to ensure economical and efficient provision of services. 86 FR 66398.
If an agency determines that performance of the contract in the same
locality or localities is reasonably necessary to ensure economical and
efficient provision of services, section 4 requires the agency, to the
extent consistent with law, to include a requirement or preference in
the solicitation for the successor contract that it be performed in the
same locality or localities. 86 FR 66399.
Section 5 of Executive Order 14055 provides exclusions.
Specifically, section 5 provides that the order does not apply to (a)
contracts under the simplified acquisition threshold as defined in 41
U.S.C. 134 (i.e., currently contracts less than $250,000); and (b)
employees who were hired to work under a Federal service contract and
one or more nonfederal service contracts as part of a single job,
provided that the employees were not deployed in a manner that was
designed to avoid the purposes of the order. 86 FR 66399.
Section 6 of Executive Order 14055 authorizes a senior official of
an agency to grant an exception from the requirements of section 3 of
the order for a particular contract under certain circumstances. In
order to grant an exception from the requirements of section 3 of the
order, the senior official must, by no later than the solicitation
date, provide a specific written explanation of why at least one of the
following circumstances exists with respect to the contract: (i)
adhering to the requirements of section 3 would not advance the Federal
Government's interests in achieving economy and efficiency in Federal
procurement; (ii) based on a market analysis, adhering to the
requirements of section 3 of the order would: (A) substantially reduce
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the number of potential bidders so as to frustrate full and open
competition; and (B) not be reasonably tailored to the agency's needs
for the contract; or (iii) adhering to the requirements of section 3
would otherwise be inconsistent with Federal statutes, regulations,
Executive Orders, or Presidential Memoranda. 86 FR 66399. The order
also requires each agency to publish descriptions of the exceptions it
has granted on a centralized public website, and any contractor granted
an exception to provide written notice to affected workers and their
collective bargaining representatives. Id. In addition, the Executive
order requires each agency to report to OMB any exceptions granted on a
quarterly basis. Id.
Section 7 of Executive Order 14055 provides that, consistent with
applicable law, the Secretary will issue final regulations to implement
the requirements of the order. 86 FR 66399. In addition, to the extent
consistent with law, the FAR Council is to amend the FAR to provide for
inclusion of the contract clause in Federal procurement solicitations
and contracts subject to the order. Id. Additionally, the Director of
OMB must, to the extent consistent with law, issue guidance to
implement section 6(c) of the order, requiring each agency to report to
OMB any exceptions granted on a quarterly basis. Id.
Section 8 of Executive Order 14055 assigns responsibility for
investigating and obtaining compliance with the order to the
Department. 86 FR 66399. This section authorizes the Department to
issue final orders in such proceedings prescribing appropriate
sanctions and remedies, including, but not limited to, orders requiring
employment and payment of wages lost. Id. The Department may also
provide that where a contractor or subcontractor has failed to comply
with any order of the Secretary or has committed willful violations of
the Executive order or its implementing regulations, the contractor or
subcontractor, its responsible officers, and any firm in which the
contractor or subcontractor has a substantial interest, may be
ineligible to be awarded any contract of the United States for a period
of up to 3 years. 86 FR 66399-66400. Neither an order for debarment of
any contractor or subcontractor from further Federal Government
contracts nor the inclusion of a contractor or subcontractor on a
published list of noncomplying contractors is to be carried out without
affording the contractor or subcontractor an opportunity to present
information and argument in opposition to the proposed debarment or
inclusion on the list. 86 FR 66400. Section 8 also specifies that
Executive Order 14055 creates no rights under the Contract Disputes
Act, and that disputes regarding the requirements of the contract
clause prescribed by section 3 of the order, to the extent permitted by
law, will be disposed of only as provided by the Department in
regulations issued under the order. Id.
Section 9 of Executive Order 14055 revokes Executive Order 13897 of
October 31, 2019, which itself rescinded Executive Order 13495 of
January 30, 2009, Nondisplacement of Qualified Workers Under Service
Contracts. 86 FR 66400. See also 84 FR 59709 (Nov. 5, 2019); 74 FR 6103
(Jan. 30, 2009). It also explains that Executive Order 13495 remains
rescinded. 86 FR 66400.
Section 10 of Executive Order 14055 provides that if any provision
of the order, or the application of any provision of the order to any
person or circumstance, is held to be invalid, the remainder of the
order and its application to any other person or circumstance will not
be affected. 86 FR 66400.
Section 11 of Executive Order 14055 provides that the order is
effective immediately and applies to solicitations issued on or after
the effective date of the final regulations issued by the FAR Council
under section 7 of the order. 86 FR 66400. For solicitations issued
between the date of Executive Order 14055 and the date of the action
taken by the FAR Council, or solicitations that were previously issued
and were outstanding as of the date of Executive Order 14055, agencies
are strongly encouraged, to the extent permitted by law, to include in
the relevant solicitation the contract clause described in section 3 of
the order. Id.
Section 12 of Executive Order 14055 specifies that nothing in the
order is to be construed to impair or otherwise affect the authority
granted by law to an executive department or agency, or the head
thereof, or the functions of the Director of OMB relating to budgetary,
administrative, or legislative proposals. 86 FR 66400. In addition, the
order is to be implemented consistent with applicable law and subject
to the availability of appropriations. The order is not intended to,
and does not, create any right or benefit, substantive or procedural,
enforceable at law or in equity by any party against the United States,
its departments, agencies, or entities; its officers, employees, or
agents; or any other person. 86 FR 66401.
Prior Relevant Executive Orders
As indicated, section 9 of Executive Order 14055 revoked Executive
Order 13897, which itself rescinded Executive Order 13495,
Nondisplacement of Qualified Workers Under Service Contracts. On August
29, 2011, after engaging in notice-and-comment rulemaking, the
Department promulgated regulations, 29 CFR part 9 (76 FR 53720), to
implement Executive Order 13495, and per Executive Order 13897,
rescinded them in a Notice published in the Federal Register on January
31, 2020 (85 FR 5567).
Executive Order 14055 is very similar to Executive Order 13495, but
there are a few notable differences. For example, Executive Order 14055
requires that the contractor give an employee at least 10 business days
to accept an employment offer, whereas Executive Order 13495 only
required 10 calendar days. 86 FR 66398, 74 FR 6104. Similarly,
Executive Order 14055 requires that the contractor must provide the
contracting officer a certified list of the names of all service
employees working under the contract during the last month of contract
performance at least 10 business days before contract completion,
whereas Executive Order 13495 only required 10 calendar days. Id.
Executive Order 13495 required that performance of the work be at the
same location for the order's requirements to apply to the successor
contract, whereas Executive Order 14055 does not include a requirement
that the successor contract be performed at the same location as the
predecessor contract. Further, Executive Order 14055 directs an agency
to consider, when preparing a solicitation for a service contract that
succeeds a contract for performance of the same or similar work,
whether performance of the contract in the same locality is reasonably
necessary to ensure economical and efficient provision of services. If
an agency determines that performance of the contract in the same
locality or localities is reasonably necessary to ensure economical and
efficient provision of services, then the agency will, to the extent
consistent with law, include a requirement or preference in the
solicitation for the successor contract that it be performed in the
same locality.
Executive Order 14055 also differs from Executive Order 13495 in
its provisions regarding a contracting agency's authority to grant an
exception from the requirements of the order for a particular contract.
Specifically, section 6 of Executive Order 14055 provides that a senior
official within an agency may except a particular contract from the
requirements of section 3 of the order by, no later than the
solicitation date, providing a specific written explanation of why at
least one of the
[[Page 42555]]
particular circumstances enumerated in the order exists with respect to
that contract that would warrant exception from the requirements of the
order. 86 FR 66399. It also requires agencies to publish descriptions
of each exception on a centralized public website and report exceptions
to OMB on a quarterly basis. Id. Finally, agencies are required to
ensure that the incumbent contractor notifies affected workers and
their collective bargaining representatives, if any, in writing of the
agency's determination to grant an exception. Id. In contrast,
Executive Order 13495 provided that if the head of a contracting
department or agency found that the application of any of the
requirements of the order would not serve the purposes of the order or
would impair the ability of the Federal Government to procure services
on an economical and efficient basis, the head of such department or
agency could exempt its department or agency from the requirements of
any or all of the provisions of the order with respect to a particular
contract, subcontract, or purchase order or any class of contracts,
subcontracts, or purchase orders. 74 FR 6104.
II. Discussion of Proposed Rule
A. Legal Authority
President Biden issued Executive Order 14055 pursuant to his
authority under ``the Constitution and the laws of the United States,''
expressly including the Procurement Act, 40 U.S.C. 101 et seq. 86 FR
66397. The Procurement Act authorizes the President to ``prescribe
policies and directives that the President considers necessary to carry
out'' the statutory purposes of ensuring ``economical and efficient''
government procurement and administration of government property. 40
U.S.C. 101, 121(a). Executive Order 14055 directs the Secretary to
issue regulations to ``implement the requirements of this order.'' 86
FR 66399. The Secretary has delegated his authority to promulgate these
types of regulations to the Administrator of the WHD (Administrator)
and to the Deputy Administrator of the WHD if the Administrator
position is vacant. Secretary's Order 01-2014 (Dec. 19, 2014), 79 FR
77527 (published Dec. 24, 2014); Secretary's Order 01-2017 (Jan. 12,
2017), 82 FR 6653 (published Jan. 19, 2017).
B. Overview of the Proposed Rule
This NPRM, which proposes to amend Title 29 of the CFR by adding
part 9, proposes standards and procedures for implementing and
enforcing Executive Order 14055. Proposed subpart A of part 9 relates
to general matters, including the purpose and scope of the rule, as
well as the definitions, coverage, exclusions, and exceptions that the
rule provides pursuant to the Executive order. Proposed subpart B
establishes requirements for contracting agencies and contractors to
comply with the Executive order. Proposed subpart C specifies standards
and procedures related to complaint intake, investigations, and
remedies. Proposed subpart D specifies standards and procedures related
to administrative enforcement proceedings.
The following section-by-section discussion of this proposed rule
presents the contents of each section in more detail. The Department
invites comments on the issues addressed in this NPRM.
Part 9 Subpart A--General
Proposed subpart A of part 9 pertains to general matters, including
the purpose and scope of the rule, as well as the definitions,
coverage, exclusions, and exceptions that the rule provides pursuant to
the Executive order.
Section 9.1 Purpose and Scope
Proposed Sec. 9.1(a) explains that the purpose of the proposed
rule is to implement Executive Order 14055. The paragraph emphasizes
that the Executive order assigns enforcement responsibility for the
nondisplacement requirements to the Department.
Proposed Sec. 9.1(b) explains the underlying policy of Executive
Order 14055. First, the paragraph repeats a statement from the
Executive order that the Federal Government's procurement interests in
economy and efficiency are served when the successor contractor or
subcontractor hires the predecessor's employees. The proposed rule
elaborates that a carryover workforce minimizes disruption in the
delivery of services during a period of transition between contractors,
maintains physical and information security, and provides the Federal
Government the benefit of an experienced and well-trained workforce
that is familiar with the Federal Government's personnel, facilities,
and requirements. It is for these reasons that the Executive order
concludes that requiring successor service contractors and
subcontractors performing on Federal contracts to offer a right of
first refusal to suitable employment under the contract to service
employees under the predecessor contract and its subcontracts whose
employment would be terminated as a result of the award of the
successor contract will lead to improved economy and efficiency in
Federal procurement.
Proposed Sec. 9.1(b) further explains the general requirement
established in section 3 of Executive Order 14055 that service
contracts and subcontracts that succeed a contract for performance of
the same or similar work, and solicitations for such contracts and
subcontracts, include a clause that requires the contractor and its
subcontractors to offer a right of first refusal of employment to
service employees employed under the predecessor contract and its
subcontracts whose employment would be terminated as a result of the
award of the successor contract in positions for which the employees
are qualified. Proposed Sec. 9.1(b) also clarifies that nothing in
Executive Order 14055 or part 9 is to be construed to excuse
noncompliance with any applicable Executive order, regulation, or law
of the United States.
Proposed Sec. 9.1(c) outlines the scope of this proposal and
provides that neither Executive Order 14055 nor part 9 creates or
changes any rights under the Contract Disputes Act, 41 U.S.C. 7101 et
seq., or any private right of action. The Department does not interpret
the Executive order as limiting existing rights under the Contract
Disputes Act. The provision also restates the Executive order's
directive that disputes regarding the requirements of the contract
clause prescribed by the Executive order, to the extent permitted by
law, shall be disposed of only as provided by the Secretary in
regulations issued under the Executive order. This paragraph also
clarifies that neither the Executive order nor the proposed rule would
preclude review of final decisions by the Secretary in accordance with
the judicial review provisions of the Administrative Procedure Act, 5
U.S.C. 701 et seq.
Section 9.2 Definitions
Proposed Sec. 9.2 defines terms for purposes of this rule
implementing Executive Order 14055. Most defined terms follow common
applications and are based on either Executive Order 14055 itself or
the definitions of relevant terms set forth in the text of related
statutes and Executive orders or the implementing regulations for those
statutes and orders. The Department notes that, while the proposed
definitions discussed in this proposed rule would govern the
implementation and enforcement of Executive Order 14055, nothing in the
proposed rule is intended to alter the meaning of or to be interpreted
inconsistently with the
[[Page 42556]]
definitions set forth in the FAR for purposes of that regulation.
Consistent with the definition provided in Executive Order 14055,
the Department proposes to define agency to mean an executive
department or agency, including an independent establishment subject to
the Procurement Act. See 86 FR 66397. As used in its definition of
agency, the Department proposes to define executive departments and
agencies by adopting the definition of executive agency provided in
section 2.101 of the FAR. 48 CFR 2.101. The proposed definition of
agency therefore would include executive departments within the meaning
of 5 U.S.C. 101, military departments within the meaning of 5 U.S.C.
102, independent establishments within the meaning of 5 U.S.C. 104(1),
and wholly owned Government corporations within the meaning of 31
U.S.C. 9101. This proposed definition would include independent
regulatory agencies.
The Department proposes to adopt the definition of Associate
Solicitor in 29 CFR 6.2(b), which means the Associate Solicitor for
Fair Labor Standards, Office of the Solicitor, U.S. Department of
Labor, Washington, DC 20210. Consistent with section 2(a) of the
Executive order, the Department proposes to define contract or service
contract to mean any contract, contract-like instrument, or subcontract
for services entered into by the Federal Government or its contractors
that is covered by the SCA and its implementing regulations. 86 FR
66397.
The Department proposes to substantially adopt the definition of
contracting officer in section 2.101 of the FAR, which means an agency
official with the authority to enter into, administer, and/or terminate
contracts and make related determinations and findings. The term
includes certain authorized representatives of the contracting officer
acting within the limits of their authority as delegated by the
contracting officer. See 48 CFR 2.101.
The Department proposes to define contractor to mean any individual
or other legal entity that is awarded a Federal Government service
contract or subcontract under a Federal Government service contract.
The Department notes that, unless the context reflects otherwise, the
term contractor refers collectively to both a prime contractor and all
of its subcontractors of any tier on a service contract with the
Federal Government. This proposed definition incorporates relevant
aspects of the definitions of the term contractor in section 9.403 of
the FAR, see 48 CFR 9.403, and the SCA's regulations at 29 CFR 4.1a(f).
Importantly, the Department notes that the fact that an individual
or entity is a contractor under the Department's definition does not
mean that such an entity has legal obligations under the Executive
order. A contractor only has obligations under the Executive order if
it has a service contract with the Federal Government that is covered
by the order. Thus, an entity that is awarded a service contract with
the Federal Government will qualify as a ``contractor'' pursuant to the
Department's definition, but that entity will only be subject to the
nondisplacement requirements of the Executive order in connection with
a particular contract if such contractor is awarded or otherwise enters
into a covered contract for the same or similar services as an existing
service contract, as described in proposed Sec. 9.3, for a
solicitation issued after the effective date of the FAR Council's
amendment of the FAR in accordance with section 7(b) of Executive Order
14055.
The Department proposes to define business day as Monday through
Friday, except Federal holidays declared under 5 U.S.C. 6103 or by
executive order.
Consistent with the definition provided in Executive Order 14055,
the Department proposes to define employee to mean a service employee
as defined in the McNamara-O'Hara Service Contract Act of 1965, as
amended, 41 U.S.C. 6701(3). 86 FR 66397. Accordingly, employee ``means
an individual engaged in the performance of'' an SCA-covered contract.
41 U.S.C. 6701(3)(A). The term employee ``includes an individual
without regard to any contractual relationship alleged to exist between
the individual and a contractor or subcontractor,'' and it therefore
includes an individual who identified as an independent contractor on
the contract. The term ``does not include an individual employed in a
bona fide executive, administrative, or professional capacity'' as
those terms are defined in 29 CFR part 541. 41 U.S.C. 6701(3)(B)-(C).
The Department proposes to define employment opening to mean any
vacancy in a service employee position on the successor contract. This
is consistent with the definition of employment opening in the
regulations that implemented Executive Order 13495.
The Department proposes to define the term Federal Government as an
agency or instrumentality of the United States that enters into a
contract pursuant to authority derived from the Constitution or the
laws of the United States. This proposed definition is based on the
definition set forth in the regulations that implemented Executive
Order 13495. Consistent with that definition and the SCA, the proposed
definition of the term Federal Government includes nonappropriated fund
instrumentalities under the jurisdiction of the Armed Forces or of
other Federal agencies. See 29 CFR 4.107(a). This proposed definition
also includes independent agencies because such agencies are subject to
the order's requirements. See 86 FR 66397. For purposes of Executive
Order 14055 and part 9, the Department's proposed definition does not
include the District of Columbia or any Territory or possession of the
United States.
The Department proposes to define month under the Executive order
as a period of 30 consecutive calendar days, regardless of the day of
the calendar month on which it begins. The Department believes defining
the term will clarify how to address partial months and will balance
calendar months of different lengths. This is consistent with the
definition of month in the regulations that implemented Executive Order
13495.
The Department proposes to define same or similar work to mean work
that is either identical to or has primary characteristics that are
alike in substance to work performed on a contract that is being
replaced either by the Federal Government or by a prime contractor on a
Federal service contract. This would require the work under the
successor contract to, at a minimum, share the characteristics
essential to the work performed under the predecessor contract.
Accordingly, work under a successor contract would not be considered to
be same or similar work where it only shares characteristics incidental
to performance of the contract under the predecessor contract.
The Department proposes to define the term Service Contract Act
(SCA) to mean the McNamara-O'Hara Service Contract Act of 1965, as
amended, 41 U.S.C. 6701 et seq., and its implementing regulations. See
29 CFR 4.1a(a).
The Department proposes to define solicitation as any request to
submit offers, bids, or quotations to the Federal Government. This
definition is consistent with the definition of solicitation in both
the regulations that implemented Executive Order 13495 and in 48 CFR
2.101. The Department broadly interprets the term solicitation to apply
to both traditional and nontraditional methods of solicitation,
including informal requests by the
[[Page 42557]]
Federal Government to submit offers or quotations. However, the
Department notes that requests for information issued by Federal
agencies and informal conversations with Federal workers are not
``solicitations'' for purposes of the Executive order.
The Department proposes to define the term United States as the
United States and all executive departments, independent
establishments, administrative agencies, and instrumentalities of the
United States, including corporations of which all or substantially all
of the stock is owned by the United States, by the foregoing
departments, establishments, agencies, instrumentalities, and including
nonappropriated fund instrumentalities. When the term is used in a
geographic sense, the Department proposes that the United States means
the 50 States, the District of Columbia, Puerto Rico, the Virgin
Islands, Outer Continental Shelf lands as defined in the Outer
Continental Shelf Lands Act, American Samoa, Guam, the Commonwealth of
the Northern Mariana Islands, Wake Island, and Johnston Island. The
geographic scope component of this proposed definition is derived from
the regulations implementing the SCA at 29 CFR 4.112(a) and the SCA's
definition of the term ``United States'' at 41 U.S.C. 6701(4).
Finally, the Department proposes to adopt the definitions of the
terms Administrative Review Board, Administrator, Office of
Administrative Law Judges, Secretary, and Wage and Hour Division set
forth in the regulations that implemented Executive Order 13495.
Section 9.3 Coverage
Proposed Sec. 9.3 addresses the coverage provisions of Executive
Order 14055. Proposed Sec. 9.3 explains the scope of the Executive
order and its coverage of executive agencies and contracts.
Executive Order 14055 provides that agencies must, to the extent
permitted by law, ensure that service contracts and subcontracts that
succeed a contract for performance of the same or similar work, and
solicitations for such contracts and subcontracts, include a clause
specifying that the successor contractor and its subcontractors must,
except as otherwise provided in the order, in good faith offer service
employees employed under the predecessor contract and its subcontracts,
whose employment would be terminated as a result of the award of the
successor contract or the expiration of the contract under which the
employees were hired, a right of first refusal of employment under the
successor contract in positions for which those employees are
qualified. Section 2 states that ``service contract'' means any
contract, contract-like instrument, or subcontract for services entered
into by the Federal Government or its contractors that is covered by
the SCA. Section 2 also defines ``agency'' to mean an executive
department or agency of the Federal Government, including an
independent establishment subject to the Procurement Act, 40 U.S.C.
102(4)(A). Section 5 specifies that the order would not apply to
contracts under the simplified acquisition threshold as defined in 41
U.S.C. 134.
Proposed Sec. 9.3 would implement these coverage provisions by
stating in proposed Sec. 9.3(a) that Executive Order 14055 and part 9
would apply to any contract or solicitation for a contract with an
executive department or agency of the Federal Government, provided
that: (1) it is a contract for services covered by the SCA; and (2) the
prime contract exceeds the simplified acquisition threshold as defined
in 41 U.S.C. 134. Proposed Sec. 9.3(b) would require all contracts
that satisfy the requirements of proposed Sec. 9.3(a) to contain the
contract clause set forth in Appendix A, and all contractors on such
contracts to comply, without limitation, with the requirements of
paragraphs (e), (f), and (g) of proposed Sec. 9.12. Proposed Sec.
9.3(c) would require all contracts that satisfy the requirements of
proposed Sec. 9.3(a) and that also succeed a contract for performance
of the same or similar work, to contain the contract clause set forth
at Appendix A, and all contractors on such contracts to comply, without
limitation, with all the requirements of proposed Sec. 9.12. Several
issues relating to the coverage provisions of the Executive order and
proposed Sec. 9.3 are discussed below.
Coverage of Executive Departments and Agencies
Executive Order 14055 would apply to contracts and solicitations
for contracts with the Federal Government that meet the requirements of
Sec. 9.3. The Department proposes to define Federal Government to
include ``an agency or instrumentality of the United States that enters
into a contract pursuant to authority derived from the Constitution or
the laws of the United States.'' See Sec. 9.2. Consistent with section
2(c) of the Executive order, the Department proposes to define agency
as all ``[e]xecutive department[s] and agenc[ies], including
independent establishment[s] subject to the Federal Property and
Administrative Services Act, 40 U.S.C. 102(4)(A).'' As used in its
definition of agency, the Department proposes to define executive
departments and agencies by adopting the definition of executive agency
provided in section 2.101 of the FAR. 48 CFR 2.101. The proposed rule
therefore would interpret the Executive order as applying to contracts
entered into by executive departments within the meaning of 5 U.S.C.
101, military departments within the meaning of 5 U.S.C. 102,
independent establishments within the meaning of 5 U.S.C. 104(1), and
wholly owned Government corporations within the meaning of 31 U.S.C.
9101. This proposed definition would include independent regulatory
agencies.
The plain text of Executive Order 14055 reflects that the order
applies to executive departments and agencies, including independent
establishments, but only when such establishments are subject to the
Procurement Act, 40 U.S.C. 121, et seq. Thus, for example, contracts
awarded by the U.S. Postal Service would not be covered by the order or
part 9 because the U.S. Postal Service is not subject to the
Procurement Act. Finally, pursuant to the proposed definition of
executive departments and agencies, contracts awarded by the District
of Columbia and any Territory or possession of the United States would
not be covered by the order.
Coverage of Contracts
Proposed Sec. 9.3(a) provides that the requirements of the
Executive order generally would apply to ``any contract or solicitation
for a contract with the Federal Government.'' Section 2(a) of the
Executive order defines contract to mean ``any contract, contract-like
instrument, or subcontract for services entered into by the Federal
Government or its contractors that is covered by the Service Contract
Act of 1965, as amended, 41 U.S.C. 6701 et seq., and its implementing
regulations.'' The Department proposes to set forth a broadly inclusive
definition of the term contract that is consistent with the Executive
order and how the term is used in the SCA. Consistent with the
definition of the term ``contract'' in the Restatement (Second) of
Contracts, which was in the process of being developed when Congress
enacted the SCA, an agreement is a ``contract'' for SCA purposes if it
amounts to ``a promise or set of promises for the breach of which the
law gives a remedy, or the performance of which the law in some way
recognizes a duty.'' In re Cradle of Forestry in Am. Interpretive
Ass'n, No. 99-035, 2001 WL 32813, at *3 (ARB Mar. 30, 2001) (quoting
Restatement (Second) of Contracts
[[Page 42558]]
section 1 (Am. L. Inst. 1979)). Licenses, permits, and similar
instruments thus may qualify as contracts under the SCA, id.,
regardless of whether parties typically consider such instruments to be
``contracts'' and regardless of whether such instruments are
characterized as ``contracts'' for purposes of the specific programs
under which they are administered. Given the SCA's coverage of a such a
wide variety of service contracts and its broad definition of covered
contracts, see, e.g., id.; 29 CFR 4.110, the Department views the term
``contract-like instrument'' as not expanding the scope of coverage
under Executive Order 14055, but rather as simply reinforcing the
breadth of contract coverage under the SCA.
Proposed Sec. 9.3(a) also provides that part 9 would apply to
``any . . . solicitation for a contract'' that meets the requirements
of proposed Sec. 9.3(a). The Department proposes to define
solicitation in Sec. 9.2 to mean ``any request to submit offers, bids,
or quotations to the Federal Government.'' The Department broadly
interprets the term solicitation to apply to both traditional and
nontraditional methods of solicitation, including informal requests by
the Federal Government to submit offers or quotations. However,
requests for information issued by Federal agencies and informal
conversations with Federal workers would not be ``solicitations'' for
purposes of the Executive order. If the solicitation is for a contract
that would be covered by part 9, then the solicitation would also be
covered.
Consistent with section 2(a) of Executive Order 14055, proposed
Sec. 9.3(a)(1) clarifies that the contract must be a contract for
services covered by the SCA in order to be covered by the Executive
order and part 9. The SCA generally applies to every ``contract or bid
specification for a contract that . . . is made by the Federal
Government or the District of Columbia'' and that ``has as its
principal purpose the furnishing of services in the United States
through the use of service employees.'' 41 U.S.C. 6702(a)(3). The SCA
is intended to cover a wide variety of service contracts with the
Federal Government, so long as the principal purpose of the contract is
to provide services through the use of service employees. See, e.g., 29
CFR 4.130(a). As reflected in the SCA's regulations, where the
principal purpose of the contract with the Federal Government is to
provide services through the use of service employees, the contract is
covered by the SCA. See 29 CFR 4.133(a). Such coverage exists
regardless of the direct beneficiary of the services or the source of
the funds from which the contractor is paid for the service and
irrespective of whether the contractor performs the work in its own
establishment, on a Federal Government installation, or elsewhere. Id.
Coverage of the SCA, however, does not extend to contracts for services
to be performed exclusively by persons who are not service employees,
i.e., persons who qualify as bona fide executive, administrative, or
professional employees as defined in the Fair Labor Standards Act's
(FLSA) regulations at 29 CFR part 541. Similarly, a contract for
professional services performed essentially by bona fide professional
employees, with the use of service employees being only a minor factor
in contract performance, is not covered by the SCA and thus would not
be covered by the Executive order or part 9. See 41 U.S.C. 6702(a)(3);
29 CFR 4.113(a) and 4.156; WHD Field Operations Handbook (FOH) ]]
14b05, 14c07.
Coverage of Contracts Above the Simplified Acquisition Threshold
Proposed Sec. 9.3(a)(2) provides that a prime contract must exceed
the simplified acquisition threshold to be covered by part 9. This is
consistent with section 5 of Executive Order 14055, which provides that
the order does not apply to contracts under the simplified acquisition
threshold as defined in 41 U.S.C. 134. Unlike Executive Order 13495,
which excluded ``contracts or subcontracts under the simplified
acquisition threshold,'' section 5 of Executive Order 14055 expressly
excludes only ``contracts under the simplified acquisition
threshold[.]''Accordingly, the Department proposes that all
subcontracts for services, regardless of size, would be covered by part
9 if the prime contract meets the coverage requirements of Sec. 9.3.
The Department notes, however, that the definitions sections of both
Executive Order 13495 and Executive Order 14055 define ``contract'' to
include ``contract or subcontract,'' which could support a continued
exception for subcontracts under the simplified acquisition threshold.
For this reason, the Department is seeking comment from the public on
the potential impact, including any unintended consequences, of
covering subcontracts below the simplified acquisition threshold.
Coverage of Successor Contracts
Proposed Sec. 9.3(c) provides requirements that would apply only
to contracts that satisfy the requirements of paragraph (a) of proposed
Sec. 9.3 and that ``succeed at contract for performance of the same or
similar work[.]'' (emphasis added). Pursuant to section 1 of Executive
Order 14055, this successor contract relationship exists when an
existing service contract ``expires'' and a follow-on contract is
awarded. Under the Executive order, the Department views a service
contract as expired when the contract ends after a fixed period of time
or is terminated. In contrast, when a term of an existing contract is
simply extended pursuant to an option clause, and no solicitation is
issued for a follow-on contract, the original contract is not
considered expired, the extended term of the contract is not a follow-
on contract under the Executive order, and the requirements of the
order and this part would not apply.
In accordance with the terms of Executive Order 14055, if a
contract expires, the Department would consider successor service
contracts and subcontracts for performance of the same or similar work,
and solicitations for such contracts and subcontracts, to be covered by
the order, assuming the successor contracts meet the requirements of
proposed Sec. 9.3(a). Thus, for example, when the term of a contract
ends and a follow-on contract is awarded as a result of a solicitation,
a predecessor-successor relationship would exist for purposes of
Executive Order 14055 if the two contracts were for the same or similar
work. Similarly, if a contract is terminated, a solicitation for a
follow-on contract is issued and the follow-on contract is awarded, a
predecessor-successor relationship would exist for purposes of
Executive Order 14055, again if the two contracts were for the same or
similar work. The identity of the contractor awarded the successor
contract would not impact the coverage determination. For example, when
a contract expires and the same contractor is awarded the successor
contract, the terms of the order and part 9 would apply. Similarly, the
successor contract would not need to be awarded by the same contracting
agency as the predecessor contract in order to be covered by the
Executive order and this part.
Coverage of Contracts for Same or Similar Work
Consistent with section 3 of Executive Order 14055, proposed Sec.
9.3(c) would require successor contracts that satisfy the requirements
of paragraph (a) of proposed Sec. 9.3 and that are for ``performance
of the same or similar work'' to meet additional requirements of part
9. As explained in the discussion of proposed Sec. 9.2, the Department
proposes to define same or similar work
[[Page 42559]]
as ``work that is either identical to or has primary characteristics
that are alike in substance to work performed on a contract that is
being replaced by the Federal Government or a contractor on a Federal
service contract.'' This definition would require the work under the
successor contract to, at a minimum, share the characteristics
essential to the work to be performed under the predecessor contract.
Accordingly, work under a successor contract would not be considered to
be same or similar work where it only shares characteristics incidental
to performance of the contract under the predecessor contract.
In many instances, determining whether a contract involves the same
or similar work as the predecessor contract will be straightforward.
For example, when a contract for food service at a Federal building
expires and a new contract for food service begins at the same location
that requires many of the same job classifications as the predecessor
contract, the work on the successor contract would be considered to be
``same or similar work.'' This would be true even where more limited
food services are provided under the successor contract than the
predecessor contract, or where work on the successor contract requires
additional job classifications that were not required for work under
the predecessor contract. In other instances, the particular facts and
circumstances may need to be carefully scrutinized in order to
determine whether a contract involves the same or similar work as the
predecessor contract. For example, when a contract expires, specific
requirements from the contract may be broken out and placed in a new
contract or combined with requirements from other contracts into a
consolidated new contract. In such circumstances, it will be necessary
to evaluate the extent to which the prior and new contracts involve the
same or similar functions of work and the same or similar job
classifications in order to determine whether the prior and new
contracts involve the same or similar services. Finally, in some
instances, it will be evident that two contracts do not involve the
same or similar work. For example, if an SCA-covered contract to
operate a gift shop in a Federal building expires, and a new contract
is awarded to operate a dry cleaning service in the same physical space
as had been occupied by the gift shop, the two contracts would not
involve the same or similar work because, even though the place of
contract performance would be the same, the nature of the work
performed under the contracts, and the job classifications performing
the work, would not be the same or similar.
Coverage of Subcontracts
Consistent with sections 2 and 3 of Executive Order 14055, which
specify that the nondisplacement requirements apply equally to
subcontracts, the Department notes that where a prime contract is
covered by the order and part 9, any subcontracts for services are also
covered and subject to the requirements of the order and part 9.
However, the Executive order does not apply to non-service subcontracts
between a subcontractor and a prime contractor for use on a covered
Federal contract. For example, a subcontract to supply napkins and
utensils to a prime contractor as part of a covered contract to operate
a cafeteria in a Federal building is not a covered subcontract for
purposes of this order because it is a supply subcontract rather than a
subcontract for services.
Geographic Scope
The Executive Order and this part would only apply to contracts
with the Federal Government requiring performance in whole or in part
within the United States, which is defined to mean, when used in a
geographic sense, the 50 States, the District of Columbia, Puerto Rico,
the Virgin Islands, Outer Continental Shelf lands as defined in the
Outer Continental Shelf Lands Act, American Samoa, Guam, the
Commonwealth of the Northern Mariana Islands, Wake Island, and Johnston
Island. Under this approach--which is consistent with the geographic
scope of coverage under the SCA--the Executive order and this part
would not apply to contracts with the Federal Government to be
performed in their entirety outside the geographical limits of the
United States as thus defined. However, if a contract with the Federal
Government is to be performed in part within and in part outside these
geographical limits and is otherwise covered by the Executive order and
this part, the order and this part would apply to the contract and
require a right of first refusal for any workers that have performed
work inside the geographical limits of the United States as defined. As
noted previously, contracts awarded by the District of Columbia or any
Territory or possession of the United States would not be covered by
the order, as neither the District of Columbia nor any Territory or
possession of the United States would constitute an executive
department or agency under this part.
Section 9.4 Exclusions
Pursuant to section 5(a) of Executive Order 14055, proposed Sec.
9.4(a) addresses the exclusion for contracts under the simplified
acquisition threshold, as defined in 41 U.S.C. 134. The simplified
acquisition threshold currently is $250,000. 41 U.S.C. 134. The
proposed regulations would omit that amount from the regulatory text in
the event that a future statutory amendment changes the amount. Any
such change would automatically apply to contracts subject to part 9.
Proposed Sec. 9.4(a)(2) clarifies that the exclusion provision at
Sec. 9.4(a)(1) would apply only to prime contracts under the
simplified acquisition threshold and that whether a subcontract is
excluded from the requirements of part 9 is dependent on the prime
contract amount. As discussed above, section 5(a) of Executive Order
14055 excludes only ``contracts under the simplified acquisition
threshold[.]'' This language differs from Executive Order 13495, which
excluded ``contracts or subcontracts under the simplified acquisition
threshold'' (emphasis added). Accordingly, proposed Sec. 9.4(a)(2)
explains that subcontracts would be excluded under Sec. 9.4(a)(1) only
if the prime contract is under the simplified acquisition threshold,
but, as explained above, the Department is seeking comment from the
public on the potential impact, including any unintended consequences,
of covering subcontracts below the simplified acquisition threshold.
Proposed Sec. 9.4(b) would implement the exclusion in section 5(b)
of Executive Order 14055 relating to employment where Federal service
work constitutes only part of the employee's job.
Proposed Sec. 9.4 does not include an exclusion for contracts
awarded for services produced or provided by persons who are blind or
have severe disabilities. Executive Order 14055 diverges from Executive
Order 13495 with respect to such contracts. Section 3 of Executive
Order 13495 specifically excluded ``contracts or subcontracts awarded
pursuant to the Javits-Wagner-O'Day Act, 41 U.S.C. 46-48c;'' ``guard,
elevator operator, messenger, or custodial services provided to the
Federal Government under contracts or subcontracts with sheltered
workshops employing the severely handicapped as described in section
505 of the Treasury, Postal Services and General Government
Appropriations Act, 1995, Public Law 103-329;'' and ``agreements for
vending facilities entered into pursuant to the preference regulations
issued under the
[[Page 42560]]
Randolph-Sheppard Act, 20 U.S.C. 107[.]'' In contrast, section 5 of
Executive Order 14055 does not enumerate any such exclusions.
Accordingly, proposed Sec. 9.4 does not exclude such contracts from
the requirements of part 9.
However, section 12 of Executive Order 14055 expressly provides
that nothing in the order should be construed ``to impair or otherwise
affect . . . the authority granted by law'' and directs that the order
be ``implemented consistent with applicable law.'' The applicable law
encompassed by these sections includes, for example, the Javits-Wagner-
O'Day Act, 41 U.S.C. 8501-8506, section 505 of the Treasury, Postal
Services and General Government Appropriations Act, 1995, Public Law
103-329, and the Randolph-Sheppard Act, 20 U.S.C. 107. Each of these
laws establishes requirements for contracts awarded for services
produced or provided by persons who are blind or have severe
disabilities that may conflict with the requirements of Executive Order
14055 in that these laws may impose hiring requirements that preclude,
in whole or in part, offering employment to the employees on the
predecessor contract. Where direct legal conflicts squarely exist
between the requirements of Executive Order 14055 and the requirements
of another statute, regulation, Executive Order, or Presidential
Memoranda under the particular factual circumstances of a specific
situation, the requirements of this part would not apply. As with any
determination to except a particular contract from the application of
the nondisplacement requirements, a contracting agency would be
obligated to follow the procedures proposed at Sec. 9.5 to support a
determination that the requirements of this part do not apply because
of a direct legal conflict.
The Department recognizes that contracting agencies award contracts
under a wide variety of programs, including those mentioned above, many
of which have, by law, specific processes and requirements. The
Department understands that some of these requirements may make
implementation of the requirements of Executive Order 14055 more
challenging under certain programs than others. The Department invites
comment on any specific programs with contracting requirements that may
conflict with Executive Order 14055 or the provisions of this proposed
rule. For example, the Department recognizes that applying the
requirements of Executive Order 14055 to some contracts awarded
pursuant the Randolph-Sheppard Act, specifically the Randolph-Sheppard
Vending Facility Program (RSVFP), may present certain challenges. The
Department invites interested parties to comment on the interaction of
the requirements in the proposed rule with the provisions of the
Randolph-Sheppard Act.
Section 9.5 Exceptions Authorized by Agencies
Exceptions Authorized by Agencies
Section 6 of the order provides a procedure for Federal agencies to
except particular contracts from the application of the nondisplacement
requirements. The Department proposes to implement this procedure
through language in Sec. 9.5 of the regulations. Under section 6 of
the order, and in proposed Sec. 9.5, an agency would be permitted to
grant an exception from the requirements of section 3 of the order (the
incorporation of the nondisplacement contract clause) for a particular
contract under certain circumstances. The determination must be made no
later than the solicitation date for the contract and must include a
specific written explanation of why at least one of the qualifying
circumstances exists with respect to that contract.
In Sec. 9.5(a), the Department proposes to list the qualifying
circumstances for an agency exception based on the agency exceptions
provision in section 6(a) of the order. These include (1) where
adhering to the requirements of the order or the implementing
regulations would not advance the Federal Government's interests in
achieving economy and efficiency in Federal procurement; (2) where
based on a market analysis, adhering to the requirements of the order
or the implementing regulations would both substantially reduce the
number of potential bidders so as to frustrate full and open
competition and not be reasonably tailored to the agency's needs for
the contract; or (3) where adhering to the requirements of the order or
the implementing regulations would otherwise be inconsistent with
statutes, regulations, Executive orders, or Presidential Memoranda.
The Department proposes to interpret section 6(a) of the order as
allowing agencies to make exceptions only for prime contracts and not
for individual subcontracts. As discussed above, whether a subcontract
is covered by the order depends on whether the prime contract is
covered. If the prime contract is covered, then the subcontracts under
that prime contract will also be covered. If a prime contract is not
covered (whether because it does not satisfy an element of coverage or
because an agency has made an exception for that prime contract), then
the subcontracts under that prime contract will also not covered. Under
the Department's interpretation of section 6(a), there would be no
mechanism for a prime contract to be covered, but for an agency to
exempt individual subcontracts for services under that prime contract.
The Department's proposed interpretation of section 6(a) follows
from a comparison of this section with the agency exemption provision
in Executive Order 13495. In Executive Order 13495, the agency
exemption provision permitted agencies to exempt ``a particular
contract, subcontract, or purchase order or any class of contracts,
subcontracts, or purchase orders.'' In Executive Order 14055, however,
section 6(a) permits agencies to make exceptions only for ``a
particular contract.'' Accordingly, the proposed regulatory text at
Sec. 9.5(a) only provides the authority for agencies to make an
exception for ``a prime contract.'' However, the Department also
recognizes that section 2(a) of the order defines the term ``contract''
as including ``subcontract,'' which could support an interpretation of
section 6(a) as allowing a continued case-by-case exception for
subcontracts. For this reason, the Department is seeking comment from
the public on the potential impact, including any unintended
consequences, of not allowing agency exceptions for particular
subcontracts or classes of subcontracts.
Section 6(a) of Executive Order 14055 limits contracting agency
exception decisions by requiring that a decision to except a contract
must be made by a ``senior official'' within the agency. The Department
interprets ``senior official'' to mean the senior procurement
executive, as defined in 41 U.S.C. 1702(c). Consistent with this
interpretation, the Department proposes regulatory text at Sec. 9.5(a)
that identifies the senior procurement executive as the senior official
who must make an exception decision. Because the order specifically
requires the decision to be made by a senior official, the Department
concludes that the decision cannot be delegated by the senior
procurement executive to a lower-level official. See 77 FR 75773
(stating the same non-delegation principle applied to the FAR rule
implementing Executive Order 13495).\1\
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\1\ Section 4 of Executive Order 13495 also included the
authority to grant a waiver of that order's effect but limited the
authority to the ``head of a contracting department or agency.''
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[[Page 42561]]
Proposed Sec. 9.5(b) reiterates the procedural requirements that
section 6(a) of the order states must be satisfied for an exception to
be effective. The proposed language would require that the action to
except a contract from some or all of the requirements of the Executive
order or the regulations include a specific written explanation of the
facts and reasoning supporting the determination. Following the text of
section 6(a) of the order, the proposed language in Sec. 9.5(b) would
require that this written explanation be issued no later than the
solicitation date, which is also the latest date that the action to
except a contract may be taken. The proposed language in Sec. 9.5(b)
provides that any determination by an agency to exercise its exception
authority that is made after the solicitation date or without the
specific written explanation would be inoperative. In such a
circumstance, the contract clause has been wrongly omitted and the
agency would be required to take action consistent with paragraph (f)
of Sec. 9.11 of this part.
Bases for Agency Exceptions
The Department also proposes to provide additional guidance and
requirements applicable to each of the three circumstances in which an
agency may make an exception for a particular contract.
Proposed Sec. 9.5(c) would address the provision in section
6(a)(i) of Executive Order 14055 permitting an exception where adhering
to the requirements of the order would not advance the Federal
Government's interests in achieving economy and efficiency in Federal
procurement. Although the wording differs slightly, the Department
interprets this circumstance to be effectively the same as the agency
exemption that was included in section 4 of Executive Order 13495,
which authorized an exemption where the requirements ``would not serve
the purposes of [the] order'' or ``would impair the ability of the
Federal Government to procure services on an economical and efficient
basis.'' Both provisions require consideration of whether, in the
specific circumstances of the particular contract, economy and
efficiency will not be served if the contract clause is incorporated.
In 2011, the Department issued detailed regulations to implement the
Executive Order 13495 exemption, including factors that could be
considered and others that could not be considered. See 76 FR 53726-29
(discussion of comments), 53754-55 (regulatory text); see also 29 CFR
9.4(d)(4) (2012). Because the exception authorized by section 6(a)(i)
of Executive Order 14055 requires a similar consideration of economy
and efficiency, the Department proposes language in Sec. 9.5(c) that
would incorporate much of that previous regulatory language.
In Sec. 9.5(c), the Department also proposes to include language
stating that the written analysis that accompanies the determination
must, among other things, compare the anticipated outcomes of hiring
predecessor contract employees with those of hiring a new workforce. In
addition, the Department proposes to include the requirement that the
consideration of cost and other factors in exercising the agency's
exception authority must reflect the general findings made in section 1
of the Executive order that the government's procurement interests in
economy and efficiency are normally served when the successor
contractor hires the predecessor's employees, and must specify how the
particular circumstances support a contrary conclusion.
In Sec. 9.5(c)(1), the Department proposes to list factors that
the contracting agency may consider in making its determination. These
factors are the same factors that the Department adopted in the
regulations that implemented Executive Order 13495. They would include
circumstances where the use of the carryover workforce would greatly
increase disruption to the delivery of services during the period of
transition between contracts. This might occur where, for example, the
entire predecessor workforce would require extensive training to learn
new technology or processes that would not be required of a new
workforce. They also could include emergency situations, such as a
natural disaster or an act of war, that physically displace incumbent
employees. Finally, they could include situations where the senior
official at the contracting agency reasonably believes, based on the
predecessor employees' past performance, that the entire predecessor
workforce failed, individually as well as collectively, to perform
suitably--and it would not be economical or efficient to provide
supplemental training to these workers.
The determination that the entire workforce failed cannot be made
lightly. A senior agency official that makes such a determination must
demonstrate that their belief is reasonable and is based upon reliable
evidence that has been provided by a knowledgeable source, such as
department or agency officials responsible for monitoring performance
under the contract. Absent an ability to demonstrate that this belief
is based upon reliable evidence, such as written credible information
provided by such a knowledgeable source, the employees working under
the predecessor contract in the last month of performance would be
presumed to have performed suitable work on the contract. The head of a
contracting agency or department may demonstrate a reasonable belief
that an entire workforce, in fact, failed to perform suitably on the
predecessor contract through written evidence that all of the
employees, collectively and individually, did not perform suitably.
Alone, information regarding the general performance of the predecessor
contractor is not sufficient to justify an exception. It is also less
likely that the agency would be able to make this showing where the
predecessor employed a large workforce.
In Sec. 9.5(c)(2), the Department proposes to list factors that
the contracting agency may not consider in making an exception
determination related to economy and efficiency. These include any
general presumptions that directly contravene the purpose and findings
of the order, such as any general presumption--without some contract-
specific facts--that the use of a carryover workforce would increase
(as opposed to decrease) disruption of services during the transition
between contracts. While, as described above, contract-specific factors
demonstrating a potential for disruption are a potential factor that
may be considered, any general presumption as to such disruption would
be contrary to and inconsistent with the purpose and findings of the
order. Similarly, it would not be permissible to consider hypothetical
cost savings that a contractor might attempt to achieve by hiring a
workforce with less seniority, given the critical benefits that an
experienced contractor workforce provides to the government.
The Department proposes, as it did in the regulations that
implemented Executive Order 13495, to preclude agencies from using any
potential reconfiguration of the contract workforce by the successor
contractor as a factor in supporting an exception. Successor
contractors are permitted to reconfigure the staffing pattern to
increase the number of employees employed in some positions while
decreasing the number of employees in others. In such cases, providing
a right of first refusal does not affect the contractor's ability to do
so, except that proposed Sec. 9.12(c)(3) would require the contractor
to examine the qualifications of each employee so as to minimize
displacement. Thus, any potential for
[[Page 42562]]
reconfiguration cannot justify excepting the entire contract from
coverage.
The Department also proposes, as it did in the regulations that
implemented Executive Order 13495, to prohibit any exception decision
based solely on the contract performance by the predecessor contractor.
This would include the termination of a service contract for default,
which, standing alone, would not satisfy the exception standards of
section 6(a)(i) of the Executive order. Such defaults, as well as other
performance problems not leading to default, may result from poor
management decisions of the predecessor contractor that have been
addressed by awarding the contract to another entity. Even where
contract problems can be traced to specific poor performing service
employees, that is not necessarily sufficient to justify invocation of
the exception, as, consistent with section 3(a) of the Executive order,
the successor contractor can decline to offer the right of first
refusal to employees for whom the contractor reasonably believes, based
on reliable evidence of the particular employees' past performance,
that there would be just cause to discharge the employee.
Finally, the Department limits contracting agencies from
considering wage rates and fringe benefit rates of services employees
in most circumstances. Minimum wage and fringe benefit rates are set by
the SCA and will apply regardless of whether the predecessor workforce
is re-hired. Thus, as a general matter, cost savings from a reduction
in wage or fringe benefits is not an appropriate basis for making an
exception for a contract from the order's requirements. Moreover, even
where cost savings may be achieved theoretically by lowering wages and
fringe benefits, such savings would be an inappropriate basis alone for
an exception from the order because higher wages and benefits allow for
the employment of workers with more skills and experience. Cf. 48 CFR
52.222-46 (stating, with regard to professional contracts not subject
to the SCA, that ``[p]rofessional compensation that is unrealistically
low or not in reasonable relationship to the various job categories,
since it may impair the Contractor's ability to attract and retain
competent professional service employees, may be viewed as evidence of
failure to comprehend the complexity of the contract requirements'').
While barring the consideration of wage costs in most circumstances,
the proposed language in Sec. 9.5(c)(2) would allow such costs to be
considered in exceptional circumstances. These exceptional
circumstances would be limited to emergency situations; where the
entire workforce would need significant training; or in other similar
situations in which the cost of employing a carryover workforce on the
successor contract would be prohibitive.
Proposed Sec. 9.5(d) would address the provision in section
6(a)(ii) of Executive Order 14055 providing that an exception may be
appropriate where application of the nondisplacement requirements would
substantially reduce the number of potential bidders so as to frustrate
full and open competition and not be reasonably tailored to the
agency's needs for the contract. The proposed language of Sec. 9.5(d)
would clarify that a reduction in the number of potential bidders is
not, alone, sufficient to except a contract from coverage under this
authority; the senior official at the contracting agency must also find
that inclusion of the contract clause would frustrate full and open
competition and would not be reasonably tailored to the agency's needs
for the contract. The proposed language states that on finding that
inclusion of the contract clause would not be reasonably tailored to
the agency's needs, the agency must specify in its written explanation
how it intends to more effectively achieve the benefits that would have
been provided by a carryover workforce, including physical and
information security and a reduction in disruption of services.
The order, and the proposed regulatory language, requires that any
exercise of this authority must be based on a market analysis. As a
general matter, during the acquisition process for FAR-covered
procurements, an agency must ``conduct market research appropriate to
the circumstances.'' 48 CFR 10.001. Thus, the extent of market research
conducted for any acquisition ``will vary, depending on such factors as
urgency, estimated dollar value, complexity, and past experience.'' 48
CFR 10.002. The market analysis must be an objective, contemporary, and
proactive examination of these factors. To justify the exception from
the nondisplacement requirements, the market analysis would have to
show that adherence to the requirements would ``substantially'' reduce
the number of potential bidders so as to frustrate full and open
competition. The likely reduction in the number of potential offerors
indicated by market analysis is not, by itself, sufficient to except a
contract from coverage under this authority unless the agency concludes
that adhering to the nondisplacement requirements would diminish the
number of potential offerors to such a degree that adequate competition
at a fair and reasonable price could not be achieved and adhering to
the nondisplacement requirements would not be reasonably tailored to
the agency's needs.
Consistent with section 6(a) of Executive Order 14055, as with any
of the exceptions, where an agency seeks to except a particular
contract under this competition-related analysis, the agency would be
required to provide a ``specific written explanation'' of why the
circumstance exists. Thus, the agency's market analysis--and
consideration of whether the requirements are nonetheless reasonably
tailored to its needs--would need to be documented in a manner
sufficient to provide and support such an explanation. See also 48 CFR
4.801(b) (requiring sufficient documentation in contract files to
support actions taken).
Proposed Sec. 9.5(e) would address the provision in section
6(a)(iii) of Executive Order 14055 providing that an exception may be
appropriate where adhering to the requirements of the order would
otherwise be inconsistent with statutes, regulations, Executive orders,
or Presidential Memoranda. In Sec. 9.5(e), the Department proposes to
require that contracting agencies consult with the Department prior to
excepting contracts on this basis, unless: (1) the governing statute at
issue is one for which the contracting agency has regulatory authority,
or (2) the Department has already issued guidance finding an exception
on the basis of the specific statute, rule, order, or memorandum to be
appropriate. The Department proposes this requirement in order to
provide consistency, to the extent possible, in the application of the
order.
Reconsideration of Agency Exceptions
The Department proposes language at Sec. 9.4(f) to provide a
procedure for interested parties to request reconsideration of agency
exception determinations. This proposed language mirrors the procedure
that was included in the regulations that implemented Executive Order
13495. See 29 CFR 9.4(d)(5) (2012). In using the term ``interested
parties,'' the Department intends to extend the opportunity to request
reconsideration to affected workers or their representatives, in
addition to actual or prospective bidders. The Department does not
intend that the term be limited to actual or prospective bidders as it
is under the Competition in Contracting Act. See 31 U.S.C. 3551(2). The
Department seeks input from commenters on whether there should be a
time limit within
[[Page 42563]]
which interested parties would have to request reconsideration, or
whether the request for reconsideration instead should just have to be
made before the contract is awarded.
Notification, Publication, and Reporting of Agency Exceptions
Section 6(b) of the order requires agencies, to the extent
permitted by law and consistent with national security and executive
branch confidentiality interests, to publish, on a centralized public
website, descriptions of the exceptions it has granted under that
section, and to ensure that the contractor notifies affected workers
and their collective bargaining representatives, if any, in writing of
the agency's determination to grant an exception. Section 6(c) of the
order also requires that, on a quarterly basis, each agency must report
to the OMB descriptions of the exceptions granted under this section.
In Sec. 9.5(g), the Department proposes to include a recitation of
these notification, publication, and reporting requirements.
Subpart B--Requirements
Proposed subpart B of part 9 establishes the requirements that
contracting agencies and contractors will undertake to comply with the
nondisplacement provisions.
Section 9.11 Contracting Agency Requirements
Proposed Sec. 9.11 would implement section 3 of Executive Order
14055, which directs agencies to ensure that covered contracts and
solicitations include the nondisplacement contract clause. The proposed
section specifies contracting agency responsibilities to incorporate
the nondisplacement contract clause in covered contracts, provide
notice to employees on predecessor contracts of their possible right to
an offer of employment, and to consider whether performance of the work
in the same locality or localities in which a predecessor contract is
currently being performed is reasonably necessary to ensure economical
and efficient provision of services. The proposed section also
specifies contracting agency responsibilities to provide the list of
employees on the predecessor contract to the successor, to forward
complaints and other pertinent information to WHD when there are
allegations of contractor non-compliance with the Executive order and
this part, and to retroactively incorporate the contract clause when it
was not initially incorporated.
Section 3 of Executive Order 14055 specifies a contract clause that
must be included in solicitations and contracts for services that
succeed contracts for the performance of the same or similar work. 86
FR 66397. Proposed Sec. 9.11(a) provides the regulatory requirement to
incorporate the contract clause specified in Appendix A in covered
service contracts, and solicitations for such contracts, that succeed
contracts for performance of the same or similar work, except for
procurement contracts subject to the FAR. For procurement contracts
subject to the FAR, contracting agencies will use the clause set forth
in the FAR developed to implement this rule; that clause must both
accomplish the same purposes as the clause set forth in Appendix A and
be consistent with the requirements set forth in this rule.
Including the full contract clause in a covered contract is an
effective and practical means of ensuring that contractors receive
notice of their obligations under Executive Order 14055. Therefore, the
Department prefers that covered contracts include the contract clause
in full. However, the Department notes that there could be instances in
which a contracting agency, or a contractor, does not include the
entire contract clause verbatim in a covered contract or solicitation
for a covered contract, but the facts and circumstances establish that
the contracting agency, or contractor, sufficiently apprised a prime or
lower-tier contractor that the Executive order and its requirements
apply to the contract. In such instances, the Department believes it
would be appropriate to find that the full contract clause has been
properly incorporated by reference. See Nat'l Electro-Coatings, Inc. v.
Brock, Case No. C86-2188, 1988 WL 125784 (N.D. Ohio 1988); In re
Progressive Design & Build, Inc., WAB Case No. 87-31, 1990 WL 484308
(WAB Feb. 21, 1990). The Department specifically notes that the full
contract clause will be deemed to have been incorporated by reference
in a covered contract if the contract provides that ``Executive Order
14055 (Nondisplacement of Qualified Workers Under Service Contracts),
and its implementing regulations, including the applicable contract
clause, are incorporated by reference into this contract as if fully
set forth in this contract,'' with a citation to a web page that
contains the contract clause in full or to the provision of the Code of
Federal Regulations containing the contract clause set forth at
Appendix A.
Contract clause paragraphs (a) through (e) of proposed Appendix A
repeat the clause in paragraphs (a) through (e) of the Executive Order
verbatim, with one exception. The proposed modification of the contract
clause would insert the number of the Executive order, 14055, to
replace the blank line that appears in paragraph (d) of the contract
clause contained in the order, as its number was not known at the time
the President signed the order.
Proposed contract clause paragraph (a) would require the successor
contractor and its subcontractors to provide the service employees
employed under the predecessor contract (including its subcontracts)
the right of first refusal of employment in positions for which the
employees are qualified. Proposed contract clause paragraph (b) would
create two exceptions to the right of first refusal. One is for
employees who are not service employees and the other is for any
employee for whom there would be just cause to discharge based on
evidence of the particular employee's past performance. Proposed
contract clause paragraph (c) would require contractors to furnish the
contracting officer with a list of employees that the contracting
officer will provide to the successor contractor to ensure the
successor contractor has the information necessary to provide the
employees with the right of first refusal. Proposed contract clause
paragraph (d) provides that the Secretary may pursue sanctions against
a contractor for its failure to comply with Executive Order 14055.
Proposed contract clause paragraph (e) would require contractors to
include provisions in their subcontracts that ensure that each
subcontractor will honor the requirements of paragraphs (a) through
(c), and require contractors to take any action with respect to any
such subcontract as may be directed by the Secretary as a means of
enforcing such provisions, including the imposition of sanctions for
noncompliance.
Proposed Appendix A sets forth additional provisions that are
necessary to implement the order. The additional paragraphs would
appear in paragraphs (f) through (i) of the contract clause contained
in Appendix A to part 9. Specifically, proposed contract clause
paragraph (f)(1) provides notice that the contractor must furnish the
contracting officer with a certified list of names of all service
employees working under the contract (including its subcontracts) at
the time the list is submitted. The list must also include anniversary
dates of employment of each service employee under the contract and its
predecessor contracts with either the current or predecessor
contractors or their subcontractors. Proposed paragraph (f)(1) further
explains that if there are changes to the workforce made after the
[[Page 42564]]
submission of this certified list, the contractor must, in accordance
with proposed paragraph (c), furnish the contracting officer with an
updated certified list of all service employees employed within the
last month of contract performance, including anniversary dates of
employment and dates of separation, if applicable.
Proposed contract clause paragraph (f)(2) provides notice that
under certain circumstances the contracting officer will, upon their
own action or upon written request of the Administrator, withhold or
cause to be withheld as much of the accrued payments due on either the
contract or any other contract between the contractor and the
Government that the Administrator requests or that the contracting
officer decides may be necessary to pay unpaid wages or to provide
other appropriate relief due under part 9.
Proposed contract clause paragraph (g) would require the contractor
to maintain certain records to demonstrate compliance with the
substantive requirements of part 9. This proposed paragraph would
enable contractors to understand their obligations and provide a
readily accessible list of records that contractors would be required
to maintain. The proposed paragraph specifies that the contractor would
be required to maintain the particular records (regardless of format,
e.g., paper or electronic) for 3 years. The specified records would
include copies of any written offers of employment or a contemporaneous
written record of any oral offers of employment, including the date,
location, and attendance roster of any employee meeting(s) at which the
offers were extended, a summary of each meeting, a copy of any written
notice that may have been distributed, and the names of the employees
from the predecessor contract to whom an offer was made; a copy of any
record that forms the basis for any exclusion or exception claimed
under part 9; a copy of the employee list(s) provided to or received
from the contracting agency; and, an entry on the pay records for an
employee of the amount of any retroactive payment of wages or
compensation under the supervision of the WHD Administrator, the period
covered by such payment, the date of payment, along with a copy of any
receipt form provided by or authorized by WHD. The proposed clause also
states that the contractor is to deliver a copy of the receipt form
provided by or authorized by WHD to the employee and, as evidence of
payment by the contractor, file the original receipt signed by the
employee with the Administrator within 10 business days after payment
is made.
Proposed contract clause paragraph (h) would require the
contractor, as a condition of the contract award, to cooperate in any
investigation by the contracting agency or the Department into possible
violations of the provisions of the nondisplacement clause and to make
records requested by such official(s) available for inspection,
copying, or transcription upon request. Proposed contract clause
paragraph (i) provides that disputes concerning the requirements of the
nondisplacement clause would not be subject to the general disputes
clause of the contract. Instead, such disputes would be resolved in
accordance with the procedures in part 9.
Proposed Sec. 9.11(b) specifies that when a contract will be
awarded to a successor for the same or similar work, the contracting
officer must take steps to ensure that the predecessor contractor
provides written notice to service employees employed under the
predecessor contract of their possible right to an offer of employment,
consistent with the requirements in Sec. 9.12(e)(3).
Proposed Sec. 9.11(c) would implement the location continuity
requirements in section 4 of the order. In Sec. 9.11(c)(1), the
proposed regulatory language restates the requirement in section 4(a)
of the order that, in preparing covered solicitations, contracting
agencies ``consider whether performance of the work in the same
locality or localities in which the contract is currently being
performed is reasonably necessary to ensure economical and efficient
provision of services.'' In Sec. 9.11(c)(2), the proposed regulatory
language also restates the requirement in section 4(b) of the order,
that, if a contracting agency determines that performance in the same
locality is reasonably necessary, then the agency must, ``to the extent
consistent with law, include a requirement or preference in the
solicitation for the successor contract that it be performed in the
same locality or localities.''
In Sec. 9.11(c)(3), the Department proposes procedural safeguards
for the required location continuity determination. The Department
proposes to require that agencies complete the location continuity
analysis prior to the date of issuance of the solicitation. The
Department also proposes to require that any agency determination not
to include a location continuity requirement or preference must be made
in writing by the agency's senior procurement executive. The
requirement that the determination be made in writing is consistent
with 48 CFR 4.801(b) of the FAR, which requires sufficient
documentation in contract files to support actions taken. The
Department seeks input from commenters regarding these proposed
procedural safeguards and any alternative safeguards that might assist
agencies in ensuring that the location continuity determination is
carried out as required by the order.
Proposed Sec. 9.11(c)(3) includes safeguards to ensure that
interested parties are able to request reconsideration of a
determination not to include a location continuity requirement or
preference. Where an agency has conducted the location continuity
analysis and determined that no such requirement or preference is
warranted, the proposed language would require that the agency include
a statement to that effect in the solicitation. The statement in the
solicitation would assist interested parties by clarifying that the
agency conducted the location continuity analysis and determined not to
include the requirement or preference, and did not simply fail to
conduct the analysis at all. The agency would also be required to
ensure that the incumbent contractor notifies affected workers and
their collective bargaining representatives, if any, in writing of the
agency's determination not to include a location continuity requirement
or preference and of the workers' right to request reconsideration.
This notification, and the contractor's confirmation to the agency that
the notification has been made, would need to occur within 5 business
days after the solicitation is issued. The Department has proposed
language in the nondisplacement contract clause set forth in Appendix A
that would require contractors to agree to provide this notification.
Finally, Sec. 9.11(c)(3) would provide that any request by an
interested party for reconsideration of an agency's decision to
include, or not to include, a location continuity requirement or
preference must be directed to the head of the contracting department
or agency. This provision for requesting reconsideration is similar to
the approach the Department proposes with regard to agency exceptions
in Sec. 9.5 of the regulations. As in that section, the use of the
term ``interested parties'' is intended to include workers and worker
representatives in addition to contractors and prospective bidders. The
Department seeks input from commenters on an appropriate time limit
within which interested parties
[[Page 42565]]
would have to request reconsideration, or whether the request for
reconsideration instead should just have to be made before the contract
is awarded.
In Sec. 9.11(c)(4), the Department proposes language that
restates, in part, the language from section 3(b) of the order, which
clarifies that nothing in the order should be interpreted as requiring
or recommending that contractors, subcontractors, or contracting
agencies must pay relocation costs for employees of predecessor
contractors hired pursuant to their exercise of their rights under the
order. The Department proposes similar language, directed at
contractors and subcontractors specifically, in Sec. 9.12(b)(6).
The location continuity provision in the order and the proposed
implementing regulations serve an important purpose. Like Executive
Order 13495, Executive Order 14055 reflects that there is a
relationship between the effectiveness of the nondisplacement order and
the location of a successor contract. In sections 1 and 5 of Executive
Order 13495, the order limited coverage only to contracts for similar
services at the ``same location.'' While Executive Order 14055 does not
contain a similar limitation to contracts at the ``same location,'' it
contains the provision at section 4 that requires contracting agencies
to consider requiring location continuity for all covered contracts.
Executive 14055 also contains additional interrelated provisions
governing how the order will apply related to the location of covered
contracts. As an initial matter, because there is no ``same location''
requirement, the order applies regardless of the location of the
successor contract. Thus, even if the place of performance for a
successor contract will be in a different locality from the predecessor
contract, the successor contract would still be required to include the
nondisplacement contract clause and the successor contractor would
still be required to provide workers on the predecessor contract with a
right of first refusal for positions on the new contract. Section 3(b)
of the order, however, clarifies that it should not be construed to
require or recommend the payment of relocation costs to workers who
exercise their right to take a new position under those circumstances.
The central location continuity provisions, in section 1 and
section 4 of Executive Order 14055, reflect the basic conclusion that
the right of first refusal in the contract clause may have a more
limited effect if a contract is moved beyond commuting distance from
the predecessor contract. Section 1 states that location continuity can
often provide the same benefits that stem from the core nondisplacement
requirement--which, the order explains, includes reducing disruption in
the delivery of services between contracts, maintaining physical and
information security, and providing experienced and well-trained
workforces that are familiar with the Federal Government's personnel,
facilities, and requirements. The benefits of using a carryover
workforce and location continuity are intertwined because, for many
contracts, moving performance to a different locality will mean that
most (or all) of the incumbent contractor's workers will ultimately not
be able or willing to relocate and therefore will not provide a
carryover workforce. In such circumstances, imposing a location
continuity requirement or preference may be the best way to ensure the
effectiveness of Executive Order 14055. For that reason, section 4 of
the order requires that for each covered contract, the contracting
officer consider whether to include a requirement or preference for
location continuity.
In many cases, contracts may already require location continuity
for reasons other than those stated in the Executive order. For
example, where the services are related to the physical security or
maintenance of a specific Federal facility, the location of the
contract performance will not be in question. In other circumstances,
where the Federal employees who receive services from or provide
oversight for the contract at issue are located at a specific Federal
facility, location continuity or a related geographic limitation may be
appropriate to ensure continuity of services or facilitate site visits
to the contractor's facilities for oversight or collaboration purposes.
See, e.g., Matter of: Novad Mgmt. Consulting, LLC, B-419194.5 (July 1,
2021) (finding geographic limitation to locate contracted loan services
within 50 miles of Tulsa to be appropriate to facilitate oversight and
monitoring of contractor facility by agency's Tulsa office). In still
other cases, however, where the place of performance would otherwise be
unspecified, a location continuity requirement may be reasonably
necessary to secure the economy and efficiency benefits identified by
Executive Order 14055.
Executive Order 14055 does not suggest that a location continuity
requirement is appropriate in all circumstances. Rather, it instructs
contracting agencies to consider whether to impose such a requirement
or preference on a case-by-case basis. In some cases, location
continuity may be particularly important because the use of a carryover
workforce provides critical benefits. This may be particularly true,
for example, where the incumbent workforce on the contract handles
classified information or sensitive information, such as personal
financial or identifiable information. For such workforces, the
contracting agency may have an overriding interest in keeping the
contract's incumbent employees--whose dependability and trust have
already been tested--rather than starting over with a new set of
contractor employees. In other cases, the contracting agency's basic
interest in a carryover workforce may be outweighed by an agency re-
organization that creates different location needs. If, for example, an
agency moves the Federal facility that will be providing oversight for
the contract from one state to another, it may make sense not to
require or prefer location continuity but instead to move the preferred
contract locality along with the related Federal facility even if it
may have a detrimental effect on contract-employee retention.
Given the order's requirement that contracting agencies consider
these questions, the Department is contemplating whether the proposed
regulatory provision at Sec. 9.11(c) should provide additional
guidance on the relevant factors that an agency should consider when it
is considering location continuity. The Department seeks comment on
whether the factors should be provided in the regulatory text, and, if
so, which factors to include and whether to provide guidance regarding
any particular weight that should be given to each of them. In this
regard, the Department notes that the ultimate question here--of
economy and efficiency--may also be at issue in the determination of
whether a contract should be excepted entirely from the application of
the order, as detailed in proposed Sec. 9.5. The location continuity
determination thus presents some of the same questions as those
exception determinations. For example, given the purpose and policy of
the order, to what extent should contracting agencies be required to
start with a presumption in favor of location continuity in order to
secure the full benefits of the nondisplacement clause on workforce
retention? When, if ever, is it appropriate for contracting officers to
consider costs--such as the potential to reduce labor costs by moving
operations to a lower-cost locality--as a reason to decline to require
location continuity? What other factors may weigh in favor
[[Page 42566]]
of location continuity? For example, where there have been significant
training investments in the incumbent contract workforce, or where the
incumbent workforce has been particularly successful in achieving
contract objectives? How might the HUBZone program or other
procurement-related programs factor into a location continuity
analysis? How should an agency weigh the history of remote work or
telework by incumbent contractor employees in the importance of
location continuity? Are there circumstances in which the contracting
agency should indicate in the solicitation that telework is permitted
or require the successor contractor to allow workers to telework?
Finally, as discussed further in proposed Sec. 9.5 regarding
exceptions authorized by agencies, the Department is proposing
regulatory language that would make an exception determination
ineffective as a matter of law if the agency does not follow the
procedural requirements for such an exception. The Department seeks
comment on whether a similar provision is appropriate for addressing
agency failures to follow location continuity procedures. The
Department also seeks comment on whether the regulations should include
specific remedies for workers or sanctions for contractors in the
circumstances in which a contractor fails to timely provide the workers
or workers' representative the required notice that a contracting
agency has determined not to include location continuity requirements
or preferences in the solicitation for a successor contract.
Proposed Sec. 9.11(d) would require the contracting officer to
provide the predecessor contractor's list of employees referenced in
proposed Sec. 9.12(e)(1) to the successor contractor and that, on
request, the list will be provided to employees or their
representatives, consistent with the Privacy Act, 5 U.S.C. 552a, and
other applicable law. The predecessor contractor's list of employees
must be provided no later than 21 calendar days prior to the beginning
of performance on the contract, and if an updated list is provided by
the predecessor contractor pursuant to Sec. 9.12(e)(2), the updated
list must be provided within 7 calendar days of the beginning of
performance on the contract. However, if the contract is awarded less
than 30 days before the beginning of performance, then the predecessor
contractor and the contracting agency must transmit the list as soon as
practicable.
Although the Department anticipates that contracting officers
typically will be able to provide the successor contractor with the
seniority list almost immediately after receiving it from the
predecessor contractor, there may be circumstances (such as if the
contracting officer has questions about the accuracy of the list) in
which the contracting officer needs several days to check or verify the
list before transmitting it to the successor contractor. The proposed
deadlines set forth in Sec. 9.11(d) take such circumstances into
account while also providing specific deadlines by which the seniority
list must be transmitted to the successor contractor in order to ensure
the successor has sufficient time to provide the workers with the right
of first refusal and to ensure continuity of performance on the
contract.
Proposed Sec. 9.11(e) addresses contracting officers'
responsibilities regarding complaints of alleged violations of part 9.
The proposal states that the contracting officer would be responsible
for reporting complaint information to the WHD within 15 calendar days
of WHD's request for such information. The Department believes 15
calendar days is an appropriate timeframe within which to require
production of information necessary to evaluate the complaint. The
proposed section elaborates that the contracting officer must provide
to WHD any complaint of contractor noncompliance with this part;
available statements by the employee or the contractor regarding the
alleged violation; evidence that a seniority list was issued by the
predecessor and provided to the successor; a copy of the seniority
list; evidence that the nondisplacement contract clause was included in
the contract or that the contract was excepted by the agency;
information concerning known settlement negotiations between the
parties (if applicable); and other pertinent information the
contracting officer chooses to disclose.
When the nondisplacement contract clause is erroneously excluded
from the contract, proposed Sec. 9.11(f) would require a contracting
agency to retroactively incorporate the nondisplacement contract clause
on its own initiative or within 15 calendar days of notification by an
authorized representative from the Department. There may be limited
circumstances where only prospective, rather than retroactive,
application of the contract clause is warranted. For example, solely
prospective relief might be warranted where the contracting officer
omitted the clause in good faith because, based on the available
information at the time, a predecessor-successor relationship was not
evident. Proposed Sec. 9.11(f) acknowledges this and permits the
Administrator, at their discretion, to determine that the circumstances
warrant prospective, rather than retroactive, incorporation of the
contract clause. The requirements for successor contractors on how to
proceed when the nondisplacement clause is retroactively incorporated
into a contract after the successor contractor already has begun
performance on the contract are detailed in Sec. 9.12(b)(8). If the
erroneous omission of the contract clause from a solicitation is
discovered before contract award, proposed Sec. 9.11(f) would also
require the contracting agency to amend the solicitation.
Section 9.12 Contractor Requirements and Prerogatives
Proposed Sec. 9.12 would implement contractors' requirements and
prerogatives under the nondisplacement requirements. The proposed
section would consist of the general obligation to offer employment,
the method of the job offer, exceptions, reduced staffing, obligations
near the end of the contract, recordkeeping, and obligations to
cooperate with reviews and investigations.
Proposed Sec. 9.12(a)(1) would implement the requirement that the
successor contractor and any subcontractors offer employment to the
employees on the predecessor contract prior to filling employment
openings. Specifically, the proposal provides that, except as provided
under the exclusion listed in proposed Sec. 9.4(b) or the exceptions
listed in paragraph (c) of proposed Sec. 9.12, a successor contractor
or subcontractor must not fill any employment openings under the
contract prior to making good faith offers of employment, in positions
for which the employees are qualified, to those employees employed
under the predecessor contract whose employment will be terminated as a
result of award of the contract or the expiration of the contract under
which the employees were hired. Because the term employee ``includes an
individual without regard to any contractual relationship alleged to
exist between the individual and a contractor or subcontractor,'' the
obligation to make good faith offers of employment extends to
independent contractor service employees performing work under the
predecessor contract. In making such an offer, a successor contractor
may hire as an employee a worker who was an independent contractor
under the predecessor contract. To the extent necessary to meet its
anticipated staffing pattern and in accordance with the requirements
described at 9.12(d), the
[[Page 42567]]
successor contractor and its subcontractors would be required to make a
bona fide, express offer of employment to each employee to a position
for which the employee is qualified and state the time within which the
employee must accept such offer. Although the offer must be for a
position for which the employee is qualified, it does not necessarily
need to be for the same or similar position as the employee held on the
predecessor contract, as discussed in proposed Sec. 9.12(b)(4). In no
case may the contractor or subcontractor give an employee fewer than 10
business days to consider and accept the offer of employment.
Proposed Sec. 9.12(a)(2) would clarify that the successor
contractor's obligation to offer a right of first refusal exists even
if the successor contractor were not provided a list of the predecessor
contractor's employees or if the list did not contain the names of all
employees employed during the final month of contract performance.
Proposed Sec. 9.12(a)(3) discusses how a successor contractor
should determine employee eligibility for a job offer. Under this
proposal, an employee would be entitled to a job offer if the
employee's name is included on the certified list of all service
employees working under the predecessor's contract or subcontracts
during the last month of contract performance. In addition, a successor
contractor would also be required to accept other reliable evidence of
an employee's entitlement to a job offer. The successor contractor
would be allowed to verify the information as a condition of accepting
it. For example, even if an employee's name does not appear on the list
of employees on the predecessor contract, an employee's assertion of an
assignment to work on a contract during the predecessor's last month of
performance coupled with contracting agency staff verification could
constitute credible evidence of an employee's entitlement to a job
offer. Similarly, an employee could demonstrate eligibility by
producing a paycheck stub that identifies the work location and dates
worked for the predecessor or that otherwise reflects that the employee
worked on the predecessor contract during the last month of
performance. The successor contractor could verify the claim with the
contracting agency, the predecessor, or another person who worked at
the facility, though if the successor contractor is unable to verify
the claim, the paycheck stub would be considered sufficient to
demonstrate eligibility absent evidence from the predecessor employer
indicating otherwise.
Proposed Sec. 9.12(a)(4) proposes to clarify that contractors and
subcontractors have an affirmative obligation to ensure that any
covered contracts they hold contain the contract clause. The contractor
or subcontractor must notify the contracting officer as soon as
possible if the contracting officer did not incorporate the required
contract clause into a covered contract.
Proposed Sec. 9.12(b) discusses the method of the job offer.
Proposed Sec. 9.12(b)(1) would require that, except as otherwise
provided in part 9, a contractor must make a bona fide, express offer
of employment to each qualified employee on the predecessor contract
before offering employment on the contract to any other employee. To
determine whether an employee is entitled to a bona fide, express offer
of employment, a contractor may consider the exceptions set forth in
proposed Sec. 9.12(c) and the conditions detailed in Sec. 9.12(d).
Proposed Sec. 9.12(b)(1) would clarify that a contractor may only use
employment screening processes, such as drug tests, background checks,
security clearance checks, and similar pre-employment screening
mechanisms under certain circumstances. These employment screening
processes may only be used when they are specifically provided for by
the contracting agency, are conditions of the service contract, and are
consistent with Executive Order 14055 and applicable local, state, and
Federal laws. Proposed Sec. 9.12(b)(1) also would clarify that while
the results of such screenings may show that an employee is unqualified
for a position and thus not entitled to an offer of employment, a
contractor may not use the requirement of an employment screening
process by itself to conclude an employee is unqualified because they
have not yet completed that screening process. For example, a successor
contractor that requires all employees to undergo a background check
cannot deem predecessor employees unqualified solely because they have
not completed the specific background check the successor contractor
requires before receiving a job offer.
Proposed Sec. 9.12(b)(2) discusses the time limit in which the
employee has a right to accept the offer, which the contractor
determines, but which in no case can be fewer than 10 business days.
The obligation to offer employment to a particular employee would cease
upon the employee's first refusal of a bona fide offer to employment on
the contract.
Proposed Sec. 9.12(b)(3) provides the process for making the job
offer. As proposed, the successor contractor would be required to make
a specific oral or written employment offer to each employee. An
invitation to apply for a job, for example, is not a bona fide offer.
In order to ensure that the offer is effectively communicated, the
successor contractor must take reasonable efforts to make the offer in
a language that each worker understands. The proposed rule contains an
example of how if the successor contractor holds a meeting for a group
of employees on the predecessor contract, it could satisfy this
provision by having a co-worker or other person translate for employees
who are not fluent in English. Where offers are not made in person, the
offers should be sent by registered or certified mail to the employees'
last known address or by any other means normally ensuring delivery.
Examples of such other means include, but are not limited to, email to
the last known email address, delivery to the last known address by
commercial courier or express delivery services, or by personal service
to the last known address.
Proposed Sec. 9.12(b)(4) would clarify that the employment offer
may be for a different job position on the contract. More specifically,
an offer of employment on the successor's contract would generally be
presumed to be a bona fide offer of employment, even if it were not for
a position similar to the one the employee previously held, if it were
for a position for which the employee were qualified. If a question
arises concerning an employee's qualifications, that question would be
decided based upon the employee's education and employment history,
with particular emphasis on the employee's experience on the
predecessor contract. A contractor would have to base its decision
regarding an employee's qualifications on reliable information provided
by a knowledgeable source, such as the predecessor contractor, the
local supervisor, the employee, or the contracting agency. For example,
an oral or written outline of job duties or skills used in prior
employment, school transcripts, or copies of relevant certificates and
diplomas all would be credible information.
Proposed Sec. 9.12(b)(5) would allow for an offer of employment to
a position providing different employment terms and conditions than the
employee held with the predecessor contractor, provided the offer is
still bona fide, i.e., the different employment terms and conditions
are not offered to discourage the employee from accepting the offer.
This would include changes to pay or benefits. The Department also
proposes
[[Page 42568]]
language in Sec. 9.12(b)(5) that addresses how this principle would
apply to telework or remote work. If a successor contractor places
limitations on telework or remote work for predecessor employees that
it does not consistently place on other, similarly situated workers,
that may reflect that those limitations are intended to cause the
predecessor employees to refuse the offer. Therefore, such a difference
likely would be impermissible under the order. Accordingly, under this
proposed language, where the successor contractor has had or will have
any employees who work or will work entirely in a remote capacity, and
the successor contractor has employment openings on the successor
contract in the same or similar occupational classifications as the
positions held by those successor employees, the successor contractor's
employment offer to qualified predecessor employees for such openings
must include the option of remote work under terms and conditions that
are reasonably similar to those afforded to the other employees of the
successor contractor. Such employment, where it is permitted on a
successor contract and is consistent with security and privacy
requirements, would generally assist with workforce carryover even in
circumstances where the location of contract performance is changing.
In Sec. 9.12(b)(6), the Department proposes to repeat, in part,
the statement in section 3(b) of Executive Order 14055 that nothing in
the order should be interpreted as requiring or recommending that
contractors, subcontractors, or contracting agencies must pay
relocation costs for employees of predecessor contractors hired
pursuant to their exercise of their rights under the order. The
Department proposes similar language, directed at contracting agencies
specifically, in Sec. 9.11(c)(3). The Department notes that this
language does not forbid the voluntary payment of relocation expenses
or the payment of any such expenses if they are otherwise required by
contract or law. Proposed Sec. 9.12(b)(7) would provide that, where an
employee is terminated under circumstances suggesting the offer of
employment may not have been bona fide, the facts and circumstances of
the offer and the termination would be closely examined to determine
whether the offer was bona fide.
Proposed Sec. 9.12(b)(8) would provide requirements for successor
contractors for proceeding when the contracting agency retroactively
incorporates the nondisplacement clause into a contract after the
successor contractor has already begun performance on the contract.
Pursuant to proposed Sec. 9.11(f), when the nondisplacement contract
clause has been erroneously excluded from a contract, contracting
agencies would be required to retroactively incorporate it. Upon
retroactive incorporation, the successor contractor would be required
to offer a right of first refusal of employment to the employees on the
predecessor contract in accordance with the requirements of Executive
Order 14055 and this part. Consistent with proposed Sec. 9.11(f),
proposed Sec. 9.12(b)(8) acknowledges that the Administrator may
exercise their discretion and require only prospective application of
the contract clause in certain circumstances. In such cases, the
successor contractor and its subcontractors would be required to
provide employees on the predecessor contract a right of first refusal
for any positions that remain open. In the event of a vacancy within 90
calendar days of the first date of contract performance, under proposed
Sec. 9.12(b)(8), the successor contractor and its subcontractors would
be required to provide the employees under the predecessor contract the
right of first refusal as well, regardless of whether incorporation of
the contract clause is retroactive or prospective. The Department
believes these requirements strike an appropriate balance between the
interests of the employees on the predecessor and successor contracts.
Proposed Sec. 9.12(c) addresses the exceptions to the general
obligation to offer employment under Executive Order 14055. The
exceptions would be included in the contract clause established in
section 3 of the Order and are distinct from the exclusions and agency
exceptions discussed in proposed Sec. 9.4. The exclusions and agency
exceptions specify both certain classes of contracts and certain
employees that either would be or may be excluded from the provisions
of Executive Order 14055. In contrast, the exceptions in proposed Sec.
9.12(c)--exceptions from the successor contractor's obligation to offer
employment on a contract to employees on the predecessor contract prior
to making an offer to anyone else--would not relieve the contractor of
other requirements of this part (e.g., the obligation near the end of
the contract to provide a list of employees who worked on the contract
during the last month). Under this proposal, the exceptions in proposed
Sec. 9.12(c) would be construed narrowly and the contractor would bear
the burden of proof regarding the applicability of any exception.
Under proposed Sec. 9.12(c)(1), a successor contractor or
subcontractor would not be required to offer employment to any employee
of the predecessor whom the predecessor contractor will retain. The
successor contractor is required to presume that all employees hired to
work under a predecessor's Federal service contract would be terminated
as a result of the award of the successor contract, unless the
successor contractor can demonstrate a reasonable belief to the
contrary, based upon reliable information provided by a knowledgeable
source, such as the predecessor contractor, the employee, or the
contracting agency.
Under proposed Sec. 9.12(c)(2), the successor contractor or
subcontractor would not be required to offer employment to any worker
on the predecessor contract who is not a service employee. Consistent
with the definition of service employee in proposed Sec. 9.2, this
exception would apply to a person employed on the predecessor contract
in a bona fide executive, administrative, or professional capacity, as
those terms are defined in 29 CFR part 541. The successor contractor
would be required to presume that all workers appearing on the list
required by Sec. 9.12(e) or who have demonstrated they should have
been included on the list were service employees, unless the successor
contractor can demonstrate a reasonable belief to the contrary, based
upon reliable information provided by a knowledgeable source, such as
the predecessor contractor, the employee, or the contracting agency.
Information regarding the general business practices of the predecessor
contractor or the industry would not be sufficient for purposes of this
exception.
Under proposed Sec. 9.12(c)(3), a successor contractor or
subcontractor would not be required to offer employment to any employee
on the predecessor contract if the successor contractor or any of its
subcontractors 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 successor contractor or
any subcontractors. Again, the successor contractor would be required
to presume that there is no just cause to discharge any employees
working under the predecessor contract in the last month of
performance, unless the successor contractor can demonstrate a
reasonable belief to the contrary, based upon reliable evidence
provided by a
[[Page 42569]]
knowledgeable source, such as the predecessor contractor, the local
supervisor, the employee, or the contracting agency. For example, a
successor contractor could demonstrate its reasonable belief that there
would be just cause to discharge an employee through reliable evidence
that the predecessor contractor initiated a process to terminate the
employee for conduct warranting termination prior to the expiration of
the contract, but the termination process was not completed before the
contract expired. Similarly, conclusive evidence that an employee on
the predecessor contract engaged in misconduct warranting discharge,
such as sexual harassment or serious safety violations, would provide
the successor contractor with a reasonable belief that there would be
just cause to discharge the employee, even if the predecessor
contractor elected to impose discipline rather than discharge the
employee. However, evidence that the predecessor contractor took
disciplinary action against an employee for poor performance but
stopped short of recommending termination would not generally
constitute sufficient evidence of just cause to discharge the employee.
The determination that this exception applies must be made on an
individual basis for each employee. Information regarding the general
performance of the predecessor contractor or any subcontractors, or
their respective workforces, would not be sufficient for purposes of
this exception. The Department is seeking comment on whether there are
other instances that would constitute just cause to discharge an
employee that the Department should take into consideration to support
the policy laid out in the Executive Order.
Under proposed Sec. 9.12(c)(4), a successor contractor or
subcontractor would not be required to offer employment to a service
employee that provided services under both a predecessor's Federal
service contract and one or more nonfederal service contracts as part
of a single job, provided that the employee was not deployed in a
manner that was designed to avoid the purposes of this part. The
successor contractor would be required to presume that all employees
hired to work under a predecessor's Federal service contract did not
work on one or more nonfederal service contracts as part of a single
job, unless the successor could demonstrate a reasonable belief to the
contrary, based upon reliable evidence provided by a knowledgeable
source, such as the predecessor contractor, the local supervisor, the
employee, or the contracting agency. In making such a reasonable
determination, the successor must also reasonably determine that the
predecessor did not deploy workers to both Federal and non-federal
contractors purposely to evade the requirements of this part.
Information regarding the general business practices of the predecessor
contractor or the industry would not be sufficient for purposes of this
exception. Knowledge that contractors generally deploy workers to both
Federal and other clients would not be sufficient for the successor to
claim the exception, because such general practices may not have been
observed on the particular predecessor contract.
For example, claims from several employees who state a janitorial
contractor reassigned its janitorial workers who previously worked
exclusively in a Federal building to both Federal and other clients as
part of a single job may indicate that the predecessor deployed workers
to avoid the purposes of the nondisplacement provisions, which include
Federal interests in economy and efficiency that would be served when
the successor hires the predecessor's employees. Conversely, where the
employees on the predecessor contract were traditionally deployed to
Federal and nonfederal service work as part of their job, the successor
would not be required to offer employment to the workers.
Proposed Sec. 9.12(d) addresses the provision in paragraph (a) of
Executive Order 14055's contract clause that allows the successor
contractor to reduce staffing. Proposed Sec. 9.12(d)(1) recognizes
that the contractor or subcontractor may determine the number of
employees necessary for efficient performance of the contract and, for
bona fide staffing or work assignment reasons, permits the successor
contractor or subcontractor to elect to employ fewer employees than the
predecessor contractor employed in performance of the work. Thus,
generally, the successor contractor or subcontractor would not be
required to offer employment on the contract to all employees on the
predecessor contract, but must offer employment to the number of
eligible employees the successor contractor believes would be necessary
to meet its anticipated staffing pattern. However, where a successor
contractor does not offer employment to all the predecessor contract
employees, the obligation to offer employment would continue for 90
calendar days after the successor contractor's first date of
performance on the contract. The contractor's obligation under this
part would end either when all of the predecessor contract employees
have received a bona fide job offer or when 90 calendar days have
passed from the successor contractor's first date of performance on the
contract. The proposed regulation provides several examples to
demonstrate the principle.
A successor prime contractor may choose to use a different
configuration of subcontractors than the predecessor prime contractor,
but any change in the number of subcontracts or the scope of work that
particular subcontractors perform does not by itself constitute reduced
staffing under proposed Sec. 9.12(d) or otherwise alter the
requirements of Executive Order 14055 and this part. Consistent with
proposed Sec. 9.13, a prime contractor is responsible for ensuring
that all qualified service employees working under the predecessor
contract (whether they were employed directly by the predecessor prime
contractor or by any subcontractors working under the predecessor
contract) receive an offer of employment under the successor contract
in accordance with the requirements of Executive Order 14055 and this
part. Where a prime successor contractor chooses to use subcontractors,
the prime contractor is responsible for ensuring that any of its
subcontractors and lower-tier subcontractors offer employment to
employees employed under the predecessor contract (including the
predecessor subcontracts) in accordance with the requirements of
Executive Order 14055 and this part. Where a prime successor contractor
chooses to use fewer subcontractors than the predecessor prime
contractor used, and instead chooses to employ more workers directly,
the prime successor contractor must offer direct employment to the
number of eligible employees employed under the predecessor contract
(including workers employed by predecessor subcontractors) necessary to
meet the prime successor contractor's anticipated staffing pattern and
as otherwise required by Executive Order 14055 and this part.
Proposed Sec. 9.12(d)(2) acknowledges that in some cases a
successor contractor may reconfigure the staffing pattern to increase
the number of employees employed in some positions while decreasing the
number of employees in others. In such cases, proposed Sec. 9.12(d)(2)
would require the successor contractor to examine the qualifications of
each employee in order to offer the greatest possible number of
predecessor contract employees positions equivalent to those they held
under the predecessor contract, thereby
[[Page 42570]]
minimizing displacement. The proposed regulation provides examples to
demonstrate this principle.
Proposed Sec. 9.12(d)(3) clarifies that subject to provisions of
this part and other applicable restrictions (including non-
discrimination laws and regulations), the successor contractor may
determine to which employees it will offer employment. Consistent with
proposed Sec. 9.1(b), this paragraph is not to be construed to excuse
noncompliance with any applicable Executive order, regulation, or
Federal, state, or local laws. For example, a contractor could not use
this provision to justify unlawful discrimination against any worker.
While WHD would not make determinations regarding Federal contractors'
compliance with nondiscrimination requirements administered by other
agencies, a finding by the Department's Office of Federal Contract
Compliance Programs, another agency, or by a court that a contractor
has unlawfully discriminated against a worker would be considered in
determining whether the discriminatory action has also violated the
nondisplacement requirements.
Proposed Sec. 9.12(e) specifies an incumbent contractor's
obligations near the end of the contract. Proposed Sec. 9.12(e)(1)
would require a contractor to, no less than 30 calendar days before
completion of the contractor's performance of services on a contract,
furnish the contracting officer a list of the names of all service
employees under the contract and its subcontracts at that time. This
list must also contain the anniversary dates of employment for each
service employee under the contract and its predecessor contracts with
either the current or predecessor contractors or their subcontractors.
A service employee is considered employed under the contract if they
are in a leave status with the predecessor prime contractor or any of
its subcontractors, whether paid or unpaid, and whether for medical or
other reasons, during the last month of contract performance. Proposed
Sec. 9.12(e)(1) would allow a contractor to satisfy these requirements
using the list it submits or that it plans to submit to satisfy the
requirements of the SCA contract clause specified at 29 CFR 4.6(l)(2),
assuming there are no changes to the workforce before the contract is
completed.
Where changes to the workforce are made after the submission of
this certified list pursuant to proposed Sec. 9.12(e)(1), proposed
Sec. 9.12(e)(2) would require a contractor to furnish the contracting
officer a certified list of the names of all service employees working
under the contract and its subcontracts during the last month of
contract performance not less than 10 business days before completion
of the contract. This list must include the anniversary dates of
employment with either the current or predecessor contractors or their
subcontractors, and, where applicable, dates of separation of each
service employee. The contractor may use the list submitted to satisfy
the requirements of the SCA contract clause specified at 29 CFR
4.6(l)(2) to meet this provision.
Proposed Sec. 9.12(e)(3) requires the predecessor contractor to,
before contract completion, provide written notice to service employees
employed under the predecessor contractor of their possible right to an
offer of employment on the successor contract. Such notice must be
either posted in a conspicuous place at the worksite or delivered to
the employees individually. The text of the proposed notice is set
forth in the Appendix B to part 9. The Department intends to translate
the notice into several common foreign languages and make the English
and translated versions available online in a poster format to allow
easy access. Another form with the same information may be used.
Proposed Sec. 9.12(e)(3) further explains that where the predecessor
contractor's workforce is comprised of a significant portion of workers
who are not fluent in English, the notice must be provided in both
English and a language in which the employees are fluent. Multiple
foreign language notices would be required to be provided where
significant portions of the workforce speak different foreign languages
and there is no common language. If, for example, a significant portion
of a workforce speaks Korean and another significant portion of the
same workforce speaks Spanish, then the information must be provided in
English, Korean, and Spanish. If there is a question of whether a
portion of the workforce is significant and the Department has a poster
in the language common to those workers, the notice should be posted in
that language. The Department solicits comments on whether it should
establish a percentage threshold for determining what constitutes a
``significant portion of the workforce.''
Proposed Sec. 9.12(f) addresses recordkeeping requirements.
Proposed Sec. 9.12(f)(1) clarifies that this part prescribes no
particular order or form of records for contractors, and that the
recordkeeping requirements apply to all records regardless of their
format (e.g., paper or electronic). A contractor would be allowed to
use records developed for any purpose to satisfy the requirements of
part 9, provided the records otherwise meet the requirements and
purposes of this part.
Proposed Sec. 9.12(f)(2) specifies the records contractors must
maintain, including copies of any written offers of employment or a
contemporaneous written record of any oral offers of employment,
including the date, location, and attendance roster of any employee
meeting(s) at which the offers were extended, a summary of each
meeting, a copy of any written notice that may have been distributed,
and the names of the employees from the predecessor contract to whom an
offer was made. Proposed Sec. 9.12(f)(2) also requires contractors to
maintain a copy of any record that forms the basis for any exclusion or
exception claimed under this part, the employee list provided to the
contracting agency, and the employee list received from the contracting
agency. In addition, every contractor that makes retroactive payment of
wages or compensation under the supervision of WHD pursuant to proposed
Sec. 9.23(b) would be required to record and preserve as an entry in
the pay records the amount of such payment to each employee, the period
covered by the payment, and the date of payment to each employee, and
to report each such payment on a receipt form authorized by WHD.
Finally, proposed Sec. 9.12(f)(2) requires contractors to maintain
evidence of any notices that they have provided to workers, or workers'
collective bargaining representatives, to satisfy the requirements of
the order or these regulations. These would include records of notices
of the possibility of employment on the successor contract that are
required under Sec. 9.12(e)(3) of the regulations; notices of agency
exceptions that a contracting agency requires a contractor to provide
under Sec. 9.5(g) of the regulations and section 6(b) of the order;
and notices that a contracting agency has declined to include location
continuity requirements or preferences in a solicitation, pursuant to
Sec. 9.11(c)(3) of the regulations. WHD will use the records that are
retained pursuant to Sec. 9.12(f)(2) in determining a contractor's
compliance and whether debarment is warranted. All contractors must
retain the records listed in proposed Sec. 9.12(f)(2) for at least 3
years from the date the records were created and must provide copies of
such records upon request of any authorized representative of the
contracting agency or the Department.
Proposed Sec. 9.12(g) outlines the contractor's obligations to
cooperate
[[Page 42571]]
during any investigation to determine compliance with part 9 and to not
discriminate against any person because such person has cooperated in
an investigation or proceeding under part 9 or has attempted to
exercise any rights afforded under part 9. As proposed, this obligation
to cooperate with investigations would not be limited to investigations
of the contractor's own actions, but would also include investigations
related to other contractors (e.g., predecessor and subsequent
contractors) and subcontractors.
Section 9.13 Subcontracts
Proposed Sec. 9.13(a) discusses the responsibilities and
liabilities of prime contractors and subcontractors with respect to
subcontractor compliance with the nondisplacement clause. The proposed
section would require prime contractors to ensure the inclusion of the
nondisplacement clause contained in Appendix A in any subcontracts and
would require any subcontractors to include the nondisplacement clause
in Appendix A in any lower-tier subcontracts. Requiring that the
contract clause be inserted in all subcontracts, including lower-tier
subcontracts, notifies subcontractors of their obligation to provide
employees the right of first refusal and of the enforcement methods WHD
may use when subcontractors are found to be in violation of the
Executive order, including the withholding of contract funds.
Proposed Sec. 9.13(a) also clarifies that prime contractors would
be responsible for the compliance of any subcontractor or lower-tier
subcontractor with the contract clause in Appendix A. In the event of a
violation of the contract clause, both the prime contractor and any
subcontractor(s) responsible would be held jointly and severally
liable. The prime contractors' contractual liability for subcontractor
violations would be a strict liability that would not require that the
prime contractor knew of or should have known of the subcontractors'
violations. The requirements of this proposed section would ensure
contractors cannot avoid the requirements of part 9 by subcontracting
the work to other contractors. Thus, this section helps to ensure that
all covered contractors and subcontractors of any tier are subject to
the requirements of Executive Order 14055 and this part, and that
employees receive the protections of the order and this part regardless
of whether they are employed by the prime contractor or a subcontractor
of any tier.
Proposed Sec. 9.13(b) explains a prime contractor's responsibility
to a subcontractor's employees when it discontinues the services of a
subcontractor at any time during the contract and performs those
services itself. Specifically, under this proposed section, the prime
contractor must offer employment to qualified employees of the
subcontractor who would otherwise be displaced.
Subpart C--Enforcement
Section 8 of Executive Order 14055, titled ``Enforcement,'' grants
the Secretary ``authority to investigate potential violations of, and
obtain compliance with, this order.'' 86 FR 66399. This proposed
subpart addresses the process for filing complaints, investigations,
and remedies and penalties for violations.
Section 9.21 Complaints
The Department proposes a procedure for filing complaints in Sec.
9.21. Section 9.21(a) outlines the procedure to file a complaint with
any office of WHD. It additionally provides that a complaint may be
filed orally or in writing and that WHD will accept a complaint in any
language. Section 9.21(b) states the well-established policy of the
Department with respect to confidential sources. See 29 CFR 4.191(a);
29 CFR 5.6(a)(5).
Section 9.22 Wage and Hour Division Investigation
Proposed Sec. 9.22(a), which outlines WHD's investigative
authority, would permit the Administrator to initiate an investigation
either as the result of a complaint or at any time on the
Administrator's own initiative. As part of the investigation, the
Administrator would be able to inspect the relevant records of the
relevant contractors (and make copies or transcriptions thereof) as
well as interview representatives and employees of those contractors.
The Administrator would additionally be able to interview any of the
contractors' workers at the worksite during normal work hours and
require the production of any documents or other evidence deemed
necessary for inspection to determine whether a violation of this part
(including conduct warranting imposition of debarment pursuant to Sec.
9.23(d) of this part) has occurred. The section would also require
Federal agencies and contractors to cooperate with authorized
representatives of the Department in the inspection of records, in
interviews with workers, and in all aspects of investigations. This
section is consistent with WHD's investigative authority under the acts
administered by WHD.
Proposed Sec. 9.22(b) addresses subsequent investigations and
allows the Administrator to conduct a new investigation or issue a new
determination if the Administrator concludes the circumstances warrant
additional action. Situations where additional action may be warranted
include, for example, situations where proceedings before an
Administrative Law Judge (ALJ) reveal that there may have been
violations with respect to other employees of the contractor, where
imposition of ineligibility sanctions is appropriate, or where the
contractor has failed to comply with an order of the Secretary.
Section 9.23 Remedies and Sanctions for Violations of This Part
Proposed Sec. 9.23 discusses remedies and sanctions for violations
of Executive Order 14055 and this part. Proposed Sec. 9.23(a)
reiterates the authority granted to the Secretary in section 8 of
Executive Order 14055, providing the Secretary the authority to issue
orders prescribing appropriate sanctions and remedies, including, but
not limited to, requiring the contractor to offer employment to
employees from the predecessor contract and payment of wages lost.
Proposed Sec. 9.23(b) provides that, in addition to satisfying any
costs imposed by an administrative order under proposed Sec. Sec.
9.34(j) or 9.35(d), a contractor that violates part 9 would be required
to take appropriate action to remedy the violation, which could include
hiring the affected employee(s) in a position on the contract for which
the employee is qualified, together with compensation (including lost
wages and interest) and other terms, conditions, and privileges of that
employment. Proposed Sec. 9.23(b) would also require the contractor to
pay interest on any underpayment of wages. A payment of interest is
consistent with the instruction in section 8 of the Executive order
that the Secretary will have the authority to issue final orders
prescribing appropriate sanctions and remedies. The payment of interest
is an appropriate remedial measure to make a worker fully whole with a
back-pay award. The proposed language provides that interest would be
calculated from the date of the underpayment or loss, using the
interest rate applicable to underpayment of taxes under 26 U.S.C. 6621,
and would be compounded daily. Various OSHA whistleblower regulations
use the tax underpayment rate and daily compounding because that
accounting best achieves the make-
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whole purpose of a back-pay award. See Procedures for the Handling of
Retaliation Complaints Under Section 806 of the Sarbanes-Oxley Act of
2002, as Amended, Final Rule, 80 FR 11865, 11872 (Mar. 5, 2015). The
Department believes that a similar approach is warranted in
implementing Executive Order 14055.
Proposed Sec. 9.23(c) addresses the withholding of contract funds
for non-compliance. Under proposed Sec. 9.23(c)(1), the Administrator
may direct that payments due on the contract or any other contract
between the contractor and the Federal Government be withheld in such
amounts as may be necessary to pay unpaid wages or to provide other
appropriate relief. Proposed Sec. 9.23(c)(1) permits the cross-
withholding of monies due. Cross-withholding is a procedure through
which contracting agencies withhold monies due a contractor from
contracts other than those on which the alleged violations occurred,
and it applies to require withholding regardless of whether the
contract on which monies are to be withheld is held by a different
agency from the agency that held the contract on which the alleged
violations occurred. The provision further provides that where monies
are withheld, upon final order of the Secretary that unpaid wages or
other monetary relief are due, the Administrator may direct that
withheld funds be transferred to the Department for disbursement.
Withholding is a long-established remedy for a contractor's failure to
fulfill its labor standards obligations under the SCA. The SCA provides
for withholding to ensure the availability of monies for the payment of
back wages to covered workers when a contractor or subcontractor has
failed to pay the full amount of required wages. 29 CFR 4.6(i). The
Department believes that withholding will be an important enforcement
tool to effectively enforce the requirements of Executive Order 14055.
Proposed Sec. 9.23(c)(2) similarly provides for the suspension of
the payment of funds if the contracting officer or the Administrator
finds that the predecessor contractor has failed to provide the
required list of service employees working under the contract and its
subcontracts as required by Sec. 9.12(e). Proposed Sec. 9.23(c)(3)
clarifies that if the Administrator directs a contracting agency to
withhold funds from a contractor pursuant to Sec. 9.23(c), the
Administrator or contracting agency must notify the affected
contractor.
Proposed Sec. 9.23(d) provides for debarment from Federal contract
work for up to 3 years for noncompliance with any order of the
Secretary or for willful violations of Executive Order 14055 or the
regulations in this part. The proposed provision provides that a
contractor would have the opportunity for a hearing before an order of
debarment is carried out and before the contractor is included on a
published list of contractors subject to debarment. Like withholding,
debarment is a long-established remedy for a contractor's failure to
fulfill its labor standard obligations under the SCA. 41 U.S.C.
6706(b); 29 CFR 4.188(a). The possibility that a contractor will be
unable to obtain government contracts for a fixed period of time due to
debarment promotes contractor compliance with the SCA, and the
Department expects such a remedy would enhance contractor compliance
with Executive Order 14055 as well.
Proposed Sec. 9.23(e) states that the Administrator may require a
contractor to provide any relief appropriate, including employment,
reinstatement, promotion, and the payment of lost wages, including
interest, when the Administrator finds that a contractor has interfered
with the Administrator's investigation or has in any manner
discriminated against any person because they cooperated in the
Administrator's investigation or attempted to exercise any rights
afforded them under this part. The Department believes that such a
provision would help ensure effective enforcement of Executive Order
14055, as effective enforcement requires worker cooperation. Consistent
with the Supreme Court's observation in interpreting the scope of the
FLSA's antiretaliation provision, enforcement of Executive Order 14055
will depend ``upon information and complaints received from employees
seeking to vindicate rights claimed to have been denied.'' Kasten v.
Saint-Gobain Performance Plastics Corp., 563 U.S. 1, 11 (2011)
(internal quotation marks omitted). The antiretaliation provision is to
be construed broadly to effectuate its remedial purpose. Importantly,
and consistent with the Supreme Court's interpretation of the FLSA's
antiretaliation provision, the Department's proposed rule would protect
workers who file oral as well as written complaints. See Kasten, 563
U.S. at 17. The Department's proposed rule also would protect workers
from retaliation for filing complaints regardless of whether they are
filed with their employer, a higher-tier subcontractor or prime
contractor, with the Department or another federal agency, or from
retaliation for otherwise taking reasonable action with the intent to
seek compliance with or enforcement of the order.
While Section 8 of the order authorizes the Secretary to prescribe
appropriate sanctions and remedies, the Department does not interpret
this affirmative direction to the Secretary to limit contracting
agencies from employing any sanctions or remedies otherwise available
to them under applicable law or to limit contracting agencies from
including noncompliance with nondisplacement contractual or regulatory
provisions in past performance reports.
Subpart D--Administrator's Determination, Mediation, and Administrative
Proceedings
Proposed subpart D addresses informal and formal proceedings to
determine compliance with the requirements of part 9 and resolution of
disputes.
Section 9.31 Determination of the Administrator
Proposed Sec. 9.31(a) provides that when an investigation is
completed, the Administrator would issue a written determination of
whether a violation occurred. A written determination would contain a
statement of the investigation findings and would address the
appropriate relief and the issue of debarment where appropriate. Notice
of the determination would be sent by registered or certified mail to
the parties' last known address or by any other means normally ensuring
delivery. Examples of such other means include, but are not limited to,
email to the last known email address, delivery to the last known
address by commercial courier or express delivery services, or by
personal service to the last known address. As has been recently
highlighted during the COVID-19 pandemic, while registered or certified
mail may generally be a reliable means of delivery, in some
circumstances other delivery methods may be just as reliable or even
more successful at assuring delivery. This flexibility would allow the
Department to choose methods to ensure that the necessary notifications
are effectively delivered to the parties.
Proposed Sec. 9.31(b)(1) explains that where the Administrator has
concluded that relevant facts are in dispute, the notice of
determination would advise that the Administrator's determination
becomes the final order of the Secretary and is not appealable in any
administrative or judicial proceeding unless a request for a hearing is
sent within 20 calendar days of the date of the Administrator's
determination, in
[[Page 42573]]
accordance with proposed Sec. 9.32(b)(1). Determining when a request
for a hearing or any other notification under this section was sent
will depend on the means of delivery, such as by the date stamp on an
email or the delivery confirmation provided by a commercial delivery
service. The proposed section also states that such a request may be
sent by letter or by any other means normally assuring delivery, and
that a detailed statement of the reasons why the Administrator's
determination is in error, including the facts alleged to be in
dispute, if any, must be submitted with the request for hearing. The
proposed regulation further explains that the Administrator's
determination not to seek debarment is not appealable.
Proposed Sec. 9.31(b)(2) would apply to situations where the
Administrator has concluded that there are no relevant facts in
dispute. The Administrator would advise the parties and their
representatives, if any, that the Administrator has concluded that no
relevant facts are in dispute and that the determination will become
the final order of the Secretary and will not be appealable in any
administrative or judicial proceeding unless a petition for review is
properly filed within 20 days of the date of the determination with the
Administrative Review Board (ARB). The Administrator's determination
would also advise that if an aggrieved party disagrees with the
Administrator's factual findings or believes there are relevant facts
in dispute, the party may advise the Administrator of the disputed
facts and request a hearing by letter or by any other means normally
assuring delivery, sent within 20 calendar days of the date of the
Administrator's determination. Upon such a request, the Administrator
will either refer the request for a hearing to the Chief Administrative
Law Judge or notify the parties and their representatives of the
Administrator's determination that there are still no relevant issues
of fact and that a petition for review may be filed with the ARB in
accordance with proposed Sec. 9.32(b)(2).
Section 9.32 Requesting Appeals
Proposed Sec. 9.32 provides procedures for requesting appeals.
Proposed Sec. 9.32(a) provides that any party desiring review of the
Administrator's determination, including judicial review, must first
request a hearing with an ALJ or file a petition for review with the
ARB, as appropriate, in accordance with the requirements of proposed
Sec. 9.31(b) of this part.
Proposed Sec. 9.32(b)(1)(i) states that any aggrieved party may
request a hearing by an ALJ within 20 days of the date of the
determination of the Administrator. To request a hearing, the aggrieved
party must send the request to the Chief Administrative Law Judge (ALJ)
of the Office of Administrative Law Judges (OALJ) by letter or by any
other means normally assuring delivery and the request must include a
copy of the Administrator's determination. The proposed section further
requires that the party send a copy of the request for hearing to the
complainant(s) or successor contractor, and their representatives, if
any, and to the Administrator and the Associate Solicitor.
Proposed Sec. 9.32(b)(1)(ii) provides that a complainant or any
other interested party may request a hearing where the Administrator
determines that there is no basis for a finding that the employer has
committed violations(s), or where the complainant or other interested
party believes that the Administrator has ordered inadequate monetary
relief. The proposed section explains that in such a proceeding, the
party requesting the hearing would be the prosecuting party and the
employer would be the respondent. The Administrator may intervene in
the proceeding as a party or as amicus curiae at any time at the
Administrator's discretion. Proposed Sec. 9.32(b)(1)(iii) provides
that the employer or any other interested party may request a hearing
where the Administrator determines, after investigation, that the
employer has committed violation(s). The proposed section provides that
in such a proceeding, the Administrator would be the prosecuting party
and the employer would be the respondent.
Proposed Sec. 9.32(b)(2)(i) explains that any aggrieved party
desiring a review of the Administrator's determination in which there
were no relevant facts in dispute, or of an ALJ's decision, must file a
petition for review with the ARB within 20 calendar days of the date of
the determination or decision. The petition must be served on all
parties, including the Chief ALJ if the case involves an appeal from an
ALJ's decision. Proposed Sec. 9.32(b)(2)(ii)(A) and (B) state that a
petition for review must refer to the specific findings of fact,
conclusions of law, or order at issue and that copies of the petition
and all briefs filed by the parties must be served on the Administrator
and the Associate Solicitor. Proposed Sec. 9.32(b)(2)(ii)(C) further
provides that if a timely request for a hearing or petition for review
is filed, the Administrator's determination or the ALJ's decision, as
appropriate, would be inoperative unless and until the ARB issues an
order affirming the determination or decision, or the determination or
decision otherwise becomes a final order of the Secretary. If a
petition for review concerns only the imposition of debarment, however,
the remainder of the decision would be immediately effective. The
proposed section clarifies that no judicial review would be available
to parties unless a petition for review to the ARB is first filed.
Section 9.33 Mediation
In order to resolve disputes by efficient and informal alternative
dispute resolution methods to the extent practicable, proposed Sec.
9.33 generally encourages parties to use settlement judges to mediate
settlement negotiations pursuant to the procedures and requirements of
29 CFR 18.13. Proposed Sec. 9.33 also provides that the assigned
administrative law judge must approve any settlement agreement reached
by the parties consistent with the procedures and requirements of 29
CFR 18.71.
Section 9.34 Administrative Law Judge Hearings
Proposed Sec. 9.34(a) provides for the OALJ to hear and decide in
its discretion appeals concerning questions of law and fact from
determinations of the Administrator issued under proposed Sec. 9.31.
The ALJ assigned to the case would act fully and finally as the
authorized representative of the Secretary, subject to any appeal filed
with the ARB, and subject to certain limits.
Proposed Sec. 9.34(a)(2) details the limits on the scope of review
for proceedings before the ALJ. Proposed Sec. 9.34(a)(2)(i) would
exclude from the ALJ's authority any jurisdiction to pass on the
validity of any provision of part 9. Proposed Sec. 9.34(a)(2)(ii)
provides that the Equal Access to Justice Act (EAJA), as amended, 5
U.S.C. 504, would not apply to proceedings under part 9. The
proceedings proposed in subpart D are not required by an underlying
statute to be determined on the record after an opportunity for an
agency hearing. Therefore, an ALJ has no authority to award attorney
fees and/or other litigation expenses pursuant to the provisions of the
EAJA for any proceeding under part 9.
Proposed Sec. 9.34(b) states that absent a stay to attempt
settlement, the ALJ would notify the parties and any representatives
within 15 calendar days following receipt of the request for hearing of
the day, time, and place for hearing. The hearing would be held within
60 days from the date of receipt of the hearing request under proposed
Sec. 9.34(b).
[[Page 42574]]
Proposed Sec. 9.34(c) provides that the ALJ may dismiss a party's
challenge to a determination of the Administrator if the party or the
party's representative requests a hearing and fails to attend the
hearing without good cause. Proposed Sec. 9.34(c) also provides that
the ALJ may dismiss a challenge to a determination of the Administrator
if a party fails to comply with a lawful order of the ALJ.
Under proposed Sec. 9.34(d), the Administrator would have the
right, at the Administrator's discretion, to participate as a party or
as amicus curiae at any time in the proceedings. This would include the
right to petition for review of an ALJ's decision in a case in which
the Administrator has not previously participated. The Administrator
would be required to participate as a party in any proceeding in which
the Administrator has determined that part 9 has been violated, except
where the proceeding only concerns a challenge to the amount of
monetary relief awarded.
Under proposed Sec. 9.34(e), a Federal agency that is interested
in a proceeding would be able to participate as amicus curiae at any
time in the proceedings. The proposed section also states that copies
of all pleadings in a proceeding must be served on the interested
Federal agency at the request of such Federal agency, even if the
Federal agency is not participating in the proceeding.
Proposed Sec. 9.34(f) provides that copies of the request for
hearing under this part would be sent to the WHD Administrator and the
Associate Solicitor, regardless of whether the Administrator is
participating in the proceeding.
With certain exceptions, proposed Sec. 9.34(g) would apply the
rules of practice and procedure for administrative hearings before the
OALJ at 29 CFR part 18, subpart A, to administrative proceedings under
this part 9. The exceptions provide that part 9 would be controlling to
the extent it provides any rules of special application that may be
inconsistent with the rules in part 18, subpart A. In addition,
proposed Sec. 9.34(g) provides that the Rules of Evidence at 29 CFR
part 18, subpart B, would be inapplicable to administrative proceedings
under this part. This proposed section clarifies that rules or
principles designed to assure production of the most probative evidence
available would be applied, and that the ALJ may exclude immaterial,
irrelevant, or unduly repetitive evidence.
Proposed Sec. 9.34(h) would require ALJ decisions (containing
appropriate findings, conclusions, and an order) to be issued within 60
days after completion of the proceeding and to be served upon all
parties to the proceeding.
Under proposed Sec. 9.34(i), upon the issuance of a decision that
a violation has occurred, the ALJ would order the successor contractor
to take appropriate action to remedy the violation. The remedies may
include ordering the successor contractor to hire each affected
employee in a position on the contract for which the employee is
qualified, together with compensation (including lost wages), terms,
conditions, and privileges of that employment. If the Administrator has
sought debarment, the order would also be required to address whether
debarment is appropriate.
Proposed Sec. 9.34(j) would allow the ALJ to assess against a
successor contractor a sum equal to the aggregate amount of all costs
(not including attorney fees) and expenses reasonably incurred by the
aggrieved employee(s) in the proceeding when an order finding the
successor contractor violated part 9 is issued. This amount would be
awarded in addition to any unpaid wages or other relief due.
Proposed Sec. 9.34(k) provides that the ALJ's decision would
become the final order of the Secretary, unless a timely appeal is
filed with the ARB.
Section 9.35 Administrative Review Board Proceedings
Proposed Sec. 9.35 describes the ARB's jurisdiction and provides
the procedures for appealing an ALJ decision to the ARB under Executive
Order 14055.
Proposed Sec. 9.35(a)(1) states the ARB has jurisdiction to hear
and decide in its discretion appeals from the Administrator's
determinations issued under Sec. 9.31, and from ALJ decisions issued
under Sec. 9.34.
Proposed Sec. 9.35(a)(2) identifies the limitations on the ARB's
scope of review, including a restriction on passing on the validity of
any provision of part 9, a general prohibition on receiving new
evidence in the record (because the ARB is an appellate body and must
decide cases before it based on substantial evidence in the existing
record), and a bar on granting attorney fees or other litigation
expenses under the EAJA.
Proposed Sec. 9.35(b) provides that the ARB would issue a final
decision within 90 days following receipt of the petition for review
and would serve the decision by mail on all parties at their last known
address, and on the Chief ALJ, if the case involves an appeal from an
ALJ's decision.
Proposed Sec. 9.35(c) requires the ARB's order to mandate action
to remedy the violation if the ARB concludes a violation occurred. Such
action may include hiring each affected employee in a position on the
contract for which the employee is qualified, together with
compensation (including lost wages), terms, conditions, and privileges
of that employment. If the Administrator has sought debarment, the ARB
would be required to determine whether debarment is appropriate.
Proposed Sec. 9.35(c) also provides that the ARB's order is subject to
discretionary review by the Secretary as provided in Secretary's Order
01-2020 or any successor to that order. See Secretary of Labor's Order,
01-2020 (Feb. 21, 2020), 85 FR 13186 (Mar. 6, 2020).
Proposed Sec. 9.35(d) allows the ARB to assess against a successor
contractor a sum equal to the aggregate amount of all costs (not
including attorney fees) and expenses reasonably incurred by the
aggrieved employee(s) in the proceeding. This amount would be awarded
in addition to any unpaid wages or other relief due under Sec. 9.23(b)
of this part.
Proposed Sec. 9.35(e) provides that the ARB's decision will become
the Secretary's final order in the matter in accordance with
Secretary's Order 01-2020 (or any successor to that order), which
provides for discretionary review of such orders by the Secretary. See
id.
Section 9.36 Severability
Section 10 of Executive Order 14055 states that if any provision of
the order, or the application of any such provision to any person or
circumstance, is held to be invalid, the remainder of the order and the
application shall not be affected. See 86 FR 66400. Consistent with
this directive, the Department proposes to include a severability
clause in part 9. Proposed Sec. 9.36 explains that each provision
would be capable of operating independently from one another. If any
provision of part 9 is held to be invalid or unenforceable by its
terms, or as applied to any person or circumstance, or stayed pending
further agency action, the Department intends that the remaining
provisions would remain in effect.
III. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq.,
and its attendant regulations, 5 CFR part 1320, require the Department
to consider the agency's need for its information collections, their
practical utility, the impact of paperwork and other information
collection burdens imposed on the public, and how to minimize
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those burdens. The PRA typically requires an agency to provide notice
and seek public comments on any proposed collection of information
contained in a proposed rule. See 44 U.S.C. 3506(c)(2)(B); 5 CFR
1320.8.
This rulemaking would require the creation of a new information
collection as well as modification to the burdens for an existing
collection. As required by the PRA, the Department has submitted
information collections, including a new information collection and a
revision of an existing collection, to OMB for review to reflect new
burdens and changes to existing burdens that will result from the
implementation of Executive Order 14055.
Summary: This rulemaking proposes to enact regulations implementing
Executive Order 14055, which generally requires Federal service
contracts, subcontracts, and their solicitations to include a clause
requiring the successor contractor, and its subcontractors, under a
contract that succeeds a contract for performance of the same or
similar services, to offer service employees employed under the
predecessor contract whose employment will be terminated as a result of
the award of the successor contract a right of first refusal of
employment in positions for which they are qualified. Section 5 of
Executive Order 14055 contains exclusions, directing that the order
will not apply to contracts under the simplified acquisition threshold
or employees who were hired to work under a Federal service contract
and one or more nonfederal service contracts as part of a single job,
provided that the employees were not deployed in a manner that was
designed to avoid the purposes of the Executive order. Section 6 of the
order permits agencies to except certain contracts from the
requirements of the Executive Order in certain circumstances. Section 8
of Executive Order 14055 grants the Secretary of Labor authority to
investigate potential violations of, and obtain compliance with, the
order.
Purpose and use: This proposed rule, which would implement
Executive Order 14055, contains the following provisions that could be
considered to entail collections of information: (1) The requirement in
proposed Sec. 9.12(e) that contractors submit a list of the names of
all service employees working under the contract and it subcontractors
to the contracting officer before contract completion; (2) disclosure
and recordkeeping requirements for covered contractors described in
proposed Sec. 9.12(f); (3) the complaint process described in proposed
Sec. 9.21; (4) disclosure and records requirements under proposed
Sec. 9.5; and (5) the administrative proceedings described in proposed
subpart D.
Proposed Sec. 9.12 states compliance requirements for contractors
covered by Executive Order 14055. Proposed Sec. 9.12 would require,
with certain exceptions, a successor contractor and its subcontractors
to make good faith employment offers to qualified service employees
employed on the predecessor contract whose employment will be
terminated as a result of award of the successor contract or the
expiration of the predecessor contract. Proposed Sec. 9.12(e) would
require a predecessor contractor to furnish the contracting officer a
certified list of the names of all service employees working under the
contract and its subcontracts during the last month of contract
performance. Additionally, proposed Sec. 9.12(e)(3) would require a
contractor to provide service employees with written notice of their
possible right to an offer of employment on a successor contract.
Proposed Sec. 9.11 would require the contracting officer to furnish
that list to the successor contractor prior to the start of performance
of the successor's contract. The successor contractor would then use
that list to aid in satisfying the requirements of Sec. 9.12(a).
Proposed Sec. 9.12(e)(2) permits the contractor to submit and retain
the list submitted to satisfy the requirements of 29 CFR 4.6(l)(2) (see
OMB Control Number 1235-0007) to meet these provisions. As contractors
are already required to develop this list to comply with the SCA, the
Department believes that this requirement does not impose any
additional information collection requirements on contractors. However,
under proposed Sec. 9.11(c)(3), when an agency decides not to include
a location continuity requirement, the agency must ensure that the
contractor notifies affected workers in writing of the agency
determination and the right of interested parties to request
reconsideration. The contractor is required to confirm to the
contracting agency that such notice was provided.
In order to verify compliance with the requirements in part 9,
proposed Sec. 9.12(f) would require contractors to maintain for 3
years copies of certain records that are subject to OMB clearance under
the PRA, including (1) any written offers of employment or a
contemporaneous written record of any oral offers of employment,
including the date, location, and attendance roster of any employee
meeting(s) at which the offers were extended; a summary of each
meeting; a copy of any written notice that may have been distributed,
and the names of the employees from the predecessor contract to whom an
offer was made; (2) any record that forms the basis for any exclusion
or exception claimed from the nondisplacement requirements; and (3) a
copy of the employee list received from the contracting agency and the
employee list provided to the contracting agency. See 44 U.S.C.
3502(3), 3518(c)(1); 5 CFR 1320.3(c), -.4(a)(2), -.4(c). Additionally,
proposed Sec. 9.12(f)(2) requires contractors to maintain evidence of
any notices that they have provided to workers, or workers' collective
bargaining representatives, to satisfy the requirements of the order or
these regulations. These would include records of notices of the
possibility of employment on the successor contract that are required
under Sec. 9.12(e)(3) of the regulations; notices of agency exceptions
that a contracting agency requires a contractor to provide under
section 6(b) of the order, and as described in Sec. 9.5(g) of the
regulations; and notices that a contracting agency has declined to
include location continuity requirements or preferences in a
solicitation, pursuant to Sec. 9.11(c)(3) of the regulations.
WHD obtains PRA clearance under control number 1235-0021 for an
information collection covering complaints alleging violations of
various labor standards that the agency already administers and
enforces. An Information Collection Request (ICR) has been submitted to
revise the approval to incorporate the regulatory citations in this
proposed rule applicable to complaints and adjust burden estimates to
reflect any increase in the number of complaints filed.
Proposed subpart D establishes administrative proceedings to
resolve investigation findings. Particularly with respect to hearings,
the rule would impose information collection requirements. The
Department notes that information exchanged between the target of a
civil or an administrative action and the agency in order to resolve
the action would be exempt from PRA requirements. See 44 U.S.C.
3518(c)(1)(B); 5 CFR 1320.4(a)(2). This exemption applies throughout
the civil or administrative action (such as an investigation and any
related administrative hearings). Therefore, the Department has
determined the administrative requirements contained in subpart D of
this proposed rule are exempt from needing OMB approval under the PRA.
Information and technology: There is no particular order or form of
records prescribed by the proposed regulations.
[[Page 42576]]
A contractor may meet the requirements of this proposed rule using
paper or electronic means. WHD, in order to reduce burden caused by the
filing of complaints that are not actionable by the agency, uses a
complaint filing process in which complainants discuss their concerns
with WHD professional staff. This process allows agency staff to refer
complainants raising concerns that are not actionable under wage and
hour laws and regulations to an agency that may be able to offer
assistance.
Public comments: The Department seeks comments on its analysis that
this NPRM creates a slight increase in paperwork burden associated with
ICR 1235-0021 and creates a new collection and supporting burdens on
the regulated community in 1235-ONEW. Commenters may send their views
on the Department's PRA analysis in the same way they send comments in
response to the NPRM as a whole (e.g., through the <a href="http://www.regulations.gov">www.regulations.gov</a>
website), including as part of a comment responding to the broader
NPRM. Alternatively, commenters may submit a comment specific to this
PRA analysis by sending an email to <a href="/cdn-cgi/l/email-protection#65322d21353724260a0808000b111625010a094b020a13"><span class="__cf_email__" data-cfemail="52051a16020013113d3f3f373c262112363d3e7c353d24">[email protected]</span></a>. While much
of the information provided to OMB in support of the information
collection request appears in the preamble, interested parties may
obtain a copy of the supporting statements for the new recordkeeping
collection and revised complaint process collection by sending a
written request to the mail address shown in the ADDRESSES section at
the beginning of this preamble. Alternatively, a copy of the new ICR
with applicable supporting documentation; including a description of
the likely respondents, proposed frequency of response, and estimated
total burden may be obtained free of charge from the <a href="http://RegInfo.gov">RegInfo.gov</a>
website. Similarly, the complaint process ICR is available by visiting
<a href="http://www.reginfo.gov/public/do/PRAMain">http://www.reginfo.gov/public/do/PRAMain</a> website. As previously
indicated, written comments directed to the Department may be submitted
within 30 days of publication of this notification.
OMB and the Department are particularly interested in comments
that:
<bullet> Evaluate whether the proposed collections of information
are necessary for the proper performance of the functions of the
agency, including whether the information will have practical utility;
<bullet> Evaluate the accuracy of the agency's estimate of the
burden of the proposed collection of information, including the
validity of the methodology and assumptions used;
<bullet> Enhance the quality, utility, and clarity of the
information to be collected; and
<bullet> Minimize the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.
Total burden for the new and complaint process information
collections, including the burdens that will be unaffected by this
proposed rule and any changes are summarized as follows:
Type of review: Revision to currently approved information
collections.
Agency: Wage and Hour Division, Department of Labor.
Title: Employment Information Form.
OMB Control Number: 1235-0021.
Affected public: Private sector, businesses or other for-profits
and Individuals or Households.
Estimated number of respondents: 38,254 (10 from this rulemaking).
Estimated number of responses: 38,254 (10 from this rulemaking).
Frequency of response: On occasion.
Estimated annual burden hours: 12,751 (3 burden hours due to this
NPRM).
Estimated annual burden costs (capital/startup): $0 ($0 from this
rulemaking).
Estimated annual burden costs (operations/maintenance): $0 ($0 from
this rulemaking).
Estimated annual burden costs: $559,896 ($132 from this
rulemaking).
Type of Review: New Collection.
Title: Nondisplacement of Qualified Workers Under Service
Contracts.
OMB Control Number: 1235-0NEW.
Affected public: Private sector, businesses or other for-profits
and Individuals or Households.
Estimated number of respondents: 249,400.
Estimated number of responses: 4,257,000.
Frequency of response: Various.
Estimated annual burden hours: 230,050.
Estimated annual burden costs: $14,237,795.
IV. Executive Order 12866, Regulatory Planning and Review; Executive
Order 13563, Improved Regulation and Regulatory Review
Under Executive Order 12866, OMB's Office of Information and
Regulatory Affairs (OIRA) determines whether a regulatory action is
significant and, therefore, subject to the requirements of the
Executive Order and OMB review.\2\ Section 3(f) of Executive Order
12866 defines a ``significant regulatory action'' as a regulatory
action that is likely to result in a rule that may: (1) have an annual
effect on the economy of $100 million or more, or adversely affect in a
material way a sector of the economy, productivity, competition, jobs,
the environment, public health or safety, or state, local, or tribal
governments or communities (also referred to as economically
significant); (2) create serious inconsistency or otherwise interfere
with an action taken or planned by another agency; (3) materially alter
the budgetary impact of entitlements, grants, user fees or loan
programs or the rights and obligations of recipients thereof; or (4)
raise novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in the Executive
Order. OIRA has determined that this proposed rule is a ``significant
regulatory action'' under section 3(f) of Executive Order 12866 and is
economically significant.
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\2\ See 58 FR 51735, 51741 (Oct. 4, 1993).
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Executive Order 13563 directs agencies to, among other things,
propose or adopt a regulation only upon a reasoned determination that
its benefits justify its costs; that it is tailored to impose the least
burden on society, consistent with obtaining the regulatory objectives;
and that, in choosing among alternative regulatory approaches, the
agency has selected those approaches that maximize net benefits.
Executive Order 13563 recognizes that some costs and benefits are
difficult to quantify and provides that, when appropriate and permitted
by law, agencies may consider and discuss qualitatively values that are
difficult or impossible to quantify, including equity, human dignity,
fairness, and distributive impacts. The analysis below outlines the
impacts that the Department anticipates may result from this proposed
rule and was prepared pursuant to the above-mentioned executive orders.
A. Introduction
On November 18, 2021, President Joseph R. Biden, Jr. issued
Executive Order 14055, ``Nondisplacement of Qualified Workers Under
Service Contracts.'' 86 FR 66397 (Nov. 23, 2021). This order explains
that ``[w]hen a service contract expires, and a follow-on contract is
awarded for the same or similar services, the Federal Government's
procurement interests in economy and efficiency are best served when
the successor contractor or
[[Page 42577]]
subcontractor hires the predecessor's employees, thus avoiding
displacement of these employees.'' Accordingly, Executive Order 14055
provides that contractors and subcontractors performing on covered
Federal service contracts must in good faith offer service employees
employed under the predecessor contract a right of first refusal of
employment. The order applies to all contracts that are covered by the
SCA.
This proposed rule requires that contracting agencies incorporate
into every covered Federal service contract the contract clause
included in Executive Order 14055. That clause requires a successor
contractor and its subcontractors to make bona fide, express offers of
employment to service employees employed under the predecessor contract
whose employment would be terminated with the change of contract. The
required contract clause also forbids successor contractors or
subcontractors from filling any contract employment openings prior to
making such good faith offers of employment to employees of the
predecessor contractor or subcontractor. See section II.B. for an in-
depth discussion of the provisions of the Executive order.
B. Number of Potentially Affected Contractor Firms and Workers
1. Number of Potentially Affected Contractor Firms
To determine the number of firms that could potentially be affected
by this rulemaking, the Department estimated a range of potentially
affected firms. The more narrowly defined population (firms actively
holding SCA-covered contracts) includes 119,700 firms (Table 1). The
broader population (including those bidding on SCA contracts but
without active contracts, or those considering bidding in the future)
includes 449,200 firms.
i. Firms Currently Holding SCA Contracts
<a href="http://USASpending.gov">USASpending.gov</a>--the official source for spending data for the U.S.
Government--contains Government award data from the Federal Procurement
Data System Next Generation (FPDS-NG), which is the system of record
for Federal procurement data. The Department used these data to
identify the number of firms that currently hold SCA contracts.\3\ \4\
Although more recent data are available, the Department used data from
2019 to avoid any shifts in the data associated with the COVID-19
pandemic in 2020. Because many Federal employees were working remotely
throughout 2020 and 2021, reliance on service contracts for Federal
buildings may have been reduced during those years and may not reflect
the level of employment on and incidence of SCA contracts going
forward.\5\ The Department welcomes comments and data on how the COVID-
19 pandemic has impacted firms and workers on SCA contracts.
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\3\ The Department recognizes that some SCA-covered contracts
that would be covered by this rule are not reflected in
<a href="http://USASpending.gov">USASpending.gov</a> (i.e., they are SCA-covered contracts that are not
procuring services directly for the Federal Government, including
certain licenses, permits, cooperative agreements, and concessions
contracts, such as, for example, delegated leases of space on a
military base from an agency to a contractor whereby the contractor
operates a barber shop). However, the Department estimates that the
number of firms holding such SCA-covered nonprocurement contracts is
a small fraction of the number of firms identified based on
<a href="http://USASpending.gov">USASpending.gov</a>.
\4\ The Department also acknowledges that prime contracts that
are less than $250,000 and their subcontracts would not be covered
by this regulation but has not made an adjustment for these
contracts in the estimation of covered contractors. Therefore, this
estimate may be an overestimate of the number of contractors that
are actually affected.
\5\ The Department estimated the number of prime contractors
using the 2021 USASpending data and found that there were fewer
contractors in 2021 than in 2019. The number of prime contractors in
2019 was 85,987 and the number of prime contractors in 2021 was
78,347. This finding is in line with our hypothesis that remote work
for federal employees could have reduced the demand for SCA
contractors in 2021.
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To identify firms with SCA contracts, the Department included all
firms with the ``Labor Standards'' element equal to ``Y'' for any of
their contracts, meaning that the contracting agency flagged the
contract as covered by the SCA. However, because this flag is often
listed as ``not applicable'' and appears to be reported with error, the
Department also included some other firms. Of the contracts not flagged
as SCA, the Department excluded (1) those for the purchase of goods \6\
and (2) those covered by the DBA.\7\ The Department also excluded (1)
awards for financial assistance such as direct payments, loans, and
insurance; and (2) contracts performed outside the U.S. because SCA
coverage is limited to the 50 states, the District of Columbia, and the
U.S. territories. The firms for the remaining contracts are included as
potentially impacted by this rulemaking.
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\6\ For example, the government purchases pencils; however, a
contract solely to purchase pencils is not covered by the SCA and so
would not be covered by the Executive order. Contracts for goods
were identified in the <a href="http://USASpending.gov">USASpending.gov</a> data if the product or
service code begins with a number (the code for services begins with
a letter).
\7\ Contracts covered by DBA were identified in the
<a href="http://USASpending.gov">USASpending.gov</a> data where the ``Construction Wage Rate
Requirements'' element for a contract is marked ``Y,'' meaning that
the contracting agency flagged that the contract is covered by the
DBA.
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In 2019, there were 86,000 unique prime contractors in USASpending
that fit the parameters discussed above, and the Department has used
this number as an estimate of prime contractors with active SCA
contracts. However, subcontractors are also impacted by this proposed
rule. The Department examined 5 years of USASpending data (2015 through
2019) and identified 33,700 unique subcontractors that did not hold
contracts as prime contractors in 2019.\8\ The Department used 5 years
of data for the count of subcontractors to compensate for lower-tier
subcontractors that may not be included in <a href="http://USASpending.gov">USASpending.gov</a>.
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\8\ For subcontractors, the Department was unable to make
restrictions to limit the data to SCA contracts because none of the
necessary variables are available in the USASpending database (i.e.,
the Labor Standards variable, the Construction Wage Rate
Requirements variable, or the product or service code variable).
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In total, the Department estimates 119,700 firms currently hold SCA
contracts and could potentially be affected by this rulemaking under
the narrow definition. Table 1 shows these firms by 2-digit NAICS
code.\9\ \10\
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\9\ The North American Industry Classification System (NAICS) is
a method by which Federal statistical agencies classify business
establishments in order to collect, analyze, and publish data about
certain industries. Each industry is categorized by a sequence of
codes ranging from 2 digits (most aggregated level) to 6 digits
(most granular level). <a href="https://www.census.gov/naics/">https://www.cens
[…truncated; see source link]Indexed from Federal Register on July 15, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.