Rule2023-27072
Nondisplacement of Qualified Workers Under Service Contracts
Primary source
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Published
December 14, 2023
Effective
February 12, 2024
Issuing agencies
Labor Department
Abstract
This document finalizes regulations to implement Executive Order 14055, "Nondisplacement of Qualified Workers Under Service Contracts" (Executive order or the order), which was signed by President Joseph R. Biden, Jr. on November 18, 2021. The Executive order states that when a service contract with the Federal Government 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. The Executive order, therefore, 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 Executive order directs the Secretary of Labor (Secretary) to issue regulations, consistent with applicable law, to implement the order's requirements. This final rule establishes standards and procedures for implementing and enforcing the nondisplacement protections of the order.
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[Federal Register Volume 88, Number 239 (Thursday, December 14, 2023)]
[Rules and Regulations]
[Pages 86736-86805]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-27072]
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Vol. 88
Thursday,
No. 239
December 14, 2023
Part II
Department of Labor
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29 CFR Part 9
Nondisplacement of Qualified Workers Under Service Contracts; Final
Rule
Federal Register / Vol. 88 , No. 239 / Thursday, December 14, 2023 /
Rules and Regulations
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DEPARTMENT OF LABOR
29 CFR Part 9
RIN 1235-AA42
Nondisplacement of Qualified Workers Under Service Contracts
AGENCY: Wage and Hour Division, Department of Labor.
ACTION: Final rule.
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SUMMARY: This document finalizes regulations to implement Executive
Order 14055, ``Nondisplacement of Qualified Workers Under Service
Contracts'' (Executive order or the order), which was signed by
President Joseph R. Biden, Jr. on November 18, 2021. The Executive
order states that when a service contract with the Federal Government
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. The Executive order, therefore,
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 Executive order directs the Secretary of Labor
(Secretary) to issue regulations, consistent with applicable law, to
implement the order's requirements. This final rule establishes
standards and procedures for implementing and enforcing the
nondisplacement protections of the order.
DATES:
Effective date: This final rule is effective February 12, 2024.
Applicability date: This final rule will apply to solicitations
issued on or after the effective date of the final regulations issued
by the Federal Acquisition Regulatory Council (FAR Council).
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 Wage and Hour Division (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/agencies/whd/contact/local-offices">https://www.dol.gov/agencies/whd/contact/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), 41 U.S.C. 6701 et seq., and its implementing
regulations. 86 FR 66397. Section 2 also 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 in section 3 of the Executive order 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
[[Page 86737]]
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 at 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 at 66398. The list must also contain
anniversary dates of employment of each service employee on 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, 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, 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 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 may 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 at
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 at 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 at 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
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 at 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 the Office of Management and
Budget (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 at 66399. In addition, to the
extent consistent with law, the FAR Council is to amend the Federal
Acquisition Regulation (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 U.S.
Department of Labor (Department). 86 FR at 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 at 66399-400. Neither an order for debarment of any
contractor or subcontractor from further Federal
[[Page 86738]]
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 at 66400. Section 8 also
specifies that Executive Order 14055 creates no rights under the
Contract Disputes Act, 41 U.S.C. 7101 et seq., 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. 86 FR at 66400.
Section 9 of Executive Order 14055 revokes Executive Order 13897 of
October 31, 2019, which itself revoked Executive Order 13495 of January
30, 2009, Nondisplacement of Qualified Workers Under Service Contracts.
86 FR at 66400; see also 84 FR 59709 (Nov. 5, 2019); 74 FR 6103 (Jan.
30, 2009). Section 9 also explains that Executive Order 13495 remains
revoked. 86 FR at 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 at 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 at 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 at 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. Id. at 66401.
A. Prior Relevant Executive Orders
As indicated, section 9 of Executive Order 14055 revoked Executive
Order 13897, which revoked 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. As required by Executive Order 13897, the Department rescinded
these regulations 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. Compare 86 FR at 66398, with 74 FR at 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. Compare 86 FR at 66398, with 74 FR at 6104. 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 the
requirements of Executive Order 14055 apply even if the successor
contract is not 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 13495 did not contain a similar
requirement.
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 particular circumstances enumerated in the order as
grounds for exemption exists with respect to that contract. 86 FR at
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, Executive Order 14055 requires
agencies 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 at 6104.
Executive Order 13495 did not require notice or publication of agency
exemptions. See id.
B. Notice of Proposed Rulemaking
On July 15, 2022, the Department published a Notice of Proposed
Rulemaking (NPRM) in the Federal Register inviting comments for a
period of 30 days on a proposal to implement the provisions of
Executive Order 14055. See 87 FR 42552. The 30-day comment period
closed on August 15, 2022. The Department received 33 timely comments
in response to the NPRM from a variety of interested stakeholders, such
as labor organizations, nonprofit organizations, contractors, and
contractor associations.
II. Discussion of Final Rule
A. Legal Authority
President Biden lawfully issued Executive Order 14055 pursuant to
his
[[Page 86739]]
authority under ``the Constitution and the laws of the United States,''
expressly including the Procurement Act. 86 FR 66397 (citing 40 U.S.C.
101 et seq.). The Procurement Act's express purpose is ``to provide the
Federal Government with an economical and efficient system'' for
``[p]rocuring and supplying property and nonpersonal services, and
performing related functions including contracting.'' 40 U.S.C. 101.
The Act empowers the President to ``prescribe policies and directives
that the President considers necessary to carry out'' that objective.
40 U.S.C. 121(a). Executive Order 14055 directs the Secretary, ``to the
extent consistent with law,'' to issue regulations to ``implement the
requirements of this order.'' 86 FR at 66399. The Secretary has
delegated the 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).
Some commenters, particularly Associated Builders and Contractors
(ABC), the Professional Services Council (PSC), and an anonymous
commenter, generally contended that neither Executive Order 14055 nor
the proposed rule provide evidentiary support for the proposition that
establishing a nondisplacement obligation would actually achieve
greater economy and efficiency in federal procurement. ABC further
commented that it believes the proposed rule conflicts with the plain
language of the SCA, as the SCA does not require a successor contractor
to hire a predecessor contractor's employees, and that neither the
President nor the Department has the authority to override the SCA.
Accordingly, ABC requested that the Department withdraw the proposed
rule in its entirety.
As a threshold matter, the purpose of this rulemaking is to
implement Executive Order 14055, and therefore the President's legal
authority to issue Executive Order 14055, and the justification for
doing so, are not matters within the scope of this rulemaking.
Concerning the scope of the Department's rulemaking authority, the
Department strongly disagrees with ABC's comment that the proposed rule
is in conflict with the SCA. While ABC is correct that the SCA does not
require a successor contractor to hire the predecessor contractor's
workforce, the SCA does not prohibit the hiring of the predecessor
contractor's workforce or address whether such hiring may be encouraged
or required by another law. That Executive Order 14055 applies to SCA-
covered contracts does not mean that the order and this rule must
mirror the SCA's substantive provisions and that the nondisplacement
provision is ``in conflict'' with the SCA because it is not required by
that statute. Rather, Executive Order 14055 provides for contractual
requirements that are separate and distinct from the legal obligations
of the SCA--with the President's authority to issue the Executive order
derived from the Procurement Act in particular. The Procurement Act
empowers the President to ``prescribe policies and directives that the
President considers necessary to carry out'' its objectives, and
Executive Order 14055 further directs the Secretary to issue
regulations to ``implement the requirements of this order.'' 40 U.S.C.
121(a); 86 FR at 66399. This final rule has been promulgated consistent
with that authority and contains obligations that are independent from
a contractor's responsibilities under the SCA. The SCA's requirements
thus do not preclude the Department from implementing and enforcing the
nondisplacement requirements of Executive Order 14055. Instead, the SCA
and Executive Order 14055 can and should be viewed as complementary and
co-existing rather than in conflict because it is possible for
contractors to comply with both authorities; the SCA does not reflect
an intent to preclude application of a nondisplacement requirement
established by another legal authority. Thus, the Department declines
ABC's request to withdraw the proposed rule.
After considering all timely comments received to the proposed
rule, the Department is issuing this final rule to implement the
provisions of Executive Order 14055.
B. Overview of the Rule
This final rule, which amends Title 29 of the Code of Federal
Regulations (CFR) by adding part 9, sets forth standards and procedures
for implementing and enforcing Executive Order 14055. 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. Subpart B
establishes requirements for contracting agencies and contractors to
comply with the Executive order. Subpart C specifies standards and
procedures related to complaint intake, investigations, and remedies.
Subpart D specifies standards and procedures related to administrative
enforcement proceedings.
The following section-by-section discussion of this rule presents
the contents of each section in more detail.
Part 9 Subpart A--General
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.
1. Section 9.1 Purpose and Scope
Proposed Sec. 9.1(a) explained that the purpose of the rule is to
implement Executive Order 14055. The paragraph emphasized that the
Executive order assigns enforcement responsibility for the
nondisplacement requirements to the Department.
Proposed Sec. 9.1(b) explained the underlying policy of Executive
Order 14055. First, the provision repeated 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. Like the order, the
proposed rule elaborated 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 explained 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
[[Page 86740]]
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 clarified 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) outlined the scope of the regulations and
provided 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 restated 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, must be disposed of only as provided by the Secretary in
regulations issued under the Executive order. This paragraph also
clarified that neither the Executive order nor the regulations 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.
The Department did not receive any comments directly related to
Sec. 9.1. The Department has addressed comments directed at specific
elements of the nondisplacement requirements, such as the scope of the
right of first refusal, in the preamble sections for the relevant
elements of the order's requirements. The final rule accordingly adopts
the Sec. 9.1 provisions as proposed.
2. Section 9.2 Definitions
Proposed Sec. 9.2 defined 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 noted that, while the definitions
discussed in the proposed rule would govern the implementation and
enforcement of Executive Order 14055, nothing in the proposed rule was
intended to alter the meaning of or to be interpreted inconsistently
with the definitions set forth in the FAR for purposes of that
regulation.
Consistent with the definition provided in Executive Order 14055,
the Department proposed to define agency to mean an executive
department or agency, including an independent establishment subject to
the Procurement Act. See 86 FR 66397. The Department explained that,
for the purpose of this definition, ``an executive department or
agency'' means any executive agency as defined 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. The
Department explained that the proposed definition would include
independent regulatory agencies. The Department did not receive any
comments addressing the term agency and the final rule adopts the
definition of that term as proposed.
The Department proposed 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. The Department did not receive any
comments addressing the definition of Associate Solicitor, and the
final rule adopts the definition of that term as proposed.
The Department proposed to define business day as Monday through
Friday, except Federal holidays declared under 5 U.S.C. 6103 or by
executive order, or any day with respect to which the U.S. Office of
Personnel Management has announced that Federal agencies in the
Washington, DC, area are closed. The Department did not receive any
comments addressing the definition of business day. The final rule
therefore adopts this definition as proposed, with one technical edit
to correct the alphabetical order of definitions that is not intended
to reflect a change in the substance of this section.
Consistent with section 2(a) of the Executive order, the Department
proposed 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. See 86 FR 66397. PSC commented that
the proposed definition of contract or service contract would wrongly
expand the coverage of the SCA to ``contract-like instruments,'' while
others, such as the Coalition,\1\ submitted comments supporting the
proposed rule's broad scope and coverage.
---------------------------------------------------------------------------
\1\ As reflected in their comment, ``the Coalition'' refers
collectively to the following organizations that submitted a joint
comment in response to the NPRM: The American Association of People
with Disabilities; the Autistic Self Advocacy Network;
Communications Workers of America; the International Brotherhood of
Teamsters; the Laborers' International Union of North America; the
National Employment Law Project; and the Service Employees
International Union.
---------------------------------------------------------------------------
PSC recommended removing ``contract-like instrument'' from the
definition of contract on the grounds that, among other reasons, the
use of ``contract-like instrument'' might ``create confusion by
suggesting that a `contract-like instrument' can be subject to the
SCA.'' The Department acknowledges that the term ``contract-like
instrument'' is not used in the SCA. However, the term ``contract-like
instrument'' was expressly used in the definition of contract and
service contract in Executive Order 14055, was used in both of the
previous Executive orders requiring a minimum wage for Federal
contractor employees (Executive Orders 13658 and 14026), and is
defined, collectively with the term contract, in the Department's
regulations implementing both Executive Order 13658 and Executive Order
14026. See 29 CFR 10.2; 29 CFR 23.20. Therefore, the Department expects
that most contracting agencies and contractors affected by this
rulemaking are already familiar with the use of this term.
Furthermore, the use of the term ``contract-like instrument'' in
Executive Order 14055 neither expands SCA coverage nor expands coverage
under Executive Order 14055 to contracts not subject to the SCA.
Rather, consistent with the SCA's scope of coverage, the term simply
reflects that the order is intended to cover all agreements of a
contractual nature (i.e., all agreements between two or more parties
creating obligations that are enforceable or otherwise recognizable at
law, including those agreements that may not be universally regarded as
a contract in other contexts) that qualify as contracts under the SCA.
Licenses, permits, and similar instruments may qualify as contracts
under the SCA 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., 29 CFR 4.110, the
Department views the term ``contract-like instrument'' as simply
reinforcing the breadth of contract coverage under the SCA, and
[[Page 86741]]
hence under Executive Order 14055. The Department further believes that
the use of the term ``contract-like instrument'' in Executive Order
14055 is intended to prevent disputes or extended discussions between
contracting agencies and contractors regarding whether a particular
legal arrangement qualifies as a contract for purposes of coverage by
the order and this part. In sum, the use of the term ``contract-like
instruments'' in Executive Order 14055 and in this rule is consistent
with previous Executive orders and will help facilitate more efficient
determinations by contractors, contracting officers, and the Department
as to whether a particular legal instrument is covered. The Department
therefore declines to delete the term ``contract-like instrument'' from
the definition of contract. Separately, however, to reduce ambiguity in
the definition of contract or service contract, the Department is
clarifying that SCA-covered temporary interim contracts are also
included within the definition of contract and service contract. This
technical clarification will ensure that temporary interim contracts
are understood to be fully included within the definition. To
effectuate the order, temporary interim contracts must be within that
definition to prevent workforce displacement during any such contracts.
PSC also recommended removing the term ``exercised contract
options'' from the illustrative list of terms defining contract, noting
that the inclusion of the term in the definition is inconsistent with
the Department's statements in the preamble to Sec. 9.3 regarding
coverage. Under Sec. 9.3, when an option is exercised and no
solicitation is issued for a follow-on contract, the original contract
is not considered expired for purposes of Executive Order 14055, and
the requirements of the order and this rule do not apply at that time
as a result of the exercised contract option. The Department agrees
with PSC's recommendation and therefore, to maintain consistency and
reduce confusion, is not including ``exercised contract options'' in
the definition of contract.
The Department proposed to substantially adopt the definition of
contracting officer in section 2.101 of the FAR, which defines the term
to mean an agency official with the authority to enter into,
administer, and/or terminate contracts and make related determinations
and findings. The term, as proposed, would include 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 did not receive any comments addressing the
definition of contracting officer, and the final rule adopts the
definition of that term as proposed.
The Department proposed 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 noted 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. The proposed definition incorporated 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 noted that the fact that an individual
or entity is a contractor under the Department's definition does not
mean that such an individual or entity has legal obligations under the
Executive order. Thus, an individual or entity that is awarded a
service contract with the Federal Government will qualify as a
``contractor'' pursuant to the Department's definition, but that
individual or entity may only be subject to the nondisplacement
requirements of the Executive order in connection with a particular
contract if the contract is one that is covered under Sec. 9.3(a). For
example, an employment contract providing for direct services to a
Federal agency by an individual is not covered by the SCA. 41 U.S.C.
6702(b)(6); 29 CFR 4.121. As a result, an individual who enters into
such a contract may be a ``contractor'' under the definition of
contractor in the nondisplacement rule, but the contract will not be
covered by the nondisplacement requirements. The Department did not
receive any comments addressing the definition of contractor, and the
final rule adopts the definition of that term as proposed.
Consistent with the definition provided in Executive Order 14055,
the Department proposed to define employee to mean a service employee
as defined in the SCA. See 86 FR 66397 (citing 41 U.S.C. 6701(3)).
Accordingly, employee ``means an individual engaged in the performance
of'' an SCA-covered contract. See 41 U.S.C. 6701(3)(A). The term
``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 is
identified as an independent contractor on the contract. See 41 U.S.C.
6701(3)(B). It ``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. See 41 U.S.C. 6701(3)(C).
The Coalition submitted a comment supporting the Department's
proposed inclusion of individuals identified as independent contractors
in the definition of employee. They stated that given the significant
volume of work performed by such individuals, the purposes of the
Executive order will be promoted by inclusion of such workers. The
Department received no other comments about the proposed definition of
employee, and therefore the final rule adopts the definition as
proposed in the NPRM, with an edit to remove ``or service employee''
from the regulatory text. This edit is not intended to reflect a change
in the substance of the definition, but is made to reduce redundancy,
as Executive Order 14055 already states that employee means service
employee as defined by the SCA.
The Department proposed to define employment opening to mean any
vacancy in a position on the successor contract. This is consistent
with the definition of employment opening in the regulations that
implemented Executive Order 13495. The Department did not receive any
comments on the proposed definition of employment opening, and the
final rule adopts the definition as proposed.
The Department proposed 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 was 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 included 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 included 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 would not
include the District of Columbia or any Territory or possession of the
United States. The Department did not receive any comments on the
proposed definition of Federal Government, and the final rule adopts
the definition as proposed.
The Department proposed to define month under the Executive order
as a
[[Page 86742]]
period of 30 consecutive calendar days, regardless of the day of the
calendar month on which it begins. The Department proposed defining the
term to clarify how to address partial months and to balance calendar
months of different lengths. The proposed definition was consistent
with the definition of month in the regulations that implemented
Executive Order 13495. The Department did not receive any comments
addressing the definition of month, and the final rule adopts the
definition of that term as proposed.
The Department proposed 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 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.
PSC requested the Department further define how the definition of
same or similar work would be applied to Multiple Agency Contracts,
especially with regard to competition at the task-order level and
completion of task orders over years-long performance periods on the
master contract as a whole, as well as best-in class contracts. PSC's
question also implicates the overall subset of contracts for indefinite
delivery indefinite quantity (IDIQ), including the Multiple Award
Schedule (MAS) and the Federal Supply Schedule program. See 48 CFR
8.401.
Whether work is ``same or similar'' is only relevant when specific
work on an expiring contract is going to be replaced by work under
another contract, such that one contract can reasonably be considered
to be a successor contract and the other a predecessor contract. In
that situation, the contracting agency must compare the expiring work
and the anticipated work to determine whether they share primary
characteristics. Thus, where a contracting agency is considering the
use of an order under an IDIQ contracting vehicle for a specific scope
of work, the nondisplacement requirements of the Executive order--
including the determination of whether a contract involves the same or
similar work--would apply at the task order level in the same manner as
for any other contract. For example, an agency may have an expiring
non-MAS contract for security services at an individual federal
facility and may seek to use the MAS program to identify a contractor
to take over the same or similar security services at that facility. In
such a circumstance, any new MAS program task order would need to
include the nondisplacement clause to be a permissible contracting
vehicle for the successor contract and the MAS contractor would need to
provide job offers to qualified employees on the expiring non-MAS
contract.
The Coalition recommended the Department modify the definition of
same or similar work to make it clear that the definition applies
regardless of whether the successor changes in size. However, such a
change would be redundant to the existing use of the term ``similar,''
which encompasses contracts of varying monetary amounts or other
material changes in size. Furthermore, the rule addresses reductions in
staffing in detail at Sec. 9.12(d), and the Coalition's suggested
revisions to the definition of same or similar work might add confusion
to that existing framework. Although the Department therefore declines
to modify the definition of same or similar work in the manner
requested, the Department has revised the definition for purposes of
clarity. As noted, the NPRM defined same or similar work 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 either
by the Federal Government or a contractor on a Federal service
contract.'' However, the portion of this proposed definition beginning
with ``that is being replaced'' does not address whether the work at
issue is the ``same or similar,'' but rather concerns the distinct
(though related) issue of whether a predecessor-successor relationship
exists. As a result, in the interest of clarity, the Department defines
same or similar work in the final rule as ``work that is either
identical to or has primary characteristics that are alike in substance
to work performed on another service contract.'' This change is
intended to be nonsubstantive, as it preserves the operative language
regarding whether the work under a predecessor and successor contract
is the same or similar.
The Department proposed to define the term Service Contract Act 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 part
4 (SCA implementing regulations); 29 CFR 4.1a(a) (defining the SCA for
the purpose of the implementing regulations). The Department did not
receive comments about this proposed definition and the final rule
adopts the definition as proposed.
The Department proposed 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 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 did not receive any comments addressing the
definition of solicitation, and the final rule adopts the definition of
that term as proposed.
The Department proposed 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 proposed 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 was 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).
The Coalition expressed support for this proposed definition,
stating that it appropriately defines the geography it covers broadly
and consistently with the SCA and its implementing regulations. The
Coalition stated that they support such consistency because the Federal
Government will obtain the most economy and efficiency benefits from
Executive Order 14055 if it is applied broadly, and that uniform
coverage between Executive Order 14055 and the SCA provides clarity for
Federal agencies, contractors, and Federal
[[Page 86743]]
service contractor workers. The Department did not receive any other
comments about the proposed definition of United States, and therefore
the final rule adopts the definition as proposed.
Finally, the Department proposed to use the definitions of the
terms Administrative Review Board, Administrator, Office of
Administrative Law Judges, Secretary, and Wage and Hour Division that
were set forth in the regulations that implemented Executive Order
13495. The Department did not receive comments on these proposed
definitions, and the final rule adopts these definitions as proposed
with one technical edit to correct the alphabetical order of Secretary
that is not intended to reflect a change in the substance of this
section.
3. Section 9.3 Coverage
Proposed Sec. 9.3 addressed the coverage provisions of Executive
Order 14055. It explained 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 (and
solicitations for such contracts and subcontracts) that succeed a
contract for performance of the same or similar work include a specific
nondisplacement clause. This clause must state that the successor
contractor and its subcontractors, except as otherwise provided in the
order, must, in good faith, offer service employees employed under the
predecessor contract and its subcontracts a right of first refusal of
employment under the successor contract in positions for which those
employees are qualified, if those service employees' employment would
otherwise be terminated as a result of the award of the successor
contract or the expiration of the contract under which the employees
were hired. Section 2 of the order 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 of the order specifies that the order does not
apply to contracts under the simplified acquisition threshold as
defined in 41 U.S.C. 134.
Section 9.3(a) of the NPRM proposed to implement these coverage
provisions by stating 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 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 related requirements of paragraphs
(e), (f), and (g) of Sec. 9.12, regarding contractor obligations near
the end of contract performance, recordkeeping, and cooperation with
investigations. Proposed Sec. 9.3(c) would require all contracts that
satisfy the requirements of 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 in Appendix A. It also would require all
contractors on such contracts to comply, without limitation, with all
the requirements of Sec. 9.12. As in the NPRM, several issues relating
to the coverage provisions of the Executive order and Sec. 9.3 are
discussed below.
i. Coverage of Agencies
Section 9.3 of the NPRM proposed to apply the nondisplacement
requirements to contracts or solicitations for contracts with ``an
agency.'' This language reflects that Executive Order 14055 applies to
contracts and solicitations with the ``Federal Government'' that meet
the other coverage requirements of the order. In Sec. 9.2 of the NPRM,
the Department proposed 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.'' And, consistent with section 2(c) of the
Executive order, the Department proposed to define ``agency'' as an
``[e]xecutive department or agency, including an independent
establishment subject to the [Procurement Act].'' The Department noted
in discussing the proposed definitions in Sec. 9.2 that it would
interpret the terms ``executive departments'' and ``agencies''
consistent with the definition of ``executive agency'' provided in
section 2.101 of the FAR. See 48 CFR 2.101. Thus, the Department stated
that the proposed rule would apply 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. See 48
CFR 2.101 (definition of ``executive agency''). The NPRM stated that
this proposed definition would be interpreted to 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. 101 et seq. Thus, for example, contracts
awarded by the U.S. Postal Service are not 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 ``Federal
Government,'' contracts awarded by the District of Columbia and any
Territory or possession of the United States would not be covered by
the order.
No comments were received regarding coverage of agencies. The
Department therefore affirms its discussion of coverage of agencies in
the final rule.
ii. Coverage of Contracts
Proposed Sec. 9.3(a) provided that the requirements of the
Executive order generally would apply to ``any contract or solicitation
for a contract with an agency.'' 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 [SCA] and its implementing
regulations.'' In Sec. 9.2, the Department proposed 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.'' Cradle of Forestry in Am.
Interpretive Ass'n, ARB No. 99-035, 2001 WL 328132, at *3 (Mar. 30,
2001) (quoting Restatement (Second) of Contracts section 1 (Am. L.
Inst. 1979)). As discussed above with regard to the definition of
``contract'' in Sec. 9.2, 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
[[Page 86744]]
purposes of the specific programs under which they are administered.
Proposed Sec. 9.3(a) provided that part 9 would also apply to
``any . . . solicitation for a contract'' that meets the other
requirements for coverage. In Sec. 9.2, the Department proposed to
define ``solicitation'' to mean ``any request to submit offers, bids,
or quotations to the Federal Government.'' In keeping with the
definition proposed in that section, 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 are not ``solicitations'' for
purposes of the Executive order. If the solicitation is for a contract
that is covered by part 9, then the solicitation will also be covered.
Consistent with section 2(a) of Executive Order 14055, proposed
Sec. 9.3(a)(1) clarified 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'' 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. See, e.g., 29 CFR
4.130(a) (providing a nonexclusive list of examples). 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. SCA coverage, 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
FLSA regulations at 29 CFR part 541. Similarly, a contract for services
performed essentially by bona fide executive, administrative, or
professional employees, with the use of service employees being only a
minor factor in contract performance, is not covered by the SCA and
thus is not covered by the Executive order or part 9. See 41 U.S.C.
6702(a)(3); 29 CFR 4.113(a); WHD Field Operations Handbook (FOH) 14c07.
No comments were received regarding Sec. 9.3(a)(1). Aside from adding
language to make clear that only contracts or solicitations issued or
entered on or after the applicability date of part 9 are covered, the
final rule adopts that provision as proposed.
iii. Coverage of Contracts at or Above the Simplified Acquisition
Threshold
Proposed Sec. 9.3(a)(2) provided 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 proposed 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.
As the Department noted in the NPRM, 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 sought comment from the public on the
potential impact, including any unintended consequences, of covering
subcontracts below the simplified acquisition threshold.
PSC advocated to exclude subcontracts with a value less than the
simplified acquisition threshold, noting, as the Department also did,
that Executive Order 14055 defines ``contract'' to include ``contract
or subcontract.'' PSC also commented that applying the rule's
nondisplacement requirements to subcontracts below the current
simplified acquisition threshold would be unreasonable, calculating
that a 5-year service subcontract that has a value below the current
simplified acquisition threshold might only employ one person. Nakupuna
Companies (Nakupuna) also opposed coverage of subcontracts below the
simplified acquisition threshold, positing that the costs of compliance
with Executive Order 14055 will be burdensome on small subcontractors.
Conversely, multiple commenters supported covering subcontracts for
amounts below the simplified acquisition threshold where the prime
contract meets or exceeds the simplified acquisition threshold. The
Coalition supported coverage of these subcontracts because such an
approach maximizes the reach of Executive Order 14055 and avoids
incentivizing circumvention of the order's requirements through
subcontracting. Likewise, the American Federation of Labor and Congress
of Industrial Organizations (AFL-CIO) supported coverage of
subcontracts below the simplified acquisition threshold as an
``important tool for ensuring that the contractors do not evade the
nondisplacement requirements,'' and noted that the proposed rule
appropriately specified that non-service subcontracts, such as supply
subcontracts, were excluded. Relatedly, the Center for American
Progress (CAP) supported the ways in which Executive Order 14055
``clos[ed] loopholes,'' thereby ``preventing low road firms from
undermining the rules.''
The final rule adopts the regulatory language at Sec. 9.3(a)(2) as
proposed in the NPRM, with a limited addition for clarity explained
below. As in the NPRM, the final rule is not excluding subcontracts
that fall below the simplified acquisition threshold where the prime
contract is itself covered. While section 2(a) of the Executive order
defines the term ``contract'' as ``any contract . . . or subcontract
for services,'' the order includes a different textual indication that
the exclusion in section 5(a) for ``contracts'' below the simplified
acquisition threshold is only intended to exclude prime contracts below
that level, not subcontracts. Notwithstanding the expansive definition
of the word ``contract'' in section 2(a), section 3(a) of the order
expressly requires the incorporation of the contract clause into
contracts ``and subcontracts.'' In section 5(a), however, the order
provides an exclusion only for ``contracts'' below the threshold and
does not mention subcontracts. This comparison (in addition to the
change in language from previous Executive Order 13495) supports
limiting the interpretation of the term ``contract'' in section 5 to
mean ``prime contract.''
This interpretation is consistent with the Executive order's stated
policy goals. The example provided by PSC--wherein a subcontractor
employing a single person for 5 years might still be below the
simplified acquisition threshold--supports, rather than
[[Page 86745]]
undercuts, extending nondisplacement protections to workers employed on
subcontracts below the simplified acquisition threshold. This is
because where, as in that example, an individual provides services to
the government for a period as long as 5 years, displacing that well-
trained and experienced employee when a new subcontract occurs would
undermine the policies of Executive Order 14055, such as uninterrupted
delivery of services, physical and informational security, and
familiarity with operations. PSC's example demonstrates that such goals
are equally operative whether a particular service employee happens to
be employed under a high-dollar-amount subcontract or not. Consistent
application of these goals outweighs the compliance costs to
subcontractors even where subcontracts are for amounts below the
simplified acquisition threshold.
In reaching this conclusion, the Department also considered that
the existing exclusions in the rule limit the real-world scenarios in
which the commenters' concerns regarding such compliance costs could be
applicable. The Executive order's nondisplacement requirements do not
apply to small prime contracts (and any subcontracts of those small
prime contracts) that fall below the simplified acquisition threshold,
nor (in keeping with the SCA) to non-service contracts, nor to
contracts for services performed essentially by bona fide executive,
administrative, or professional employees as defined in the FLSA's
regulations at 29 CFR part 541, with the use of service employees being
only a minor factor in contract performance. Likewise, the Executive
order does not apply to ``employees who were hired to work under a
Federal service contract and one or more nonfederal service contracts
as part of a single job.'' As a result, many subcontracts below the
simplified acquisition threshold will be excluded from coverage for
other reasons.
Finally, as indicated by commenters, extending coverage to
subcontracts below the simplified acquisition threshold will avoid the
creation of subcontracts for the purpose of circumventing the
requirements of Executive Order 14055, helping to maintain the efficacy
and consistent application of the order.
Separately, the Department is modifying the language of Sec.
9.3(a)(2) to clarify the coverage of contracts at the simplified
acquisition threshold. Proposed Sec. 9.3(a)(2) provided that part 9
would apply only to prime contracts that exceed the simplified
acquisition threshold. However, section 5 of Executive Order 14055
provides that the order does not apply to contracts under the
simplified acquisition threshold. To avoid ambiguity, the Department is
adding language to Sec. 9.3(a)(2) to include prime contracts equal to
the simplified acquisition threshold. The Department did not receive
any comments on this issue. This clarification is consistent with the
intent of the order and ensures that prime contracts equal to the
simplified acquisition threshold are covered by part 9.
Accordingly, the final rule adopts Sec. 9.3(a)(2) as proposed with
an amendment to clarify that part 9 applies to prime contracts equal to
the simplified acquisition threshold.
iv. Coverage of Successor Contracts
Proposed Sec. 9.3(c) provided that all of the nondisplacement
requirements would apply only to contracts that satisfy the
requirements of paragraph (a) of Sec. 9.3 and that ``succeed'' a
contract for performance of the same or similar work. 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
due to the completion of performance or is terminated. In contrast, if
a term of an existing contract is simply extended pursuant to an option
clause, and no solicitation is issued for a follow-on contract, then
the original contract is not considered expired for purposes of
Executive Order 14055, the extended term of the contract is not
considered a new or 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 considers 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 Sec.
9.3(a). Thus, for example, when the term of a contract ends and a
follow-on contract is awarded, a predecessor-successor relationship
exists for purposes of Executive Order 14055 if the two contracts are
for the same or similar work. This includes circumstances where a
temporary interim contract is the successor to a full-term predecessor
contract and circumstances where a temporary interim contract is a
predecessor to a full-term successor contract. Similarly, if a contract
is terminated, a solicitation for a follow-on contract is issued, and a
follow-on contract is awarded, then a predecessor-successor
relationship exists for purposes of Executive Order 14055 (again if the
two contracts are for the same or similar work). The identity of the
contractor awarded the successor contract does 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 apply. Similarly, the successor contract does not need to be
awarded by the same contracting agency as the predecessor contract to
be covered by the Executive order and this part.
PSC commented that the exclusion of options from the type of
contract event that creates a successor contract under the Executive
order conflicted with the Department's inclusion of ``exercised
contract options'' in the list of terms in Sec. 9.2 that define
``contract'' for purposes of the order. As explained in the discussion
of Sec. 9.2, to resolve this inconsistency in accordance with the
Executive order's scope of coverage, the Department is removing the
term ``exercised contract options'' from the definition in Sec. 9.2 of
the final rule. This change to Sec. 9.2 reduces the potential for
confusion identified by PSC and no change is necessary to Sec. 9.3. No
other comments were received regarding coverage of successor contracts,
and the final rule adopts the language regarding those provisions of
Sec. 9.3 as proposed. For clarity, the Department has switched the
order of Sec. 9.3(b) and (c) and has revised the text for technical
accuracy and to reflect that (b) applies to covered contracts that
succeed a contract for performance of the same or similar work, whereas
(c) applies to covered contracts and solicitations that do not succeed
a contract for the same or similar work (i.e., SCA-covered contracts
that are strictly predecessor contracts). Revised (b) and (c) thus
reflect more clearly that contractor requirements under this rule may
depend on whether a contractor is a predecessor contractor, a successor
contractor, or both. For example, a predecessor contractor that is not
succeeding a contract for the same or similar work will be required to
provide the certified list of employees under Sec. 9.12(c) but would
not be required to offer employment to any service employees because
the contractor is not succeeding another contract.
[[Page 86746]]
v. 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 to be for the ``performance of
the same or similar work'' in order to be covered by the
nondisplacement requirements. As explained in the discussion of
proposed Sec. 9.2, the Department proposed to define ``same or similar
work,'' in relevant part, as ``work that is either identical to or has
primary characteristics that are alike in substance.'' This definition
requires 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 is
not considered to be same or similar work where it only shares
characteristics incidental to performance 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, the work on the successor contract would be considered to be
``same or similar work.'' This is 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 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 to
determine whether the prior and new contracts involve the same or
similar work. Although such a circumstance-specific evaluation may be
complex in certain instances, nondisplacement requirements can be
expected to apply when a larger SCA-covered contract expires and is re-
bid as several individual SCA-covered contracts, as well as when two
covered contracts expire and the new solicitation combines the work
previously performed under those two contracts into a new contract.
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.
PSC expressed concern that various federal acquisition initiatives,
including the category management initiative, are leading to an
increase in the consolidation of smaller contracts and having a
negative effect on small business contractors that are less able to
compete for the resulting larger contracts. PSC stated that if
nondisplacement rules apply in these situations, ``small business
employees may be retained by successor contractors'' and ``small
businesses themselves may suffer from employee attrition to follow-on
successors.'' However, PSC also stated that ``such hiring is
commonplace in many instances'' already even without the
nondisplacement order. The Department understands that the Federal
Government is carefully monitoring small business participation levels
and implementing strategies to help ensure that new contracting
initiatives such as category management do not undermine small business
contracting. The Department believes this strikes the right balance for
both small businesses and workers on service contracts even though
there may be the potential for employee attrition from a small business
predecessor to a successor contract.
As noted above, in the final rule, the Department has switched the
order of Sec. 9.3(b) and (c) and made edits for clarity, so that the
proposed Sec. 9.3(c) is now, with minor revisions, located at Sec.
9.3(b).
vi. 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 noted 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. As a
corollary, the Executive order does not apply to non-service
subcontracts. 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. No comments were received about the coverage
of subcontracts, other than those related to the discussion of
subcontracts below the simplified acquisition threshold.
vii. Geographic Scope
The Executive order and this part apply to contracts that are both:
(1) with the Federal Government; and (2) require performance in whole
or in part within the United States. Performance in whole or in part
within the United States means within 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 these regulations do 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 these regulations, the order and the regulations
apply to the contract and require a right of first refusal for any
workers who 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 are not covered by the order, as neither the District of
Columbia nor any Territory or possession of the United States
constitutes the ``Federal Government'' under these regulations. The
Coalition expressed support for the scope of geographic coverage under
the proposed rule; no other comments were received regarding the
geographic scope of coverage.
4. Section 9.4 Exclusions
Pursuant to section 5(a) of Executive Order 14055, proposed Sec.
9.4(a) addressed 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.
[[Page 86747]]
The regulations, as finalized, omit that amount from the regulatory
text in the event that a future statutory amendment changes the amount.
Any such change would automatically apply prospectively to new
contracts subject to part 9.
Proposed Sec. 9.4(a)(2) clarified 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 in the discussion of Sec. 9.3,
section 5(a) of Executive Order 14055 excludes only ``contracts under
the simplified acquisition threshold[.]'' The proposed rule explained
that this language differs from Executive Order 13495, which excluded
``contracts or subcontracts under the simplified acquisition
threshold.'' See Executive Order 13495, 74 FR 6103 (Feb. 4, 2009)
(emphasis added). Accordingly, proposed Sec. 9.4(a)(2) explained that
subcontracts would be excluded under Sec. 9.4(a)(1) only if the prime
contract is under the simplified acquisition threshold. The Department
sought comment on the potential impact, including any unintended
consequences, of covering subcontracts below the simplified acquisition
threshold.
As described in the preamble to Sec. 9.3(a)(2), the Coalition and
the AFL-CIO commented in support of coverage of subcontracts below the
simplified acquisition threshold where the prime contract exceeds the
simplified acquisition threshold. Conversely, PSC and Nakupuna
suggested excluding subcontracts with a value less than the simplified
acquisition threshold from the requirements of Executive Order 14055
and this part. For the reasons given in the preamble to Sec.
9.3(a)(2), the final rule does not exclude subcontracts below the
simplified acquisition threshold where the prime contract meets or
exceeds that threshold, and the final rule adopts paragraphs Sec.
9.4(a)(1) and 9.4(a)(2) as proposed.
In Sec. 9.4(b), the Department proposed to 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. The
Department did not receive any comments on proposed Sec. 9.4(b), and
the final rule adopts the provision as proposed.
Proposed Sec. 9.4 did not include an exclusion for contracts
awarded for services produced or provided by persons who are blind or
have severe disabilities. The proposed rule explained that section 3 of
Executive Order 13495 specifically excluded ``contracts or subcontracts
awarded pursuant to the Javits-Wagner-O'Day Act,'' ``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,'' and ``agreements for vending facilities entered into pursuant
to the preference regulations issued under the Randolph-Sheppard
Act[.]'' In contrast, section 5 of Executive Order 14055 does not
enumerate any such exclusions. For this reason, proposed Sec. 9.4 did
not exclude such contracts from the requirements of part 9.
The proposed rule explained, however, that 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'' to an agency and directs that the order be ``implemented
consistent with applicable law.'' The applicable law encompassed by
these sections includes the statutes that were excluded explicitly from
Executive Order 13495, such as the Javits-Wagner-O'Day (JWOD) Act, 41
U.S.C. 8501 et seq., and the Randolph-Sheppard Act, 20 U.S.C. 107.
These laws establish requirements for contracts awarded for services
produced or provided by persons who are blind or have severe
disabilities, and the laws may conflict with the requirements of
Executive Order 14055 in that the laws may impose staffing requirements
that in many cases would preclude, in whole or in part, offering
employment to the employees on the predecessor contract. For example,
under the JWOD Act, a qualified nonprofit agency operating under the
AbilityOne Program is required to employ blind or severely disabled
individuals for at least 75 percent of the direct labor hours required
for the particular nonprofit agency's production or provision of
services. See 41 U.S.C. 8501(6)(C). If there are few blind or severely
disabled workers on a predecessor contract, it could be impossible for
a successor contractor to make offers to all incumbent workers and also
comply with the JWOD Act 75-percent requirement. The proposed rule
explained that where direct legal conflicts squarely exist between the
requirements of Executive Order 14055 and the requirements of another
statute, regulation, Executive order, or presidential memorandum under
the particular factual circumstances of a specific situation, the
requirements of this part would not apply. Under the proposed rule, a
contracting agency would be obligated to follow the procedures proposed
at Sec. 9.5 to make a case-by-case exception for contracts on the
basis of a determination that the requirements of this part did not
apply to a particular contract because of a direct legal conflict.
In the NPRM, the Department also recognized that contracting
agencies award contracts under a wide variety of programs, including
those mentioned above, some of which have, by law, specific processes
and requirements that may make it challenging to fully implement the
requirements of Executive Order 14055. The Department invited comments
on how Executive Order 14055 and its implementing regulations should be
applied to any specific programs that are subject to contracting
requirements that may conflict with Executive Order 14055 or the
provisions of the proposed rule.
Several commenters supported the Department's approach in the
proposed rule. The Coalition commented that they supported the proposed
rule's coverage of contracts covered by the JWOD Act and awarded under
the AbilityOne Program, indicating that coverage of AbilityOne
contracts is consistent with modern disability policy and promotes
``integrated employment in which workers with disabilities work
alongside nondisabled workers and enjoy the same rights and
protections.'' In its comment, Jobs to Move America thanked the
Department for ``providing equal treatment to disabled workers by
covering'' these contracts.
Several other commenters expressed opposition to the proposed
treatment of contracts covered by the JWOD Act. These commenters
requested an across-the-board exclusion for contracts or subcontracts
awarded pursuant to the JWOD Act, in line with the exclusion previously
granted in Executive Order 13495. These commenters criticized the
proposed exception process in Sec. 9.5 that contracting agencies would
need to use for AbilityOne contracts if the Department did not provide
an express exclusion. Peckham Inc., Didlake Inc., and Nobis
Enterprises, which are AbilityOne contractors, commented that making
``case-by-case determinations on AbilityOne contracts will lead to
inconsistent management of the AbilityOne Program, unnecessary contract
award delays, and adverse impacts on the employment of individuals with
disabilities.'' Source America, an AbilityOne contractor network, noted
that the lack of an
[[Page 86748]]
express exclusion puts the burden of decision-making on procurement
officers, possibly leading to inconsistent application for contracts
covered by the AbilityOne Program. Source America further noted that
the exception process in the proposed rule does not apply to
subcontracts and that there are several instances where a JWOD Act
contractor may operate as a subcontractor instead of a prime
contractor.
National Industries for the Blind (NIB), a nonprofit agency
designated by the AbilityOne Commission to distribute Federal
Government orders for products and services on the AbilityOne
Procurement List, wrote that the potential need for a case-by-case
exception for AbilityOne contracts may not even be recognized by the
contracting agency. Melwood Horticultural Training Center, Inc.
(Melwood), an AbilityOne contractor, commented that if the rule, as
finalized, applies to AbilityOne authorized contractors, it would be
extremely unlikely that those contractors would be able to maintain
compliance with the AbilityOne program when a predecessor workforce
does not have individuals who meet the required AbilityOne labor
criteria. Melwood further explained that ``[i]f AbilityOne authorized
contractors are not explicitly exempted from the requirements of the
rule, they will be compelled to hire the incumbent workforce instead of
offering up meaningful, steady opportunities to people with significant
disabilities.'' Melwood recommended that the final rule explicitly
exclude contracts under the JWOD Act. In the alternative, Melwood
suggested that the Department codify an arrangement specifically for
successor contracts awarded under the JWOD Act that would (1) create a
right of nondisplacement for jobs constituting 25 percent of the direct
labor hours on a contract; (2) require the successor contractor to
offer positions to displaced predecessor contract workers on other
contracts to the extent doing so would not affect AbilityOne
compliance; (3) require the successor contractor to offer to displaced
predecessor contract workers a right to be recalled for up to two years
should a vacancy occur in roles performing the 25 percent of direct
labor hours performed by people without disabilities; and (4) require
the successor contractor to take a neutral position should a displaced
worker accept an offer at a non-unionized site and attempt to organize
it.
Other commenters similarly requested exemptions from the
nondisplacement requirements based on a perceived inconsistency between
the requirements and other statutes. PSC, in response to the
Department's question about location continuity and HUBZones, as well
as other procurement preference programs,\2\ urged a broad exemption
from the nondisplacement requirements whenever they would ``impact
internal organizational or federal Diversity, Equity, Inclusion and
Accessibility goals.'' The Council on Federal Procurement of
Architectural & Engineering Services (COFPAES) asserted that
architecture, engineering (A/E) and related services (including
surveying and mapping) should be exempted from the rule because these
services are governed by the Brooks Act, 40 U.S.C. 1101 et seq. COFPAES
stated that the Brooks Act is inconsistent with the right of first
refusal, because it requires that evaluation and selection of firms for
A/E services be based on ``demonstrated competence and qualification,''
including award to the ``most highly qualified'' firm.
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\2\ The HUBZone program, established by title VI of the Small
Business Reauthorization Act of 1997, is one of several procurement-
related preference programs for small businesses, and it is designed
to aid small businesses that are located in economically distressed
areas. See 15 U.S.C. 657a. HUBZone is an acronym for Historically
Underutilized Business Zone Empowerment Contracting (HUBZone). The
other small business preference programs include preferences for
small businesses generally, Women-Owned Small Businesses, Service-
Disabled Veteran-Owned Small Businesses, and Small Disadvantaged
Businesses. See generally Congressional Research Service, Small
Business Administration HUBZone Program, R41268, (Updated July 29,
2022), <a href="https://sgp.fas.org/crs/misc/R41268.pdf">https://sgp.fas.org/crs/misc/R41268.pdf</a>.
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After consideration of these comments, the Department is amending
the contract clause to give effect to the requirements and goals of
Executive Order 14055 to the maximum extent possible in light of the
requirements and policy objectives of the HUBZone program statute, the
JWOD Act, and the Randolph-Sheppard Act. Specifically, the Department
has added paragraph (j) to the contract clause in Appendix A, which
sets forth a requirement that, to the maximum extent possible,
contractors that are awarded contracts under the HUBZone program
statute, the JWOD Act, or the Randolph-Sheppard Act must comply with
both the relevant requirements under those statutes and the
requirements of Executive Order 14055. Paragraph (j) clarifies that
nothing in the contract clause will be construed to permit a contractor
or subcontractor to fail to comply with any applicable provision of the
HUBZone program statute, the JWOD Act, or the Randolph-Sheppard Act.
Consistent with paragraph (j) of the contract clause, when the
requirements of such laws would conflict with the requirements of
Executive Order 14055 in connection with a particular contract, then
the requirements of such laws may be satisfied in tandem with and, if
necessary, prior to the requirements of Executive Order 14055 and this
part. In the contract clause, the Department has not included reference
to section 505 of the Treasury, Postal Services and General Government
Appropriations Act, because the requirements of that Act are covered
already by the reference to the JWOD Act.
Under this framework, for example, a successor AbilityOne
contractor will be required to provide a right of first refusal to
workers from the predecessor contract who have significant disabilities
or visual impairment, as defined by the JWOD Act. The AbilityOne
successor contractor could then hire non-predecessor contract workers
with significant disabilities or visual impairment to the extent
necessary to satisfy the employment threshold requirements of the
AbilityOne Program. Specifically, the JWOD Act requires that 75 percent
of direct labor hours be performed by workers with significant
disabilities or visual impairment. See 41 U.S.C. 8501(6)(c). After
ensuring that this programmatic threshold requirement is met, the
AbilityOne successor contractor will be required under paragraph (j) of
the nondisplacement contract clause in Appendix A to provide the right
of first refusal to as many of the remaining predecessor contract
employees (i.e., those who do not have significant disabilities or
visual impairment) as necessary to fill any remaining positions on the
successor contract for which those employees are qualified.
Similarly, the HUBZone program statute requires small business
concerns (SBCs) to have 35 percent of all of their employees reside in
a HUBZone to be certified under the program, and to attempt to maintain
this percentage when they are awarded contracts on the basis of a
HUBZone preference. See 14 U.S.C. 657a(c) and (d). When both the
successor and the predecessor contractors are SBCs, the residence
requirement threshold normally could be met through a standard
application of this final rule where the successor contractor is
required to offer a right of first refusal to employees on the
predecessor contract. Under circumstances where the successor is an SBC
but the predecessor is not, HUBZone SBCs can meet both the requirements
of the HUBZone program and the Executive order in accordance with
paragraph (j) of the contract clause. For instance, the successor SBC
contractor would first have to extend
[[Page 86749]]
offers of employment to the qualified predecessor contractor's
employees who reside in a HUBZone. If necessary to reach the residency
threshold, the successor HUBZone SBC would next extend offers of
employment to qualified residents of a HUBZone who are not employees of
the predecessor. The HUBZone SBC would next extend offers for the
remaining employment openings to non-HUBZone-resident qualified
employees of the predecessor contractor. Under such an approach, the
HUBZone SBC would first ensure that it meets the statutory requirements
of the HUBZone program so that it is not decertified, and then would be
required to offer employment to the predecessor's employees pursuant to
Executive Order 14055 to the maximum extent possible without violating
HUBZone program requirements. This approach would also apply in other
circumstances, such as where the predecessor HUBZone SBC did not
maintain the HUBZone residence requirement but was permitted to remain
in the program. While the HUBZone SBC must maintain the 35 percent
HUBZone residency requirement at all times while certified in the
program, there is an exception: an SBC may ``attempt to maintain'' this
requirement when performing on a HUBZone contract. When that occurs and
the HUBZone SBC is permitted to fall below the 35 percent threshold, it
still must meet the requirement any time it submits a subsequent offer
and wins a HUBZone contract. Where a non-SBC successor follows a
HUBZone SBC predecessor, the non-SBC successor would be required to
comply without limitation with the requirements of the nondisplacement
contract clause and implementing regulations by offering a right of
first refusal to all qualified predecessor contract employees. This
framework is consistent with the Department's treatment of HUBZones in
the 2011 final rule for Executive Order 13495. See 76 FR 53720, 53723.
The Department believes that this framework recognizes contractors'
obligations to comply with the requirements of the HUBZone program
statute, the JWOD Act, and the Randolph-Sheppard Act while satisfying
Executive Order 14055 by providing the nondisplacement benefit to
workers employed on predecessor contracts to the greatest extent
permissible. Consistent with Executive Order 14055, this part also
applies to covered contracts in which the predecessor contractor, but
not the successor contractor, is covered by the HUBZone program
statute, the JWOD Act, or the Randolph-Sheppard Act. Similarly, this
part applies to covered contracts in which both the predecessor and
successor contracts are covered by the HUBZone program statute, the
JWOD Act, the Randolph-Sheppard Act.
In light of new paragraph (j) in the contract clause, there is no
need for contracting agencies to authorize an exception under the
agency exception procedure in Sec. 9.5 of these regulations for
contracts because of the potential application of the HUBZone program
statute, the JWOD Act, or the Randolph-Sheppard Act. Paragraph (j)
operates to provide an exception to the requirements of Executive Order
14055 where necessary (and only to the extent necessary) to enable
compliance with these statutory provisions. The Department believes
that the approach reflected in the final rule will promote consistency
in applying the requirements of Executive Order 14055 to contracts
subject to the HUBZone program statute, the JWOD Act, and the Randolph-
Sheppard Act. The approach in the final rule thus is preferable to an
approach under which some such contracts would nominally be fully
subject to Executive Order 14055's requirements even where application
of those requirements would conflict with these statutory preference
programs, while others would be entirely exempt from Executive Order
14055's requirements even though certain positions on the successor
contract could be filled with predecessor contract employees without
any conflict with these preference programs. In this manner, the final
rule strikes an important balance by retaining the nondisplacement
benefit for many workers on predecessor contracts while enabling
successor contractors to maintain compliance with these other statutes.
The Department declines to create a broader exemption from the
nondisplacement requirements wherever they might impact a contractor's
``internal organizational'' or Federal Diversity, Equity, Inclusion,
and Accessibility (DEIA) goals, as requested by PSC. There is no basis
in the order to allow exceptions from the nondisplacement requirements
to pursue internal corporate goals however laudable, and such an
exemption would not be administrable. With regard to other Federal
procurement preference and nondiscrimination programs, PSC did not
identify any inconsistency between the nondisplacement requirements and
such programs, other than the HUBZone employment requirements addressed
in this preamble and contract clause. As noted in Sec. 9.12(d)(3),
contractors are required to carry out their responsibilities and
exercise their discretion under the nondisplacement requirements in a
manner consistent with non-discrimination laws and regulations.
The Department also considered COFPAES's assertion that there is a
direct conflict between the Brooks Act and the nondisplacement
requirements. COFPAES commented that a conflict exists because the
Brooks Act requires that evaluation and selection of firms for
architecture and engineering services be based on ``demonstrated
competence and qualification'' and be awarded to the ``most highly
qualified'' firm. See 40 U.S.C. 1101, 1103(d). COFPAES further stated
that the Brooks Act requires selection of contractors based on the
qualifications of ``key employees'' who will work on the contract and
that firms compete by submitting a Standard Form (SF) 330 with the
resumes of proposed personnel. See 48 CFR 36.603. The Department does
not agree that these requirements create direct conflicts. The
nondisplacement requirements do not conflict with a requirement to
contract with the most highly qualified firm or with a firm based on
its qualifications or demonstrated competence. Moreover, the order does
not require a right of first refusal for employees who are exempt under
the professional exemption in part 541 of the FLSA regulations and who
therefore are not service employees within the meaning of the SCA. See
Executive Order 14055, section 3(b). The Department's FLSA regulations
state that the ``traditional professions'' of architecture and
engineering are ``field[s] of science or learning'' such that employees
performing work requiring advanced knowledge in those fields generally
meet the duties requirements for the learned professional exemption.
See 29 CFR 541.301(a) and (c). Accordingly, these individuals will
generally not be ``service employees'' under the definition in the
Executive order and thus there will generally not be any duty under the
nondisplacement rule to provide a right of first refusal to these
individuals or any reason that a bidder cannot list its own
professional employees on its SF 330 form.\3\
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\3\ While the order does not require a right of first refusal
for professional architects and engineers, Brooks Act contracts may
still be covered by the nondisplacement requirement. As discussed in
Sec. 9.3, the order applies to contracts that are covered by the
SCA and are at or above the simplified acquisition threshold. See
also Executive Order 14055, section 2(a), 3(a). The SCA, and
therefore the order, does not extend to contracts for services ``to
be performed exclusively by persons who are not service employees--
i.e., persons who are bona fide executive, administrative or
professional personnel[.]'' 29 CFR 4.113(a)(2). However, SCA (and
therefore nondisplacement) coverage extends to contracts ``which may
involve the use of service employees to a significant or substantial
extent,'' even if there is ``some use of bona fide executive,
administrative, or professional employees[.]'' 29 CFR 4.113(a)(3);
see also Nat'l Cancer Inst., BSCA No. 93-10, 1993 WL 832143 (Dec.
30, 1993) (discussing the meaning of ``significant or substantial
extent''). Many employees who work on Brooks Act-covered contracts
may be nonexempt service employees. The Brooks Act contemplates that
covered work may include ``incidental services'' carried out by
architects and engineers ``and individuals in their employ.'' 40
U.S.C. 1103(2)(C)). Accordingly, some Brooks Act contracts could be
covered by the SCA and therefore the nondisplacement order.
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[[Page 86750]]
While there is no direct conflict between the Brooks Act and the
nondisplacement requirements so as to justify an across-the-board
exemption, an agency exception may be appropriate depending on the
specific facts of a particular contract under the nondisplacement
regulations in Sec. 9.5(a)(1) or (a)(2). See section II.B.5. below.
These agency exceptions apply 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 or 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. Where a contract is largely performed
by SCA-exempt professional services employees, it may still be covered
by the order even if only a relatively small percentage of the
employees on the project would be provided with a right of first
refusal. In such a situation, where the agency's overriding interest
may be in fostering creative competition between the professional
employees on the project, it may not make sense to impose the
nondisplacement requirements if their inclusion would adversely affect
the ability of the agency to maximize the number of such firms that
might participate while providing a benefit only to a limited number of
covered service employees on the contract.
Accordingly, the final rule adopts the paragraph at Sec. 9.4 as
proposed, along with the amendments specified above to the contract
clause in Appendix A.
5. Section 9.5 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 proposed to implement this procedure
through language in Sec. 9.5 of the regulations. Under section 6 of
the order, and in Sec. 9.5 as proposed and as adopted in this final
rule, 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.
Proposed Sec. 9.5(a) listed the qualifying circumstances for an
agency exception, as provided for in the agency exceptions provision in
section 6(a) of the order. These included (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; and (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 proposed to interpret section 6(a) of the order as
allowing agencies to make exceptions only for prime contracts and not
for individual subcontracts. The proposed language in Sec. 9.5(a)
carried out this interpretation by authorizing contracting agencies to
waive nondisplacement provisions only ``as to a prime contract.'' The
Department's proposed interpretation of section 6(a) followed 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''
and does not reference subcontracts. In the NPRM, the Department also
noted that section 2(a) of Executive Order 14055 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 that reason, the Department sought
comment from the public on the potential impact, including any
unintended consequences, of not allowing agency exceptions for
particular subcontracts or classes of subcontracts.
In response to the Department's request for comments, the Coalition
responded in support of the proposed limitation that would allow
exceptions to be granted only for prime contracts and not separately
for subcontracts. The Coalition expressed concern that permitting
exceptions for particular subcontracts could ``create opportunities for
circumvention'' of the nondisplacement requirements by ``pushing more
work to the subcontractor.'' The Coalition described an example of how
contractors use subcontracting arrangements to evade contract
requirements. In the example, a New Jersey state law required certain
services to be provided only by nonprofits; a contractor evaded the law
by using a shell nonprofit prime contractor and then subcontracting to
a for-profit entity.
No commenter specifically opposed the Department's proposed
interpretation. PSC's comment, however, contained a more general legal
argument that paralleled the Department's discussion in the NPRM. PSC
opposed the Department's proposed limitation on the application of the
simplified acquisition threshold exclusion (which appears in section
5(a) of the order) to subcontracts. In making its argument, PSC
referenced the order's definition section at section 2(a) that includes
``subcontract'' within the definition of the term ``contract.'' PSC
asserted that, because of this definition, the order requires the
exclusion for prime contracts below the simplified acquisition
threshold in section 5(a) of the order to apply to subcontracts as
well. Although PSC did not extend its argument to the interpretation of
section 6(a) of the order, the same logic would apply there too, given
that section 6(a) provides for agency exceptions for ``a particular
contract.''
NIB expressed concern that if the agency exception process only
applies to prime contracts, then the regulations might not be able to
adequately account for potential conflicts between the nondisplacement
requirements and the requirements of the JWOD Act and the AbilityOne
Program. NIB noted that the FAR recognizes ``[t]he statutory
obligation'' under the JWOD Act ``also applies when contractors
purchase the supplies or services for Government use,'' 48 CFR
8.002(c)--i.e., including
[[Page 86751]]
when contractors subcontract for services. Likewise, SourceAmerica
noted that Marine Corps Food Service contracts are ``mandatory
subcontracts'' under the JWOD Act, so there would be a direct conflict
between the JWOD Act and the Executive order if JWOD-covered
subcontracts are not given an exception. To remedy this concern, NIB
recommended providing an express exemption for AbilityOne contracts and
subcontracts so that contracting agencies would not need to follow the
procedures in Sec. 9.5 of the nondisplacement regulations to except
these contracts and subcontracts.
Finally, PSC raised questions about the application of the
Executive order and the regulations to Multi-Agency Contracts (MACs)
and the individual task orders that may be made from them. For MACs, as
well as for similar MAS/IDIQ contracts, there are at least two separate
moments in which a contracting agency takes an action to enter into a
contract: First, when the General Services Administration (GSA) (or
other coordinating agency) negotiates the underlying umbrella contract
with the contractor; and second, when the individual contracting agency
issues a task order under the umbrella contract. As a general matter,
an umbrella IDIQ contract should include the nondisplacement clause
with appropriate modification (or some mechanism for its later
inclusion at the task order level) if there is any reasonable
possibility that a future task order under the contract could be found
to be a covered successor contract. Unless a mechanism exists to add
the nondisplacement clause to individual task orders at the time of
their issuance, the fact that such a possibility is unknown at the time
of the solicitation for the underlying MAS/IDIQ contract would not be
sufficient reason to exempt the entire umbrella contract from coverage
under the procedure in Sec. 9.5.
Having considered these comments, the final rule retains the
language that authorizes agency exceptions for ``a prime contract'' and
not subcontracts. As noted in the NPRM, this approach follows from a
comparison between Executive Order 14055 and its predecessor, Executive
Order 13495. Executive Order 13495 expressly included the term
``subcontracts'' in its authorization for agency exceptions, while
section 6(a) of Executive Order 14055 does not. While it is true, as
PSC noted, that the definition of ``contract'' in section 2(a) of
Executive Order 14055 includes subcontracts, Executive Order 13495
contained this same definition. The Department therefore believes the
better interpretation of Executive Order 14055 is to give weight to the
fact that Executive Order 14055 eliminated the express reference to
``subcontracts'' that was included in the agency exemptions provision
of Executive Order 13495. A comparison between section 3(a) and section
6(a) supports this interpretation. Notwithstanding the expansive
definition of the word ``contract,'' section 3(a) of the order
expressly requires the incorporation of the contract clause into
``contracts and subcontracts.'' In 6(a), however, the order provides an
exception process only for ``contracts.'' In addition, the potential
division of contract work through subcontracts is often only clear
after prime contractors have submitted bids in response to a
solicitation and not before it is issued. It would be impractical or
impossible in many cases for contracting agencies, prior to the
solicitation date for a prime contract, to identify ``particular''
subcontracts which could appropriately be excepted from coverage.
The Department is mindful of NIB's concern regarding the
application of the Sec. 9.5 agency exception procedure to JWOD Act-
covered contracts and subcontracts. However, as discussed in section
II.B.4., the Department has separately addressed these concerns by
including language in the contract clause that applies to all such
contracts and subcontracts and instructs contractors that they must
implement the JWOD Act and the nondisplacement provisions in tandem and
to the maximum extent possible.
To account for the unique structure of MAS/IDIQ contracts, the
Department has added a new sentence to Sec. 9.5(b) that provides for a
bifurcated exception process. The provision provides that for IDIQ
contracts, an exception must be granted prior to the solicitation date
if the basis for the exception cited would apply to all orders.
Otherwise, exceptions must be granted for each order by the time of the
notice of the intent to place an order. The appropriate entity to
analyze and grant an agency exception at the time of a task order may
often be the ordering agency, as the ordering agency will usually be
best placed to make the initial determination of whether a task order
is a successor contract that would be covered by the order and
therefore whether it is relevant to consider an agency exception to
coverage. As a general matter, however, the agency responsible for the
umbrella contract may determine the procedure through which task orders
may be excepted (and whether the contracting agency can overrule an
ordering agency's determination regarding an agency exception), as long
as that procedure is consistent with the nondisplacement order, these
regulations, and any applicable FAR provisions.
Accordingly, the final rule adopts the language limiting section
6(a) to prime contracts as proposed, with a limited amendment to
account for MAS/IDIQ contract task orders. The Department has also
added a sentence to Sec. 9.5(b) to clarify that when an agency
determines that a prime contract is excepted under this section, the
nondisplacement requirements will not apply to any subcontracts under
that prime contract.
Section 6(a) of Executive Order 14055 also 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 proposed regulatory text at Sec.
9.5(a) that identifies the senior procurement executive as the senior
official who must make an exception decision. In the NPRM, the
Department explained that, because the order specifically requires the
decision to be made by a senior official, the decision cannot be
delegated by the senior procurement executive to a lower-level
official. This same non-delegation principle was applied in the 2012
FAR rule that implemented Executive Order 13495. See 77 FR at 75773.\4\
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\4\ 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.''
---------------------------------------------------------------------------
The Coalition approved of the Department's interpretation of the
term ``senior official'' in Sec. 9.5(a), stating that the required
approval of the senior procurement executive will ensure that
exceptions are ``subject to consistent, rigorous levels of review.''
The Coalition noted that an agency's senior procurement executive is
``well positioned to assess whether the need for any particular service
contract is sufficiently unusual to justify waiving the nondisplacement
requirement.'' The Coalition agreed with the Department that
prohibiting any further delegation of this duty is consistent with use
of the term ``senior official'' in section 6(a) of the order. The
Coalition, however, also recommended that the Department add a
consultation requirement, such that the senior procurement executive
would have to make the determination ``in consultation with the agency
head.'' The Coalition noted that such a requirement
[[Page 86752]]
would be consistent with the FAR, which permits individual deviations
from FAR requirements when authorized by the agency head. See 48 CFR
1.403. The AFL-CIO stated that they supported the requirement that any
exception decision be made by the senior procurement executive.
In contrast, Nakupuna expressed concern that the exception process
in Sec. 9.5(a) is ``too arduous'' and may result in agencies not
granting exceptions that would have been in the best interest of the
Federal government. Nakupuna also stated that the head of a contracting
department or agency should have the authority to exempt contracts from
the requirements of the order if justified. Several other commenters
expressed more general concerns about the requirements for senior-level
decision-making. PSC, in a response to the Department's proposal
regarding location continuity, stated that requiring the senior
procurement executive to make a determination ``would cause needless
delay'' because such decisions ``require time, consideration, and
decision capital'' that may ``bottleneck solicitations.'' NIB, in
requesting a blanket exemption for contracts awarded under the JWOD
Act, suggested that exception decisions by senior procurement
executives would be ``superfluous'' and ``time-consuming.'' Several
other entities involved in contracting under the JWOD Act expressed
similar concerns. These comments, however, did not address the express
language in section 6(a) of the Executive order that limits the
exception authority to a ``senior official within an agency'' or
suggest that the Department was incorrect to interpret that language as
limiting the decision to the senior procurement executive.
The final rule adopts the senior-procurement-executive requirement
in Sec. 9.5(a) as proposed. As the Coalition noted, this language is
consistent with the requirement in the order that the decision must be
made by a ``senior official,'' and the involvement of the senior
procurement executive will promote consistency in agency exception
decisions. The requirement is also consistent with the implementation
of Executive Order 13495 in the 2012 FAR final rule, which adopted
language at 48 CFR 22.103-3 authorizing the senior procurement
executive to waive nondisplacement requirements. See 77 FR at 75767.
The Department declines to implement the Coalition's proposal to
require consultation with the agency head. While such consultation may
be appropriate and should be encouraged, it is not required by the
order and may not be warranted in every instance.
NIB also suggested that the word ``may'' in Sec. 9.5(a) should be
replaced with the word ``shall,'' to more effectively require a
contracting agency to grant an exception to the nondisplacement
requirements in certain circumstances. While acknowledging that section
6(a) of the order itself uses the term ``may,'' NIB asserted that
replacing it with the word ``shall'' in the regulations would eliminate
any implication that a contracting agency has any ``discretion'' to
apply the nondisplacement requirements even when that would be
inconsistent with another law such as the JWOD Act. The Department
agrees with NIB that in circumstances in which the application of the
nondisplacement requirements would directly conflict with an express
provision of another statute, such that compliance with the
nondisplacement requirements set forth in this final rule would
necessarily result in a violation of another statute, the agency should
authorize the exception. But the Department interprets the order's use
of the term ``may'' to suggest only that (consistent with Nakupuna's
suggestion) the senior procurement executive's determination can still
be subject to review and revision by the contracting agency head or
otherwise pursuant to an individual contracting agency's procurement
procedure. Accordingly, the final rule continues to authorize, but not
require, the agency to waive the application of nondisplacement
provisions after the determination of the senior procurement executive.
The final rule therefore adopts the language of Sec. 9.5(a) as
proposed.
Proposed Sec. 9.5(b) reiterated the procedural requirements that
section 6(a) of the order states must be satisfied for an exception to
be effective. The proposed language stated that the action to except a
contract from some or all of the requirements of the Executive order or
the regulations must 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) stated
that this written explanation must 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)
provided that any determination by an agency to exercise its exception
authority that is made after the solicitation date or without the
timely and specific written explanation would be inoperative. In such a
circumstance, the contract clause would have been wrongly omitted and
the agency would be required to take action consistent with paragraph
Sec. 9.11(f) of this part, which sets forth the requirements for
incorporating missing contract clauses.
The Coalition and the AFL-CIO expressed general support for the
proposed procedural requirements in Sec. 9.5(b). The Coalition noted
that the requirement for a specific written explanation, including the
facts and reasoning, will promote thorough analyses and consistent
decision-making. They also noted that this requirement is in accordance
with the FAR's requirement that documentation in contract files be
sufficient to constitute a complete history of the contractual action,
including support for actions taken. See 48 CFR 4.801(b). The
Coalition, however, recommended modifying the language of Sec. 9.5(b)
to also require an ``attestation'' by the incoming contractor that ``no
service disruption will occur due to the displacement of predecessor
contract employees.'' They explained that the attestation could be
requested in the solicitation.
The Department declines to require an additional ``attestation''
condition. Such an attestation requirement could be an effective
mechanism in a particular contract to maximize the use of predecessor
employees and limit disruption even when the nondisplacement contract
clause is not included in the solicitation. However, the order does not
impose this blanket requirement, and the Department did not propose one
in the NPRM. Thus, while agencies are encouraged to take alternative
and contract-specific measures to protect against service disruption
where the nondisplacement provisions do not apply--including an
attestation requirement on a contract-by-contract or agency-wide
basis--the Department is not imposing such a requirement in this final
rule.
Multiple commenters noted potential challenges from the requirement
in Sec. 9.5(b) that the exception determination and written analysis
must be carried out no later than the solicitation date. One entity,
Professional Contract Services, Inc. (PCSI), requested a modification
of these timing requirements to accommodate the potential for
interaction between bidders and the contracting agency. PCSI noted that
the regulations do not provide for a ``process for a bidder or
contractor to interact with the contracting agency and explain its need
for such an exception.'' PCSI suggested that such a procedure would be
particularly useful with regard to the AbilityOne program, where ``a
contracting agency may not understand
[[Page 86753]]
the conflict in laws posed without such an interaction with the
selected [AbilityOne contracting entity].'' PCSI did not suggest how
exactly the timeframe should be modified--whether by providing a pre-
solicitation procedure or by allowing exceptions to be requested and
provided after the solicitation date.
The Coalition discussed the challenge of the exception deadline in
the context of a comment about the proposed reconsideration process.
Under their suggestion, agencies would be required to notify workers
and their representatives of a proposed exception no later than 120
days before the solicitation, providing time for comment from
interested parties. The deadline for the agency to make an initial
exception decision would be 60 days prior to the solicitation date, to
accommodate time for interested parties to then request reconsideration
and for that reconsideration to be resolved before any bid solicitation
goes out. The AFL-CIO expressed agreement with the Coalition's proposed
timeframe.
The Department acknowledges that the solicitation-date deadline for
an agency exception decision may be challenging in some circumstances
because it requires agencies to collect relevant information regarding
the need for an exception prior to the solicitation date, and because
any decision that is made close to or on the solicitation date leaves
little to no time for interested parties to assist the agency in
correcting any mistakes before the solicitation is issued.
Notwithstanding these concerns, the Department declines to extend the
deadline for agency exceptions beyond the solicitation date, which
would be contrary to the specification in the order itself that the
exception may be granted ``no later than the solicitation date.'' This
language does not allow a procedure in which exceptions are granted
after the solicitation date, unless the solicitation is subsequently
canceled and reissued. Such a rule strikes a reasonable balance, as
allowing exceptions after the solicitation date would not make sense
procedurally and could invite abuse of the exceptions provision.
The Department also declines to impose a procedural framework that
would require agency exception decisions to be made 60 days before the
solicitation date for all contracts. The Department agrees with the
Coalition that agencies will be able to make better-informed decisions
and avoid errors if they engage with stakeholders--including workers on
predecessor contracts or their collective bargaining representatives--
as early as possible in the acquisition planning process. The order,
however, requires only that the exception decision be made no later
than the solicitation date, which allows, but does not require, agency
exception decisions to be made at an earlier date. In responding to the
Coalition's suggestion, the Department considered that the FAR contains
broad requirements for acquisition planning prior to the issuance of
solicitations. See generally 48 CFR 7.102 (``Agencies shall perform
acquisition planning and conduct market research . . . for all
acquisitions[.]''). It is during this advance planning process that
agencies should be identifying whether an exception from the
nondisplacement provisions is necessary--and engaging workers and their
representatives if possible--and not at the last minute before a
solicitation is issued. The language of the order allows agencies to
address exceptions in this way, and agencies are encouraged to carry
out the exceptions decision as early as possible. At this time,
however, the Department declines to impose by regulation an earlier
deadline for agency exceptions determinations. As noted below, however,
the Department has included new language in Sec. 9.5(d) that requires
contracting agencies, to the extent consistent with mission security,
to include employee representatives in any pre-solicitation market-
research-related industry exchanges that are specific to the
nondisplacement requirements and conducted for the purpose of analyzing
whether to impose an agency exception under Sec. 9.5.
For the foregoing reasons, the final rule adopts Sec. 9.5(b) as
proposed.
i. Bases for Agency Exceptions
In the NPRM, the Department also proposed 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.
In Sec. 9.5(c), the Department proposed language to address the
first of the three circumstances under which an agency may authorize an
exception from the nondisplacement provisions: where adhering to the
requirements of the order would not advance the Federal Government's
interests in achieving economy and efficiency in Federal procurement.
The proposed language in Sec. 9.5(c) is consistent with the language
in section 6(a)(i) of Executive Order 14055. 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 nondisplacement 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 the Executive Order 13495 and Executive Order
14055 versions of this exception 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 at 53726-
29 (discussion of comments); 29 CFR 9.4(d)(4) (2012) (regulatory text).
The Department has not received information suggesting that, during the
several years in which the prior regulations were in effect, these
factors were over- or under-prescriptive or abused by contracting
agencies. The AFL-CIO noted in its comment that the prior
nondisplacement procedure was a ``resounding success.''
In Sec. 9.5(c), as it did in the regulations implementing
Executive Order 13495, the Department proposed 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 proposed to include the same requirement as
under the prior regulations 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. Thus, if the agency finds that costs or other factors
support an exception from the nondisplacement requirements, it must
specify how the particular circumstances support a conclusion contrary
to the general findings of the order.
In Sec. 9.5(c)(1), the Department proposed to include a non-
exhaustive list of 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 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
[[Page 86754]]
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 replacement workforce. They also include
emergency situations, such as a natural disaster or an act of war, that
physically displace incumbent employees. Finally, they 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.
As the Department explained in the NPRM, a determination that the
entire workforce failed cannot be made lightly. A senior agency
official who 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. 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 proposed 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 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 appropriate 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 proposed in Sec. 9.5(c)(2), 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 to minimize displacement. Thus, any potential for
reconfiguration cannot justify excepting the entire contract from
coverage.
The Department also proposed in Sec. 9.5(c)(2), 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 employees.
Finally, the Department proposed in Sec. 9.5(c)(2) to limit
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 the Executive orders
governing minimum wage and sick leave for Federal contractors, and
these rates will therefore apply regardless of whether the predecessor
workforce is rehired. 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(c) (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.
The AFL-CIO expressed general support for the Department's approach
to agency exceptions, including the Department's decision to provide a
set of specific factors in Sec. 9.5(c) that the agency may and may not
consider in determining whether an exception is appropriate. The
Coalition stated that the Department's proposed agency exception
process was a ``good start.'' The Coalition in particular supported the
requirement in Sec. 9.5(c) that an agency justify its deviation from
the order's assessment of the benefits of nondisplacement if it seeks
to rely on costs as a basis for exception. The Coalition stated that
this requirement would promote a thorough and consistent analysis
across agencies. They also stated that this requirement is in line with
general principles under the Procurement Act, under which, they
explained, ``economy and efficiency are not necessarily promoted by
contracting with the lowest bidder or seeking to minimize costs with a
less effective workforce.''
The Coalition also suggested a number of changes to the procedural
requirements in Sec. 9.5(c). As an initial matter, the Coalition
recommended that the required comparison of anticipated outcomes should
include a cost-benefit analysis in a standard format, as
[[Page 86755]]
determined by the Secretary, that estimates the direct and indirect
costs of employee turnover during the first year of the successor
contract. The Coalition also suggested amending the discussion of
relevant factors in Sec. 9.5(c)(1) and exceptional circumstances in
Sec. 9.5(c)(2) to require that any conclusions about potential
disruptions or workforce failures must be based on ``documented
incidents'' during the predecessor contract's period of performance
``such as at least two consecutive annual past performance ratings of
`unsatisfactory' as defined by FAR 42.1503(b)(4).''
The Department declines to adopt the Coalition's suggestion that
Sec. 9.5(c) include a requirement to carry out a standardized cost-
benefit analysis in a format designated by the Secretary. As the
Coalition noted, Sec. 9.5(c) already requires agencies to carry out a
written analysis that compares the anticipated outcomes of hiring
predecessor contract employees with those of hiring a new workforce;
and the proposed regulation already provides guidance for how to
consider costs as part of that analysis, as well as guidance about
factors that are not appropriate. The Department believes the scope of
the current Sec. 9.5(c) is sufficient to assist agencies in a way that
will lead to consistent decision-making across agencies. Under
paragraphs 6(b) and 6(c) of the Executive order, agencies are also
required to publish descriptions of the exceptions they have granted on
a centralized website and to report to OMB descriptions of these
exceptions on a quarterly basis. The Department intends to analyze use
of the agency exception process as these regulations are implemented
and may consider in the future whether additional procedural
requirements (such as the suggested standardized cost-benefit analysis)
are necessary.
The Department also declines to adopt the Coalition's suggestion
regarding additional guideposts for the discussion of factors in Sec.
9.5(c)(1) and (c)(2). The existence of two consecutive annual
``unsatisfactory'' past performance ratings, as suggested by the
Coalition, would certainly be relevant evidence for a determination
made with reference to the factor at Sec. 9.5(c)(1)(iii). That factor
provides for agency exceptions in situations where there is a
reasonable belief ``based on the predecessor employees' past
performance, that the entire predecessor workforce failed, individually
as well as collectively to perform suitably on the job[.]'' However, as
the Department noted in the NPRM, a contractor's past performance alone
will generally not be sufficient basis to invoke an exception, because
poor performance may result from poor management decisions of the
predecessor contractor (and not from failures of the predecessor's
service employees), and the management failures could be addressed by
awarding the contract to another entity. Instead, as the Department
proposed in the NPRM, the specific reasons for such poor performance
ratings would need to be considered. The Department is concerned that
adopting the Coalition's suggested language could give the impression
that past performance ratings alone can justify an exception. Thus, the
Department declines to adopt the Coalition's suggested amendments. For
the reasons discussed, the final rule adopts Sec. 9.5(c) as proposed.
In Sec. 9.5(d), the Department proposed language to address the
second of the three circumstances under which an agency may authorize
an exception from the nondisplacement provisions: where their
application 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. This exception is
provided for in section 6(a)(ii) of Executive Order 14055. The proposed
language of Sec. 9.5(d) clarified that a reduction in the number of
potential bidders is not, alone, sufficient to except a contract from
coverage under this authority; the senior procurement executive 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
stated 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 requires that any exercise of this authority must be
based on a market analysis. This requirement was addressed in proposed
Sec. 9.5(a)(2) and (d). This market analysis requirement is consistent
with existing requirements in the FAR. 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(b)(1). To justify the exception from the
nondisplacement requirements, the order requires that the market
analysis show that adherence to the requirements would
``substantially'' reduce the number of potential bidders so as to
frustrate full and open competition. In proposed Sec. 9.5(d), the
Department clarified that 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.
As with any of the exceptions, where an agency seeks to except a
particular contract under this competition-related analysis, the agency
is required, consistent with section 6(a) of Executive Order 14055 and
proposed Sec. 9.5(b), 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--must 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).
The AFL-CIO stated their general support for the Department's
proposed specific requirements in Sec. 9.5(d). As noted above,
however, the AFL-CIO and the Coalition also sought a process by which
employees for incumbent contractors would be notified of the potential
for an exception 120 days before the solicitation date and allowed to
submit comments. The final rule adopts Sec. 9.5(d) as proposed with a
slight and nonsubstantive change to the wording of one sentence, and
with two limited additions. In a nonsubstantive change, the Department
has streamlined the language that explains that a potential reduction
in the number of bidders alone is not sufficient to justify the
exception. The final rule clarifies that such a reduction is not
sufficient ``unless it is coupled with the finding that the reduction
would not allow for adequate competition at a fair and reasonable
price'' and adhering to the nondisplacement requirements would not be
reasonably tailored to the agency's needs for the contract.
In the first addition to this paragraph, the Department has
included a sentence to provide additional detail regarding
[[Page 86756]]
the requirement that the agency determine whether ``a fair and
reasonable price'' can be achieved in order to justify this exception.
The new sentence states that ``[w]hen determining whether a fair and
reasonable price can be achieved, the agency must consider current
market conditions and the extent to which price fluctuations may be
attributable to factors other than the nondisplacement requirements
(e.g., costs of labor or materials, supply chain costs).'' The
consideration of current market conditions in a price analysis is
consistent with agency approaches under FAR subpart 15.4 (Contract
Pricing). See Nomura Enter., Inc., B-271215 (May 24, 1996).
Second, the Department has added language to Sec. 9.5(d) to
require contracting agencies, to the extent consistent with mission
security, to include employees' representatives in any market-research-
related exchanges with industry that are specific to the
nondisplacement requirement. See 48 CFR 10.002(b)(2) (discussing market
research techniques involving industry outreach); 48 CFR 15.201
(encouraging ``early exchanges'' of information with industry and other
interested parties to identify concerns about acquisition strategy). As
the Department noted in the NPRM, to satisfy the Executive order's
requirement for an agency exception, the market analysis must be an
objective, contemporary, and proactive examination of the market
conditions. Accordingly, it would not be appropriate for the agency to
except a contract from the nondisplacement requirements on the basis of
a market analysis without a proactive effort to determine whether
sufficient bidders may exist so as to satisfy full and open
competition, including through communication with other knowledgeable
sources (such as, where feasible, the representatives of employees
currently working in that industry) regarding the services to be
provided.
In Sec. 9.5(e), the Department proposed to address the third
circumstance in which an agency exception would be appropriate: where
adhering to the requirements of the order would otherwise be
inconsistent with statutes, regulations, Executive orders, or
Presidential Memoranda. This exception basis is articulated in section
6(a)(iii) of Executive Order 14055 and restated in Sec. 9.5(a)(3) of
the regulations. In Sec. 9.5(e), the Department proposed 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 proposed this requirement to provide
consistency, to the extent possible, in the application of the order.
NIB commented that the exception process described in Sec. 9.5(e)
is, at least as to the legal questions around the JWOD Act,
``unnecessary and likely to negatively impact the AbilityOne Program.''
NIB noted that unless the Department issues guidance as referenced in
the proposed Sec. 9.5(e) regarding the AbilityOne Program, contracting
agencies would always be required to consult with the Department before
invoking this exception. For this reason, among others, NIB advocated
for an express exemption for AbilityOne contracts to remove these steps
from the procurement process. Melwood expressed a different but related
general concern--that the determination of legal conflicts by
contracting agencies ``on a case-by-case basis'' may lead to
inconsistent application or exceptions for AbilityOne authorized
contractors. Several other commenters, including SourceAmerica, Peckham
Inc., ServiceSource, and Didlake Inc., expressed similar concerns.
The Coalition, on the other hand, commented in support of the
proposed consultation requirement in Sec. 9.5(e). In their comment,
however, the Coalition advocated that the rule should further require
that the Department approve any exception before a contracting agency
is allowed to proceed. They also advocated that the Department's
approval should be contingent on a finding that such an exception would
be ``consistent with the federal government's interest in promoting
competitive integrated employment for people with disabilities, as
defined by the Workforce Innovation and Opportunity Act and applicable
implementing regulations and guidance issued by the Rehabilitation
Services Administration.''
Having considered the comments received regarding the procedure in
proposed Sec. 9.5(e), the final rule adopts the text of this paragraph
as proposed. Section 6(a) of the Executive order itself provides for a
default procedure of individual case-by-case determinations regarding
potential legal conflicts with the nondisplacement requirements. The
Department agrees with the various commenters that it makes sense to
ensure, as much as possible, that these agency exception decisions are
not made on an inconsistent basis or with inconsistent outcomes. The
proposed consultation procedure in Sec. 9.5(e) is intended to ensure
that these case-by-case determinations are as consistent as possible.
The Department declines to adopt the Coalition's suggestion that
agencies be required to receive approval from the Department, in
addition to seeking consultation, before issuing an exception for a
contract under Sec. 9.5. The procedure in Sec. 9.5(e) provides an
appropriate balance. In most cases, the procedure will require
consultation with the Department if a potential conflict is identified.
Consultation will allow the Department to share any resources or
information with the contracting agency, including how the specific
potential conflict has been treated by other agencies. This should
decrease the potential for inconsistency, about which commenters
expressed concern. Section 9.5(e) also seeks to increase efficiency,
without cost to consistency, by eliminating the consultation
requirement where the Department has already issued guidance on the
potential conflict.
If an agency itself has the authority to interpret and implement a
particular law or policy that potentially conflicts with the
requirements of Executive Order 14055 or this regulation, the procedure
in Sec. 9.5(e) defers in the first instance to that agency and does
not require consultation with the Department. Although no consultation
is required, the Department encourages communication because the
determination of whether a conflict exists between two legal
requirements necessarily involves interpreting both legal
requirements--and the Department itself has authority to interpret and
enforce nondisplacement requirements.
Finally, with regard to the potential conflicts with contracts
covered by the JWOD Act, as discussed in section II.B.4. above, the
Department has separately addressed these concerns by including a
contract clause that applies to all such contracts and subcontracts and
instructs contractors that they must implement the JWOD Act (and
certain other statutory procurement preference programs) and the
nondisplacement provisions in tandem and to the maximum extent
possible.
ii. Reconsideration of Agency Exceptions
In the NPRM, the Department proposed language at Sec. 9.5(f) to
provide a procedure for interested parties to request reconsideration
of agency exception determinations. This proposed language mirrored the
procedure that was included in the
[[Page 86757]]
regulations that implemented Executive Order 13495. See 29 CFR
9.4(d)(5) (2012). In using the term ``interested parties,'' the
Department stated that it intended to extend the opportunity to request
reconsideration to affected workers or their representatives, in
addition to actual or prospective bidders. The Department stated that
it did 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 sought input from commenters regarding
the proposed procedure.
PSC expressed concerns about the reconsideration process that the
Department proposed for both the location continuity decision described
in Sec. 9.11 and the agency exception decision in Sec. 9.5. The PSC
noted that the Executive order does not expressly provide for a
reconsideration process and stated that the process could have negative
outcomes, such as by allowing a broad set of individuals or entities to
``potentially delay the implementation of business judgments of agency
acquisition personnel'' and thereby delay acquisitions. PSC warned that
the Department's intent to give a broad meaning to the term
``interested parties'' could have unforeseen results, like potentially
allowing formal requests for reconsideration by governmental
jurisdictions that might be competing to be the location of a successor
contract.
The Coalition and the AFL-CIO, on the other hand, expressed general
support for the concept of a reconsideration provision, but with
significant amendments. As noted above, these commenters suggested that
agency exception decisions should be made 60 days before a solicitation
is issued so that reconsideration could be sought and resolved before
the solicitation date. The Coalition also advocated that requests for
reconsideration be directed to the Department, not to the contracting
agency that proposed the exception. The Coalition noted that this
suggestion is ``consistent with the fundamental principle of fairness
that appeals should not be directed to the original decisionmaker.''
The Department considered these comments within the larger context
of the agency exceptions determination and finds that it is not
necessary at this time to include the proposed formal reconsideration
provision in Sec. 9.5. When an agency seeks to waive the
nondisplacement requirements for a particular contract, there are
several safeguards to ensure that this procedure is not misused. As
adopted in this final rule, Sec. 9.5(b) of the regulations requires
the agency, through its senior procurement executive, to make a written
explanation, ``including the facts and reasoning supporting the
determination,'' and to make that determination no later than the
solicitation date. Paragraphs 9.5(c) and (d) contain specific
additional requirements regarding the factors that must be considered
and those that cannot be considered for the first two exception
provisions, and Sec. 9.5(e) contains additional procedural
requirements where an agency seeks to waive the nondisplacement
provisions based on a perceived conflict with another law or policy. If
the agency does not issue a timely specific written explanation, then
the exception will be inoperative, and the agency will be required to
either terminate the contract or cancel the solicitation and properly
reissue it or to modify the existing contract to incorporate the
nondisplacement contract clause consistent with the procedure outlined
in Sec. 9.11(f) of the regulations.
Even without a formal reconsideration provision in the regulations,
the Department expects and encourages workers and their representatives
to communicate with contracting agencies (and the Department, as
appropriate) about any potential agency exception decision. Decisions
regarding agency exceptions should be rare. But when they occur, they
will generally be fact-specific, and workers and their representatives
will likely have important information that can assist agencies in
weighing the potential outcomes of a decision regarding an agency
exception. Moreover, section 6(b) of the Executive order itself
requires agencies to provide notice of an agency exception decision to
workers and any collective bargaining representatives. The implication
of that notice provision is that contracting agencies should welcome
communications from workers or their representatives about an exception
decision, and agencies should be prepared to reconsider any decision if
they are provided with material facts or persuasive legal arguments
that they had not previously considered.
In light of these safeguards--and in particular the availability of
the retroactivity mechanism at Sec. 9.11(f)--the Department finds that
it is not necessary at this time to implement the formal
reconsideration procedure that was previously proposed for Sec.
9.5(f). However, the Department will carefully analyze the publication
and reporting of exception decisions that is required under the order,
along with feedback from workers, their representatives, and
contractors. If appropriate, the Department may engage in a future
notice and comment rulemaking to implement a more formal
reconsideration procedure or take other appropriate action such as
issuance of subregulatory guidance.
The Department therefore is removing the reconsideration provision
that was at Sec. 9.5(f) of the proposed rule and is removing from the
contract clause, set forth in Appendix A, the language that required
notices of agency exceptions to include reference to the manner of
directing a request for reconsideration.
iii. Notification, Publication, and Reporting of Agency Exceptions
In the NPRM, the Department proposed to include in the regulations
at Sec. 9.5(g) a recitation of the notification, publication, and
reporting requirements contained in sections 6(b) and 6(c) of the
order. 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.
The Department received comments from the Coalition and the AFL-CIO
regarding these notice and publication provisions. The commenters
proposed revisions to the timeframe for notice of agency exceptions
decisions so that agencies would have to notify workers and their
representatives of a proposed exception no later than 120 days before a
bid solicitation goes out to give workers time to comment on the
proposed exception, the agency to respond, and the workers to request
reconsideration (from the Department). The Coalition and Jobs to Move
America also encouraged the Department to provide guidance to agencies
about the form, content, and accessibility of the required publications
on agency websites that are required by section 6(b) of the order, and
to periodically monitor their compliance. They also stated that the
Department could also promote the purposes of the order and
transparency into government decision-making by coordinating with OMB
to ensure that the quarterly reports that it receives from agencies are
compiled and
[[Page 86758]]
published on a centralized public website.
The Department acknowledges these comments, but notes that section
7(a) of the Executive order does not provide the Department with the
authority to issue implementing regulations regarding the notice and
publication requirements in paragraphs 6(b) and (c) of the order. 86 FR
at 66399. For that reason, the Department's proposed regulations at
Sec. 9.5(g), which are finalized in Sec. 9.5(f) of the final rule,
are recitations of the text of the Executive order itself and do not
include any additional detail. For contracts that are subject to the
FAR, the regulations that are implemented by the FAR Council may
include additional instructions regarding the notice, publication, and
reporting requirements.
Accordingly, the final rule adopts the language regarding notice,
publication, and reporting provisions as proposed, except that the
language now appears in Sec. 9.5(f) of the final rule instead of Sec.
9.5(g) to account for the removal of the reconsideration language
previously proposed for Sec. 9.5(f).
Subpart B--Requirements
6. Section 9.11 Contracting Agency Requirements
As proposed, Sec. 9.11 would implement sections 3 and 4 of
Executive Order 14055. Section 3 of the order directs agencies to
ensure that covered contracts and solicitations include the
nondisplacement contract clause. 86 FR at 66397-98. Section 4 of the
order directs agencies to consider, during the preparation of a covered
solicitation, 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--and, if so, to include a requirement or preference for
location continuity in the solicitation. Id. at 66398-99.
Proposed Sec. 9.11 specified contracting agency responsibilities
to incorporate the nondisplacement contract clause in covered
contracts, to ensure notice is provided 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 specified contracting agency
responsibilities to provide the list of employees working under the
predecessor contract and its subcontracts to the successor, to forward
complaints and other pertinent information to WHD when there are
allegations of contractor non-compliance with the nondisplacement
contract clause or this part, and to incorporate the contract clause
when it has been erroneously omitted from the contract.
i. Section 9.11(a) Incorporation of Contract Clause
Section 3(a) of Executive Order 14055 specifies the 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) provided a regulatory requirement to
incorporate the contract clause specified in Appendix A into covered
service contracts, and solicitations for such contracts, except for
procurement contracts subject to the FAR. For procurement contracts
subject to the FAR, contracting agencies would use the relevant clause
developed to implement this rule set forth in the FAR. As the proposed
rule explained, 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, as the Department noted in the proposed rule, 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 the 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, No. C86-2188, 1988 WL 125784, at *4
(N.D. Ohio 1988) (finding SCA clause was enforceable where the SCA
contract clause was not incorporated ``verbatim,'' but the contract
incorporated by reference a GSA form that set forth the provisions of
the SCA); Progressive Design & Build, Inc., WAB No. 87-31, 1990 WL
484308, at *2 (Feb. 21, 1990) (finding subcontractor liable for Davis-
Bacon Act (DBA) back wages where the DBA contract clause was not
physically incorporated into subcontracts, but was incorporated by
reference). The Department specifically noted in the proposed rule that
the full contract clause will be deemed to have been incorporated by
reference in a covered contract when 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. Similarly, under the FAR, a contract that contains
a provision expressly incorporating contract clauses by reference gives
those clauses the same force and effect as if they were given in full
text. See 48 CFR 52.107, 52.252-2.
ii. Appendix A Contract Clause
Appendix A contains the nondisplacement contract clause that must
be inserted in covered contracts as required by Sec. 9.11(a). The
proposed language of the contract clause in Appendix A is based on the
language of the clause that appears in the Executive order itself.
Contract clause paragraphs (a) through (e) of proposed Appendix A
repeat the language in paragraphs (a) through (e) of the Executive
order's contract clause verbatim, with one exception. The Department
proposed to modify the contract clause by inserting 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.
As 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 was
for employees who are not service employees and the other was 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 would provide to the successor contractor to ensure the
[[Page 86759]]
successor contractor has the information necessary to provide the
employees with the right of first refusal. Proposed contract clause
paragraph (d) provided 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 honor the requirements of paragraphs (a) through (c) and
would 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 set forth additional provisions necessary to
implement the Executive order. As the proposed rule explained, 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) provided 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 on the
contract and its predecessor contracts with either the current or
predecessor contractors or their subcontractors. Proposed paragraph
(f)(1) further explained that if there are changes to the workforce
made after the 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.
Proposed contract clause paragraph (f)(2) provided notice that
under certain circumstances the contracting officer would, 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 (f)(3) provided that contractors
would deliver notices to their employees of an agency determination to
except a successor contractor from the nondisplacement requirements of
29 CFR part 9, or to decline to include location-continuity
requirements or preferences in a successor contract.
In contract clause paragraph (g), the Department proposed to
require the contractor to maintain certain records to demonstrate
compliance with the substantive requirements of part 9. As proposed,
this 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 specified that the
contractor would be required to maintain the particular records
(regardless of format, e.g., paper or electronic) for 3 years. The
proposed paragraph further specified that such 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, and the date of payment, along with a copy of any receipt form
provided by or authorized by WHD. The proposed clause also stated 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) provided 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.
The Coalition requested that the Department explicitly provide in
the contract clause a statement that covered employees are intended
third-party beneficiaries of the contract clause. The Coalition
explained that this would give employees the ability to pursue private
litigation to enforce Executive Order 14055. The Department does not
adopt the Coalition's suggestion. Section 12(c) of Executive Order
14055 states that 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 66400. The Department interprets this language to limit
its discretion to create or authorize a private right of action. Accord
86 FR 67192 (interpreting identical language to similarly limit
discretion under Executive Order 14026). The Department declines to
amend the contract clause to expressly designate workers as third-party
beneficiaries of the contract's nondisplacement requirements. While the
Coalition noted that Executive Order 14055 ``explicitly create[s]
particular nondisplacement rights for workers,'' the Department
believes that section 12(c) of the order is clear in limiting the
Department's ability to create or authorize a private right of action
under Executive Order 14055. As explained in Sec. 9.1(c), however,
neither Executive Order 14055 nor this part creates or changes any
private right of action that may exist under other applicable laws.
Thus, nothing is intended to limit or preclude a civil action under the
False Claims Act, 31 U.S.C. 3730, or criminal prosecution under 18
U.S.C. 1001. Likewise, whether a worker could make a third-party
beneficiary claim under relevant state law would be determined by such
state law.
The Department did not receive additional comments on proposed
Sec. 9.11(a) or on the proposed contract clause in Appendix A, and
thus the final rule adopts them as proposed, with the following
exceptions. The Department has added language to Sec. 9.11(a) to
reflect that the application of the FAR nondisplacement clause will
take place under the procedures set forth in the FAR, as well as
paragraph (f)(3) of Appendix A to add reference to the requirement from
Sec. 9.12(e)(3) that predecessor contractors provide notice to
employees of their possible right to an offer of employment on the
successor contract. The Department also made several revisions to the
contract clause
[[Page 86760]]
for purposes of clarity and to reflect revisions to the regulations
that are discussed elsewhere in this final rule.
iii. Section 9.11(b) Notices
Proposed Sec. 9.11(b) specified 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). The Department
did not receive any comments on proposed Sec. 9.11(b). Comments
addressing the other notice requirements contained in this rule are
addressed in the preamble sections corresponding to where they appear
in the regulatory text. The final rule adopts Sec. 9.11(b) as
proposed, other than, for clarity, adding a cross-reference to the
other employee notice provisions found at Sec. 9.11(c)(4) (relating to
notice to employees' representatives to provide information relevant to
the location continuity analysis), and where relevant, Sec. 9.5(f)
(relating to agency exceptions).
iv. Section 9.11(c) Location Continuity
Section 9.11(c) implements the location continuity requirements in
section 4 of Executive Order 14055. Section 4(a) of the order states
that, in preparing covered solicitations, contracting agencies must
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 at 66398. Section 4(b) states 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. 86 FR at 66399. For IDIQ contracts under the MAS and other
similar programs, the location continuity determination would be made
by the ordering agency prior to issuing the RFQ. See 48 CFR 8.405-
1(d)(2), 8.405-2(b)-(c), 8.405-3(b)(ii) (requiring statements of work
and/or RFQs for proposed orders and blanket purchase agreements
exceeding the simplified acquisition threshold).
These requirements represent a different approach to location
considerations than the prior nondisplacement provisions in Executive
Order 13495. The new requirements seek to increase the government's
opportunity to benefit from carryover workforces even where a contract
location changes, but the requirements also place significantly more
emphasis on the potential benefits of keeping contract locations
constant. Executive Order 13495 limited the application of the
nondisplacement requirements to contracts for similar services at the
``same location.'' 74 FR at 6104. Executive Order 14055, in contrast,
does not contain such a limitation. As a result, Executive Order 14055
applies the nondisplacement requirements regardless of the location of
the successor contract. Even if the place of performance for a
successor contract will be in a different locality from the predecessor
contract, the successor contract will still be required to include the
nondisplacement contract clause and the successor contractor will 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
Executive Order 14055, however, clarifies that these requirements
should not be construed to require or recommend the payment of
relocation costs to workers who exercise their right to take a new
position when a contract location is moved. 86 FR at 66398. Executive
Order 14055 recognizes this through the location continuity
requirements in section 4 of the order, as well as in a discussion of
location continuity in section 1 of the order. Id. at 66397-99. The
central location continuity provisions, in section 1 and section 4 of
Executive Order 14055, reflect the basic but important conclusion that
the right of first refusal in the contract clause may have a more
limited effect in many circumstances 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. 86 FR
66397. The benefits of using a carryover workforce and location
continuity are intertwined because for many contracts, in particular
those on which workers cannot or may not be allowed to work in a fully
remote capacity, 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, the
provisions of section 4 of the order require that for each covered
contract, the contracting officer consider whether to include a
requirement or preference for location continuity. See 86 FR at 66398-
99. The Department proposed to restate these requirements from the
order in Sec. 9.11(c)(1) and Sec. 9.11(c)(2), respectively.
The Department received several general comments regarding the
location continuity requirements in the order and in the proposed text
of Sec. 9.11(c). The AFL-CIO and the Coalition expressed strong
support for the requirements. The Coalition stated that the benefits of
retaining experienced workers are no different for contracts that
change locations. They provided the example of a 2008 decision by the
State Department to move a call center contract for the National
Passport Center to Michigan from New Hampshire, where it had been
operating for 12 years. The decision resulted in the termination of
hundreds of trained workers and allegations of significant service
disruptions.\5\ The AFL-CIO agreed with the NPRM that the benefits of
using a carryover workforce and location continuity are intertwined.
They stated that absent a location continuity requirement, there is
``significant risk that the broader benefits of the nondisplacement
rule will not be realized.''
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\5\ See ``Call Center to Close in Dover; 300 Jobs Cut,''
Associated Press (Dec. 3, 2008), <a href="https://www.seacoastonline.com/story/news/2008/12/03/call-center-to-close-in/52169521007/">https://www.seacoastonline.com/story/news/2008/12/03/call-center-to-close-in/52169521007/</a>; ``Local
AT&T Worker Claims Mich. Call Center Backed Up,'' Fosters Daily
Democrat (Mar. 11, 2009), <a href="https://www.fosters.com/story/news/2009/03/11/local-at-t-worker-claims/52067699007/">https://www.fosters.com/story/news/2009/03/11/local-at-t-worker-claims/52067699007/</a>.
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In contrast, ABC and Nakupuna opposed the location continuity
provision in its entirety. ABC commented that the combination of the
location continuity provisions and the elimination of the ``same
location'' requirement from the prior nondisplacement order ``will
needlessly limit successor contractors from performing the work in a
new locality with employees who are familiar with the new location.''
Nakupuna expressed concern that the required location continuity
analysis will be burdensome for agencies and that ``any subsequent
final decision will severely constrain the government if labor market
[[Page 86761]]
conditions change rapidly throughout the solicitation, award, and
hiring/staffing process.'' Nakupuna thus advocated for limiting
coverage of the nondisplacement rule only to the same location, and
``specifically the same Federal facility.''
The Department reviewed and considered the above general comments
regarding the location continuity provisions and declines to eliminate
these provisions in the final rule. The Executive order expressly
requires agencies to consider location continuity and include location
continuity requirements or preferences where reasonably necessary. 86
FR at 66398-99. Accordingly, Sec. 9.11(c)(1) and (c)(2), as finalized,
include these requirements within the subpart of the regulations that
addresses contracting agency requirements.
The Department, however, also disagrees with ABC and Nakupuna that
the location continuity requirements will have adverse effects. Even
though there is no express requirement to do so in the FAR, agencies
already in many cases require contracts to be performed at specific
locations or otherwise consider whether to include location continuity
requirements in solicitations. For example, where the services at issue
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., Novad Mgmt.
Consulting, LLC, B-419194.5, 2021 WL 3418798, at *3-4 (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 or preference may be
reasonably necessary to ensure economical and efficient provision of
services.
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. 86 FR at 66398-99. 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. One commenter, PSC, while opposing several of the
procedural safeguards that the Department proposed for the location
continuity requirement, noted its general agreement that location
continuity might be appropriate where related to ``efficiency in
facilities or with regard to classified information management.''
The Department also noted in the NPRM that there will be other
cases in which changed agency needs may outweigh the basic interest in
a carryover workforce. 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. The Coalition provided another
example in their comment. If workers under the predecessor contract
have been primarily working in a fully remote capacity, location
continuity may be less necessary to obtain the goals of the order,
particularly if the solicitation contemplates the continued
availability of remote work on the successor contract. As discussed
below, the Department is not limiting contracting agencies from
considering any aspects of agency requirements in making location
continuity determinations. Accordingly, the Department does not agree
with ABC or Nakupuna that the location continuity provisions will
unnecessarily limit or constrain agency decision-making.
(A) ``Same Location'' and ``Same Locality''
COFPAES requested clarification regarding the meaning of the
Executive order's statement in section 1 that the same benefits of the
nondisplacement order are also realized when the successor contractor
performs the work at ``the same location where the predecessor contract
was performed.'' See 86 FR 66397. COFPAES stated that this reference
was confusing because the NPRM explained that the order's coverage
applies coextensively with the SCA, and therefore applies irrespective
of where the contractor performs the work. See 29 CFR 4
[…truncated; see source link]Indexed from Federal Register on December 14, 2023.
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