On September 13, 2011, we told you about the Department of Labor’s (“DOL”) August 29, 2001 final rule implementing Executive Order 13495, Nondisplacement of Qualified Workers Under Service Contracts.  According to Executive Order 13495, the Federal Government’s procurement interest in economy and efficiency are better served when a successor contractor who wins a follow-on contract for the same or similar services at the same location, hires the predecessor’s employees.  The Government believes that using the carryover workforce reduces disruption to the delivery of services during the period of transition between contractors, and provides the Federal Government the benefits of an experienced and trained workforce that is familiar with the Federal Government’s personnel, facilities, and requirements. 

The DOL’s rule requires contractors, and its subcontractors, who win a follow-on services contract for performance of the same or similar services at the same location, to offer those employees employed under the predecessor contract (other than managerial and supervisory employees) the right of first refusal of employment under the successor contract in positions for which they are qualified, if their employment would otherwise be terminated as a result of the award of a successor contract to another company.

On May 3, 2012, the FAR Council issued a proposed rule which would amend the FAR to implement Executive Order 13495.  It will apply to all service contracts above the simplified acquisition threshold ($150,000).  The proposed FAR rule requirements are taken from the Executive Order and adopt, in part, the DOL’s final rule.  Both rules require many successor contractors and their subcontractors to offer employment to their predecessor's workforces for performance of the same or similar work at the same location.  Both rules also include similar exemptions, similar preparation of waiver requirements, similar notification requirements for incumbent employees, and a similar requirement that the outgoing contractor furnish the contracting officer with a list of the names of all service employees working under its contract and subcontracts.

The two rules are different in that the proposed FAR rule does not repeat those elements of the DOL rule relative to enforcement mechanisms, investigation techniques or review methods, except as necessary to ensure that contracting officers and contractors are aware of the DOL requirements.  The FAR rule does, however, include additional administrative burdens for all parties and an additional exemption whereby the agency may waive the application of the Executive Order if its application would impair the ability of the Government to procure services on an economical and efficient basis.

The FAR Council has indicated that it is considering adding language to this proposed rule that encourages agencies to enter into bilateral modifications which obligate predecessor contractors to inform their service employees of their right of first refusal, and to provide the list of impacted employees to the contracting officer no less than 30 days before contract completion. The FAR Council has specifically requested public comment on this proposed language.

The FAR Council has also requested public comment on (1) the level to which waiver authority may be delegated under the rule; and (2) the steps that could be taken (as agencies transition to the requirements of the new FAR clause) to reduce instances where service employees of the predecessor contractor and successor contractor do not receive notice of their rights, and where successor contractors receive employee lists less than 30 days before the end of the predecessor contract. 

Comments on the proposed rule will be accepted until July 2, 2012.