The Office of Federal Contract Compliance Programs (“OFCCP”) has articulated a renewed focus on ensuring that covered federal government contractors, including subcontractors, are in compliance with the equal employment opportunity and affirmative action requirements of Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Veterans’ Readjustment Assistance Act of 1974. The OFCCP’s aggressive stance can be seen in its plans for increased compliance evaluations and enforcement actions in 2010, its expansive interpretation of what constitutes a covered government contract, and in its recent directive regarding compliance evaluations of contractors that receive funds pursuant to the American Recovery and Reinvestment Act of 2009 (“ARRA”).

Covered federal government contractors can expect to see a marked increase in enforcement efforts by the OFCCP in the coming years. For fiscal year 2010, the OFCCP has requested an additional 25 million in funds to support an additional 213 full time employees to support enforcement and outreach efforts, a thirty-six percent increase in the number of full time employees at the agency. Hoping to mark its fifth consecutive year of record enforcement numbers, the OFCCP plans to increase the number of compliance evaluations by twenty percent in 2010 and to make it a priority to review compensation data for potential discrimination. The OFCCP’s budget request also includes funds for a new case management system that it believes will help it better identify contractors for compliance evaluations and better manage the evaluation process. While final appropriations action on the budget is pending, it is apparent that the OFCCP will be increasing its compliance and enforcement efforts.

The OFCCP also recently has taken a more expansive view of who is a covered government subcontractor. For example, in OFCCP v. Braddock, the Department of Labor Administrative Review Board (“ARB”) held that hospitals become federal subcontractors when they join a Health Maintenance Organization (“HMO”) network that provides benefits to federal employees under an HMO’s contract with the Office of Personnel Management. Prior to this ruling, health care providers participating in HMO arrangements, like those participating in insured fee for service arrangements, were not regarded as covered federal subcontractors. Under Braddock, however, a hospital that enters into an HMO arrangement that covers federal employees is a federal subcontractor, even if it never agreed to any affirmative action plan requirements in its contract with the HMO. Accordingly, those hospitals must be in compliance with applicable equal employment opportunity and affirmative action plan requirements. A challenge to this ruling is pending in federal court, but the ARB’s Braddock ruling currently has the force of law.

In addition, contractors or subcontractors who receive service and supply contracts under the American Recovery and Reinvestment Act of 2009 (“ARRA”) can expect aggressive efforts by the OFCCP to ensure their compliance with applicable equal employment opportunity and affirmative action requirements.

ARRA compliance evaluations, unlike compliance evaluations for non-ARRA contractors, will consist of full desk audits and onsite reviews, even in the absence of indications of systemic discrimination. In addition, ARRA contractors may be audited more frequently, and there is no limit to the number of establishments within a company that may be audited. Further, a federal contractor who has been audited pursuant to the OFCCP’s standard compliance evaluation procedures will be exempt from a more rigorous ARRA compliance evaluation for only six months. Under the new directive, the OFCCP must conduct a pre-award clearance evaluation for companies that bid for federal contracts of over $10 million unless the contractor already is listed on the National Pre-Award Registry.

The new directive places a particular focus on construction contractors, who are expected to receive the bulk of ARRA funds, but ARRA funds also are available to other industries including environmental and energy businesses. It is important to note that not all funds or opportunities awarded pursuant to ARRA constitute covered “service and supply” contracts. For example, institutions that receive government grants will not be considered federal government contractors on the basis of those funds, and therefore they will not be subject to OFCCP compliance evaluations. Accordingly, it is important to consult with experienced counsel to determine whether ARRA funds received qualify as a covered “service and supply” contract. Entities that may be receiving government funds for the first time should be particularly cognizant of these requirements.

In light of the OFCCP’s renewed focus on compliance and enforcement efforts, all federal contractors and subcontractors should take action examine whether their equal employment opportunity and affirmative action policies and procedures are compliant with federal requirements.