The Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) have issued a proposed rule that would amend the Federal Acquisition Regulation (FAR) to implement Executive Order (E.O.) 13495, Nondisplacement of Qualified Workers Under Service Contracts, signed by President Obama on January 30, 2009. Generally, this E.O. requires that any federal service contracts covered by the Service Contract Act (SCA) above the simplified acquisition threshold (currently $150,000) and solicitations for such contracts include a clause requiring contractors and their subcontractors – with certain listed exclusions – to offer existing employees the right of first refusal to take positions for which they are qualified under the new contract. In August 2011, the Department of Labor issued final regulations outlining the applicable sanctions and remedies in the event a contractor is found in violation of this E.O. The new proposed rule published in the May 3, 2012 edition of the Federal Register would add subpart 22.12 and a new clause to the FAR to incorporate the language and intent of EO 13495 and the DOL’s implementing regulations. The proposal does not, however, address the investigative methods, available reviews, or enforcement mechanisms established by the DOL regulations “except as necessary to ensure that contracting officers and contractors, including subcontractors, are aware of their requirements and responsibilities.”

The proposed regulations discuss the following issues:

  • The definitions of “service contract” and “service employee.”
  • Statement of policy. The proposal clarifies that the EO’s policy applies only to service contracts for performance of the same or similar services at the same location.
  • The five exemptions to the EO’s requirements, which are listed in the E.O. itself.
  • Waiver authority and limitations. Under the E.O., the head of the procuring agency has the right to waive some or all of the provisions of this right of first refusal obligation if he or she determines in writing that doing so would not serve the purposes of E.O. or “would impair the ability of the federal government to procure services on an economical and efficient basis.” The proposed rule outlines the waiver requirements and penalties for noncompliance.
  • Certified employee lists. The predecessor contractor is required to provide to the successor contractor in a timely manner a certified list of its employees who are qualified to work on the successor contract. The proposal discusses these timeframes.
  • Required notifications to contractors and employees. The contracting officer (CO) is required to ensure that the predecessor contractor notifies its service employees of their rights under the E.O. At least 30 days before the expiration of the contract, the contractor must provide the CO with a list of the names of all service employees working under the contract and its subcontracts at the time the list is submitted. According to the proposal, there is a likelihood that, “during the initial implementation of the E.O., service employees of the predecessor contractor may not receive written notice and Contracting Officers (and hence successor contractors) may not receive the list 30 days before the end of the contract,” as the current notification clause in the FAR regulations does not include a right of first refusal, and permits submission of the list to the CO as few as 10 days prior to completion of the contract. As discussed in the proposal, the FAR Council is “considering possible steps that might be taken, as agencies transition to the new clause, to reduce instances where service employees of the predecessor contractor and successor contractors do not receive notice of their rights and successors receive lists less than 30 days before the end of the contract.” The agencies seek input on one possible solution, which is to “encourage agencies to enter into bilateral modifications (starting with the largest SCA-covered contracts) that obligate predecessor contractors to: (1) inform their service employees of their right of first refusal and (2) provide the list to the Contracting Officer no less than 30 days before contract completion.”
  • Remedies and sanctions, which are taken from the DOL’s final rule; and
  • The contract clause itself that must be inserted into federal service contracts.

Comments on this proposal must contain the identification number: FAR Case 2011-028 and be received by July 2, 2012. Comments may be submitted electronically through the federal eRulemaking portal  or via facsimile to: 202-501-4067. Alternatively, written comments may be sent to: General Services Administration, Regulatory Secretariat (MVCB), ATTN: Hada Flowers, 1275 First Street, NE., 7th Floor, Washington, DC 20417.