Federal service contracts and solicitations made on or after January 18, 2013 will need to comply with regulations implementing Executive Order (E.O.) 13495, Nondisplacement of Qualified Workers Under Service Contracts, signed by President Obama on January 30, 2009. 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 to offer existing employees the right of first refusal to take positions for which they are qualified under the new contract. The right of first refusal clause does not apply to managerial or supervisory employees. Contractors found in violation of the E.O. and its implementing regulations could be barred from future federal contracts for up to three years.

While the Department of Labor (DOL) issued final regulations on E.O 13495 in August 2011, these regulations could not take effect until the Federal Acquisition Regulatory Council (FARC) amended the Federal Acquisition Regulation (FAR) to include the new contract clause required by the E.O. On December 21, 2012, the final regulations amending the FAR were published. The DOL’s notice announcing the January 18, 2013 effective date appears in the December 21, 2012 edition of the Federal Register.

The final rule incorporating the E.O. language into the FAR varies slightly from the initial proposal. Specifically, the final rule:

  • clarifies that the DOL regulations implementing E.O. 13495 apply.
  • adds three subsections to FAR 22.1203 to address “Method of job offer,” “Exceptions,” and “Reduced staffing.”
  • adds cross-references throughout FAR subpart 22.12 to the applicable section of the DOL implementing regulations.
  • clarifies that a “service employee” does not include an individual employed in a bona fide executive, administrative, or professional capacity.

The rule advises contracting officers to work with their existing service contractors to modify their contracts, to the extent feasible, to include the right of first refusal clause set forth in FAR 52.222-17. Alternatively, contracting officers

should consider entering into bilateral modifications with existing service contractors to agree to perform paragraph (c) of the clause at FAR 52.222-17, which: (1) informs the existing predecessor contractor’s workforce of their right of first refusal; and (2) provides the list of service employees to the contracting officer no less than 30 days before contract completion. Contracting officers shall document the contract files of their existing service contracts to describe the steps that were taken.