Labor Department, industry dispute impact of contracting rule

Friday - 9/2/2011, 5:33am EDT

By Jason Miller
Executive Editor
Federal News Radio

The Labor Department's final rule changing the way service contractors fill vacancies after winning a recompeted contract goes further than previous regulations. But it is far from the blanket requirement to hire all workers on the losing incumbent bidder's team that many believe it calls for.

Labor issued a final rule Monday implementing the rule first laid out in President Barack Obama's January 2009 Executive Order.

The rule requires "contractors and subcontractors who are awarded a federal service contract to provide the same or similar services at the same location to, in most circumstances, offer employment to the predecessor contractor's employees in positions for which they are qualified. Successor contractors are allowed to reduce the size of the workforce and to give first preference to certain of their current employees," Labor wrote on its new website about the regulations.

Tim Helm, the branch chief for Government Contracts Enforcement in Labor's Wage and Hour division, said the rule applies to all service contracts worth more than $150,000 — the government's simplified acquisition threshold. He said the type of services includes everything from technology support to automation to security guards to cleaning to cafeteria services.

"There is a recognition the federal government's procurement interest in economy and efficiency are best served when the successor contractor hires predecessor contractor employees," said Helm in an interview with Federal News Radio. "The logic here is a carryover workforce reduces disruption to the delivery of services during the period of transition between contractors and it provides the federal government with the benefits of an experienced and trained workforce that is familiar with the mission and purpose of the underlying contract."

Helm said the rule doesn't require winning vendors to hire every worker from the incumbent, nor does it require the successful company from displacing its current workforce.

But Alan Chvotkin, the executive vice president and general counsel for the Professional Services Council, an industry association, said the hiring of incumbent workers isn't the issue.

"That's a smart business choice to make to minimize the cost of hiring and the cost of training, but it really depends in large part on how the company plans for and chooses to implement the solution to the work they've proposed and the government selected them to perform," he said. "Under this rule the company's flexibility to choose is diminished."

He said many times winning vendors hire losing vendors employees. The issue is the mandate to offer the right of first refusal because it affects the way vendors bid on certain contracts.

Labor estimated the rule would affect about 40,000 federal prime and subcontractors.

Chvotkin says he's not sure how many of his members would be negatively affected.

PSC along with the Society for Human Resource Management (SHRM), the labor unions such as the AFL-CIO and the Service Employees International Union, were among those who commented on the proposed rule.

SHRM wrote in comments to Labor on the proposed rule that it "devalues the important considerations of human capital and firm-specific competencies thereby compromising and/or eliminating economy and efficiency in federal government procurement."

Even though Labor issued the final rule, it is not yet in effect.

Helm said the Federal Acquisition Regulations Council will issue a complimentary rule in the coming months.

"Our expectation is the FAR Council will issue regulations that contain provisions we included in our regulations," he said. "We spent a great deal of time working with agencies to make sure we addressed their concerns. We wanted to make sure the flow from our regulations to their implementing regulations was a smooth one."

Based the comments it received, Helm said Labor made several changes to the final rule.

"There were questions about the timing of what we call a certified seniority list from the predecessor to the successor contractor and the contracting agency," he said. "We made adjustments to reflect what appears to be a far more appropriate time frame for providing that list. So that time frame when from 10 days to 30 days."

Another change calls for Helm's office to review all complaints from agencies or employees about vendors not following the rules. The proposed rule said the protests would go to the procuring agency.

This is the second time agencies and vendors have had to abide by these regulations. Helm said President Bill Clinton issued a similar order and Labor provided implementation regulations in the 1990s.