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This week’s episode covers IT modernization, tariff news, and OFCCP news, and is hosted by partner David Robbins. Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without.

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Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without, with the latest edition hosted by partners David Robbins and Peter Eyre and including updates on the latest executive orders by President Trump, the Homeland Security Acquisition Regulation, and OFCCP’s voluntary self-disclosure of disability form. Click on one of the options listed below to listen.
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On December 9, 2014, the Office of Federal Contract Compliance Programs (OFCCP) within the Department of Labor (DOL) issued a final rule implementing the President’s July 2014 Executive Order 13672, which prohibits federal contractors from discriminating on the basis of sexual orientation or gender identity. The rule requires contractors and subcontractors to add “gender identity” and “sexual orientation” to the Equal Opportunity Clause and to their solicitations or advertisements for employment, but it does not require them to solicit such information from applicants or employees, to set placement goals, or to maintain or analyze any data on those categories. Companies that wish to learn more about this rule might be interested in a December 5 open forum hosted by DOL and DOL’s Frequently Asked Questions regarding this rule. In response to questions from industry about the rule, a DOL spokesperson indicated additional meetings with stakeholders will be scheduled and further guidance will be issued.

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Contractors felt the squeeze from budget cutbacks and increased compliance requirements during 2013. As government agencies continue to operate under constrained budgets, competition for the federal contracts will remain intense. What should contractors expect in 2014? Join our Crowell & Moring team on Thursday, January 9 at 1:00 pm EST for a free webinar as we discuss the hot issues contractors will be facing next year. We will cover the likely trends in the areas of costs, suspension and debarment, cybersecurity, bid protests, international issues, procurement fraud, small business, OFCCP, claims/contractor recovery, data rights, and many others. Presenters include some of the most experienced attorneys in the field, and we hope you can join us.

Please click here to register.

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Here they go again. Undeterred by the failure of the EO Survey five years ago, on August 10, 2011, the Office of Federal Contract Compliance Programs (“OFCCP”) published an Advance Notice of Proposed Rulemaking (“ANPRM”) soliciting public feedback on development of a new compensation data collection tool.  According to the ANPRM, this data collection is intended to identify “potential problems of compensation discrimination . . . that warrant further review or evaluation by OFCCP . . . as well as to identify and analyze industry trends, Federal contractors’ compensation practices, and potential equal employment related issues.” This latest initiative is consistent with OFCCP’s long-standing focus on compensation issues, and is illustrative of the Agency’s recent aggressive efforts to significantly augment its investigative “toolbox” and broaden the obligations imposed on federal contractors and subcontractors. 

The ANPRM seeks input on a series of fifteen questions that address the types of data to be collected, the manner in which such data would be organized, and the intended uses of the data. The fifteen questions  indicate the OFCCP is considering the following:

  • Collecting data used on a very broad definition of compensation, which could include starting salary, current salary, bonuses, commissions, stock options, shift differentials, paid leave, and health and retirement benefits.
  • Collecting the data on an individualized basis or aggregated by salary grade or band, EEO-1 categories, job groups, or census occupational codes.
  • Using the tool to target specific industries for “industry-focused compensation reviews.”
  • Using the data to conduct nationwide reviews of a contractor’s compensation system, across multiple establishments.
  • Requiring businesses to submit compensation data as part of the initial bidding process for future government contracts to enable OFCCP to better “target[] contractors for post-award compliance”.
  • Expanding the scope of this data collection tool to include construction contractors as well as service and supply contractors.

While it is too early to predict the precise scope and structure of the compensation data collection tool the OFCCP will ultimately adopt, the one sure bet is that this initiative will have a significant impact on the affirmative action reporting obligations of all federal contractors and subcontractors.  We will keep you updated as the OFCCP continues to develop this tool. 

It is common knowledge that performance of government contracts requires the contractor to comply with a range of clauses not found in commercial contracting, which are included to advance the federal government’s social and economic policies. For example, the Equal Opportunity clause (FAR 52.222-26) prohibits government prime contractors from discriminating based on race, color, religion, sex, or national origin and requires most contractors to have an affirmative action plan. Additionally, it requires the prime contractor to “flow down” these same prohibitions and requirements to subcontractors. 

The Department of Labor is responsible for enforcing the Equal Opportunity clause, as well as clauses prohibiting contractors and subcontractors from discrimination based on disability (Affirmative Action for Workers with Disabilities, FAR 52.222-36) and on disability and veteran status (Equal Opportunity for Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans, FAR 52.222-35). Historically, the DOL has taken a broad view of who qualifies as a government subcontractor subject to the requirements of these non-discrimination clauses. 

According to the DOL, there are two circumstances in which a person doing business with a government contractor is considered a subcontractor for purposes of the non-discrimination laws:

The first circumstance is when the person provides the Federal contractor with services or property ‘necessary to achievement of’ the prime Federal contract. The second circumstance is when a person ‘performs part of the Federal contract’ on the Federal prime contractor’s behalf.

Office of Federal Contract Compliance Programs v. Bridgeport Hospital  (.pdf), ARB Case No. 00-034 (Jan. 31, 2003) (emphasis added). While the DOL Administrative Review Board ("ARB") determined in Bridgeport that the hospital was not a subcontractor because its provision of medical care pursuant to a contract between it and the government contractor was not “necessary to performance” of the prime government contract, the DOL has reached the opposite decision for hospitals in two cases since then.

First, in Office of Federal Contract Compliance Programs v. UPMC Braddock et al. (.pdf), ARB Case No. 08-048 (May 29, 2009), the DOL ARB determined that the medical services provided by three UPMC hospitals pursuant to an agreement with UPMC Health Plan, which had an HMO contract with the Office of Personnel Management to provide health care services to the Federal Employees Health Benefit Program, qualified the hospitals as subcontractors and subjected them to compliance with the non-discrimination clauses because they performed part of UPMC Health Plan’s government contract. UPMC’s appeal of the DOL ARB’s decision is pending.

Second, on October 18, 2010, a DOL Administrative Law Judge ("ALJ") determined that a Florida hospital that provided medical care to TRICARE beneficiaries qualified as a government subcontractor such that the DOL had jurisdiction to audit the hospital’s compliance with its affirmative action and non-discrimination obligations. See Office of Federal Contract Compliance Programs v. Florida Hospital of Orlando (.pdf), ALJ Case No. 2009-OFC-00002. In this case, the hospital had an agreement with Humana Military Health Services, Inc. (“HMHS”), an entity that performed a government prime contract to provide managed health care services to TRICARE beneficiaries. The hospital argued that it was not performing any of the contractual obligations under the prime contract, so it did not meet DOL’s definition of “subcontractor,” but the DOL ALJ found that the prime contract required the provision of medical services to TRICARE beneficiaries and, by providing medical services to its patients, which were TRICARE beneficiaries, the hospital did perform part of HMHS’ prime contract duties. Whether the hospital will appeal this decision remains to be seen.

The UPMC Braddock and Florida Hospital of Orlando decisions are particularly important to providers of medical services when they have agreements with federal health care program contractors, but are equally instructive to all other government subcontractors with respect to DOL’s broad notion of a “subcontractor” for purposes of enforcing the affirmative action and non-discrimination laws. Whether DOL’s broad definition will be adopted by other agencies responsible for enforcing other flow down clauses contained in government contracts remains to be seen.