Labor toughens hiring rules for service contractors

Labor Department officials have decided that incoming contracting companies, and their subcontractors, must offer jobs to current employees before finding workers elsewhere.

The policy mandates that federal service contracts have a clause requiring companies to offer those to the previous contractor's employees, whose jobs would end as a result of the new award -- a right of first refusal of employment, according to a rule published in the Aug. 29 Federal Register.

Officials did not give a date as to when the final rule would take effect. They will publish another notice with the starting date after officials decide the date. The Federal Acquisition Regulatory Council first must issue regulations.

The new rule carries out President Barack Obama’s Jan. 30, 2009, Executive Order on Nondisplacement of Qualified Workers Under Service Contracts. It replaces a President George W. Bush order from 2001, which overturned an order from President Bill Clinton.

The idea behind Obama's order is that the government can continue operations more smoothly when a successor service company hires the previous company’s employees.


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“A carryover workforce reduces disruption to the delivery of services during the period of transition between contractors,” officials wrote in the notice.

In comments in the proposed rule, groups raised questions about employees and their job performance with the previous company. They pointed out that companies may not to want to share employees’ work evaluations for privacy reasons.

Labor officials disagreed.

“The department is not convinced that evidence of past poor performance would be difficult to obtain,” they wrote.

The groups also questioned if the outgoing contractor would take good employees and leave the others behind for the new contractor.

In the final months of a contract, “those remaining employees will likely have more experience with the contract and contracting agency than new hires recruited by the successor contractor for the purpose of filling the contract requirements,” officials wrote.

The Professional Services Council reiterated its frustrations with the rule. Stan Soloway, president and CEO of the Professional Services Council, called the rule inappropriate and even counterintuitive.

“While experience shows that companies often hire as many qualified incumbents as possible to avoid the costs of training new employees, this rule denies those companies, who have full responsibility for performance under the contract, their ability to select a workforce they believe is best suited to meeting the contract requirements,” Soloway said.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Sat, Sep 3, 2011 Jaime Gracia Washington, DC

This is more of the same by this Administration, creating misguided policy that will not improve the situation is intended to fix. I too agree this will hurt small businesses, because most small businesses differentiate themselves with the ability to be flexible, and provide specialized, value-added services through its offerings and its people. Taking that away so poorly performing programs can continue with dead weight is indeed continuity, but does performance matter anymore? Change can be difficult, but sometimes it is needed. If incumbents underperform, get the bums out. The acquisition strategy should allow for a transition period to ensure the new contractor has a shorter learning curve and can get the incumbent to transfer institutional knowledge. Accountability is key to ensure this happens, in addition to program and procurement officials doing their jobs and providing honest assessments of poor performance in CPARS/PPIRS.

Thu, Sep 1, 2011 Program Manager Chantilly, VA

Exactly -- so what happens if it is a CPAF contract? Can I get a mediocre rating and then go to the KO and say "Sorry, not mt fault -- the Labor Department made me use employees I didn't want in the first place. Give me the full award fee"?

Thu, Sep 1, 2011

At U.S. DOT, Bowhead Technology, who had continuous complaints of poor performance, lost the multi-million IT enterprise contract. ActioNet won the contract and held a job fair across the street from the DOT HQ in Washington, DC. This "job fair" was advertised to all of the Bowhead Technology employees who were told to bring their ID and SSN's because they would be rehired on the spot. The result of this was that the same underperforming, unskilled, and uneducated employees that were on the previous contract were brought back into the building and the employees were subjected to the same poor customer service accompanied with the arrogance of knowing no matter who wins the on-site government IT contract our how poor performance is that rehiring is guaranteed. The sad thing is the permanent federal government workers who should be treated as clients by the contractors are forced to receive the service of contractor companies who have no fear of losing contracts because they can partner with another company who can use the relationships that they have formed at these Agencies to win the contract and rehire their entire staff including the executives. It is sad that Congress is so out of touch of illegal practices that go on each day in Federal Contracting and now are proposing a rule to encourage it. Convert some of these over-paid contractor jobs to permanent Federal jobs so that their is accountability.

Wed, Aug 31, 2011

Agree with Ben, This is totally counterproductive and provides an out for any shell body shop to provide substandard performance. The government has just assumed responsibility for contractor performance.

Wed, Aug 31, 2011 Ben Collins

The proposed "rule" is especially bad for small companies. A small company bids a service contract because they have the ability to perform. This rule presumes that everyone bidding is an empty office that just wants the money and will figure out how to do it later. That is not the case with a small company with a loyal and competent staff. I can't imagine a contractor telling his faithful employees the good news and the bad. The good news is we got the contract. The bad news is that I have to give the job to the guys who couldn't do it in the first place, so sorry, I have to lay you off, because the government says I can't replace them. This rule makes NO SENSE and should not be added.

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