Rule: Winning contractor must offer jobs to incumbent's employees

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

The policy mandates that federal service contracts have a clause requiring companies to offer positions 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, but will publish another notice once the starting date has been decided. 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 an order President George W. Bush issued in 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 contractor 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.

Some comments on the proposed rule raised questions about employees and their job performance with the previous company. They pointed out that companies might 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.

Comments also questioned whether the outgoing contractor would take its 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.

“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.