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.


Related stories:

New Labor rule would constrict contractors' hiring options

Government urged to stop meddling in hiring practices


“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.

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

Reader Comments

Sat, Dec 1, 2012 Virginia

I strongly feel that there should be regulations regarding contract transition. I am a single 62-year-old female who was not picked up on a recent new contract (nor was anyone over the age of 60). My performance evaluations were excellent, I have many very strong letters of recommendation, and a rare work ethic. I lost my 27-year-old son in an automobile accident in March of 2011, and went back to work several weeks later. I never failed to show up at work with a smile on my face, even though my heart was broken. A coworker wrote in his letter of recommendation that they were prepared to rally around and support me when I returned to work, but I ended up teaching them about strength and grace. My job was extremely important to me and my co-workers were like family. Aside from the obvious financial problems this has caused, it was an incredibly hard blow after working so hard to deal with the loss of my son. I was given absolutely no explanation regarding why I was not hired on the new contract, even though I asked. On a different note, I do realize the problem new contractors may have with the "dead wood" mentioned above, but shouldn't that be dealt with in a timely manner by the current contractor, and not left for a new contractor? My reputation and performance were extremely important to me, not only as an employee, but as part of a team. It only takes one bad employee to give the whole contract a bad reputation. In closing, it is my wish that all employers realized the worth of a "golden girl" who has years of experience, has learned life's hard lessons, and is available to give whatever it takes to get the job done.

Fri, Feb 17, 2012

I have been working with this for awhile as a contract specialist now you have to offer them the job you don't have to pay them the same or provide the same benefits. You have to give them the vacation time allowed in the service contract act but that has always been the case. Some new companies have not hired the experienced employees for the fact they needed to provide the longer vacation times. You also don't have to keep them.

Wed, Sep 21, 2011

When your focus and your rule are this broad, you can expect a wide-range of results: good, bad, and mixed. The devil will be in the details - Will the rule only apply to contracts that have not changed in their financial design? Will expensive experts on Best Value contracts be offered positions built only to sustain bottom-of-the-barrel, barely qualified people of Lowest Price contract? If not, not much of a rule. If yes, what's the point behind changing a contract from Best Value to Lowest Cost? On service contracts, labor is often the lion's share of the cost.

Wed, Sep 21, 2011

So how would a non-incumbent firm account for this requirement in its bid? Let's face it, cost concerns will likely play a larger role in contractor selection. If an incumbent's cost structure is upside down / top heavy, and a challenger proposes a more balanced workforce is the challenger allowed to seek an upward adjustment for the additional costs as a result of this rule (even if only for the additional cost of healthcare)? Let's face it, people with reasonable alternatives are not going to take a pay cut to work, so the new company is forced to take the incumbent's 'leftovers'. Never mind the baggage these 'new' employees are going to bring with them. Years of their lives, stock options & incentives, pension plans, seniority, and their standard of living all disrupted, and they're going to be expected to thank their new employer for paying them half as much for the same work...really? I certainly doubt this rule is paired with relaxed anti-age discrimination requirements, such that once the 'knowledge' is transferred, the the new contractor can get right-side up. That and you're forcing the new company to do things 'the old way' which frankly, may be the very reason why the incumbent lost in the first place.

Wed, Sep 7, 2011

This may be one time the adminstration "almost" got it right. We need those years of expertise of these contractors. To lose that is to lose history. Are we to ask the tax payer to foot the bill for re-inventing the wheel. Things we already know. Without this, that is exactly what we will be doing. I am not saying we need to ignore the "Up and Coming" engineers. We do need fresh ideas and ways of looking at things. However, let us not cut our own throats in doing so. Remember, we are looking for the biggest "BANG" for the buck here. That takes a lot of historical knowledge and new inovative ideas. Not just one or the other.

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