Over the last few years, with the uber-competitive labor market and evolving landscape of remote and hybrid work arrangements, I've had many conversations (some feeling more like counseling sessions!) with clients who had become very tired and frustrated with the rising compensation and work-related demands of candidates. These conversations included questions like: When will we see the labor market settle? How can we be profitable when paying rates such as this? What makes sense? Is there any way this would be considered reasonable? Will that be fair to my long-term employees? What we found is those with established and well-structured compensation plans were able to respond to these questions and the challenging scenarios they faced much more efficiently and effectively than those who did not.
All Time and Material (T&M) contracts with the Federal Government, even commercial ones under Federal Acquisition Regulations (FAR) part 12, have one big thing in common. That big thing is that all of the labor hours delivered must be performed by individuals meeting the labor qualifications specified in the contract. The Federal Government uses very strong language in its contract requirement related to this, stating the hours “will not be paid to the extent the work is performed by individuals that do not meet the qualifications.”
In late 2008, the Final Rule on Contractor Code of Business Ethics and Conduct (“CoBEC”) was added to FAR Part 3 (Improper Business Practices and Personal Conflicts of Interest) in response to the heightened focus on increased lapses in corporate ethical behavior. FAR Subpart 3.10 sets forth guidance for all contractors with regard to enhanced ethical and compliance standards and requires the insertion of the clause at FAR 52.203-13 in solicitations and contracts if the value of such contract is expected to exceed $6 million, and the performance of which is 120 days or longer. DCAA focuses on compliance with FAR 52.203-13 when conducting accounting system audits.
The Office of Federal Contract Compliance Programs (OFCCP) has been busy since the start of fiscal year 2023, which began on October 1, 2022. Since this time, they have completed over fifteen investigations that have resulted in large settlements totaling more than ten million dollars. Many of the investigations centered around discrimination in hiring and compensation.
Oftentimes when supporting the production of cost volumes and pricing exercises for clients, we’re given a basis of estimate (BOE) that has been written by someone on the technical team. Even being a group of accounting and compliance professionals who know little in areas such as cyber, engineering, or other technical areas of the scope of work, we’re left scratching our heads. This usually leads to several back-and-forth discussions centered around gleaning enough information from the technical team to pass the proverbial government “sniff test”.
On January 5, 2023, the Federal Trade Commission (FTC) voted 3-1 on proposed regulations that, if upheld, would ban employers from imposing non-competition agreements on their employees. Relying on Section 5 of the FTC Act, the FTC concluded that “non-compete clauses reduce competition in labor markets, suppressing earnings and opportunity even for workers who are not directly subject to a non-compete.” Commissioner Wilson dissented, stating that the FTC lacks the authority to engage in rulemaking, particularly with consequences of this significance.
In this uber competitive labor market, it is more crucial than ever to be creative with compensation and benefits. Compensation programs and retention strategies have expanded beyond base compensation and bonus to include all methods in which employees are rewarded and incentivized. As a Federal Government Contractor, it is especially important to understand the FAR requirements which may impact compensation decisions and to document all processes and procedures related to your compensation program.
Throughout this series, we’ve explored the fundamentals of compliance with the regulations administered by the Office of Federal Contractor Compliance Programs (OFCCP) and many of the components of a written Affirmative Action Plan. In this final blog of the series, we will answer a question frequently asked of us…What do you do with all this information?
As mentioned throughout this series on Office of Federal Contract Compliance Programs (OFCCP) and Affirmative Action (AA), recordkeeping is essential. A particularly important component when developing your AAP , as shown in a previous blog, is Applicant Flow (i.e., records pertaining to each “applicant”). When working with clients, we find that this tends to be the most complex and often confusing information requested. Following are answers to some of the most common questions we are regularly asked: