The federal government can be a demanding customer. Before getting a share of the billions of dollars it spends on goods and services each year, a business must meet certain federal contractor requirements.
To start, company leaders must familiarize themselves with the basic rules, including the Federal Acquisition Regulation (FAR), which publishes uniform policies and procedures for federal agencies to follow when navigating a procurement process.
Sound like a lot of information to wade through? It is, but it’s also not as daunting as it sounds. We’ll break down the basic requirements in the paragraphs ahead and give you some pointers on how to stay on the federal government’s good side. We will focus on the requirements that businesses must meet regarding the way they treat their employees. We also will list several resources available to help businesses meet all these requirements.
Requirements for federal contractors and subcontractors
Besides the regulations spelled out in FAR, the requirements for registering to do business with the federal government, and the rules for bidding on and carrying out contracts, there is another set of requirements to consider. These have to do with treating employees fairly.
Federal contractors are subject to requirements, laws and regulations established by the Office of Federal Contract Compliance Programs, known as the OFCCP. This office was created to protect workers by guaranteeing nondiscrimination and supporting voluntary compliance by federal contractors and subcontractors, promoting diversity through equal employment opportunity, and enforcing the law.
The office holds government contractors responsible for complying with any legal requirements to take affirmative action and not discriminate based on race, color, sex, sexual orientation, gender identity, religion, national origin, disability, or status as a protected veteran.
The OFCCP completes focused reviews and compliance checks to make sure federal contractors and subcontractors operate within its laws. The office also provides compliance assistance by offering additional resources about best practices regarding equal employment opportunities. The office offers several programs to further its goals, including:
- Excellence in Disability Inclusion Award – Federal contractors must take proactive steps to recruit, hire, retain and advance qualified individuals with disabilities under Section 503 of the Rehabilitation Act. This award recognizes contractors who excel at this.
- Minority Education Initiatives – The OFCCP coordinates with other federal agencies and offices to implement initiatives for excellence in minority education, including American Indian and Alaskan natives, African Americans and Hispanic individuals. The program also includes additional resources for federal contractors, stakeholders and sample diversity and inclusion programs.
- Indian and Native American Employment Rights Program (INAERP) – This program is meant to bring awareness of employment rights and job opportunities for American Indians and Alaskan natives employed by companies that do federal contracting work. The office helps federal contractors and coordination with tribal representatives, community-based programs, workforce agencies, apprenticeship programs, and more.
- Functional Affirmative Action Programs (FAAP) – This program enables federal contractors to develop affirmative action programs based on business function or business unit rather than base it on the entire company.
- Ombuds Service – This program works to ensure that any individual involved with the work of a federal agency or federal contractors and subcontractors has access to a confidential resource that operates independent of the agency. The Ombuds offers informal conversations, conflict coaching, facilitated dialogue with involved parties, mediation and much more.
Businesses that fail to meet the requirements of any of the OFCCP’s federal contract compliance programs are subject to potentially severe penalties. For example, the OFCCP recovered $35.6 million in 2020 and more than $116 million between October 2016 and September 2020, the most collected in any four-year period on record.
Construction vs. non-construction work
The requirements for companies that do construction differ from those that do non-construction work. It’s up to each company to know which requirements it must meet and what affirmative action obligations it is subject to.
Non-construction contractors and subcontractors, also known as supply and service, must develop written affirmative action plans. Some must have more than one plan. It depends on whether the organization or small business meets certain thresholds of the OFCCP’s laws regarding the type and dollar value of its contracts and the number of employees.
You will have to develop an AAP if you have 50 or more employees and at least one contract worth $50,000 or more, as outlined in Executive Order 11246 and Section 503 of the Rehabilitation Act of 1973.
You also must have an AAP if you have 50 or more employees and at least one contract valued at $150,000 or more, under the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA).
Non-construction contractors and subcontractors that must develop AAPs also have to meet specific administrative and reporting requirements, including:
- Maintaining additional employment and personnel records.
- Creating recruitment and placement goals.
- Inviting applicants and employees to voluntarily self-identify race, gender and, when applicable, disability or veteran status.
- Reporting demographic data of its applicants and employees.
- There are two types of construction requirements: one set for direct federal construction contracts and one set for federally assisted construction contracts. Neither is required to develop a written affirmative action plan, but companies that have a federal or federally assisted construction contract or subcontract valued at $10,000 or more must follow a list of affirmative action steps.
But wait, there’s more!
As you might expect, there are a few other requirements you’ll need to know to stay compliant.
One such requirement is paying a certain minimum wage of $10.60 an hour, unless the employee receives tips. Tipped employees must be paid a minimum of $7.40 an hour. For work valued at more than $2,000 performed on a federal contract for construction, alteration or repair, you must pay workers on the contract locally prevailing wages and fringe benefits for all hours worked. For prime contracts valued at $150,000 and higher, you’ll have to pay laborers and mechanics a minimum of 1.5 times their pay rate for any hours worked over 40 in a single workweek.
Additionally, you will also be responsible for confirming the eligibility of your employees to work in the United States. Federal contractors and subcontractors are required under FAR to use E-Verify to electronically verify their employee’s employment eligibility.
Lastly, you might be required to hang posters in your workplace informing your employees of their rights under the Department of Labor, which also provides free electronic copies of all required notices and posters.
Help with compliance
We’ve covered a lot of ground here and while it can feel overwhelming, the good news is that, just like the abundance of resources in existence to help you become a contractor, there are plenty of resources and organizations that are ready to help you meet these compliance requirements.
The OFCCP offers several resources, so it’s a great place to start. For questions, you can call its help desk to speak with OFCCP staff at 1-800-397-6251. The office also offers webinars and a video training library as well.
As previously mentioned, there are many sources in the private sector that will provide help, including consultants, software solution (SaaS) companies, and law firms.
Additionally, the Department of Labor and OFCCP have many assistance guides and additional resources online, including:
Preparing to do business with the federal government and its agencies is a multi-tiered process, but you don’t have to go it alone. GovCon Wealth, a division of Cope Corrales, helps government contractors position themselves for success and look toward the day when they sell the business.