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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


December 2021
Vol. XXII, No. 12
[pdf version]

CONTENTS


Labor Issues Regulations Enforcing $15/Hour Minimum Wage for Contractor Employees
Trade Agreements Thresholds Increased
Number of Protests Decreased by 12% in FY 2021
Nondisplacement of Service Employees Ordered
OFCCP Proposes Rescinding Religious Exemption
FAC 2022-01 Revises "Commercial Item" Definition
DOD Unleases Deluge of Acquisition Actions
SBA Gets Into the Act, Too



Labor Issues Regulations Enforcing
$15/Hour Minimum Wage for Contractor Employees

The Department of Labor (DOL) has issued a 111-page final rule amending its regulations to implement Executive Order (EO) 14026, Increasing the Minimum Wage for Federal Contractors, which mandates that "workers working on or in connection with a federal government contract" be paid a minimum wage of $15.00 per hour. The $15.00 rate will go into effect on January 30, 2022, and will apply to federal service contractors and their subcontractors. For covered tipped workers, the minimum required cash wage will be $10.50/hour beginning January 30, 2022, gradually rising to the full EO 14026 minimum wage on January 1, 2024. This is expected to increase the wages of approximately 327,000 workers. (For more on EO 14026, see the May 2021 Federal Contracts Perspective article "Biden Orders $15/Hour Minimum Wage on Federal Contracts").

EO 14026 is an extension and update of EO 13658, Establishing a Minimum Wage for Contractors, which was issued by President Obama in 2014 (when Joe Biden was vice president) (see the March 2014 Federal Contracts Perspective article "President Issues Executive Order Mandating $10.10/Hour Minimum Wage"). EO 14026 increases the minimum wage applicable to federal contracts from the $11.25/hour minimum wage mandated by EO 13658 effective January 1, 2022, a 33% increase (see the October 2021 Federal Contracts Perspective article "Federal Minimum Wage Increased to $11.25/Hour for 2022").

DOL published a notice of proposed rulemaking (NPRM) on July 22, 2021, and invited comments (see the August 2021 Federal Contracts Perspective article "Labor Proposes Rule to Increase Minimum Wage for Federal Contractors"). In response, 275 respondents (including labor organizations, contractors and contractor associations, worker advocates, contracting agencies, small businesses, and workers) submitted comments. However, other than clarifying editorial changes, DOL adopted the NPRM as proposed.

DOL's final rule amends the Code of Federal Regulations (CFR) by adding to Title 29, Labor, a new Part 23, Increasing the Minimum Wage for Federal Contractors (29 CFR part 23). The following are some significant provisions of 29 CFR part 23:



Trade Agreements Thresholds Increased

On November 26, the U.S. Trade Representative performed the biennial adjustment of the thresholds for the various trade agreements into which the United States has entered with other countries. The adjustments are made to account for inflation that occurred in the previous two years and changes in the value of the respective currencies. These thresholds will be incorporated into FAR part 25, Foreign Acquisition, specifically FAR subpart 25.4, Trade Agreements.

Paragraph (a)(1) of FAR 25.402, General [explanation of the Trade Agreements] describes how the trade agreements thresholds work: "The Trade Agreements Act (19 USC 2501, et seq.) provides the authority for the president to waive the Buy American statute and other discriminatory provisions for eligible products from countries that have signed an international trade agreement with the United States...The president has delegated this waiver authority to the U.S. Trade Representative. In acquisitions covered by the WTO GPA [World Trade Organization Agreement on Government Procurement], Free Trade Agreements, or the Israeli Trade Act, the U.S. Trade Representative has waived the Buy American statute and other discriminatory provisions for eligible products. Offers of eligible products receive equal consideration with domestic offers" (emphasis added). The value of the acquisition determines whether a trade agreement applies - an acquisition greater than or equal to the applicable trade agreement's threshold is exempt from the Buy American statute and thus treated the same as an offer of a domestic end product.

The following are the revised thresholds for 2022 and 2023 (with the previous thresholds in parentheses):



Number of Protests Decreased by 12% in FY 2021

The Government Accountability Office (GAO) issued its annual letter on bid protests to various Congressional committees, in which it reported that 1,897 protests, cost claims, and requests for reconsideration were filed in Fiscal Year (FY) 2021, 12% fewer than the 2,149 filed in FY 2020. Of the 1,897 FY 2021 cases, 1,816 were protests against contract award, 43 were cost claims, and 38 were requests for reconsideration.

In addition, GAO closed 2,017 cases in FY 2021, a 5.6% decrease from the 2,137 cases closed in FY 2020. Of these 2,017 closed cases, 401 were attributable to GAO's bid protest jurisdiction over task or delivery orders placed under indefinite-delivery/indefinite-quantity (IDIQ) contracts.

The FY 2021 protest sustain rate (the number of GAO decisions in favor of the protestor versus the number of all protests) was 15%, the same as the 15% sustain rate for FY 2020. The 48% effectiveness rate (that is, the protestor obtained some form of relief from the agency either because of a voluntary corrective action by the agency or a GAO decision sustaining the protest) was lower than the 51% effectiveness rate for FY 2020.

GAO's review of its decisions shows the most prevalent reasons for sustaining protests during FY 2021 were: (1) unreasonable technical evaluation; (2) flawed discussions; (3) unreasonable cost or price evaluation; and (4) unequal treatment.



Nondisplacement of Service Employees Ordered

President Biden has issued EO 14055, Nondisplacement of Qualified Workers Under Service Contracts, requiring all service contracts and subcontracts exceeding the simplified acquisition threshold (currently $250,000) that succeed a contract for performance of the same or similar work, and solicitations for such contracts and subcontracts, include a clause that requires the contractor and its subcontractors to "offer service employees...employed under the predecessor contract and its subcontracts whose employment would be terminated as a result of the award of this contract or the expiration of the contract under which the employees were hired, a right of first refusal of employment under this contract in positions for which those employees are qualified."

EO 14055 rescinds President Trump's EO 13897, Improving Federal Contractor Operations by Revoking Executive Order 13495 (for more on EO 13897, see the December 2019 Federal Contracts Perspective article "EO Ordering Nondisplacement of Employees Rescinded"). EO 13897 revoked President Obama's EO 13495, Nondisplacement of Qualified Workers Under Service Contracts, which was practically a duplicate of EO 14055 (for more on EO 13495, see "Executive Order 13495, Nondisplacement of Qualified Workers Under Service Contracts" in the March 2009 Federal Contracts Perspective article "Obama Issues Four Labor-Related Executive Orders").

With the issuance of EO 14055, President Biden joins a long list of presidents who have rescinded the previous presidents' EOs on the subject. President Obama's EO 13495 rescinded President George W. Bush's EO 13204, Revocation of Executive Order on Nondisplacement of Qualified Workers Under Certain Contracts, which in turn rescinded President Clinton's EO 12933, which directed federal agencies to include in public building maintenance contracts a clause that required successor contractors to give their predecessors' employees the right of first refusal to employment openings under the new contract (for more on EO 13204, see the March 2001 Federal Contracts Perspective article "Bush Issues Three Acquisition-Related Orders Involving Labor Issues in FAR Part 22"). Undoubtedly, the next time a Republican takes office as president, he or she will issue an EO rescinding EO 14055.



OFCCP Proposes Rescinding Religious Exemption

The Office of Federal Contract Compliance Programs (OFCCP) is proposing to rescind its 2020 rule that sought to clarify the scope and application of the "religious exemption" in EO 11246, Equal Employment Opportunity. "If the 2020 rule is rescinded as proposed here, OFCCP will return to its policy and practice of interpreting and applying the religious exemption in...Executive Order 11246, as codified in OFCCP's regulations at 41 CFR 60-1.5(a)(5)..."

41 CFR 60-1.5(a)(5) states, "(5) Contracts with religious entities...Executive Order 11246, as amended, shall not apply to a government contractor or subcontractor that is a religious corporation, association, educational institution, or society, with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities. Such contractors and subcontractors are not exempted or excused from complying with the other requirements contained in this order."

There have been various interpretations among federal circuit courts of the scope and application of this religious exemption, employing a "confusing variety of tests, [which] themselves often involve unclear or constitutionally suspect criteria." So the 2020 OFCCP rule added the following four definitions to 41 CFR 60-1.3, Definitions, to clarify 41 CFR 60-1.5(a)(5):

Now, the OFCCP, under the Biden administration, "believes that the 2020 rule creates a lack of clarity regarding the scope and application of the exemption because...it misstates the law in key respects...The entities entitled to the religious exemption as codified by OFCCP's 2020 rule are the comparatively few contractors and subcontractors (and potential contractors and subcontractors) that meet the regulatory definition of "religious corporation, association, educational institution, or society." Therefore, OFCCP is proposing to rescind its 2020 rule and is inviting comments on the proposed rescission.

Comments on this proposed rule must be submitted no later than December 9, 2021, identified as "RIN 1250-AA09," by any of the following methods: through the Federal eRulemaking Portal at http://www.regulations.gov; by fax: 202-693-1304 (for comments of six pages or less); or by mail to Tina Williams, Director, Division of Policy and Program Development, Office of Federal Contract Compliance Programs, Room C-3325, 200 Constitution Avenue NW, Washington, DC 20210.

To help potential commenters understand the proposed rescission, OFCCP has created OFCCP's Landing Page for the Proposal to Rescind Implementing Legal Requirements Regarding the Equal Opportunity Clause's Religious Exemption at https://www.dol.gov/agencies/ofccp/religious-exemption?utm_medium=email&utm_source=govdelivery.

For more on the 2020 rule, see the January 2021 Federal Contracts Perspective article "OFCCP Issues Instructions on Complying with the Equal Opportunity Clause's Religious Exemption."



FAC 2022-01 Revises "Commercial Item" Definition

Federal Acquisition Circular (FAC) 2022-01 amends the Federal Acquisition Regulation (FAR) to replace the "commercial item" definition with definitions for "commercial product" and "commercial service" to better reflect the significant roles services and commercial services play today in the federal procurement budget. In addition, FAC 2022-01 requires public notification of an agency's determination to substantially bundle or consolidate contract requirements, and modifies the maximum award price for manufacturing contracts awarded under various socio-economic programs.



DOD Unleases Deluge of Acquisition Actions

After taking it easy in October, the Department of Defense (DOD) got back to work in November, issuing a final rule, a proposed rule, a notice of proposed rulemaking, four deviations, and a request for comments on a reciprocal Defense Procurement Memorandum of Understanding the Ministry of National Defence of Lithuania.



SBA Gets Into the Act, Too

The Small Business Administration (SBA) took it upon itself to get back to work in November (just like DOD) and start catching up its small business regulations to reflect various provisions of statutes (primarily National Defense Authorization Acts) that have made changes to small business programs. Also, SBA is proposing to terminate one nonmanufacturing rule waiver.





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