Publication

July 17, 2020Client Alert

HR Government Contracts Procurement Action to Avoid an OFCCP Audit

Speaking at the National Industry Liaison Group’s annual conference last week, OFCCP Director Craig Leen reminded participants that federal contractors who fail to accurately certify the status of their affirmative action programs in the System for Award Management (SAM) face an increased chance of an OFCCP audit. Director Leen also noted that the virtual compliance reviews are moving faster than anticipated and it may be that the OFCCP issues a new Corporate Scheduling Announcement List before September 30, 2020, the end of the government’s fiscal year. Accordingly, the Human Resources and Contracts/Procurement departments at most companies should check their federal contracting status immediately and then collaborate with their relevant internal departments to confirm required compliance steps have been taken.

Federal Prime Contractors: 100% Compliance

Under Director Leen’s leadership the OFCCP is targeting 100% compliance with affirmative action obligations by federal contractors and subcontractors. As part of this initiative, the agency is currently developing its own certification database for contractors and subcontractors. More news to come as the database nears completion.

In his remarks, Director Leen commented extensively on the certification question contained in the SAM database. He emphasized that while the SAM database may be an integral part of daily work for those in the contracting department, many HR professionals are unfamiliar with it. He further noted that often the contracts/procurement employees completing the SAM certifications are unaware of the HR department’s hard work on affirmative action programs. As a result, the all-important, audit-triggering certification question frequently is answered incorrectly.

The SAM database requires that contractors complete the following certification:

The offeror represents that:

(i)  It  has developed and has on file, It  has not developed and does not have on file, at each establishment, affirmative action programs required by rules and regulations of the Secretary of Labor (41 CFR parts 60-1 and 60-2), or

(ii)  It  has not previously had contracts subject to the written affirmative action programs requirement of the rules and regulations of the Secretary of Labor.

If you believe there is any chance that your company has direct contracts with the federal government, you should check USA Spending and/or the Federal Procurement Database to verify whether or not these systems show an active contract. If there appears to be an active contract, you also should also verify that the equal employment and affirmative action certifications in the SAM database are consistent with the status of your company’s EEO and affirmative action compliance. Contractors should be aware that for prime federal contractors, under the Christian doctrine the affirmative action obligations may well attach even if they are not spelled out in the contract itself. Contractors should also be aware that the commercially available off the shelf exception to many clauses in the Federal Acquisition (FAR) clauses generally does not apply to many of the affirmative action obligations. If you believe that your company is a contractor or subcontractor but may be exempt from the affirmative action obligations, we recommend you seek legal review.

Federal Subcontractors

Companies that provide goods or services which are essential to another company’s performance of a government contract or subcontract OR that assume the performance of part of another company’s government contract or subcontract are also bound by the federal Equal Employment Opportunity and Affirmative Action requirements, depending on the size of the subcontract. Companies that hold no direct federal contracts are not currently required to complete the SAM certifications, although some prime contractors prefer that their subcontractors complete the SAM certifications on-line. Accordingly, even if you are sure your company is not a prime contractor, it always pays to check SAM to see if there is an active entry for your company. Also, federal contractors and subcontractors are required to flow down the EEO and affirmative action obligations of Executive Order 11246, the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Assistance Act to covered subcontractors. HR should be sure that the contracts department has copies of the required flow-down language so they can notify HR if the language is found in any contract.

Federal Prime and Subcontractors

In addition to ensuring that contract certifications are accurate, HR and contracts departments should be working together to confirm all covered subcontracts have the flow-down language required by Executive Order 11246, the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Assistance Act, as applicable, considering the size of the contract and the services to be performed or goods obtained. While many of the FAR clauses may be incorporated into subcontracts by reference, the OFCCP regulations have very specific language that must be included for the flow-down to be acceptable. In a compliance review, the contractor will be asked to provide either a form purchase order or executed contract with the required language.

State and Local Contracting

Some state and local governments may require contractors and subcontractors to certify compliance with equal employment opportunity laws and/or undertake affirmative action for protected groups. While some only require certification at the contracting stage, others also require that the company obtain a certificate of compliance as part of the proposal process and/or file annual or bi-annual compliance reports. Coordination between the HR and contracts departments on these issues will help avoid delay or suspension of contracts due to lack of certificates or failure to file timely compliance reports.

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