Indeed, Executive Order (EO) No. 14055, Nondisplacement of Qualified Workers Under Service Contracts, was only one of many predecessor EOs rescinded by the Trump administration shortly after taking office. But its removal has significant impacts on federal government contracting. As explained in EO No. 14055, its requirements sought to promote skilled worker retention in the federal workforce by placing requirements on contractors (and subcontractors) to provide the service employees from predecessor service contracts an essential right of first refusal of employment in successor or follow-on contracts. But EO No. 14055 has now been officially rescinded as part of the new administration’s stated policy to lift any orders it felt were “replacing hard work, merit, and equality with a divisive and dangerous preferential hierarchy.”
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The FAR’s Nondisplacement of Qualified Workers Clause is Finally Getting the Boot
Federal agencies will be issuing a final rule that will remove the infamous nondisplacement of qualified workers clause from the FAR. The final rule goes into effect June 5, 2020. Let’s take a look.
Board: Contractor On Hook For Incumbent Employees’ Vacation Time
The Service Contract Act requires contractors to pay certain provide no less than certain prevailing wages and fringe benefits (including vacation) to its service employees. The amount of vacation ordinarily is based on an employee’s years of service—and service with a predecessor contractor counts. The FAR’s Nondisplacement of Qualified Workers provision, in turn, requires follow-on contractors to offer a “right of first refusal” to many of those same incumbent employees.
A follow-on contractor is to be given a list of incumbent service personnel, but that information ordinarily isn’t available at the proposal stage. So what happens when a follow-on contractor unknowingly underbids because it isn’t aware how much vacation is owed to incumbent service personnel? The answer, at least in a fixed-price contract, is “too bad for the contractor.”
So it was in SecTek, Inc., CBCA 5036 (May 3, 2017)—there, the Civilian Board of Contract appeals held that a contractor must pay employees retained from the incumbent nearly $170,000 in wage and benefit costs based on its underestimate of those costs in its proposal.