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Are You A Covered Government Contractor?

Part I: Determining Your Organization's Affirmative Action Obligations

The cost of doing business with the federal government can increase dramatically if your company finds out too late that it is a federal contractor with affirmative action obligations. Problems with allegedly discriminatory pay practices or other personnel practices have led to multi-million dollar settlements with the Office of Federal Contract Compliance Programs, the U.S. Department of Labor agency that enforces the federal affirmative action regulations.

Federal affirmative action obligations are imposed pursuant to Executive Order 11246 (minorities and females), the Rehabilitation Act of 1973 (individuals with disabilities) and the Vietnam-Era Veterans Readjustment Assistance Act of 1974 ("VEVRAA" - covered veterans). The requirement to implement and maintain an affirmative action program can occur in two ways: either through: 1) a direct contractual relationship to supply goods or services to an agency of the federal government or indirectly through a subcontract to supply goods or services necessary to fulfill another entity's federal contract or subcontract; or, 2) an intra-company relationship with a parent, subsidiary, division or affiliate company which has a federal contract or subcontract. The first in a two part series, we briefly explore what constitutes a government contract and then offer a self-audit checklist tool for ascertaining coverage. Next edition, we explore how intra-corporate relationships can spread coverage from one entity to another in a greater corporate family of organizations.

Coverage under the federal affirmative action regulations occurs when an employer has at least fifty employees and enters into a contract for at least $50,000 annually to supply goods or services directly to the federal government. Coverage also arises when a subcontractor supplies goods or services to a government contractor and such goods or services are necessary, in whole or in part, to the fulfillment of a government contract. A "covered" contractor must implement and maintain a written affirmative action plan (or plans) covering all employees and all establishments. A federal contract (or subcontract) basically is any agreement (or modification to that agreement) between any contracting agency and any person for the purchase, sale or use of personal property or non personal services.

As part of their affirmative action obligations, contractors must ascertain the race and sex of their employees and applicants and then track, monitor and analyze how minorities and females are paid and selected and rejected for hire, advancement and termination in employment.

To determine coverage, review the following audit questions:

1. Are there any contracts or other agreements to provide services to the federal government?
2. Are there any contracts or other agreements to provide services to a company servicing an agency of the federal government (e.g., the General Services Administration or, the Departments of Defense, Commerce, Treasury, Interior, Transportation, Health and Human Services, Agriculture, Justice, Home Land Security, Labor, etc.) or the U.S. Military or military personnel or servicing the Veterans Administration or any VA organization such as a hospital?
3. Are any funds or payments received directly from the federal government?
4. Do any contracts, agreements, invoices or purchase orders contain any reference to the provisions of Executive Order 11246, Section 503 of the Rehabilitation Act, the Vietnam Era Veterans Readjustment Assistant Act, or otherwise reference EEO, affirmative action, disability, or veteran laws or regulations?
5. Are you aware of any agreement to provide goods or services to an entity that uses those goods or services for the fulfillment of contractual obligations with the federal government or any agency of the federal government?
6. Is an annual EEO-1 report filed?
7. If "yes," is a response indicated in Section C, Question 3 of the EEO-1 form?
8. Has a notice ever been received from a subcontractor, vendor, or otherwise requesting that the company certify it is in compliance with: any EEO or Equal Opportunity Laws; any Affirmative Action laws or regulations; Executive Order 11246, Section 503 of the Rehabilitation Act, or the Vietnam Era Veterans Readjustment Assistant Act; any part of 41 CFR Part 60 or similarly referenced regulations; the Federal Acquisition Regulations or FAR; or any other similar laws, rules, acts, regulations, guidelines or ordinances?
9. Have you entered into any agreements to provide services which referenced any government agencies such as the Office of Federal Contract Compliance Programs, the OFCCP, the United States Department of Labor or the U.S. DOL?
10. Have you entered into any arrangement for the provision of goods or services where the business was obtained through a bidding process?
11. If the answer to the previous question was yes, did you respond through a Request for Proposal (RFP)?
12. If you have entered into any arrangement for the provision of goods or services that was obtained through a Request for Proposal (RFP), did such document make reference to, or have attachments or appendices that made reference to, legal compliance with any of the sources listed in Question 8 or any of the agencies listed in Question 9?
13. Have you entered into any arrangement that was characterized as a "grant" or cooperative agreement?
14. Have you entered into any business arrangement which was characterized as an "indefinite quantity contract?"

A "yes" answer to any of the above questions can be an indicator of coverage. If you are covered, there are steps that you can take to ensure compliance and minimize liability in the event you are audited by the OFCCP.