Pursuant to a rule finalized by the the Federal Acquisition Regulatory (FAR) Council, effective January 18, 2013, contractors who win the right to take over a previous federal service contract now must make a first-right-of-refusal employment offer to workers on the earlier contract. The new rule applies only to contracts that are subject to the Service Contract Act (SCA).
The new rule implements Executive Order 13495, Nondisplacement of Qualified Workers Under Service Contracts, dated January 30, 2009. The FAR has been amended to add subpart 22.12 and a new clause at FAR 52.222-17.
The new requirement applies when the successor contract is for same or similar services at the same location as the predecessor contract. 29 CFR 9.2 defines “same or similar service” to mean “a service that is either identical to or has one or more characteristics that are alike in substance to a service performed at the same location on a contract that is being replaced by the Federal Government or a contractor on a Federal service contract.”
An exception to the right-of-first-refusal requirement involves the successor contractor’s current employees, who would otherwise face termination themselves, are qualified for the new contract and subject to SCA. Another exception is for predecessor employees with documented past unsuitable performance. In addition, if the successor contractor will be working with a smaller workforce than the predecessor contractor to achieve greater efficiency, the successor is only required to offer employment to those eligible employees who would be qualified to fill the positions that will exist on the new contract.
If a successor wins a contract award due to a contract terminated for performance reasons, the successor contractor is not to assume it was the fault of the service employees; the assumption to be made is that the employees were performing suitable work in support of the contract and the fault lay with management. If the Government determines that the poor performance of the predecessor contract was due to the entire predecessor workforce, then the new SCA rules may be waived.
FAR 52.222-41(n) already requires the predecessor contractor to provide to the contracting officer a certified list not less than 10 days prior to completion of an existing contract of the names of all service employees on the contractor’s or subcontractor’s payroll during the last month of the contract performance. This list must contain the anniversary dates of employment on the contract. Under the new rule, this list will be required no less than 30 days prior to completion instead of 10. If the list is not provided, the Government will have the right to suspend contract payments until it is provided.
