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New rule would protect jobs of many contractor employees

May. 8, 2012 - 06:00AM   |  
By SARAH CHACKO   |   Comments

A company that wins a federal services contract from another vendor would have to hire the predecessor firm's employees, under a proposed new federal contracting rule.

The rule, issued Tuesday by the Federal Acquisition Regulatory Council, aims to carry out a 2009 executive order that seeks to reduce disruption during contract transitions and retain experienced workers.

The Labor Department issued a similar rule in August. The FAR council's proposed rule would officially add it to federal regulations, which would require agencies to add the rule as a clause in contracts.

Contractors and agencies have another chance to voice their opinions on the rule until July 2.

The rule, which would cover service contracts valued at more than $150,000, is opposed by industry groups, which say the rule dictates who companies should hire and predetermines who is best qualified to do the work.

The Labor Department, using 2006 federal procurement data, estimates that 40,000 contractors and subcontractors will be subject to the rule annually.

Winning vendors would have to give the right of first refusal to most incumbent contractor employees, but not managers or supervisors.

Opponents of the rule include the Professional Services Council, TechAmerica and the U.S. Chamber of Commerce. In comments to the Labor Department last year, they say the rule limits a contractor's ability to make sweeping changes that may be needed and potentially guarantees work for some poor-performing employees.

While the successor contractor does not have to offer employment to an incumbent employee if there is evidence of past poor performance, the outgoing contractor may not provide meaningful performance information because of employee privacy rights or corporate liability issues, PSC executive vice president Alan Chvotkin said after the Labor Department issued its rule last year.

The rule states that federal contracting officers will help determine which employees would stay on their jobs when contracted work changes hands.

But Navy and Air Force officials said in public comments to the Labor Department last year that this presents challenges for federal contract officials.

Navy labor adviser Frank Dean, for example, said federal contracting officers often do not know or work with contractor employees and thus are not in a good position to help make those decisions.

Patrick Rhode, chief of the Air Force Installations and Sourcing Division, said complications could arise if, for example, a new contractor is forced to hire a predecessor's employees and then performs poorly. The contractor, in that case, could argue that the poor performance was the result of employees it was forced to hire and, thus, was not at fault.

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