Article Date: 08/23/2013

Just How Much Will It Cost to Comply with the Obama Administration’s Forthcoming Employment Rules for Federal Contracting?

By Steve Rizer


For construction contractors doing business with the federal government, how much of a financial hit should they expect to take in order to comply with new employment rules for federal contracting that the Obama administration is expected to issue soon? With industry and government estimates varying substantially, a true answer is difficult to find. Complicating matters are conflicting projections about the number of establishments that could be affected by the forthcoming requirements, which address affirmative action for certain veterans and people with disabilities.


Here is a rundown of what the impending rules are expected to require, what the costs of compliance may total, and where the rules could take effect:


Under the U.S. Department of Labor’s “Section 503” rule, the administration is expected to compel federal contractors to work toward achieving a 7 percent disability utilization goal for all job groups. A 2 percent sub-goal is expected to be set for the severely disabled. Among other things, the rule is expected to require federal contractors to build files of all known disabled applicants and employees. Each file would include documentation of every opportunity for which the person with a disability was considered (vacancy, training, promotion) and a statement outlining the reason/s for rejection if he or she was not selected. 


The rule addressing affirmative action for veterans, “Section 4212,” is expected to compel federal contractors to establish numerical hiring benchmarks using data they would collect under the rule. Among other things, the rule is expected to direct federal contractors to collect, calculate, and maintain 11 new data points on veteran referrals, applicants, and hires. Data points include the following: the number of priority referrals of protected veterans from each employment service office (i.e., one-stop career centers or another appropriate entity); the number of total referrals of protected veterans from each employment service office (via linkage agreements); the ratio of priority referrals to total referrals; the total number of known or self-identified protected veteran applicants; the total number of job openings and the total number of jobs filled; the ratio of jobs filled to openings; the total number of applicants for all jobs; the ratio of protected veteran applicants to total applicants; the total number of protected veterans hired; the total number of applicants hired; and the ratio of protected veterans hired to all hires.


The administration believes the cost of complying with the Section 503 rule will total $473 per establishment. For Section 4212, Obama’s comparable estimate is $560. The overall impact from these rules is expected to fall short of the $100-million threshold at which the administration would be required to conduct a more thorough cost analysis.


Associated General Contractors of America (AGC) expects a very different cost impact from the rules.


“A representative sampling of AGC member companies asserts that it will cost each establishment at least $14,056 to comply with the Section 503 rule and $11,333 to comply with the veterans rule; that’s 20-30 times more than the administration’s estimate,” Tamika Carter, director of Construction Human Resources for the association, told ConstructionPro Week (CPW). “For many construction companies, each establishment may mean each construction jobsite. That’s a substantial cost for contractors with double- and even triple-digit establishments.”


There also is a substantial disagreement regarding the number of establishments that the rules will encompass.


The U.S. Department of Labor’s (DOL) Office of Federal Contract Compliance Programs (OFCCP) “has grossly underestimated the number of establishments these rules will cover,” Carter asserted. “In one of the proposed rules, OFCCP [initially] estimated that the number of covered establishments would be 108,288. Eight months later, when the second proposed rule was published, OFCCP estimated the number of covered establishments affected at 171,275. According to the number of VETS-100A reports directly submitted to the Veterans and Employment Training Service (VETS) of [DOL], in 2010, the number of covered establishments was 285,390, substantially higher than OFCCP’s estimated number of establishments. Without regard to the debate over the cost of the proposed rules per establishment, using OFCCP’s own $473 and $560 cost estimates with a more accurate, verifiable number of federal contractor establishments required to comply with these rules would easily exceed $100 million, requiring the agency to conduct a thorough economic cost analysis.”


A White House spokesperson did not immediately respond to CPW’s questions on this topic.


The ConstructionPro Network member version of this article includes links to the rules as they were proposed in the Federal Register, additional comments from Carter, and further details about the rules. To sign up for a membership, click here



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