Federal Contracting 101: What You Need to Know

By: Kate Hayek and Sheryl Harmening

Organizations with supply and service contracts with the Federal government are required to comply with multiple sets of regulations in the affirmative action and equal employment opportunity space. Organizations that are new contractors may not know where to begin with this new compliance obligations. To help, DCI has prepared a guide for organizations that are new to Federal Contracting.

Know Your Status & Tell the World About It 

• Know Your Status  
  Did you know that the amount of money your organization can receive in the coming year – otherwise known as a “Contract Threshold” – will affect your compliance obligations?  If your organization has 50 or more employees, you may be a “Covered Contractor.”    Look below to see if your organization needs coverage and the level of coverage required:  

• • Basic Coverage 
    • $10,000 Executive Order 11246 (EO 11246 Minorities and Females) 
    • $15,000 Section 503 of the Rehabilitation Act (Section 503 - Individuals with Disabilities) 
    • $150,000 Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA - Protected Veterans) 
  • AAP Coverage
    • $50,000 EO 11246 (Minorities and Females) 
    • $50,000 Section 503 (Individuals with Disabilities) 
    • $150,000 VEVRAA (Protected Veterans)
• Tell the World About It 
  Covered contractors who have Federal Contracts totaling at least $10,000 or more are obligated to take affirmative action and ensure nondiscrimination in all their employment practices.  Additionally, covered contractors must inform their subcontractors, employees, applicants and any unions with which they have a collective bargaining agreement of their status as an equal opportunity employer.  Ensure compliance by having your organization implement the following “Postings and Notice” requirements: 
  • Equal Opportunity Clause – Let your subcontractors know that doing business with you may require their own adherence to nondiscrimination and affirmative action obligations by incorporating the Equal Opportunity Clause (EO Clause) into all subcontracts and purchase orders.  Be sure to reference the following EO Clause requirements as determined by your contract threshold: 
    • Executive Order 11246: 41 CFR 60-1.4(a) 
    • Section 503: 41 CFR 60-741.5(a) 
    • VEVRAA: 41 CFR 60-300.5(a) 

Here is an example of an EO Clause to leverage all three regulations:

This contractor and subcontractor shall abide by the requirements of 41 CFR 60–1.4(a), 60–300.5(a) and 60–741.5(a). These regulations prohibit discrimination against qualified individuals based on their status as protected veterans or individuals with disabilities and prohibit discrimination against all individuals based on their race, color, religion, sex, sexual orientation, gender identity, national origin, or for inquiring about, discussing, or disclosing information about compensation. Moreover, these regulations require that covered prime contractors and subcontractors take affirmative action to employ and advance in employment individuals without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability or veteran status. 

• • EEO Taglines & Required Posters – Let your current employees and applicants know that you are an equal opportunity employer while informing them of their right to discuss compensation information by adding appropriate EEO taglines to job postings and ensuring access to required posters.  Incorporate disability or protected veteran statuses to the tagline as determined by your contract threshold. 

Here are two examples of EEO Taglines that references all three regulations:  

Option 1: All qualified applicants will receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or status as a protected veteran. 

Option 2: EOE, including disability/vets. 

Regardless of your organization’s contract threshold, be sure your employees and applicants have access to OFCCP’s Required Posters (“Know Your Rights” and Pay Transparency Nondiscrimination) by hanging them in each workplace, adding them to the employee handbook, and linking the posters to your organization’s intranet and on your Career Page or individual job postings.   

• • Job Postings – If your organization is covered by VEVRAA, the obligation to recruit qualified veterans requires posting all job openings with the state/local employment service delivery system of the state where the organization intends the new hire to report.  There are three exceptions that do not require postings: 
    • Jobs that last fewer than 3 days 
    • Executive level jobs 
    • Internally filled jobs 

• • Notice to Unions – Your organization must let labor unions know your status as a covered contractor.  Here is a sample notification that covers all three regulations: 

This is to notify the union that the company is covered by the federal affirmative action laws and regulations, and that it will provide affirmative action for minorities, females, protected veterans, and individuals with disabilities and avoid discriminating against any applicant or employee on the basis of race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or veteran status. 

• • Executive Order 13496 – Finally, covered contractors must include language about their employees’ rights to organize in all contracts and purchase orders with a few exceptions.  There is no prescribed language, but here is an example: 

This contractor and subcontractor shall abide by all provisions of Executive Order 13496 and all relevant rules, regulations, and orders in regard to Executive Order 13496. 

Additionally, like other required OFCCP posters, covered contractors must display the EO 13496 poster in every establishment and make it available electronically to their workforce. 

*Additional Consideration about Know Your Status: Does your organization have more than one legal entity?  Ask DCI more about the Single Entity Five Factor Test and the 27 Point Questionnaire to determine if your other entities require AAP coverage. 

Have A Plan  

• Have a Plan
  If your contract thresholds require AAP coverage, then your organization must develop and maintain Affirmative Action Plans (AAPs) on an annual basis. As stated above, contract thresholds apply to AAP coverage – contracts of $50,000 or more require AAPs for Minorities and Females and Individuals with Disabilities. Contracts of $150,00 or more require an AAP for Protected Veterans. Here is quick list of to-do’s to get you on your way to AAP compliance: 
  • Set a Date – The first step in AAP development is to determine when your plan will start.  Your Plan Date should be within 120 days of signing of the Federal contract.  DCI recommends considering when your HR professionals can prioritize the initiative during the 120 period when establishing your plan date.   
  • Ask the Questions – Depending on contract thresholds, (i.e., basic or AAP coverage) covered contractors are required to solicit and maintain the following information about employees and applicants.
    • Sex/Gender
    • Race/Ethnicity (recognized categories are: American Indian/Alaskan Native, Asian, Black or African American, Hispanic or Latino, Native Hawaiian or Pacific Islander, Two or More Races, and White)
    • Disability Status 
    • Protected Veteran Status  

Note that solicitations are voluntary – employees and applicants must be able to decline self-identification.  As OFCCP expects all employees to be classified, your organization may use visual observation to assign the sex/gender and race/ethnicity values of employees who decline to self-identify.  Covered contractors are allowed to have unclassified applicants, however any that have been given offers of employment should be classified.  

• • Gather Additional Information – AAPs analyze your workforce and certain decisions made about your employees throughout the year. If your organization does not have the following data, start collecting it immediately:  

• • • Descriptive data of all employees, including job title, department, wage information, EEO-1 category, work location, sex/gender, race/ethnicity, disability status and veteran status (as appropriate per contract threshold).
    • Transaction data including hires, promotions and terminations.  Be sure to capture reason for termination. 
    • Applicant data including name, job posting title, job posting location, date of application, disposition, date of hire, sex/gender, race/ethnicity, disability status and veteran status (as appropriate per contract threshold). 

• • Ready, Set, Go! – Now that you have decided your plan date, are asking applicants and employees self-identification questions, and have gathered your data, it’s time to develop your first year AAPs!  Below is a quick list of essential elements of each AAP by regulation.  Please follow the links provided to read about all required elements by regulation.  

Executive Order 11246 (Minorities and Females)  

• • • Organizational Profile/Workforce Analysis: A listing of each job title within a department which is used to determine if barriers exist in the workforce for both females and minorities in higher level positions.
    • Job Group Analysis: Grouping similarly situated employees together based on similar job content, wage rates and opportunities. 
    • Placement of Incumbents in Job Groups: Reporting on the representation of minorities and women in each job group. 
    • Determining Availability: Estimating the representation of qualified minorities and women available to work in each job group by combining recruitment area census data and current employees that are promotable, transferrable or trainable. 
    • Comparing Incumbency to Availability: Assessing how your current workforce compares with availability rates. 
    • Placement Goals: A way to measure progress toward achieving equal opportunity employment when your incumbency is less than reasonably expected. 
    • Additional required elements of AAPs: Notably evaluation of personnel activity, compensation systems, and selection, recruitment, referral and other personnel procedures. 

Section 503 (Individuals with Disabilities) 

• • • Data Collection Analysis: Collection of disability status of applicants and hires.
    • Utilization Analysis: Evaluation of the representation of individuals with disabilities by job group.

VEVRAA (Protected Veterans) 

• • • Data Collection: Collection of veteran status of applicants and hires.
    • Hiring Benchmark Analysis: Measuring progress toward equal opportunity for protected veterans.

• • Make it Official and Certify in the Contractor Portal: After you’ve developed your affirmative action plan, don’t forget to certify in OFCCP’s Contractor Portal. Covered contractors are required to certify compliance on an annual basis stating that they’ve developed and maintained an affirmative action plan. Partner with DCI for an accurate and timely certification.  

*Additional Considerations about Having a Plan: Reach out to DCI with questions about best practices regarding reporting on Gender X/non-binary employees, remote employees, how to assign employees to different AAP locations, developing a functional AAP (FAAP) structure, guidance on forming job groups, appropriate analytical tests, how to bolster self-identification rates, compensation evaluation… we could keep going! 

Keep the Momentum Going  

• Keep the Momentum Going
  So you’ve completed your first AAP…. Now what? Covered contractor obligations extend beyond implementing the required notices and postings and the development of AAPs.  Compliance is a yearlong effort. Here’s a final compliance checklist to get your organization through to Year Two, when your AAP will need updating with fresh data:  

• • File Your (Cool) Compliance Reports
    • EEO-1 Reports 
    • VETS-4212 Reports (if applicable) 
  • Develop and disseminate your AAP policy statement 
  • Recording-keeping and retention requirements 
  • Audit & reporting 
  • Accommodation requests and tracking for applicants and employees 
  • Periodic assessment of existing personnel procedures 
  • Review of physical and mental job qualifications  
  • Outreach & recruitment  
  • Development and implementation of action-oriented programs to correct AAP findings 
  • Disseminating AAP findings to appropriate stakeholders 
  • EEO Training for recruiters and hiring managers 
  • Harassment training 
  • Pay transparency and sex discrimination guidelines compliance