View Rule

On November 18, 2021, President Biden signed Executive Order 14055 requiring the Secretary of Labor to issue final regulations on the nondisplacement of qualified workers under service contracts. Implementation of this Executive Order will promote retention of experienced and skilled employees working on federal service contracts. Service work supporting federal government functions occurs all over the country, from federal building maintenance to services provided on military bases to skilled technicians operating and maintaining federal equipment. Under this Executive Order, when a federal service contract transitions from one contractor to another, the new contractor will be required to offer jobs to qualified employees who worked for the previous contractor and performed their jobs well. This prevents disruptions in federal services, makes it easier for employers to find workers who are already trained for the job, and saves taxpayer dollars.

Statement of Need:

Executive Order 14055 requires the Secretary of Labor to issue regulations on the nondisplacement of qualified workers under service contracts.

Summary of the Legal Basis:

President Biden issued Executive Order 14055 pursuant to his authority under "the Constitution and the laws of the United States," expressly including the Procurement Act.  86 FR 66397.  The Procurement Act authorizes the President to "prescribe policies and directives that the President considers necessary to carry out" the statutory purposes of ensuring "economical and efficient" government procurement and administration of government property.  40 U.S.C. 101.121(a).  Executive Order 14055 directs the Secretary to issue regulations to "implement the requirements of this order."  86 FR 66399.

Alternatives:

The Department has discussed a few specific provisions in which limited alternatives are possible.

First, in cases where a prime contract is above the simplified acquisition threshold, but their subcontract falls below this threshold, the Department could potentially have discretion to exclude these subcontracts from the requirements of this proposed rule.  However, the Department stated in the NPRM that, consistent with the language in the Executive Order, where a prime contract is covered by the rule, all subcontracts for services, regardless of size, would also be covered. Second, the Department has some discretion in defining the specific analysis that must be completed by contracting agencies regarding location continuity.  The Department is considering whether to require contracting officers to analyze additional factors when determining whether to decline to require location continuity.  Any requirement of a more in-depth analysis could potentially increase costs for contracting agencies.

Anticipated Costs and Benefits:

The rule could result in costs for covered contractors and contracting agencies in the form of rule familiarization costs, implementation costs, and recordkeeping costs.  The rule would increase the use of a carryover workforce which would reduce disruption in the delivery of services during the period of transition between contractors, maintains physical and information security, and provides the Federal Government with the benefits of an experienced and well-trained workforce that is familiar with the Federal Government's personnel, facilities, and requirements.

The Department estimated both familiarization costs, implementation costs and familiarization costs.  Costs in Year 1 consists of $11,124,370 in rule familiarization costs, $35,471,685 in implementation costs ($7,518,342 for contractors and $27,953,342 for contracting agencies), and $6,014,674 in recordkeeping costs.  Therefore, total Year 1 costs are $52,610,728.  Costs in the following years consist only of implementation and recordkeeping costs and amount to $41,486,358.  Average annualized costs over 10 years are $43 million using a 7 percent discount rate, and $52 million using a 3 percent discount rate. 

Risks:

This action does not affect the public health, safety, or the environment.