Piliero Mazza &
Pargament, PLLC

Vol. V, Issue 4
April 2000

An Update for Federal Contractors and Commercial Businesses


OSHA Clarifies Home Office Safety Policy; Industries Respond to Proposed Ergonomics Standard

Government Contractors to Receive Mandatory Pay Surveys

A-76 Contracting Opportunities in 2000




OSHA Clarifies Home Office Safety Policy; Industries Respond to Proposed Ergonomics Standard

In the January 2000 issue of Legal Advisor, we reported that the Department of Labor rescinded a letter issued by the Occupational Safety and Health Administration ("OSHA"), which reflected OSHA's policy regarding employers' liability for federal health and safety violations that occur in employees' home offices. The letter suggested that employers could be held liable for injuries caused by such conditions as unsafe stairs, improper lighting and inadequate ventilation in home offices. As a result, the letter caused widespread controversy among employers.

In response to continued uncertainty with respect to OSHA's policy regarding this issue, OSHA recently issued a directive that exempts home offices from employers' job safety inspections. The directive specifies that OSHA "does not expect employers to inspect the home offices of their employees," and stated that, with respect to most job safety complaints regarding home offices, OSHA will adhere to its position that such sites are exempt from employers' inspections.

OSHA reserved the right, however, to inspect certain home work sites, such as home manufacturing sites, when a complaint indicates the existence of a safety violation that threatens physical harm or poses an imminent danger. Examples of such potentially dangerous work include assembling electronics, using unguarded crimping machines, and handling adhesives without protective gloves.

Importantly, the directive does not absolve employers from responsibility for hazards in home work sites caused by those "materials, equipment or work processes" that the employer requires the employee to utilize. Additionally, those employers who are required to maintain records of work-related injuries must also maintain such records regarding injuries associated with employees' home-based work.

In the January 2000 issue, we also reported that, in November 1999, OSHA proposed controversial regulations that would require employers to take new steps to minimize repetitive stress, or "ergonomic," injuries such as back injuries and carpal tunnel syndrome. These proposed regulations would require employers in manual handling and manufacturing operations to implement ergonomic programs in the workplace. The regulations also would require all other employers, except those in the agriculture, maritime operations and construction industries, to implement such programs after an on-the-job musculoskeletal disorder is reported.

Since their proposal, the regulations have come under heavy criticism from, among others, industry leaders who claim the regulations create undue burdens by inflating employers' costs. The United States Chamber of Commerce has also criticized the measure, arguing that it requires employers to experiment with measures to combat musculoskeletal injuries, while penalizing them when such measures are found to be ineffective.

Labor groups, however, have voiced their support for the new measures, while citing statistics to illustrate the proliferation of musculoskeletal injuries that occur at the workplace. Public hearings with respect to the proposed regulations are scheduled to continue throughout April and May.



Government Contractors to Receive Mandatory Pay Surveys

The Office of Federal Contract Compliance Programs ("OFCCP") has announced that the Labor Department will be sending mandatory surveys to approximately 7000 government contractors requesting detailed information about their employee pay policies. The survey follows OFCCP's ongoing effort to obtain specific compensation data from federal contractors during routine compliance reviews. Both the surveys and OFCCP's efforts are related to the Clinton Administration's initiative to address potential wage discrimination against females and minorities.

The surveys are mandatory and must be completed and returned by all recipients. Failure to provide the required responses may result in OFCCP initiating enforcement action against delinquent contractors.

Although OFCCP has plans to send surveys to an additional 53,000 contractors, the first 7000 will be sent to contractors who have been identified as potentially being in violation of the affirmative action requirements of Executive Order 11246 and other statutes. The OFCCP is targeting the 7000 contractors based on earlier reporting forms which indicated either an underutilization or a concentration of minorities and women in specific job categories. Of the 7000 contractors targeted for the surveys, 4000 have already undergone OFCCP review, while the remaining 3000 are scheduled for review later this year.

Contractors were notified that they have been selected for the survey on April 7, 2000. Notifications are sent to each contractor's human resources official. The actual surveys, which are "virtually unchanged" from a February version, will be sent on April 14, 2000. The surveys are to be completed and returned within 30 days.

The surveys will require contractors to provide compensation pay data based on nine labor categories, including managers, technicians, craft workers, and professionals. Contractors will be asked to provide data on each labor category based on minority and non-minority, and female and male groupings. The compensation data required by the form include the total annual monetary compensation for each category and group, as well as the highest and lowest monetary compensation for any single employee within the job category.

The surveys will also seek detailed information about the contractor's "personnel activity," including hirings, promotions, terminations and affirmative action program. Completion of the surveys is estimated to take approximately 12 hours.

The survey has been the focus of substantial controversy. Initially, about 150 comments were submitted in response to the proposed surveys. While civil rights and women's groups have welcomed the survey, employer's groups raised concerns about both the cost and the utility of the surveys. Approximately 50 additional comments were submitted in response to the Office of Management and Budget's request for comments on ways "to enhance the quality, utility, and clarity of the information to be collected." The OMB approved the survey on March 29, 2000.



A-76 Contracting Opportunities in 2000

The Federal Activities Inventory Reform Act of 1998, commonly referred to as the FAIR Act, is creating unprecedented numbers of contracting opportunities for contractors. The FAIR Act requires that all federal agencies submit annual reports to Congress and make available to the public an inventory of commercial activities to determine whether they should be performed by the Government or contractors. Executive agencies began complying with the law in 1999 and have been publishing commercial activities inventories which may be the subject of competitions in accordance with Office of Management and Budget ("OMB") Circular A-76. The Department of Defense ("DoD"), for example, identified approximately 504,000 civilian full-time equivalent positions that cover a wide array of commercial activities. Of these civilian positions, approximately 308,000 have been identified as potential candidates for competition under the Circular. Given the large number of contracting opportunities that have been identified, Contractors should have a general understanding of how A-76 cost comparison competitions are conducted.

OMB Circular A-76 sets forth the Government's policy of relying generally on private commercial sources for supplies and services. This policy, however, is subject to consideration of the relative costs between Government performance and performance by a contractor. In order to determine whether outsourcing is more economical than performance through Government personnel, procuring agencies must follow the guidelines in OMB Circular A-76. Some procuring agencies, however, are not familiar with the process, find it cumbersome and complex, and would prefer to avoid it.

Firms that qualify as "preferential procurement sources" may be able to market themselves to those and other procuring agencies by pointing out that A-76 cost comparisons are not required when award is to be made to a "preferential procurement source." Although the A-76 Circular does not identify in detail any such sources, the OMB has applied the rule to 8(a) program participants, eligible prison industry participants and other such entities. Instead of engaging in an A-76 cost comparison, procuring agencies can engage in a "direct conversion" of the requirement. Such direct conversions not only further the Government's policy of relying on private commercial sources for supplies and services, but also furthers the Government's goal of awarding contracts to small disadvantaged businesses.

Firms that are unable to successfully market the direct conversion alternative should understand the process given its increasing use. We will be discussing the overall A-76 process in more detail during PMP's seminar on outsourcing scheduled for May 9, 2000. For those of you who will not be able to attend, we would like to briefly summarize the process which consists of four general steps.

First, the Government must develop a Performance Work Statement ("PWS") outlining the scope of work for the activity, and then develop its estimate for in-house performance based on the requirements outlined in the PWS. Second, contractors must compete with each other so that one can be selected for comparison with the Government's in-house cost estimate. Third, the winning Contractor's proposal must be compared with the Government's in-house estimate to ensure that both are based on the same scope of work and performance level. Fourth, the actual cost comparison is conducted between the private sector proposal and the Government's in-house estimate.

The most significant step in the process from a contractor's perspective is the cost comparison itself. Following the submission of offers, the procuring agency identifies the offer which represents the best overall value to the Government. The offeror then competes with the Government's in-house cost estimate. Before the cost comparison, however, the Source Selection Authority must review the in-house management plan, i.e., technical proposal, to determine whether the Government's offer is responsive to the technical requirements of the statement of work. If the procuring agency is not satisfied with the Government's proposal, the Government must make all changes necessary to meet the performance standards of the solicitation. The purpose of these changes is to make sure that the Government's in-house cost estimate is based upon the same scope of work and performance levels as the offers from the Contractors.

Thereafter, the Government's in-house cost estimate and the contractor's price are entered on a cost comparison form. The contracting officer is required to make several adjustments to the contractor's price. For example, the contractor's price must be increased by the administrative costs the Government estimates it will incur in outsourcing the work, such as the wages of Government personnel needed to administer the contract. Conversely, the contracting officer may deduct from the contractor's price the tax revenues the Government would receive from the contractor were it to perform the work.

After all necessary adjustments have been made, award should be made to the offeror with the lowest cost. However, before the award is made, the "public" has the right to review all supporting documents regarding the cost comparison. Within 20 days of receipt of the supporting documentation, interested parties may file an appeal of the cost comparison decision. The scope of the appeal is limited, however, to whether the agency complied with the requirements and procedures of the OMB Circular and properly prepared (or adjusted) the cost comparison form. Within 30 days of receipt of the appeal, the Agency's Appeal Authority is required to render a final decision. If a contractor receives an adverse decision on the appeal, the contractor may file a protest with the GAO. However, the GAO will only review whether the cost comparison was faulty or misleading, provided those issues were previously raised in the agency level appeal.

In summary, the Government is issuing many solicitations for public-private competition. Firms in the 8(a) program should identify requirements which may be the subject of A-76 cost comparisons and pursue the direct conversion alternative to an A-76 competition. To effectively participate, contractors should understand the opportunities available, how to market their capabilities to agencies which are considering contracting-out work and the A-76 cost comparison process itself. We will be explaining the process in greater detail during the May 9, 2000 seminar. We look forward to seeing you there.


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