Being a US Government Contractor: Many Hoops Many Mistakes

On May 19th I am giving a presentation to a group of small company business owners and managers. I will be talking about the top 5 HR mistakes that small businesses make. (Which I posted on Feb. 5, 2010) In particular this group is interested in potentially being Federal Contractors. The people that asked me to speak deal with helping small businesses become contractors and they mentioned that often it is the HR stuff that fouls up a small company. Often times it is having the FLSA requirements messed up or they improperly classify employees as independent contractors. So I will be covering that.

However, I ran across an article in the April 2010 issue of HR Magazine, written by Alissa Horvitz and Joshua Roffman, called A High Bar in which they detail several other compliance areas that may cause problems and cost money for businesses which desire to be contractors. As most of you know Federal Contracts are controlled by the Office of Federal Contract Compliance Programs (OFCCP) (almost looks Soviet doesn't it?) and there are several requirements that include:

• Understanding prevailing wage issues and doing proper trainning
• Having your computer and accounting systems set up to track required OFCCP fields
• Making sure applicant data is being recorded
• Instituting the Drug-Free Workplace Act requirements
• Having a statement of non-discrimination or a full Affirmative Action Plan if needed. An AAP is necessary if you have 50 employees and a contract greater than $50,000.
• Tracking subcontracts awarded to enterprises owned by women, minorities, veterans and people with disabilities
• Making sure that all jobs filled externally are posted with the appropriate state and local unemployment offices
• Necessary use of the E-verify system for background checks
• Posting required notices about rights under the National Labor Relations Act (due out later in 2010.)

As the authors mention, there are alot of up front costs associated with having federal contracts. However, there are costs associated with blowing the compliance as well. Companies that are awarded contracts and then get audited and are found to be out of compliance may get fined, with remedies often exceeding $100,000 or loss of contract. Many compliance issues deal with proper applicant tracking or improper employment ratios as well as improper pay structures.

Because of the size of contracts, and the way the law is written, often the requirements for compliance are either not clearly articulated or are buried deep in contract language. Either way ignorance of the law is no excuse.

Contracts with the Federal government can be lucrative, however, there are many obligations that go with being a Federal contractor and they should not be pursued or entered into lightly.