Service Contractors Becoming “Meat Markets”?

malehandwithbarcodeCould contractors offering services to the federal government essentially become staffing agencies?  I think the argument could be made based on the soon-to-be-effective rules labeled as “Nondisplacement of Qualified Workers Under Service Contracts.”

Don’t get me wrong, I can understand the purpose being fulfilled by the government in implementing this rule.  The government gets a lot of services from a lot of contractors.  Contractors could be around for a long time and have a lot of institutional knowledge (been there, done that) and provide a real benefit to the government to keep them around.  Perhaps they are in the middle of a big project that was included in the services, but not in a specific contract.  So, when the service contract comes up for re-bid and the incumbent loses?!?!?!?!?  Aaaaah!!!  All of a sudden, you have a department head at a government agency scrambling to ensure all that information and knowledge is somehow “braindumped” for the successor contractor.

But that is the old way.  The federal government has now decided that instead of true knowledge management and retention of ideas and information that comes out of a contract, we will just keep the people around.

Effective January 18, the final rule gives the right of first refusal to predecessor contract employees that are qualified for successor contract positions.  Again, the reasoning is sound.  The government interests are served by having personnel that already know the system.  My biggest question is how can this be accomplished in an equitable manner.

Let’s take a look at a brief (and simplified) example:

Contractor 1 is the incumbent.  Contractor 2 is the new guy.  The service contract is up for rebid and Contractor 2 sees an opportunity to beat the incumbent based on price.  Done!  The new guy beats Contractor 1 and gets the award – not to mention that little issue the agency had with Contractor 1 being able to bill properly at the end when their chief accountant left… (I have to put in some backstory to make it interesting).  So, Contract 2 gets ready to step up and realizes this rule is in place.  One of the employees has been critical to the success of the ongoing projects from Contractor 1, but is making $5/hr more than proposed by Contractor 2.  What can be done?  Contractor 2 offers the key employee a job at $5 less per hour and the benefit package isn’t as great… or the key employee can just try to get onto another project with his current employer.  Hmmmm…

I am seeing a hurt workforce here.  It will be interesting to see how it is actually applied in Meat58practice once it is effective.  As if transiency in government contracting wasn’t already high enough, here we have an example of the federal government potentially increasing it.

Are there any service contractors out there reading this?  How have you prepared?


About Marty Herbert

With 13 years of government contract administration, analysis, finance, and audit experience, I have established a firm baseline in ethics and a specialization in government contracts that has prepared me to become a subject matter expert in my field. I am currently working on enhancing government contracts management and compliance through workflow tools and product offerings - attempting to make the process proactive as opposed to reactive.
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