Thursday, May 5, 2022: GAO Offered Service Contract Act Enforcement Insights When It Reported Progress to The U.S. Senate Budget Committee, But Also The Need For Further Improvement As To Five Recommendations GAO Made In 2020
The Government Accounting Office (GAO) is a fact-based federal agency working for the Congress as its nonpartisan “watchdog” and its in-house investigator. One thing you learn about GAO once you are in a federal Executive Branch agency, is that GAO has a memory like an elephant. GAO will come back in later years like a bad date to criticize a federal Executive Branch agency, in ever-so-genteel language, if that agency failed or refused to heed GAO’s recommendations for improvement. GAO can whine for years if it feels dismissed or disregarded. GAO whining at a Budget Hearing can be either good news or bad news: because maybe GAO will support an agency cry for more needed funds to strengthen a faltering program: a federal agency’s first thought always: throw more money at it; fix failure with more taxpayer funding.
GAO’s testimony on May 5 to the U.S. Senate Budget Committee took the form of a 16-page Special GAO Report: “Opportunities Remain for Department of Labor to Improve Enforcement of Service Worker Wage Protections.” GAO’s Thomas M. Costa, Director of the Education, Workforce, and Income Security team at GAO reported that the U.S. Department of Labor’s Wage and Hour Division (WHD) completed 5,261 Service Contract Act (SCA) case investigations in the six fiscal years 2014-2019, leading to over $220 million in back wage collections for employees (an average of almost $37M per year). Note: WHD is responsible to enforce the SCA across all federal government contracting agencies. In an astounding 3,562 of these cases (68%), WHD found some kind of an SCA violation.
Almost seven out of ten violations are among the highest violation rates any federal enforcement agency reports under its organic statutory enforcement authority. This high alleged violation rate suggests widespread federal contractor noncompliance with the SCA. (Compare OFCCP’s 1 out of a million record of even alleged, let alone actually proven, compensation discrimination and alleged unlawful employment discrimination of some sort on average in fewer than 2% of their investigations over the decades.)
In 2,468 (almost 47%) of WHD’s SCA cases, by contrast, WHD found prevailing wage violations. In addition, in 2,920 (55%) of its SCA cases, WHD found fringe benefit violations. Due to serious violations it found, WHD debarred sixty contractors from receiving new federal contracts for three years (so-called “term” debarments, through a sanctions authority unique to the SCA (but who knew? See below).
After reviewing 5-years of results (from FY 2014—FY 2018) in October of 2020, the GAO published a report about WHD’s enforcement of the SCA. At that time, GAO reported that WHD did not consistently share critical information with other contracting agencies, thereby increasing the risk that excluded contractors might get contracts. GAO therefore made six recommendations in 2020 to improve the SCA audit process, including one to help ensure knowledge throughout the federal government contracting agencies as to which federal service contractors WHD had debarred from federal contracting and for what length of time.
On May 5, 2022, GAO Director Costa reflected on how well WHD had absorbed and implemented GAO’s six recommendations. Ok. Not great. Needs more work. WHD blew off GAO. GAO now not happy. GAO now goes bulldog.
The GAO 2022 Follow Up Report
there is still room for improvement. See the immediately below recommendations and “Status” reporting line:
1. Standardize data entry on SCA investigations.
Status: Complete. [This was the “good news” GAO reported and why the headline to this story reported that GAO is only crying about the next five recommendations WHD and the USPS blew off.]
2. Analyze information on enforcement actions, including the debarment processes and outcomes.
Status: WHD developed a revised internal tracking system that contains additional information on SCA debarments. It will provide a year-end summary of debarment information.
Pending: Information about how WHD plans to analyze information on its enforcement actions, including both debarments and compliance agreements. [EDITOR’s NOTE: Ok. WHD is thinking it has only been two years since the recommendation and those were pandemic years, at that. Little meaningful work got done. Yeah, we at WHD really could not, in fact, work efficiently from home, but we are not giving back our paychecks for sliding through the last two years. Lost years. Too bad. Mulligan. Do over. Give us a break. We will try harder. Honest. Just keep sending paychecks.]
3. For the WHD: Collaborate with the U.S. Postmaster General of the United States Postal Service (“USPS”) (which managed to contract with the greatest number of companies (across all federal contracting agencies, including DoD) found to have violated the SCA) to develop and implement written protocols to improve communication and collaboration between the two agencies.
Status: The Agencies developed a draft Memorandum of Understanding (MOU) that outlines protocols and procedures to increase collaboration and SCA compliance.
Pending: The Agencies have not finalized the MOU because of communication challenges.
[Editor’s Note: We just can’t let that one slide by. “Communication challenges.” Really? What does that even mean? That is one of the nicest politically correct newspeak criticisms we have encountered in some time. All the many words available in the English language, so GAO picks this uninformative phrase to hide what it really means? New nonsense speak: like a lawyer who gave you a technically correct answer but did not tell you a darn thing! How does WHD even know what it needs to do to correct whatever the “communication challenge” was? Build an undersea cable from WHD to USPS? Buy the guys at USPS a cell phone? Teach the guys at USPS how to dial the call-back number on their new cell phones?]
4. For the USPS: Collaborate with the Wage and Hour Division Administrator to develop and implement written protocols to improve communication and collaboration between the two agencies.
See above.
[Editor’s Note: Or how about locking the two agency heads in a room for an hour to edit and sign the MOU? Or tell their Mothers to withhold their dinners until they get done and can come down from their rooms to eat? And here we are as taxpayers paying the big bucks for a fancy formal GAO Report reporting what could have been said more directly by simply attaching scene 78 from the movie Cool Hand Luke [“What we have here is a failure to communicate”] to the final GAO report and testimony.
5. Ensure that the unique company identifier designated by the Federal Acquisition Regulation is included in SCA debarment records in the System for Award Management whenever appropriate and available.
Status: WHD developed a tool to allow its SCA enforcement team to retrieve a government contractor’s DUNS number. Regional staff will include the DUNS number with the debarment recommendations, and the national office will record the SCA debarment records in SAM.
Pending: A progress report on the revised process.
Editor’s Note: Surprise! Don’t shoot the messenger, and speaking of improving communication, we hope GAO is aware that the federal government contracting world officially discontinued use of DUNS Numbers as of April 4, 2022, as we wrote about here “The DUNS Number is Out – Federal Contractors Must Secure a New “Unique Entity Identifier” And, geez, the WIR is free to subscribers…
6. Develop written procedures for consistently and reliably informing relevant contracting agencies about findings in SCA investigations that identify violations.
Status: Pending.
[Editor’s Note: And geez, what about that gerund? …” procedures for consistently and reliably informing”… .” How about those words without the gerund? “…procedures to consistently and reliably inform….” Much stronger, shorter, leaner, and crisper sentence….just sayin’ to help a good report move along and get read. Writing counts!]
In the Know – The Service Contract Act
The McNamara-O’Hara Service Contract Act requires contractors and subcontractors performing services on prime contracts over $2,500 to pay service employees prevailing wages (or the previous contractor’s collective bargaining contract rates) and fringe benefits. The U.S. Department of Labor issues Wage Determinations on a contract-by-contract basis as to many, but not all, of the job titles employees perform on and under the federal service contract.
Contracts equal to or less than $2,500 require the payment of the federal minimum wage as Section 6(a)(1) of the Fair Labor Standards Act (“FLSA”) requires. The overtime provisions of the FLSA may also apply to SCA-covered contracts.
See the WHD’s landing page on the Service Contract Act for additional resources.
Conclusion
The Wage and Hour Division
“has taken steps to improve its oversight of the SCA and communication with contracting agencies—for example, by strengthening its ability to track debarments. Nevertheless, certain challenges persist. These challenges hinder its ability to effectively and efficiently enforce the SCA, increasing the chance that workers will not receive pay and benefits to which they are entitled. We will continue to monitor DOL and USPS’ actions in response to our recommendations.”
