Strategies for Federal Contractors to Ensure OFCCP Compliance

Executive Summary 

Federal contractors are obligated to comply with three Federal laws that require two regulatory mandates: nondiscrimination and affirmative action. [1] On its face, these mandates should be rather easy requirements; however, achieving compliance is a complex process that requires comprehensive strategies. As a former Executive Manager in the U.S. Department of Labor’s Office of Federal Contract Compliance Programs’ (OFCCP) Division of Program Operations, and as the former Director of two OFCCP District Offices, my experience is that there are consistent non-compliant patterns among Federal contractors when audited by the OFCCP. Even more surprising is the repeat violations for establishment-level entities within the same corporate organizational structure.  The central question is why are recurring violations and/or repeat patterns found during OFCCP audits? I believe the answer lies in two broad areas: (1) a lack of focus and clarity by Federal contractors regarding their Affirmative Action Program obligations and (2) the lack of dedicated resources allocated to ensure better compliance, thereby reducing the risk of non-compliance. In this paper, I address these two areas and highlight strategies for Federal contractors to ensure compliance with OFCCP’s laws and regulations.


Lack of Focus and Clarity Concerning Affirmative Action Programs

The regulatory guidance promulgated by OFCCP describes clearly the purpose of an affirmative action program.[2] The guidance in part indicates that an affirmative action program:

· Is a management tool designed to ensure equal employment opportunity;

· Ensures equal employment opportunity by institutionalizing the contractor’s commitment to equality in every aspect of the employment process; and

· Is more than a paperwork exercise

Historically, the common-pattern for violations appears to be attributed to a lack of focus and direct attention toward the general purpose of the affirmative action program. Too often, the affirmative action program is not given the same corporate urgency and priority attention when juxtaposed against other corporate priorities within an organization. I contend that the keys to corporate business successes in non-affirmative action program/equal employment opportunity areas can be attributed to the implementation of comprehensive risk-management strategies. These strategies may include corporate actions such as: 

· Ensuring effective management systems are in place for the early identification and forecasting of potential problem areas; 

· Employing immediate and aggressive corrective actions for problem resolutions; 

· Requiring conscientious monitoring of all significant areas impacting the business’ success; 

· Expecting a total commitment from all principals involved in every aspects of the business; and 

· Instilling a corporate and organizational culture that it’s more than management exercises or redundant paperwork drills, but rather the business’ total success depends on accurate and timely reports, individual responsibility, and management accountability, from top to bottom. 


The risk-management strategies noted above are also necessary and should be equally applied to the affirmative action program/equal employment opportunity program (AAP/EEO) areas as strategic guiding principles to ensure success and compliance. In essence, successful operations in AAP/EEO business areas should be guided by aggressive proactive measures rather than by reactive measures in response to an OFCCP audit. For example, some large Federal contractors have establishments within their organizational structure that undergo audits on a regular basis at various locations during OFCCP’s audit cycles. When this occurs, an audit may identify a substantial violation (e.g., hiring discrimination, adverse impact indicators, recordkeeping deficiencies, etc.) that requires corrective actions, including appropriate make-whole remedies. Because of a lack of specific attention and focus on these types of violations, many Federal contractors do not take action to determine whether similar deficiencies/inadequacies are occurring at other establishments within their organization. As a result, subsequent audits by OFCCP often find the same substantive violations at either a different establishment of the same contractor or sometimes even within the same audited-establishment. This then requires further corrective action by the Federal contractor for the repetitive violations, which can mean additional financial risks, including the potential for loss of current and future Federal contracts.  


Substantive OFCCP violations within the same organization should not repeatedly occur and can be prevented or minimized with appropriate staff training regarding a contractor’s obligations under the laws and regulations enforced by OFCCP and appropriate contractor resources. Further, substantive violations may be prevented by Federal contractors by their implementing AAP requirements[3] such as: 

· Performing in-depth analyses of its total employment processes to determine whether and where impediments to equal employment exist.

· Developing and executing action-oriented programs to correct any problem areas identified.

· Developing and implementing an auditing system that periodically measures the effectiveness of the total AAP. 


Lack of Dedicated Resources

Through my 28 years of audit experience, another common theme I have observed by a number of Federal contractors is the notion that AAP/EEO requirements are perceived burdensome regulatory requirements that require extensive dedicated resources. While resources are necessary to comply with not only the Federal regulatory AAP/EEO requirements, but also to ensure compliance with other State, municipal and local statutory requirements, some contractors may not have sufficient resources available for AAP/EEO purposes only.  Nonetheless, with any successful business practice, adequate resources must be available and performance must be accurately tracked and measured. When the appropriate level of  dedicated resources, whether internal or external, are not allocated for AAP/EEO monitoring, problems or violations requiring corrective actions are often found in OFCCP audits in areas such as AAP development and requirements, non-discrimination/EEO obligations, management accountability, internal auditing, documentation of Human Resources/hiring official actions, records accountability, etc. 


To mitigate potential problem areas by resource-challenged Federal contractors, it’s imperative that competent resources are available and allocated to protect contractors from audit surprises and to minimize risks in employment activities. Compliant contractors must ensure that necessary resources and tools are available as a proactive business strategy, including where appropriate the acquisition of external competent services and assistance. My experience has been that Federal contractors with successful programs apply dedicated resources and fully commit those resources throughout their organization to the AAP/EEO programs and principles whether they are required contractually or not, because they indicate it is a good sound business practice. Further, there is an expectation by successful contractors that all employees, both management and non-management, fully embrace these critical programs. When appropriate resources are allocated, compliance and financial risks are minimized.  Competent resources help to identify and correct any potential problem areas in advance, similar to quality audit inspections being performed before the release of a business product.   


Summary

Federal contractors with successful AAP/EEO programs historically undertake proactive measures, rather than being caught off-guard and reacting to unknown or repetitive problem areas requiring last minute corrections to be in compliance. The solution to minimize risks and challenges faced by unprepared Federal contractors is to apply the same tried and tested principles employed by compliant contractors to increase the likelihood for success as discussed above. Akin to those principles are proven contractor strategies for successful AAP/EEO compliance programs such as:

· Implementing, tracking, and monitoring personnel actions;

· Developing and implementing timely action-oriented programs; and

· Ensuring management accountability and accurate reporting for all aspects of the AAP/EEO program.


Piercing Strategies can off-set perceived regulatory burden for resource-challenged contractors by providing expert services that assist Federal contractors in effectively managing their OFCCP obligations, thereby minimizing financial risk for being non-compliant as a result of an audit.  Our experience has shown that the deployment of careful risk management strategies can ensure that Federal contractors are not surprised about their compliance status before, during or after an OFCCO audit. Piercing Strategies works with Federal contractors to re-focus and to re-direct efforts to improve internal self-assessments for problem area identification, prepare for audits, defend and resolve questionable problem areas, and train staff. As clearly demonstrated in non-AAP/EEO areas, the allocation of the right blend of dedicated corporate resources and external expert assistance provides a strengthened strategy, which minimizes risks for successful operations in the Federal contracting market. 

    

[1] Executive Order 11246, as amended; Section 503 of the Rehabilitation Act of 1973, as amended; and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as amended, 38 U.S. C. Section 4212.


[2] See 41 CFR 60-2.10 (a). 


[3] See 41 CFR 60-2.17