The Department of Energy (DOE) has proposed an amendment to the Department of Energy Acquisition Regulation (DEAR) that, among other changes, clarifies that FAR Subpart 22.12, Nondisplacement of Qualified Workers Under Service Contracts, and the associated Department of Labor regulations, applies to subcontracts under DOE’s management and operating (M&O) contracts. M&O contractors and their subcontractors need to be aware of these changes, particularly the impact on the requirement to hire service employees working on incumbent contracts set forth in contract clause FAR 52.222-17.

FAR Subpart 22.12 implements Executive Order 13495 (January 30, 2009), and requires a successor contractor and its subcontractors to offer “service employees,” as defined by the Service Contract Act, under the predecessor contract (of the same or similar services at the same location) and whose employment will be terminated as a result of the successor contract award, a right of first refusal of employment under the new contract. Employment openings are generally prohibited until such right of refusal has been provided, meaning an incoming contractor will have limited opportunity to staff its current employees on the contract. Importantly, each bona fide express offer of employment must have a stated time limit of not less than 10 days for an employee response, a time period that successor contractors should account for when determining how long it will take to transition the contract. The contract clause, FAR 52.222-17, has to be flowed down to service subcontracts over the simplified acquisition threshold, typically $150,000. The requirements of FAR Subpart 22.12 do not apply to service contracts performed entirely outside the United States. 77 Fed. Reg. 75768 (Dec. 21, 2012).

This rule includes a number of exemptions and exceptions. For example, it does not apply to contracts and subcontracts below the simplified acquisition threshold or those awarded pursuant to 41 U.S.C. Chapter 85, Committee for Purchase from People Who Are Blind or Severely Disabled. It also does not apply when either the predecessor or successor contract has been awarded for services produced or provided by the “severely handicapped” as defined in 40 U.S.C. 593. And there is an exemption for service employees whose job requires work under both a federal service contract and one or more nonfederal service contracts. Finally, a successor contractor or its subcontractors are not required to offer employment to a service employee of the predecessor contractor who will be retained by the predecessor contractor or who is reasonably believed to have failed to perform suitably on the job.

This proposed rule also replaces the dollar thresholds at DEAR 970.5244-1, Contractor Purchasing System, with references to the appropriate FAR 28.102-2 provisions to accurately reflect the current threshold. In addition, pursuant to a class deviation regarding Buy American Act non-availability determinations, DOE is proposing that non-availability determinations of individual items in excess of $500,000 (currently $100,000) require prior approval of the Head of Contracting Activity.