OFCCP Changes Up Many Important Technical Details of its Audit Selection Process in its First FY 2024 Corporate Scheduling Announcement List

Most AAP Establishments with Fewer Than 500 Employees Passed Over

Audit Methodology Undercuts Need for Much of the Data Burden the OFCCP Contractor AAP Certifications Annually Cause: Three Days Left to Comment

NOTE: Those federal contractors subject to OFCCP’s jurisdiction need not read this story (as irrelevant to you) if your company:

• is signatory to a Functional Affirmative Action Plan with fewer than 300 employees, or
• has no AAP Establishment in the 50 United States with fewer than 500 employees.

OFCCP published its first Fiscal Year 2024 Corporate Scheduling Announcement List (“CSAL”) for Supply & Service (“S&S”) contractors on its Scheduling List Resources webpage. The list identifies 500 federal contractors now slated to undergo OFCCP Compliance Reviews across 462 corporations, the agency noted in its corresponding email announcement. In contrast to an OFCCP audit Scheduling Letter, the CSAL letter is a courtesy advance notification of a coming audit. OFCCP also made numerous conforming changes to its CSAL FAQs you may find here.

CONTRACTORS BEWARE: Contractors should prepare for the possible early arrival of the coming OFCCP audit Scheduling Letters announced in last week’s CSAL. OFCCP no longer delays audits for 45 days, as the agency did for years, after its publication of a new CSAL. While that lack of advance notice for those audits the agency schedules immediately on the heels of the publication of a new CSAL defeats the very purpose of the CSAL, it is nonetheless OFCCP’s current audit scheduling practice. At the same time, OFCCP’s publication of this particular CSAL is very late relative to the agency’s need for a continuous supply of audit targets for each of its remaining 31 District Offices. While some OFCCP District Offices have a backlog of work, many others are “running on fumes” and need more audit targets now. It is a difficult balancing act for OFCCP to operate 31 District Offices to run a race and reach a common finish line together following the publication of each CSAL. OFCCP is currently very short on audit targets from the last CSAL for Supply & Service Contractors, with fewer than 25% of contractors on the last CSAL remaining available for audit. OFCCP’s audit Scheduling Letter giving your company 30-days from receipt to respond with detailed corporate documents and information needed for OFCCP’s audit could be in the mail even today or already in your e-mail inbox. Be ready!

Latest Audit Selection Methodology Contained Multiple Refinements; List Includes Financial Institutions, Colleges/Universities, CMCE & FAAP Reviews

As it has done for various CSALs going back to November 2019, OFCCP published a corresponding methodology explaining how it developed this latest CSAL. This latest, two-page methodology notes that OFCCP created the pool of eligible contractors for the new list by first downloading federal contracts valued at $50,000 or more from the USAspending.gov database.

EDITORIAL NOTE:

First, notice that OFCCP is not using its Contractor Portal, despite its stated intent to use the Portal to not only certify contractor compliance with the AAP requirement, but to also use it to select contractors for audit (hence the need for AAP web pages). This raises the question why federal contractors are continuing to complete detailed AAP Establishment Pages in the Contractor Portal OFCCP has established for this purpose (along with capturing contractor “certifications” that the contractor has developed AAPs for its AAP Establishments) if OFCCP is not going to use the AAP Establishment Page data annually gathered at millions of dollars of cost to contractors.

• See the Calendar Section, far below, noting that three days from now (on Wednesday, June 12, 2024) the Comment Period will close for the public to comment on OFCCP’s proposed extension of its authority from the Office of Management and Budget (“OMB”) to continue to annually impose hundreds of thousands of dollars of cost burden on federal contractors to develop annually almost 200,000 AAP Establishment Pages in its Contractor Portal. To what end since OFCCP is finding its audit targets in federal government contracting reports as refined by EEO-1 reports as to employee headcount sizes in each AAP Establishment?

Second, the $50,000 contract level is important to OFCCP since it is only those federal contractors that have a legal obligation under Executive Order 11246 and Section 503 of The Rehabilitation Act of 1973 to develop Affirmative Action Programs that organize and isolate the contractor’s human resources data of interest to OFCCP to audit.

OFCCP did NOT sift its federal contract value databases for contractors with covered federal Government contracts of $150,000 or more (OFCCP’s jurisdictional threshold over contractors with VEVRAA obligations). It is thus possible that OFCCP has swept into its audit pool some contractors obligated to ONLY produce AAPs pursuant to OFCCP’s Rules implementing Executive Order 11246 (as to minorities and women) and Section 503 (as to individuals with disabilities) but NOT pursuant to VEVRAA (because none of that contractor’s federal contracts are “a” contract valued at $150,000 or more). Any such contractors will simply have to inform OFCCP upon audit that it is not a covered federal Government contractor as to VEVRAA (even apparently covered by EO 11246 and Section 503).

Then OFCCP removed from its potential audit pool:

1. contracts awarded to federal, state, local, municipal, tribal, city, and foreign governments, school districts, and construction companies;
2. Healthcare contracts that fall under OFCCP’s Final Rule: Affirmative Action and Nondiscrimination Obligations of Federal Contractors and Subcontractors: TRICARE Providers (published on July 2, 2020; see our story here);
3. OFCCP’s Extending the Scheduling Moratorium for Veterans Affairs Health Benefits Program Providers Directive (DIR 2021-01) (revised on May 1, 2023, see our story here); and
4. contracts expiring on or before December 31, 2024.

EDITORIAL NOTE: Tuck away in the back of your mind that last exclusion from OFCCP’s audit target list for future use: OFCCP is not interested in auditing closed contracts.

Next, OFCCP further refined its potential audit pool by prioritizing contractor and subcontractor establishments in conjunction with its “biggest first” audit strategy: i.e., by selecting for audit those AAP Establishments with the highest employee headcount in each OFCCP District Office’s jurisdiction going down the list in size of employee headcount until they ran out of audits to be allocated to that District Office. The agency matched company names and addresses against the 2021 EEO‐1 filings to obtain employee counts (not to source federal contractors). For each parent company with at least one contract of $50,000 anywhere in the organization, all U.S. establishments with at least 500 employees, establishments in U.S. territories with at least 150 employees, and Functional Affirmative Action Program (“FAAP”) units with at least 300 employees that meet the scheduling list’s other criteria below were included in the eligible pool of contractors.

Audit Methodology Undercuts OFCCP’s Claimed Need for Likely Over 100,000 “AAP Establishment Pages” It Demands Contractors Annually Load In a “Contractor Portal”

Contractors have three days (until Wednesday, June 12, 2024) to comment to the Office of Management and Budget about OFCCP’s request to renew its use of OFCCP’s Contractor Portal. See the links in the Calendar section, below, of this WIR.

Even apart from the question whether there is any use for contractors to continue to annually complete almost 200,000 AAP Establishment pages in OFCCP’s Contractor Portal, there is a second question that simultaneously undermines OFCCP’s claimed need for the first 100,000, or so, of those estimated required AAP establishment Pages.

OFCCP currently purports to require covered federal contractors to BOTH:

• annually certify that they have developed AAPs for all AAP Establishments in their company (fine and good); and
• create an AAP Establishment page in OFCCP’s “Contractor Portal” for each AAP Establishment, including with fewer than 500 employees, complete with numerous fields of called-for data about each listed AAP Establishment. A federal contractor could, of course, certify its development of all of its required AAP Establishment AAPs without completing a single AAP Establishment Page (i.e., “I hereby certify on behalf of the above-referenced covered federal Government contractor, that it has developed all Affirmative Action Plans OFCCP Rules require it to develop or to annually update.” DONE.)

OFCCP designed the AAP Establishment Page (purported) requirement to allow OFCCP to assist it to select Supply & Service contractor AAP Establishments for audit as OFCCP has reported to contractors here:

“…GAO recommended that OFCCP ‘develop a mechanism to monitor AAPs from covered federal contractors on a regular basis.’ Such a mechanism could include electronically collecting AAPs and contractor certification of annual updates. OFCCP developed the Contractor Portal in response to the GAO recommendations.”

OFCCP could simply request Contractors to “certify” (as GAO suggested) that they had developed AAPs for all AAP Establishments, in this case, of 499 or fewer employees without the need to create AAP Establishment Pages for these (we shall call) “smaller AAP establishments.” OFCCP has always claimed it wanted to use the Contractor Portal to load AAP Establishment information to assist it in auditing its contractor universe, IN ADDITION, to the GAO’s suggestion OFCCP confirm contractor certification of adherence to OFCCP’s AAP development requirements.

Detailed information about these smaller AAP Establishments is simply not relevant to OFCCP’s audit targeting decisions. OFCCP simply needs only a certification that the contractor developed the smaller AAPs, which is all the assurance OFCCP is currently obtaining at any rate in the absence of audits to determine whether that is true. Moreover, OFCCP’s current audit architecture proceeds without making any resort to the detailed AAP Establishment Pages contractors must currently set up in OFCCP’s Contractor Portal. The AAP Establishment Pages for these smaller AAP Establishments are seemingly of no use to OFCCP and are being collected for no useful reason.

Apart from the national security concerns associated with creating a perfect national map of every federal contractor’s work locations within the United States, and each location’s staffing sizes, annually creating easily over 100,000 AAP Establishment Pages for AAP Establishments OFCCP has no interest or intention to audit is unnecessarily burdensome to federal contractors and wastes taxpayer dollars buying digital storage for all those data.

(By the way, not even Google publishes the accurate GPS locations of defense contractor locations to help deter missile strikes on establishments necessary to the national defense. True story! Practice Tip: For those of you driving to a sensitive defense location for a work meeting, be sure to first obtain from the company the street-by-street driving instructions since Google will likely put you about a mile off of your driving target.)

Final Note: The clock is ticking on any Comments you wish to file with OMB concerning OFCCP’s request to OMB to reauthorize OFCCP’s continued use of the Contractor Portal, as is.

OFCCP’s Methodology for Financial Institutions (i.e., primarily Banks and Credit Unions)

OFCCP created the pool of eligible financial institutions by downloading FDIC-insured banks, addresses, and employee counts from the FDIC’s publicly available database. The agency cross-referenced all eligible establishments and FAAP units with its case management system and removed those that were: (1) currently under review; (2) currently in a monitoring period pursuant to a conciliation agreement; (3) currently within the exemption period following a closed review; (4) currently pending scheduling for review from a prior scheduling list; or (5) have an active separate facilities waiver.

OFCCP’s Methodology for Finalizing the List

To finalize the scheduling list, OFCCP selected:

1. five Corporate Management Compliance Evaluation (“CMCE”) reviews per OFCCP region (thus only 30 “Glass Ceiling” audits total nationwide), prioritizing those with the highest employee count in an OFCCP’s District Office’s jurisdiction;
2. establishments with the highest employee count within each OFCCP’s District Office’s jurisdiction for establishment reviews and did not include more than two establishments of any parent company;
3. four FAAP units per OFCCP region (thus only 24 FAAP audits total nationwide), prioritizing those with the highest employee count in each OFCCP District Office’s jurisdiction – the agency did not select more than two FAAP units of any parent company;
4. two financial institutions for review per OFCCP region (thus only 12 banks/credit union audits total nationwide), prioritizing those with the highest employee count in each region. [NOTE: At this point, however, OFCCP only has jurisdiction over those banks/financial institutions that receive “Direct Deposits” from the federal government equal to or more than OFCCP’s financial jurisdictional limits of $10,000 (EO 11246), $15,000 (Section 503), and $150,000 (VEVRAA); and
5. one college/university for review per OFCCP region (thus only 6 colleges/universities total nationwide). HOWEVER, each of these are potentially very large audits that could include dozens of AAP Establishments following OFCCP’s change in practice to audit all AAP Establishments (undefined, but OFCCP knows it when it sees it) that operate in what OFCCP calls a “campus-like setting;” and prioritizing those with the highest employee headcount in each region. NOTE: It is also unclear whether OFCCP would audit AAP Establishments within the “campus-like setting” that have a headcount smaller than 500 given OFCCP’s decision that AAP Establishments smaller than 500 are not worth auditing. OFCCP has left college and university contractors to either force that issue by leaving AAP Establishments within their campus-like settings out of their responses to OFCCP’s audit Scheduling Letters or make inquiry as to why OFCCP would choose to audit smaller college and university AAP Establishments but not the under 500 employee AAP Establishments of other Supply & Service contractors.

How OFCCP Distributed Audits to Its 31 (Currently) District Offices

After that, OFCCP assigned District Office and Regional Office codes to each qualifying AAP Establishment and FAAP unit based on their postal address. Then, the agency proportionally distributed the number of “Compliance Evaluations” (i.e., “Compliance Reviews” (“CEs”), “CMCEs,” and “FAAP CEs”) across its OFCCP Regions and their District Offices based on available staff, measured in full-time equivalents. When OFCCP District Offices did not have a large enough pool to receive their proportional share, OFCCP assigned additional audits (which OFCCP calls “cases”) to other offices of the same OFCCP Regional Office to maintain the regional share. OFCCP Regions may (and several frequently do) transfer “cases” to other District Offices within their Region to balance their workload when appropriate, OFCCP noted.

Those contractors with two AAP Establishments on the CSAL, but located in different OFCCP Regions, will find that OFCCP assigned only one OFCCP Region to conduct both audits. OFCCP’s rationale was that both the agency and the contractor could then more easily engage in these audits in a coordinated manner.

EDITORIAL NOTE: This new audit assignment protocol begins to implement the third of GAO’s 2016 six Recommendations that OFCCP “[m]ake changes to the current scheduling list distribution process so that it addresses changes in human capital and does not rely exclusively on geographic location.” (We wrote about that GAO recommendation almost eight years ago here.) This is the recommendation, even before the COVID-19 pandemic and while OFCCP continues to move away from the use of the onsite portion of its 3-part Compliance Review process, which has caused many to wonder why OFCCP simply does not close all its Regional, District, and Area Offices to operate remotely out of only one or perhaps two low-cost locations to increase efficiency, homogeneity of audit experience, and Compliance Officer headcount.

The agency also placed these “grouped establishments” at the beginning of the list and university reviews were placed at the end; all other reviews were randomly assigned within each OFCCP District Office.

Also, “OFCCP does not purge unscheduled cases from prior lists before releasing a new scheduling list,” the agency noted in the methodology document. That means, as usual, that OFCCP will continue to audit to conclusion all AAP Establishments it has previously identified for audit in previous CSALs.

The agency published its most recent previous S&S CSAL in September 2023 (our story is here). Before today’s numerous conforming updates to OFCCP’s CSAL FAQs, OFCCP previously updated its CSAL FAQ section on December 4, 2023 (see our story here).