Reprinted with permission by Circa.
OFCCP is requesting that the Office of Management and Budget (OMB) reauthorize the supply and service program “compliance review scheduling letter” that provides federal contractors with notice of audit, and the “itemized listing”, included with the scheduling letter, which identifies the information contractors are to include in their response to the Agency’s audit request.
Far from seeking reauthorization of the existing document, however, OFCCP is proposing a major increase in the scope and detail of contractors’ initial audit response. The proposed update and OFCCP’s Supporting Statement are here. OFCCP is seeking your comment on its request, which can be filed here through January 20, 2023.
Review under the Paperwork Reduction Act requires balancing the burden that producing the additional information represents for contractors against the utility of the information collected in evaluating contractors’ compliance. In its Supporting Statement OFCCP estimates the “burden hours” for assembling and submitting the requested documents to be approximately 39 hours per contractor. This is one person working full-time one week. Given the range of the proposed changes outlined below, is this realistic?
OFCCP states that the additional detail will facilitate speedy review. Will the increased mass of data bog audits down instead? Is it better to continue the current practice of requesting additional detail later in the audit, if and when initial review justifies?
Contractors will Have to Prove they Maintain Action-Oriented Programs
OFCCP’s proposed update would build on existing regulatory provisions to require that contractors maintain “action-oriented” programs and demonstrate “good faith efforts to remove identified barriers, expand employment opportunities, and produce measurable results”. A contractor must implement “an auditing system that periodically measures the effectiveness of its total affirmative action program” (41 CFR 60-2.17(c) and (d)). If steps taken do not remedy barriers to equal access, contractors must develop and implement new strategies.
The action-oriented program requirement is of long-standing. What is new is the approach taken in the proposed scheduling letter. It requires that contractor’s detail how they proactively address underrepresentation in their initial audit responses. For example, under the proposed Itemized Listing paragraph 11 (“Item 11”), if “any” underutilization of individuals with disabilities is found, the response must:
… provide a description of the steps taken to determine whether and where impediments for equal employment opportunity exist in accordance with 41 CFR § 60-741.45(e). Per 41 CFR § 60-741.45(e) and (f), this description shall include your assessment of personnel processes, the effectiveness of your outreach and recruitment efforts, the results of your affirmative action program audit, any other areas that might affect the success of the affirmative action program, and a description of action-oriented programs developed and executed to correct any identified problem area.
Similar additional new requirements for demonstrating program effectiveness are found in the new Item 8 (old Item 7, effectiveness of disability program outreach) and Item 12 (old Item 11m veterans’ outreach). Both add language that would require that contractors submit documentation that indicates “whether you believe the totality of your efforts were effective.” Item 25 (old item 21) would require that contractors identify “any impediments to equal employment opportunity identified through the assessment”, and detail actions taken “including modifications made or new processes added” as a result of the assessment. Item 7 (a new item) would require a list identifying all action-oriented programs designed to correct any problem areas identified through the mandated 41 CFR 60-2.17(b)(3) compensation system review.
If OMB allows OFCCP to implement these requirements, these additions and others outlined below will swell audit responses. By requiring detail concerning any underrepresentation, whether it is indicative of patterns and trends in contractors’ program or not, the requirement will significantly complicate audit response for contractors and could make it difficult for Agency Compliance Officers to focus on their audit review.
Is OFCCP Asking for Documents and Analyses Contractors are Not Required to Create?
The proposed changes would incorporate elements of the recently updated Directive 2022-01 “Advancing Pay Equity Through Compensation Analysis” into the proposed Item 22 (a new item not to be confused with Item 7 above). The Directive remains controversial as its requirements may exceed those outlined in the regulation it interprets (see Circa’s blog “What does OFCCP’s Updated Pay Directive 2022-01 Mean to You?”). Although the Directive and updated scheduling letter define what the Agency expects contractors produce to show they met their compensation review requirements, 41 CFR 60-2.17(b)(3) requires the creation of no such specific detail.
OFCCP provided notice of its intent to update the scheduling letter pursuant to the Paperwork Reduction Act (PRA), which governs how federal agencies collect information from the public. To actually expand the reporting requirement beyond currently existing regulation, however, the common practice is for an agency to seek “notice and comment” under the Administrative Procedure Act (APA). The APA governs the process for developing and updating regulations. In other words, should OFCCP expand the regulatory definition of what constitutes an “in-depth” compensation review before requiring the production of the specific, detailed information now outlined in the proposed Item 22?
Other Proposed Scheduling Letter Changes Would Also Increase Burden on Contractors
Page 2 of the proposed Scheduling Letter states that a “post-secondary institution or federal contractor with a campus-like setting that maintains multiple AAPs” must submit audits for all work locations in either the city or the state of the facility for which notice of audit was actually given.
Item 16 (current Item 15) would require post-secondary institutions to submit copies of their “Integrated Postsecondary Education Data System (IPEDS) Human Resources Survey Component data collection reports”. (Educational institutions create IPEDS in lieu of EEO-1 submissions.)
Item 19 (a new Item) would require producing documentation of “policies and practices regarding all employment recruiting, screening, and hiring mechanisms, including the use of artificial intelligence, algorithms, automated systems or other technology-based selection procedures.” (OFCCP could conceivably include production of validation studies to justify use of Artificial Intelligence. See 4 CFR 60-3 and the White House Office of Science and Technology Policy (OSTP) Blueprint for an AI Bill of Rights for an overview of the administration’s thinking about AI.)
Proposed Item 20 (current Item 18) would require identifying whether a promotion is “competitive” or “non-competitive”, and require termination detail (retirement, conduct, etc.).
Item 21 (current Item 19) would double the amount of compensation data to produce. It would require information for the prior plan year in addition to the currently required snapshot of data relating to the plan year under review. Data on “factors used to determine employment compensation such as education, experience, time in current position”, which was optional, would become mandatory. (Not all contractors maintain this information.)
The updated Item 21 would also require providing compensation detail for “temporary employees, including those provided by staffing agencies” – even though contractors are not likely to set the pay of staffing agencies’ employees.
As noted above concerning the compensation review, the updated scheduling letter would require specific, detailed information to meet a compensation analysis requirement that 41 CFR 60-2.17(b)(3) defines broadly. Submitting audits for all work locations in a city or state contradicts the current practice of responding only for the work location specifically audited. Should OFCCP require these changes without notice and comment under the Administrative Procedures Act? The Agency has given notice that it plans to request updates to the supply and service regulations by March 2023. Should the Agency consider deferring changes to the scheduling letter until changes to supply and service regulations are vetted via public comment and OMB review squarely focused on the pros and cons of updating the statute?
Despite the proposed massive increase in the amount of detail to be returned with a desk audit, the proposed Scheduling Letter still requires that contractors respond within 30 days. The proposal adds that the Agency may initiate enforcement for contractor failure to respond within the time limit.