what government contractors need to know about executive order 13494 “economy in government...

Hogge Law

What Government Contractors Need to Know About Executive Order 13494

“Economy in Government Contracting”

Raymond L. Hogge, Jr.Hogge Law

Attorneys and Counselors at Law500 E. Plume Street, Suite 800

Norfolk, Virginia, 23510(757) 961-5400

[email protected]

This presentation is intended solely for informational purposes and is not offered as legal advice

VirginiaLaborLaw.com

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Federal Acquisition Regulations Part 31:

Determines allowable costs under contracts with• General Services Administration• Department of Defense• NASA


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Federal Acquisition Regulations Subpart 31.2:

Governs contracts withcommercial organizations


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Federal Acquisition Regulations Subpart 31.205-21:

Governs costs allowable aslabor relations costs


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Federal Acquisition Regulations Subpart 31.205-21

before Executive Order 13494:

“Costs incurred in maintaining satisfactory relations between the contractor and its employees” are allowable


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Federal Acquisition Regulations Subpart 31.205-21

before Executive Order 13494:

Allowable labor relations costs include• Costs of shop stewards

• Costs of labor management committees• Costs of employee publications• Costs of other related activity


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Executive Order 13494

“Economy in Government Contracting”

Amended Federal Acquisition Regulations Subpart 31.205-21

Issued January 30, 2009Amended Oct. 30, 2009 by Exec. Order 13517


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Proposed regulations issued April 14, 2010

Final regulations issued Nov. 2, 2011and effective December 2, 2011

48 CFR 31.205-21


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Under Executive Order 13494costs incurred in maintaining satisfactory relations between the contractor and its

employees include• Costs of shop stewards

• Costs of labor management committees• Costs of employee publications• Costs of other related activities

(same as before Executive Order 13494)


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Executive Order 13494allows costs of

“Costs incurred in maintaining satisfactory relations between the contractor and its

employees” other than the costs of persuader activities


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Executive Order 13494disallows costs of “persuader activities”

“Any activities to persuade undertaken to persuade employees to exercise or not to

exercise, or concerning the manner of exercising, the right to organize and bargain collectively through representatives of the

employees’ own choosing”


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31.205-21 After Exec. Order 13494:

Specifically disallows persuader activity costs of “preparing and distributing materials”

31.-205-21(b)(1)


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Specifically disallows persuader activity costs of“hiring or consulting

legal counsel or consultants”

31.-205-21(b)(2)


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Specifically disallows persuader activity costs of“meetings (including paying the salaries of the attendees at meetings held for this purpose)”

31.-205-21(b)(3)


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Specifically disallows persuader activity costs of“planning or conducting activities by

managers, supervisors, or union representatives during work hours”

31.-205-21(b)(4)


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Costs associated with development, implementing, and enforcement

of neutrality agreements

Allowable provided the activity is not a persuader activity

and is not “otherwise unlawful”

(Preamble to Final Regulations)


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Costs associated with negotiating collective bargaining agreements

Allowable provided the negotiation is not “otherwise unlawful”



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Costs associated with encouraging employees to ratify a collective

bargaining agreement

Allowable provided the activity is not “otherwise unlawful”



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Costs associated with “administering collective bargaining

agreements”

Allowable provided the activity is not “otherwise unlawful”



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Costs associated with any activity found unlawful by the

National Labor Relations Board

Not allowable



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Public Comment: The rule favors unions

and penalizes contractors

Response in Final Rule Preamble: The rule only applies to persuade activities


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Public Comment: The rule infringes on the rights of employers

to engage in speech which is lawful under the National Labor Relations Act

Response in Final Rule Preamble: The rule does not prohibit speech; it only

disallows the contractor’s cost of engaging in that persuader activities


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Public Comment: The rule is unclear as to

what costs are disallowed

Response in Final Rule Preamble: The rule identifies the costs that are allowed

and the costs that are disallowed


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Public Comment: The rule defines “persuader activity”

more broadly than the Labor Management Relations Reporting and Disclosure Act

Response in Final Rule Preamble: The rule does not alter the reporting

obligations of employers under the LMRDA


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Public Comment: The rule imposes significant compliance

burdens and accounting costs to segregate disallowed costs

Response in Final Rule Preamble: FAR 31.201-6 requires contractors to have

accounting system to segregate allowable costs


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Employee handbook of non-union employerexpressing preference to remain non-union

A persuader activity?

Cost disallowed for only the policy or for the entire handbook?


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Employee satisfaction surveys

A persuader activity?Or maintaining satisfactory labor relations?


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Employer wage and benefit surveys



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Workplace “town hall” meetings conducted by employer to discuss employee concerns



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Use by employer of management consultants to improve workforce satisfaction



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Use by employer of legal counsel for advice on labor relations issues



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To obtain a complementary copy of this presentation, or for assistance in complying

with Executive Order 13494, please contact Ray Hogge

at (757) 961-5400 or at [email protected]


what government contractors need to know about executive order 13494 “economy in government...

Documents

costs of costs

allowable costs

costs allowable

costs of persuader activities

executive order

proposed regulations

final regulations

satisfactory relations