More By This Author

Current Issue

Current Issue

Posted: July 26, 2012

Affirmative action: Federal audits run amok

It can happen to any government contractor

Chris Chrisbens

Federal government regulation got you down?  Well, it could be worse; just ask U.S. Security Associates, Inc. (USSA).  In June, USSA filed an administrative complaint seeking to stop most of the 40 affirmative action compliance audits the Office of Federal Contract Compliance Programs (OFCCP) decided to conduct of USSA’s locations across the country.  The 40 audits, all of which OFCCP intended to start in 2011, would have covered nearly 30 percent of USSA’s 135 nationwide locations, and almost one third of its 29,000 employees.  USSA calculates that the number of audits was an 850 percent increase over its 2009 OFCCP audits, and a 425 percent increase over its 2010 audits – more than a little excessive, it argues.  USSA also asserts: 

OFCCP has also refused to advise USSA of exactly how OFCCP suddenly came to decide to select USSA for potential audit 40 times in less than one year (perhaps unprecedented in the history of the OFCCP) and to allocate 1 percent of OFCCP’s … audit resources to one company with only a single $150,000 [federal] contract, no history of pervasive or repeated OFCCP audit violations and at a time [when] there are 171,000 … other audit targets available to OFCCP. 

Triggered by a Single Federal Contract of $150,000

Among other triggers, companies with 50 or more employees and $50,000 or more in federal government supply or service contracts or subcontracts must have a written affirmative action plan (AAP) addressing equal employment opportunity and affirmative action for women and minorities.  Companies with a federal contract of $100,000 or more must also have a written AAP covering veterans and individuals with disabilities.  And, each company location with 50 or more employees must have its own AAP. 

USSA’s complaint doesn’t object to its affirmative action obligations.  Rather, it argues that in light of its single, comparatively meager $150,000 federal contract, the number of audits is excessive and OFCCP lacks probable cause under the 4th Amendment’s unreasonable search and seizure provisions.  USSA argues OFCCP unfairly decided to conduct the multiple audits without regard to the required “administratively neutral selection system” and without any evidence of a current affirmative action violation. 

But…All Covered Federal Contractors are Subject to Possible Audit

USSA’s situation certainly appears unusual, if not “fishy.”  How and why did the OFCCP decide to subject USSA to 40 audits in a single year?  However, while USSA may succeed with its complaint because of the particular circumstances, OFCCP routinely audits big and small federal contractors that have no history of violation or huge federal contracts.   While the OFCCP has disclosed the factors used in its “administratively neutral selection system,” OFCCP audits are not readily predictable, either in terms of which federal contractors will be selected, or what areas on which they may focus.  And, for obvious reasons, the OFCCP likes it that way; it wants all federal contractors to be wary of, and prepared for, an audit. 

Preparing for an OFCCP Audit

USSA was apparently prepared for its audits, just not the burden of so many of them.  Any company that suspects it might do business with the federal government, either directly or pursuant to a subcontract, would be wise to assess possible affirmative action obligations, prepare a compliant AAP, understand its contents and be prepared to defend it.  OFCCP entanglement can be time-consuming and expensive even with a fully-compliant AAP, let alone without one. 

While OFCCP notice of an audit allows 30 days to submit an AAP, one prepared in haste after receipt of an audit notice will be obvious to the OFCCP and may expose the company to audit issues for which it is not adequately prepared.  Likewise, if there are doubts about affirmative action coverage, address them first, before providing an AAP to the OFCCP because 4th Amendment arguments are likely waived at that point, as happened to USSA when it first sought in good faith to cooperate with some of OFCCP’s 40 audits.  Covered companies need also to be on the lookout for OFCCP notice of an audit, and companies with multiple locations and AAPs should be on the lookout twice a year for the OFCCP’s Corporate Scheduling Announcement Letter, which provides large companies with even more advance notice of OFCCP’s intention to audit multiple, designated company locations. 

In short, the USSA case demonstrates that OFCCP is as aggressive as ever, if not more so.  While USSA’s complaint may require OFCCP to justify how and why it seems to have run amok with 40 audits in a single year despite USSA’s clean record, even if USSA is successful in lessening its burden, it remains clear OFCCP has the power to subject all covered federal contractors to periodic compliance audits.  That will not change as a result of the USSA case and all federal contractors must therefore be attuned to their affirmative action obligations. 
 
 

As an attorney with Holland & Hart, Mr. Chrisbens works with federal contractor employers to develop compliance strategies and solutions concerning all aspects of affirmative action planning and OFCCP regulation. He can be reached at 303-295-8193 or fcchrisbens@hollandhart.com.

Enjoy this article? Sign up to get ColoradoBiz Exclusives. The opinions expressed in this article are solely that of the author and do not represent ColoradoBiz magazine. Comments on articles will be removed if they include personal attacks.

Readers Respond

USSA simply had to read its contract with the federal government to know that they are opening themselves to such audits. That is why businesses should not just go after any business for the sake of increasing revenue. Weigh the pros and cons of doing business with a specific client and, in the end, proceed only if it is in your company's best interest to go after that contract. That is why that business people should hope for the best outcome but, more importantly, prepare for the worst as well and have an exit plan. Now that USSA feels the burden of this contract is too heavy, I wonder if they have read and prepared for an exit plan to cut their losses? By MileHigh on 2012 07 26
Commenting is not available in this channel entry.

ColoradoBiz TV

Loading the player ...

Featured Video