OFCCP’s New Supply and Service Scheduling Letter Significantly Increases Audit Scope

At a Glance

• On August 25, 2023, the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) announced that it has updated its Supply and Service Scheduling Letter and Itemized Listing (Scheduling Letter).
• The updated Scheduling Letter “encourages contractors to submit information electronically, clarifies existing requirements, and requests new information that will allow OFCCP to better assess compliance.”

On August 25, 2023, the Office of Federal Contract Compliance Programs (OFCCP) announced it has updated its Supply and Service Scheduling Letter and Itemized Listing (Scheduling Letter) for all compliance evaluations retroactive to those beginning on August 24, 2023, or after.

On November 22, 2022, the OFCCP put forward proposed modifications to its Scheduling Letter for approval from the Office of Management and Budget (OMB). The initial proposed changes sought to increase the breadth of information and data federal contractors and subcontractors (contractors) must provide OFCCP at the start of compliance evaluations. After receiving public comments, the updated Scheduling Letter incorporates some, but not all, of the changes it initially proposed in November 2022.

According to the OFCCP’s announcement, the updated Scheduling Letter “encourages contractors to submit information electronically, clarifies existing requirements, and requests new information that will allow OFCCP to better assess compliance.” Broadly speaking, the changes underscore the OFCCP’s increasingly rigorous approach to audits by requiring contractors to provide an increased amount of information and support data to demonstrate compliance at the outset of the audit. In addition to the updated Scheduling Letter, the OFCCP has provided limited supplemental information in its OFCCP's Frequently Asked Questions (FAQs). The OFCCP has also stated that it will be posting a course in its Contractor Compliance Institute to provide additional guidance.

Although the Scheduling Letter includes numerous changes, the following topics are those that contractors should pay particularly close attention to for compliance purposes:

Action-Orientated Programs: New Item 7 requires contractors to provide documentation demonstrating their development and execution of action-oriented programs which contractors are required to design to correct any problem areas when conducting an in-depth analysis of its total employment processes to determine whether impediments to equal employment opportunity exist, including evaluating the contractor’s personnel activity (applicant flow, hires, terminations, promotions) and compensation systems.

Outreach and Recruitment Efforts: Newly numbered Items 8 and 12 (previously Items 7 and 11) now require additional details and documentation about contractor outreach and positive recruitment efforts regarding protected veterans and individuals with disabilities, including documentation indicating whether the contractor believes the totality of their efforts were effective. If a contractor believes its efforts were not effective, contractors must describe what they did to implement or identify other possible efforts. According to the FAQs, this information includes things such as the documentation of all activities undertaken, and the criteria used to evaluate the effectiveness of its efforts. Similarly, Item 11 (previously Item 10), requires contractors to describe the steps taken to determine whether impediments to equal employment opportunity exist if underutilization of disabilities is identified.

Compensation: Revised Item 19 and New Item 22 significantly expand the scope of data sought on compensation.

• Contractors must now provide two years of compensation data for all employees as of the following snapshot dates: (1) the date of the organizational display or workforce analysis and (2) the date of the prior year’s organizational display or workforce analysis.
• Contractors must now provide additional compensation data for each employee in response to the Scheduling Letter. For example, although previously optional, contractors are now required to provide data regarding the factors used to determine employee compensation, such as education, experience, time in current position, geographical differentials, performance ratings, department or function, job families and/or subfamilies and salary level/band/range/grade. Contractors are still required to provide the previously required information on base salary/wage rate, annualized compensation, and hours worked but must now separately identify “other compensation or adjustments to salary” including such categories as bonuses, incentives, commissions, merit increase, locality pay or overtime.
• The Scheduling Letter also specifies that contractors must provide all documentation and policies concerning the contractor’s compensation practices, such as those that that explain the factors used to determine compensation.
• Consistent with the OFCCP’s Directive 2022-01 Revision 1, Advancing Pay Equity Through Compensation Analysis, contractors are also now required to produce detailed documentation showing that the contractor has satisfied its obligation to evaluate its “compensation system(s) to whether there are gender, race, or ethnicity-based disparities,” through analyses of its total employment process, including at least the following information: when the analysis was completed, the number and categories of employees included in the analysis, which forms of compensation were analyzed, that compensation was analyzed by gender, race and ethnicity, and the statistical method employed.

Technology-Selection Process: For the first time, new Item 21 requires contractors to submit documents and information regarding technology-based selection procedures and other recruiting, screening and hiring tools.

In addition to those changes, the OFCCP has also expanded audits for contractors and post-secondary institutions with “campus-like settings,” who will now need to provide information for all Affirmative Action Programs (AAPs) developed for campuses. And post-secondary institutions are also now required to submit copies of their Integrated Postsecondary Education Data System (IPEDS) Human Resources Survey Component data collection reports for the previous three years. The OFCCP’s FAQs clarify that it only requires submission of copies of the Human Resources Survey Component data collection reports

Finally, the Scheduling Letter also sets out that the OFCCP is now requesting that contractors submit information electronically through email or another secure file sharing system.

As a reminder, upon receipt of a Scheduling Letter, contractors will have only 30 days to submit their AAPs and additional contractor records and information to the OFCCP. Thus, contractors should start reviewing their compliance efforts now to take steps to comply with the new data requirements and to reduce the risk of future noncompliance findings.

Faegre Drinker will continue to provide updates on the new Scheduling Letter, future CSALs and other OFCCP compliance updates.