Nondisplacement of Qualified Workers Under Service Contracts
Executive Order 14055, Nondisplacement of Qualified Workers Under Service Contracts, directs federal agencies to promote workforce continuity when a service contract ends and a follow-on contract for the same or similar work is awarded. The core idea is to give qualified employees of the predecessor contractor a right of first refusal for positions under the new contract, thereby reducing displacement and preserving an experienced, security-cleared, and well-trained workforce. The order requires a specific non-displacement clause in successor contracts, outlines when and how employment offers must be made, sets reporting and data-sharing requirements, and establishes enforcement and exception processes. It also introduces a “location continuity” consideration to favor keeping work in the same locality when it supports efficiency. The order becomes effective when final regulations are issued, with agencies encouraged to include the clause in interim solicitations and standard contracts in the meantime.
Key Points
- 1Nondisplacement clause in follow-on service contracts: successor contractors must offer employment to qualified service employees of the predecessor contract, with an express right of first refusal, and a minimum 10-business-day response window for acceptance.
- 2Scope and definitions: applies to service contracts covered by the Service Contract Act (SCA); defines “service employee,” and identifies the relevant agency/contracting context.
- 3Employment process details: the successor contractor may determine staffing needs (can hire more or fewer employees based on how many are necessary); no employment openings can be created or filled before meeting the clause requirements; includes an obligation to offer to each eligible employee and set the acceptance period.
- 4Transition data and enforcement: contractors must provide the Contracting Officer with a certified list of affected employees (including anniversary dates) before the contract ends; this list is shared with the successor contractor and may be provided to employees upon request; the Secretary of Labor can impose sanctions for noncompliance, including debarment in certain cases.
- 5Subcontractor obligations: every subcontract must also honor the nondisplacement requirements for employees of predecessor subcontractors/workers, with mechanisms to provide needed employee information to comply.
- 6Location continuity: agencies must consider whether performing the contract in the same locality is necessary for economy and efficiency, and may require the successor contract to be performed in the same locality if appropriate.
- 7Exclusions and exemptions: the order does not apply to contracts below the simplified acquisition threshold or to certain mixed-employment scenarios; agencies can grant specific exemptions for particular contracts if certain criteria are met (e.g., not advancing economy/efficiency, market constraints, or statutory/regulatory conflicts). Public descriptions of exemptions and quarterly reporting to OMB are required.
- 8Regulations and implementation timeline: the Secretary of Labor will issue final regulations within 180 days; the FAR Council will amend the FAR within 60 days after final regulations; the Office of Management and Budget will provide guidance for the 6(c) reporting provision.
- 9Revocation and effective date: revokes prior nondisplacement orders and clarifies this order’s relationship to existing rules; becomes effective immediately but applies to solicitations issued on or after the final regulations; agencies are urged to apply the clause to solicitations issued during the interim period where feasible.