The Federal contract compliance program is mandated by Executive Order 11246, signed in 1965, which forbids discrimination in employment by Government contractors and subcontractors on the basis of race, color, religion, or national origin. The order was amended in 1967 to forbid discrimination in employment on the basis of sex as well. It requires Government contractors to take affirmative action to insure that job applicants and employees are not discriminated against on the basis of race, color, religion, national origin, or sex.

Contractors subject to the requirements of the program must ensure that equal employment opportunity principles are followed at all company facilities, including those facilities not engaged in work on a Federal contract. For example, if a Government agency enters into a contract with a contractor in Washington, D.C., and that contractor has other facilities scattered throughout the United States, each of the contractor's facilities is required to comply with the provisions of the Federal contract compliance program.

Each nonconstruction contractor that has 50 or more employees and a Government contract of $50,000 or more is also required to prepare a written affirmative action plan (AAP) applicable to each of its facilities.

To meet the standards for acceptability set forth in regulations issued by the Secretary of Labor, the AAP must include specific types of data. These include: (1) goals for improving the employment of minorities and females in those cases where the contractor is found to be deficient (i.e., where the contractor is presently employing fewer minorities and/or females than would reasonably be expected considering their availability within an area where the contractor can be expected to recruit); and (2) timetables for achieving those goals. Following this plan, the contractor should be able to increase materially the utilization of minorities and women at all levels and in all segments of its work force where deficiencies exist.

Various sanctions are authorized if a Government contractor fails to prepare an acceptable AAP or to exercise good faith in implementing it. These include contract suspension, contract cancellation, debarment from future Government contracts, and referral to the Department of Justice for court action under Title VII of the Civil Rights Act of 1964.

Gregory J. Ahart is the director of the Manpower and Welfare Division of the U.S. General Accounting Office. This article is adapted from testimony delivered September 11, 1974, before the Joint Economic Committee's Subcommittee on Fiscal Policy.

Responsibility for administration of the Executive order is assigned to the Secretary of Labor. The Secretary has redelegated some of his authority (including the authority to designate agencies to act as compliance agencies) to the Director of the Office of Federal Contract Compliance (OFCC) within the Department's Employment Standards Administration.

OFCC's responsibilities include:

• Establishing policies, objectives, priorities, and goals for the program,

Reviewing and evaluating the capability and performance of each contracting agency to assure maximum progress to achieve the objectives of the Executive order; and

• Developing and recommending such standards, rules, and regulations (referred to here as guidelines) for issuance by the Secretary of Labor as are necessary for the administration of the Executive order.

The Compliance Agencies

The primary responsibility for enforcing the Executive order and related guidelines rests with the Federal agencies designated as compliance agencies, which at the time GAO began its review numbered 13 for nonconstruction contractors. These were:

Agency for International Development (AID)
Atomic Energy Commission (AEC)
Department of Agriculture

Department of Commerce

Department of Defense (DOD)

Department of Health, Education, and Welfare (HEW)

Department of the Interior
Department of Treasury

Department of Transportation

General Services Administration (GSA)
National Aeronautics and Space Administration
(NASA)

United States Postal Service (USPS)
Veterans Administration (VA)

OFCC assigns to each of the compliance agencies the responsibility for contractors in specified industries. This assignment is made primarily on the basis of standard industrial classification codes, irrespective of which Government agency has entered into the contract. For example, GSA is responsible for the utilities and communications industries, Treasury is responsible for banking institutions, and HEW is assigned universities and hospitals.

Effective August 1, 1974, OFCC reduced the number of compliance agencies responsible for nonconstruction contractors from 13 to 11. AID's compliance responsibility was transferred to GSA and NASA's was split between AEC and DOD.

The compliance agencies are responsible for performing compliance reviews of Government contractors within the industries assigned to them. Compliance reviews (including preaward reviews, initial compliance reviews, followup reviews, and complaint investigations) consist of investigation by a compliance officer who conducts an in-depth and comprehensive analysis of each aspect of the contractor's employment policies, systems, and practices to determine adherence to the nondiscrimination and affirmative action requirements. Where the review discloses that the contractor has not prepared a required AAP, has deviated substantially from his approved AAP, or has a program which is unacceptable, a "show cause notice" is required to be issued.

The show cause notice affords the contractor a period of 30 days to show cause why enforcement procedures should not be instituted. If the contractor fails to show good cause for his failure to comply with the program or fails to remedy that failure, debarment or other appropriate sanction actions are required to be initiated, and the contractor must be given the opportunity of having a formal hearing before sanction actions are imposed.

Scope of Review

Although definite minimum standards and criteria are needed in order to apprise bidders of the basis upon which their compliance with OFCC guidelines will be judged, GAO evaluated the implementation of the Federal contract compliance program under existing guidelines issued by the Secretary of Labor and OFCC.

At the request of the Joint Economic Committee's Subcommittee on Fiscal Policy, the GAO review, which is still underway, is directed toward an evaluation of:

• Compliance agencies' efforts in implementing OFCC guidelines for conducting compliance reviews and complaint investigations,

• Application of enforcement measures available to the compliance agencies,

• OFCC's guidance to the Federal agencies assigned compliance review responsibility for nonconstruction contractors, and

• The coordination of compliance review and

complaint investigation activities between OFCC and the Equal Employment Opportunity Commis

sion.

Audit work is being concentrated at OFCC and at two of the largest compliance agencies-GSA and DOD. At each of these agencies, audit work is being done at headquarters and regional offices in Chicago, Philadelphia, Washington, D.C., and San Francisco. Also, limited audit work is underway at the head. quarters offices of the other compliance agencies responsible for the administration of the contract com. pliance program for nonconstruction contractors.

The Implementation

Results to date show that compliance agencies are not adequately implementing the guidelines prescribed by the Secretary of Labor and OFCC for carrying out the contract compliance program. More specifically:

1) Only one of the 13 compliance agencies has identified all contractors for which it is responsible.

2) Some compliance agencies do not always perform the required preaward reviews.

3) Most compliance agencies make periodic compliance reviews at only a small percentage of the total number of estimated contractor facilities for which they are responsible.

4) DOD and GSA are approving contractors' AAPs although these AAPs do not meet OFCC's guidelines.

5) Sanction actions prescribed by the Executive order for noncompliance are seldom imposed.

OFCC guidelines provide that each compliance agency is responsible for assuring that all the contractors in its assigned area of responsibility comply with the Executive order and implementing guidelines. However, OFCC has not developed a centralized system to identify all contractor facilities for which each compliance agency is responsible.

Officials of GSA and DOD at the three regions stated that they did not have complete information showing all contractor facilities in their regions for which they were responsible. Headquarters officials at 12 of the 13 nonconstruction compliance agencies also advised GAO that they too did not have complete information showing the identity of all contractor facilities under their responsibility. Only at NASA did officials state that they had complete information on all contractor facilities for which NASA was responsible. They also stated, however, that NASA-unlike the other compliance agencies is only responsible for contractors having NASA contracts and which are located on or near NASA installations.

If a compliance agency is unaware that a particular business firm is a Government contractor, it will obviously not review the contractor to determine if it is in compliance. Without knowledge of the identity of all contractor facilities for which it is responsible, the compliance agency can not systematically select for review those contractor facilities which offer the most potential for improving equal employment opportunity.

More accurate identification of contractor facilities under each compliance agency's responsibility is not necessarily difficult. For example, the Manpower Administration of the Department of Labor entered into a contract effective June 1, 1973, with a private firm under which the firm provides periodic listings to the Department of Labor and to State employment offices of current contractors holding Government contracts of $2,500 or more.

These listings are used in assisting veterans in obtaining employment with Government contractors, but are not presently used in identifying Government contractors subject to the Executive order. An OFCC official informed investigators that OFCC is considering using these listings as an identification aid.

Preaward Reviews

DOL regulations require that before an agency awards a contract of $1 million or more, the awarding agency must first assure itself that a compliance review of the contractor has been performed within the preceeding 12 months and that the contractor was in compliance with all provisions of the contract compliance program. When the contracting agency is not the responsible compliance agency for a particular contractor, the contracting agency is required by DOL regulations to request preaward clearance from the responsible compliance agency. If the latter has not performed a compliance review of the contractor within the preceding 12 months, preaward clearance may not be granted until a preaward reveiw takes place and the contractor is found in compliance.

In some instances compliance agencies are granting preaward clearances without having performed the required compliance reviews. In others, contracting officers are apparently awarding contracts in excess of $1 million without requesting a preaward clearance from the responsible compliance agency.

For example, in November 1973, AEC requested preaward clearances from HEW for two proposed AEC contract awards, each in excess of $1 million, to two large universities in California. HEW advised AEC that its records indicated that each of the universities appeared to be able to comply with the requirements of the Executive order and were therefore eligible for contract awards.

HEW officials told investigators in May 1974 that neither university had an approved AAP, that reviews of the schools had not been performed in the 12 months prior to the preaward clearances; and the preaward reviews were not performed. If HEW had been following OFCC guidelines it would have had to perform preaward compliances reviews and find the schools in compliance before notifying AEC that the schools were eligible for the proposed contract awards.

In July 1974, HEW officials said that because only 16 colleges and universities had currently approved AAPs, it was HEW's policy to grant a preaward clearance to a school unless HEW had reviewed the school's AAP, found it deficient, and found that the school was not, in a timely manner, revising the AAP to correct the deficiencies noted.

GAO reviewed six requests by DOD for preaward clearance received by the Department of the Interior during calendar year 1973. The Department of the Interior issued preaward clearances to DOD in all six instances. The review showed, however, that in four of the six instances DOL requirements for preaward reviews were not followed. In these four instances, the contractors had not been reviewed during the preceeding 12 months, nor had preaward reviews been performed.

A Department of the Interior compliance official stated that when a request for preaward clearance is received, a preaward review is not performed even if the prospective contractor had not been reviewed during the preceeding 12 months. Preaward clearances are withheld only if there are outstanding show cause notices against prospective contractors.

DOL regulations require that compliance agencies must respond to requests for preaward clearances within 30 days. But the Department of the Interior compliance official stated that as a practical matter, it is not possible to perform an in-depth preaward compliance review and persuade contractors to resolve deficiencies within the 30-day period.

In another case, an AID official said that AID requires contractors (during a compliance review) to list their current Government contracts. As a result, AID found instances in which other Government agencies had awarded contracts in excess of $1 million to con

tractors for which AID has compliance responsibility without requesting preaward clearances from AID.

The Number of Reviews

The GAO review showed that with one exception-NASA-the compliance agencies are performing compliance reviews at a relatively small percentage of the estimated total number of contractor facilities for which they are responsible. (On August 1, 1974, NASA's compliance responsibility was transferred in part to DOD and in part to AEC.) In April and September 1973 OFCC reviewed NASA's enforcement of the Executive order and implementing guidelines and found that 1) NASA was not consistently following OFCC's standards and requirements, and 2) NASA was apparently reluctant to issue show cause notices or take sanction actions.

HelHarsod

Table I shows for each compliance agency the number of compliance reviews performed during fiscal years 1973 and 1974 (through March 31, 1974), expressed as a percentage of the total number of contractor facilities for which those agencies estimate they are responsible. Eight of the 13 nonconstruction compliance agencies reviewed less than 15 percent of their contractor facilities in fiscal 1973. Four agencies reviewed 17 to 28 percent.

During fiscal year 1973, about 45 percent of the compliance reviews performed were followup reviews of contractors reviewed previously. If the compliance agencies were to perform annual followup reviews on each contractor previously reviewed, they would not perform compliance reviews at many of their contractor facilities.

For example, during fiscal year 1973 the Department of Agriculture performed compliance reviews at about

Compliance

Estimated number of

agency

contractor facilities

4 percent of its contractor facilities. If the Department of Agriculture were to perform followup reviews in subsequent years of only the same facilities, it would be unable to examine the other 96 percent of the contractor facilities for which it is responsible.

Affirmative Action Plans

Compliance reviews are often directed towards an evaluation of, and approval or rejection of, contractors' AAPs. In this regard, OFCC has specified certain requirements which must be included in AAPs.

To determine the consistency of application of OFCC regulations and the adequacy of approved AAPs, a random sample of 120 AAPs approved during the first 9 months of fiscal year 1974 was selected for review. The sample consisted of 20 approved by DOD and 20 approved by GSA in each of the three regions reviewed. The investigators analyzed each of the AAPs to determine if they met the requirements for acceptable AAPS as established by OFCC.

Based on the analyses, 42 (or 70 percent) of the 60 GSA-approved AAPs, and 12 (or 20 percent) of the 60 DOD-approved AAPs did not meet OFCC's guidelines and should not have been approved. In most instances,

GSA and DOD regional officials agreed with this conclusion.

One deficiency frequently noted was that the AAPs did not contain a sufficient breakdown of job categories. The job category of "salesworkers" might include highly paid salesmen selling expensive merchandise on a commission basis as well as over-thecounter salesclerks earning the minimum wage. If a contractor were to discriminate against females and limit them to salesclerk positons, and if the data on these two types of jobs were combined in the AAP, it would not be possible by reviewing the AAP to discern a possible pattern of discrimination against females for further investigation. Other deficiencies noted included inadequate work force utilization analyses and the lack of goals and timetables as required by OFCC regulations.

In one regional office, GSA representatives were unable to provide GAO with copies of several AAPs that their records showed as having been approved. The GSA representatives stated that errors had been made in reporting these AAPs as approved; in fact, GSA had not reviewed nor approved the AAP in question. The proportion of deficient AAPs ranged from a low of 15 percent in the DOD Chicago region to a high of 80 percent in the GSA Washington region.