Thursday, June 11, 2009

Impact of the 2009 Corporate Scheduling Announcement Letter

by Christi Anthony
Consultant, Biddle Consulting Group

Federal contractors across the country have now likely received their copy of the Spring 2009 Corporate Scheduling Announcement Letter (CSAL) from the Office of Federal Contract Compliance Programs (OFCCP). The OFCCP can list up to 25 additional sites per organization on each CSAL. Many contractors who previously experienced little audit activity are seeing dramatic increases in the number of scheduled audits with each CSAL. Preparing well in advance of submission to the OFCCP is critical to ensure a smooth audit year.

Biddle Consulting Group (BCG) has already supported dozens of audits in the 2009 Fiscal Year. Compared to previous years, the Compliance Officers (COs) are clearly looking at Affirmative Action Plans (AAPs) in more detail. The result of a more thorough review of the AAP is a dynamic increase in the number of follow-up requests by the CO. Compliance Officers are asking for more data, subsets of data, and for explanations of the basic plan components such as creation of placement goals, goal attainment, and much more. Contractors should prepare to answer these detailed questions prior to submitting their AAP..

Below is a list of steps that BCG recommends following once a CSAL is received. Depending on the implementation period of the Affirmative Action Plan (AAP), the plan may already be completed. However, if the CSAL is received while preparing the AAP, the steps to preparing for audit submittal are the same as if the plan is already complete.

1. Review the Data: The first and most important step is to review the data that has been used to create the technical reports of the AAP. The OFCCP focuses their review on identifying systemic disparities and, therefore, investigates adverse impact and compensation with a careful eye. Ensuring that all legitimate data refinements have been made is the first step in preparing the AAP. Questions to consider are: “Was the Internet Applicant Rule applied?” “Are the correct compensation values reported?”

2. Critically Evaluate the Technical Reports: Once the data has been deemed as clean as possible, the second step to prepare for an audit submittal is to critically evaluate the AAP reports. Areas of underutilization should be addressed in the narrative, and should have a specific Action Oriented Program that aims to rectify the underrepresentation. Any significant adverse impact should also be investigated thoroughly. The OFCCP seems to be especially interested in adverse impact in the applicant to hire comparisons and sees adverse impact in hiring as “low hanging fruit”. In past years, this type of adverse impact has been the OFCCP’s most significant money maker . Be sure that the correct applicant pool is being used in comparison to hires made during the transaction period. If there is adverse impact in the overall job group, is there a specific title or requisition that is driving those results? If there is significant adverse impact in terminations, be sure to single out voluntary from involuntary terminations. For voluntary terminations, collect and retain letters of resignation. Review exit interviews for those that were involuntarily terminated and be sure that proper procedures were followed. Be especially critical of those job groups that have underutilization, and also show adverse impact against that same group.

3. Analyze Compensation Using an OFCCP-Style Approach: Analyzing compensation in a manner similar to the OFCCP is important to help contractors know what OFCCP may find. Be sure to prepare your compensation report in the manner that best represents your compensation practices as directly requested in the standard desk-audit letter. The OFCCP runs an initial indicator test to identify any potential for the existence of systemic compensation disparities. If the data includes job groupings that have a 5% difference in pay, has at least 10% of the impacted group effected (females, for example), and that group is effected at a rate three times greater than the less-impacted group (males), then the OFCCP is likely going to request additional data. Be aware that the OFCCP has the right to investigate compensation under any terms, and will often investigate individual titles or groups that have a greater than 5% difference in pay, even if the indicator test does not identify an issue.

4. Get Help: Most importantly, if you do not have the resources to help you prepare to submit AAPs for the identified locations, seek help. Careful preparation is the key element to surviving any audit. A lack of preparation can result in a Notice of Violation, and possibly a conciliation agreement which equates to potentially burdensome costs to the contractor. Preparing at the CSAL stage, and prior to receiving a desk-audit letter, will help organizations position themselves for the best chance of closing an audit at the desk-audit stage.

Preparing for an OFCCP compliance evaluation can be an overwhelming task. Following the steps outlined above can help contractors feel comfortable that they are taking the necessary actions in their preparations and presenting their organization to the OFCCP in the best possible light.