The Department of Defense (DOD), State Department and United States Agency for International Development (USAID) all recruit labor from countries with low wages to employ in locations where local labor is prohibitively expensive or poses a security risk. Current recruitment methods for these workers create the potential for human trafficking-related abuses.

A 2011 State Department report found “no evidence of direct coercion from contractors,” but noted that a majority of foreign workers in Middle Eastern countries paid substantial recruitment fees that “effectively resulted in debt bondage at their destinations.”

A 2014 Government Accountability Office (GAO) report recommended that contracting officers create monitoring plans that include mechanisms for preventing human trafficking. It also recommended the development of more precise definitions of recruitment fees. DOD concurred with the latter suggestion and committed to incorporating an improved definition of recruitment fees in its acquisition regulations. While current guidance documents require contracting officials to monitor projects for human trafficking-related problems, the agencies do not yet have consistent, specific processes to effectively monitor all current contracts.

The Trafficking Prevention in Foreign Affairs Contract Act (H.R. 400), which passed the House Feb. 1 and was introduced in the Senate the next day, seeks to remedy these problems by standardizing the federal government’s approach to preventing human trafficking.

During the first two weeks of February, agencies and Congress signaled potential changes to Part 52 of the Federal Acquisition Regulations (FAR), which contains standard solicitation provisions and contract clauses that may be read into government
contracts depending on the nature of the provision and the type of contract. Government contractors must pay close attention to all requirements outlined in Part 52 because the Christian Doctrine may require inclusion of some solicitation provisions or contract clauses, even where the provision or clause was not expressly mentioned in the RFP.

If H.R. 400 becomes law, it will require the State Department and USAID to, within 180 days, define “placement and recruitment fees” as the phrase is used in the Trafficking Victims Protection Act of 2000. The agencies also would need to specify how this definition would be incorporated into grants, contracts, cooperative agreements, and comprehensive monitoring and compliance programs aimed at preventing government contractors from engaging in or contributing to human trafficking. The agencies also would have to specify how the new requirements would apply to contractors, subcontractors, grantees, sub-grantees, labor recruiters, brokers and other agents.

The FAR Council has already started the process of clarifying the meaning of “placement and recruitment fees” by issuing a proposed rulemaking in 2015. The draft definition signaled that the final rule will extend beyond the requirements of Executive Order 13627 and Title VII of the 2013 National Defense Authorization Act by replacing a reasonableness requirement on fees charged with a complete ban on fees used to recruit foreign workers. 

Adopting a complete ban on recruitment fees would be consistent with the recommendations made by both USAID and the State Department.

Contractors should ensure they have sufficient controls and standardized practices in place for complying with the expansion of anti-human trafficking laws. Actions by the executive, federal agencies and Congress demonstrate that the federal government is increasingly attempting to combat human trafficking through the regulation of government contractors.

The reporting requirements elaborated in FAR 52.222-50(d) mandate that contractors must notify their contracting officer and the relevant agency Inspector General when they become aware of a violation by one of their employees, subcontractors or agents. Other parts of the regulation require detailed compliance plans for preventing human trafficking, which may need to be updated to reflect any changes in the meaning of “placement and recruitment fees.”

New Audit Requirements
In February, federal agencies issued two proposed rules affecting how the government conducts audits and who bears the costs of those audits. NASA, DOD and the General Services Administration (GSA) have proposed a rule that would disallow companies from recouping costs they incur due to congressional investigation of their activities. The proposed rule, would extend Section 857 of the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015. While congressional investigation into the performance of government contracts is relatively rare, this rule could impose significant financial burden on any entity that becomes the target of an investigation. While the proposed rule was issued by only three agencies, its current form would impose new requirements on all government contracts.

The proposed audit requirements come on the heels of another proposed rule that would change how government contractors are supposed to notify the government about anticipated changes to the cost of performing a government contract. FAR Part 52.230-6 requires contractors to explain changes in the performance of part of a contract, which would affect the overall price. The proposed rule would require government contractors to notify their contracting officer of changes to their “cost accounting practices” and is part of a larger attempt to streamline the process for submitting cost changes.

As these changes unfold during the coming months, construction companies performing government contracts should keep an eye on further guidance from the government regarding anti-human trafficking regulations and updates to current cost accounting methods. Interested parties should ensure that their internal procedures can be easily brought into compliance with the new requirements.

 
Barbara Werther is head of the government contracts and construction group in Sedgwick’s Washington, D.C., office. For more information, call (202) 204-3740 or email barbara.werther@sedgwicklaw.com