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Contractors face the prospect of higher mandatory wages and treating independent subcontractors like employees. And that’s not all. The vaccine mandate might be coming back. How are companies reacting? To find out, the Federal Drive with Tom Temin talked with Stephanie Kostro, Executive VP for policy at the Professional Services Council.

Interview transcript:

Tom Temin: Stephanie, I want to start with the possible return of the vaccine mandate. This happened Friday in relation to the 11th Circuit Court of Appeals ruling and the White House guidance that came out immediately afterward is almost unintelligible and that’s not just me speaking. That’s four or five people we’ve already spoken to about this. What do you see is going on here? It looks like it’s turning back into a giant patchwork.

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Stephanie Kostro: I’m so glad that you brought this up, Tom, the Safer Federal Workforce Task Force website upon which all of this has been hinged. You know, if you look at the contract clauses that were incorporated into existing contracts, it refers back to this website. The website was updated on Friday afternoon to indicate that, you know, as you mentioned, the court ruling back in August, takes effect today, Oct. 18. And that is to say that court ruling was to lift partially the nationwide injunction on enforcement of this contractor vaccine mandate. And it’s a matter of making sure all of the workers within federal contractors are vaccinated. And the deadline for that was supposed to be back in January of this year. It was tied up in the court since then. What’s interesting about this is that there are several steps outlined by the Safer Federal Workforce Task Force and the White House that could lead to requiring federal contractors to be fully vaccinated if they have a federal contract. And what are these steps? The first one is, you know, now that we’re, you know, Oct. 18, is the day that it’s posted this, this lifting of the injunction is supposed to take place. OMB wants to notify agencies whether those contract clauses should still be included. So that’s the first wicket. The second wicket is, you know, the taskforce will update its protocols. And then the director of OMB will look at this updated guidance and make a determination whether it makes sense is it in the best interest of the government for economy and efficiency? Those are the standards by which we normally judge these things. And then that determination will be published in the Federal Register, and then if that determination is made, OMB will provide guidance in written form to agencies. So this is a multi-step. I mean, it’s a cotillion really, in terms of all of the moving pieces, and all of the steps that have to be gone through. What I find most interesting is on that website, it clearly says that unless and until that third step is completed, agencies should not take any steps to enforce the vaccine mandate anywhere in the country, or enforce contract clauses related to it. So I always having been a former Hill staffer my stuff should versus shall. It says, agencies should not take any steps. I just wonder what exactly the contracting officers are thinking about this language.

Tom Temin: The appeals decision says that there is no nationwide injunction against the vaccine mandate. And instead, only those entities that sued and the companies involved are enforceable or not having the mandate. So we really don’t know what an agency will do in a given area, then correct?

Stephanie Kostro: That’s exactly right. You know, the parties to this lawsuit were building and contractors, and then also six, I believe, six or seven states. And so the initial decision was to put an injunction nationwide. And then the appeals court ruled that that is not, that’s an overreach, and that it can only pertain to the entities who are suing. And so you have to look if you’re a contracting officer, at the states that are still under this injunction versus the states that aren’t, do you have the building and contractors anywhere in the mix here? Because it doesn’t pertain to them? It really is very, very messy. And, you know, having spoken with folks at the White House about what this all means, they refer us back to this website. And I would say, as an update, it’s not clear what the next steps are, and what contractors should do as a result.

Tom Temin: We’re speaking with Stephanie Kostro, she is executive vice president for policy at the Professional Services Council. So wait and see and try to decipher the tea leaves in the meantime, because they were pretty vague about what and when they’ll do from the federal contractor federal agency standpoint.

Stephanie Kostro: And I think everything is open for discussion, right? Is it 100% of your employees if you’re a federal contractor, which it was previously, I mean, there’s a lot of wiggle room and what it means for contractors, you know, the wait and see approach is frustrating for them as they move forward to be watching a website waiting for guidance is a difficult position to be put in.

Tom Temin: Yes, sure is. So just be sure to use that Wayback Machine so you make sure what they said is actually new here.

Stephanie Kostro: And you’re constantly hit the refresh button. Right?

Tom Temin: Right. And then also affecting contractors, this idea of the administration wanting to treat gig workers as employees that is wanting companies to treat their gig workers as employees and a lot of federal contractors use gig workers, writers, consultants, this kind of thing. What are companies in the PSC world saying about this?

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Stephanie Kostro: So this is a fascinating topic that’s been batted around for years now. And that is the role of independent contractors or in some cases, they are called 1099 workers. And the gig folks are the folks who kind of put together their own schedule, they love having the flexibility to work for multiple entities, but they don’t get benefits, and they don’t get health insurance, etc. So what the Biden-Harris administration has done through the Department of Labor, they released a proposed rule, this independent contractor rule, how do you classify people. And there is a six part test and this is nothing new, the six part test has been around for a while, but the ones that the Biden-Harris administration are emphasizing are things like broad based, is the worker economically dependent on a particular company. And if they are, according to the six part test, economically dependent, then they should be treated as employees. And that drives the cost up because obviously, the fully burdened cost for compensation who hiring folks is much higher, because you do have to pay into the system. And it does reduce flexibility for the workers. So what happens to the folks that get reclassified as employees, but they don’t want to be employees, they want to have the flexibility, they want to be able to pay quarterly taxes as an independent contractor versus having it taken out of every paycheck, etc. So we’re watching this very closely. Comments are due on Nov. 28, and PSC, we are working with our member companies to submit pretty robust comments on this one.

Tom Temin: The issue of the project labor agreements has also come up now, that’s also in the rulemaking docket, not too much time to get back to the Department of Labor on that one?

Stephanie Kostro: Comments are due today, Oct.18. And so this is one of those areas where they are proposing to require a major construction contract. So anything valued at 35 million and above would need to have project labor agreements in place. This is a pro-union, pro-organized labor move. My heartburn, if I could use that word, with this is that there is no data, there are no data to support whether for these large construction contracts, whether or not having PLAs as we call them, not not the People’s Liberation Army in China, but the project labor agreements are actually effective in making sure things get done on time and efficiently. So this is something that we are submitting comments today to address. And I invite anyone who is in the construction world, the building world, the general contractor world to take a look at what the Department of Labor is proposing.

Tom Temin: Is there any bridge to professional services have this type of rule?

Stephanie Kostro: So it there is a bridge in terms of you know, you’ve got architects and engineers looking at construction, you know, it is whether you’re a subcontractor or a partner, or in a teaming arrangement with a construction company on the so professional services, we are weighing in with the information that we’ve gleaned from several member companies who have expressed interest in this.

Tom Temin: And the final issue I wanted to ask you about is federal insurance response to catastrophic cyber incidents. There’s some recommendations from the Government Accountability Office, Homeland Security, Treasury, assessing the need for a federal insurance response for critical infrastructure risks. And again, this is kind of a perennial, but back to the front burner. What are contractors’ feelings about this.

Stephanie Kostro: So this is another area where PSC will be submitting comments on behalf of our member companies, because as they face insurance requirements for cyber risk, I will give you an example a particular company got back to me very quickly and said they are seeing 63% increases in their premiums year over year for cyber insurance. And so they are also facing a situation where their prime contractor, their sub, is requiring them to have cyber insurance, even though the contract doesn’t require the prime to so we are facing a situation in which some of the smaller companies are really hurting to be able to pay these insurance premiums that are being required by their primes and in some cases by the contract. So a federal insurance constructors framework to work in would be welcome in this area. So we are going to be submitting comments. They’re due mid month in November, Nov.14. And it’s an area where we’re going to help figure out how to define catastrophic cyber incidents, what are the nature, what’s the nature of them, etc. And this will be helpful for particularly small businesses.

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Tom Temin: I guess if they shut off the heat in the winter and turn off the computers, that’s a catastrophic cyber incident.

Stephanie Kostro: It could be it could be I think they have more in mind that bad actors, but yeah, it could also be energy.

Tom Temin: All right. Stephanie Kostro is executive vice president for policy at the Professional Services Council. As always, thanks so much.

Stephanie Kostro: Thanks, Tom.

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