It Appears The Government Shutdown Has No Apparent End In Sight

We recently posted a story in this blog about the temporary closing of E-Verify due to a partial lapse in federal funding. We brought it to your attention thinking it would be a temporary inconvenience and to direct you toward agency resources.

Since then it appears the government shutdown, which primarily involves funding for a border wall, has no apparent end in sight. While it only affects certain agencies — Departments of Agriculture, Housing and Urban Development, State, Homeland Security, Interior, Justice, Treasury, Transportation, Commerce, and others — the repercussions will be felt more widespread the longer the lapse continues.

While the news focuses on the impact on federal employees as well as federal services such as Social Security checks, airport screening, national parks, and museums, and the ability of the IRS to conduct business, the impact on federal contractors is not insignificant. Affected contractors are increasingly asking questions so we wanted to take this opportunity to provide a little information regarding its impact on federal contracting and to direct you toward contracting information that may be helpful.

A very helpful resource to better understand federal contracting legal issues when there is a lapse in funding is the Congressional Research Service report titled, Government Procurement in Times of Fiscal Uncertainty, dated April 6, 2012 (R42469). A copy of this report can be viewed at https://fas.org/sgp/crs/misc/R42469.pdf  Below is a summary of key issues:

• Both contractors and the agency personnel that administer contracts are paid with appropriated funds. Generally, if there is a lapse in appropriated funds, this would cause a lapse in the ability to award and manage contracts as well.
• The federal government generally has broad discretion to cancel a solicitation at any time during a procurement before award.
• The federal government also has broad discretion regarding exercising an option. Contractors are not entitled to any recovery of lost profits if the government chooses not to exercise an option.
• Funding lapses generally prevent the government from entering new contracts or allocating new funding to cost-reimbursement contracts.
• The government is permitted to make reductions in scope, alter the period of performance, or terminate contracts.

Please keep in mind that each circumstance is different, so there is no single answer to many of the questions we receive. It is important to note that past government shutdown experience has shown that some agencies are willing to work with government contractors and consider equitable adjustments, or other tools such as overtime, to offset lost work. Contractors should be documenting lost hours, and the impact on deliverables should this option become available.

Additionally, some unintended contract events occurred as a result of the shutdown including the previously mentioned shutdown of E-Verify, as well as limited functionality of the Civilian Board of Contract Appeals.

This is not a legal opinion as to what contractors should do during a shutdown; rather it’s an effort to direct you toward some useful information.

Survey Shows Construction Industry Salaries Are On The Rise

In December, the National Center for Construction Education and Research (NCCER) announced results from their 2018 Construction Craft Salary Survey which indicates that salaries are on the rise in the construction industry. Findings also showed that skilled craft professionals continue to earn high wages.

The survey shows that in 2018 the annual salaries ranged from $47,771 to $92,523; up from 2015 when the range was $47,166 to $88,675. Findings also indicated that since 2015 the majority of the individual craft positions experienced an increase of 4-20 percent in their annual salaries.

Currently, the highest earning position remains that of project managers at $92,523 and supervisors at $88,355, while numerous professionals are earning over $65,000 such as combo and pipe welders, instrumentation technician, and industrial electrician. Two positions which saw the most dramatic pay increase from 2015 were HVAC technicians, up 20 percent, and sheet metal worker, up 18 percent.

One hundred thirty-two companies, representing 353,503 employees from the commercial and industrial construction industries, voluntarily provided data for this survey. Figures in the study represent average annual salaries for 32 specific individual craft areas, not including overtime, bonuses, per diem or other incentives.

E-Verify Inaccessible Due to Government Shutdown

Currently, employers will not be able to access their E-Verify accounts and services due to the federal government shutdown. The E-Verify program is run by the Department of Homeland Security (DHS) which is one of the agencies affected by the shutdown and until funding for the government is resolved these services will remain inaccessible. In the meantime, employers should plan to keep track of all new hires during this shutdown.

This means that while E-Verify is unavailable, employers will not be able to access their E-Verify accounts to create an E-Verify case, enroll ins E-Verify, view or take action on any case, add or edit any user accounts, reset passwords, terminate accounts or run reports. Also, employees will be unable to resolve E-Verify Tentative Nonconfirmations (TNCs).

Employers should also be aware that many upcoming webinars have been canceled and that there will be no telephone or email support during this time.

DHS recognizes that this has a significant impact on operations, and to help minimize the burden on both employers and employees they will be implementing the following policies:

• The “three-day rule” for creating E-Verify cases is suspended for cases affected by the unavailability of E-Verify.
• The period during which employees may resolve TNCs will be extended.
• DHS will provide additional guidance regarding “three-day rule” and period to resolve TNCs deadlines once operations resume.
• Employers may not take adverse action against an employee because the E-Verify case is in an interim case status, including while the employee’s case is in an extended interim case status due to the unavailability of E-Verify.
• Federal contractors with the Federal Acquisition Regulation (FAR) E-Verify clause should contact their contracting officer to inquire about extending federal contractor deadlines.

The government shutdown may continue into the new year so employers should implement methods for keeping track of new hires and employee issues so that cases can be created once the system is back online. DHS also suggests the use of several of their free E-Verify resources which can be found at https://www.e-verify.gov/e-verify-and-e-verify-services-are-unavailable

Building Blocks For Retirement: Market Volatility

The stock market has exhibited significantly higher volatility thus far in the final quarter of 2018, with large up and down swings. This volatility is being driven by a number of different factors including uncertainty with the Federal Reserve’s potential interest rate path for 2019, the Trump administration tariffs proposal, the Brexit situation in Europe, and potentially slowing U.S. corporate earnings growth, among other factors. However, it is important to note that, in general, company fundamentals and global economic growth remain solid to strong.

Please click here to read the full document provided by Pentegra Retirement Plan Services.

Reports of Increasing Construction Labor Shortages

The Bureau of Labor Statistics (BLS) recently published an Employment Situation Summary which highlighted the growing shortage of construction employees.  A month prior, the Autodesk and the Associated General Contractors of America (AGC) issued findings of an industry-wide survey that found an overwhelming majority of construction firms are having a hard time finding qualified workers. These reports both support the fact that workforce shortages are on the increase and are affecting the industry’s economic growth.

In the BLS summary, the employment situation by industry in September 2018 shows that construction employment continued to trend up in September (+23,000) and has added 315,000 jobs over the past 12 months. Similarly, the Autodesk/AGC report found a widespread shortage of construction professionals with more than 80 percent of contractors surveyed unable to fill jobs. This report also noted that the “Nationwide Shortage of Skilled Workers Has Raised the Cost of Construction and Delayed Project Schedules, Putting Broader Economic Growth at Risk.”

As the construction labor shortage continues to grow in general, so does the competition for employees between public and private projects. One of the advantages of public projects is that employers can typically offer fringe benefits which can serve to attract and retain employees.

Study Identifies Drivers To Millennial’s Retirement Savings

Financial experts are concerned that Americans are not saving enough for retirement. Millennials are no exception, as they represent a vast majority of those who are not saving for their post-career lives. In a recent report by Navient, Money Under 35, a glimpse is provided at how Millennials look at retirement and what was shown to correlate with increased savings rates.

Money Under 35 is a national study that looked at the financial health of young Americans aged 22-35 and found that just 3 in 10 young Americans are saving and nearly 4 in 10 believe that saving for retirement can wait. Of those saving, the average amount saved for retirement in 2017 was a total of $32,818, a decrease from the prior year’s total of $37,638.

It appears that the driver behind the belief that retirement saving can wait is that young people are facing competing demands for their financial resources and making decisions between paying off debt and building their savings.

However, the study also found that the presence of a 401(k) plan correlates strongly with increased savings rates. Millennials whose employers offered a 401(k) match program were almost twice as likely to save for retirement than those whose employers did not, 61% and 31% respectively. Also, the young adults who were offered such a program have accumulated nearly twice the average savings, $32,851 compared with $18,879.

While young adults are confronted with competing financial goals, employers who offer 401(k) match programs do motivate Millennials to save for retirement which leads to improved financial health.

July 2018 Construction Spending

The U.S. Census Bureau announced construction spending for July 2018 was up at a seasonally adjusted annual rate of $1,315.4 billion, 0.1 percent above the revised estimate of $1,314.2 billion. During the first seven months of this year, construction spending amounted to $740.5 billion, 5.2 percent above the $703.7 billion for the same period in 2017.

While private construction spending was $1,010.9 billion, 0.1 percent below the revised June estimate of $1,011.9 billion; public construction spending was $304.5 billion which is up 0.7 percent above last month’s revised estimates of $302.3 billion. Public construction spending was also up 8.3% from this same time last year.

Two of the main contributors to the public construction spending growth in July come from educational construction, 2.1 percent above the revised June estimate of $70.1 billion, and highway construction, 0.4 percent above the revised June estimate of $93.8 billion.

More information may be found at:

https://www.census.gov/construction/c30/pdf/release.pdf

June 2018 Construction Spending

The U.S. Census Bureau announced construction spending for June 2018 which was at a seasonally adjusted annual rate of $1,317.2 billion, 1.1 percent below the revised May estimate of $1,332.2 billion.

Despite the drop from May to June, June was 6.1 percent above the June 2017 estimate of $1,241.3 billion. Additionally, during the first six months of this year, construction spending amounted to $619.9 billion, 5.1 percent above the $589.6 billion for the same period in 2017.

While private construction spending was $1,019.8 billion, 0.4 below the revised May estimate of $1,023.9 billion; public construction spending was $297.4 billion, 3.5 percent below the revised May estimate of $308.3 billion. However, Total Public Construction is up 4.9% over June 2017. A couple of contributors to this growth are Transportation up 11.9%, and Highway & Streets up 6.3%.

More information may be found at:

https://www.census.gov/construction/c30/pdf/release.pdf

Executive Order Focuses on Job Creation

Last week President Trump issued an Executive Order establishing the President’s National Council for the American Worker. The Order looks to foster an environment of lifelong learning and skills-based training, and cultivate a demand-driven approach to workforce development. The Order is intended to show a national commitment to job creation over the next five years.

Under the Order, more than 15 companies and associations have signed a pledge to train and educate 3.8 million American students and workers for in-demand job skills. The companies committed to expanding apprenticeships, increasing on-the-job training, and provide people with opportunities to develop skills with the goal of being hired.

The Order also establishes the President’s National Council for the American Worker (Council) which is co-chaired by the Secretary of Commerce, the Secretary of Labor, the Assistant to the President for Domestic Policy, and the Advisor to the President overseeing the Office of Economic Initiatives (Co-Chairs). The Co-Chairs will work to develop ongoing recommendations for the President on policy and strategy related to the American workforce. Within the first 180 days of this Order, the Council is expected to help shape a national approach to train Americans for the skills they require to fill open jobs now and in the future.

Additionally, the Order created the American Workforce Policy Advisory Board (Board) that will work to bring together business executives and educators. In particular, the Board is tasked with encouraging the private sector and educational institutions to combat the skills crisis by investing in and increasing demand-driven education, training, and re-training, including through apprenticeships and work-based learning opportunities.

U.S. Department of Labor Announces Change to SCA Fringe Rate

The prevailing health & welfare fringe benefits issued under the McNamara-O’Hara Service Contract Act (SCA) awarded before January 1st, 2018 with Option Years on or after August 1st, 2018 will utilize the new fringe rate of $4.48.

Additional SCA Health & Welfare Fringe Benefit Rate Information

All service contracts awarded on or after January 1st, 2018, that contain paid sick leave (EO 13706) will utilize the newly reduced $4.18 SCA health & welfare benefit rate. The DOL memorandum is posted on the Wage and Hour Division (WHD) website.

For more information: Click Here To Read The Full Memo