SDVOSB Changes in the FY 2024 National Defense Authorization Act

The National Defense Authorization Act (NDAA) for Fiscal Year 2024, signed into law on December 22, 2023, introduces significant changes to federal contracting, focusing on Service-Disabled Veteran-Owned Small Businesses (SDVOSBs).

Highlights of the changes include:

• Prime Contracting Goal Increase: Congress has increased the prime contracting goal for SDVOSBs from 3% to 5% of total prime contract spending. Section 863 of the 2024 NDAA replaces the previous 3% goal with the new 5% target, effective immediately upon the President’s signature.
• Prohibition of Self-Certified SDVOSBs: Section 864 of the 2024 NDAA prohibits the government from counting awards to self-certified SDVOSBs towards prime and subcontracting goals. Awards must be made to SBA-certified SDVOSBs to contribute to meeting goals.
• Grace Period for Section 864: Unlike the immediate effectiveness of the goal increase, Section 864 includes a grace period. The SBA has 180 days to prepare regulations, and until October 1 of the fiscal year following the publication of these regulations, the government can continue counting awards to self-certified SDVOSBs.
• Goal Impact: The new 5% goal challenges the government to improve its SDVOSB performance. In Fiscal Year 2022, the government awarded 4.57% of prime contract dollars to SDVOSBs. Achieving the 5% goal would have meant over $2.5 billion in additional SDVOSB prime contracting.
• Clarifies Previous Legislation: Section 864 explains that, despite prior legislation and SBA regulations in 2021 that say the government could claim credit for prime contracts awarded to self-certified SDVOSBs, the new rule closes this gap and emphasizes the importance of awards going to SBA-certified SDVOSBs.

In conclusion, the 2024 NDAA brings about a substantial increase in the SDVOSB prime contracting goal, accompanied by measures to ensure that only SBA-certified SDVOSBs contribute to meeting these goals, eliminating the previous practice of counting awards to self-certified SDVOSBs.

GSA Final Rule to Require Project Labor Agreements on Federal Construction Projects

On December 18, 2023, the General Services Administration (GSA) introduced a final rule enforcing Executive Order 14063, requiring federal agencies to implement project labor agreements (PLA) on large-scale federal construction projects. PLAs are pre-hire collective bargaining agreements with construction trades unions, establishing terms and conditions for all workers on specific federal construction projects.

The rule amends the Federal Acquisition Regulation, stipulating that federal construction projects exceeding $35 million must adopt a PLA to govern terms and conditions for construction workers. All involved parties must negotiate and establish these terms. The Biden Administration asserts that this expansion aims to ensure a predictable supply of skilled workers and eliminate construction delays caused by labor unrest.

The rule is set to affect around 200,000 workers on federal construction projects and will be effective  January 22, 2024. Opponents argue that the requirement may discriminate against non-union contractors and substantially raise costs for federal construction projects.

DOL Announces Final Rule on Nondisplacement of Service Contract Workers

The Department of Labor (DOL) has announced a final rule to enact the provisions of Executive Order (EO) 14055, titled “Nondisplacement of Qualified Workers Under Service Contracts.” This EO, issued by President Biden, mandates that contractors and subcontractors engaged in federal service contracts must extend the right of first refusal for employment on the successor contract to service employees previously employed under the predecessor contract.

The final rule establishes comprehensive standards and procedures for implementing and enforcing EO 14055. The rule outlines the obligations of contracting agencies and contractors under the executive order, creating a robust investigation process designed to safeguard workers from displacement. Additionally, it clarifies how the executive order applies to subcontracts and enumerates potential sanctions and remedies that the Department of Labor may impose.

The final rule takes effect on February 12, 2024. However, it will apply exclusively to solicitations issued on or after this effective date as stipulated by regulations from the Federal Acquisition Regulatory Council (FAR Council). For more information, please visit Final Rule: Nondisplacement of Qualified Workers under Service Contracts.

California’s Expanded Paid Sick Leave Requirements Take Effect January 1, 2024

In October, Governor Newsom approved SB 616, which changes California’s sick pay law. These modifications, slated to take effect on January 1, 2024, impact various facets of the Healthy Workplaces, Healthy Families Act of 2014.

The changes introduced by SB 616 encompass an increase in the allowable paid sick leave, rising from 24 hours or three days to 40 hours or five days, whichever is greater. Simultaneously, the accrual cap on paid sick leave sees an upward adjustment from 48 hours or six days to 80 hours or ten days.

Changes in accrual requirements now mandate that, for employers utilizing a different accrual system than one hour per 30 hours worked, employees must accumulate a minimum of 24 hours or three days by their 120th day of employment and 40 hours or five days by their 200th day of work.

Moreover, adjustments to conditions for paid leave or time-off policies specify that eligibility for at least 40 hours or five days of paid sick leave or time off must occur within six months of employment. Extending paid sick leave provisions to employees covered by a collective bargaining agreement eliminates the previous exemption for such employees.

In addition, SB 616 establishes a statewide standard, preempting any local ordinances with less generous leave requirements than those stipulated in the bill. California employers must ensure that their policies align with these new changes to guarantee compliance.

SBA Issues Final Rule Addressing Credit for Lower-Tier Subcontracts on Federal Contracts

The U.S. Small Business Administration (SBA) has amended its regulations to align with the National Defense Authorization Act (NDAA) for Fiscal Year 2020. Effective November 13, 2023, the final rule allows federal prime contractors to apply credit for subcontracts to small businesses at lower tiers toward subcontracting goals. This change involves incorporating lower-tier subcontracting performance into the subcontracting plan goals.

The final rule responds to changes in section 870 of the NDAA of 2020, affecting section 8(d) of the Small Business Act regarding the requirements that apply to a Federal contractor seeking to obtain subcontracting credit on certain types of Federal contracts. The amendments permit prime contractors to elect to receive credit for lower-tier subcontracts, eliminate tier-specific goals for such contractors, and require subcontracting plans to specify the records maintained for lower-tier credit substantiation. The changes replace the prior mandate with an election and streamline subcontracting goals for all prime contractors.

In the past, the final rule had allowed contractors to receive lower-tier subcontracting credit only if they had two sets of subcontracting goals: one for small-business subcontracting at the first tier and an additional goal for small-business subcontracting at lower levels. Section 870 prohibits agencies from setting tier-specific goals for prime contractors utilizing lower-tier credit. Consequently, the SBA has revised the regulations to streamline subcontracting goals, ensuring that prime contractors have only one set of goals.

These adjustments provide prime contractors greater flexibility in receiving credit for lower-tier subcontracts and eliminate tier-specific goals. Additionally, it represents a shift away from the prior mandatory practice of recognizing lower-tier subcontracts, moving towards an optional framework. Prime contractors now have the option to receive recognition for either first-tier subcontracts alone or for subcontracts at any tier. This flexibility reflects the stipulations outlined in the NDAA of 2020.

What Employers Should Know About the Illinois & Chicago New Paid Leave Rules

On November 3, 2023, the Illinois Department of Labor released proposed regulations for implementing the Paid Leave for All Workers Act (PLAWA).

This law mandates that private employers throughout the state provide their employees with earned paid leave, applicable for any purpose. While some Illinois municipalities already had similar requirements, this Act ensures uniform benefits statewide.

Broadly, the PLAWA covers most employers with employees who work in Illinois, and under this Act, employees are entitled to one hour of paid time off for every 40 hours they work in 12 months. Employers are not required to grant more than 40 hours of paid leave in that period, but employees can also take that leave for any reason.

Although the proposed rules are not yet finalized, they provide additional guidance for employers to consider when aligning their leave policies with the impending PLAWA, which will be effective on January 1, 2024.

Meanwhile, on November 9, 2023, Chicago passed an ordinance providing a comprehensive package encompassing paid leave to all employees who work at least two hours in two weeks while physically present within the City of Chicago.

As per the ordinance, employees can accumulate up to 40 hours of paid leave within 12 months. Additionally, employees can now use an additional 40 hours of paid leave for any reason, making the total allowable paid time off 80 hours per 12-month period. The Chicago ordinance is one of the nation’s most generous paid time off regulations.

The implementation of the Chicago ordinance is scheduled for December 31, 2023, requiring businesses in the city to modify their policies to align with this broader framework quickly.

Moreover, businesses with employees in Illinois, including those within and outside the City of Chicago, should take measures to ensure compliance with the provisions of the Illinois Paid Leave for All Workers Act, which is also to take effect at the beginning of the new year.

NLRB Issues Final Rule on Joint-Employer Status; Revision to Effective Date

In October, the National Labor Relations Board (NLRB) issued a final rule revising the joint-employer standard under the National Labor Relations Act (Act). This new rule replaced the 2020 final rule established by the previous Board, effective April 27, 2020. The updated regulation introduces a fresh criterion for determining when two employers are joint employers of specific employees as defined by the Act.

Essentially, the 2023 rule states that, according to the Act, multiple entities can be considered joint employers of a group of employees if each entity has an employment relationship with those employees and if they collectively influence or determine one or more essential terms and conditions of employment.

The 2023 rule aligns more closely with established common-law agency principles. It assesses the alleged joint employers’ authority to control essential employment terms and conditions, regardless of whether such control is actively exercised and irrespective of whether the exercise of control is direct or indirect. This rule recognizes the relevance of reserved and indirect control, consistent with common-law principles.

In contrast, the 2020 rule made it easier for actual joint employers to avoid a finding of joint-employer status because it set a higher threshold of “substantial direct and immediate control” over essential employment terms of conditions, which lacks a foundation in common law.

However, the Board has recently prolonged the implementation date of its updated rule outlining the criteria for determining joint-employer status until February 26, 2024. This extension aims to allow for the resolution of legal challenges associated with the rule. Importantly, the revised standard will only be applicable to cases initiated after the rule takes effect.

Administration Announces New Better Contracting Initiative

The Biden-Harris Administration is launching the Better Contracting Initiative (BCI) as part of the Federal Government’s next enterprise approach phase. This initiative is geared toward transforming the purchasing landscape, ensuring better terms, improved pricing, and a deliberate focus on engaging small and disadvantaged businesses. The primary goal is to optimize government spending, especially in procuring common items like IT products and services.

One facet of this initiative is leveraging data sharing across federal agencies. By capitalizing on data, standardizing software licenses, improving contract requirement procedures, and instituting enhanced evaluations for high-risk contracts, as much as $10 billion in annual savings can be achieved.

The BCI focuses on reforming the entire procurement process. The goal is to mitigate risks on high-risk contracts and ensure agencies can negotiate favorable deals in challenging situations.

Overall, the BCI aligns with efforts to enhance diversity and innovation in federal procurement while modernizing workforce development opportunities to keep pace with the ever-evolving procurement landscape. This initiative strives to save billions annually and improve the efficiency and efficacy of federal contracts.

August 2023 Construction Spending

The U.S. Census Bureau announced construction spending for August 2023 was at a seasonally adjusted annual rate of $1,983 billion, 0.5% above the revised estimate of $1,974 billion in July. Compared to the same period last year, construction spending was up 7.4%. During the first eight months of this year, spending amounted to $1,85 billion, up 4.2% above that period in 2022.

While private construction spending in August was $1,553 billion, up 0.5% from the revised July estimate of $1,545 billion, public construction spending was $432 billion, 0.6% above the revised July estimate of $429 billion. Two contributors were educational construction at $91 billion, up 0.25 from July, and highway construction at $130 billion, up 0.4% from July. Additionally, public construction spending is up 14.1% from last year’s period.

More information may be found at:

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

IRS Announces Changes for 2024 Tax Year Regarding Contribution Limits

The Internal Revenue Service (IRS) recently announced notable changes concerning retirement plans for the tax year 2024. These changes reflect ongoing efforts to adapt retirement-related regulations to evolving economic conditions and financial needs.

Changes include the contribution limit for 401(k), 403(b), and most 457 plans, along with the federal Thrift Savings Plan, which has been increased to $23,000, up from the previous limit of $22,500 in 2023. The annual contribution limit for Individual Retirement Accounts (IRA) has also been raised to $7,000 from $6,500. There is a catch-up rate for those 50 or older, who can now add an extra $1,000. For participants in 401(k), 403(b), and most 457 plans, as well as the federal Thrift Savings Plan, who are 50 and older, the catch-up contribution limit remains $7,500, allowing a total contribution of up to $30,500 starting in 2024.

Furthermore, income ranges have been adjusted to determine eligibility for deductible contributions to traditional IRAs, contributions to Roth IRAs, and claiming the Saver’s Credit. Phase-out ranges for traditional IRA deductions have been updated, including an increase for single taxpayers to $77,000 to $87,000.

The income phase-out range for Roth IRA contributions has also increased, with singles and heads of household now falling between $146,000 and $161,000. The Saver’s Credit income limit has been adjusted to $76,500 for married couples filing jointly.

Other changes introduced under the SECURE 2.0 Act include increasing the contribution limit for SIMPLE retirement accounts to $16,000 from $15,500. Additionally, adjustments have been made to the limitation on premiums for qualifying longevity annuity contracts, the deductible limit on charitable distributions, and the deductible limit for a one-time election to treat a distribution from an IRA made directly to a split-interest entity.

Details on these and other retirement-related cost-of-living adjustments for 2024 are in Notice 2023-75, available on IRS.gov.