5 Compliance Regulations Government Contractors Should Know

Quick look: Government contractors must be compliant to work harmoniously with the federal government. Discover the five types of compliance regulations that shape the success of government contracting agencies today.

In the world of government contracting, navigating the intricacies of employment regulations is as crucial as bidding on contracts themselves. Still, keeping track of and abiding by compliances prone to change over time can be a hassle. Keep reading to see which employment laws and compliance regulations government contractors should keep top of mind while conducting daily business operations.

Federal Acquisition Regulation (FAR) contract laws

After winning a job, government contractors must document and discuss procurement contract terms with their customers. Each party will have their own set of terms, aiming to curate a deal favoring their interests. However, it’s important to accomplish a middle ground agreement that renders fair and rewarding results for both parties. 

The Federal Acquisition Regulation (FAR) eases the process for government contractors. Introduced in 1984, FAR outlines systematic procedures that federal agencies must consider while crafting a procurement contract. The regulations are broken down into 53 parts and feature best practices for the U.S. government to use while acquiring goods and services. Topics covered include proper contract formation, administration, pricing, and subcontracting standards.

By adhering to FAR’s rules, government contractors protect the integrity of their business and dodge potential legal and financial consequences for contract misconduct and improper charging.

Labor laws on wages and workplace safety

Hiring the right candidates empowers an agency’s ability to win and fulfill more contracts in a shorter span of time. However, government contractors need a compliant labor environment to attract and retain top talent within their competitive job market. To achieve that goal, agencies must follow various wage-based labor laws such as:

• Davis-Bacon Act: When a public buildings or public works contract exceeds $2,000 for construction and/or repair work, government contractors and subcontractors must pay any employees the locally prevailing wage and fringe benefits as determined by the Department of Labor
• McNamara-O’Hara Service Contract Act (SCA): Service employees performing under a prime service contract worth more than $2,500 must be paid locally-approved wage rates and benefits, or rates contained in a predecessor contractor’s collective bargaining agreement
• Contract Work Hours and Safety Standards Act (CWHSSA): Federal and federally assisted construction contracts worth over $100,000 requires employed laborers and mechanics to be paid 1.5 times their basic payrate for all overtime hours worked beyond a 40-hour workweek
• Walsh-Healy Public Contracts Act (PCA): This act outlines the minimum wage expectations and maximum working hours for contracts exceeding $15,000 for the furnishing and manufacturing of federally-exchanged materials, supplies, and equipment

Federal contractors and subcontractors also need to consider labor laws focused on workplace health and safety. The Occupational Safety and Health Administration (OSHA) enforces multiple protective regulations for hazardous materials exposure, safety equipment access, the right to report worksite injuries, and other workplace guidelines. OSHA also spotlights extra precautions for contractors offering construction and manufacturing services since those environments are exceptionally high risk. By achieving remarkable OSHA compliance, government contractors increase their chances of increasing employee satisfaction and retention rates.

Discrimination and affirmative action regulations

In addition to recognizing wage and safety labor laws, government contractors should be aware of compliance standards associated with discrimination. The Employment Opportunity Commission (EEOC), for example, works with federal agencies to ensure applicants and employees are not discriminated against based on their race, sex, religion, gender, sexuality, age, disability, and other genetic and prolific factors. Government contractors must adhere to Equal Employment Opportunity (EEO) guidelines and trainings to meet the commission’s standards.

Federal contractors and subcontractors also have affirmative action obligations. Creating an affirmative action program (AAP) is required when a government contracting agency has: 

• At least 50 employees and one contract worth $50,000 or more, as addressed under Executive Order 11246 and Section 503 of the Rehabilitation Act of 1973
• At least 50 employees and one contract worth $150,000, as addressed under Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA)

The Office of Federal Contract Compliance Programs (OFCCP) sets federal standards to make sure government contracting agencies use their AAPs to maintain diversity-driven goals such as nondiscriminatory recruitment targeting, transparent workforce demographic reporting, and inclusive worksite facilities and company activities. Adopting these regulations allows government contractors to properly diversify their workplace, which can increase brand morale and strengthen the talent acquisition pool as the business grows.

Small business and socioeconomic verifications

Every agency has to start somewhere. If a government contractor is running a small business, they must acknowledge the numerous requirements set by the U.S. Small Business Administration (SBA). For example, every federal agency must obtain a Unique Entity Identifier (UEI). This identifier gives contractors the official right to work with the federal government, adding ease to validation process agencies must undergo during the contract proposal stage. The services and products offered by government contractors are also given identifiers known as North American Industry Classification System (NAICS) codes. The federal government uses these codes to further categorize businesses and verify what goods they can expect to receive when entering a contract with an agency. 

Most importantly, government contractors must register within the System of Award Management (SAM) database. This protected database lists every active government contracting agency, noting their eligibility for small-business level contracts. The SAM database also defines which small business government contractors who are women-owned, veteran-owned, minority-owned, or categorized as another socioeconomic group. Thanks to the efforts of SBA programs, government contractors with socioeconomic edibility gain access to additional contract opportunities. In other words, adhering to these requirements helps government contractors legitimize their small business and elevates their status as a lawful competitor in their marketspace.

Cybersecurity and data protection

Government contractors rely on consistent communication with their clients to verify a project is meeting its contract expectations. Unfortunately, the sensitive data digitally exchanged between the contracted parties can be at risk of being breached. Data breaches continue to be a growing threat, with one study stating 45% of U.S. companies have experienced a breach before. Worst yet, recovering from a breach is a costly effort. According to Statista, the average cost of a data breach is $9.48 million in 2023. 

These risks are why compliance standards for security and data protection are put in place. The National Institute of Standards and Technology (NIST) offers expert publications and guidelines on computer and technology security for government contractors. One core publication, titled NIST SP 800-171 Rev. 2, highlights the security measures federal contractors must follow to protect controlled unclassified information (CUI) in nonfederal systems and organizations.

Contractors and subcontractors working with the Department of Defense (DoD) gain additional security guidelines under the Defense Federal Acquisition Regulation Supplement (DFARS). According to DFARS, federal contractors and subcontractors must submit a self-assessment detailing their efforts to protect CUI in adherence to NIST guidelines. The DoD must also be given access to their infrastructure to ensure the assessment is accurate. If the government contractor is a small business, the Office of Small Business Programs (OFSBP) provides federally-approved cybersecurity training videos and resources through Project Spectrum encourage data protection education within the industry. 

Investing time in cybersecurity and data compliance further protects government contractors from current date threats and minimizes their risk of facing data breaches in the future.

PEOs keep government contractors compliant

Maintaining compliance within the government contracting industry is an evident necessity. However, agency leaders can struggle to navigate these laws while balancing the progress of their acquired contracts. Fortunately, PEOs help protect government contractors from compliance risks by thoroughly researching and tracking the updates of top priority regulations. In addition to helping decode how major compliance laws affect government contractors’ business operations, PEO professionals offer risk and compliance solutions such as:

• Managing an Employee Protection Program (EPP)
• Overseeing the administrative tasks behind each compliance activity 
• Helping investigate and rectify unemployment insurance claims
• Ensuring employees complete required training videos and education cybersecurity, discrimination, sexual harassment, and other compliance topics
• Provide workers’ compensation insurance to protect against wage misconduct

Sign onto better HR with ExtensisHR

Ramping up compliance initiatives doesn’t have to be a stressful task. Choosing ExtensisHR as your PEO gives you access to dedicated risk experts, expert HR advice, and more freedom to refocus on winning the best contracts in the industry. In addition to protecting government contractors from compliance risks, ExtensisHR offers multiple customer-first HR services including:

• Payroll and tax management
• Benefits enrollment and administration
• Talent acquisition and full-cycle recruiting at no extra cost
• Advanced HR reporting and progress tracking via our mobile-first Work Anywhere® platform
• General HR support and consultations
• Access to dedicated customer service representatives who keep the “human” in human resources

Ready to scale your compliance strategy? Contact our risk experts to learn more about ExtensisHR’s PEO solution and HR services today.