Federal Agency Modifies all Contracts to Include E-Verify Clause

[Editor’s Note: this is the first in a series of ongoing “guest blogs” by respected experts in I-9 and E-Verify compliance. Today’s blog is courtesy of Dawn M. Lurie of Greenberg Traurig.]

I remember sitting a few feet away from former Secretary of Commerce Carlos Gutierrez and former Department of Homeland Security Secretary Michael Chertoff when they both expressed their disappointment over the stalling of Comprehensive Immigration Reform at a briefing I attended on August 10, 2007.  In my head, I was already drafting the news for my clients:   the no-match regulations would be published after years of delays, the new E-Verify was being unveiled, and, most importantly, the Federal government would “now lead by example.”  Secretary Chertoff discussed the upcoming rulemaking  that would amend the Federal Acquisition Regulation (FAR) with ample time allowed for comments. I remember thinking, “This is it, the government will find a way to force federal contractors to run current employees through this E- Verify program.”  While the Alert I posted within hours of getting back to the office discussed a laundry list of other changes, by far I knew the biggest long-term issue would be the FAR amendments. Sure enough, almost three years later, federal contractors continue to struggle on a daily basis with the FAR E-Verify clause.

While there were significant delays, eventually Executive Order 12989 was implemented by amending the FAR to make E-Verify mandatory for all federal contractors after the effective date of September 8, 2009.  The government slowly but surely began to include the E-Verify provision in new contracts as well as bi-laterally amended contracts. After discussing upcoming changes in May of 2010, the General Services Administration (GSA) announced a mass modification last week for all Federal Supply Service (FSS) contracts that forces E-Verify to be incorporated along with other standard clauses and contract exceptions pursuant to the authority of FAR 1.108(d)(3).

This mass modification will cause a huge ripple effect in the world of contractors and their subs, as it will require that all current employees assigned to FSS contracts have their employment eligibility electronically verified.  It is critical that GSA points of contact notify all parties involved in implementing the E-Verify process for the company prior to accepting the modification. Every day will count once the modification is accepted by the company.  In an effort to assist GSA suppliers, the agency issued a training document entitled: Goldstar Phase II- Capturing Clause Exceptions and the E-Verify Mass Mod, which describes how vendors should respond to the modification. It is very technical and could be dangerous for those who are not government contract specialists, so read at your own risk.  It confirms that the modifications are immediate and will take effect the day the Contracting Officer executes the modification for the company.  Remember, the  E-Verify timelines are tight: If your company has not already sat down with the right experts at the table, now is the time to have everything coordinated.  Guidance will need to be distributed to various business units within large companies, and additional burdens will need to be accepted by those in smaller ones.  Quick, informed decisions will also need to be made upon receiving an amendment (or new E-Verify contract) including, but not limited to, the following:

  • deciding whether it is wise or even possible to re-verify an entire workforce or whether it would be better just to stick with E-Verifying those existing employees “assigned to the contract;”
  • deciding whether to update existing I-9s or create new ones for entering the existing employees into the E-Verify system;
  • identifying which individuals are not considered to be directly performing work under the contract, as they will not need to be E-Verified;
  • considering whether to utilize an E-Verify Agent and/or an electronic I-9 provider to facilitate this process (another full blog topic);
  • identifying who was hired prior to November 7, 1986, as these individuals will not have an I-9 and should not be run through E-Verify;
  • identifying those individuals with certain security clearances; and
  • establishing flow-down and best practices to deal with sub-contractor requirements.

FSS/GSA FAQs

Is my company affected by the GSA Mass Modification?

If you are a contractor to a GSA/FSS Contract, then you are affected and the point of contact would have been notified by e-mail.

Will other government agencies initiate mass modifications requiring the E-Verify requirement?

Yes, possibly, although not many agencies are doing this. As government contracts attorney Dorn McGrath stated, “Mass modifications are creatures of FSS schedules.”

What is a “mass modification?”

Mass modifications or “Mass Mods,” as they are referred to, are initiated by the government when uniform changes to large numbers of GSA/FSS contracts are required. Generally, Mass Mods are the same for all recipients, unless there are contract-specific changes.

Can we select “no” to the E-Verify clause?

While it appears that FSS contractors have the ability to select one of two choices regarding the E-Verify portion of the mass modification by choosing to either 1) accept the clause or 2)  indicate that the requirement is not applicable to the contract because of one of the enumerated exemptions in FAR 22.1803, I would not recommend selecting the second option without a careful review by legal counsel.

What happens if we reject the modification?

The Procuring Contracting Officer (PCO) will be notified and may initiate the cancellation of the contract in accordance with clause 552.238-73, Cancellation. The FAR E-Verify provisions are complicated and require teamwork between legal counsel, contract administrators, the human resource team, sales and many other departments.  Timing is critical and so is a careful review of modifications such as the one made by GSA.  If you think your company is entitled to one of the exemptions outlined below, you may request an individual contract exemption from the E-Verify clause. The PCO will then review the contract and make an independent determination of the appropriateness of the exemption.

What are those exemptions?

Basically, E-Verify now applies in all solicitations and contracts that exceed the simplified acquisition threshold, except for those that:

  • Are only for work that will be performed outside of the United States;
  • Are for a period of performance of less than 120 days; or
  • Are only for:
  • Commercially available off-the-shelf items (COTS);
  • Items that would be COTS items but for minor modifications
  • Items that would be COTS items if they were not bulk cargo; or
  • Commercial services that are-
  1. Part of the purchase of a COTS item (or an item that would be a COTS item but for minor modifications);
  2. Performed by the COTS provider; and
  3. Are normally provided for that COTS item

How are employers supposed to determine whether an exemption applies to certain FSS contracts?

By speaking to the (PCO) as well as competent compliance and government contracts counsel, that’s how! The GSA states the following:

It is important to note the difference between the definitions of a commercial item for services found in FAR 2.101 commercial item (6) and the definition of commercial services in FAR 22.1803 (4). The exemption provided by FAR 22.1803 (4) has more limitations than the FAR 2.101 commercial item (6) definition for services in that FAR 22.1803 (4) exempts only commercial services that are a part of a purchase of a COTS item of supply, performed by the COTS provider, and are normally provided for that COTS supply item (see FAR 22.1803 (4)(i)(ii)(iii)).

As I mentioned above, the FAR E-Verify requirements are complicated and require careful consideration and strategic planning by a company.  Given all that is involved, correct handling of a GSA mass modification will truly “take a village!”