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Do you need an affirmative action plan to do business with the government? Maybe.

There are certain guidelines those who do biz with the fed government are required to adhere to, and most have to do with diversity and equity.

The federal government expects you to run an equitable business if you're going to contract with it.

(Photo by Rodnae-Productions on Pexels)

Contracting with the government means potentially huge, company-altering contracts. For a lot of tech and STEM companies, landing federal contracts is a goal, for growth, notoriety and financial gain. But it doesn’t come without some red tape.

Before you can even think about bidding on a federal contract, you should check and see if you qualify for any special interest certifications. These certifications can give your business a boost, making all kinds of businesses more competitive by preventing large corporations from monopolizing federal contracts.

You may know that there are certifications for socially and economically disadvantaged business owners, women, veterans, disabled business owners and companies that do business in specified underdeveloped areas.

Small businesses, regardless of ownership, can also get certification that accesses them to federal set asides — that is, contracts that are only available to small businesses.

Small business, defined

If a mom-and-pop shop with five or 10 employees comes to mind when you think of a small business, think again. The federal government’s definition of a small business varies from industry to industry, but on average a company is considered small if it has fewer than 500 employees or has average annual receipts less than $7 million. In tech and STEM, where most businesses are measured by millions of dollars, a small engineering firm takes in $41 million or less, and a small lab services company takes in $30 million or less. If your graphic design business has less than $8 million in annual receipts, it is considered small. You can download the full table on the US Small Business Administration’s website.

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Once that’s out of the way, you just have to complete your System for Award Management (SAM) Registration, and you can start bidding. Right?

Not exactly. (No one ever said bureaucracy was easy.) If you’re going to actually win any contracts, you have to comply with federal contractor regulations.

Requirements when doing business with the federal government

The Office of Federal Contract Compliance Programs (OFCCP) will make sure your company is in compliance, and will conduct audits to make sure you remain in compliance.

Most of OFCCP’s regulations are about discrimination policies. Your company can’t discriminate against any group, and it will need to be official company policy.

There are very few exceptions to this requirement. Religious organizations may legally reject applicants based on religion and hire members of its religion exclusively, and that’s about it.

This regulation isn’t just to protect socially disadvantaged people. In 2020, the University of Delaware, which has multiple federal contracts, resolved a noncompliance case with the US Labor Department when an OFCCP evaluation found that the school’s rejection of 210 male applicants for custodial technician jobs was gender discrimination.

Is affirmative action required?

With affirmative action in university admissions in the news, it might seem that procedures to help eliminate systemic discrimination is some kind of lofty, elite thing. In reality, affirmative action is a requirement of all federal agencies and contractors, from caterers to construction to defense.

If you want a federal contract, you’re required to have an affirmative action program (AAP) if you have 50 or more employees and at least one contract of $50,000 or more. If you don’t meet that threshold, but have at least one contract of $10,000 or more, you won’t be penalized if you don’t have an AAP, but you will still be held to regulations barring discrimination on the basis of race, color, sex, sexual orientation, gender identity, religion and national origin. Also protected are disabled people, veterans and employees who disclose their income to other employees.

What does an AAP look like?

The OFCCP offers resources to help business owners create and certify their AAP, including samples. AAPs vary by industry, location and company size, but there are a few things most include:

  • Organizational profile with employee head count, including race, ethnicity, gender and other available data
  • A job group analysis that estimates the availability of qualified minorities and women applicants
  • Designation of responsibility and identification of problem areas
  • Action oriented programs to correct any identified problem areas
  • Placement goals
  • An internal audit and reporting system
  • Records of letters to suppliers, vendors and recruiters stating your AAP

The kinds of strict quotas a college or university might have are not required, but the plan, and evidence that the company is actually implementing it as best they can, will be.

Reporting incidents is mandatory, whether there is a sexual harassment claim, racial mistreatment or wrongful termination. Unreported incidents will likely be found in an audit.

The Drug-Free Workplace Act of 1988

Yes, a drug policy from the ’80s is still a requirement for federal contractors.

Under the Drug-Free Workplace Act of 1988, a drug-free workplace policy is required for any organization that receives a federal contract of $100,000 or more. (It’s also required for any organization receiving a federal grant.)

Some companies cite this as a reason they continue to drug test for THC (or, as the government commonly refers to it, marijuana) despite it being legal for medical use, recreational use or both in many states. THC is still classified as a controlled substance federally, but as a business owner who contracts with the federal government, you don’t have to test employees for it to be compliant.

What you will need is a formal written company policy on drugs clearly prohibiting the manufacture, use and distribution of controlled substances in the workplace and citing specific consequences if the policy is violated, which may be anything from rehabilitation classes to dismissal.

You will need to make sure that your employees know that they must report to the company within five days if they are convicted of a drug charge; the company itself has 10 days to report the conviction to the federal contracting agency. The agency will expect to see consequences as laid out in the company policy for the employee.

In October 2022, President Joe Biden released a statement on marijuana reform in which he asked the secretary of health and human services and the attorney general to review the classification of marijuana under federal law. Until then, it is legally treated the same as heroin, fentanyl and methamphetamine on the federal level. State laws vary, but even if you live in a state where THC is legal, when you’re working with the federal government, federal law supersedes state law.

Any questions? You can find assistance via usa.gov.

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