Executive Order Underpinning SCA Contractors’ Right of First Refusal Rescinded By Trump Administration

On Inauguration Day, President Trump issued a flurry of executive orders.  Among the first he signed was the Initial Rescissions Of Harmful Executive Orders and Actions Executive Order (the “Rescinding EO”). This directive rescinded 78 executive orders issued by the Biden Administration.  The revocation of one in particular, Executive Order 14055 of November 18, 2021 Non-displacement of Qualified Workers Under Service Contracts (the “EO 14055”), will have an immediate impact on federal contractors performing and bidding on Service Contracts.

EO 14055, issued in 2021, provided a right of first refusal of employment to employees working on a Service Contract when that contract changed hands from one federal contractor to the other.  The stated purpose of EO 14055 was to provide “the Federal Government with the benefits of an experienced and well-trained work force that is familiar with the Federal Government’s personnel, facilities, and requirements.”  In 2023, the Department of Labor (DOL) issued a Final Rule, codified as 29 C.F.R. § 9.1 et seq., implementing EO 14055 and clarifying the requirements federal contractors must follow when beginning work on an SCA contract and extending offers of employment to the contract’s previous workforce.

At a high level, the DOL Final Rule required predecessor contractors to provide a certified list of Service Contract employees to the contracting officer at least 30 calendar days before the end of the contract.  Likewise, the Final Rule required successor contractors to ensure that the certified list was correct and offer bona fide written job offers to those identified Service Contract employees.  While there were some exceptions, the Rule by and large covered most if not all Service Contracts. 

President Trump’s Rescinding EO rescinds EO 14055 but does not automatically void existing contractual terms for contractors that impose obligations under EO 14055 or the DOL Final Rule codified in 29 C.F.R. § 9.1 et seq.  Rather, it provides a directive to Agency officials to take appropriate steps, using their agency authority, to comply with the Rescinding EO.  For federal contractors performing work on a Service Contract, or those bidding on a Service Contract, it is important to carefully review contract provisions as well as any applicable agency rules to understand their obligations.  Contractors should expect that Agency officials will begin directing contracting officers to remove clauses that impose obligations under the rescinded EO 14055 from all existing contracts, and to omit such clauses and obligations from all new contracts, thereby removing the right of first refusal for Service Contract employees.  In practice, this means that awardees of Service Contracts will not be required to provide offers of employment to staff of the predecessor contract but instead may staff the program as they wish.

It is worth noting that in 2019, the first Trump Administration rescinded similar obligations contained in President Obama’s Executive Order 13496 (“Nondisplacement of Qualified Workers under Service Contracts”).  In that instance, President Trump’s order contained details and guidance on how to specifically rescind the implementation of EO 13496 at the Agency level.  Unlike in 2019, the Rescinding EO merely rescinds President Biden’s EO 14055 and does not provide any details or guidance to agencies on how to implement the recission.  As such, we may see subsequent guidance clarifying obligations related to the rescission of EO 14055.  Stay tuned, and do not hesitate to reach out with any questions.