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Contractors contest new rules for employing veterans

New regulatory changes are meant to promote the hiring of veterans, but the local head of the Association of General Contractors claims paperwork costs could be prohibitive.

The U.S. Department of Labor said this week that it has updated a federal rule designed to promote the hiring and employment of veterans—and while veterans appear to welcome the change, contractors say it is unnecessary and will increase costs.

The new rule updates the requirements set forth by the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) of 1974, which told federal contractors and subcontractors to recruit, hire, train, and promote veterans but that didn’t contain any benchmarks for companies.

The rule requires contractors to adopt either an 8 percent benchmark (which reflects the percentage of veterans in the national workforce) or create their own benchmark based on “the best available data.” For example, if an employer is based in a geographic area with very few veterans who are applying for these jobs, the metric may be adjusted.

Veteran groups appear pleased with the change. “Veterans are eager to return to work, and we appreciate the efforts to make the transition back to work easier,” Dennis Davis, a former Navy man who is the chief translation officer for Metafrazo, a Twin Cities firm that helps organizations create and manage sustainable veteran hiring practices, told Twin Cities Business. Davis noted that what vets really want is a fair chance to compete in the marketplace.

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Nationally, the unemployment rate for veterans of the Iraq and Afghanistan wars is 7.2 percent, according to a June report from the Bureau of Labor Statistics. In Minnesota it’s about the same, which is a couple pointshigher than the overall workforce, according to the Minnesota Department of Employment and Economic Development.

But not everyone is praising the rule change. The Associated General Contractors of America (AGC) said that the new rule would create an Everest of new paperwork with a steep price tag for compliance. “Any Minnesota contractor that does business directly with the federal government will be forced to spend thousands more a year to complete paperwork,” said Brian Turmail, executive director of public affairs for the organization.

Dave Semerad, the head of the local branch of the AGC, is also concerned.

“This seems to be an overreach by this administration . . . I have not seen any data that justifies it,” he told Twin Cities Business. “Additionally, I think the increased regulations will act as a deterrent to contractors who may be interested in federal work. Over time, this drives up the cost of construction by reducing competition. The taxpayers end up paying more.”

Twin Cities BusinessIn addition to the changes to rules pertaining to veterans, the Obama administration also announced this week an update to Section 503 of the Rehabilitation Act of 1973 concerning the hiring of people with disabilities by federal contractors. Under the new rule, contractors and subcontractors are asked to set a goal of staffing 7 percent of their workforces with people with disabilities. Turmail notes that the cost nationally to comply with the two rules could rise to $6 billion a year for contractors.

The Labor Department disputes this. “The Section 503 rule is expected to cost between $349 million and $659 million, and the VEVRAA rule is expected to cost $177 million and $483 million. That means that on the highest end of these estimates, the two rules will cost up to $1.1 billion in the first year of implementation,” said Patricia Shiu, director of the Office of Federal Contract Compliance Programs.

This article is reprinted in partnership with Twin Cities Business.

American flag image by Flickr user Denise Krebs and used under Creative Commons license.