Proposed Change to Labor Relations Cost Principle

Soon after his inaguration, President Obama issued Executive Order (EO) 13494, Economy in Government Contracting. The EO stated that the cost of activities, when they are undertaken to persuade employees in the matter of exercising rights to organize and bargain collectively, are unallowable. According to the EO, examples of such costs include

• preparing and sitributing materials,
• hiring or consulting legal counsel or consultants,
• holding meetings,
• planning or conducting activities by managers, supervisors, or union representatives during work hours

This week, the FAR Councils published a proposed regulation to make the corresponding changes to FAR by amending FAR 31.205-21, Labor Relations Costs.

Currently, FAR 31.205-21 simply states that costs incurred in maintaining satisfactory relations between the contractor and its employees, including costs of shop stewards, labor management committees, employee publications, and other related activities, are allowable.

While retaining the current language, the proposal adds the following restrictions:

As required by Executive Order 13494, Economy in Government Contracting, costs of any activities undertaken to persuade employees, of any entity, to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively through represenetatives of the employees' own choosing are unallowable. Examples of unallowable costs ... include but are not limted to, the costs of

• preparing and distributing materials
• hiring or consulting legal counsel or consultants,
• meetings (including paying the salaries of the attendees at meetings held for this purpose), and
• planning or conducting

Written comments to this proposed change must be submitted by June 14th.