What Happens to the Workforce When You Win (or Lose) a Recompete

Winning a recompete is supposed to be good news. For the HR team, though, it often marks the beginning of a compressed, legally constrained workforce transition that has to be executed correctly before the period of performance begins — typically in 30 to 60 days.

The Service Contract Act's successor contractor provisions establish specific obligations for both the incoming and outgoing contractor when a covered service contract changes hands. These rules govern who gets offered a job, how quickly, at what wage, and what happens if the predecessor workforce doesn't show up. They also set record-keeping obligations that most contractors don't discover until a DOL investigator asks for documentation they don't have.

The Core Obligation: Right of First Refusal

Under FAR Subpart 22.12 and the implementing regulations at 29 C.F.R. Part 9, a successor contractor on an SCA-covered service contract must offer employment, before hiring anyone else, to the service employees employed under the predecessor contract — as long as those employees are qualified for the positions being filled on the successor contract. This is commonly called the "right of first refusal."

The right applies when all three of the following conditions are met:

• The contract is subject to the SCA (most service contracts over $2,500 with the federal government are)
• The contract is for substantially the same services performed at the same location
• The successor contractor needs employees in the same or substantially similar positions

Notably, the obligation doesn't require the successor to hire the predecessor workforce — only to offer them the opportunity before turning to external recruitment. If a qualified predecessor employee declines the offer, the successor is free to hire from elsewhere. If the successor fails to make the offer at all, it has violated the regulation regardless of whether the affected employees were harmed.

The Predecessor's Role: Certified Employee Lists

The right of first refusal framework only works if the successor actually knows who to contact. The regulations therefore require the predecessor contractor — within 10 days of receiving notice of contract expiration or award to a successor — to provide a certified list of service employees working on the contract. This list must include each employee's name, address, telephone number, and job classification.

In practice, this obligation is routinely ignored or executed carelessly. Predecessors who have just lost a contract are not always motivated to invest effort in an orderly transition, and there is no formal enforcement mechanism that compels them to provide accurate lists on time. Successors who assume the list will arrive — and don't build a contingency plan for the scenario where it doesn't — sometimes find themselves at contract start without a compliant offer process on record.

Wage Obligations on Transition

Winning a recompete doesn't give a successor contractor the right to reset compensation. The new wage determination incorporated into the successor contract establishes the minimum wage for each classification, and the successor must pay at least those rates from day one of performance.

The complexity arises when the new wage determination reflects a rate increase from what predecessor employees were earning, or when the successor's internal compensation structure doesn't align cleanly with the wage determination classifications. A common error is mapping predecessor employees into successor classifications that don't accurately reflect the work being performed — which creates both a wage liability and a misclassification exposure.

The fringe benefit reset

Predecessor employees who accept offers on the successor contract are entitled to the fringe benefits required under the new wage determination, not necessarily the benefits they received from the predecessor. This means the successor cannot simply port over the predecessor's benefit structure and assume compliance. The H&W obligation must be recalculated against the current wage determination rate — and if that rate has increased since the predecessor contract was awarded, the successor starts with a higher baseline than the predecessor was working against.

What Changed in 2025: The Non-Displacement Rule Rollback

From January 2023 through early 2025, federal contractors were also subject to Executive Order 14055, which imposed a stronger non-displacement requirement than the baseline SCA provisions. Under that rule, successor contractors were required not just to offer jobs to qualified predecessor employees, but to give them preference for a period of at least 90 days before terminating them without cause. The rule applied to contracts exceeding $250,000 and included detailed transition notice requirements.

President Trump rescinded EO 14055 on January 20, 2025, and the DOL's implementing regulations were formally removed in December 2025. The non-displacement rule no longer applies to new contracts or contract options exercised after rescission.

Importantly, the rollback of EO 14055 did not eliminate the baseline SCA successor obligation — only the enhanced non-displacement layer. Contractors still must comply with the right of first refusal and the certified employee list requirements under 29 C.F.R. Part 9. And contractors whose existing contracts still contain EO 14055 language as a contract clause remain bound by those terms for the life of that contract, regardless of rescission.

The Obligations Run Both Ways

It's worth being explicit that successor contractor compliance applies whether you're the one taking over a contract or the one losing it. The two sets of obligations are related but distinct.

Where Transitions Break Down

Most transition problems aren't caused by deliberate non-compliance. They arise from compressed timelines, poor communication between contracting parties, and the assumption that the other side will handle its obligations without follow-up. A few patterns appear repeatedly in post-transition disputes:

• No written offer documentation. The successor verbally extends offers but doesn't create a paper trail. When a former employee files a complaint claiming they weren't offered a job, there's no record to defend against it.
• Misclassification at transition. The successor maps predecessor employees into classifications that don't match the new wage determination, either undervaluing their roles or placing them into categories with lower H&W obligations.
• Delayed start of fringe benefits. Successor contractors sometimes delay benefit enrollment pending their normal HR onboarding cycle. For SCA-covered employees, fringe benefits must be provided from the first day of performance — waiting 30 or 60 days for open enrollment creates a back-pay exposure for every day of the gap.
• Assuming the predecessor list is complete and accurate. Predecessor employee lists are often incomplete, out of date, or delivered late. Successors who rely on them without independent verification miss employees who have a right of first refusal but were never contacted.

Planning the Transition Before Award

The successor contractor obligations are not something to address after contract award. By the time award is announced, the timeline is already running. Contractors who incorporate transition planning into the proposal phase — including a workforce absorption model, a day-one wage determination analysis, and a draft offer letter template — are substantially better positioned to execute a clean transition than those who treat it as a post-award HR project.

The same applies to recompete defense. An incumbent contractor that loses a recompete still has active obligations during the phase-out period, and its handling of the employee list and transition coordination is visible to the contracting officer, the successor, and — if something goes wrong — the Department of Labor.