If today's workforce has no borders, what does that mean to companies and organizations who fulfill U.S. government OCONUS contracts (outside the continental U.S.)?
Is your organization poised to leverage these global trends by driving a workforce strategy that will help your business grow? With the global pandemic, we've been forced to rethink the very nature of work. How teams work together, how to manage a global workforce, and how we will continue to adapt in the space of government contracting. Do these trends point to strategies to help organizations win OCONUS contracts?
GovConPay recently partnered with Elements Global Services, an employer of records service provider, and Public Health Institute, an independent non-profit organization dedicated to promoting the health, well-being, quality of life of people worldwide, to discuss these pressing strategies surrounding the global workforce and OCONUS contracts.
COVID-19 and the Global Workforce
As we continue to distance ourselves from the pandemic, it’s increasingly evident to notice just how much the global workforce has changed. Every organization was impacted by the pandemic in some way or another, and understanding these changes is crucial to the future of winning OCONUS contracts.
Q: How has the Public Health Institute been impacted by the pandemic, and what challenges have you had in managing a global workforce?
A: It's certainly a topic that everyone can identify with no matter what organization you're working at, but the impact at PHI has been unique because we work in the public health space, so we're all trying to navigate the pandemic, but we've also, organizationally, been working directly on the pandemic. On one hand, that's actually brought tremendous growth and programmatic opportunities to PHI.
For example, as you mentioned, part of our work in the last year has been overseeing the launch of a program called Tracing Health, which supports local health jurisdictions in Oregon, Washington, and California to do contact tracing. We've literally doubled PHI's workforce, as well as our revenue, in the last 12 months, so you can imagine all the organizational and operational challenges we've been navigating to do that.
Fortunately, most of all of our work can be done remotely and it's inside the U.S., so that piece of our impact from COVID has been easier to manage, but it has been challenging to try to keep on top of the COVID situation in all of our foreign jurisdictions where our people are working. We're working now in about 40 countries globally, where we have local staff engaged on the ground, primarily through Elements Global Services.
Figuring out how to support our people and manage that, taking into account the realities of COVID on the ground, and then making sure we're meeting our funder expectations at the same time, has been a real challenge. Frankly, it's required a lot of communication and coordination and a lot of hours.
Our teams have been working around the clock since last March, or even early in February, we were already anticipating some of the impact. But we're really committed to public health, so I can say that while it's impacted us, we've risen to the challenge and continue to move forward even now.
Q: How has the pandemic impacted your hiring and day-to-day operations?
A: With COVID shutting down travel to and from many of the countries, we had to get creative because the need to improve, and in some cases, simply maintain the capacity of health systems, was even greater.
One solution for us to have new fellows support their teams remotely. For example, we hired two Ugandan local country nationals. One was supporting Zimbabwe, another supporting Malawi, who worked remotely until travel restrictions were lifted and they were allowed to travel to post.
We've also seen lengthy delays in work visa processing over the last year, and have had to use a similar model in including a local country national from Nigeria who also happens to be supporting Malawi remotely. When travel was opened up, he was able to visit his team and do some field work for a couple of weeks before turning to Nigeria while he still waits for his work permit to come in.
Q: How has the Public Health Institute balanced employee safety with programmatic success?
A: It certainly hasn't always been easy. Fortunately, we have a very clear mission to guide us when making decisions around employee safety. As the Public Health Institute, our priority is the health and well-being of all people, and for PHI, that really starts with our employees.
Without a question, we have erred on the side of caution when necessary and prioritized our employee safety at every step. It doesn't mean we've gotten it right. Especially during those early days of the pandemic where I think we were all trying to figure out what are the modes of transmission, where are our employees at risk.
But we very quickly moved into a remote workforce completely, and we've implemented what's called a limit workspace access policy, where essentially it requires prior approval of a critical business need for any of our employees to do in-person activity. They also have to adhere to a set of on-site safety standards, and then individual certifications around their own personal safety standards they're going to comply with.
We're actually still in that remote status, requiring all on-site activities to have prior approval. We're trying to grapple with that, with the return to on-site activities. But as you mentioned, there's a balance with the programmatic work.
At every turn, because we are working on the pandemic, we did have to work closely with our funders and their programmatic pressures for us to be on-site or undertake travel. Our program leaders have had to partner really closely with, for example, our USAID representatives or CDC representatives to make sure we're meeting those awards even if we're not able to be on-site because we do need to focus on employee safety.
I will say that we've actually found that we've been able to be effective at finding ways of creative ways to work remotely that have been a value add to our funders. Just a small example is just the fact that we can't undertake a lot of international travel at this point, a lot of our programs are expanding their training programs by doing a recording of those trainings, and that helps us to minimize not only our carbon footprint, which is a really important priority for PHI, but it also makes us more cost-effective for our funders. I think every chance we can find that little value add, even though we're being remote and prioritizing employee safety, has been a benefit for us. We've grown in spite of that.
Q: How have you navigated different legal jurisdictions when trying to keep your employees safe and comply with local regulations at the same time?
A: This has actually been one of our biggest challenges, as responses to COVID have varied so much by country around the world. While employee safety is our priority, there's also the reality that we're working in so many foreign jurisdictions and can't control the local office activities.
For example, many of our fellows work in their host organization, whether that be the Ministry of Health, USAID, or another implementing partner. Some of these countries went into a strict lockdown, which impacted the ability for them to work or do anything, while other countries basically failed to acknowledge COVID at all for months. And then in some of those cases, there's pressure and/or guilt on our employees to go into the office when their colleagues are there.
While we've taken steps to outline precautions that should be in place before they return, and we can advocate for them with our funder to continue to work remotely, we aren't on the ground in a lot of these countries and we can't make them stay home. There are definite challenges and risks that we've been trying to manage through all of this.
Managing the Global Workforce and Employer of Record Model
With the global workforce expanding, it creates new challenges for GovCons to take into account. From non-traditional employment to how those trends will impact the future of the global workforce, GovCons are adapting continually.
Q: Are non-traditional forms of employment, things like contractors and volunteers, causing compliance headaches for employers?
A: Absolutely. Not only do they present compliance challenges, but you're also assuming all of the risks as an employer. A contractor, a volunteer, they don't have the same rights as an employee. They don't have the same support as a full employee.
In-country, a lot of times there are requirements for restrictions on who can be a contractor, how long they can be a contractor. For example, let's take Honduras. You can only be a contractor for six months, at which point you are expected to be an employee. And if the company that you are a contractor for does not know this and doesn't convert you, that employer can then be subject to a lot of penalties and fines, as well as tax implications, because payroll taxes come into play.
If you have a U.S. government-funded project that runs two and a half years, and two of those years you thought you were okay having the contractor in place, there goes your project budget and fines back taxes. It can really spell a nightmare, especially in the development industry where dollars are very, very tight. When you have a very strict budget that you have to stick to for your program, you don't want sometimes hundreds of thousands of dollars to just evaporate out of your budget.
Q: What are the dominant trends in the global workforce? And what impact do they have on government agencies and their contractors?
A: The prioritization of safety and health for their employees, making sure their employees are clean, indicate how to come back to work, what's the protocol, what's the rules around that, and maintaining constant communication for that employee to make sure they feel safe. That's priority number one.
We see a dispersed workforce, decentralized. Look at this call. We're all working in our remote locations. And then you see the hybrid workplace, where companies are making a decision, is this a forever stay, the work from home? Last week JP Morgan Chase came out with a rather strong statement that said, "We're back in the office," and I think he got a lot of blowback. His rebuttal was, "We're doing remote except on Mondays and Fridays." Everyone's back in the office on those days.
On the other side, Nationwide Insurance announced that work from home will be a forever benefit, already reducing office space, reducing their footprint. I recently had a conversation with colleagues in another company that indicated they're letting each department manage their global workforce by department. For example, the goal was to have departmental representation five days a week. If you had five people in your department, you're going to go into an office one day out of the week to ensure that there's someone on that team in the office all day, so folks that are there can have that access.
From a government-specific impact, the global workforce, what we saw was, for those of us pursuing government contracts, site visits have been dramatically reduced, obviously. Government employees aren't going out to sea, and offices that aren't open yet to invite them in. That side that's been a negative impact in terms of RFPs.
You think about it from a global workforce, some of the contracts that are larger, what may have slated to hire people. That workforce has been delayed as a result of the delayed RFPs. The good news, in general, we're seeing there's not a lot of cancellations of government contracts. It's more of a delay. That's been a positive. The hybrid workplace does bring new security concerns. I don't know if anyone read the Wall Street Journal this morning, in fact. It's a six-page section on the hybrid workplace and what it's doing from cybersecurity, and the remote worker brings a new risk to the organization.
What we anticipate is within workforces, is higher-level security. When you see future contracts, we'll likely see, within the RFI, talk to us about your security place for your workforce. How do we ensure them that they are going to be compliant and comfortable?
Lastly, we do see probably third-party auditors growing as a result of that. I would say those are the major trends that I'm seeing today.
Q: What Is an Employer of Record?
A: It’s a tool that allows organizations to sustain their business and grow their workforce. It lets you onboard employees easily and manage compliance of payroll globally. It's such an obvious tool.
What I love about it, it solves a problem that many companies don't see. It's one of those blind spots, that you're excited to expand. You're in a new location. You think about your product, your service you're about to grow, and this is one of those, "Wow, I didn't realize there was any tax event that just triggered this global expansion." The employee of record model is such a beautiful, simple solution to fixing that issue.
What's also very nice about it, you can turn it on within a relatively short span of time, as opposed to months, maybe even a year. We're talking weeks. And then you can turn it off if that project has ended, or you're exiting that country. You could end that tool, or the service, rather quickly. It's a nice compact model that helps companies expand.
It allows them to expand into foreign countries without setting up their own entity so that they can be faster to market and hopefully save some money as well. The cost of savings alone of setting up a legal entity for a small company that is scaling up and wanting to expand rapidly, if you're trying to put workforce in five countries, you're multiplying that cost by every country that you want to put your workforce in. Whereas with the EOR model, you don't have to worry about that because an EOR provider is already going to have the established entities in those countries. It takes all of that time and cost right out of it.
Q: Given the STAR Program, what challenges did PHI face onboarding a global workforce?
A: Apart from COVID, which has been a whole unexpected challenge that we faced, two of our biggest have been around benefits. The first was in trying to equity across our program and from country to country. To help solve this, we established baseline benefits that were comparable to those our direct-hire, U.S.-based employees receive, and then adapt those as needed based on local regulations, as well as industry norms.
In most cases, because our focus on employee well being, our package of benefits and allowances, we usually well above the minimum required by waiver laws. But this brought on that additional challenge in trying to achieve an equitable standard across all countries. If an organization is just trying to meet the local labor law requirements, this process can be fairly straightforward. But to be competitive in the health field where we operate, a lot of work goes into researching industry norms for our field, figuring out the realities on the ground so we can tailor our plans to recruit the best candidates.
Our other big challenge around benefits was that we started out trying to offer a standard benefits package; but as we implemented, we found it wasn't available in many of the countries we were working in, so we switched to a model that allows our fellows to choose the best coverage based on their needs.
Then, of course, we found out good plans aren't always readily available in some countries that we now operate in, so we're now in the middle of a procurement for another direct benefit option, so we're kind of going full circle on tackling these challenges.
Q: Do you have any advice for other organizations considering their global hiring, maybe considering employer of record?
A: EOR opens up great opportunities for growth. But there really is still a lot of work that goes into it. As was mentioned, realistically, we never would've been able to create our own entities for the 30-plus countries that we're active in right now. The resources to set up and maintain that wouldn't be realistic for the scale we operate at with one to five employees in all of the countries that we work in.
You have to also expect to put in the work to establish the benefits, do all the hiring, orientation, training, management, and everything else you would do with any other employee that you hire, and understand that you then have multiple workflows working in parallel between your direct hire and your employee of record companies. You really need to help prepare the organization for the internal challenges that come up in implementing it.
The employer of record, while it does create these opportunities and makes a lot of things easier, it's not a silver bullet. It's not going to solve everything for you. You have to work through all of your internal change management processes to get your team to understand how the employer of record works. You have to adjust policies and procedures where appropriate, and assigned resources, making sure you have enough people dedicated to getting it right from the beginning.
Q: What are some of the mobility challenges that organizations are facing?
A: I would say number one, still immigration. That was even pre-COVID. There are so many rules and complexities around immigration. As administrations change, as country treaties change, there is a lot to pay attention to, so that's been a consistent challenge and it was exasperated during COVID with the new rules and regulations.
Then right behind that, I would say is the complex tax rules. As you're moving somebody into a new location, that global mobility person has to pay attention to what's the correct payroll tax, what's the correct Social Security tax, what are the benefits, all these examples we just heard, that global mobility person has to manage that. They have to understand that, and that's a full-time job by itself, just understanding the complex tax rules.
Third, probably the most consistent, is a high-cost living and salary adjustment that people understand what should I pay this employee in this new area, given this title. We want to be consistent. We want to be fair. For those of us at Elements, we know there's not a week that doesn't go by that we get a salary request information on what kind of salary should I pay this person. Those are consistent, ongoing challenges the industry has faced.
Best Strategies for Winning OCONUS Contracts
Now it’s time to get into ways that government contractors can win OCONUS contracts. Clearly, the expanded global workforce has created numerous opportunities that GovCons can take advantage of immediately.
Q: How does a company register to do business with the federal government?
A: The basics are you need a dunce number to register. But there are some really basic things that you need to do. My recommendation first is to really spend some time researching your space. There is a lot of government resources that help you understand who are your competitors, what's the market that you're competing in, and then where you think you can show traction in. I would spend the time researching getting into the government industry.
It is a prolonged process. For those of us that haven't been in the government space, it takes time to get traction. You need to have your name out there and show the value you create and differentiate yourself from your competition. But there's a lot of rules and regulations that sometimes intimidate folks, but I recommend once you start studying and understanding the federal acquisition regulations, you will do well.
I think then for the more mature companies, I would understand your indirect cost when bidding. That's really, especially as the topic of this is OCONUS growth, what's the cost of expanding in those countries. Are you setting up an office? Now do you have rent? Do you have utilities? Do you have general office administration? Really getting into the details of that. And that falls into your understanding of the costs that you can charge the government.
That's FAR part 31, that the mature companies know that part very well. That gets into the allowability of costs, so the allowable versus unallowable, and then the allocation of cost, direct versus indirect. And then really, you want to map those out to determine what's the pricing for your contracts and what's the margin you potentially win.
I would say the last thought that I have around that is the FAR 31 is not a responsibility of a single person. Large organizations have a government compliance team that focuses on that, but that government compliance team or individual has to have a view across account management, operations, sales, accounting, and finance to adhere to the rules of contracting.
If you rely on a single person to be the FAR expert, you can get yourself in trouble. I've seen large organizations sometimes that compliance person feels like a rub, that they're in your department but it's a good thing, that they're helping to make sure you’ve complied, and making sure that you're invoicing for the right things and containing the margin you're looking for.
Q: What do you think are some strategies to find and respond to government business opportunities?
A: The first and possibly the most obvious is network, network, network. I can give you an example right now. Let's use Joe Young at GovConPay. He is the president of this company and we work very closely together. Every once in a while a client of theirs will say, "Hey Joe, I'm bidding on this contract but I don't know where to turn." Joe says, "I know where to go.”
The other obvious ones are weed through the budget. Once you identify which agency or agencies that you want to target for a client to look for opportunities in, start looking at their budget allocations. Start reading their press releases, because they're going to announce a project long before it's actually up and running. When you see that budget allocation has been approved by Congress, you know that they're going to be getting funding for this project that they've been talking about for the last six months, then you know that an RFP is going to drop.
That's when you want to start talking to your contacts within the space, the companies that you think are probably going to be actively seeking this opportunity. Start networking with your contracting officers. Start networking with the decision-makers. Get yourself out in front of it before the RFP drops.
Aggregators are a great tool as well. There are a lot of services, both free and paid, where they do a lot of the leg work for you. They look at the budgets. They talk to the federal side contracting officers. That can be a way to get in as well.
Q: In winning government contracts, do you think that your choice to go the EOR route is an asset in winning contracts?
A: By all means, what the EOR does for PHI, it's that partnership that we now have with Elements, means that we're ready to respond to any RFP. We're a non-profit, so often we're responding to the RK, the cooperative agreement grant space, but we're ready to respond and to meet the programmatic requirement on the other end very quickly to any government contract, cooperative agreement, or any other funder that requires PHI to be ready to engage a global workforce in any jurisdiction.
We can do that with good confidence now because we know that we've done it. We have procedures in place. We have a process. We can speak to that. We have a past performance record that can show this is what we can do. Just toggling back to some of the compliance points, at the end of the day, it's our organizational responsibility, so again, as a non-profit, we work inside, not FAR 31, but the uniform guidance that really lays out what are our regulations for compliance. But those sitting on us as an organization to make sure that we can do that.
The funder, whether it's USAID, CDC, whoever the funder may be, they don't necessarily understand those nuances of what it takes to get registered and time and whatnot, so you, as a bidder, you have the ability, or we feel like we have the ability now to say we've done this and we actually have a model for doing this.
Any other organization that doesn't have that already in place in X country, we need you to implement and be a 30 country and we can say we've either been there or we know how to get there, and here's how we do it. And any other organization who doesn't have that, you may want to be checking into how they're going to do that and how long is that going to take. That's a value add for us.
Q: Are there other types of companies or certain types of companies that have built any advantages to winning OCONUS contracts?
A: Absolutely. The federal government actually tries to set aside at least 5% of all of their contracting dollars in the 8(a) program. Those are the small socially or economically disadvantaged businesses. 5% of that entire federal contracting budget, which is huge, there are a lot of zeroes there, is set aside specifically for the 8(a) program participants.
I do know that those requirements for 8(a) did change. I think it's almost a year ago, not quite a year. But the business development program is great for the small and disadvantaged businesses. There are a lot of RFPs and contracts and funding vehicles that are only available to participants of this program, so it's definitely an advantage there.
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