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Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules
BILLING CODE 451027C

b. SCA and DBA Procurement Contracts in the U.S. Territories
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The methodology to estimate potentially affected workers in the U.S.
territories is similar to the methodology above. The primary difference is that data on gross output in the territories are not available, and so the Department had to make some assumptions. Federal contracting expenditures from USASpending.gov data show that the Government spent $1.8 billion on service contracts in 2019 in Puerto Rico, Guam, and the U.S. Virgin Islands.
Other territories were excluded because employment data are not available.39
The Department approximated gross output in these three territories by calculating the ratio of the Gross Domestic Product GDP to total gross output for the U.S., then applying that ratio to GDP in each territory to estimate total gross output. For example, the Department estimated that Puerto Ricos gross output totaled $140.5 billion.40
The rest of the methodology follows the methodology for the fifty states and Washington, DC. To determine the share of all output associated with Government contracts, the Department divided contracting expenditures by gross output. The Department then multiplied the ratio of covered contract spending to gross output by private sector employment to estimate the share of employees working on covered contracts.41 This analysis was not conducted at the industry level because the number of observations in some industries is very small, making estimates imprecise. The Department estimated 11,800 employees will be potentially affected in Puerto Rico, Guam, and the U.S. Virgin Islands.
39 The other territories comprise a very small share of Federal contracting expenditure and thus the impact of their exclusion is expected to be very small 0.1 percent of all Federal contracting expenditures in 2019. This includes American Samoa and the Commonwealth of the Northern Mariana Islands. Other territories do not have any Federal expenditures in USASpending.
40 In the U.S. the sum of personal consumption expenditures and gross private domestic investment the relevant components of GDP was $17.6 trillion in 2018, while gross output totaled $33.7 trillion.
In Puerto Rico, personal consumption expenditures plus gross private domestic investment in 2018
most recent data available equaled $73.4 billion.
Therefore, Puerto Rico gross output was calculated as $73.4 billion $33.7 trillion/$17.6 trillion.
41 For the U.S. territories, the unincorporated selfemployed are excluded because CPS data are not available on the number of unincorporated selfemployed workers in U.S. territories.

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c. Nonprocurement Concessions Contracts and Contracts on Federal Properties or Lands The above analysis found 1.5 million potentially affected employees on SCA
and DBA contracts. However, the employees of entities operating under covered nonprocurement contracts on Federal property or lands may not be included in that total. To account for these employees, the Department used a variety of sources. First, the Department estimated the number of entities operating under covered nonprocurement contracts on Federal property or lands section V.B.ii.. Then the Department multiplied the number of contracting firms by the number of potentially affected employees per contracting firm, by industry. This ratio was calculated by dividing the potentially affected employees on direct contracts by the number of contractors prime and subcontractors with potentially affected employees from USASpending. For example, in the information industry, there are 15,400
potentially affected workers in 4,000
entities, for an average of 3.9 potentially affected workers per firm. This estimate of potentially affected workers per firm is multiplied by the estimated 5,872
entities in the information industry operating under covered nonprocurement contracts on Federal property or lands, resulting in 22,800
potentially affected employees in these firms.
The exception to the above methodology is for employees of military Exchanges. These 41,500
employees are directly included because Exchanges are very large employers and using the ratio method above would underestimate employment.42 The AAFES employs 35,000 employees,43
NEXCOM employs 13,000 associates,44
and MSX employs 12,000 workers.45
Data on employment for the Coast Guard Exchange CGX was not available and so the Department estimated there are 614 employees.46
These numbers were then reduced by 32
percent to remove employees stationed 42 Many of these employees are Federal employees, but because it may include some contractors, the Department has chosen to include these workers in the analysis.
43 AAFES. 2019. Exchange Fact Sheet 2019.
https www.aafes.com/Images/AboutExchange/
factsheet2017b.pdf.
44 Navy Supply Systems Command. 2020. 2019
Navy Exchange Service Command Annual Report.
https www.mynavyexchange.com/assets/Static/
NEXCOMEnterpriseInfo/AR19.pdf.
45 Marine Corps Community Services. n.d..
About Us. https usmc-mccs.org/about/.
46 Calculated by taking the ratio of CGX facilities to MSX facilities 5 percent and multiplying by the number of Marine Corps employees 12,000.

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overseas, based on the share of AAFES
net sales that occur outside the continental U.S.47 Summing these calculations over all industries results in an additional 259,300 covered employees for a total of 1.8 million potentially affected employees.
d. Additional Considerations Because the Executive orders requirements only apply to new contracts as defined in the NPRM, some of these potentially affected workers may not be impacted in the first year after implementation. However, the Department believes the majority will be impacted in Year 1. For example, section 9c of the Executive order strongly encourages agencies administering existing contracts to ensure that the hourly wages paid under such contracts or contract-like instruments are consistent with the minimum wages specified under the order. Additionally, if workers are staffed on more than one contract, their hourly wage rate may increase for all contracts as soon as any one of the contracts is impacted. Lastly, rather than increasing pay for only a subset of their workers, some employers may increase wages for all potentially affected workers earning less than $15
per hour at the time their first contract is affected rather than paying different wage rates to employees working on new contracts and employees working on existing contracts. For these reasons, the Department included all workers in the analysis of Year 1 impacts. This assumption may result in an overestimate of Year 1 impacts, but the Department believes it is preferable to overestimate transfers in Year 1 than to underestimate transfers because of uncertainty when contractors will be affected.
While some SCA contracts are for terms of more than a year and hence may not be covered by this E.O. for several years if the contract was entered into in the last year or two, many consist of a base term of one year followed by a series of 1-year option periods. Executing a new option year under such a contract will trigger the E.O.s provisions. It is reasonable to assume that many such contracts whether base or option period will be entered into during 2021.
The Department notes that at first glance the estimated number of affected firms 507,200 and potentially affected employees 1.8 million may seem inconsistent because this is an average 47 AAFES. 2020. 2019 Mission Report. https
publicaffairs-sme.com/Community/wp-content/
uploads/2020/06/2019AnnualReportDigi.pdf.

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