As you note, the regulations allow visual observation when an individual declines to self-ID. As you also point out, using visual observation provides the data needed for analysis. So, if you want to have the most accurate assessment of where candidates are falling out of the process, visual observation is going to be helpful. While OFCCP does not require employers to use visual observation, they have been known to cite contractors when the rate of unknowns is extremely high, as it often indicates that the contractor is not making a best effort in the process of inviting candidates to self-ID.
You can use this OFCCP audit checklist to ensure you're doing what is required to maintain OFCCP's regulations including VEVRAA, Section 503, and EO 11246. Or request a demo to streamline your compliance and recruiting efforts.