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The most used form of Affirmative Action Plan (AAP) reviews the employees assigned to a single physical location (an “establishment”).  The employees reported in an establishment AAP may work in a multitude of unrelated business units and departments.

Functional Affirmative Action Plans (FAAPs) detail one segment of a contractor’s business operation.  Because FAAPs reflect how contractors do business, they can better issues affecting equal access than establishment plans.

This blog outlines what FAAPs are, why most contractors don’t use them – why they can still be a good fit for some employers.  Any federal contractor with a complex organizational structure should weigh the pros and cons of adopting FAAPs.


FAAP Requirements

As outlined in OFCCP Directive 2-13-01 Rev. 3, FAAPs must have at least 50 employees.  Each FAAP must name a managing official (someone in charge of the unit with “clear responsibility” for making progress towards affirmative action plan goals).  The official can be a be a director, a VP, or a CEO depending on the size of the FAAP.  HR systems must keep personnel records specific to each business unit reported.  A FAAP must include the AAP elements outlined in the supply and service regulations: 41 CFR 60-2, and “if applicable”, Subpart C of 41 CFR 60-300, and Subpart C of 41 CFR 60-741.


FAAP Benefits

If the FAAP meets the basic requirements of size, identification of a managing official and centralized records keeping, the OFCCP should accept the grouping.  FAAPS are effective means of analyzing contractors’ diversity profiles and monitoring progress towards achieving equal access.  The operational view of, for example, a contractor’s finance department that a FAAP provides facilitates a meaningful analysis of patterns and trends in the gender, race, and disability representation of that function or business unit.

FAAPs are flexible.  The business unit reported need not be gigantic (as little as fifty employees as noted above).  Contractors can break a large line of business into separate FAAPs for each of the functional units within it.  Contractors may maintain both FAAPs and location-specific establishment plans at the same time – for example, a FAAP for marketing operations run from multiple work locations, plus individual establishment plans for each of the call centers that implement the marketing group’s plans.

The OFCCP’s new scheduling letter and itemized listing may prove to be another reason to consider adopting FAAPs.  As written, contractors must detail the action-oriented programs undertaken to address “any” indicator identified in the 41 CFR 2.17(b) compensation system review (Item 7) and “any” job-group underrepresentation of individuals with disabilities (Item 11). Not every plan-specific indicator in an establishment plan warrants a pro-active response – but on paper, at least, the OFCCP requires just such a location-specific response for each such indicator in each of a contractor’s establishments.  Because FAAPs align better with the way in which an organization operates, the indicators identified are likely to have more meaning – and therefore to have been addressed.

FAAPS can help address another pain point in the maintenance of establishment plans – accounting for those assigned to one location for whom personnel decisions are made at another location.  “Employees for whom selection decisions are made at a higher-level establishment with the organization must be included in the affirmative action program of the establishment where the selection decision is made.”  (41 C.F.R. §60-2.1(d) (3).  Because FAAPs report employees based on hierarchical workgroup structure, work location is of little relevance, making “annotating” individuals out of one plan and into another unnecessary.

In addition, “FAAP units that have undergone a compliance evaluation will be exempt from another evaluation for 36 months from the date OFCCP closed the previous evaluation.”  Dir 2013-01 Rev. 3 Section 8(h).  This beats the 24-month hiatus available for establishment plans.


FAAP Negatives

Contractors may not simply adopt FAAPs.  OFCCP must approve them.  As usual, OFCCP underestimates the time it takes contractors to pull together the detailed application.  (Dir-2013’s Appendix A outlines the complex requirements).

FAAPs can be hard to manage in organizations that undergo frequent structural changes because contractors must report relevant reorganizations, mergers/acquisitions, and changes in “primary corporate contact” within 60 days.  This is burdensome.  The FAAP Agreement that contractors must sign to maintain functional plans establishes an additional annual filing requirement.  (Currently there are no references to this requirement in the FAAP Directive and only a passing reference in the FAAP FAQ.) Contractors must renew permission to maintain FAAP every 5 years, creating more administrative overhead.

A strength of the FAAP program can also be a negative.  Upon audit, a large FAAP can provide OFCCP with more data than single-location establishment plans.  More hires, promotions and terminations to review can mean more opportunities for the OFCCP to identify potential problems.  Also, when reviewing a large set of transactions, a small difference (hiring a few more males than females, for example) can be statistical significance, an indicator of possible discrimination – something for the OFCCP to follow up on. Indicators from a large data set and a small actual difference in selection rates should be taken with a grain of salt: they can have little “practical significance”.  Unfortunately, the Agency’s Compliance Officers sometimes assume systemic discrimination in these situations.

One way to address the ‘large numbers’ problem is to keep FAAPs small.  Federal contractors can right-size the number of employees in FAAP – this is impossible with establishment plans, for which size is set by the number of employees reporting to a specific location.  Even with small FAAPs, however, another possible negative looms.  FAPPs can provide the OFCCP with the same clear picture of the contractor’s business unit that the contractor has!   Before you adopt FAAPs, model them to find potential issues.  Perform this review under legal privilege to preserve confidentiality.  Make sure you take proactive steps to address the issues that your FAAP reveals.



The workforce is increasingly dynamic.  Fewer and fewer companies’ organization charts map to the “brick and mortar” work locations reported in establishment plans.  What was right for a manufacturing economy may not be right for a distributed, technologically interconnected workforce.

The administrative burden inherent in the current FAAP program has limited the number of contractors who adopt them. In addition, some contractors see the clear picture that FAAPs provide as a possible audit risk – this curtails some contractors’ enthusiasm.

Currently less than 100 of the 24,000 total federal contractors maintain FAAPs. Nevertheless, contractors with complex, distributed organizations should consider FAAPs.  They reveal issues affecting equal access and identify the company official responsible for responding.  Properly used, FAAPs are effective.

By adopting FAAPs, your organization may go from reporting scores, hundreds or even thousands of establishments plans to preparing a handful of functional or business-unit specific plans.  This may be sufficient reason to adopt FAAPs.


Paul McGovern
Managing Partner
Praxis Compliance

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