The first half of 2026 has been one of the most active periods of federal policy change in recent years for government contractors. Through executive orders, acquisition policy initiatives, and agency implementation guidance, the federal government has continued reshaping the regulatory landscape for organizations that perform work under federal contracts.

While many of these initiatives will continue to evolve through Federal Acquisition Regulation (FAR) updates and agency guidance, contractors should begin evaluating how these changes may affect their compliance programs, employment practices, cybersecurity readiness, and contract performance. 

Below are several developments that deserve management’s attention. 

FAR Modernization Initiative 

Federal agencies continued implementation of the Revolutionary FAR Overhaul (RFO), a government-wide effort to modernize the Federal Acquisition Regulation. The initiative is intended to streamline procurement, reduce unnecessary regulatory burden, and make federal acquisitions more efficient.

Although many proposed revisions are still under development, contractors should expect procurement procedures, solicitation language and contract administration requirements to continue evolving throughout 2026. 

Recommended Actions 

• Monitor FAR Council announcements. 

  
  

• Review internal procurement and contract administration procedures. 

  
  

• Train contract management personnel on new acquisition requirements. 

Resources 

• Acquisition.gov – Revolutionary FAR Overhaul (RFO)

  
  

• GSA News Release – Revolutionary FAR Overhaul Initiative

  
  

• GSA Acquisition Policy Library & Resources

  
  

Defense Procurement Reform 

The Department of Defense continues emphasizing faster acquisition timelines, improved contractor performance, and increased accountability across the defense industrial base.

Procurement reforms are designed to reduce acquisition delays while strengthening supply chain resiliency and contractor performance. Contractors supporting defense programs may experience updated performance metrics, accelerated procurement schedules, and increased expectations regarding delivery and production capacity. 

Recommended Actions 

• Review project management and contract performance metrics. 

  
  

• Strengthen subcontractor oversight. 

  
  

• Prepare for evolving reporting requirements. 

Resources 

• White House – Executive Order 14402: Promoting Efficiency, Accountability, and Performance in Federal Contracting

  
  

Cybersecurity and CMMC Readiness 

Cybersecurity remains one of the highest compliance priorities for federal contractors. During the first half of 2026, the Department of Defense continued preparations for implementation of the Cybersecurity Maturity Model Certification (CMMC) program.

Although implementation timelines continue to evolve, contractors handling Federal Contract Information (FCI) or Controlled Unclassified Information (CUI) should not delay cybersecurity planning. Organizations seeking future DoD contracts should continue preparing for CMMC assessments and ensure implementation of required NIST security controls. 

Recommended Actions 

• Conduct cybersecurity gap assessments. 

  
  

• Review NIST SP 800-171 compliance. 

  
  

• Prepare documentation for future CMMC certification requirements. 

Resources 

• Department of Defense – Cybersecurity Maturity Model Certification (CMMC)

  
  

• National Institute of Standards and Technology (NIST) Special Publication 800-171

  
  

Increased Supply Chain Oversight 

Federal agencies continue placing greater emphasis on supply chain security, domestic sourcing, and vendor transparency. Contractors supporting national security and critical infrastructure projects should expect increased scrutiny of suppliers, subcontractors, and foreign sourcing risks. Supply chain resiliency has become an increasingly important factor in federal procurement decisions. 

Recommended Actions 

• Identify critical suppliers and subcontractors. 

  
  

• Evaluate foreign sourcing risks. 

  
  

• Maintain documentation supporting supply chain due diligence. 

Resources 

• SAM.gov – Federal Contract Opportunities and Entity Registration

  
  

• Acquisition.gov – Federal Acquisition Regulation Resources

   

Artificial Intelligence and Technology Procurement 

Federal agencies continue expanding investments in artificial intelligence, software modernization, and advanced technology solutions. As AI becomes more integrated into government operations, contractors should expect evolving acquisition requirements governing responsible AI use, cybersecurity, data rights, and software assurance. 

Technology contractors should closely monitor emerging procurement guidance as agencies establish consistent standards for AI-enabled products and services. 

Recommended Actions 

• Review software development and cybersecurity documentation. 

  
  

• Evaluate intellectual property and data rights provisions. 

  
  

• Monitor agency guidance regarding AI procurement requirements. 

Resources 

• Acquisition.gov – Federal Acquisition Regulation Updates

  
  

• NIST Artificial Intelligence Resource Center (AIRC)

  
  

Changes to Federal Contractor DEI and Equal Employment Requirements 

The Administration continued implementing changes to diversity, equity, and inclusion (DEI) requirements for federal contractors. Executive Order 14398 directs agencies to remove certain DEI-related contract requirements and implement new contract language addressing unlawful discrimination.

As agencies update solicitations and contract clauses, contractors should expect continued changes in compliance expectations. It is important to note that while federal contractor obligations are changing, employers remain subject to federal and applicable state anti-discrimination laws. Requirements under Section 503 of the Rehabilitation Act and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) continue unless modified by future regulatory action. 

Recommended Actions 

• Review affirmative action, EEO, and DEI-related policies. 

  
  

• Monitor new solicitations and contract modifications for updated contract clauses. 

  
  

• Continue complying with all applicable federal and state employment laws. 

Resources 

• White House – Executive Order 14398: Addressing DEI Discrimination by Federal Contractors  

  
  

• GSA Acquisition Letter MV-2026-02 – Implementation Guidance

  
  

• Acquisition.gov – FAR Implementation & FAR Overhaul Updates  

  
  

  
  

Looking Ahead 

The pace of federal contracting reform is expected to continue throughout the remainder of 2026. Many executive orders and acquisition initiatives will continue moving through agency implementation, FAR revisions, and contract modifications before becoming fully operational.

For small and medium-sized government contractors, the most effective strategy is to remain proactive. Regular reviews of employment policies, cybersecurity practices, supply chain management, and contract administration procedures can help reduce compliance risk while positioning organizations for future federal contracting opportunities. 

How C2 Essentials Can Help 

Federal contracting requirements continue to evolve, making proactive compliance more important than ever. As your HR and compliance partner, C2 Essentials monitors federal employment, payroll, and government contractor regulatory developments that impact your business.

Our HR, payroll, and compliance professionals help clients evaluate regulatory changes, update workplace policies, support multi-state compliance, assist with government contractor workforce obligations, and navigate evolving federal contractor requirements—allowing you to stay focused on delivering for your customers. 

Links to Federal Resources 

• White House – Executive Orders & Presidential Actions

  
  

• Acquisition.gov – Federal Acquisition Regulation (FAR) & FAR Overhaul Updates

  
  

• General Services Administration (GSA) – Acquisition Policy Library & Resources

  
  

• Department of Defense – Cybersecurity Maturity Model Certification (CMMC)  

  
  

• SAM.gov – Federal Contract Opportunities

  
  

• National Institute of Standards and Technology (NIST)

  
  

• U.S. Department of Labor – Office of Federal Contract Compliance Programs (OFCCP)

  
  

States continue to explore new approaches to address rising healthcare costs, and employers should be aware of emerging legislation that may create additional compliance obligations. New Jersey recently enacted an employer healthcare fee program that became effective July 1, 2026, requiring certain employers to contribute toward the state’s Medicaid program when employees and their dependents rely on Medicaid coverage.

While the requirements currently apply only to employers meeting specific criteria in New Jersey, the law represents a broader trend of states evaluating employer-funded healthcare programs as part of their efforts to address healthcare affordability.   

The law also prohibits employers from using an applicant's or employee's Medicaid status as a reason to deny employment, continued employment or advancement.   

The law applies based on the number of employees associated with an employer who are enrolled in New Jersey Medicaid, not simply the employer's total headcount. The fee schedule is: 

• 50–249 Medicaid-covered employees: $325 per Medicaid-covered employee and each Medicaid-covered dependent.  

  
  

• 250–499 Medicaid-covered employees: $525 per Medicaid-covered employee and each Medicaid-covered dependent.  

  
  

• 500 or more Medicaid-covered employees: $725 per Medicaid-covered employee and each Medicaid-covered dependent.  

  
  

The threshold is not based on having 50 total employees like the ACA's Applicable Large Employer (ALE) rules. 

Instead, the New Jersey law looks at how many of an employer's employees are enrolled in New Jersey Medicaid.  

For example: 

• An employer with 1,000 total employees but only 20 employees enrolled in New Jersey Medicaid would not meet the threshold.  

  
  

• An employer with 300 total employees and 75 employees enrolled in New Jersey Medicaid would fall into the first fee tier.  

The New Jersey requirement is designed to address concerns that some employers may not provide affordable healthcare coverage to employees, resulting in increased reliance on public healthcare programs. The program is structured as an employer fee, assessment, or contribution rather than a traditional tax. While New Jersey is among the first states in the current wave of states considering these types of programs, other states continue to evaluate similar approaches. 

New Jersey included several safeguards in the law. Beginning July 1, 2027, employees who have worked for an employer for fewer than 90 days will be excluded from the fee, along with part-time, per diem, temporary and seasonal workers. Fees assessed for those workers before that date may qualify for a credit or refund in the following year. In addition, employees and dependents with certain developmental, intellectual, or permanent physical disabilities are exempt from the assessment.  

Emerging Compliance Trend 

Employers should view this development as an emerging state compliance trend rather than an immediate nationwide requirement. For government contractors operating across multiple states, maintaining accurate workforce data and monitoring state-specific employment requirements will be increasingly important as additional states evaluate similar employer healthcare assessments. 

What Employers Should Do Now 

At this time, employers should not expect to independently enroll in a program or submit payments unless notified by the State of New Jersey. The legislation provides that the employer fee will be assessed by the state, based on employees and dependents receiving Medicaid coverage, and employers will be notified of any liability.  Employers with New Jersey employees should consider taking the following steps: 

• Review employee work locations: Confirm which employees are assigned to or working in New Jersey, particularly for employers with multi-state operations.  

  
  

• Maintain accurate employee records: Ensure payroll, benefits eligibility, and employee census information is accurate and up to date.  

  
  

• Monitor state communications: Watch for guidance from New Jersey agencies regarding employer notices, assessment procedures, payment deadlines, and any required appeals process.  

  
  

• Coordinate payroll and benefits administration: Employers should be prepared to address any State assessments that may require coordination between HR, payroll, finance, and benefits teams.  

  
  

• Avoid employment decisions based on Medicaid status: Employers should not ask applicants or employees whether they receive Medicaid benefits or make employment decisions based on an individual’s healthcare coverage status.  

The bill provides that: 

• The fee is assessed by the New Jersey Division of Revenue and Enterprise Services, not self-reported by employers.  

  
  

• The assessment is based on the number of employees and dependents receiving New Jersey Medicaid coverage as of December 31 preceding the assessment year.  

  
  

• Employers are then notified of their liability by the State.  

  
  

• Employers, if they receive an assessment, will be provided an opportunity to review or challenge the assessment if the employer believes the assessment is inaccurate. 

  
  

• The law also protects employee privacy by providing that individually identifiable information about an employee or dependent is exempt from public disclosure.  

Although the statute doesn't describe the mechanics, the State almost certainly will need to match Medicaid enrollment records with employer wage information, quarterly unemployment insurance (UI) wage reports and other payroll reporting.  

Growing Interest Among Other States 

New Jersey is not alone in exploring employer healthcare funding approaches. Similar proposals have been considered in several other states, including: 

• Colorado and Oregon – Both states considered legislation that would have required certain employers to contribute toward healthcare costs, although those proposals did not become law. 

  
  

• Washington – Lawmakers introduced a similar proposal focused on employer contributions toward healthcare affordability. 

  
  

• Connecticut – The Governor has proposed a future employer healthcare fee program that could take effect in upcoming years if approved. 

As States continue evaluating healthcare funding options, additional employer requirements may develop.  

Separate From ACA Employer Requirements 

New Jersey's employer healthcare fee is separate from the federal Affordable Care Act (ACA) and does not replace or modify existing employer responsibilities.

Employers that qualify as Applicable Large Employers (ALEs)—generally those with 50 or more full-time and full-time equivalent employees across all business locations—must continue to comply with the ACA's employer shared responsibility provisions, which generally require offering affordable, minimum-value health coverage to substantially all full-time employees and their dependent children or potentially facing an IRS employer shared responsibility payment. 

A State employer healthcare fee does not replace or modify an employer’s federal ACA responsibilities. Employers should continue to evaluate both Federal and State requirements when administering healthcare benefits. 

Your Compliance Partner 

C2 Essentials is committed to helping clients navigate an increasingly complex regulatory environment. As your PEO and HR consulting partner, we monitor legislative developments, evaluate their impact on employers, and align our HR, payroll, and compliance processes with new federal and state requirements as they become effective. Our goal is to help your organization remain compliant so you can stay focused on running your business. 

For employers performing work under covered federal service contracts, wage and hour compliance extends beyond the Fair Labor Standards Act (FLSA). The Service Contract Labor Standards (SCLS)—formerly known as the Service Contract Act (SCA)—requires contractors and subcontractors performing covered federal service contracts generally exceeding $2,500 to pay covered service employees at least the applicable prevailing wage rates and fringe benefits established by the U.S. Department of Labor. 

Common SCLS compliance mistakes include: 

• Misclassifying employees into the wrong labor category.  

  
  

• Paying less than the applicable wage determination.  

  
  

• Failing to provide the required health and welfare fringe benefit.  

  
  

• Using outdated wage determinations after a contract renewal or option year.  

  
  

• Failing to post the applicable wage determination at the worksite.  

  
  

• Maintaining inadequate payroll and labor records to demonstrate compliance.  

Unlike many private-sector wage and hour issues, SCLS violations can affect both your workforce and your federal contract. Noncompliance may result in back wage liability, withheld contract payments, contract disputes, or even debarment from future federal contracting opportunities in serious cases. 

Your First SCLS Contract 

For new government contractors subject to SCLS, the biggest compliance mistakes usually happen because they treat SCLS like a normal benefits or payroll issue. It is really a contract compliance obligation that affects HR, payroll, accounting, contracts, and operations. Highlights include: 

Confirm Whether the Contract Is Covered by SCLS - Not every federal contract requires SCLS compliance.  

Before applying SCLS requirements, contractors should confirm: 

• The contract is a covered service contract.  

  
  

• The contract value exceeds the applicable threshold (generally $2,500).  

  
  

• The contract incorporates the required SCLS clauses and Wage Determination.  

Obtain and Review the Correct Wage Determination - The Wage Determination is the foundation of SCLS compliance. Do not use an old Wage Determination from a previous contract or assume the same rates apply to all employees.  Always review the Wage Determination at contract award/renewal/modification for:  

• Geographic location covered by the contract.  

  
  

• Labor classifications.  

  
  

• Minimum hourly wages.  

  
  

• Health and welfare fringe benefit requirements.  

  
  

• Vacation and holiday requirements.  

  
  

• Effective dates.  

Properly Classify Employees - Choosing the lowest-cost labor category without confirming duties align with the classification can lead to compliance issues. Employees must be matched to the correct labor category based on their actual duties—not simply their job title. For example an employee titled "Administrative Assistant" may actually perform duties that align with a different Wage Determination classification. 

Track SCLS Hours Separately - SCLS obligations are generally tied to hours worked on covered contracts and contractors should not apply one company-wide payroll approach without distinguishing SCLS-covered employees.. Contractors should be able to identify: 

• Which employees worked on covered contracts.  

  
  

• Hours worked under each contract.  

  
  

• Applicable Wage Determination.  

  
  

• Benefits provided for those hours.  

Understand Health & Welfare Fringe Benefit Administration - The H&W fringe benefit is one of the most misunderstood areas. Contractors should assume employee enrollment in a company benefit plan automatically satisfies the H&W obligation. Contractors should: 

• Reconcile required H&W amounts against qualifying benefits provided.  

  
  

• Maintain documentation supporting benefit costs.  

  
  

• Address any shortfalls through additional benefits or cash equivalent payments.  

Do Not Overlook Vacation Benefits - Unlike typical private-sector PTO policies, SCLS vacation benefits may be a contractual obligation. Issues arise if contractors apply the standard company PTO policy to SCLS-covered employees without reviewing the Wage Determination:  

• Review the Wage Determination vacation requirements.  

  
  

• Track employee eligibility.  

  
  

• Recognize predecessor contractor service when applicable.  

  
  

• Maintain separate records for SCLS vacation accrual.  

Maintain Required Payroll Records - SCLS-covered contractors must maintain accurate records, including: 

• Employee name and address.  

  
  

• Job classification and wage rates paid.  

  
  

• Fringe benefits provided.  

  
  

• Hours worked and payroll deductions 

Train Supervisors and Program Managers - Supervisors should understand: 

• Employees cannot work outside recorded hours.  

  
  

• Employees cannot perform higher-level duties without review.  

  
  

• Time must be accurately reported.  

  
  

• Changes in assignments may impact classifications.  

Review Contract Changes - Continuing old payroll practices after a contract modification changes requirements as contract modification can change SCLS obligations. Contractors should review: 

• Option year renewals.  

  
  

• New Wage Determinations.  

  
  

• Additional labor categories.  

  
  

• Changes in work location.  

  
  

• Increased contract scope.  

Compliance Spotlight 

A U.S. Government Accountability Office (GAO) review of DOL enforcement found that between FY 2014-2019: 

• The DOL completed more than 5,000 Service Contract Act (now SCLS) investigations.  

  
  

• Approximately 68% of investigations resulted in violations.  

  
  

• Employers agreed to pay approximately $224 million in back wages.  

  
  

• 60 employers were debarred from receiving new federal contracts for three years.  

Service Contract Labor Standards (SCLS) violations can have consequences beyond back wages. In one case, a federal food service contractor was ordered to pay more than $1.4 million in back wages to employees and was debarred from bidding on federal contracts for three years after the Department of Labor found it failed to pay the required prevailing wages and fringe benefits.

More recently, the Department's Administrative Review Board affirmed another three-year debarment where a contractor failed to timely implement a revised wage determination after a contract modification—even though the contractor ultimately paid the affected employees. These cases underscore the importance of reviewing wage determinations whenever a contract is awarded, renewed, or modified.  

Health and Welfare Fringe Benefits 

The health and welfare fringe benefit is one of the most commonly misunderstood SCLS requirements. For example, if an employee works 2,000 hours on an SCLS-covered contract during the year, a $5.36/hour fringe benefit requirement equates to $10,720 annually in required fringe benefits. Failing to account for this cost when pricing a government contract can significantly reduce—or eliminate—the contract's profitability. 

Before submitting a proposal—or whenever a contract is renewed or modified—verify the applicable wage determination, confirm employee labor classifications, review fringe benefit calculations, and ensure payroll is aligned with current contract requirements. For additional guidance on SCLS compliance, the U.S. Department of Labor offers several employer resources: 

• Service Contract Labor Standards Guidance 

  
  

• Service Contract Labor Standards Overview 

  
  

• Employment Law Guide – Prevailing Wages in Service Contracts 

  
  

• FAR Subpart 22.10 – Service Contract Labor Standards 

Example: Service Contract Labor Standards (SCLS) Wage Determination 

A federal contractor is awarded a janitorial services contract  

for a federal office building in Fairfax County, Virginia.  

The solicitation includes a U.S. Department of Labor Wage Determination  

applicable to that geographic area. 

*Illustrative example only. Wage rates and fringe benefit requirements vary by Wage Determination, location, and contract. Employers should always refer to the Wage Determination incorporated into their federal contract. 

If a contractor hires a Janitor to perform work under this contract, the employee generally must receive at least: 

• $22.15 per hour in wages, and  

  
  

• An additional $5.36 per hour in fringe benefits, which may be provided through bona fide benefits (such as health insurance or retirement contributions) or, if permitted, paid as cash in lieu of benefits.  

  
  

If the employer pays only $20.00 per hour and does not provide the required fringe benefit, the contractor may owe back wages and fringe benefits for every hour worked under the contract. 

The Department of Labor's Wage Determinations are available through the official SAM.gov Wage Determinations database. Employers can search by contract type, state, county, or locality to identify the prevailing wages and fringe benefits applicable to a federal contract. 

• SAM.gov Wage Determinations  

  
  

• DOL Service Contract Labor Standards Resources  

  
  

Vacation Benefits 

Vacation benefits are one of the biggest differences between SCLS-covered employees and non-SCLS employees, and they are also one of the most common compliance issues for government contractors. Under the Service Contract Labor Standards (SCLS), vacation is not simply an employer policy. If the applicable Wage Determination includes a vacation benefit (most do), the contractor is legally required to provide that vacation benefit to covered service employees who meet the eligibility requirements. This is separate from—and in addition to—the health and welfare fringe benefit. }

Key Differences 

Suppose a Wage Determination provides: 

• 2 weeks of paid vacation after one year of service  

  
  

• 3 weeks after five years  

  
  

• 4 weeks after fifteen years  

If a contractor's standard PTO policy provides only one week of vacation after one year, that policy would not satisfy the SCLS requirement for covered employees. The contractor would need to provide at least the vacation benefit required by the Wage Determination to employees performing work on the covered contract. 

Successor Contractor Rule 

Another unique SCLS requirement is that an employee's length of service may carry over when a federal contract changes contractors. For example: 

• Contractor A loses the contract.  

  
  

• Contractor B wins the recompete and hires many of the incumbent employees.  

  
  

• An employee has 8 years of continuous service on that contract.  

  
  

For vacation purposes, Contractor B generally must recognize that prior service rather than treating the employee as a new hire. This is a significant departure from most private-sector PTO policies, where vacation is typically based only on service with the current employer. Because vacation under SCLS is tied to the applicable Wage Determination and, in many cases, an employee's continuous service on the contract, many government contractors: 

• Maintain separate PTO/vacation policies for SCLS-covered employees.  

  
  

• Track SCLS service dates separately from company hire dates.  

  
  

• Configure payroll and HRIS systems to apply different accrual rules for covered employees.  

  
  

• Review vacation entitlements whenever a contract is awarded, renewed, or transitions to a successor.  

  
  

When onboarding a new SCLS contract, identify which employees are covered by the Wage Determination and review both the required health and welfare fringe benefit and the required vacation schedule. If your organization hires incumbent employees from the previous contractor, obtain documentation of their qualifying service so vacation benefits are administered correctly from day one. 

Health and Welfare Fringe Benefit Reconciliation 

One of the most common SCLS compliance challenges involves properly administering and tracking the required health and welfare (H&W) fringe benefit. Contractors must ensure that covered employees receive at least the fringe benefit amount required by the applicable Wage Determination for every eligible hour worked on the contract.  

Because H&W benefits are often provided through a combination of employer-paid benefits and cash payments, contractors should periodically reconcile their fringe benefit obligations to confirm compliance. A proper reconciliation helps identify whether the value of qualifying benefits provided to employees meets or exceeds the required SCLS fringe benefit rate. A periodic H&W reconciliation should include: 

• Reviewing the applicable Wage Determination to confirm the required H&W rate. 

  
  

• Calculating the total H&W obligation based on covered employee hours worked. 

  
  

• Comparing required fringe obligations against qualifying employer-paid benefits, such as health insurance premiums, retirement contributions, or other allowable benefits. 

  
  

• Identifying any shortfalls that may require additional payments to employees. 

  
  

• Maintaining documentation supporting the benefit calculations and payments. 

For example, if an employee works 1,800 SCLS-covered hours during a contract year and the applicable Wage Determination requires a $5.36 per hour H&W fringe benefit, the contractor has a fringe benefit obligation of $9,648 for that employee. If the contractor only provided $8,500 in qualifying benefits, the remaining balance may need to be paid to the employee such as an employer retirement contribution, or a properly documented cash equivalent payment.  

Contractors should establish a regular review process—such as monthly, quarterly, or at contract milestones—to reconcile SCLS H&W obligations. Regular monitoring helps prevent small discrepancies from accumulating into significant back wage liabilities during a Department of Labor investigation. 

How C2 Essentials Can Help 

Maintaining compliance with the Service Contract Labor Standards (SCLS) requires more than processing payroll correctly. Contractors must ensure employees are properly classified under the applicable Wage Determination, receive the required prevailing wages and fringe benefits, administer vacation benefits correctly, and maintain accurate payroll and contract records. Regular reviews of contract modifications, wage determinations, and payroll practices can help identify compliance issues before they become costly liabilities. 

C2 Essentials partners with government contractors to navigate the complexities of SCLS compliance by assisting with wage determination reviews, employee labor classifications, fringe benefit administration, payroll compliance, and HR policy guidance. If your organization has questions regarding SCLS requirements or needs assistance evaluating its compliance practices, contact your HR Business Partner or Payroll Team before a minor oversight results in back wages, contract disputes, or a Department of Labor investigation. 

The U.S. Department of Defense (DoD) has announced that it is suspending implementation of Cybersecurity Maturity Model Certification (CMMC) Phase 2 while conducting a 60-day review of the program. Although this announcement has created uncertainty for many federal contractors, it should not be interpreted as a signal that cybersecurity requirements are going away. Instead, the DoD is evaluating how to streamline and improve the CMMC program while continuing to protect sensitive government information. 

For small and medium-sized government contractors, now is the time to remain focused on cybersecurity readiness rather than delaying compliance efforts. 

What Is Changing? 

Phase 2 of the CMMC program was expected to expand the number of contractors required to obtain third-party cybersecurity certifications before being awarded certain DoD contracts. Under the announced pause, the DoD will review the certification framework, implementation process, and associated costs to determine whether reforms are necessary. 

The review is expected to focus on reducing unnecessary administrative burdens while maintaining appropriate safeguards for Federal Contract Information (FCI) and Controlled Unclassified Information (CUI). 

What This Means for Contractors 

While the certification timeline may shift, the underlying cybersecurity obligations have not been suspended. Contractors should remember that: 

• Existing cybersecurity requirements under DFARS clauses remain in effect.  

  
  

• Contractors handling Controlled Unclassified Information (CUI) are still expected to implement the security controls outlined in NIST SP 800-171.  

  
  

• Future DoD solicitations may continue to include cybersecurity requirements even if formal CMMC certification dates change.  

Waiting until the review concludes could leave contractors scrambling if implementation resumes with little notice. 

Recommended Actions 

Government contractors should use this period to strengthen their cybersecurity posture by: 

• Reviewing compliance with NIST SP 800-171 security controls.  

  
  

• Identifying and remediating gaps in cybersecurity policies and technical safeguards.  

  
  

• Updating the organization's System Security Plan (SSP) and Plan of Action & Milestones (POA&M).  

  
  

• Maintaining documentation that demonstrates ongoing cybersecurity efforts.  

  
  

• Monitoring DoD announcements regarding the outcome of the reform review.  

Organizations that continue preparing now will likely be in a much stronger position regardless of how the final CMMC framework evolves. 

HR's Role in Cybersecurity Compliance 

Although CMMC is often viewed as an IT initiative, Human Resources plays an important supporting role. HR departments should ensure that: 

• Cybersecurity awareness training is provided to employees.  

  
  

• New hire onboarding includes required security policies and acceptable use acknowledgments.  

  
  

• Employee terminations include timely removal of system access.  

  
  

• Personnel responsible for handling sensitive information understand their cybersecurity responsibilities.  

  
  

• Security-related policies remain current and are consistently enforced.  

Strong administrative controls complement technical safeguards and help demonstrate an organization's commitment to protecting sensitive information. 

Looking Ahead 

The DoD's 60-day reform review introduces some short-term uncertainty, but the long-term direction is clear: cybersecurity will remain a critical requirement for companies doing business with the federal government. Contractors that continue investing in compliance, documentation, and employee awareness will be better positioned to compete for future contracts while reducing operational and security risks. 

How C2 Essentials Can Help 

Navigating federal contractor compliance requires more than understanding HR regulations. C2 Essentials partners with government contractors to support policy development, employee training, onboarding and offboarding procedures, documentation practices, and other administrative controls that complement your organization's cybersecurity compliance efforts. While technical cybersecurity implementation should be managed by qualified IT and security professionals, C2 Essentials helps ensure your workforce practices support your overall compliance strategy and readiness for future federal requirements. 

For many employers, wage and hour compliance seems straightforward—pay employees accurately and on time. However, the U.S. Department of Labor's (DOL) Wage and Hour Division routinely investigates employers for violations of the Fair Labor Standards Act (FLSA), and many findings result from common administrative mistakes rather than intentional misconduct. 

Enforcement Spotlight 

The U.S. Department of Labor continues to aggressively enforce the Fair Labor Standards Act. In Fiscal Year 2025 alone, the Wage and Hour Division recovered more than $259 million in back wages for nearly 177,000 employees nationwide—the highest annual recovery since 2019. Common violations included unpaid overtime, employee misclassification, and failure to compensate employees for all hours worked.  

While many investigations involve large employers, small and mid-sized businesses are frequently investigated after an employee complaint. The DOL does not limit investigations to Fortune 500 companies—any employer covered by the Fair Labor Standards Act may be subject to an audit. 

Government contractors may face additional wage compliance risks. In addition to the Fair Labor Standards Act, many federal contractors must comply with prevailing wage requirements under laws such as the Davis-Bacon Act or the McNamara-O'Hara Service Contract Act (SCLS). Timekeeping errors, employee misclassification, or improper overtime calculations can create contractual issues in addition to DOL wage and hour liability.  

For government contractors, where contract compliance and accurate labor reporting are already under increased scrutiny, maintaining sound wage and hour practices is essential. 

1. Misclassifying Employees as Exempt from Overtime 

One of the most common compliance issues involves incorrectly classifying employees as exempt from overtime. Paying an employee a salary alone does not make them exempt from the FLSA's overtime requirements. Most exemptions require employees to satisfy both a salary basis test and a duties test. Positions that have evolved over time—or employees whose responsibilities have changed—should be reviewed periodically to ensure they continue to qualify for an exemption. 

Tip: Conduct periodic exemption reviews, especially following promotions, reorganizations, or significant job duty changes. 

2. Failing to Pay for All Hours Worked 

The FLSA generally requires employers to pay nonexempt employees for all hours they are "suffered or permitted" to work. This may include work performed before or after scheduled shifts, responding to emails after hours, completing mandatory training, or performing work during meal periods. Remote and hybrid work environments have increased the likelihood of employees performing work outside their scheduled hours. 

Tip: Establish clear policies for recording all hours worked and train supervisors not to allow off-the-clock work. 

3. Incorrectly Calculating Overtime 

Overtime calculations can become more complicated when employees receive nondiscretionary bonuses, shift differentials, commissions, or multiple hourly rates. These forms of compensation often must be included when determining an employee's regular rate of pay for overtime purposes. Errors frequently occur when payroll systems or manual calculations fail to account for these additional earnings. 

Tip: Periodically review payroll calculations and ensure overtime is computed using the employee's correct regular rate of pay. 

4. Poor Timekeeping Practices 

Accurate time records remain one of an employer's strongest defenses during a wage and hour investigation. Missing, incomplete, or altered time records can make it difficult to demonstrate compliance. Employers should ensure employees accurately record all hours worked and that supervisors understand they may not modify time records without a legitimate business reason and appropriate documentation. 

Tip: Conduct periodic audits of timekeeping records and promptly investigate missing punches, recurring edits, or unusual patterns. 

5. Assuming Federal Law Is the Only Requirement 

Many states have wage and hour laws that provide greater protections than federal law. Depending on where employees work, employers may need to comply with state-specific requirements related to overtime, meal and rest breaks, final pay, minimum wage, or employee recordkeeping. For employers with remote employees or operations in multiple states, compliance should be evaluated under both federal and applicable state law. 

Tip: Review wage and hour policies whenever expanding into a new state or hiring remote employees. 

Helpful DOL Resources 

The U.S. Department of Labor provides several excellent compliance resources for employers: 

• Fair Labor Standards Act (FLSA) Handy Reference Guide 

  
  

• Overtime Pay Requirements Fact Sheet #23 

  
  

• Wage and Hour Division Overtime Resources 

  
  

• Overtime Fact Sheets Library 

How C2 Essentials Can Help 

Maintaining wage and hour compliance requires more than accurate payroll processing. Proper employee classification, timekeeping practices, supervisor training, and periodic HR audits all play an important role in reducing compliance risk.

C2 Essentials works with employers to review exempt classifications, evaluate wage and hour practices, assist with policy development, and help clients navigate federal and state employment law requirements. If your organization has questions regarding overtime eligibility, employee classification, or wage and hour compliance, contact your HR Team before a small issue becomes a costly investigation. 

People are every organization's greatest asset, but managing a workforce involves far more than hiring employees and processing payroll. As businesses grow, so do the challenges of recruiting top talent, staying compliant with employment laws, administering benefits, managing performance, and creating a workplace where employees can succeed.

This is where human resources (HR) plays a critical role.

If you've ever asked, "What does human resources do?", the answer extends well beyond paperwork and administrative tasks. Modern HR helps organizations attract and retain talent, navigate complex employment regulations, support employees throughout their careers, and align workforce strategies with long-term business goals.

Human resources oversees the entire employee lifecycle, including recruiting, hiring, onboarding, compensation, benefits administration, payroll coordination, employee relations, compliance, training, and performance management. When these responsibilities are managed effectively, businesses are better positioned to reduce risk, improve employee engagement, and build a stronger, more productive workforce.

We'll explore the core functions of human resources, how the profession has evolved, and why a well-developed HR strategy is essential for organizations of every size. You'll also learn how partnering with an experienced HR provider like C2 Essentials can help simplify HR administration, strengthen compliance, and support long-term business growth.

The Core Responsibilities of Human Resources

Behind every successful organization is a human resources team working to support employees, strengthen workplace culture, and help the business operate efficiently. While many people associate HR with hiring or payroll, the department's responsibilities extend far beyond those functions.

From attracting qualified candidates and onboarding new employees to managing compliance, employee relations, compensation, and professional development, HR plays a central role in nearly every stage of the employee experience. A well-managed HR function not only supports employees but also helps organizations reduce risk, improve productivity, and achieve their long-term business objectives.

Below are some of the primary responsibilities that make human resources an essential part of every successful organization.

Finding and Hiring the Right Talent

Recruiting the right employees is one of the most important responsibilities of any HR department. Building a strong workforce requires more than posting a job opening and reviewing resumes. It involves understanding the organization's needs, identifying qualified candidates, and creating a hiring process that consistently attracts top talent.

HR professionals develop job descriptions, determine required qualifications, source candidates through multiple recruiting channels, coordinate interviews, and guide hiring managers through the selection process. They also help ensure candidates align with the organization's culture, values, and long-term goals.

In today's competitive hiring market, the candidate experience is just as important as the interview itself. HR helps build a strong employer brand that encourages qualified professionals to choose your organization over competing employers.

For organizations looking to strengthen their hiring strategy or streamline recruiting, partnering with an experienced HR provider like C2 Essentials can help improve hiring efficiency while ensuring employment practices remain compliant.

Helping New Employees Succeed from Day One

Hiring the right employee is only the first step. A thoughtful onboarding process helps new hires become productive more quickly while creating a positive first impression of the organization.

Human resources coordinates everything from completing employment paperwork and benefits enrollment to introducing company policies, workplace expectations, technology systems, and organizational culture. Effective onboarding helps employees understand their role, connect with their team, and begin contributing with confidence.

HR also supports ongoing employee development through training programs, professional education, leadership development, and continuing learning opportunities. Investing in employee growth not only strengthens individual performance but also improves engagement, retention, and long-term organizational success.

Managing Compensation and Employee Benefits

Competitive compensation plays a significant role in attracting and retaining talented employees. Human resources works closely with leadership to develop compensation strategies that align with market conditions, organizational goals, and financial objectives.

Beyond base salaries, HR administers employee benefits such as health insurance, retirement plans, paid time off, wellness programs, and other voluntary benefits. This includes coordinating open enrollment, communicating benefit options, working with insurance providers, and ensuring employees understand the resources available to them.

For many organizations, particularly those partnering with a Professional Employer Organization (PEO), HR also helps provide access to competitive benefits that might otherwise be difficult for smaller employers to offer on their own.

Supporting Employee Performance and Career Development

Successful organizations create opportunities for employees to grow throughout their careers. Human resources helps establish structured performance management programs that encourage continuous feedback, goal setting, and professional development.

HR works with managers to establish clear performance expectations, conduct evaluations, identify development opportunities, and address performance concerns when necessary. They also assist with succession planning, leadership development, and internal career advancement to help organizations retain valuable employees and prepare future leaders.

When employees understand how they can grow within an organization, they are more likely to remain engaged and committed to its long-term success.

Building Strong Employee Relationships

Healthy workplace relationships contribute to higher employee satisfaction, stronger collaboration, and improved productivity. Human resources serves as a trusted resource for both employees and managers by helping resolve workplace concerns fairly, consistently, and professionally.

HR may assist with employee concerns, workplace conflicts, policy questions, accommodations, investigations, and other sensitive employment matters. By promoting open communication and consistent policy application, HR helps create a respectful workplace where employees feel supported and valued.

Strong employee relations also help organizations reduce turnover, strengthen morale, and maintain a positive workplace culture.

Supporting Accurate Payroll and Timekeeping

Accurate payroll is one of the most visible responsibilities associated with human resources. Employees expect to be paid correctly and on time, making payroll accuracy essential to maintaining trust and compliance.

HR often works closely with payroll professionals to verify employee hours, manage overtime, administer leave, coordinate payroll deductions, and help ensure compliance with federal, state, and local wage and hour requirements.

As organizations grow, payroll administration becomes increasingly complex. Many employers choose to partner with an Administrative Services Organization (ASO) or Professional Employer Organization (PEO) to simplify payroll processing, improve compliance, and reduce administrative burdens while maintaining control over their workforce.

The Evolution of Human Resources

To understand the role of modern human resources, it helps to look at how the profession has evolved over time.

Decades ago, HR was commonly known as the Personnel Department and focused primarily on administrative responsibilities such as maintaining employee records, processing payroll, tracking attendance, and ensuring basic workplace compliance. The department played an important role, but it was largely viewed as a support function rather than a strategic business partner.

Today, human resources has become an integral part of organizational success. In addition to managing traditional HR responsibilities, today's professionals help organizations develop workforce strategies, improve employee engagement, strengthen workplace culture, manage organizational change, and support long-term business growth.

Modern HR leaders work closely with executives to align people strategies with business objectives. They provide guidance on recruiting, retention, succession planning, compensation, compliance, workforce planning, and organizational development. As labor markets become more competitive and employment laws continue to evolve, HR has become increasingly important in helping organizations adapt while remaining compliant.

According to the Society for Human Resource Management (SHRM), the profession has shifted from primarily administrative work to strategic human capital management. Rather than simply managing employment paperwork, HR professionals now help organizations attract top talent, reduce risk, develop future leaders, and create workplaces where employees and businesses can thrive together.

For many organizations, HR is no longer viewed as a cost center. It has become a strategic investment that directly influences employee retention, operational efficiency, organizational culture, and overall business performance.

Why Human Resources Management Matters for Your Business

Human resources is more than an administrative department. It plays a direct role in helping organizations attract talent, manage risk, improve employee performance, and build a workplace where people can succeed. Whether you're a small business hiring your first employees or a mid-market business managing a large workforce, effective HR practices can have a lasting impact on your business.

Building a Strong Workplace Culture

A positive workplace culture doesn't happen by accident. It develops through consistent leadership, clear communication, fair policies, and employees who feel valued and supported.

Human resources helps shape that culture by developing onboarding programs, employee recognition initiatives, performance management processes, and workplace policies that encourage collaboration and accountability. HR also works closely with managers to address concerns early, reinforce company values, and create an environment where employees can do their best work.

Organizations with strong workplace cultures often experience higher employee engagement, better retention, and stronger overall business performance.

Reducing Compliance Risks

Employment laws continue to evolve, making compliance one of HR's most important responsibilities. From hiring and onboarding to payroll, leave administration, workplace accommodations, and employee terminations, nearly every stage of the employment relationship involves legal requirements that employers must follow.

HR professionals help organizations comply with federal, state, and local employment laws while reducing the risk of audits, penalties, and costly employment claims, reporting to entities like the Equal Employment Opportunity Commission (EEOC) and following guidelines set by the Department of Labor (DOL).

This includes managing wage and hour compliance, employee classifications, Equal Employment Opportunity (EEO) requirements, Family and Medical Leave Act (FMLA) administration, Americans with Disabilities Act (ADA) accommodations, workplace harassment prevention, payroll compliance, and employee recordkeeping.

For organizations operating in multiple states—or federal contractors with additional regulatory obligations—having experienced HR guidance is even more critical in mitigating employer liability and risk management.

Improving Employee Engagement and Retention

Attracting talented employees is only part of the challenge. Retaining them requires an environment where employees feel supported, recognized, and given opportunities to grow.

Human resources helps organizations improve engagement by implementing career development programs, gathering employee feedback, supporting managers, recognizing achievements, and creating opportunities for professional growth. HR also analyzes turnover trends and workforce data to identify areas where improvements can strengthen retention.

Research at Gallup has consistently shown that engaged employees are more productive, provide better customer service, and are more likely to remain with their employer over the long term. By investing in people, organizations build stronger teams and create a more resilient business.

Key Roles Within an HR Team

As organizations grow, so do their human resources needs. While smaller businesses may rely on a single HR professional to manage a wide range of responsibilities, larger organizations often build specialized HR teams with experts focused on specific areas of workforce management. Understanding the different roles within an HR department can help business leaders determine the type of support their organization needs as it grows.

HR Coordinator or HR Assistant

An HR Coordinator or HR Assistant provides administrative support for many day-to-day HR functions. They help maintain employee records, coordinate onboarding, schedule interviews, process employment paperwork, and respond to routine employee questions. This role helps keep HR operations organized and ensures important administrative tasks are completed accurately and efficiently.

HR Generalist

HR Generalists are often the backbone of an HR department, particularly within small and mid-sized organizations. They manage a broad range of responsibilities, including recruiting, employee relations, benefits administration, policy implementation, compliance, performance management, and onboarding. Because of their broad knowledge, HR Generalists are well-equipped to support both employees and managers across multiple areas of the business.

HR Specialist

As organizations expand, they often require professionals with expertise in specific areas of human resources. HR Specialists focus on a particular discipline such as talent acquisition, compensation and benefits, payroll, employee relations, learning and development, or compliance. Their specialized knowledge allows organizations to address increasingly complex workforce challenges while ensuring critical HR functions are managed effectively.

HR Business Partner (HRBP)

An HR Business Partner takes a more strategic approach by working directly with business leaders to align workforce initiatives with organizational goals. Rather than focusing primarily on administrative responsibilities, HRBPs advise leadership on workforce planning, organizational development, succession planning, employee engagement, and change management. This role helps ensure people strategies support the organization's long-term growth and business objectives.

Chief Human Resources Officer (CHRO)

The Chief Human Resources Officer (CHRO) is the senior executive responsible for the organization's overall HR strategy. In addition to overseeing recruiting, compensation, compliance, and employee development, the CHRO partners with executive leadership to shape workforce planning, organizational culture, leadership development, and long-term business strategy. For growing organizations, the CHRO plays an essential role in ensuring the company's people strategy evolves alongside its business goals.

How Technology Is Transforming Human Resources

Technology has reshaped nearly every aspect of human resources. Tasks that once required paper files, manual spreadsheets, and time-consuming administrative work can now be managed through integrated HR technology platforms. As a result, HR professionals spend less time on repetitive tasks and more time supporting employees, strengthening compliance, and helping organizations achieve their business goals.

Modern Human Resource Information Systems (HRIS) centralize employee data and simplify many day-to-day HR processes. From onboarding new hires and managing employee records to tracking time off, administering benefits, and processing payroll, these platforms improve efficiency while reducing the risk of administrative errors.

Automation has also transformed routine HR functions. Workflows such as new hire onboarding, benefits enrollment, timekeeping, document management, and performance reviews can now be completed electronically, creating a more seamless experience for both employees and managers. Employee self-service portals further enhance efficiency by allowing employees to update personal information, access pay statements, request time off, enroll in benefits, and complete required forms without relying on HR for every request.

Artificial intelligence (AI) is becoming an increasingly valuable tool for HR teams. AI can help streamline recruiting by identifying qualified candidates, scheduling interviews, assisting with job descriptions, and analyzing workforce trends. It can also support employee communications by answering common HR questions and helping employees quickly find policies, forms, and other workplace resources.

As organizations continue to grow, data has become an increasingly important part of HR decision-making. Workforce analytics allow HR leaders to identify hiring trends, monitor employee turnover, evaluate engagement, forecast staffing needs, and measure the effectiveness of HR initiatives. These insights help organizations make more informed decisions while supporting long-term workforce planning.

While technology has made HR more efficient, it has not replaced the human element. Building relationships, coaching managers, resolving workplace concerns, and supporting employees through complex situations still require experience, judgment, and empathy. The most successful organizations use technology to automate administrative work while allowing HR professionals to focus on what matters most—supporting people and helping the business succeed.

Outsourcing Human Resources: Is It the Right Choice for Your Business?

As businesses grow, so do the demands placed on their HR teams. Recruiting, payroll administration, benefits management, compliance, employee relations, and workforce planning all require specialized knowledge and significant time. For many organizations, especially small and mid-sized businesses, building and maintaining a full in-house HR department may not be the most practical or cost-effective solution.

HR outsourcing allows organizations to access experienced HR professionals without the overhead of expanding their internal staff. Depending on a company's needs, outsourced HR services can range from payroll processing and benefits administration to compliance support, employee relations, recruiting, and strategic HR consulting.

If you are considering outsourcing your HR, many employers choose to partner with either an Administrative Services Organization (ASO) or a Professional Employer Organization (PEO). While both models provide valuable HR support, they serve different purposes.

The right solution depends on your organization's size, growth plans, compliance needs, and internal HR resources. Some businesses benefit from supplementing an existing HR team with outsourced expertise, while others rely on a trusted partner to manage most of their day-to-day HR operations.

At C2 Essentials, we understand that every organization has unique workforce challenges. For more than 30 years, we've helped businesses simplify human resources through flexible PEO and ASO solutions that support payroll administration, employee benefits, HR compliance, risk management, recruiting, and strategic HR guidance. Whether you're hiring your first employee, expanding into new states, or managing a growing workforce, our team provides the expertise and technology to help you stay focused on running your business while we help support your people.

Frequently Asked Questions

What is the main purpose of human resources? 

The main purpose of HR is to manage the employee lifecycle effectively while aligning the workforce with the strategic goals of the business. They exist to maximize employee performance, ensure legal compliance, and foster a healthy, productive work environment.

How do human resources handle employee complaints? 

HR handles complaints by conducting impartial, confidential investigations. They listen to all parties involved, review any evidence or documentation, and mediate a resolution that aligns with company policy and employment law. Their goal is to resolve issues fairly while protecting both the employee and the company.

What is the difference between HR and payroll? 

While they often overlap, HR focuses on the entire employee experience (hiring, training, benefits, relations), whereas payroll is specifically the financial administration of paying employees, withholding taxes, and managing wage compliance. Many companies integrate both functions for efficiency.

Why do small businesses need human resources? 

Small businesses need HR to protect themselves from legal liabilities, ensure they are hiring the right people to grow the company, and build a culture that prevents costly employee turnover. Even a small team needs clear policies and structured management.

How can HR improve workplace culture? 

HR improves culture by establishing clear values, promoting diversity and inclusion, offering continuous training, recognizing top performers, and ensuring management communicates transparently with the staff. They create the framework that allows a positive culture to grow organically.

Navigating the complexities of workforce management can feel overwhelming, but it doesn't have to be a solo journey. Having a dedicated team that understands the nuances of human capital is what separates average companies from industry leaders. By recruiting top-tier talent, managing competitive benefits, ensuring strict legal compliance, and fostering a vibrant workplace culture, a strong people strategy creates an immeasurable impact on your bottom line.

When you truly grasp what human resources do, you realize they are the foundational pillar supporting your company's growth and stability. If you are ready to elevate your business and leave the complex administrative burdens to the experts, the team at C2 Essentials is here to help. Reach out and contact us today to discover how tailored HR solutions can empower your team and transform your business trajectory.

The U.S. Army recently announced a significant initiative to strengthen America's defense industrial base by partnering with private industry to develop domestic critical mineral processing facilities on Army installations. While the announcement focuses on large industrial projects, it may also create meaningful business opportunities for small and mid-sized government contractors throughout the defense supply chain. The effort originated with March 2025 executive order aimed at increasing the ability to mine and produce rare Earth elements for manufacturing in the United States. 

The announcement was published by U.S. Army Public Affairs on June 25, 2026 and explains that the Army has conditionally selected four companies to negotiate long-term Enhanced Use Leases to design, finance, build, and operate critical mineral processing facilities on Army installations. The projects are intended to strengthen the domestic defense industrial base, reduce reliance on foreign processing, and enhance supply chain security. 

Why Critical Minerals Matter 

Critical minerals—including rare earth elements, lithium, graphite, and boron—are essential components in many defense systems and advanced technologies. They are used in products ranging from military vehicles and communications equipment to drones, batteries, precision weapons, radar systems, and aerospace components. 

Historically, much of the world's processing capacity for these materials has been concentrated outside the United States. Federal policymakers have increasingly emphasized building domestic production and processing capabilities to improve supply chain resilience and support national security. 

To help accomplish this goal, the Army has announced conditional agreements with several companies to design, finance, construct, and operate mineral processing facilities on underutilized Army property. The facilities are expected to support the production of materials that are vital to future military readiness. 

Opportunities Beyond the Prime Contractors 

Although the companies awarded these projects will serve as prime contractors or facility operators, history shows that projects of this size generate substantial subcontracting opportunities for businesses across many industries. 

Examples may include: 

• Construction management and general contracting 

  
  

• Civil, electrical, and mechanical engineering 

  
  

• Environmental consulting and permitting support 

  
  

• Industrial maintenance services 

  
  

• Safety and OSHA compliance consulting 

  
  

• Security services 

  
  

• Information technology and cybersecurity 

  
  

• Industrial automation and controls 

  
  

• Logistics and transportation 

  
  

• Equipment installation and maintenance 

  
  

• Human resources and workforce staffing 

  
  

• Training and technical documentation 

  
  

• Administrative and professional support services 

Many small businesses already supporting the federal government may find opportunities that align with their existing capabilities, even if they have no experience in mining or mineral processing. 

Preparing for Future Opportunities 

Government contractors interested in supporting these projects should ensure their business development efforts and compliance programs are current. 

Recommended steps include: 

• Maintain an active registration in the System for Award Management (SAM.gov). 

  
  

• Review and update capability statements highlighting relevant technical experience. 

  
  

• Ensure socioeconomic certifications (such as HUBZone, Woman-Owned Small Business, Veteran-Owned Small Business, or 8(a), if applicable) remain current. 

  
  

• Monitor procurement notices from federal agencies and prime contractors. 

  
  

• Build relationships with larger contractors that may be seeking qualified subcontractors. 

  
  

As these projects move from planning into construction and operations, additional procurement activity is expected over the coming months and years. 

Where to Look for Contracting Opportunities 

Government contractors should regularly monitor official procurement resources, including: 

• SAM.gov for federal contract opportunities 

  
  

• SBA SubNet for subcontracting opportunities with large prime contractors 

  
  

• The Department of Defense Office of Small Business Programs 

  
  

• Individual defense contractors' supplier registration portals 

  
  

Many large defense contractors also maintain supplier diversity and small business outreach programs where qualified subcontractors can register for future opportunities. 

HR Considerations as Growth Occurs 

C2 Essentials, as your HR and compliance partner, is here to support workforce planning for contractors as they pursue new defense opportunities handling:  

• Hiring and onboarding processes 

  
  

• Wage and compensation competitiveness 

  
  

• Multi-state employment compliance 

  
  

• Background screening procedures 

  
  

• Employee handbook updates 

  
  

• Safety training requirements 

  
  

• Benefit offerings that support recruitment and retention 

  
  

Expanding federal work often brings additional workforce compliance obligations that should be addressed early to avoid delays during contract performance. 

Final Thoughts 

The Army's investment in domestic critical mineral processing represents more than an infrastructure initiative—it reflects a broader effort to strengthen the U.S. defense industrial base and domestic manufacturing capacity. While only a handful of companies will develop the processing facilities themselves, the supporting ecosystem will likely involve hundreds of subcontractors providing construction, engineering, professional services, logistics, technology, and workforce support. 

For small and mid-sized government contractors, now is an excellent time to evaluate where your organization fits within this evolving supply chain. Preparing today can position your business to compete for future subcontracting opportunities as these projects move forward. 

On June 10, 2026, President Trump signed the Secure America Act (S. 2) into law following its passage by both the U.S. Senate and House of Representatives. The legislation provides approximately $70 billion in funding for immigration enforcement activities through September 30, 2029. 

While the law does not change existing immigration eligibility requirements, visa categories, or employment authorization rules, it significantly increases funding for federal immigration enforcement agencies, including U.S. Immigration and Customs Enforcement (ICE) and U.S. Customs and Border Protection (CBP). 

For employers—particularly federal government contractors—the legislation serves as a reminder that immigration compliance remains an important business risk area. 

What Does the New Law Do? 

The Secure America Act allocates funding for: 

• Additional ICE and CBP personnel 

• Immigration enforcement technology and equipment 

• Detention and removal operations 

• Expanded partnerships between federal, state, and local law enforcement agencies 

• Enhanced compliance and enforcement activities 

Because the funding remains available through fiscal year 2029, employers should anticipate a sustained increase in immigration enforcement efforts rather than a short-term initiative. 

Potential Impact on Government Contractors 

Many small and mid-sized government contractors already operate in a highly regulated environment. While the Secure America Act does not create new employment eligibility requirements, increased enforcement resources could result in: 

• More I-9 audits 

• Increased worksite inspections 

• Additional requests for employment records 

• Greater scrutiny of federal contractor compliance practices 

• Increased enforcement actions against employers with deficient hiring records 

Organizations that employ foreign nationals under employer-sponsored visa programs should also ensure that visa-related documentation, job descriptions, payroll records, and work authorization records are accurate and up to date. 

Why Proper I-9 and E-Verify Compliance Matters 

Federal contractors subject to the Federal Acquisition Regulation (FAR) E-Verify clause are already required to verify employment eligibility through the E-Verify system for covered employees.

As part of C2 Essentials' onboarding process, newly hired employees complete their Form I-9 through the employee portal, and C2 administers E-Verify services for clients that are subject to federal E-Verify requirements. These processes help establish consistent employment eligibility verification procedures and support compliance with federal regulations. 

Looking Ahead 

The Secure America Act does not automatically change immigration laws or work authorization requirements. However, the substantial increase in enforcement funding signals that immigration compliance will remain a federal priority for the foreseeable future.

Government contractors that maintain strong hiring, onboarding, and recordkeeping practices will be better positioned to respond to audits, inspections, and compliance reviews should enforcement activity increase.  

On June 9, 2026, the U.S. Department of Justice (DOJ) announced a $21.3 million settlement involving allegations that federal contracts reserved for Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) and other small businesses were improperly obtained through a pass-through arrangement.

Although the settlement does not constitute a determination of liability, it highlights the federal government's continuing focus on the integrity of small business contracting programs and compliance with SBA requirements. 

A pass-through arrangement occurs when a small or certified business wins a government contract but does not meaningfully perform or control the work required under the contract. Instead, most of the work is subcontracted to another entity—often a larger or ineligible company—that effectively manages performance, staffing, and delivery.

In these situations, the certified small business may function primarily as a “front” for contract eligibility while another company carries out the actual work and receives the majority of contract value.   

According to the DOL, “The civil settlement includes the resolution of claims brought under the qui tam provisions of the False Claims Act by two whistleblowers, a veteran of the United States Air Force and an executive with an SDVOSB firm.

The False Claims Act allows private individuals to file suit on behalf of the United States for false claims and share in any recovery. Under the settlement agreement, the relators will receive $3,674,250. The case is captioned United States ex rel. Welch, et al. v. American First Contracting Inc., et al., No. 3:23-cv-0525 (N.D.N.Y.).” 

Federal agencies rely on programs such as the 8(a) Business Development Program, HUBZone Program, Women-Owned Small Business (WOSB) Program, and Veteran Contracting Programs to help eligible small businesses compete for federal contracts.

These programs create significant opportunities for small businesses but also impose strict requirements regarding ownership, control, performance of work, and subcontracting. 

A common area of enforcement involves allegations that a certified small business serves primarily as a vehicle for a larger or otherwise ineligible company to obtain set-aside work.

Government investigators may review whether the certified firm truly controls contract performance, manages day-to-day operations, makes key business decisions, and performs the required percentage of contract work. Contractors should pay particular attention to: 

• Joint venture and mentor-protégé arrangements 

• Teaming agreements and subcontracting relationships 

• SBA size and certification requirements 

• Limitations on subcontracting rules 

• Documentation demonstrating operational control and management authority 

• Internal records supporting compliance with program eligibility requirements 

The SBA's limitations on subcontracting rules are designed to ensure that small businesses—not larger partners or subcontractors—perform the required share of work under set-aside contracts. These requirements vary depending on whether the contract is for services, supplies, general construction, or specialty construction and can have a significant impact on contract performance planning.

Contractors should ensure that project managers, contracts personnel, and business development teams understand these requirements before submitting proposals.  SBA guidance explains that limitations on subcontracting are intended to prevent ineligible businesses from using small businesses merely as vehicles to access set-aside contracts and outlines minimum performance requirements applicable to many set-aside awards. 

Potential consequences of noncompliance may include contract termination, suspension or debarment, loss of certification status, False Claims Act investigations, financial penalties, and repayment obligations. 

Recommended Employer Actions 

While no immediate action is required, government contractors participating in SBA programs should consider: 

• Reviewing ownership and management structures to confirm continued eligibility 

• Evaluating subcontracting and teaming arrangements for compliance risks 

• Confirming that key personnel and decision-making authority remain with the certified business 

• Reviewing contract performance to ensure compliance with subcontracting limitations 

• Maintaining documentation supporting certification eligibility and contract compliance 

• Providing periodic compliance training to contracts, program management, and business development personnel 

Category FY 2024 Awards 

According to SBA procurement data, Service-Disabled Veteran-Owned Small Businesses received a record $32.8 billion in federal prime contract awards during FY 2024, accounting for 5.15% of eligible federal contracting dollars and exceeding the federal government's 5% SDVOSB contracting goal. 

• Small Businesses (all categories) - $183.3 billion 

• Small Disadvantaged Businesses - $78.1 billion 

• Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) - $32.8 billion 

• Women-Owned Small Businesses - $31.7 billion 

• HUBZone Small Businesses - $17.5 billion 

Helpful SBA Resources 

• Federal Contracting Overview 

• Contracting Assistance Programs

• Prime Contracting and Subcontracting Guidance

• Federal Contracting Rules and Responsibilities