Sourcing Speak

The U.S. Department of Defense, General Services Administration and the National Aeronautics and Space Administration (NASA) have issued a proposal to amend the Federal Acquisition Regulation (FAR) implementing Executive Order 13495 , which will require government contractors that take over service work from other companies to offer jobs to certain categories of the predecessor’s employees.

The presidential order is intended to aid procurement efficiency and mitigate transition risk by preserving the service continuity of the predecessor’s employees, if the contract is awarded for the same or similar work in the same location. There are many similarities with the long standing protections offered to citizens of the European Union, whose jobs are protected in certain circumstances by the Acquired Rights Directive (ARD). Under the ARD, an employee’s job is safeguarded by requiring a successor contractor to hire the employee from its predecessor on substantially the same terms and conditions (e.g., salary, benefits, years of services) as the employee enjoyed with its predecessor. Notably, the ARD applies to private sector outsourcing transactions, not just to government contracts as is the case under the proposed FAR regulations.

For any company that has sought to outsource its IT or BPO functions on a global basis, the implications of the ARD are impossible to ignore. It requires suppliers to conduct substantial due diligence on the customer’s HR policies and personnel before signing an outsourcing deal, and to make offers to its predecessor’s employees as opposed to using its own employees to perform the services. As a result, the supplier must factor the cost of hiring the new personnel into its solution, and in turn, pass that cost back as a charge to the customer. Although the consequences vary from country to country, ARD non-compliance violations can result in hefty fines for both customers and suppliers as well as potential criminal liability for certain breaches of consultation requirements in countries such as France.

Back in 1999 Kevin Ashton, the British technology pioneer and cofounder of Auto-ID Center at MIT (creators of the global standard system for radio-frequency identification (RFID)), coined the term, the Internet of Things, to describe “uniquely identifiable objects (things) and their virtual representations in an internet-like structure.” Put simply, the Internet of Things refers to networks of everyday objects such as phones, car and household appliances which are wirelessly connected to the internet through smart chips, and can collect and share data.

Now, well over a decade later, the European Commission has issued an online questionnaire which seeks views on the future regulation of the Internet of Things. The Commission sees both opportunity and threat from the exponential growth of interconnected networks, with 50 billion wirelessly connected devices predicted by 2020: “The Internet of Things holds the promise of significant progress in addressing global and societal challenges and to improve daily life. It is also a highly promising economic sector for sustainability, growth, innovation and employment. But it is likely to have a profound impact on society, in areas like privacy, security, ethics, and liability.”

Predicting a future where everyday objects are linked, the Commission has started to gather views on how best to design and shape a regulatory framework which operates in an open manner, enabling a level playing field, whilst ensuring an adequate level of control over the connected devices gathering, processing and storing information. Views on privacy, safety and security, security of infrastructure, ethics, interoperability, governance and standards are sought. Responses to the questionnaire are requested by 12 July 2012. The Commission’s recommendation on the Internet of Things is expected to be published by summer 2013.