Utilization Analysis

Utilization analysis is one of those compliance terms that only matters to a specific set of employers but matters enormously to them. Federal contractors above certain size and dollar thresholds are required by Executive Order 11246 and the regulations at 41 CFR 60-2 to conduct utilization analyses as part of their annual affirmative action plan. The analysis isn't a diversity report; it's a legally defined statistical exercise that compares workforce composition by job group to labor market availability and produces placement goals when gaps exist. Getting the analysis right is the difference between a routine OFCCP compliance review and a finding that escalates into conciliation, debarment proceedings, or litigation.

Who Is Required to Conduct a Utilization Analysis

Federal contractors and subcontractors with 50 or more employees and contracts of $50,000 or more are required to develop a written affirmative action plan (AAP) that includes utilization analysis. The requirement flows from Executive Order 11246 (which primarily addresses race, color, religion, sex, sexual orientation, gender identity, and national origin) and from related requirements under Section 503 of the Rehabilitation Act (disability) and VEVRAA (protected veterans).

Non-contractors are not required to conduct utilization analysis, though some employers do similar analysis voluntarily as part of broader workforce reporting.

How Utilization Analysis Actually Works

Step one: segment the workforce into job groups. Job groups are collections of jobs with similar content, wage rates, and opportunities for advancement. Most employers end up with 10 to 40 job groups depending on size and complexity.

Step two: determine availability for each job group. Availability is the percentage of qualified persons available in the relevant recruiting area (which varies by job group, from internal feeder pools for senior roles to broader external pools for entry-level). Availability calculations use Census, BLS, and internal data sources.

Step three: compare incumbency (current workforce composition) to availability. Where incumbency is materially below availability, the group is underutilized.

Step four: set placement goals for underutilized groups. Placement goals are not quotas; they're annual good-faith targets for the percentage of that group's representation in specific job groups through hiring and promotion.

What Counts as Material Underutilization?

The OFCCP generally considers underutilization present when the ratio of incumbency to availability is less than 80% (the same general threshold used in the four-fifths rule for disparate impact analysis). The specific methodology can vary, and OFCCP reviewers may apply different statistical approaches in audit.

What Placement Goals Come Out of Utilization Findings

For each underutilized group within a job group, the AAP sets a placement goal expressed as a percentage, typically equal to the availability percentage. The contractor then documents good-faith efforts to achieve the goal through recruiting, outreach, and promotion practices.

Placement goals are not hiring quotas, and the OFCCP has been explicit that they cannot be used to establish preferences. They're targets for good-faith effort and indicators for the contractor about where to focus recruiting and development investment.

Running Utilization Analysis That Holds Up to OFCCP Audit

Document the methodology. OFCCP audits focus heavily on whether the contractor can explain its job grouping, availability sources, and calculation approach.

Update annually. Utilization analysis is an annual requirement; stale data is an audit finding.

Tie placement goals to actual recruiting and retention activity. The OFCCP wants to see documented good-faith effort, not just goal statements.

Pair utilization analysis with diversity metrics, performance review calibration for promotion decisions, and onboarding data that feeds internal mobility analysis. Reference the DOL Office of Federal Contract Compliance Programs for current regulations and compliance guidance, and the BLS Occupational Employment and Wage Statistics for labor market availability data that feeds the analysis.