I do not know the specifics, but each time a DOE contractor gives a pay raise to an employee the DOE contractor may be contractually required to seek prior DOE authorization. In this case, the DOE would then simply be giving prior notice with this announcement to all of its contractors, and through them, to all of the contractors' employees, that no DOE contractor employee raises will be approved by DOE for two years. Under this hypothesis, the DOE contractor could still seek approval for a DOE contractor employee raise, but it would be worse than pointless to do so, since the DOE would then be given justification to ask the DOE contractor why it is wasting time and money asking for something that it has already been given notice that it will not be granted.
Note that according to the article, all DOE contractor union employees covered by union collective bargaining agreements are not affected. This also may be a contractual consideration, since in order for the DOE to enforce the rule on DOE contractor union employees covered by union collective bargaining agreements, the DOE would be effectively a third party agent requiring the contractor to break the prior in-place contractor-union contract. Technically, this would, if actually performed, appear to be something like union-busting, which may violate other prior federal laws already in place...
Usually, the contractor is paid a set rate as specified in the contract. It’s up to the contractor to manage wages paid and benefits and overhead leaving any thing left over to the contractor as profit.
I simply don’t know of any authority to set contractor pay scales. Here’s my problem with this: if the Energy Department can specified actually wages paid (not labor rates charged), then the government has the power to set wages across the entire spectrum of any company doing business with the government.
There are a lot of liberals who would like to see that authority established. They would use this to correct ‘pay disparities’ between classes of people (correct gender, race, etc, discrimination).
I suspect there will be a large number of lawsuits about this and predict the government will lose.