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Requirement to pay current SCA wage rates when the contracting officer doesn't incorporate the new/updated WD into the contract


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@C Culham

1 hour ago, C Culham said:

You it would seem are the one who has their mind made up, but I will leave it to you to confirm so or not.  So Vern what say you?

 

22 hours ago, Vern Edwards said:

Carl, I am not yet saying that you are wrong, but I am questioning what you said. I, too, have believed it. But I now question the truth of it.

 

 

 

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22 hours ago, C Culham said:

Now to 52.222-43 which says nothing about the revised WD having to be with the mod , right?  Option or anniversary date contractor ye shall comply.

That's been my understanding of how it works. When you have "Place of Performance Unknown at Award" (in my case, "nationwide") the CO literally cannot provide wage determinations without the contractor requesting them.  The DOL site certainly makes it sound like federal contractors have a responsibility to comply with WD's regardless of whatever their contract may or may not say.  It makes sense: would DOL want to adjudicate terms of a contract every time they cite a vendor for SCA violations related to that contract? Probably not.  (e.g., I have a branch chief who considers himself God's Gift to Contracting and therefore has granted himself the exclusive right to make up T's & C's and insert them in random places throughout a contract. I have no doubt he's re-written SCA clauses to fit his demented worldview. This guy thinks 16.505 Orders against a SA IDIQ is 'source selection' so I wouldn't put anything past him.)  My point being that DOL needs a straight line to enforcing WD's that doesn't rely on a winding path through contracts of questionable legal sufficiency. 

There's also the 'living document' principle similar to a QASP in that it's expected to change and as long as you have the proper QA clauses in the contract which reference the QASP, the fact the actual source document is not incorporated into the contract is irrelevant.

The burning question in my mind is why DOL doesn't just publish the rates publicly and why my contract doesn't just say "comply with the published rates". What is the point of playing hide-the-ball with DOL wage determinations?  My "nationwide" wage determination files were so big they almost broke the internet when we tried to email them to the vendor.  So 1990's.

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Well as it goes I could not move on. 

I spent the better part of a day reading the whole of 29 CFR 4, including every case law reference in the CFR that I was able to find.  I did so based on this reference -  "Rulings and interpretations of the Service Contract Act of 1965, as amended, are contained in Regulations, 29 CFR part 4."  Interpretations is what caught my eye.  

 I won't waste anyone's time in providing every excerpt I found that I thought applied to the discussion in this thread.   The question raised and answered in my read (yes and it is by MY read)  is if a contract is subject to the SCA the contractor will be found by the USDOL to have the obligation to observe SCA and the most current wage determination inclusive of revision regardless of whether a CO does what SCA and 29 CFR 4 requires the CO shall do.

And just some other idle thoughts based on the most recent comments posted and beyond.

29 CFR 4.1a - It would seem WDOL and SAM.gov for finding wage determinations are defined as the appropriate Web site.

29 CFR 4.4(c)(3)  About the WDOL

29 CFR 4.5(a)(3) About the WDOL

29 CFR 4.5(c) - Interesting cases to read.

Reference - https://www.ecfr.gov/current/title-29/subtitle-A/part-4#p-4.4(c) 

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3 hours ago, C Culham said:

The question raised and answered in my read (yes and it is by MY read)  is if a contract is subject to the SCA the contractor will be found by the USDOL to have the obligation to observe SCA and the most current wage determination inclusive of revision regardless of whether a CO does what SCA and 29 CFR 4 requires the CO shall do.

I agree with that. But where I think we may part company is that I believe the contractor will not be found to have violated the SCA because it did not pay increased wages and fringes in accordance with the revised WD before the CO attached it to the contract. I think what will happen is that after the CO attaches the revised WD to the contract the contractor will have to pay the increases back to the WD's effective date, and the contracting agency will have to make an equitable adjustment back to that date.

I knew you would do more research. Good for you! I did more research, too, and was unable to find any DOL decision holding that a contractor is obligated to pay the increased wages and fringes in a revised WD before the revised WD is attached to the contract, or that a contractor that had not done so had violated the SCA.

And I found the following, writTen by a partner at the prominent law firm Piliero Mazza, which has represented government contractors hundreds of times before the GAO, the boards of contract appeals, and the Court of Federal Claims:

Quote

 

How New Minimum Wage and Service Contract Act Health and Welfare Rates Apply to Your Contract

As we head into a busy proposal and award season, keep in mind some important changes to Service Contract Act (“SCA”) wages and fringe benefits. In July, the Department of Labor (“DOL”) issued revised SCA health and welfare (“H&W”) benefit amounts, increasing the base rate from $4.41 per hour to $4.48 per hour. An H&W rate of $4.18 per hour is now applicable to employees performing work on contracts that include FAR 52.222-62, Sick Leave for Contractors...

* * *

1. Should I increase H&W rates on all of my SCA contracts now?
No. Although the new wage determinations will be issued by DOL, the only H&W rate that is applicable to your contract is the rate that is on the wage determination incorporated into the government contract on which the employees are working. These new wage determinations are not effective until one is incorporated into your contract by modification.

 

https://www.pilieromazza.com/how-new-minimum-wage-and-service-contract-act-health-and-welfare-rates-apply-to-your-contract/

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3 hours ago, Vern Edwards said:

where I think we may part company

I agree.   

My twist.   I think that the contractor would be found in violation by USDOL because SCA was initially (clause in contract but not most current WD) found to be applicable to the contract.   What comes after, and it seems most case law deals with, is whether contractor will be granted an equitable adjustment to the contract as a result of having to pay higher wages as a result of the WD.    FAR 22.2015 provides guidance on the EA but only if the CO erroneously did something.  Some of the cases in the 29 CFR 4.5(c) paragraph I referenced gets to the why 22.2015 provides what it does.

I appreciate the link.  I too, but not knowing of the historic relevance of the firm, found the following written by the same firm yesterday.   Seems to support of sorts my above even though it deals with the EO.

https://www.pilieromazza.com/dol-updates-language-on-service-contract-act-wage-determinations-again/ 

All said and in sorts in agreement with Piliero Mazza it would seem  a contractor should strive to confirm whether SCA is or is not applicable to the contract and if it  does, strive as well to confirm whether a new wage determination revision is applicable to a contract.  In doing so a contractor should do all communication in writing.  I think contractors and CO's alike do not strive to apply SCA as intended.   Like it or not it is a Federal regulation and duty and good faith suggest all should.

I think I am now ready to move on!

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On 10/22/2022 at 11:31 AM, Vern Edwards said:

I think what will happen is that after the CO attaches the revised WD to the contract the contractor will have to pay the increases back to the WD's effective date, and the contracting agency will have to make an equitable adjustment back to that date.

Because we are talking about a WD issued after a contract is executed, if 52.222-43 is in the contract and an option is exercised, wouldn't the contractor be entitled to a price adjustment calculated in accordance with that clause instead of an equitable adjustment if the contracting officer failed to include the revised WD in the contract at the time the option was exercised? 

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1 hour ago, Retreadfed said:

Because we are talking about a WD issued after a contract is executed, if 52.222-43 is in the contract and an option is exercised, wouldn't the contractor be entitled to a price adjustment calculated in accordance with that clause instead of an equitable adjustment if the contracting officer failed to include the revised WD in the contract at the time the option was exercised? 

That’s what the clause provides for (a price adjustment). Here the  company was awarded a multiple-year task order with a 5-year period of performance (no options).

 

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2 hours ago, Retreadfed said:

Because we are talking about a WD issued after a contract is executed, if 52.222-43 is in the contract and an option is exercised, wouldn't the contractor be entitled to a price adjustment calculated in accordance with that clause instead of an equitable adjustment if the contracting officer failed to include the revised WD in the contract at the time the option was exercised?

Yes. I should not have said "equitable adjustment," just price adjustment.

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2 hours ago, REA'n Maker said:

DOL WAGE AND HOUR DIVISION

Prevailing Wage Resource Book May 2015

https://www.dol.gov/agencies/whd/government-contracts/prevailing-wage-resource-book

See #14 SCA Wage Determinations as cited long ago in a post:

https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/Tab14.pdf

I’m of the opinion that the Original Poster has by this point retained legal representation or has otherwise contacted DOL to request that it direct the KO to DO HIS JOB.


Edit:

[The OP probably can determine the estimated amount of any increased cost for this year’s wage adjustment. If the KO won’t add the updated WD, the OP can submit a claim for the increase.

I remember there was an ASBCA or Court decision probably 20 years ago where a contractor was awarded entitlement to interest on the total claim amount even before it incurred the total cost. I don’t remember the name or decision number just that I was surprised that interest was paid before the claim amount had been incurred. The OP’s lawyer can check it out.]

At any rate, we are beating a dead horse here.

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4 hours ago, joel hoffman said:

At any rate, we are beating a dead horse here.

Yes, but there is something very important to be learned here.

Several of us who have been most involved in this thread have been experienced COs who have administered many service contracts subject to the SCA (now SCLS), yet we have been unable to agree on how it works.

When enacted in 1965 and published in the Statutes-at-Large (79 Stat. 1034) the law was about 3-¾ pages long. Yet the FAR, DOL's regulations and other publications, and administrative and court decisions about the Act amount to  many thousand of pages of rules, guidance, and decisional case law.  I suspect that very few COs would call themselves experts in its implementation and administration. I certainly wouldn't.

This is typical of the rules governing the socio-economic programs, as we have seen in other debates here, including debates about the Buy American Act and the Trade Agreements Act.

On October 13, the DOL published a 58-page notice of proposed rulemaking in the Federal Register:

Quote

The U.S. Department of Labor (the Department) is proposing to modify Wage and Hour Division regulations to revise its analysis for determining employee or independent contractor classification under the Fair Labor Standards Act (FLSA or Act) to be more consistent with judicial precedent and the Act’s text and purpose.

Judging from the past, when the final rule comes out the Federal Register announcement will be much longer than 58 pages. All to determine the difference between an employee and an individual contractor.

On July 15, DOL published a 45-page notice of proposed rulemaking to implement the executive order about nondisplacement of qualified workers.

The acquisition system has been submerged by hurricanes of new political programs, laws, regulations, policies, and procedures that have little if anything to do with acquiring supplies, services, and construction. The acquisition workforce is being drowned in paper.

This is all par for the course, but most members of the American public have no idea about what has gone on and will continue go on. And no one knows whether the benefits exceed the costs. It doesn't seem to matter.

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On 10/25/2022 at 8:37 AM, joel hoffman said:

I remember there was an ASBCA or Court decision probably 20 years ago where a contractor was awarded entitlement to interest on the total claim amount even before it incurred the total cost. I don’t remember the name or decision number just that I was surprised that interest was paid before the claim amount had been incurred.

Joel, there have been at least 4 such decisions by the Federal Circuit.  Those decisions are based upon the plain language of the CDA.  There is some confusion concerning those decisions.  In none has the court held that the contractor is entitled to recover interest on amounts in the claim that the contractor never incurs.  Instead, interest is only paid on costs the contractor actually incurs although interest will have accrued on the paid amounts before they are actually incurred.  For example, the contractor submits a claim for $10K before it has incurred any of the claimed costs.  In reality, the contractor only incurs $8K of costs, all of which were incurred after submission of the claim.  The contractor will recover interest on the $8K running from the date the contracting officer receives the claim until the $8K is paid by the government.

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@joel hoffman @Retreadfed

See Servidone Construction Co. v. U.S., 931 F.2d 860, 862 (Fed. Cir., 1991):

Quote

Under 41 U.S.C. § 611 (1982) (Section 12 of the CDA), the Claims Court awarded Servidone interest on its damages from the date the contracting officer received Servidone's claim in March 1984. Section 611 states:

Interest on amounts found due contractors on claims shall be paid to the contractor from the date the contracting officer receives the claim pursuant to Section 605(a) of this title from the contractor until payment thereof.

This language clearly sets a date from which to compute interest on awards.

At the time it filed a proper claim, Servidone had yet to incur the total costs which it later recovered. Nonetheless Section 611 awards interest on any amounts later “found due ... from the date the contracting officer receives the claim.” This language sets a single, red-letter date for interest on all amounts found due by a court without regard to when the contractor incurred the costs. See Fidelity Constr. Co. v. United States, 700 F.2d 1379, 1385 (Fed.Cir.), cert. denied, 464 U.S. 826, 104 S.Ct. 97, 78 L.Ed.2d 103 (1983).

The CDA's legislative history confirms Congress's reasons for setting a red-letter date for interest. During the legislative process, the Senate's version of the CDA mandated that interest would run from the time the claim accrued or the additional costs were incurred, whichever was later. S.Rep.No. 95–1118, 95th Cong., 2d Sess. 32, reprinted in 1978 U.S.Code Cong. & Admin.News 5235, 5266. Congress declined to adopt this language. Instead, the Senate majority leader inserted in the record a prepared explanation of Congress's reasons for preferring the enacted version of Section 611:

"Section 12, Interest, is amended to address the concerns expressed by the executive agencies as well as the Armed Services Committee and the Justice Department that the determination as to “the date the claim accrues” could cause problems in defining the actual date when interest should start. There was added concern that contractors might delay submission of claims, thus not allowing the procuring agency the opportunity to review the claim at an early stage and possibly disposed [sic] of it. Because of these concerns, Section 12 has been amended. ... This will provide a specific date from which interest will be paid and serve as an incentive for contractors to submit claims as soon as they are identified."

124 Cong.Rec. S36267 (1978). This passage explains Congress's reasons for adopting an objective, bright line standard. Thus, Section 611' s standard for interest accrual effectively advances some of the main policies of the CDA—to expedite dispute resolution and to ensure fair and equitable treatment to contractors. 41 U.S.C. § 601 note (1988). The Claims Court correctly set the date from which interest on Servidone's damages should accrue.

 

Footnote omitted.

And that is one reason why COs should settle claims promptly, especially at today's 4% Treasury prompt payment and Contract Disputes Act interest rate.

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Thanks, Retreadfed and Vern. 
Servidone Construction Company was the case I was thinking of. I might have a hard copy of it in my “Miscellaneous Good Stuff” file folder packed away for posterity. 🤠

 

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