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Holiday pay and the Service Contract Act


cscm2012

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The U.S. Government declared 12/24 as a Federal Holiday. This holiday is not specified in the applicable DOL Wage Determinations that governs my Federal service contracts. Do the employees receive the holiday benefit for this U.S. Government declared day? Or do they just get Christmas as determined by the Wage Determation as we normally provide? This extra day was not built into our pricing model, so I am not sure how this is handled. I appreciate any input.

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Unless your contract contains something dealing with this situation (doubtful), I believe that your contracts would need to be modified for your employees to receive the holiday benefit. The executive order excused federal employees from work and concluded with the following:

This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
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Don, depending on the terms of the contract the contractor may have a claim for a constructive change. Also, I have seen contracts that contain clauses that address how the contractor is to treat costs caused by unexpected shut downs of government facilities. These clauses usually relate to events like snow days, but may be broad enough to cover Christmas Eve holidays. In addition to just looking at the WD, CSCM should look at the other terms of the contract to see if any address her situation.

The real question for contractors in this circumstance is how to treat costs they incur as a result of the unexpected shut down. If the employees can perform work on other contracts, those labor costs would be charged to the other contracts. Some contractors place employees on enforced leave, while others have in house training. As a consequence, the costs of the shut down should be identified with what the employees are doing on that day if the contract does not have a clause addressing the shut down.

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CSCM2012,

I should add that if your contracts are cost-reimbursement, paid administrative leave may be allowable as a fringe benefit. The applicable coverage for contracts with commercial organizations is at FAR 31.205-6(m)(1). Again, this assumes that nothing in your contract addresses these specific costs.

Retreadfed,

You may already know this, but the DCAA CAM contains coverage of Administrative Leave due to Weather-Related Closures at 7-2124:

When contractor personnel receive paid administrative leave due to inclement weather, the allowability and accounting treatment of such payments should be evaluated on a case-by-case basis in accordance with FAR 31.205-6. Paid absences are fringe benefits that, per FAR 31.205-6(m)(1), are allowable to the extent that they are reasonable in nature and amount and are required by law, employer-employee agreement, or an established policy of the contractor. The reasonableness of the amount paid is generally not an issue. The issue is whether or not the circumstances warranted the payment of administrative leave. Some factors to consider in determining reasonableness include the severity of the weather conditions and whether other businesses and organizations in the same geographical location were closed. The fact that the Federal Government suspended similar operations in the area due to the weather generally would support that it was reasonable for the contractor to incur the administrative leave costs. If the costs are determined to be allowable, they should be charged in accordance with the contractor’s disclosed or established cost accounting practice for charging paid absences.

I couldn't find anything about closures for other reasons.

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Guest Vern Edwards

This issue comes up every year for service contractors working at a government facility. Since we will have no governmentwide policy about how to handle this matter, it is up to COs to make provision for it in their contracts. A government closure is a change to the specified contract work hours, and if it affects the cost of performance, including profit, then there ought to be an equitable adjustment pursuant to the Changes clause.

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This issue comes up every year for service contractors working at a government facility. Since we will have no governmentwide policy about how to handle this matter, it is up to COs to make provision for it in their contracts. A government closure is a change to the specified contract work hours, and if it affects the cost of performance, including profit, then there ought to be an equitable adjustment pursuant to the Changes clause.

Vern,

If the closure is a sovereign act (which it typically is), wouldn't the Sovereign Acts doctrine preclude claims for increased costs? See Appeal of Conner Brothers, ASBCA 54109.

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Conner Bros. may not be a good comparison case here. In that case, the Government interferred with the contractor's ability to proceed with the work. The court decided that because the site exclusion was a sovereign act, the contractor was entitled to extra time (but not money) as contemplated by the excusable delays text of the contract's Default clause -- thus, the contract itself provided the remedy. The court also explained why the Changes clause did not apply to this situation, and also why the Suspension of Work clause did not apply.

For cases involving the unexpected December 24 holiday, a contractor will have to assert something to the contracting officer. If the holiday really did affect a contractor's ability to perform the contract work within the contract's period of performance, then the excusable delays text of the Default clause may provide the remedy of additional time (no money) -- to me, this is the only applicable lesson to be drawn from the Conner Bros. case. The Default clause in fixed-price construction contracts affirmatively requires the contractor to notify the contracting officer in writing of the delay within ten days of the beginning of the delay. The ball is in the contractor's court, it seems to me.

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Department of State has a DOSAR clause placed in all service contracts that allows paying for the hours. See paragraph c on down.

OBSERVANCE OF LEGAL HOLIDAYS AND ADMINISTRATIVE LEAVE (APR 2004)

(a) The Department of State observes the following days as holidays:

Christmas Day

Full list removed to shorten.

And any other day designated by Federal law, Executive Order, or Presidential Proclamation.

(B) When any such day falls on a Saturday or Sunday, the following Monday is observed. Observance of such days by Government personnel shall not be cause for additional period of performance or entitlement to compensation except as set forth in the contract. If the contractor’s personnel work on a holiday, no form of holiday or other premium compensation will be reimbursed either as a direct or indirect cost, unless authorized pursuant to an overtime clause elsewhere in this contract.

© When the Department of State grants administrative leave to its Government employees, assigned contractor personnel in Government facilities shall also be dismissed. However, the contractor agrees to continue to provide sufficient personnel to perform round-the-clock requirements of critical tasks already in operation or scheduled, and shall be guided by the instructions issued by the contracting officer or his/her duly authorized representative.

(d) For fixed-price contracts, if services are not required or provided because the building is closed due to inclement weather, unanticipated holidays declared by the President, failure of Congress to appropriate funds, or similar reasons, deductions will be computed as follows:

(1) The deduction rate in dollars per day will be equal to the per month contract price divided by 21 days per month.

(2) The deduction rate in dollars per day will be multiplied by the number of days services are not required or provided.

If services are provided for portions of days, appropriate adjustment will be made by the contracting officer to ensure that the contractor is compensated for services provided.

(e) If administrative leave is granted to contractor personnel as a result of conditions stipulated in any “Excusable Delays” clause of this contract, it will be without loss to the contractor. The cost of salaries and wages to the contractor for the period of any such excused absence shall be a reimbursable item of direct cost hereunder for employees whose regular time is normally charged, and a reimbursable item of indirect cost for employees whose time is normally charged indirectly in accordance with the contractors accounting policy.

(End of clause)

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Guest Vern Edwards

Vern,

If the closure is a sovereign act (which it typically is), wouldn't the Sovereign Acts doctrine preclude claims for increased costs? See Appeal of Conner Brothers, ASBCA 54109.

Good point. This teaches me not to answer questions during the holidays.

I'm researching the matter. There have been exceptions. See, e.g., Raytheon STX Corp. v. Department of Commerce, GSBCA No. 14296-COM, 00-1 BCA para. 30632. So it's not exactly clear cut. I would think that a presidential proclamation is a sovereign act, but something is bothering me. I'll post my research findings when I have them.

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Good point. This teaches me not to answer questions during the holidays.

I'm researching the matter. There have been exceptions. See, e.g., Raytheon STX Corp. v. Department of Commerce, GSBCA No. 14296-COM, 00-1 BCA para. 30632. So it's not exactly clear cut. I would think that a presidential proclamation is a sovereign act, but something is bothering me. I'll post my research findings when I have them.

In Appeals of Holmes & Narver Services, Inc., 90-3 BCA P 23198, August 6, 1990, the board recognized the closing of executive department offices by Executive Order as a sovereign act:

"Sovereign Act." In closing executive department offices by Executive Order, the President is clearly acting in a sovereign capacity, as the Government here notes.

The Executive Orders in that case excused Federal employees from work around Christmas in 1986 & 1987.

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Guest Vern Edwards

OK, but let's not draw a conclusion from this or that board decision. Even if it's a sovereign act, the contractor might have a contractual basis for relief of some kind. My reading so far suggests that the problem is quite complex.

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We have a very similar situation. I would be interested in how this turns out. I'll post more about our situation next week.

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