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CBA expires, WD rates lower, Who keeps the difference?


DCGOVLAW

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Facts: 5 year option contract to provide janitorial services; years one and two wages are under a CBA; CBA expires during performance and contract states that the prevailing wage determination will apply to remaining option years upon expiration of the CBA; CBA wages are higher than incorporated wage determination rates; contractor operated at a loss at the CBA rates; the agency knew the wage rates were lower under the WDR than under the CBA when they executed this FFP contract.

Situation: CO seeks a reduction in the firm fixed price contract price to capture the difference between the CBA rates and the wage determination rates.

Question: Does the expiration of the CBA and reversion to the WDR constitute "a decreased wage determination applied to this contract by operation of law" even though the WDR was incorporated into the contract at the time of execution?

Certainly there is an equitable argument here somewhere???

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Guest Vern Edwards

Has the CO shown you a contract clause that says the government is entitled to a reduction? Have you asked him to show you one? Just say,

Where in the contract does it say that you get a price reduction in this circumstance? Show me the words.

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DC, you say that the contractor performed at a loss while the CBA was in existence. I'm curious, did you price the contract using the CBA rates or the WD rates or some other rates?

It is my understanding that the yearly pricing is higher than the WD rates but lower than the CBA rates. So the contractor will recover the loss (i.e., make enough profit on the out years to cover the losses from the first 2 plus some gravy) when the wage rates are lowered to match the WDR.

(I know people say this all the time, but I am actually asking the question for another. I have no personal involvement in the contract or the negotiation)

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