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My agency has received a protest regarding a contract awardee's ability to comply with the contract's SCA provisions at the awarded price.

The protester argues that the awarded price is too low for the "Admin Assistant" wage determination labor category that they believe applies.

The awardee has confirmed that they used the "General Clerk" wage determination labor category when they priced and they can be reasonably expected to perform at that price.

Needless to say, the labor categories are substantially different in terms of their rates and both categories fall within the range identified as "Administrative Support and Clerical Occupations".

The solicitation is also silent on which precise wage determination labor category applies

Note: We usually just incorporate the entire wage determination and drive on and let the contractors worry about the exact categories.

This approach is supported by the fact that I am unaware of an SCA requirement for the Government to specify the applicable labor category in the solicitation/contract.

As such, I assume the determination is discretionary to the contractor, the awardee picked smarter/better than the protester and that's how it won the contract.

That said, common sense tells me that such discretion is contrary to the purpose of the SCA both in terms of ensuring a reasonable wage and for enabling fair and reasonable competition.

I'd appreciate any thoughts or insights and apologize in advance if I've missed something obvious in FAR 22, or the 52.22 clauses.

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Was the requirement performance based? If so, the Government does not tell the contractor how to staff the requirement.

I would, however, be curious to know. In this instance I would contact the DOL at the geographic location where performance will be performed and send them a copy of the PWS. Ask the DOL if the services outlined in the PWS support the General Clerk or the Admin Assistant labor category and which level (I, II, III, IV).

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NavyKguy, if the contract is a T&M/LH contract, you should specify labor categories needed to perform the contract and qualifications for each category. Going beyond that, I know of no requirement for the government to tell the contractor what labor categories to use in performing the contract.

From an SCA perspective, DoL has a directory of occupations that describes the functions performed by each occupation. When classifying employees for SCA purposes, the contractor has to ensure that what the employee is doing is consistent with the description of the functions performed by the category at which the employee is paid. If the contractor misclassifies an employee and underpays the employee there are several adverse consequences that can result for the contractor.

As for the proposed price, I recall that the GAO has held that there is no requirement for a contractor to propose a price that will enable the contractor to meet its SCA obligations. What is required is that the contractor recognize its obligation to pay in accordance with the SCA and intends to do so. Whether the contractor will be able to perform at the price offered is another question that has to be answered based on the facts of the situation.

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Guest Vern Edwards

You said the protester argues that the awardee's price is too low.

Was the award for a fixed-price contract?

If so, was "price realism" an evaluation factor, or did the RFP say that the government would verify or confirm that the offeror's price included the proper SCA wages?

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NavyK -

I do not believe that discretion is contrary to either reasonable wage or competition. To me it is clear that the contractor is to identify the proper wage based on what the employee is doing and how the duties required of that employee fit in to the already referenced Directory of Occupations. By simple example without referencing DOL regulation I believe my view is reinforced by the following statement found in all SCA Wage Determinations and in part the discussion of “conformance” that will follow this statement in a wage determination.

“The duties of employees under job titles listed are those described in the "Service Contract Act Directory of Occupations", Fifth Edition, April 2006, unless otherwise indicated. Copies of the Directory are available on the Internet. A links to the Directory may be found on the WHD home page at http://www.dol.gov/esa/whd/ or through the Wage Determinations On-Line (WDOL) Web site athttp://wdol.gov/.”

From my view I believe your first impression is right on but stated another way the awardee was more educated about SCA and used it as a competitive edge.

The caveat to my general statement above is that in fact through all the due diligence that is implied or stated in the other posts in this thread was performed by you (the agency). Or stated another way you believe that under the awardee’s intended performance employees performing could be properly classified as “General Clerk” per the duties defined in the Directory.

Stretching to the issue of the protest if this is what you are saying it would seem that you might be in good standing to have the protest denied but that is just a guess because lots of facts are missing. In the end only assistance from your legal counsel and ultimately the GAO process will decide the merit of the protest.

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Guest Vern Edwards

If the contract is fixed-price, and if the protester is complaining that the price is too low to permit the offeror to comply with the SCA, and if the RFP did not say that the government would evaluate price realism or wage rates, then the protest should be denied.

See Group GPS Mulitmedia, GAO B-310716, 2008 CPD ¶ 34 (January 2, 2008):

On a fixed-price contract, as here, under which the awardee is required to pay the actual SCA wages and benefits out of whatever price it offers, and where the proposal contains no indication that the company will not meet its statutory obligations in this regard, labor rates or benefits that are less than the SCA-required rates or benefits may constitute a below-cost offer but one which is legally unobjectionable. Biospherics, Inc., B–285065, July 13, 2000, 2000 CPD para. 118 at 12. That is, regardless of what wage rates K–MAR used in calculating its proposed price, it will still be required to compensate its employees at the appropriate prescribed SCA wage rates. Free State Reporting Inc., B–259650, Apr. 4, 1995, 95–1 CPD para. 199 at 7.

If the protester is complaining about the offeror's categorization of its workers under the wage determination, then the protest should be denied. Again, see Group GPS Multimedia:

[T]he determination of prevailing wages and fringe benefits, and the issuance of appropriate wage determinations under the SCA, are matters for the Department of Labor (DOL). Concerns with regard to establishing proper wage rate determinations or the application of the statutory requirements should be raised with the Wage and Hour Division in DOL, the agency that is statutorily charged with the implementation of the Act. See 41 U.S.C. sections 353(a); 40 U.S.C. sect. 276a; SAGE Sys. Techs., LLC, B–310155, Nov. 29, 2007, 2007 CPD para. 219 at 3. Thus, to the extent the protester's contention is that K–MAR may not properly categorize its employees under the SCA or compensate some of its employees at the required SCA wage rate, it is not a matter for our consideration, since the responsibility for the administration and enforcement of the SCA is vested in DOL, not our Office, and whether contract requirements are met is a matter of contract administration, which is the function of the contracting agency. SAGE Sys. Techs., LLC, supra; Free State Reporting Inc., supra, at 7 n.7.

If the protester is complaining that the offeror will not be able to comply with the SCA at that price, then the protest should be denied. See ALM, Inc., GAO B-225679, 87-1 CPD ¶ 493 (May 8, 1987):

Whether Information Spectrum can or intends to perform the contract with the personnel it proposed relates to the company's responsibility as a prospective contractor. Dayton T. Brown, Inc., B–223774.3, Dec. 4, 1986, 86–2 C.P.D. ¶ 642... Award to the firm necessarily was preceded by the Navy finding Information Spectrum responsible, FAR, 48 C.F.R. § 9.103, and our Office will not review such an affirmative determination of responsibility absent a showing of possible agency fraud or bad faith or an alleged failure to apply definitive responsibility criteria properly. [4 C.F.R. § 21.5( c ).]

Hopefully, NavyKGuy told the whole story in the original post and told it properly, without the need for additions, adjustments, and corrections and so that we won't get dribble, dribble, dribble.

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FWIW, I don't think that Group GPS Mulitmedia is consistent with other GAO decisions holding that a proposal is unacceptable if the proposal, on its face, should lead an agency to the conclusion that an offeror has not agreed to comply with a term of the solicitation. See for example, TYBRIN Corporation B-298364.6; B-298364.7, March 13,2007.

Assume there is a solicitation that is a small business set-aside (containing FAR 52.219-14) and subject to the Service Contract Labor Standards statute (SCA). Offeror A's cost proposal shows that the wages he used to calculate his price are below SCA. Offeror B's cost proposal shows that his subcontract costs will exceeed 50% of the proposed work. Neither offeror has expressly objected to any term of the solicitation. Following the GAO's logic, Offeror A's proposal is acceptable, but Offeror B's is not.

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Don, as you are no doubt aware, there are many decisions like Group GPS Multimedia. How is the line of decisions of which this decision is a part inconsistent with the decisions on 52.219-14?

Unlike the offeror on the set-aside who proposes to subcontract in violation of the Limitations on Subcontracting clause, your inference that the contractor intends to violate the Service Contract Act is just that, inference. It does not follow inevitably (or by deductive logic) that because the price it seeks would not permit it to pay SCA wages AND SIMULTANEOUSLY NOT PERFORM AT A LOSS, that the contractor will not comply with the SCA clause. Nothing prohibits a contractor performing an FFP at a loss, intending to perform an FFP contract at a loss, or proposing to perform an FFP contract at a loss.

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Don, as you are no doubt aware, there are many decisions like Group GPS Multimedia. How is the line of decisions of which this decision is a part inconsistent with the decisions on 52.219-14?

Unlike the offeror on the set-aside who proposes to subcontract in violation of the Limitations on Subcontracting clause, your inference that the contractor intends to violate the Service Contract Act is just that, inference. It does not follow inevitably (or by deductive logic) that because the price it seeks would not permit it to pay SCA wages AND SIMULTANEOUSLY NOT PERFORM AT A LOSS, that the contractor will not comply with the SCA clause. Nothing prohibits a contractor performing an FFP at a loss, intending to perform an FFP contract at a loss, or proposing to perform an FFP contract at a loss.

I did not infer anything, Jacques. You should re-read my post. I merely highlighted an inconsistency in the GAO's decisions.

You argue that it would be unreasonable to infer an intention to violate the Service Contract Labor Standards statute merely because a cost proposal showed that an offeror used wage rates that were lower than the prevailing wages when estimating its costs. If that's what you believe, then do you think it would be reasonable to infer an intention to violate the limitation on subcontracting clause because a cost proposal showed that more than 50% of the estimated cost of the work was subcontract costs? Assume that both offers unconditionally agree to comply with the terms and conditions contained in the solicitation.

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Don, I apparently did misread your Post #7. I didn’t appreciate that the cost proposal (which I read to mean nothing more than cost volume or price volume) literally included proposed wages (lower than SCA prevailing wages), not just prices.

In any case, can you point me to any GAO decisions for the award of a FFP contract where the protested proposal literally included proposed wages (something typically not required to be included in proposals for competitively awarded FFP contracts) where those proposed wages were lower than SCA prevailing wages and the GAO held in the same way it did in, e.g., Group GPS Multimedia? In other words, do you have an actual example of how these lines of cases are inconsistent?

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Jacques,

I need to clarify the words and terms that I'm using. When I referred to the "cost proposal", I meant that part of a proposal submission that contains information necessary to evaluate an offered price (i.e., estimated costs and proposed profit). While the offered price would be binding, the information in the cost proposal would not be. You may refer to this as a "cost volume".

I do not think that Group GPS Multimedia is inconsistent with earlier decisions dealing with the same set of facts (i.e., use of wages below prevailing wages in a cost proposal). However, I do think the decision is inconsistent with other GAO decisions holding that a proposal is unacceptable if the proposal, on its face, should lead an agency to the conclusion that an offeror has not agreed to comply with a term of the solicitation. My use of "proposal" means the entire submission--the binding offer and information necessary to evaluate the offer (e.g., cost information) and the offeror's capability (past performance information, etc.). In the TYBRIN Corporation case, the offer did not take exception to the limitation on subcontracting clause, but the cost information submitted showed that the prime's estimated subcontract costs exceeded 50%. The GAO said that the offer was unacceptable, even though the SBA had issued a CoC to the offeror. The GAO stated a general rule:

...our Office has consistently held that where a proposal, on its face, should lead an agency to the conclusion that an offeror has not agreed to comply with the subcontracting limitation, the matter is one of the proposal’s acceptability.

Following the GAO's logic, a cost proposal that shows that an offeror estimated more than 50% of the costs of performance to be subcontract costs should lead an agency to the conclusion that an offeror has not agreed to comply with the subcontracting limitation, but a cost proposal that shows that an offeror used wages that were less than prevailing wages to estimate its costs should not lead an agency to the conclusion that an offeror has not agreed to comply with the Service Contract Labor Standards statute. I think that's inconsistent.

Vern's reference to Group GPS Multimedia reminded me of this issue. However, I think I have derailed the original discussion.

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Guest Vern Edwards

The key to the distinction between the Group GPS line of decisions and the decision in TYBRIN might be in this sentence from Group GPS:

"Thus, to the extent the protester's contention is that K–MAR may not properly categorize its employees under the SCA or compensate some of its employees at the required SCA wage rate, it is not a matter for our consideration, since the responsibility for the administration and enforcement of the SCA is vested in DOL, not our Office, and whether contract requirements are met is a matter of contract administration, which is the function of the contracting agency."

The DOL enforces the SCA, not the CO. See FAR 22.1004. Enforcement is not subject to the Disputes clause and COs have no power of decision. See FAR 22.1026 and 52.222-41. The GAO doesn't want to get involved. On the other hand, it is up to COs to enforce the subcontracting limitations. The SBA has no powers of enforcement and has prescribed no enforcement mechanism.

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In contrast, the government has a much more active role in administration and enforcement of the DBA and associated construction contract labor requirements. Just wanted to state that for those contracting personnel that primarily deal with service contracts.

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Hi, Joel,

Why the more active role for DBA? I have taken that active role myself on occasion, but never dealt much directly with the SCA.

apsofacto, I don't know "why" the more active role for the DBA and related labor relations because I don't know why the government agencies are so passive regarding the SCA - but I have my suspicions. I also think that many service contracts that use SCA labor probably involve lesser numbers of SCA employees than many construction contracts use of trade labor. Plus construction often involves many different subcontractors.

At any rate, labor relations is a major activity and responsibility in any construction company, especially those dealing with unionized labor.

I have seen all sorts of machinations by constructiuon companies, primarily the smaller firms, non-union firms and/or subcontractors in dealing with their workforces.

And I have witnessed strikes, wildcat strikes, labor strife, non-payment, underpayment of wages and benefits, over use of "apprentice" classified employees, mis-classified employees, union violence, sabotage of equipment and entire job sites for that matter, bomb threats that shut down the jobsite and required evacuatiion of thousands of construction and government employees alike. Someone once set-off some type of gas bomb or bombs (meant to create a false mustard gas or nerve agent leak) that almost killed some workers in a huge building under construction to destroy chemical weapons. That sabotage caused a panic evacuation, permenently disabling several employees and shutting down the site for over a week.

Perhaps that is why it is necessary for a more active role in labor relations enforcement on construction projects.

I have provided a link to the US Army Corps of Engineers Engineering Regulation 1180-1-8, dated 1 AUG 2006, entitled Contracts - Labor Relations. This document explains the various labor laws, regulations and contract provisions. pre-solicitation administration and determinations, compliance procedures, applicability of the labor provisions to various situations, conditions and work activities, Labor Disputes, work stoppages, complaints of labor reps, Enforcement procedures and reporting, area pratice surveys, labor standards resources, info systems and reports. and appendices. Its about a 1/2 inch thick when printed on both sides of the paper.

http://www.publications.usace.army.mil/Portals/76/Publications/EngineerRegulations/ER_1180-1-8.pdf

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Guest Vern Edwards
Why the more active role for DBA? I have taken that active role myself on occasion, but never dealt much directly with the SCA.

The two laws were enacted in very different times and political climates. Do a little online research into them and you'll understand what I'm talking about. I'd prefer not to raise the issues in this forum.

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Yes, I agree with Vern.

By the way, my first significant new construction contract was a military family housing project for 250 new quarters, while in the Air Force. It had just been awarded a few months before I was commissioned in June 1971. I dont remember what month it was awarded in but President Nixon had temporarily suspended the Davis-Bacon Act before award. As a result, our design-build project included a mix of Union and non-Union subcontractors. This was in Merced, Ca.

I remember the roofing sub's foreman, who was blind, would pay his roofers based upon the number of squares (100 sf) of roofing they installed per day. Well, of course that ended up causing a site-wide walkout by the union trades. The roofer agreed to pay a hourly wage. Oh, about him being blind - it didn't slow him down or affect quality. He was the best and fastest roofer on the job!

The sub who was paving the sidewalks and curb and gutters had a brand new device (at the time), an automated paving machine that was wire controlled instead of using forms and manual labor. Well, one morning we came to work to find the site grading subcontractor's D-8 Cat dozer sitting atop the completely FLATTENED Gomaco paving machine, itself a very large piece of equipment. The D-8 dozer's fuel tank had been filled with sugar, too - ruining the engine. Welcome to the world of organized trade labor, I learned - all within the first 10 months of my career.

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The above is an aside to the rather avoidance oriented or passive approach (in comparison) for SCA oversite by the contracting office. I simply want to advise and warn those KO's who get involved in construction contracting that one can't treat construction contract labor requirements and issues the same as you would treat labor issues in service contracting.

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Guest Vern Edwards

Hi, Joel,

Why the more active role for DBA? I have taken that active role myself on occasion, but never dealt much directly with the SCA.

The Davis-Bacon Act (DBA) was enacted in 1931 and the SCA was first enacted in 1965. By the time the SCA was being considered, many were not happy with the administrative and enforcement demands imposed on contracting agencies by the DBA and did not want them under the SCA. The cost of similar administration and enforcement of the SCA in today's services-dominated acquisition environment would be very high.

Under the DBA, contracting agencies have extensive administration and enforcement responsibilities. See FAR 22.406, "Administration and enforcement," specifically 22.406-6, 22.406-7, and 22.406-8. Those responsibilities increase the costs of construction contract administration. There are no comparable FAR rules for the SCA, under which agencies have very few administrative and enforcement duties.

In 1979 GAO recommended repeal of the DBA, arguing that it had increased the costs of construction projects and was no longer necessary.

http://www.gao.gov/assets/130/126529.pdf.

As an aside, there has long been controversy over the origins of the DBA. For contrasting views, see:

http://www.cato.org/pubs/briefs/bp-017.html

http://www.faircontracting.org/wp-content/uploads/2012/11/The-Davis-Baco-Act-A-Response-to-CATO-Institute-Attack.pdf

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Thanks, Vern and Joel. I haven't run into nearly the volume of issues Joel describes, but we often find employee misclassifications and struggle getting timely certified payroll. I think we do not even allow the use of apprentices. Our *ahem* political climate may be much different in this part of the country, though no one is immune to that type of thing.

I mentioned the Cato objections to DBA Ver links to above to our lead Davis Bacon Compliance officer, who would by virtue of his background take a special interest . It was news to him.

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Speaking of passivity versus active management, once I happened across a situation on an SCA-covered contract where, when the Dept. of Labor issued new wage determinations, the COR directed the contractor to demote the affected contractor employees so as to not increase the contract price. The contractor complied with the COR direction. Many attorneys, accountants, and other governmental personnel were required to remedy the situation.

There were other aspects of the situation, other tomfoolery unrelated to SCA compliance, but helping to untangle that hot mess was one of the highlights of my professional career.

H2H

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