Jump to content

Recommended Posts

Hello,

I stumbled across the website and feel like I've hit the lottery with all the great info and advice. Thank you for having me.

I have a question, I'm administering a large dollar, multi year Cost Plus Award Fee contract for services and it has the clause 52.222-41 Service Contract Act of 1965. The Contractor wants to know if there are any indirect costs that can be included in a request for equitable adjustments under a wage re-determination? I've scoured through the clause and it doesn't speak to it.

Clause 52.222-43 Fair Labor Standards Act and Service Contract Act?Price Adjustment (Multiple Year and Option Contracts) and 52.222-44 Fair Labor Standards Act and Service Contract Act?Price Adjustment specifically state that there will be no G&A, Overhead, or profit in any price adjustments.

I realize these 2 clauses are used with a Fixed Price service contract and they don't apply to my situation.

However, 52.222-41 states If the term of this contract is more than 1 year, the minimum monetary wages and fringe benefits required to be paid or furnished thereunder to service employees under this contract shall be subject to adjustment after 1 year and not less often than once every 2 years, under wage determinations issued by the Wage and Hour Division.

Because it doesn't specifically say "no Overhead" can it be included?

Thank you for time.

Link to comment
Share on other sites

Hello,

I stumbled across the website and feel like I've hit the lottery with all the great info and advice. Thank you for having me.

I have a question, I'm administering a large dollar, multi year Cost Plus Award Fee contract for services and it has the clause 52.222-41 Service Contract Act of 1965. The Contractor wants to know if there are any indirect costs that can be included in a request for equitable adjustments under a wage re-determination? I've scoured through the clause and it doesn't speak to it.

Clause 52.222-43 Fair Labor Standards Act and Service Contract Act?Price Adjustment (Multiple Year and Option Contracts) and 52.222-44 Fair Labor Standards Act and Service Contract Act?Price Adjustment specifically state that there will be no G&A, Overhead, or profit in any price adjustments.

I realize these 2 clauses are used with a Fixed Price service contract and they don't apply to my situation.

However, 52.222-41 states If the term of this contract is more than 1 year, the minimum monetary wages and fringe benefits required to be paid or furnished thereunder to service employees under this contract shall be subject to adjustment after 1 year and not less often than once every 2 years, under wage determinations issued by the Wage and Hour Division.

Because it doesn't specifically say "no Overhead" can it be included?

Thank you for time.

Does your contract include any clause or other language saying that issuance of a new wage determination entitles the contractor to an equitable price adjustment? I expect it doesn't.

Does it include FAR 52.216-7 Allowable Cost and Payment? I expect it does. Unless there are some other limitations or restrictions elsewhere in the contract, the contractor will be paid for all his allowable costs (indirect as well as direct) without there being a need for a "price adjustment."

Link to comment
Share on other sites

Guest Vern Edwards

This is an intriguing issue and one of the mysteries of cost-reimbursement contracting.

As br549 has pointed out, the price adjustment clauses do not apply to CR contracts and are inappropriate for inclusion in such contracts. However, the contractor will get its allowable costs whether the contract estimated cost is adjusted or not. But if the government increases the minimum wage rates, and if the increase raises the contractor's costs, and if the contractor did not make provision for such increases in the out years, then the increase will go down as a cost overrun. Should that be the case? The situation is further complicated if earned value is being used on the contract.

I have long believed that COs should write an adjustment clause for use in CR contracts of more than one year to which the Service Contract Act applies. But, strictly speaking, such a clause is not necessary from the standpoint of the contractor.

Link to comment
Share on other sites

This is an intriguing issue and one of the mysteries of cost-reimbursement contracting.

As br549 has pointed out, the price adjustment clauses do not apply to CR contracts and are inappropriate for inclusion in such contracts. However, the contractor will get its allowable costs whether the contract estimated cost is adjusted or not. But if the government increases the minimum wage rates, and if the increase raises the contractor's costs, and if the contractor did not make provision for such increases in the out years, then the increase will go down as a cost overrun. Should that be the case? The situation is further complicated if earned value is being used on the contract.

I have long believed that COs should write an adjustment clause for use in CR contracts of more than one year to which the Service Contract Act applies. But, strictly speaking, such a clause is not necessary from the standpoint of the contractor.

DHSGUY, I agree with Vern's observations and would like to bring up another issue for your consideration. You said this was CPAF contract. If part of the award fee determination is based on cost control, how would you handle any overrun of the type that Vern described? Also, how would you rate the contractor in its past performance evaluation on cost control if its increased costs were cused by the government through a revised wage determination?

Link to comment
Share on other sites

Does your contract include any clause or other language saying that issuance of a new wage determination entitles the contractor to an equitable price adjustment? I expect it doesn't.

Does it include FAR 52.216-7 Allowable Cost and Payment? I expect it does. Unless there are some other limitations or restrictions elsewhere in the contract, the contractor will be paid for all his allowable costs (indirect as well as direct) without there being a need for a "price adjustment."

I thank all of you for your responses. Looks like we'll treat it as an allowable cost.

Navy, 52.216-7 is in the contract. The only language that speaks to new wage determination is the section I quoted above from 52.222-41.

Retreadfed, Cost Management is one of many categories used for the award fee. I have to say it is a very well written award fee plan and you bring up a great point for the award and past performance. Our office has gone from treating the contractors like enemies to a more group hug agency.

Vern, I need a beer. Earned Value is being used.

Thanks BR.

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
 Share

×
×
  • Create New...