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Scenario: An IDIQ/Task Order contract with one base + four one option years. The FFP task order was awarded on 1 October 2015 subject to SCA with WD documentation included.  On 31 March 2016 CO issued a modification to include a correct WD because the original one was wrong. After review, we concluded the rates remain the same but the H/W went up 20 cents according to the correct WD. We have one subcontractor under this task order working on a FFP basis. My questions are:

(1) when should the correct WD apply to this TO contract? The original award date or the beginning of the option year or the modification effective date? IAW FAR 52.222-43 (c) Fair Labor Standards Act and Service Contract Labor Standards -Price Adjustment (Multiple Year and Option Contracts), the current Wage Determination should apply on the anniversary date of a multiple year contract or the beginning of each renewal option period. But the CO issued a modification during the base year to correct an error. How should I best interpret this clause under this circumstance?

(2) I have asked the CO for guidance. Are there any corrective actions that I should take while waiting for the reply from the CO?

(3) Should I modify subcontract to include correct WD before getting everything sorted with the government including getting price adjustment if any?

Thanks.

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If the new wage determination causes the contractor to increase its payments to covered employees, then the contractor shall notify the contracting officer of any increase within 30 days after receiving the new wage determination.  For example, see para ( f ) of the contract clause at FAR 52.222-43 or para. ( e ) of the clause at 52.222-44.

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(1) The modification incorporating the corrected WD should provide the answer to your first question.  Didn't it include a statement regarding the effectivity of the corrected WD?  If it didn't, you will definitely need some direction from the CO.  

(2) and (3)  Of course, you could modify your subcontract to incorporate the corrected WD in the same manner as the CO did with your prime contract, but then you'd be faced with the same question from the subcontractor as you have for the CO.  Until you find the answer to your first question, I would recommend you refrain from taking any action other than to provide the corrected WD to the subcontractor informally to get a sense of its potential impact, depending on whether the CO tells you that it is effective on the date of the modification or on the effective date of the contract. 

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4 hours ago, huwen119 said:

 On 31 March 2016 CO issued a modification to include a correct WD because the original one was wrong. After review, we concluded the rates remain the same but the H/W went up 20 cents according to the correct WD.

Was your review completed within 30 days after your receipt of the wage determination modification?  Your 30 days to request an adjustment has already ended -- that period ended on April 30.

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Thanks both. I understand there is a 30 day reviewing period when receiving a new WD for any increase claimed. However, I am still hoping to get a clear understanding from the CO of when the correct WD should apply to this contract so we can learn the lesson and move forward. I think I am really stuck on the effective date here.      

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FAR 22.1015 applies if the Department of Labor discovers the error -- if so, the Wage and Hour Administrator may order retroactive application.  So at first glance, it seems 22.1015 doesn't apply because the original posting doesn't make any mention of the Department of Labor.

However, you bring up a good point, Carl.  The Wage and Hour Administrator can order a retroactive application, but I don't know of any text that allows the contracting officer to order a retroactive application.

huwen, I think you are wasting time.  If the new wage determination caused you to increase your H&W payments to employees by 20 cents per hour, you should have already submitted your notice -- I can't give you legal advice, but I think you really shouldn't wait to file your notice.  You need to make your assertion and provide the notice required by the contract clause.  The effective date at the top of the SF-30 is what you should work with, unless the text in block 14 says otherwise -- but if block 14 is silent, run with the effective date at the top of the SF-30.  If I were your contracting officer, and you dilly-dallied or otherwise failed to provide the notice within the required 30 days, my first inclination would be to reject your notice as untimely, especially if I thought your failure prejudiced the Government in some way (not providing timely notices so that the Government can make prudent business decisions can be seen as prejudice).

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Carl,

FAR 22.1015 may or may not apply.  It isn't clear what caused the CO to realize the original WD was incorrect, (it may have been the DoL who brought it to his/her attention).  Regardless, though, if the newly incorporated WD was in effect at the time of issuance of the order, and should have been incorporated into the basic order, but wasn't, then I expect the CO will advise that it should be made effective retroactively, from the date of award -- because the law required it -- and a price adjustment should be made as described in FAR 52.222-43.

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Navy, why would you make a price adjustment as described in 52.222-43?  The conditions for making such an adjustment are not present in this case.  Therefore, that clause does not apply.  It seems to me that what we have is a mistake in contract formation.  In that case, the contract should be adjusted to reflect the agreement the parties would have reached had the mistake not been made.

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Hmmmm…..Am I thinking wrong here?

Fact – IDIQ contract

Fact Unknown – What is the anniversary date of the IDIQ

Fact Unknown – Did the IDIQ include WD applicable to all the work under the IDIQ

Fact –Task Order Issued on October 1, 2015 with WD attached

Fact Unknown – Was the WD that was attached the same WD carried in the IDIQ

Fact Unknown – What is the total performance period of the Task Order as compared to the anniversary period of the IDIQ contract

Fact – CO modified Task Order to include “new” WD.

Fact Unknown – Was the WD that was added to the Task Order to correct the previous WD in the Task Order also the logical follow on to the WD in the IDIQ if the IDIQ did carry a WD?

Conclusion – I am not sure we can answer the OP’s questions based on the limited information provided to date.

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Thanks everyone for sharing your opinions and advice. The CO provided some great guidance and has confirmed that the effective date should be backdated to the task order award date. As Navy said, the law requires it so we ought to comply with the correct document. Thanks again.

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On 6/15/2016 at 9:14 AM, Retreadfed said:

Navy, why would you make a price adjustment as described in 52.222-43?  The conditions for making such an adjustment are not present in this case.  Therefore, that clause does not apply.  It seems to me that what we have is a mistake in contract formation.  In that case, the contract should be adjusted to reflect the agreement the parties would have reached had the mistake not been made.

I'd suggest a price adjustment as described in FAR 52.222-43 because the new WD was "[a]n increased...wage determination...applied to the contract by operation of law," per paragraph (d)(2) of the clause. 

If I were the contractor, however, I would certainly make your argument.

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However, the predicate to a price adjustment under 52.222-43 is that the adjustment is to be based on the wage determination "current on the anniversary date of a multiple year contract or the beginning of each renewal option period,"  In this regard, the wages and fringe benefits required to be paid under a CBA do not have to be incorporated into a WD before they become a part of the contract obligation of the contractor.  Instead, the CBA is a self executing WD that is incorporated into the contract by operation of law.  The clause says nothing about a price adjustment to correct a mistake made by the contracting officer when awarding the contract.  Also, remember that under 52.222-41, the contractor is required to provide its service employees performing on the contract, the wages and fringe benefits called for by the WD attached to the contract.  Reading the two clauses together, it is pretty clear to me, that 52.222-43 provides a price adjustment if the WD "current on the anniversary date of a multiple year contract or the beginning of each renewal option period," makes a change in the wages and fringe benefits the contractor was required to provide by the WD attached to the contract in the previous period.

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Navy, is it your interpretation of 52.222-43(d)(2) that if a CBA calls for an increase in wages and fringe benefits at the mid-point of an option period that the new CBA rates would be applicable then and the contractor could be entitled to a price adjustment?  Also, just to make sure I understand you, are you saying that (d)(2) was intended to cover more than the terms of CBA's that are self executing and incorporated into applicable contracts by operation of law?

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Retread,

In response to your first question, no, that is not my interpretation, but I don't understand why CBAs are even part of this discussion.  In response to your second question, I don't know what the intent of (d)(2) was; I was merely thinking that for the CO to incorporate a new WD at the midpoint of the first performance year, there must be some authority, and the authority I came up with was the SCLS statute, and so I concluded that it would be incorporated into the contract by operation of law. I have since seen the error of my ways, though, and am now of the opinion that if the CO directs retroactive application, then the contractor should be entitled to an equitable adjustment, as you suggested originally.

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Navy, the reason that CBAs are relevant is that a CBA is a WD that is self executing.  That it, it applies to a contract by operation of law regardless of whether DOL has issued a WD incorporating the CBA.  Thus, (d)(2) covers that situation.  Generally, a CBA that becomes effective during an annual performance period does not entitle a contractor to a price adjustment.  However, if a new CBA becomes effective during an option period, it may be applied retroactively, if the government failed to give the contractor and union notice of its intent to exercise the option as required by FAR 22.1010. 

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