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bob7947

Real Estate Services Exemption to SCA - FAR 22.1003-4

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This is for a member called Roma who posted this on the blogs.

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As a contracting person for the National Park Service my office supports the acquisition of real property for our Land program offices.  In doing so, we procure title services (everything from title commitments to closing services) to officially transfer the ownership of the land to the NPS.  Typically these procurements are of small value that could typically be procured via purchase cards, however, title companies do not tend to accept credit card payments so we end up writing a lot of small purchase orders for these services.  In doing this I started to investigate if these title services qualify under the $2500 micro-purchase threshold for "services subject to 41 U.S.C. chapter 67, Service Contract Labor Standards" as stated in the definitions at FAR Part 2, or if it meets the exemption to SCA under FAR 22.1003-4(d)(1)(vi), therefore putting it under the $3500 micro-purchase threshold.  

Micro-purchase threshold as defined in FAR Part 2 reads as follows:

“Micro-purchase threshold” means $3,500, except it means—

(2) For acquisitions of services subject to 41 U.S.C. chapter 67, Service Contract Labor Standards, $2,500; and..." 

And the exemption shown in FAR 22.1003-4(d)(1)(vi) reads as follows:

(d) Contracts for certain services.—

(1) Exemption. Except as provided in paragraph (d)(5) of this subsection, the Secretary of Labor has exempted from the Service Contract Labor Standards statute contracts and subcontracts in which the primary purpose is to provide the following services, if the conditions in paragraph (d)(2) of this subsection are met:

(vi) Real estate services, including real property appraisal services, related to housing Federal agencies or disposing of real property owned by the Government. 

I guess my real question here is... Does anyone have any supporting legal basis to define "related to housing Federal agencies" when used in the context of FAR 22.1003-4(d)(1)(vi)?  Do you think the acquisition of title services to support the acquisition of real property by the NPS meets the "related to housing federal agencies" statement? Typically the real property is not acquired to provide living quarters for per se, however, the land being obtained by the NPS may include residential buildings where persons may, or may not have, lived at some time, historical or not.

Anyone have any thoughts on this? 

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If by "title services" you mean the settlement services of a title insurance company, they are not provided by "service employees," and thus the SCA does not apply to a contract for such services. See 29 CFR 4.113, 29 CFR 4.156, and 29 CFR Part 541. The real estate services exemption is not an issue.

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Vern – In trying to wrap my head around this one do you think the below is off base and if so why?

The Service Contract Statute requires that certain service contracts are “subject” to the  statute (41 USC 6702) and in the end when you hash out the FAR and the CFR it is left to the contractor and not the Government as to which individual employees under a service contract the Statute (and related CFR) would be applicable based on  limitations, variations, tolerances and exemptions that may apply.   I know it is cherry picking to an extent but one  reference from the CFR you have provided, specifically 29 CFR 4.156 seems to suggest this as well in that it states certain employees “are not excluded from coverage” if they cannot meet the test of 29 CFR Part 541. 

Noting this would not the response to the OP’s question be something like this?

The exemption of 22.1003-4(d)(1)(vi) as well as other exemptions of the FAR and the related 29 CFR may apply but such exemptions are left for the contractor to determine.  The procurement itself is “subject” to the Service Contract Statute as it is for a service as included in the Statute and therefore you are limited to the $2500 threshold.

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On 6/17/2017 at 7:26 PM, Vern Edwards said:

If by "title services" you mean the settlement services of a title insurance company, they are not provided by "service employees," and thus the SCA does not apply to a contract for such services. See 29 CFR 4.113, 29 CFR 4.156, and 29 CFR Part 541. The real estate services exemption is not an issue.

Thank you!  So then is the micro purchase threshold for this type of procurement $3,500 instead of the $2500 limit? - This is the crux of what I am trying to get at, and why my research on this even started, because many of these actions fall between $2500 and $3500.  I just want to be sure I am doing them properly.

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On 6/17/2017 at 3:20 PM, bob7947 said:

This is for a member called Roma who posted this on the blogs.

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Thank you for reposting this... I'm just learning how to use your site. ;)  I appreciate the patience!!!

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Assuming that I'm right about what you're buying, the micro purchase threshold is $3,500. See the definition in FAR 2.101.

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1 minute ago, Vern Edwards said:

Assuming that I'm right about what you're buying, the micro purchase threshold is $3,500. See the definition in FAR 2.101.

My apologies, Yes you are correct in what we are buying.  Thank you! 

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I am not a grammar expert.  Does the comma usage the way the sentence is written restrict the exception to real estate services of a specific nature, that is those related to housing Federal agencies or disposing of real property owned by the Government?

The agency I work for also acquires "title services" but they are not typically provided by a title insurance company. Instead they are usually provided by a local title and abstract company.  The title company conducts title research at the courthouse and other sources, an individual (usually an attorney) examines the legal documents and prepares a title opinion/commitment, acquires a title insurance policy from a title insurance company, then facilitates the closing.  The cost of the title insurance policy, title examination, and title commitment is typically performed by someone who is not a "service employee".  Consequently, even if the real estate exemption did not apply, it could be that in the situation described by the OP, the services may still not be subject to the SCLS statues.

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34 minutes ago, Todd Davis said:

Does the comma usage a way the sentence is written restrict the exception to real estate services of a specific nature, that is those related to housing Federal agencies or disposing of real property owned by the Government?

Yes. The sentence could have been written like this:

On 6/17/2017 at 2:20 PM, bob7947 said:

Real estate services (including real property appraisal services) related to housing Federal agencies or disposing of real property owned by the Government

 

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Here is the explanation for the real estate services exemption granted by the DOL that appeared in the final rule dated January 18, 2001, 66 FR 5328, 5332:

Quote

h. Real estate services. Federal agencies involved in acquiring and disposing of real property often contract for real estate services, including lease acquisition, real property appraisal, broker, space planning, lease re-negotiation, tax abatement, and real property disposal services. The primary classes of workers that are involved in performing the work are appraisers, leasing specialists, brokers, space planners, interior designers, fire safety engineers, and project managers. In many cases, the employees are required by contracts with the Government to be licensed. In many cases, the Department of Labor has not established wage determinations that apply to these classes of workers. The individual requirements are typically relatively low dollar value (under $25,000) and require that services be performed in a variety of different geographic locations. Knowledge of the local real estate market is required to perform the services effectively. Therefore, individual employees, particularly in rural areas, spend only a small fraction of their time working on Government contracts.

While the Federal Government's use of these services is significant, it represents a small fraction of the transactions that flow through the industry/commercial sources. As a result, the FAR Council reported that it is very difficult to get competition for these services where the Federal Government imposes unique requirements like those in the Service Contract Act on the contractors. The contractors will not change their way of doing business to accommodate a customer that represents a small portion of their business. The FAR Council stated that as the Government continues to downsize, it must rely more and more on commercial sources for these services and it is critical that the Federal Government has access to well-qualified sources of supply for these types of services.

LIUNA [Laborers' International Union of North America] opposed this exemption simply by commenting that the “FAR Council nowhere states that it cannot obtain these services or that any contractor has refused to bid in these categories of services.” No other comments were directed specifically at this service category. While LIUNA is correct that the FAR Council did not state that contractors had “refused to bid,” the FAR Council did report that it is very difficult to get competition for these services. The Department does not believe that LIUNA's comment, unsupported by factual statements as to how the work is currently done or as to how the Government could obtain the services, is of sufficient weight to counter the FAR Council's representations. Therefore the exemption for real estate services is retained in the final rule.

 That's it. There was no additional info in the proposed rule. Are title settlement services real estate services? Why not. But th exemption is limited as discussed by Todd and Don.

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The previous post in this thread has failed to mention that in a further read the quoted January 2001 rule had a subsequent interim rule - FAC 2005-21 (website reference below) and in part quoted below, and a final rule (website reference also below) in which language regarding real estate was not changed in the FAR from that found in FAC 2005-21.   Interesting how application would occur once the estimated contract value and method of contracting are determined with regard to the specific situation stated by the OP.

https://www.federalregister.gov/documents/2007/11/07/07-5481/federal-acquisition-regulation-far-case-2001-004-exemption-of-certain-service-contracts-from-the

http://www.wifcon.com/2009/2001_4_final.pdf

A. Background

On January 18, 2001, the Wage and Hour Division of the U.S. Department of Labor's Employment Standards Administration, issued a final rule amending the regulations at 29 CFR part 4 to exempt certain contracts for services meeting specific criteria from coverage under the SCA (66 FR 5327). The Councils opened FAR case 2001-004 to implement the Department of Labor (DoL) rule.

The FAR currently exempts contracts (or subcontracts) principally for the maintenance, calibration, or repair of certain equipment if……

In addition to this first category of service contracts, in order to implement the new DoL regulations, the FAR interim rule establishes a new category of exemption for contracts for certain services that includes the following:……..

Transportation by common carrier of persons by air, motor vehicle, rail, or marine vessel on regularly scheduled routes or via standard commercial services (not including charter services).

Real estate services, including real property appraisal services, related to housing Federal agencies or disposing of real property owned by the Government.

Relocation services, including services of real estate brokers and appraisers to assist Federal employees or military personnel in buying and selling homes (which shall not include actual moving or storage of household goods and related services).

In order for these contracts for services to be exempt, the contract must meet all the criteria for the other services in the first category (substituting “services” for “item of equipment” in the first criterion, and removing other specific references to “equipment” and “manufacturer”), BUT THE CONTRACT MUST ALSO MEET THE FOLLOWING CRITERIA (emphasis added):

The services under the contract (or subcontract) will be awarded on a sole-source basis or the contractor will be selected for award based on other factors in addition to price or cost, with the combination of other factors at least as important as price or cost in selecting the contractor.

Each service employee who will perform the services under the contract (or subcontract) will spend only a small portion of his or her time (a monthly average of less than 20 percent of the available hours on an annualized basis, or less than 20 percent of available hours during the contract period if the contract period is less than a month) servicing the Government contract (or subcontract).

The contracting officer (or contractor with respect to a subcontract) determines in advance, based on the nature of the contract (or subcontract) requirements and knowledge of the practices of likely offerors, that all or nearly all offerors will meet the conditions. If the services are currently being performed under contract (or subcontract), the contracting officer (or contractor with respect to a subcontract) shall consider the practices of the existing contractor (or subcontractor) in making a determination regarding the conditions.

The apparent successful offeror certifies, the contracting officer has no reason to doubt the certification, and the contracting officer determines that the same certification is obtained from substantially all other offerors that are—

In the competitive range, if discussions are to be conducted (see FAR 15.306)(c)); or

Considered responsive, if award is to be made without discussions (see FAR 15.306(a)).

Council representatives discussed with DoL the implementation of the DoL rule for these contracts for services at the point of receipt of offers. The FAR rule attempts to minimize the occurrence of the situation in which it will be necessary to revise the solicitation after receipt of offers to remove the exemption provision and require use of the SCA clauses, even though the apparent successful offeror certified to criteria for the exemption. The FAR rule uses the term “substantially all” to indicate that there could be a slightly different interpretation of the phrase “all or nearly all” than at the beginning of the process. DoL concurs that the contracting officer will have the discretion to interpret this term, as long as the intention reflected in the preamble to the SCA regulations (66 FR 5327) controls the contracting officer's exercise of discretion. DoL also concurs that it is not necessary to consider offerors that did not certify if these offerors were not in the competitive range or not responsive. Therefore, the FAR rule adds this condition when considering whether substantially all offerors have certified……

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