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Agency forgot to include a wage determination in a concessions contract until several years into contract. Agency finally added the WD at DOL request. DOL seeking back wages from contractor. Contractor intends to seek equitable adjustment from Agency. We cannot find precedent for how an equitable adjustment would work in a concessions contract. Contractor earns a modest management fee as FFP % of sales and remits a similar size fee to Agency.

Any ideas? 

Let me know if you need additional facts. And thanks for any insight you all may have for us!

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What, if anything, does your contract say about compliance with the SCA and adjustments because of changes in the WD?

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Guest Vern Edwards

Did the contract also omit the SCA clause?

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Contract is with USPS, which does not use FAR. Contract does include USPS's version of the SCA clauses, including 9-10: Service Contract Act, 9-11: Service Contract Act: Short Form, and 9-12: FLSA and SCA - Price Adjustment Clause. Contract also includes, B-10: Pricing of Adjustments, which basically says - to price adjustments, follow the instructions in Conduct Price/Cost Analysis instructions of the USPS Supply manual.  That section explains how the CO should think about pricing an adjustment, but I'm not sure how to apply those principles to pricing an adjustment to a concessions contract.

Note that section 9-12(c) provides that:

When, as a result of the determination of minimum prevailing wages and fringe benefits applicable (1) every two years after original award date, (2) at the beginning of any option or renewal period, or (3) in the case of a significant change in labor requirements, an increased or decreased wage determination is applied to this contract, or when as a result of any amendment to the Fair Labor Standards Act enacted after award that affects minimum wage, and whenever such a determination becomes applicable to this contract under law, the supplier increases or decreases wages or fringe benefits of employees working on the contract to comply, the supplier and the contracting officer will negotiate whether and to what extent either party will absorb the costs of the wage change. Any resulting change in contract price is limited to increases or decreases in wages or fringe benefits, and the concomitant increases or decreases in Social Security, unemployment taxes, and workers’ compensation insurance, but may not otherwise include any amount for general and administrative costs, overhead, or profit.

[I read this to apply only to the three WD-driven contract modifications listed at the beginning of the clause, and not the situation here--meaning that this contractor should have the opportunity to negotiate for profit....]

Also, USPS Supply Principles and Practices Manual offer the following guidance on SCA (discussed as one of several mandatory federal laws):

7-7.1.1.3.d Price Negotiations

Price adjustment negotiations should be handled on a case-by-case basis. In such negotiations, the contracting officer should consider whether the supplier has attained new efficiencies allowing it to absorb additional wage costs, whether it is possible to decrease hours or consolidate scheduling, changed market conditions, the complexity of the type of service being purchased, and other factors affecting the supplier’s ability to absorb all or any portion of the adjustment costs.

7-7.1.1.5.d If circumstances require that a contract be awarded before a wage determination is obtained, the contract must include Clause 9-10: Service Contract Act and provide for equitable adjustment of the contract terms when the wage determination is incorporated, effective from the date of issuance unless another effective date is specified in the determination. The e98, if not already submitted, must be submitted promptly and explain the need for immediate award.

7-7.1.1.5.h The DOL Wage and Hour Division may require that a wage determination be applied to a contract retroactively, if the contract is subject to the Act and more than five service employees are involved in performing the work. . . .  the contracting officer must incorporate the applicable wage determination and attempt to negotiate an equitable price adjustment.

 

 

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Guest Vern Edwards

Have you consulted a USPS contracts lawyer? I ask because you may not owe the contractor anything. The contractor knew or should have known that it would have to pay prevailing wages as determined by the Department of Labor. It had a duty to inquire about the absence of a wage determination and a duty to find out the prevailing wage whether the WD was attached to the contract or not. 

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39 minutes ago, Vern Edwards said:

Have you consulted a USPS contracts lawyer? I ask because you may not owe the contractor anything. The contractor knew or should have known that it would have to pay prevailing wages as determined by the Department of Labor. It had a duty to inquire about the absence of a wage determination and a duty to find out the prevailing wage whether the WD was attached to the contract or not. 

I'm on the contractor side of this issue. . . . so I assume this is not good news for us? :unsure:

I didn't think an agency could delegate its obligation to provide the correct WD to a contractor. Can a CO really ask the contractor to locate their own WD?

I should have mentioned at the outset that at the time of contracting, the places of performance were not known. And the CO included the following clause on the award cover sheet - "supplier is responsible for obtaining the correct Wage Determination(s) from the website www.dol.gov and paying the wages prescribed as if that Wage Determination was attached to this solicitation/contract."

21 minutes ago, Retreadfed said:

Just to clarify, were the SCA clauses in the contract at time of award or were they added with the WD?

Yes, the SCA clauses were in the contract at the time of award. They were not added with the WD.

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Guest Vern Edwards
7 hours ago, NenaLenz said:

I didn't think an agency could delegate its obligation to provide the correct WD to a contractor. Can a CO really ask the contractor to locate their own WD?

The SCA requires contractors to do a thing, with or without a contract clause. The clause merely puts prospective contractors on notice of their prospective obligations and actual contractors on notice of their actual obligations. If you are a contractor and you agreed to pay certain wages, and if the solicitation to which you responded with an offer did not provide information about those wages, it is up to you to inquire. If you don't inquire you take a risk. If you sign the contract without inquiring you seal your fate.

But don't take my word for it. Consult an attorney.

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Duplicate post sorry...

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15 hours ago, NenaLenz said:

I should have mentioned at the outset that at the time of contracting, the places of performance were not known. And the CO included the following clause on the award cover sheet - "supplier is responsible for obtaining the correct Wage Determination(s) from the website www.dol.gov and paying the wages prescribed as if that Wage Determination was attached to this solicitation/contract."

Can a contractor obtain SCA wage rates when the places of performance are unknown?  How do the parties contract for concession services at undetermined locations? There seems to be some missing info here on how the contractor could or did price the contract.  I’ll admit that I’m not familiar with concession contracting details

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On 4/5/2018 at 6:03 AM, joel hoffman said:

Can a contractor obtain SCA wage rates when the places of performance are unknown?  How do the parties contract for concession services at undetermined locations? There seems to be some missing info here on how the contractor could or did price the contract.  I’ll admit that I’m not familiar with concession contracting details

It's been a few months, but I'm circling back to this one, @joel hoffman. The contract does not include any specific locations. They were to be identified by the parties later. Contractor did take over management of concession operations, but those locations were never added to the contract, and neither were the appropriate WDs.

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This may or may not be the same situation as in another current thread, where specific site concessions were to be arranged with the forest service’s reps at the site locations.  If so,   Both parties should have known that there must be an SCA Wage decision applicable to the negotiation of the specific site concession.  It could be a mutual mistake in the formation of the site specific agreements. I don’t necessarily buy that the government could  get away with being ignorant and negligent but not the concessionaire.

I also assume that the government isn’t paying for the labor - the concessionaires fees or sales would probably be covering labor costs. That might make a big difference in the criteria for determining responsibility.

 Vern has advised in both threads that you consult a knowledgeable contracts attorney to advise you.  I agree with him. 

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2 minutes ago, NenaLenz said:

Thanks, @joel hoffman. This is helpful. 

Nina, I edited my post while you were typing your response. Sorry. 

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17 minutes ago, joel hoffman said:

I also assume that the government isn’t paying for the labor - the concessionaires fees or sales would probably be covering labor costs. That might make a big difference in the criteria for determining responsibility.

You're right that the government isn't paying directly for labor. But the government does approve menu prices. 

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18 minutes ago, NenaLenz said:

You're right that the government isn't paying directly for labor. But the government does approve menu prices. 

On the basis of what information?  Cost or pricing data with calculation showing how the prices are determined??

You also didn’t answer my earlier questions from 4/5/2018...

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Darn, I didn’t read or forgot an earlier post of yours that made the contractor responsible for obtaining the applicable wage decision to establish menu prices.  That will affect my post earlier with regard to a possible mutual mistake.  

I suggest that you get a lawyer to help you but I don’t think that the contractor can ignore a clear requirement to obtain and use the applicable wage rates, then claim that the government approved the menu prices that weren’t based upon the applicable wage rates . 

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