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Interpretation of Far 52.222.43


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I need some help interpreting Far 52.222.43. We bid on a contract which we won, only to discover afterward that the bid had wrong information in it. The fringe benefits only included the H&W amount on the WD. It had no taxes, workers comp, any other benefit like holidays, vacation nothing else. Because the WD included the EO for sick leave our bid also had the wrong hours. Now the first option has come up with a new WD attached, it increase the wages, but decreases the H&W amount. I think I am within my rights to include on the increased portion only (I think, I’d like to be able to include for the total) all the taxes (FICA, FUTA, SUTA), vacation, holiday, sick workers comp. Can I include other things like health, dental, vision….and do I have to include the decrease in the H&W? I ask about the decrease because far 52.222.43 (d) says “the decrease is voluntarily made by the contractor. Hardest REA I have ever had to write. thanks

 

 

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I'm not sure, I understand exactly what your situation is, but here are a couple of things that I think I do understand.  First, let's be careful with our terminology.  52.222-43 does not use the term equitable adjustment which is generally intended to make a contractor or the government whole and includes profit, overhead and G&A.  Instead, it refers to a price adjustment which is limited in scope.  In regard to the adjustment for an increase in increased wages, in accordance with subsection (e) of the clause, the contractor is only entitled to include the increases in "social security and unemployment taxes and workers’ compensation insurance" relating to the increase in wages in the price adjustment.  For example, the WD increases required wages from $10 @ hr. to $10.50 @ hr.  the contractor could only include the social security and unemployment taxes and workers’ compensation insurance on $0.50 @ hr. increase in its price adjustment.  The fact that you did not include these costs in your original proposal is irrelevant to the price adjustment.

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  • 5 months later...

Contract Type is relevant.  If this was a fixed price contract, you may not suffer as you think.

Leaving out Vacation, Sick, Holiday would mean the fringes were understated, but your Direct Labor would be overstated by a significant number of hours and dollars.  What you "lost" in fringes would be "gained" in direct labor and cost.  If you completely left out your payroll taxes and worker's comp, your contract amount is truly short by what would be proper.

Your RFEA should include the increase in labor, increase in fringes, and payroll taxes/workers comp in proper amounts whether they were bid correctly the first time or not.

 

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https://www.ecfr.gov/cgi-bin/text-idx?SID=7adc42db63a3decb0a18eea91f635e0e&mc=true&node=se48.2.52_1222_643&rgn=div8

There is no equitable adjustment involved. A price adjustment would not include items left out initially but perhaps increases or decreases in the contractors costs for those items due to the effects of the wage decision on them. 

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You can include the increases in costs of fringe benefits caused by the wage determination increase.

For example, if the wage rate went from $19 to $20,  that is a dollar per hour for each hour of vacation to be paid, including the hours already granted but not yet taken.

It increases FICA by 7.65 cents times all of the hours to be paid, including vacation and sick time.

Workers comp is usually a percentage of payroll, so that is cost increase to be included.

FUTA and SUTA are stranger animals.  Include them, but do not be surprised if the Govt takes them out, saying there is no cost increase because the employees exceed the $7000 FUTA base and similar SUTA base.

If medical costs are formulaic tied to payroll (such as 10% of payroll), then yes, the increases can be added.  If they do not increase because of the wage determination change, then sorry, you are out of luck.  But, that may be coming from or limited to your H&W payments, not something in addition to them, so you may have no added medical costs.

And, this is often overlooked, when you compute the amount to add to each hour, consider only the hours to be worked (billed), which won't include vacation and sick time which the employee will take (may take).   If you spread it over 2080 hours, and only work (and bill) 1824, then you won't recover all of your extra costs.

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