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In these scenarios, is contractor hosed or can he get increased T&M rates?

Scenario 1.    Contract is awarded, with 200 SCA positions.  In the proposal the then offeror, now contractor, clearly mapped all the SCA positions to General Clerk I in the applicable age determination, and built his rates on that rate as a base.   Let's say that rate is $16.00 per hour.  Contractor offers the General Clerk I job and pay to incumbent employees.  Most take it, a few don't.  No requests for SCA wage conformance are made.  Questions about the proper wage arise.   Eventually the decision is made by DoL and hence the contracting officer that $20.00 per hour is appropriate.   Is the contractor hosed?

 

Scenario 2.  Essentially the same scenario, but the now contractor files 200 wage conformance requests, stating that $16.00 is appropriate.  DoL does its thing and says $20 .00 is appropriate.  Is the contractor hosed?

 

 

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In either scenario the contractor would be required to pay the prevailing wages as determined by DoL retroactively from the start of the contract, and would not be entitled to an adjustment to the contract price. 

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A counter view regarding Scenario 2 - Depends.  

Conformance is a mutual effort that flows from the Contractor to the CO to the DOL.   In this process the CO provides its agreement or not with the proposed conformed rate to the DOL with DOL having the final say.   If in the process of the contract negotiations contractor was astute in providing to the CO advance information during negotiations on the need for classification conformance I could see that the CO and the contractor could agree that the contractor could get an adjustment to whatever the DOL decides.   No clause of the FAR provides for this, but nothing says it could not be an agreed to condition of contract award (and so documented).

TAP has provided the view if such a condition at award was not agreed to.

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Guest Vern Edwards
31 minutes ago, C Culham said:

the CO and the contractor could agree that the contractor could get an adjustment to whatever the DOL decides.

In writing? Have you ever seen that done? Would that be a FAR deviation? I'm not challenging, just asking.

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How about documenting the basis of negotiation in the record of negotiations and in a “memorandum of agreement” (MOA) or a “memorandum of understanding” (MOU)?  I’ve seen that idone and have done it, although not for the specific purpose mentioned here.

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Guest Vern Edwards
3 minutes ago, joel hoffman said:

How about documenting the basis of negotiation in the record of negotiations and in a “memorandum of agreement” (MOA) or a “memorandum of understanding” (MOU)?  I’ve seen that idone and have done it, although not for the specific purpose mentioned here.

Suppose you do that and lotus's scenario comes about. Would the record of negotiations enable the contractor to get a price adjustment? On the basis of what contract clause or legal doctrine could the contractor lay claim to a price adjustment?

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Never did it related to SCA but have regarding other issues of unknowns.  Remember specifically using an added option to do so. 

Deviation, why?  It's not changing anything the FAR says you cant do. It's a negotiated stipulation.

Fits FAR 1.102(d) too.

 

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Guest Vern Edwards
46 minutes ago, C Culham said:

Deviation, why?  It's not changing anything the FAR says you cant do. It's a negotiated stipulation.

I don't know. I don't necessarily think it would be a deviation. I'm just trying to consider every possible angle and anticipate any possible objection by staff upon review.

FAR 52.222-41(c), Compensation, subparagraph (2) discusses the conformance procedure and makes no mention of an adjustment to the contract price if DOL rejects the conformance and requires a higher rate of pay. The only mention of price adjustment in the clause is in paragraph (c)(3), which says nothing about a price adjustment in such a case.

FAR 1.102 does not say you can do anything as long as it's not prohibited. FAR 1.102(d) says:

Quote

(d) The role of each member of the Acquisition Team is to exercise personal initiative and sound business judgment in providing the best value product or service to meet the customer’s needs. In exercising initiative, Government members of the Acquisition Team may assume if a specific strategy, practice, policy or procedure is in the best interests of the Government and is not addressed in the FAR, nor prohibited by law (statute or case law), Executive order or other regulation, that the strategy, practice, policy or procedure is a permissible exercise of authority.

FAR 1.102-4(e) says:

Quote

(e) The FAR outlines procurement policies and procedures that are used by members of the Acquisition Team. If a policy or procedure, or a particular strategy or practice, is in the best interest of the Government and is not specifically addressed in the FAR, nor prohibited by law (statute or case law), Executive order or other regulation, Government members of the Team should not assume it is prohibited. Rather, absence of direction should be interpreted as permitting the Team to innovate and use sound business judgment that is otherwise consistent with law and within the limits of their authority. Contracting officers should take the lead in encouraging business process innovations and ensuring that business decisions are sound.

Well, FAR 52.222-41 does specifically address conformance, compensation, and price adjustment, provides for a price adjustment in a specific instance, which does not include cases such as the one presented by lotus. So how would you explain and justify such an adjustment if someone argued that it would deviate from the clause? I think a CO would want to be prepared to show that agreeing to such an adjustment was in the government's best interest.

What would the CO cite as authority on the SF30 under which the adjustment is made. She couldn't cite FAR 52.222-41. It she wrote "mutual agreement," what would she cite for authority to make such an agreement.

I'm not objecting to your idea. I'm just trying to think it through. You have to anticipate objections.

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Does the contract contain 52.222-43 Fair Labor Standards Act and Service Contract Labor Standards—Price Adjustment (Multiple Year and Option Contracts)?  If so, that may offer a solution to the problem.    

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8 hours ago, Vern Edwards said:

Suppose you do that and lotus's scenario comes about. Would the record of negotiations enable the contractor to get a price adjustment? On the basis of what contract clause or legal doctrine could the contractor lay claim to a price adjustment?

Vern, I was apparently mistaken as to Carl’s scenario, of which I was responding to. I interpreted his scenario as one where the parties were negotiating the contract price, based upon using wage rates from the government provided wage decision. In lotus’s scenario, it appeared to me that the wage decision used the wrong classification for all 200 employees.  If both parties were negotiating the price based upon what they thought was the correct classification, subject to DOL determination, then the price  could be based upon a mutual mistake. 

However, it now appears to be a situation where the firm proposed a wage rate that wasn’t listed in the wage decision and initiated a conforming process, proposing an alternate wage and fringe rate for all the employees.

So my assumed scenario isn’t applicable.  

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Guest Vern Edwards

Here's lotus's 1st scenario:

Quote

Contract is awarded, with 200 SCA positions.  In the proposal the then offeror, now contractor, clearly mapped all the SCA positions to General Clerk I in the applicable age determination, and built his rates on that rate as a base.   Let's say that rate is $16.00 per hour.  Contractor offers the General Clerk I job and pay to incumbent employees.  Most take it, a few don't.  No requests for SCA wage conformance are made.  Questions about the proper wage arise.   Eventually the decision is made by DoL and hence the contracting officer that $20.00 per hour is appropriate.   Is the contractor hosed?

Note:

1. "No requests for SCA wage conformance are made."

2. "Questions about the proper wage arise.   Eventually the decision is made by DoL and hence the contracting officer that $20.00 per hour is appropriate."

I don't understand 2. It does not appear that the WD was wrong. It appears that the contractor's link between its workers and the appropriate wage rate was wrong. If that's true, then the contractor is "hosed."

lotus's second scenario, seems to be what Carl was addressing. There is a wage conformance, but DOL disagrees with it. I still think the contractor is "hosed," even if the CO agreed with the contractor's conformance.

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Guest Vern Edwards

So you have a time-and-materials service contract with a number of service employees who must be paid at least the wage specified in a wage determination. Suppose that the contractor decides to conform certain of those employees to the classification "General Clerk 1." The wage rate/hourly rate for that classification is $16 per hour. The CO agrees to that classification and forwards SF 1444, Request for Authorization of Additional Classification and Rate, to Department of Labor (DOL) for review. DOL rejects the conformance and determines that a classification with a wage rate of $20 is applicable.

The question is whether the contractor can get an upward adjustment of its hourly rates.

FAR 52.222-41 specifies the conformance procedure. The CO's agreement to a conformance, as indicated by signature on SF 1444, is not a contract price agreement. It is just an classification agreement between the parties that is subject to DOL approval. The parties hope, but do not know, that DOL will approve. The Service Contract Act clauses, FAR 52.222-41 and, as mentioned by bremen, FAR 52.222-43, prescribe the conformance procedure and make no provision for a contract price adjustment in the event DOL rejects a conformance agreement and imposes a different classification with a higher wage rate.

In the case of the scenario described in my first paragraph, suppose that the contractor asks for a price adjustment. Can the CO agree, as proposed by Carl:

23 hours ago, C Culham said:

If in the process of the contract negotiations contractor was astute in providing to the CO advance information during negotiations on the need for classification conformance I could see that the CO and the contractor could agree that the contractor could get an adjustment to whatever the DOL decides. 

Presuming that the contractor read the contract, it knows what the conformance procedure is to be and that there is no provision for an adjustment in the clause that prescribes the procedure.  A wage determination does not specify the contract price for an employee's work. No standard contract clause conditions the contract price upon DOL approval of the proposed conformance. The CO's signature on SF 1444 does not indicate that the contract price is conditioned upon DOL approval. Thus, contractually, the government is not obligated to agree to an adjustment. So, even assuming that the CO has authority to agree to such an adjustment, the CO would have to get consideration from the contractor in return. The CO couldn't just agree to an adjustment out of the goodness of his or her heart. He or she would have to get something in exchange.

But I question the CO's authority to agree to such an adjustment. The CO would, in effect, be making policy, and I think it would be a FAR deviation, because FAR addresses conformance and makes no provision for an adjustment in the event of DOL disapproval. If I were a reviewer or an approving official, I would reject any agreement to an adjustment.

I have not consulted the Service Contract Act literature or case law, and I don't know that I'm right on the basis of rules or past decisions. I'm just thinking out loud, so to speak.

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So what does the clause 52.222-41 have to do with it?  Nothing I say.

Contractor at negotiation says that she will need to conform.  CO  and contractor agree and understand its DOLs call on a conformed rate.   CO and contractor agree to a CLIN using the closest stated wage (the clerk1) which they hope DOL will accept and also add a T&M optional labor category via a CLIN, priced,  in case they might be wrong on the rate that contractor is proposing and CO agrees with.  The optional rate/CLIN is based on mutual agreement at negotiation table that DOL might go two bucks higher in the worst case.  Option is conditioned that option will only be taken pursuant to DOL none acceptance of proposed rate.  All the other stuff happens and contractor (either as sole source or competitive that allows for negotiation) is selected for award. Contractor submits 1444 prior to contract performance (after award)  to CO who due to negotiations agrees with proposed wage rate.   CO sends to DOL who has their say.  Option exercised or not.

In this example it is a negotiated stipulation with regard to an optional T&M labor category available on the contract.  Option Clause will be stated on the SF30 exercising the option.  Pulling in FAR 52.222-41 has nothing to do with it because it's not a price adjustment its exercising an option.  

I believe this way of handling could work even with using an unpriced option, it just makes the evaluation process for award when negotiations are allowed a little more complicated.

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Thanks for the opinions, guys.  Reading through this my reactions are

1.  Who would ever bid on SCA work. since it appears the Govt can retroactively demand that higher wages be paid without a price adjustment.

2.  I can see why some companies run, not walk, away from SCA work.

3.  The contractor is in a no win situation.

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Guest Vern Edwards
1 hour ago, C Culham said:

So what does the clause 52.222-41 have to do with it?  Nothing I say.

It has everything to do with it in the scenarios that lotus gave us. You have described a different set of facts than lotus described. In both of lotus's scenarios there is no discussion/negotiation of conformance classifications before contract award. Conformance and referral to DoL begins after contract award and is thus governed by the clause. Those were the scenarios on which I based my analysis. It seems to me that those scenarios are the bases on which we should discuss this, but you have chosen a different course.

The wording you used to describe what you would do confuses me a little, but I think I get the general idea. You appear to have described a sole source acquisition. The parties would negotiate an agreement about price adjustment prior to contract award and an agreement on price adjustment terms pertaining to the outcome of the conformance process. I presume that the parties would negotiate a special clause to implement their agreement. That might work, it's just not what lotus presented us with. If I were a reviewer I'd ask why you want to agree to such an adjustment when FAR and 52.222-41 do not provide for it. I suppose you'd say something about "fairness."

If the acquisition were competitive, then what you propose might work if you described your procedure in the solicitation and did the same with all offerors in the competitive range. I'm sure that the offerors would welcome it. The risk is that you might get an outside-the-scope-of-the competition protest when you modified the winner's contract to adjust the price if the adjustment changed the winner's price standing and raised an issue about the technical/price tradeoff on which the decision were based.

 

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Sorry I was disconnected for most of the day yesterday.

19 hours ago, Vern Edwards said:

You have described a different set of facts

Yes and in my original post in this thread is so stated.   I am confused now because I thought you understood is was a different set of facts by posting "In writing? Have you ever seen that done? Would that be a FAR deviation? I'm not challenging, just asking."

 

20 hours ago, Vern Edwards said:

Conformance and referral to DoL begins after contract award and is thus governed by the clause.

Agreed the process to conform a wage occurs after award and the act of conformance is also supported by specific statement on the DOL wage determination which I simply call to attention as 52.222-41 is not the only place in a solicitation and contract where conformance is provided. 

My concern in continuing this thread is I read you responses to indicate that if an astute contractor considers and anticipates the need for conformance during proposal preparation, offer and negotiation they are still hosed.    You have provided, at least to this point, no alternative other than your strict interpretation that the FAR and its required 52.222-41 clause  do not allow a contractor any alternative regarding anticipated or even the known need for conformance until after contract award and prior to performance and not through proposal preparation, proposal submission, negotiation and mutual agreement on award.   If  in fact I have read your posts correctly your conclusion is unrealistic.  Consider for example  lotus's last post as perfect evidence.   A contractor would always be hosed because there is nothing they can do about DOLs power position of being the final say on conformance, a power position they are placed in because by your reasoning at least as I read it a contractor cannot do anything until after contract award because 52.222-41 does not allow it.  

As to  the one alternative I have offered (and I could conjure up more) which is the suggested use of an option as I have offered I have taken the issue out of a labor compliance and into a negotiated agreement and insertion of an option into a awarded contract.   It clearly works in a sole source and based on how I laid it out adding the option needs absolutely no other clause than the options clause in the resulting contract.

20 hours ago, Vern Edwards said:

That might work, it's just not what lotus presented us with.

You throw this in with regard to your review and challenge of my idea and again I did not propose it would fix lotus's issue based on a strict read of the scenario's lotus offered.  What I offered was a way to lotus could be put in a position of not being hosed.  A futuristic view.

20 hours ago, Vern Edwards said:

If the acquisition were competitive, then what you propose might work if you described your procedure in the solicitation and did the same with all offerors in the competitive range

I do not believe this would be necessary as I believe prudently conducted and perfectly documented evaluations and negotiations would avoid the implied risks you state.  an option would clearly work here as well and would require no additional clause other than the option clause.    I suppose you would say how and quite honestly I will leave that to you to mull over as I believe that one could do it and whatever risk you would want to throw in there would/could be mitigated within the sidewalls of FAR part 15. 

To the discussion in total I pose to you - Can you offer an alternative as I have done?  I and I expect @lotus and others would appreciate an alternative that would work as well.  An alternative that would put them in a position of not always having to be hosed because you have provided, at least to this point, that  52.222-41 prevents a contractor from anticipating and addressing the unknowns of conformance prior to contract award and performance and they are to just take their lumps after contract award.   

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47 minutes ago, C Culham said:

Sorry I was disconnected for most of the day yesterday.

Yes and in my original post in this thread is so stated.   I am confused now because I thought you understood is was a different set of facts by posting "In writing? Have you ever seen that done? Would that be a FAR deviation? I'm not challenging, just asking."

 

Agreed the process to conform a wage occurs after award and the act of conformance is also supported by specific statement on the DOL wage determination which I simply call to attention as 52.222-41 is not the only place in a solicitation and contract where conformance is provided. 

My concern in continuing this thread is I read you responses to indicate that if an astute contractor considers and anticipates the need for conformance during proposal preparation, offer and negotiation they are still hosed.    You have provided, at least to this point, no alternative other than your strict interpretation that the FAR and its required 52.222-41 clause  do not allow a contractor any alternative regarding anticipated or even the known need for conformance until after contract award and prior to performance and not through proposal preparation, proposal submission, negotiation and mutual agreement on award.   If  in fact I have read your posts correctly your conclusion is unrealistic.  Consider for example  lotus's last post as perfect evidence.   A contractor would always be hosed because there is nothing they can do about DOLs power position of being the final say on conformance, a power position they are placed in because by your reasoning at least as I read it a contractor cannot do anything until after contract award because 52.222-41 does not allow it.  

As to  the one alternative I have offered (and I could conjure up more) which is the suggested use of an option as I have offered I have taken the issue out of a labor compliance and into a negotiated agreement and insertion of an option into a awarded contract.   It clearly works in a sole source and based on how I laid it out adding the option needs absolutely no other clause than the options clause in the resulting contract.

You throw this in with regard to your review and challenge of my idea and again I did not propose it would fix lotus's issue based on a strict read of the scenario's lotus offered.  What I offered was a way to lotus could be put in a position of not being hosed.  A futuristic view.

I do not believe this would be necessary as I believe prudently conducted and perfectly documented evaluations and negotiations would avoid the implied risks you state.  an option would clearly work here as well and would require no additional clause other than the option clause.    I suppose you would say how and quite honestly I will leave that to you to mull over as I believe that one could do it and whatever risk you would want to throw in there would/could be mitigated within the sidewalls of FAR part 15. 

To the discussion in total I pose to you - Can you offer an alternative as I have done?  I and I expect @lotus and others would appreciate an alternative that would work as well.  An alternative that would put them in a position of not always having to be hosed because you have provided, at least to this point, that  52.222-41 prevents a contractor from anticipating and addressing the unknowns of conformance prior to contract award and performance and they are to just take their lumps after contract award.   

Carl, I don’t think that your idea would be the proper way to resolve a labor rate compliance question in a competitive acquisition, unless the government amends the solicitation to offer all competitors a common opportunity. Even then, it might be difficult to compare apples to apples or to gyoranges.

For a sole source contract action, it might be doable. 

I would prefer that the government resolve an uncertainty that arose during a competitively negotiated acquisition (or a sole source), if circumstances and time permit.  There should be a common understanding of the labor classification I would think. 

What puzzles me here is that the issue affects all 200 positions for the service contract.  I don’t understand the exact scenario presented. Did the wage decision include the $20 rate that the DOL later determined applicable ? Did the successful proposer offer the lower rate from a listed category in the wage decision?  It would seem that even those employees who accepted the $16 rate would have to be paid the $20 rate after the DOL determination.  Was there no classification provided for the actual jobs under the contract?

Did the successful proposer (the new contractor) simply decide to propose the lower rate, based upon competitive advantage? 

Something doesn’t make sense here. This scenario affects all 200 employees...

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Also, If the proposer specifically identifies a lower rate than that included in the wage decision in the solicitation, Id say that the government should evaluate it and, if necessary, confirm that DOL would accept it.  The government should understand the possible effect on the contract cost or the contractors cost  if DOL rejects the lower proposed classification or rate. If the contractor would be expected to bear the risk for every position, it may likely affect the risk of successful performance.

I freely admit that I’m not an SCA expert and don’t know to what extent the government would have knowledge of what the current employees are/were being paid.  

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Guest Vern Edwards
1 hour ago, C Culham said:

Can you offer an alternative as I have done? 

I'm not interested in offering an alternative. I don't think there is a problem that needs to be solved. The OP asked if the contractor would be hosed. The first response to that question, from someone else, was Yes.  Then you proposed a solution. I've been interested in figuring out whether your solution would work. You have obviously taken my questions and thinking to be a hostile challenge.

To the best of my recollection the conformance procedure has been around and unchanged for as long as I've been in government contracting. I've been involved in such procedures several times and they were always routine. I never had a problem. I have not heard that it's been much of a problem governmentwide. But lotus is worried about something and wants to know if there is a way out. You have proposed an interesting solution, but one that requires foresight that lotus and colleagues apparently did not apply, and one that raises questions in my mind about CO authority to establish what to my mind would be a new policy.

I've explained my thinking as well as I can. I don't want to go on with you about this, rehashing what was and was not said, because I sense a rising tension on your part. I've tried to have a civil, analytical discussion about this, and now I'm done with it. Go on as you please.

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2 minutes ago, Vern Edwards said:

I sense a rising tension on your part

You misread and hope that you will step back and appreciate the spirit of the conversation.  Your thoughts are always welcome and I find it very, very confusing that in the context of this specific discussion that you now play the "poor me" card to avoid what I always anticipate, fruitful dialog.

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Guest Vern Edwards
2 minutes ago, C Culham said:

you now play the "poor me" card

Right.

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31 minutes ago, joel hoffman said:

it might be doable

All is doable and I completely understand the concerns about the "doing" passing strict scrutiny.  

 

32 minutes ago, joel hoffman said:

What puzzles me here

Agree but only the OP can provide the facts to sort it out.

 

22 minutes ago, joel hoffman said:

confirm that DOL would accept it.

In my experience I have never had success with DOL confirming something outside their official processes and this is specifically related to conformance.

 

24 minutes ago, joel hoffman said:

The government should understand

The very point on which additional thoughts are based.

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22 hours ago, Retreadfed said:

Lotus, in regard to scenario 2 is the contract a definitized contract or a letter contract?

It is a definitized contract.  It was competed procurement.  The mapping was clearly shown in proposal. 

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Guest Vern Edwards

The fact that the mapping was shown in the proposal is irrelevant.

The contractor is responsible for setting its price. The contractor should know whether it will have to conform some labor classifications and knows or should know that the DoL has the final say and might conform the classification to one with a higher minimum wage. It must take the chance, which is a reason to classify/conform conservatively and price accordingly.

The agreement between the parties on the contract price is not an agreement on individual elements of cost. The CO's agreement with the conformance proposal does not constitute a warranty that the DoL will approve the proposed conformance or that the contract price will cover the contractor's labor cost. It merely expresses agreement or disagreement with the contractor's conformance decision.

Finally, I believe (but am not sure) that the DoL's approval or disapproval of the conformance proposal is the government acting in its sovereign, not its contractual capacity, and the contractor will have to live with it, just as it would if the federal or a state government raised taxes or fees.

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