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Guidance on SCA/DOL Applicability

The agency I work for has a general rule of thumb when assigning acquisition packages received that contain both supplies (SUP) and services (SVC) elements.

 The way they decide which team it gets assigned too is by looking if SVC component is more than $2,500.00 (SCA applicability threshold).

If it is higher then it goes to the SVC team and if less, then it goes to the SUP team.

I done some research and provided it below: Thoughts? Am I close or way of the mark?

Resource for Determination:

The Department of Labor (DOL) provides many resources to make these decisions. The best one I have found is located at the link below:

This is the Field Operations Handbook (FOH), which was updates in 2016, to help when making these decisions in accordance with federal law and DOL guidance. The link below is for chapter 14 that provides this guidance for the SCA:

https://www.dol.gov/whd/FOH/FOH_Ch14.pdf

At section 14a01 it states:

“The SCA (41 USC 351, et seq.) applies to every contract entered into by the U.S. or the District of Columbia (DC), the principal purpose of which is to furnish services in the U.S. through the use of service employees. Contractors performing on such federal service contracts in excess of $2,500.00 must observe minimum monetary wage and safety and health standards and maintain certain records. Service employees on covered contracts in excess of $2,500.00 must be paid not less than the monetary wages and fringe benefits contained in wage determinations issued by the DOL for the contract work. Such wage and fringe benefit determinations may reflect what has been determined to be prevailing in the locality or may reflect the wage rates and fringe benefits contained in the predecessor contractor’s collective bargaining agreement (CBA), if any, pursuant to section 4(c) of the SCA. See 29 CFR 4.” (Emphasis Added)

The definition of Principal is below (Marriam-Webster):

  • most important, consequential, or influential

The definition of Purpose is below (Marriam-Webster):

  • something set up as an object or end to be attained

From these definitions we can reasonably assume that “the principal purpose” means “the most important end to be obtained.”

At section 14d13 the FOH speaks to the applicability of the SCA when services and other items are to be obtained under a single contract:

“The SCA applies only where a contract as a whole is principally for the furnishing of services, as opposed to line items for specific work in a contract. The SCA reference to bid specification refers to the advertised specifications in a solicitation for bids rather than a separate line item or work requirement within a contract. See 29 CFR 4.132.” (Emphasis Added)

The CFR reference is below:

§ 4.132 Services and other items to be furnished under a single contract.

If the principal purpose of a contract is to furnish services through the use of service employees within the meaning of the Act, the contract to furnish such services is not removed from the Act's coverage merely because, as a matter of convenience in procurement, the service specifications are combined in a single contract document with specifications for the procurement of different or unrelated items. In such case, the Act would apply to service specifications but would not apply to any specifications subject to the Walsh-Healey Act or to the Davis-Bacon Act. With respect to contracts which contain separate specifications for the furnishing of services and construction activity, see § 4.116(c).

Section 14d13 and 29 CFR 4.132 clearly state that the SCA’s applicability for a contract that contains both services and supplies is based on the “principal purpose” or “the most important end to be obtained.”

Dollar value is not consulted for applicability.

 

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You are on the right path.  Consider this example.  The government awards a contract for the construction of a nuclear powered aircraft carrier that contains classified equipment.  The contract is valued at $7B.  The contract requires the contractor to provide site security to protect the classified equipment.  The cost of the site security services will be $75K.  Here it is obvious that the principle purpose of the contract is construction of the aircraft carrier, with security services only being incidental to contract performance.  Thus, a service NAICS would not be assigned to this procurement and the SCA would not apply to the security services.

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4 hours ago, Constricting Officer said:

Section 14d13 and 29 CFR 4.132 clearly state that the SCA’s applicability for a contract that contains both services and supplies is based on the “principal purpose” or “the most important end to be obtained.”

Dollar value is not consulted for applicability.

 

My agencies lawyers and the SBA have acted as if dollar value does matter when determining if something is a supply or service for the purpose of applying the non-manufacture rule.  Not the same thing as the SCA, but close .

I classified something as a supply, although the majority of the expected cost was service in support of that supply.  So I said the NMR applied.  Threat of protest.  Legal review.  SBA involved.  Ultimately, it was reclassified as service, so no NMR.  That SB knew what he was doing, he won.

Fun Fact:  In that case the PSC of record was the key thing - that is what determines supply or service.  And you can only pick one.   I've been doing this for years and have only a vague idea of what most of the IT services PSC mean or how to classify stuff.  Nobody knows.  Once, for a presentation on how arbitrary assignment of PSC actually is, I ran a query on FPDS-NG for a particular brand of software and came back with something like eight different PSC for the same thing.  Some supplies, some services. This software was GIS,  and someone had heroically classified it as aerial photographic services.  Which isn't necessarily wrong.

 

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I thought referencing would be appropriate to this discussion as well.....

FAR 22.402 – Applicability

(b) Nonconstruction contracts involving some construction work.

(1) The requirements of this subpart apply to construction work to be performed as part of nonconstruction contracts (supply, service, research and development, etc.) if --

(i) The construction work is to be performed on a public building or public work;

(ii) The contract contains specific requirements for a substantial amount of construction work exceeding the monetary threshold for application of the Construction Wage Rate Requirements statute (the word “substantial” relates to the type and quantity of construction work to be performed and not merely to the total value of construction work as compared to the total value of the contract); and

(iii) The construction work is physically or functionally separate from, and is capable of being performed on a segregated basis from, the other work required by the contract.

(2) The requirements of this subpart do not apply if --

(i) The construction work is incidental to the furnishing of supplies, equipment, or services (for example, the requirements do not apply to simple installation or alteration at a public building or public work that is incidental to furnishing supplies or equipment under a supply contract; however, if a substantial and segregable amount of construction, alteration, or repair is required, such as for installation of heavy generators or large refrigerator systems or for plant modification or rearrangement, the requirements of this subpart apply); or

(ii) The construction work is so merged with non-construction work or so fragmented in terms of the locations or time spans in which it is to be performed, that it is not capable of being segregated as a separate contractual requirement.

 

AND

 

FAR 22.1003 -- Applicability.

22.1003-1 -- General.

This Subpart 22.10 applies to all Government contracts, the principal purpose of which is to furnish services in the United States through the use of service employees, except as exempted in 22.1003-3 and 22.1003-4 of this section, or any subcontract at any tier thereunder. This subpart does not apply to individual contract requirements for services in contracts not having as their principal purpose the furnishing of services. The nomenclature, type, or particular form of contract used by contracting agencies is not determinative of coverage.

 

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General,

Do you take care to compare services furnished to the Government to supplies furnished to the Government?  Just because it is service work doesn’t mean it must be counted in the services column for comparison.  So don’t put all service work in the services column — only services that are furnished to the Government.

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16 hours ago, ji20874 said:

General,

Do you take care to compare services furnished to the Government to supplies furnished to the Government?  Just because it is service work doesn’t mean it must be counted in the services column for comparison.  So don’t put all service work in the services column — only services that are furnished to the Government.

I don't know what that means.  What does it mean?

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It means that if a contractor uses service workers to sweep and mop the floors in its assembly facility every evening, that cost should be in the supplies column for comparison, not the services column.  The work is services, and is essential and might even be required by the SOW (“keep the work area clean”), and is performed by service workers, but the services are not furnished to the Government.

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19 hours ago, Constricting Officer said:

I believe "incidental" is word to be focused on when making a decision in both my OP and all comments/conversation thereafter.

Thanks for the feedback.

I believe you have concentrated on the wrong word with regard to "criterion" and application of SCA as you consider your agency's policy of assignment.   Instead  concentration should be on "principle purpose".  By example you have provided no reference to 29 CFR 4.111 in your OP.   Here is what it says...

"§ 4.111 Contracts “to furnish services.”

(a)“Principal purpose” as criterion. Under its terms, the Act applies to a “contract * * * the principal purpose of which is to furnish services * * *.” If the principal purpose is to provide something other than services of the character contemplated by the Act and any such services which may be performed are only incidental to the performance of a contract for another purpose, the Act does not apply. However, as will be seen by examining the illustrative examples of covered contracts in §§ 4.130et seq., no hard and fast rule can be laid down as to the precise meaning of the term principal purpose. ...." (Emphasis added)

29 CFR 4.111 as compared with 22.1003 or read in harmony (my words) suggests to me that your agency's general rule as a determining factor is not foul proof.  Just because the services needed are over $2500 does not dictate the need is a service.  As the FAR says  "The nomenclature, type, or particular form of contract used by contracting agencies is not determinative of coverage."

My view is not to say that your agency is wrong, they can do whatever they feel is the most efficient way to assign work.  What I am saying is that it is false to reason that just because a need has more than $2500 in service work connected to it automatically makes it a service.  A need could have more than $2500 in service work yet its principle purpose could be the providing of a supply.

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31 minutes ago, C Culham said:

I believe you have concentrated on the wrong word with regard to "criterion" and application of SCA as you consider your agency's policy of assignment.   Instead  concentration should be on "principle purpose".  By example you have provided no reference to 29 CFR 4.111 in your OP.   Here is what it says...

C Culham,

Thank you for the additional source to provide clarity to the meaning. I replaced the section of my OP that used the definitions to make a relatable wording to use with the CFR reference.

The situation that sent me down this rabbit hole was a requirement I received to purchase $1.9 million worth of supplies and have them installed for $250K. It sure don't sound like the "principal purpose" is to in that case is to provide services. Not trying to get out of the work (as I am almost done with the requirement), but simply to make the case to leadership.

Thanks

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57 minutes ago, Constricting Officer said:

The situation that sent me down this rabbit hole was a requirement I received to purchase $1.9 million worth of supplies and have them installed for $250K. It sure don't sound like the "principal purpose" is to in that case is to provide services. Not trying to get out of the work (as I am almost done with the requirement), but simply to make the case to leadership.

I would tend to agree with you.

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1 hour ago, Constricting Officer said:

The situation that sent me down this rabbit hole was a requirement I received to purchase $1.9 million worth of supplies and have them installed for $250K

What type of NAICS code is assigned to this requirement, supply or service?  It seems to me that is the real issue, not which unit of a contracting shop handles the procurement.

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Curious - How does one “install” supplies?  Servicing equipment perhaps? If so, wouldn’t the servicing of equipment or like be the primary purpose of the contract, even though the major cost is thesupplies? 

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43 minutes ago, Retreadfed said:

What type of NAICS code is assigned to this requirement, supply or service?  It seems to me that is the real issue, not which unit of a contracting shop handles the procurement.

That's the problem with this. All of the contracts reported in FPDS with the company are either reporting it as a supply NAICS/service PSC or vise-versa. The program office didn't bother to provide one with the package.

5 minutes ago, joel hoffman said:

Curious - How does one “install” supplies?  Servicing equipment perhaps? If so, wouldn’t the servicing of equipment or like be the primary purpose of the contract, even though the major cost is thesupplies? 

Joel,

The requirement is for a Weight-Based Inventory Management System to be purchased and installed. I see what you are getting at and yes a long-term contract to maintain the system would be a service contract.

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2 hours ago, Constricting Officer said:

The situation that sent me down this rabbit hole was a requirement I received to purchase $1.9 million worth of supplies and have them installed for $250K. It sure don't sound like the "principal purpose" is to in that case is to provide services. Not trying to get out of the work (as I am almost done with the requirement), but simply to make the case to leadership.

Maybe the definition of "supplies" at FAR 2.101 would help?

Quote

“Supplies” means all property except land or interest in land. It includes (but is not limited to) public works, buildings, and facilities; ships, floating equipment, and vessels of every character, type, and description, together with parts and accessories; aircraft and aircraft parts, accessories, and equipment; machine tools; and the alteration or installation of any of the foregoing.

 

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22 minutes ago, joel hoffman said:

Curious - How does one “install” supplies?

When the government buys office furniture, as is so often the case today, the government is buying a "system."  This system needs to be installed (set up) which sometimes includes electrical connections.  The same concept applies to the acquisition of computer systems which sometimes means running of cables and other installation services which are probably construction instead of services.

Also, there are some warehouse systems that require installation.  Probably a lot of others that I am not familiar with.

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I didn’t know if it involved real property installed equipment or something else. 

Thanks for the clarification. 

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On ‎3‎/‎29‎/‎2019 at 12:26 PM, Don Mansfield said:

Maybe the definition of "supplies" at FAR 2.101 would help?

 

Don, right there in front of my nose. . . Thank you. I have tendency to do that from time time-to-time.

On ‎3‎/‎29‎/‎2019 at 12:30 PM, Retreadfed said:

What type of NAICS code did you assign and what was your rationale?

NAICS # 423490: "The industry comprises establishments primarily engaged in the merchant wholesale distribution of professional equipment and supplies (except ophthalmic goods and medical, dental, and hospital equipment and supplies)."

The requirement is for a hospital, but is not medical in nature. Best match I could find.

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