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SCA Price Adjustments


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Facts: a contract subject to the SCA has been performed for 10 years. For the 10 years, various collective bargaining agreements have been in place. The most recent CBA is set to expire shortly before the current contract expires. The contractor and union negotiate a new CBA and inform the agency of this prior to the issuance of a competitive RFP for the follow-on contract. However, the agency includes the wages and fringe benefits from the old CBA in the RFP. The RFP for the follow-on contract calls for the contractor to perform services for a firm fixed price per month. The follow-on contract has a one year base period and 4 option periods of 1 year each.

The successful contractor bases its prices on the wages and fringe benefits in the RFP, but after award has to pay its SCA covered employees the wages and fringe benefits specified in the current CBA which are higher than those in the RFP. The contractor asserts it is entitled to a price adjustment to the contract prices for all years because of the government's failure to include the proper wages and fringe benefits in the RFP. The dispute regarding the agency's liability has been proceeding for two years resulting in the contractor having performed the services for two years.

If the contractor is entitled to an adjustment, does the adjustment apply to the prices for the base year and each option year? Also, is the adjustment for the years in which services have already been performed computed on the basis of the labor mix that was anticipated when the contract was negotiated or the labor mix the contractor actually experienced?

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Guest Vern Edwards
If the contractor is entitled to an adjustment, does the adjustment apply to the prices for the base year and each option year?

If a board or court finds that the contractor is entitled to an adjustment because the government failed to do what it should have done, then I would say that the contractor is entitled to an adjustment of the base and option year prices.

I'm not sure that the contractor is entitled to an adjustment, however. The new collective bargaining agreement was signed before the release of the RFP. The contractor knew or should have known that it would be obligated to pay the wages stipulated in the new CBA, rather than what was in the wage determination, and should have taken that into account when it prepared its proposal. Why didn't the contractor check with the union? If it did check, why didn't it take the higher wages into account? (Probably because it was afraid that the other competitors would not.) How was that the government's fault? A board or court might find that the government's failure to include an updated wage determination in the solicitation did not harm the contractor and that there is no basis for entitlement.

Also, is the adjustment for the years in which services have already been performed computed on the basis of the labor mix that was anticipated when the contract was negotiated or the labor mix the contractor actually experienced?

I don't understand this question. The adjustments would be to labor rates, wouldn't they? Are you saying that the contractor is actually employing different labor categories than it proposed?

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Guest carl r culham

It appears the following has been taken into consideration but just in case it has not-

FAR 22.1010 Notification to interested parties under collective bargaining agreements.

(a) The contracting officer should determine whether the incumbent prime contractor?s or its subcontractors? service employees performing on the current contract are represented by a collective bargaining agent. If there is a collective bargaining agent, the contracting officer shall give both the incumbent contractor and its employees? collective bargaining agent written notification of?

(1) The forthcoming successor contract and the applicable acquisition dates (issuance of solicitation, opening of bids, commencement of negotiations, award of contract, or start of performance, as the case may be); or

(2) The forthcoming contract modification and applicable acquisition dates (exercise of option, extension of contract, change in scope, or start of performance, as the case may be); or

(3) The forthcoming multiple year contract anniversary date (annual anniversary date or biennial date, as the case may be).

(:lol: This written notification must be given at least 30 days in advance of the earliest applicable acquisition date or the applicable annual or biennial anniversary date in order for the time-of-receipt limitations in paragraphs 22.1012-2(a) and (:lol: to apply. The contracting officer shall retain a copy of the notification in the contract file.

FAR 22.1012-2 Wage determinations based on collective bargaining agreements.

(a) In sealed bidding, a new or changed collective bargaining agreement shall not be effective under section 4© of the Act if the contracting agency has received notice of the terms of the new or changed collective bargaining agreement less than 10 days before bid opening and the contracting officer determines that there is not reasonable time to incorporate the new or changed terms of the collective bargaining agreement in the solicitation.

(:lol: For contractual actions other than sealed bidding, a new or changed collective bargaining agreement shall not be effective under section 4© of the Act if notice of the terms of the new or changed collective bargaining agreement is received by the contracting agency after award of a successor contract or a modification as specified in 22.1007(:lol:, provided that the contract start of performance is within 30 days of the award of the contract or of the specified modification. If the contract does not specify a start of performance date which is within 30 days of the award of the contract or of the specified modification, or if contract performance does not commence within 30 days of the award of the contract or of the specified modification, any notice of the terms of a new or changed collective bargaining agreement received by the agency not less than 10 days before commencement of the work shall be effective for purposes of the successor contract under section 4© of the Act.

© The limitations in paragraphs (a) and (:lol: of this subsection shall apply only if timely notification required in 22.1010 has been given.

(d) If the contracting officer has submitted an e98 to Department of Labor requesting a wage determination based on a collective bargaining agreement and has not received a response from the Department of Labor within 10 days, the contracting officer shall contact the Wage and Hour Division by telephone to determine when the wage determination can be expected. (The telephone number is provided on the e98 website.) If the Department of Labor is unable to provide the wage determination by the latest date needed to maintain the acquisition schedule, the contracting officer shall incorporate the collective bargaining agreement itself in a solicitation or other contract action (e.g., exercise of option) and include a wage determination referencing that collective bargaining agreement created by use of the WDOL website (see 22.1008-1(d)(2)).

From DOL website - http://www.wdol.gov/usrguide/sectionb.aspx#timelycba

8.Timely receipt of Collective Bargaining Agreement (CBA)s (Title 29 CFR Part 4, Section 4.1(:lol: and FAR Section 22.1012).

a.The obligation of a successor contractor to pay its employees no less than the wages and fringe benefits required under the predecessor contractor's Collective Bargaining Agreement (CBA) is a statutory requirement of SCA Section 4©. DOL has applied a limitation on the self-executing aspects of Section 4© (reference Title 29 CFR Part 4, Section 4.1(:lol:). This limitation only applies, however, if the contracting officer has given both the incumbent (predecessor) contractor and the employees' collective bargaining representative written notification at least 30 days in advance of all estimated procurement dates. A sample letter for notification is provided at Appendix B, "FAR Section 22.1010 Notification".

b.For contract actions resulting from other than sealed bidding:

1.A revised Collective Bargaining Agreement (CBA) shall apply to the successor contract if it is received by the contracting agency before the date of award (or date of modification for an option or extension).

2.If a Collective Bargaining Agreement (CBA) is received after award, it shall NOT apply to the successor contract if contract performance starts less than 30 days from date of award or modification.

3.If a Collective Bargaining Agreement (CBA) is received after award and performance starts more than 30 days from award or modification date, the Collective Bargaining Agreement (CBA) shall apply to the successor contract if received no later than 10 days prior to start of performance.

c.For contract actions resulting from sealed bidding:

1.A revised Collective Bargaining Agreement (CBA) shall NOT apply to the successor contract if received by the contracting agency less than 10 days prior to opening of bids, unless there is sufficient time to amend the solicitation and incorporate the revised WD.

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If a board or court finds that the contractor is entitled to an adjustment because the government failed to do what it should have done, then I would say that the contractor is entitled to an adjustment of the base and option year prices.

I'm not sure that the contractor is entitled to an adjustment, however. The new collective bargaining agreement was signed before the release of the RFP. The contractor knew or should have known that it would be obligated to pay the wages stipulated in the new CBA, rather than what was in the wage determination, and should have taken that into account when it prepared its proposal. Why didn't the contractor check with the union? If it did check, why didn't it take the higher wages into account? (Probably because it was afraid that the other competitors would not.) How was that the government's fault? A board or court might find that the government's failure to include an updated wage determination in the solicitation did not harm the contractor and that there is no basis for entitlement.

I don't understand this question. The adjustments would be to labor rates, wouldn't they? Are you saying that the contractor is actually employing different labor categories than it proposed?

To answer your last question, the contract was awarded based on a competitive RFP. Because of this, the contractor was not required to submit a proposal identifying labor categories or a level of effort for the contract. What was required was only a proposal stating a price for the services. The contract does not list any labor categories. Nevertheless, when performing the contract, the contractor is using the same labor categories upon which it based its pricing. However, the contractor has been able to perform the services using less labor than anticipated. For example, it anticipated that it would take 100 hours to perform a task during one year, but it took 90. Thus, for the years when the contractor was able to perform more efficiently, would the retroactive adjustment, if one is due, be computed based on the hours it took to perform the task or the hours anticipated when the price for the task was accepted. For the coming year, it may take the contractor more or less than the 100 hours originally anticipated.

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