SCA Wage Adjustments

[1102INSD]

I have an FFP contract. No CBA.

Contains 52.222-43

Period of Performance runs March - February

Option Year 1 was exercised for March 2022 - February 2023 with a wage determination updated in December 2021 incorporated. During Option Year 1, in 01 July 2022, the wage determination was updated.

The Option Year 2 was recently exercised and the contractor has requested a retroactive adjustment for the Option Year 1 based on the wage determination updated in July. Is the contractor entitled to adjustments after the "anniversary date of the multiple year contract, or at the beginning of the renewal option period?"

[joel hoffman]

No. [Edited on April2, 2023: My answer was based upon the scenario presented in the initial post on April 1, 2023.  Quote: 

“I have an FFP contract. No CBA.

Contains 52.222-43

Period of Performance runs March - February

Option Year 1 was exercised for March 2022 - February 2023 with a wage determination updated in December 2021 incorporated. During Option Year 1, in 01 July 2022, the wage determination was updated.

The Option Year 2 was recently exercised and the contractor has requested a retroactive adjustment for the Option Year 1 based on the wage determination updated in July. Is the contractor entitled to adjustments after the "anniversary date of the multiple year contract, or at the beginning of the renewal option period?"

See 52.222.43

“Fair Labor Standards Act and Service Contract Labor Standards - Price Adjustment (Multiple Year and Option Contracts) (AUG 2018)

“…(c) The wage determination, issued under the Service Contract Labor Standards statute, (41 U.S.C. chapter 67), by the Administrator, Wage and Hour Division, U.S. Department of Labor, current on the anniversary date of a multiple year contract or the beginning of each renewal option period, shall apply to this contract.”

What do you think this means? What contractual basis is there for a price adjustment?

Did the contractor actually already pay the midterm increased wage rates? Doesn’t establish any entitlement but I’m just curious. If so, why didn’t the contractor mention this back in July 2022 if it wants to be reimbursed?

Just because a firm pays higher wages than required by the contract doesn’t establish any entitlement to a price increase.

Edited April 3, 2023 by joel hoffman
Clarified that my answer is based upon the scenario described in the original post

[C Culham]

9 hours ago, 1102INSD said:

contractor has requested a retroactive adjustment 

My thoughts-

Based on what?  Did the contractor provide data that the employees were actually paid in accord with the updated determination? 

Or can the contractor provide evidence that it is required to pay the labor retroactive pursuant to (d)(2) of the clause?  

Is there anything in the determination or amendment adding it that says it was retroactive?

Essentially all the above would provide evidence that may or may not (probable) support a retroactive adjustment would be allowable.

 

[joel hoffman]

This is from the prescription for the clause. 

CFR 22.1006 Solicitation provisions and contract clauses.

(c) (1) …Contracting officers shall ensure that contract prices or contract unit price labor rates are adjusted only to the extent that a contractor's increases or decreases in applicable wages and fringe benefits are made to comply with the requirements set forth in the clauses at 52.222-43(subparagraphs (d) (1), (2) and (3)…”

If the contractor mistakenly paid increased wages on its own, without government action or direction, then there is no entitlement to price increase.

[Vern Edwards]

9 hours ago, 1102INSD said:

During Option Year 1, in 01 July 2022, the wage determination was updated.

@1102INSDDid the government modify the contract to incorporate the July 2022 update? Was the contractor required to pay accordingly?

[joel hoffman]

10 minutes ago, C Culham said:

My thoughts-

Based on what?  Did the contractor provide data that the employees were actually paid in accord with the updated determination? 

Or can the contractor provide evidence that it is required to pay the labor retroactive pursuant to (d)(2) of the clause?  

Is there anything in the determination or amendment adding it that says it was retroactive?

Essentially all the above would provide evidence that may or may not (probable) support a retroactive adjustment would be allowable.

 

 

4 minutes ago, Vern Edwards said:

@1102INSDDid the government modify the contract to incorporate the July 2022 update? Was the contractor required to pay accordingly?

All good questions. 

[Vern Edwards]

11 hours ago, 1102INSD said:

Is the contractor entitled to adjustments after the "anniversary date of the multiple year contract, or at the beginning of the renewal option period?"

FAR 52.222-41 says that the contractor must compensate employees in accordance with the wage determination attached to the contract, and I presume that 1102INSD can read English. Yet 1102INSD does not couch the question in contractual terms (the word update does not appear in FAR 52.222-41, -43, or -44) and does not provide essential context.

This is not the Beginners Forum. The question, as asked, does not deserve any answer, and certainly not the first one, so emphatic and so hastily offered.

[joel hoffman]

53 minutes ago, Vern Edwards said:

FAR 52.222-41 says that the contractor must compensate employees in accordance with the wage determination attached to the contract, and I presume that 1102INSD can read English.

Actually FAR 52.222-41 says 

“…(c) Compensation.

(1) Each service employee employed in the performance of this contract by the Contractor or any  subcontractor shall be paid not less than the minimum monetary wages and shall be furnished fringe benefits in accordance with the wages and fringe benefits determined by the Secretary of Labor, or authorized representative, as specified in any wage determination attached to this contract.”

The contractor can decide without the government’s direction to pay more than the minimum specified rates at any point in an option year. However, it’s not entitled to a price increase during the option year.

Price adjustments due to contract incorporated updates to wage decisions are determined pursuant to paragraphs (d) and (e) of 52.222-43, which discuss situations where the contractor pays more than the minimum specified wage rates.

The contractor might have paid more than the contract rates to replace employees or to retain employees who might otherwise go elsewhere for higher wages.

[Vern Edwards]

We know all that, Joel.

What we don't know are the facts of the case, which is why your "No" was hasty.

12 hours ago, 1102INSD said:

During Option Year 1, in 01 July 2022, the wage determination was updated.

What does "updated" mean?

[joel hoffman]

On 4/2/2023 at 10:12 AM, Vern Edwards said:

We know all that, Joel.

What we don't know are the facts of the case, which is why your "No" was hasty.

What does "updated" mean?

The author hasn’t signed in since the time of the original post, last Saturday night. He/she may have found an answer to the question in the OP, here or elsewhere:

On 4/1/2023 at 9:54 PM, 1102INSD said:

Is the contractor entitled to adjustments after the "anniversary date of the multiple year contract, or at the beginning of the renewal option period?"

At any rate, the OP has disengaged.