Difference between revisions of "Service Contract Act of 1965"

Revision as of 08:37, 9 November 2023

Introduction

The Service Contract Act (also referred as the McNamara-O'Hara Service Contract Act) protects worker's on federal contracts when the contract's principal purpose is to provide services in the United States using service employees. Minimum wages and fringe benefits must be based on rates that the Secretary of Labor determines as prevailing for service employees.^[1]

Definitions

A “service employee” is an employee, excluding an executive, administrative, or exempt professional employee under 29 CFR Part 541, who is actively working in performance of a service pursuant to contract covered by the SCA.

Service Contract means a contract that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end item of supply. A service contract may be either a nonpersonal or personal contract. It can also cover services performed by either professional or nonprofessional personnel whether on an individual or organizational basis. Some of the areas in which service contracts are found include the following:

• (1) Maintenance, overhaul, repair, servicing, rehabilitation, salvage, modernization, or modification of supplies, systems, or equipment.

• (2) Routine recurring maintenance of real property.

• (3) Housekeeping and base services.

• (4) Advisory and assistance services.

• (5) Operation of Government-owned equipment, real property, and systems.

• (6) Communications services.

• (7) Architect-Engineering (see subpart 36.6).

• (8) Transportation and related services (see part 47).

• (9) Research and development (see part 35).

FAR 37.101 Defines service contract as a contract that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end item of supply.

Is Your Company Required to Comply with the SCA?

To answer this, it must first be determined if the contract is one covered by the Service Contracts Act. The easiest way of determining this is to check the solicitation or request for bids which sometimes indicates whether the SCA will apply to a particular contract. If this is unclear, look at the contract, FAR 52.222-41 - Service Contract Labor Standards needs to be in the contract or subcontract

Formulating Your Bid/Proposal

In formulating a bid you will need to be aware of the applicable DoL SCA wage determination. That wage determination will eventually be attached and incorporated into your contract. Under wage determinations, the required pay will be determined by the place where the contract will be performed. In determining the minimum wage and benefits for particular jobs, employers are required to identify job tasks for each employee and match or “map” those to the comparable DOL labor category.

Wage Determinations

Wage determinations are site specific, contract specific. While you can look up wage determinations on SAM, you need to understand which wage determination applies to your contract. That is the DoL's responsibility. Procurement contracting officers shall seek assistance from DoL, when implementing and determining wage determinations applicable to contracts.

Here is an example of a wage determination

• 

  Click again on the icon to see the determination

You can find Wage Determinations on SAM. Effective 9/26/2005, The Department of Labor (DOL) is amended two regulations to allow for full implementation of the Wage Determinations OnLine (WDOL) Internet Web site (http://www.wdol.gov) as the source for federal contracting agencies to use when obtaining wage determinations issued by the DOL for service contracts subject to the McNamara-O'Hara Service Contract Act (SCA) and for construction contracts subject to the Davis-Bacon Act and Related Acts (DBRA).

You can find wage determinations here:

https://sam.gov/search/?index=sca&sort=-modifiedDate&page=1&pageSize=25&sfm%5BsimpleSearch%5D%5BkeywordRadio%5D=ALL&sfm%5Bstatus%5D%5Bis_active%5D=true

Regulatory Responsibility

The Secretary of Labor is tasked with enforcing the provision of the SCA by issuing regulations, orders, conducting hearings, deciding disputes and taking other action as appropriate. Wage determinations are specific to each contract. The Department of Labor has made many regulations implementing the SCA into practice. These regulations involve various matters from procedure to compensation and safety standards, all of which can be found in various parts of Title 29 of the Code of Federal Regulations.

As the requirement to be in compliance with the SCA are very detailed, the Secretary of Labor, through the Wage and Hour Division of the Employment Standards Administration, provides assistance to contractors to learn and navigate the SCA. This assistance consists of publishing brochures and other explanatory literature, copies of which may be found at local Wage and Hour Division offices. The Wage and Hour Division also provides much information on its website. There is also the Wage and Hour Division helpline which is reached toll free by dialing 1-866-4USWAGE.

The Department of Labor may request reports on the costs of employee pay and benefit per contract so the contractor should keep meticulous records tracking this information to that it is readily produced when requested.

Contractor Requirements

For prime contracts exceeding $2,500, contractors and subcontractors performing work are required to:

Pay

Pay their employees at least at the wage rate and with the benefits of private employers in the locality at which the work is being performed. If there was a prior contactor with a collective bargaining agreement, the new contractor must pay the rates set forth in that agreement.

Benefits

The contractor must pay the amount of benefits listed in the wage determination. The contractor has two options:

• To pay at least the amount of benefits listed in the wage determination, or

• To provide benefits to the employee which are equal to or more than the amount in the wage determination in leu of cash. If this option is chosen, it is up to the contractor to prove that the benefits being provided are the equivalent or more than the amounts required in the wage determination.

Conformance of Labor Categories

http://www.govcwiki.org/index.php?title=File:SCA_Conformance_Process.pdf

The SCA conformance process is a method by which a contractor may propose job titles and wage rates to legally employ workers engaged in work on a contract in occupations that are not listed in the applicable SCA wage determination.

When an applicable contract wage determination does not list an occupation in which covered workers will be or are employed, the conformance process allows contractors to conform the unlisted occupation at a wage rate that is reasonable in relationship to the wage rates of listed occupations in the applicable wage determination that have comparable skills and duties.

It should be emphasized that “the conformance process of establishing wage rates that bear a reasonable relationship to those listed in a wage determination cannot be reduced to any single formula.” 29 C.F.R. § 4.6(b)(2)(iv)(A). The fringe benefits for such conformed occupations will be those already contained in the applicable wage determinations.

The contractor must forward the conformance request to the contracting agency no later than 30 days after employment of workers has begun in the occupation to be conformed.

Resources

The U.S. Department of Labor has a very useful site with loads of resources for contractors. That site can be found here:

https://www.dol.gov/agencies/whd/government-contracts/service-contracts

References

1. ↑ codified at 41 U.S.C. §§ 6701–6707