1. 2011 McNamara – O’Hara Service Contract Act Webinar for Contracting Officials

2. Presenters
William Brooks, Senior Compliance Specialist, U.S. Department of Labor
Sandra Hamlett, Branch Chief, U.S. Department of Labor
Kyle Roberts, Labor Advisor, United States Air Force
Mahruba Uddowla, Procurement Analyst, General Services Administration

3. Internet Sites Wage Determinations – http://www.wdol.gov
Wage and Hour Division -
Office of the Administrative Law Judges Law Library -
Administrative Review Board -
Debarred Bidders List -

4. Code of Federal Regulations 29 CFR Part
1 - Procedures for Predetermination of Wage Rates under the Davis-Bacon Act
3 - Payment & Reporting of Wages on Federal Construction Contracts
4 - Federal Service Contracts
5 - Labor Standards Provisions Applicable to Federal
Construction Contracts
6 - Rules of Practice for Administrative Proceedings

5. Code of Federal Regulations 29 CFR Part
7 & 8 - Rules for DBA/SCA appeals before the ARB
FLSA (Workers with Disabilities)
FLSA (Credit for tips, meals, & lodging)
FLSA (Exempt - Salaried employees)
FLSA (Overtime)
FLSA (Hours Worked)

6. Labor Standards Statutes
The Davis-Bacon Act (DBA)
Davis-Bacon and Related Acts (DBRA)
Contract Work Hours and Safety
Standards Act (CWHSSA)
Copeland “Anti-Kickback” Act (CA)
Walsh-Healey Public Contracts Act (PCA)
McNamara-O’Hara Service Contract Act (SCA)

7. SCA Legislative History and Purpose
SCA became effective in January 1966
SCA was amended in 1972 and 1976
It is the most recent of government contract labor standards laws administered by the Wage and Hour Division (WHD) 7

8. SCA Legislative History and Purpose
To “close the gap” in labor standards protection for service contracts subject to SCA and contracts subject to PCA and DBA
To remove wages as a bidding factor in the competition for Federal service contracts 8

9. SCA Requirements (29 C.F.R. § 4.6)
Contracts in excess of $2,500 must contain labor standards clauses and:
Minimum monetary wages and fringe benefits determined by Department of Labor (DOL)
Recordkeeping - Posting requirements
Safety and health provisions
Statement of rates paid to federal employees

10. SCA Requirements (cont’d.)
Payment of FLSA minimum wage for contracts of $2,500 or less, or contracts exceeding without wage determination:
FLSA Minimum Wage:
Effective July 24, 2009 = $7.25

11. SCA Coverage Elements (29 C.F.R. §§ 4.107, 4.108 & 4.110)
Contracts entered into by Federal Government and District of Columbia
Contracts principally for services
Contracts performed in the U.S.
Contracts performed through the use of service employees

12. Federal Contracting Agencies (29 C.F.R. §§ 4.107 & 4.108)
Agencies or instrumentality
Department of Defense (DOD)
Wholly owned corporations of the Government
U.S. Postal Service
Non-appropriated fund activities
Military post exchanges (PX’s)
Contracts entered into by
District of Columbia

13. Contracts to Furnish Services (29 C.F.R. §§ 4.111 & 4.130)
Examples of service contracts:
Security and guard services
Janitorial services
Cafeteria and food services
Support services at Government installations

14. Contracts “in the US” (29 C.F.R. § 4.112)
50 States, the District of Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf, American Samoa, Guam, Wake Island, Johnston Island, and the Northern Marianas (Canton Island, Eniwetok Atoll, and Kwajalein Atoll are no longer a part of the United States)
Any portion of a contract principally for services performed in the United States is covered

15. Use of “service employees” (29 C.F.R. § 4.113)
Section 8(b) of SCA defines service employee as:
Any person engaged in performance of contract, except
Employees who qualify for exemption as bona fide executive, administrative or professional employees under the FLSA (29 C.F.R. Part 541)
Employee coverage does not depend on contractual relationship (29 C.F.R. § 4.155)

16. Three Tests for 541 Exemption
Salary Level
Salary Basis
Job Duties

17. Salary Basis Test
Regularly receives a predetermined amount of compensation each pay period (on a weekly or less frequent basis)
The compensation cannot be reduced because of variations in the quality or quantity of the work performed
Must be paid the full salary for any week in which the employee performs any work
Need not be paid for any workweek when no work is performed

18. Minimum Salary Level: $455
For most employees, the minimum salary level required for exemption is $455 per week
Must be paid “free and clear”
The $455 per week may be paid in equivalent amounts for periods longer than one week
Biweekly: $910.00
Semimonthly: $985.83
Monthly: $1,971.66

19. Administrative Duties
Primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers
Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance

20. Professional Duties
Primary duty is the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction
Primary duty is the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor

21. Executive Duties
Primary duty is management of the enterprise or of a customarily recognized department or subdivision
Customarily and regularly directs the work of two or more other employees
Authority to hire or fire other employees or recommendations as to the hiring, firing, advancement, promotion or other change of status of other employees given particular weight

22. Contracts Not SCA Covered (29 C.F.R. § 4.134)
Contracts primarily for something other than services, e.g., construction
Contracts for leasing of space
Contracts for professional services
Federally-assisted contracts for services entered into by state governments, e.g., Medicaid and Medicare programs

23. Statutory Exemptions

24. SCA Statutory Exemptions (41 U.S.C. § 356)
SCA does not apply to the following:
Contracts for construction of public buildings or public works covered by DBA
PCA work required by contract – e.g. manufacturing or supplies
Contracts for carriage of freight or personnel where published tariff rates are in effect (excluding mail haul contracts)

25. SCA Statutory Exemptions (cont’d.)
Contracts for services of communications companies (e.g., radio, telephone) subject to the Communications Act of 1934
Contracts for public utility services, including electric light and power, water, steam, and gas
Employment contracts providing for direct services to a Federal agency by individuals
Contracts with the U.S. Postal Service for operation of postal contract stations

26. Authority to Grant Exemptions (41 U.S.C. § 353(b)(3))
Necessary and proper in the public interest or to avoid serious impairment of government business; and
In accord with remedial purpose to protect prevailing labor standards

27. “Workers with Disabilities” (29 C.F.R. § 4.6(o))
Contractors who obtain FLSA “section 14” certificates for SCA workers:
Permitted to pay less than prevailing wage
Must pay prevailing fringe benefits
Health and welfare benefits in full
Vacation and holiday benefits based on “commensurate rate” and hours worked

28. SCA Apprentices and Trainees
Apprentices and trainees are permitted to work at less than the SCA predetermined rate for the work they perform when individually registered in a:
bona fide apprenticeship program registered with a State apprenticeship agency that is recognized by the DOL, or
under a program registered with the DOL’s Employment Training Administration Office of Apprenticeship.

29. Regulatory Exemptions

30. Regulatory Exemptions (29 C.F.R. §§ 4.123(d)-(e))
SCA does not apply to the following:
Postal Service contracts with common carriers
Postal Service mail contracts with owner- operators (i.e., individuals, not partnerships)
Certain items for “commercial services”

31. “Commercial Services” (29 C.F.R. § 4.123(e)(1))
Contracts and subcontracts for maintenance, calibration, and repair of:
ADP & office information/word processing systems
Scientific & medical apparatus or equipment where the application of microelectronic circuitry or other technology of at least similar sophistication
Office/business machines where services performed by supplier or manufacturer

32. “Commercial Services” (29 CFR 4.123(e)(2))
For the following seven services:
Maintenance and servicing of motorized vehicles owned by Federal agencies
Issuance and servicing of credit, debit, or similar cards by Federal employees
Lodging, meals, and space in hotels/motels for conferences

33. “Commercial Services” (cont’d)
Real estate services
Transportation on regularly scheduled routes
Relocation services
Maintenance services for all types of equipment obtained from manufacturer or supplier under a “sole source” contract

34. “Commercial Services” Criteria to Apply Exemption
Services offered and sold regularly
Contract awarded on “sole source basis” or on basis of factors in addition to price
Services furnished at “market” or “catalog” prices

35. “Commercial Services” Criteria (cont’d.)
Employee spends small portion of available hours on government contract
Employee receives same compensation plan
Contracting officer and prime contractor certify that criteria can be met and complied with

36. Concession Contracts Exemption
Section 4.133(b) of SCA provides a limited exemption for concession contracts principally (i.e., greater than 50 percent) for the furnishing of food, lodging, automobile fuel, souvenirs, newspaper stands and recreational equipment, but only if these services are principally furnished to the general public, who visit government recreation and scenic areas, as distinguished from concession services provided the U.S. Government or its personnel (e.g., cafeterias in federal office buildings).

37. GOCO Contracts Exemption
Contracts to operate or manage an entire federal facility or program
Sometimes contracts are entered into with a prime contractor to operate a federal facility or program for and on behalf of the government.
Because the prime contractor is in effect operating in the place of the government as an “agent for the government, the prime contractor’s workers are not covered by the SCA. Subcontractors must comply with SCA.

38. SCA Coverage Determinations
Contracting agencies have initial responsibility for determining whether SCA applies
DOL has authority for final determination on coverage
Final rulings may be appealed to the Administrative Review Board (ARB)

39. Introduction to SCA Wage Determinations

40. Basic Statutory Requirement
Sections 2(a)(1) and (2) of SCA provide that covered contracts in excess of $2,500 contain a wage determination
2(a)(1) – Wages
2(a)(2) – Fringe Benefits

41. Applying Wage Determinations (29 C.F.R. §§ 4.143 – 4.145)
Agencies must obtain new WD at least once every two years
New WD may be required each year if:
Contract subject to annual appropriations
Annual contract option being exercised
Most contract extensions, even if shorter than one year, require a new WD

42. Obtaining an SCA WD (29 C.F.R. § 4.4)
Regulations no longer require Agencies to submit Standard Form (SF-98) or an Electronic (e) 98
Agencies have option to download WD directly from website, or submitting an e98 to DOL, at
Other approaches no longer utilized include the Blanket WD program, MOUs with agencies, and paper Standard Form (SF) 98 and 98a

43. Two Types of Wage Determinations
Prevailing – includes union dominance wage determinations
4(c) – based on the previous contractor’s collective bargaining agreement (CBA)

44. SCA Prevailing Wage Determinations

45. SCA Prevailing WDs Principles
WDs must be based on data
WDs must reflect a consistent wage and salary structure

46. Determining “Prevailing” Wage (29 C.F.R. § 4.51(b))
Majority paid same rate (rare) (e.g., union dominance)
If no majority, then measure of central tendency –
Median (midpoint in distribution)
Mean (weighted average)

47. Determining “Prevailing” Wage (29 C.F.R. §§ 4.51(c)-(d)) (cont’d.)
Regulations also authorize “slotting” to determine rate for occupation
Insufficient survey data
Based on similarity of duties and skills of occupations with sufficient data
Due Consideration

48. Basis for Prevailing WDs
The best available data – usually Bureau of Labor Statistics (BLS) surveys.
WDs may also be based on:
Non-appropriated Fund (NAF) surveys
Wage Board surveys and rates
GS locality pay schedules

49. BLS Surveys
National Compensation Survey (NCS) - (This data is no longer available in a format that can be used to issue wage rates)
Occupational Employment Statistics (OES) survey

50. OES Surveys every metropolitan and non-metropolitan area in US
Mail survey conducted by State Employment Services under BLS’ direction
Samples 400,000 establishments annually for a three- year total of 1.2 million establishments

51. OES (cont’d)
OES sample much larger than NCS and publishes results for more occupations
Does not level workers within an occupation
Data are used for ETA’s Foreign Labor Certification programs

52. How is BLS Data Used for SCA WDs?
OES is the primary data source in which to issue wage rates.

53. Importance of Salary Structure for SCA
Surveys produce estimates with resulting anomalies in the data
Wage increases are capped at 10% annually
SCA wage rates are retained when the survey data below current SCA WD rate

54. Locality Basis of WDs
Locality has an elastic and variable meaning under SCA
WDs are based on data for a MSA and Non-MSAs
Regionwide
Nationwide WDs.

55. Consolidated (Standard) Prevailing SCA WDs
or WD numbers
Wage rates for approximately 400 occupations grouped by several broad occupational categories
Based primarily on BLS cross-industry survey data
Job descriptions are listed in the SCA Directory of Occupation

56. SCA Directory of Occupations
Contains standard position descriptions for most SCA occupations listed on prevailing WDs
Contains Federal Grade Equivalencies (FGE)
If WD occupation is not listed in the Directory, the position description may be included on the WD

57. Non-Standard Prevailing WDs
Usually based on different data sources
Data sources may be industry specific
May cover broader geographic areas
Job definitions may or may not be listed in SCA Directory of Occupations

58. Examples of Non-Standard WDs
Union Dominance
Food & Lodging
Halfway House
Nursing Home
Moving & Storage
Fast Food
Forestry
Forest Firefighting
Elevator Maintenance
Maritime
Mail hauling
Debt Collection
Barber & Beautician
Diving services .

59. Fringe Benefits (on most prevailing SCA WDs)
Health & Welfare (H&W) Benefits:
1996 Rulemaking -- Variance to permit nationwide benefits
Updated in June
Based on:
BLS Employer Costs for Employee
Compensation
Use data for all workers in Private Industry

60. Fringe Benefits (cont’d.)
H&W rate is the total
Of all benefits not legally required,
Except vacation & holiday
H&W rate - two different methods of compliance
“Fixed cost” per employee
“Average cost”
(Discussed in Compliance Principles session)

61. Other Fringe Benefits (on most prevailing SCA WDs)
Vacation pay
Holiday pay

62. Clarifying Common Misconceptions About SCA WDs
Federal agencies must obtain SCA WD or request (by e98) for any contract in excess of $2,500
WHD issues SCA WD for any contract that may involve more than five service employees
For contracts with fewer than five service employees, WHD has the option of issuing a WD

63. Review and Reconsideration of SCA WDs
Must be timely submitted
Prior to the Opening of Bids for an IFB
No later than 10 days before
Commencement of a negotiated contract
Exercise of contract option, or
Extension
Administrator within 30 days will render decision or notify that more time is needed

64. Review and Reconsideration of SCA WDs
Must provide supporting data:
Current survey of contract location and contested occupation
Based on statistical sample of population
Identification of who conducted survey and statistical methods utilized
Administrator ruling may be appealed to ARB

65. Administrative Review Board (ARB)
Independent review body to which any final ruling of the Administrator or decision of an ALJ may be appealed
Decision of the ARB is final administrative action
Title 29 C.F.R. Part 8 provides timeframes and procedures for ARB appeals

66. SCA - Section 4(c) Wage Determinations

67. Section 4(c) WDS Incumbent CBA
Part of 1972 Amendments to SCA, a Statutory requirement
Does not depend on issuance of WD
Short-form WD should be issued
Based on incumbent CBA
Includes accrued, as well as prospective,
wages and fringe benefits
A contractor may be its own successor

68. Application
The CBA must be applicable to work performed on the predecessor contract in order to have application to the successor contract
The successor contract must be for substantially the same services being provided in the same contract locations

69. Provisions Successor contractor must pay CBA rates
whether or not employees are hired
whether or not signatory to CBA
Obligations of Section 4(c) are self-executing
Interpretation of CBA is based on intent of parties signatory to CBA

70. Limitations of Section 4(c)
Section 4(c) does not extend to other CBA provisions such as:
Seniority
Grievance procedures
Work rules
Overtime

71. Limitation on Self-Executing Application of 4(c)
Applies if contracting officer (CO) provides contractor and union with written notice of key procurement dates:
IFB – CBA must be received by CO not less than 10 days before bid opening
RFP – CBA must be received before award if start is within 30 days, or
RFP – Not less than10 days before start if award is beyond 30 days

72. Exception to the Application of Section 4(c) Requirement
Successor contractor is statutorily obligated to pay the CBA rates until such time as the CBA is determined to be:
“Substantially at variance” with locally prevailing rates (29 C.F.R. § 4.10), or
Not reached as a result of “arm’s-length” negotiations (29 C.F.R. § 4.11)

73. Wage Determinations On-Line (WDOL)
(An E-Government Initiative)

74. WDOL.GOV
Created by an inter-agency task force including DOL, DOD, OMB, GSA, DOE, and the National Technical Information Systems
The purpose was two-fold:
To meet the Presidential initiative for e-government
To enhance the public’s ability to obtain WDs

75. WDOL.GOV Provides access to: SCA Wage Determinations (WDs)
Davis-Bacon Act (DBA) Wage Decisions
Archived SCA and DBA WDs

76. WDOL.GOV 5th Edition of the Service Contract Directory of Occupations
Agency Labor Advisors
DOL and FAR regulation cites
Users guide
AAMs

77. WDOL.GOV The system is menu driven Reduces WD processing time
Ensures consistent application of labor standards
Provides an “alert” service to notify users of the latest update

78. Obtain SCA WDs on WDOL.gov
On WDOL homepage click on “Selecting SCA Wage Determinations”
Respond to each logic question
Two “Standard” prevailing WDs for each locality
Odd-Numbered WD
Even-Numbered WD

79. Obtain SCA WDs (cont’d.)
“Non-Standard” prevailing WDs
WDOL selection process will prompt user
Menu will provide a drop-down listing
20 specific service industries
If no WD available on WDOL, the CO must use the “e98” system

80. Monitoring SCA Wage Determinations
Effective WDs are:
WDs received timely by agency
Required to be included into contracts
Published in WDOL (date at top of WD) each Tuesday
Issued by DOL (date found next to WD#)
“Published” date and “Issued” date are different to reflect time needed to process

81. Alert Service
Contracting officer and the public may select to be notified of revisions to SCA WDs
Specific contract action
“Standard” WDs
“Non-Standard” WDs
notification for period of time or date

82. Archived SCA Wage Determinations
Current WDs are published and accessible
Prior revisions to WDS are maintained in the “Archived SCA WD” database
Archived WD Number must be known
May not be used without DOL approval

83. SCA Conformance Procedures
SCA Regulations
29 C.F.R. § 4.6(b)(2)

84. Conformance (Adding Missing Class of Work to WD)
Work not performed by a class on WD
Proposed rate must bear a reasonable relationship to those listed on WD:
No single formula
Look at comparable classes on WD
No specific analytical process to determine conformable rate

85. Conformance (cont’d.) Conformances may not be used to:
Artificially subdivide classes listed in WD
Combine two or more classes listed in WD to create a new class
Establish a job level lower than lowest level listed in WD for a job classification family (Computer Operator I through V)
Establish helper and trainee classes

86. Conformance (cont’d.)
Contractor prepares conformance request (SF 1444) or other format:
Proposes class of worker and job description
Proposes hourly rate and rationale
Submits to contracting agency no later than 30 days after employee performance
Request form (SF 1444) on WDOL.gov

87. Conformance (cont’d.) Contracting agency reviews request
Makes recommendation
Submits to DOL for final action
DOL should respond within 30 days

88. Updating Conformed Rates (29 C.F.R. § 4.6(b)(iv)(B))
Two methods may be used:
Submit a new conformance request, or
“Indexing:”
Calculate overall percent change between rates in previous and new WD for classes used on contract
Overall percent change is applied to conformed rate to obtain an updated rate
Contracting agency must be advised, not DOL

89. EXAMPLE OF INDEXING WD Rev. 8 WD Rev. 9 % Secretary I $10.00 $10.80 8
Accting Clk I $10.50 $
10/2
= 5%
Previously conformed class:
Account Collector $ % =
New indexed rate is $13.13

90. Questions?