Service Contract Act; Labor Standards for Federal Service
Contracts [07/26/2000]
Volume 65, Number 144, Page 45903-45908
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DEPARTMENT OF LABOR
Office of the Secretary
29 CFR Part 4
RIN 1215-AB26
Service Contract Act; Labor Standards for Federal Service
Contracts
AGENCY: Wage and Hour Division, Employment Standards Administration,
Labor.
ACTION: Final rule.
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SUMMARY: Pursuant to Section 4(b) of the McNamara-O'Hara Service
Contract Act (SCA), the Department of Labor (DOL or the Department) is
issuing a temporary exemption from coverage for certain subcontracts
for commercial services. On this same date, the Department of Labor is
separately proposing a similar exemption for both prime contracts and
subcontracts. This exemption mirrors the subcontract portion of the
proposed rule and will remain in effect for the period of one year or
until final action is taken on the DOL proposed exemption for both
prime and subcontracts, whichever occurs first. The exemption for
subcontracts was determined to be necessary and proper in the public
interest to avoid the serious impairment of government business, and is
in accord with the remedial purpose of the SCA to protect prevailing
labor standards.
EFFECTIVE DATE: August 25, 2000.
FOR FURTHER INFORMATION CONTACT: William W. Gross, Director, Office of
Wage Determinations, Wage and Hour Division, Employment Standards
Administration, U.S. Department of Labor, Room S-3028, 200 Constitution
Avenue, N.W., Washington, D.C. 20210; telephone (202) 693-0062. This is
not a toll-free number.
SUPPLEMENTARY INFORMATION:
I. Paperwork Reduction Act
This rule contains no reporting or recordkeeping requirements
subject to the Paperwork Reduction Act of 1980 (Pub. L. 96-511). The
existing information collection requirements contained in Regulations,
29 CFR Part 4 were previously approved by the Office of Management and
Budget under OMB control number 1215-0150.
II. Background
On October 1, 1995, the Federal Acquisition Regulations were
amended to implement provisions of the Federal Acquisition Streamlining
Act (FASA). One provision of the final regulation, 48 CFR
12.504(a)(10)), provided that the requirements of the McNamara-O'Hara
Service Contract Act (SCA) are not applicable to subcontracts at any
tier for the acquisition of commercial items or services.
After a subsequent review of the issue by the FAR Council, the
Administrator for Federal Procurement Policy wrote to the Secretary of
Labor and requested that the Department propose an exemption for a more
limited group of commercial service contracts (both prime contracts and
subcontracts). The Administrator stated that the FAR Council had
concluded that a blanket exemption of all subcontracts for commercial
items may not adequately serve the Administration's policy of
supporting exemptions of the SCA only where they do not undermine the
purposes for which the SCA was enacted. Therefore the FAR Council
agreed that any exemption from the coverage of SCA for subcontracts for
the acquisition of commercial items or components should be
accomplished under the Secretary of Labor's authority in the SCA, and
stated that it would withdraw the FAR provision.
The FAR Council indicated that the adoption of their
recommendations will further the commitment of the Administration to be
more commercial-like, encourage broader participation in government
procurement by companies doing business in the commercial sector, and
reinforce their commitment to reduce government-unique terms and
conditions from their contracts. Furthermore, the FAR Council
represented that the limited exemptions that they proposed would be in
accord with the remedial purpose of the SCA to protect prevailing labor
standards.
The Department of Labor on this date has issued a Notice of
Proposed Rulemaking (NPRM) to amend the SCA Regulations to implement
the exemptions requested by the FAR Council. The FAR Council is
contemporaneously withdrawing its current rule that exempts commercial
subcontracts from the application of SCA (48 CFR 12.504(a)(10)). As a
result of the FAR Council's actions, a small group of commercial
subcontracts that were previously exempted under the FAR rule and that
also meet the requirements of DOL's proposed rule could change from
exempt to nonexempt and back to exempt if the DOL proposal becomes
final as it is currently proposed. The Department, pursuant to its
authority under section 4(b) of the SCA, finds that a temporary,
limited exemption from the SCA is necessary and proper in the public
interest to avoid the serious impairment of government business. This
exemption is necessary to prevent the disruption that could be caused
by such changes, including the possible disruption of services if the
current subcontractor does not agree to continue the subcontract
services under the requirements of SCA. Furthermore, the Department
finds that as a result of the criteria applied to the exempt services,
this temporary, limited exemption is in accord with the remedial
purpose of the Act to protect prevailing labor standards.
This exemption does not apply to all commercial subcontracts that
may have been exempt under the now withdrawn FAR rule nor does it apply
to any prime contracts. The exemption is limited solely to those
subcontracts that (1) were or would have been exempt under the now
withdrawn FAR rule and (2) would be exempt under the DOL proposed rule
if that rule becomes final in its current form. The exemption will be
in effect for one year or until final action is taken on the NPRM
issued this date, whichever occurs first. The Department notes that it
intends to proceed expeditiously with this
[[Page 45904]]
rulemaking and anticipates that a final rule, after review of all of
the comments, will be issued within six months.
The Department also finds that there is good cause to issue this
temporary final rule without prior notice and comment. Prior notice and
comment would be contrary to the public interest because of the
disruption to contractors and to the provision of services to the
Government caused by such changes from SCA-exempt, to SCA-covered, to
SCA-exempt over the period of less than one year.
III. Summary of the Exemptions
This rule addresses two separate but somewhat related issues.
First, the current exemption for the maintenance and repair of
Automated Data Processing (ADP) equipment, 29 CFR 4.123(e)(1), is
modified to apply the exemption to subcontracts, and with respect to
subcontracts, reflects terminology changes in law that have occurred,
and applies the exemption to installation services. Second, a new
exemption, similar to the current ADP exemption, is added to 4.123(e)
to exempt subcontracts for a specified subset of commercial services
that also meet certain criteria.
Revision of the current ADP exemption
This final rule retains the current language of the ADP exemption
for application to prime contracts and adds a new subparagraph (2) to
Sec. 4.123(e) for application to subcontracts. The new subparagraph
first reflects changes in terminology stemming from the passage of the
Clinger-Cohen Act of 1996, 40 U.S.C. 1401 et seq., which set forth a
new framework for the management and acquisition of information
technology and replaced the ``ADP'' terminology originally in the
Brooks Automatic Data Processing Act, 40 U.S.C. 759, with ``information
technology'' to reflect the convergence of ADP and telecommunications
equipment and technology.
As defined at 40 U.S.C. 1401(3) and incorporated in the FAR, 48 CFR
2.101, the term ``information technology,'' with respect to an
executive agency, means ``any equipment or interconnected system or
subsystem of equipment that is used in the automatic acquisition,
storage, manipulation, management, movement, control, display,
switching, interchange, transmission, or reception of data or
information.'' Under this definition, equipment is considered to be
used by an executive agency if the agency uses the equipment directly
or if the equipment is used by a contractor under a contract which
requires the use of such equipment, or requires the use of such
equipment to a significant extent in the performance of a service or
the furnishing of a product. The term ``information technology'' does
not include any equipment that is acquired by a contractor incidental
to a contract; or any equipment that contains imbedded information
technology that is used as an integral part of the product, but the
principal function of which is not the acquisition, storage,
manipulation, management, movement, control, display, switching,
interchange, transmission, or reception of data or information. For
example, HVAC (heating, ventilation, and air conditioning) equipment
such as thermostats or temperature control devices and medical
equipment where information technology is integral to its operation, is
not information technology.
In addition, the final rule applies to installation services (where
those services are not subject to the requirements of the Davis-Bacon
Act).
New exemption for Certain Commercial Service Subcontracts
In certain situations, an employee's work on a government contract
represents a small portion of his or her time and the balance of the
time is spent on commercial work. In such cases, the FAR Council
represents that the Government loses the full benefits of competition
for its service contracts because some contractors decline to compete
for Government work due to specific government requirements. Consistent
with the recommendation of the FAR Council, this exemption is limited
to those subcontracts where the services being procured are such that
it would be more efficient and practical for the subcontractor to
perform the services with a workforce that is not primarily assigned to
the performance of government work. In addition, in order that the
exemption comport with the statutory requirement that it be in accord
with the remedial purposes of the Act to protect prevailing labor
standards, a number of criteria must be satisfied. First, the proposed
exemption would apply only when the subcontract award is not determined
primarily upon the factor of cost. Therefore, the subcontractor
providing the best service at a somewhat higher or lower cost would not
be at a competitive disadvantage. Second, the criteria would limit the
application of the exemption to circumstances where the nature of the
procurement dictates that the most efficient and practical performance
of the workload can be accomplished with a workforce that is not
dedicated to working primarily on the Government contract. Thus, the
competitive pressures upon employee wages that might exist if the
services were performed by a workforce dedicated to the Government
contract would not come into play on the subcontracts within the scope
of the exemption. Furthermore, even if a subcontractor might be
inclined to reduce wages to secure the subcontract, the criteria would
forbid that practice.
Under this rule, the following criteria for exemption are applied
to a short list of services. The exemption applies only if the services
under the subcontract meet all of the following criteria.
(1) The services under the subcontract are commercial--i.e., they
are offered and sold regularly to non-Governmental customers, and are
provided by the subcontractor to the general public in substantial
quantities in the course of normal business operations.
The basic underlying purpose of the exemption is to permit a
prospective subcontractor to utilize its commercial compensation
practices for both Government and private commercial work. If the
prospective subcontractor does not currently perform the solicited
services, then conforming to the SCA requirements would not cause the
subcontractor to alter its commercial compensation practices.
(2) The subcontract will be awarded on a sole source basis or the
subcontractor will be selected for award on the basis of other factors
in addition to price. In such cases, price must be equal to or less
important than the combination of other non-price or cost factors in
selecting the subcontractor.
One of the basic purposes of the Service Contract Act is to
counteract the negative impact that competition based on price alone
may have upon wages. If a subcontract is awarded on a sole source
basis, there is no competition and price is clearly not the basis for
awarding the subcontract.
For the majority of other subcontracts that are competitively
awarded, this criterion would attempt to largely remove wages from
consideration by making quality of service and other non-cost factors
equal to or more important than the bottom line price. If one assumes
that the best employees (contractors) are paid (pay) higher wages, then
this criterion would allow these employees (contractors) to compete on
the basis of the employees' increased productivity and higher quality
service. These employees/contractors should not be disadvantaged even
though the employee wages and possibly the resulting subcontract price
are somewhat higher than the lowest offer.
[[Page 45905]]
(3) The subcontract services are furnished at prices which are, or
are based on, established catalog or market prices. An established
price is a price included in a catalog, price list, schedule, or other
form that is regularly maintained by the subcontractor, is either
published or otherwise available for inspection by customers, and
states prices at which sales are currently, or were last, made to a
significant number of buyers constituting the general public. An
established market price is a current price, established in the usual
course of trade between buyers and sellers free to bargain, which can
be substantiated from sources independent of the manufacturer or
subcontractor. Normally, market price information is taken from
independent market reports, but market price could be established by
surveying the firms in a particular industry or market.
This criterion ensures that the subcontractor will provide the
services to the Government on the same basis that the subcontractor
services commercial accounts. Combined with the other criteria, this
requirement should ensure that subcontractors do not decrease employee
compensation as a part of the competitive contracting process.
(4) All of the service employees who will perform the services
under the subcontract spend only a small portion of their time (a
monthly average of less than 20 percent of the available hours on an
annualized basis, or less than 20 percent of available hours during the
contract period if the contract period is less than a month) servicing
the Government subcontract.
If the employees spend only a small portion of their available work
hours on the Government contract, the subcontractor would not likely be
willing to alter its compensation practices simply to obtain the
subcontract. (Note: Criterion 5 would also specifically preclude any
such change in compensation practices.) Furthermore, the criteria for
exemption will not be satisfied by rotating the workforce and having
different employees work on the contract each day of the week. In the
Department's experience it would be extraordinary for a contractor to
staff a contract in this manner. Therefore in such a case, although
each individual employee would spend less than 20% of his/her work
hours on the Government contract, a prime contractor could not
certify--as required by Criterion 6--that all or nearly all offerors
would staff the contract with service employees who spend only a small
portion of their time on the project.
(5) The subcontractor utilizes the same compensation (wage and
fringe benefits) plan for all service employees performing work under
the subcontract as the subcontractor uses for these employees and for
equivalent employees servicing commercial customers.
This criterion ensures that the employees servicing the government
contract will be compensated exactly as they would be if they were
servicing a commercial account. Thus, the prevailing labor standards
for private work would not be impacted in any way by the award of the
subcontract. Furthermore, because subcontract award is not determined
primarily on the basis of cost (Criterion 2), the subcontractor paying
the lowest wages will not have a competitive advantage over other
employers who pay average or above average wages. These subcontractors
will compete for the subcontract work on the same basis that they
compete for private work: quality of service and overall value.
(6) The prime contractor determines in advance, based on the nature
of the subcontract requirements and knowledge of the practices of
likely offerors, that all or nearly all offerors will meet the above
requirements. If the services are currently being performed under a
contract or subcontract, the prime contractor shall consider the
practices of the existing contractor or subcontractor in making a
determination regarding the above requirements.
This requirement is designed to ensure that all subcontractors
compete on an equal basis, and eliminate the possibility that a
subcontractor subject to SCA would be forced to compete against a
subcontractor that would be exempt from SCA. Furthermore, as noted in
the discussion of Criterion 4, this requirement, which takes into
consideration not only the practices of likely offerors but also the
nature of the subcontract requirements, is a necessary safeguard to
prevent individual offerors from juggling staffing patterns simply in
an effort to avoid SCA coverage. This criterion also serves to protect
those employees (either contractor or Federal employees) who might
currently be engaged in performing the solicited services on a full-
time basis.
(7) The exempted subcontractor certifies in the subcontract to the
provisions in paragraphs (1), and (3) through (5). The prime contractor
shall review available information concerning the subcontractor and the
manner in which the subcontract will be performed. If the prime
contractor has reason to doubt the validity of the certification, SCA
stipulations shall be included in the subcontract.
This criterion provides a mechanism for addressing and correcting
situations where the exemption may have been misapplied. (It is not
anticipated that the prime contractor will do a complete investigation
into the application of the exemption to the subcontractor, but rather
will do a review based on known information regarding the
subcontractor, including information submitted in the solicitation
process.) Furthermore, if the Department of Labor, in its enforcement,
determines that the subcontract is not in fact exempt, it shall require
that SCA stipulations be included in the subcontract. The prime
contractor, who in almost all cases will have SCA stipulations included
in its contract, will be ultimately responsible for compliance with the
requirements of the Act. The Department may therefore require that the
SCA requirements be effective as of the date of contract award. The
Department notes that an exempt subcontractor is not required to keep
any particular records to meet its burden of showing that the criteria
are satisfied.
These criteria will be applied only to the following small group of
commercial services. In order for the exemption to apply, the
subcontract must meet all of the required criteria and must be for one
of the specified services listed below. Subcontracts for services that
are not within the scope of the services specifically listed, will not
be exempt from coverage of SCA even though the subcontract meets all of
the required criteria. Furthermore, subcontracts subject to section
4(c) of the SCA are not exempt.
For each of the services included on the list of services to which
the exemption would apply, the type of services covered is explained.
The difficulties which the FAR Council stated have been encountered in
procuring the services are discussed in the NPRM.
Automatic Data Processing and Telecommunications Services
For several years the Department of Labor regulations implementing
the Service Contract Act have contained an exemption for contracts
principally for the maintenance, calibration and/or repair of 1)
automated data processing and office information/word processing
systems; 2) scientific equipment and medical apparatus or equipment of
microelectronic circuitry or other technology of at least similar
sophistication; and 3) office/business machines not otherwise exempt
where services are performed by the
[[Page 45906]]
manufacturer or supplier of the equipment. In short, the current
exemption applies exclusively to hardware maintenance when certain
criteria are met. In addition to the expansion of the current ADP
exemption to subcontracts for installation services as well as hardware
maintenance, an exemption for subcontracts for software and other ADP
support services is added in conjunction with the criteria listed
above.
Provided the specified criteria are met, the exemption covers a
broader range of automatic data processing and telecommunications
services including: ADP facility operation and maintenance services
provided at the contractor's facility, ADP telecommunications and
transmission services, ADP teleprocessing and timesharing services, ADP
systems analysis services, information and data broadcasting or data
distribution services, ADP backup and security services, ADP data
conversion services, computer aided design/computer aided manufacturing
(CAD/CAM) services, digitizing services (including cartographic and
geographic information), telecommunications network management
services, automated news services, data services or other information
services (e.g., buying data, the electronic equivalent of books,
periodicals, newspapers, etc.) and data storage on tapes, compact
disks, etc. This exemption does not apply to ADP data entry services or
ADP optical scanning services.
Automobile or other vehicle (e.g., aircraft) maintenance services
(other than contracts to operate a Government motor pool or similar
facility).
Contractors operating automobiles or other vehicles have a need for
services such as normal maintenance (e.g., changing oil and filters,
rotating tires, etc.), mechanical repairs, paint and body work, glass
replacement, and other repairs needed to maintain the automobile or
other vehicle. Unless the contractor has its own repair shop for such
work, it is subcontracted to commercial firms.
Financial services involving the issuance and servicing of cards
(including credit cards, debit cards, purchase cards, smart cards, and
similar card services).
Although these services are not typically required by most service
contracts and therefore any subcontracts for these services would not
typically be covered by the wage determination requirements of the
prime contract, any subcontract for such financial services would be
exempt if all the required criteria are met.
Lodging at hotels/motels and contracts with hotels/motels for
conferences, including lodging and/or meals, which are part of the
contract for the conference.
Prime contractors may contract with hotels/motels for meeting rooms
for conferences of limited duration (e.g., one to five days). These
subcontracts may be for conferences where attendance is limited to
Government employees or may involve attendance by other organizations
and/or the public. These subcontracts may also involve furnishing
lodging and meals to those participating in the conference.
In other cases, the prime contractor establishes contractual
arrangements with hotels/motels to obtain special rates for lodging
when the contractor has a large number of employees that frequently
travel to a particular location. The hotel/motel agrees to special
reduced rates in exchange for being designated a preferred provider for
the agency travelers to that city/location.
Maintenance services for all types of specialized building or
facility equipment such as elevators, escalators, temperature control
systems, security systems, smoke and/or heat detection equipment, etc.
Prime contractors that operate and maintain Government owned
buildings often subcontract for services related to specialized
equipment. Subcontracts for these services would be exempt if all of
the required criteria are met.
Installation, maintenance, calibration or repair services for all
types of equipment where services are obtained from the equipment
manufacturer or supplier of the equipment.
Sometimes prime contractors are required to provide equipment and
the prime contractors may have a need to acquire services to install,
maintain, calibrate, service or repair the equipment from the
manufacturer or original supplier in order to avoid compromising a
warranty or because proprietary information needed to perform the work
is only available from the manufacturer, an authorized representative
of the manufacturer or the supplier of the equipment. These
subcontracts may involve sophisticated equipment that requires access
to proprietary information or requires employees involved in performing
the work to have extensive training that is often only available
through the manufacturer or equipment supplier. Examples of the type of
equipment include automated building control systems, HVAC equipment,
building security systems, and elevators or escalators.
Transportation of persons by air, motor vehicle, rail, or marine on
regularly scheduled routes or via standard commercial services (not
including charter services).
The General Services Administration (GSA) enters into contracts
with airlines called ``City Pairs'' so that Federal employees and
contract employees traveling on Government business can get discount
airfares. Where contract employees travel on official business at
reduced government fares, it is not considered an SCA-covered
subcontract for transportation services.
Real estate services, including real property appraisal services,
related to housing federal agencies or disposing of real property owned
by the Federal Government.
To the extent that these services may be required, a subcontract
for real estate services, including lease acquisition, real property
appraisal, broker, space planning, lease re-negotiation, tax abatement,
and real property disposal services, would be exempt if the required
criteria are met.
Relocation services, including services of real estate brokers and
appraisers, to assist federal employees or military personnel in buying
and selling homes.
Subcontracts are not generally awarded for employee relocation
services. To the extent that relocation services may be required,
subcontracts for these services would be exempt if the required
criteria are met.
IV. Executive Order 12866 and 13132; Sec. 202 of the Unfunded
Mandates Reform Act of 1995; Small Business Regulatory Enforcement
Fairness Act
This final rule is being treated as a ``significant regulatory
action'' within the meaning of Executive Order 12866 because of the
significant impact of this rule on other agencies. Therefore, the
Office of Management and Budget has reviewed the final rule. However,
the Department has determined that this rule is not ``economically
significant'' as defined in section 3(f)(1) of E.O. 12866, and
therefore it does not require a full economic impact analysis under
section 6(a)(3)(C) of the Order. Under this rule, subcontracts would
not be exempt unless price is equal to or less important than the
combination of other non-price or cost factors in selecting the
subcontractor. Therefore it is not anticipated that the changes
proposed by this rule will have an annual effect on the economy of $100
million or more or adversely affect in a material way the economy, a
sector of the economy, productivity, jobs, the environment,
[[Page 45907]]
public health or safety, or State, local, or tribal governments or
communities.
The Department has similarly concluded that this rule is not a
``major rule'' requiring approval by the Congress under the Small
Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et
seq.). It will not likely result in (1) an annual effect on the economy
of $100 million or more; (2) a major increase in costs or prices for
consumers, individual industries, Federal, State or local government
agencies, or geographic regions; or (3) significant adverse effects on
competition, employment, investment, productivity, innovation, or on
the ability of U.S.-based enterprises to compete with foreign-based
enterprises in domestic or export markets.
For purposes of the Unfunded Mandates Reform Act of 1995, this rule
does not include any federal mandate that may result in excess of $100
million in expenditures by state, local and tribal governments in the
aggregate, or by the private sector. Furthermore, the requirements of
the Unfunded Mandates Reform Act, 2 U.S.C. 1532, do not apply here
because the rule does not include a ``Federal mandate.'' The term
``Federal mandate'' is defined to include either a ``Federal
intergovernmental mandate'' or a ``Federal private sector mandate.'' 2
U.S.C. 658(6). Except in limited circumstances not applicable here,
those terms do not include an enforceable duty which is ``a duty
arising from participation in a voluntary program.'' 2 U.S.C.
658(7)(A). A decision by a subcontractor to bid on Federal service
contracts is purely voluntary in nature, and the subcontractor's duty
to meet Service Contract Act requirements arises ``from participation
in a voluntary Federal program.''
The Department has also reviewed this rule in accordance with
Executive Order 13132 regarding federalism, and has determined that it
does not have ``federalism implications.'' The rule does not ``have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government.''
V. Document Preparation
This document was prepared under the direction and control of John
R. Fraser, Deputy Administrator, Wage and Hour Division, Employment
Standards Administration, U.S. Department of Labor.
List of Subjects in 29 CFR Part 4
Administrative practice and procedures, Employee benefit plans,
Government contracts, Investigations, Labor, Law enforcement, Minimum
wages, Penalties, Recordkeeping requirements, Reporting requirements,
wages.
Accordingly, for the reasons set out in the preamble, 29 CFR Part 4
is amended as set forth below:
PART 4--LABOR STANDARDS FOR FEDERAL SERVICE CONTRACTS
1. The authority citation for Part 4 continues to read as follows:
Authority: 41 U.S.C. 351, et seq., 79 Stat. 1034, as amended in
86 Stat. 789, 90 Stat. 2358: 41 U.S.C. 38 and 39; 5 U.S.C. 301; and
108 Stat. 4101(c).
2. New paragraphs (e)(2) and (3) are added to Sec. 4.123(e), to
read as follows:
Sec. 4.123 Administrative limitations, and exemptions.
* * * * *
(e) * * *
(2) The following exemptions shall expire no later than July 26,
2001:
(i) Subcontracts principally for the maintenance, calibration,
repair, and/or installation (where the installation is not subject to
the Davis-Bacon Act, as provided in Sec. 4.116(c)(2) of this part) of
information technology. The term information technology means any
equipment or interconnected system or subsystem of equipment that is
used in the automatic acquisition, storage, manipulation, management,
movement, control, display, switching, interchange, transmission, or
reception of data or information. The term information technology does
not include equipment that contains imbedded information technology
that is used as an integral part of the product, but the principal
function of which is not the acquisition, storage, manipulation,
management, movement, control, display, switching, interchange,
transmission, or reception of data or information. For example, HVAC
(heating, ventilation, and air conditioning) equipment such as
thermostats or temperature control devices and medical equipment where
information technology is integral to its operation, are not
information technology.
(ii) The exemptions set forth in this paragraph (e)(2) shall apply
only under the following circumstances:
(A) The items of equipment are commercial items which are used
regularly for other than Government purposes, and are sold or traded by
the subcontractor in substantial quantities to the general public in
the course of normal business operations;
(B) The subcontract services are furnished at prices which are, or
are based on, established catalog or market prices for the maintenance,
calibration, repair, and/or installation of such commercial items. An
``established catalog price'' is a price included in a catalog, price
list, schedule, or other form that is regularly maintained by the
manufacturer or the contractor, is either published or otherwise
available for inspection by customers, and states prices at which sales
currently, or were last, made to a significant number of buyers
constituting the general public. An ``established market price'' is a
current price, established in the usual course of trade between buyers
and sellers free to bargain, which can be substantiated from sources
independent of the manufacturer or contractor; and
(C) The subcontractor utilizes the same compensation (wage and
fringe benefits) plan for all service employees performing work under
the contract as the subcontractor uses for these employees and
equivalent employees servicing the same equipment of commercial
customers;
(D) The subcontractor certifies in the subcontract to the
provisions in this paragraph (e)(2)(ii).
(iii) Determinations of the applicability of this exemption to
subcontracts shall be made by the prime contractor prior to subcontract
award. In making a judgment that the exemption applies, the prime
contractor shall consider all factors and make an affirmative
determination that all of the above conditions have been met.
(iv) The prime contractor is responsible for compliance with the
requirements of the Service Contract Act by its subcontractors,
including compliance with all of the requirements of this exemption
(see Sec. 4.114(b) of this part). If the Department of Labor determines
that any of the above requirements for exemption has not been met with
respect to a subcontract, the exemption will be deemed inapplicable,
and the prime contractor may be responsible for compliance with the
Act, effective as of the date of contract award.
(3) The following exemptions shall expire no later than July 26,
2001:
(i) Subcontracts for the following services where the services
under the subcontract meet all of the criteria set forth in paragraph
(e)(3)(ii) and are not excluded by paragraph (e)(3)(iii):
(A) Automated data processing and telecommunications services,
including ADP facility operation and maintenance services provided at
the subcontractor's facility, ADP telecommunications and transmission
services, ADP teleprocessing and timesharing services, ADP systems
analysis services,
[[Page 45908]]
information and data broadcasting or data distribution services, ADP
backup and security services, ADP data conversion services, computer
aided design/computer aided manufacturing (CAD/CAM) services,
digitizing services (including cartographic and geographic
information), telecommunications network management services, automated
news services, data services or other information services (e.g.,
buying data, the electronic equivalent of books, periodicals,
newspapers, etc.) and data storage on tapes, compact disks, etc. This
category does not include ADP data entry services or ADP optical
scanning services;
(B) Automobile or other vehicle (e.g., aircraft) maintenance
services (other than subcontracts to operate a Government motor pool or
similar facility);
(C) Financial services involving the issuance and servicing of
cards (including credit cards, debit cards, purchase cards, smart
cards, and similar card services);
(D) Lodging at hotels/motels and contracts with hotels/motels for
conferences, including lodging and/or meals, which are part of the
subcontract for the conference;
(E) Maintenance services for all types of specialized building or
facility equipment such as elevators, escalators, temperature control
systems, security systems, smoke and/or heat detection equipment, etc;
(F) Maintenance, calibration, repair, or installation (where the
installation is not subject to the Davis-Bacon Act, as provided in
Sec. 4.116(c)(2) of this part) services for all types of equipment
where the services are obtained from the manufacturer or supplier of
the equipment;
(G) Transportation of persons by air, motor vehicle, rail, or
marine vessel on regularly scheduled routes or via standard commercial
services (not including charter services);
(H) Real estate services, including real property appraisal
services, related to housing federal agencies or disposing of real
property owned by the Federal Government; and
(I) Relocation services, including services of real estate brokers
and appraisers to assist federal employees or military personnel in
buying and selling homes.
(ii) The exemption set forth in this paragraph (e)(3) shall apply
to the services listed in paragraphs (e)(3)(i) of this seciton only
when all of the following criteria are met:
(A) The services under the subcontract are commercial--i.e., they
are offered and sold regularly to non-Governmental customers, and are
provided by the subcontractor to the general public in substantial
quantities in the course of normal business operations;
(B) The subcontract will be awarded on a sole source basis or the
subcontractor will be selected for award on the basis of other factors
in addition to price. In such cases, price must be equal to or less
important than the combination of other non-price or cost factors in
selecting the subcontractor.
(C) The subcontract services are furnished at prices which are, or
are based on, established catalog or market prices. An established
price is a price included in a catalog, price list, schedule, or other
form that is regularly maintained by the subcontractor, is either
published or otherwise available for inspection by customers, and
states prices at which sales are currently, or were last, made to a
significant number of buyers constituting the general public. An
established market price is a current price, established in the usual
course of trade between buyers and sellers free to bargain, which can
be substantiated from sources independent of the manufacturer or
subcontractor. Normally, market price information is taken from
independent market reports, but market price could be established by
surveying the firms in a particular industry or market;
(D) All of the service employees who will perform the services
under the subcontract spend only a small portion of their time (a
monthly average of less than 20 percent of the available hours on an
annualized basis, or less than 20 percent of available hours during the
contract period if the contract period is less than a month) servicing
the government subcontract;
(E) The subcontractor utilizes the same compensation (wage and
fringe benefits) plan for all service employees performing work under
the subcontract as the subcontractor uses for these employees and for
equivalent employees servicing commercial customers;
(F) The prime contractor determines in advance, based on the nature
of the subcontract requirements and knowledge of the practices of
likely offerors, that all or nearly all offerors will meet the above
requirements. If the services are currently being performed under a
contract or subcontract, the prime contractor shall consider the
practices of the existing contractor or subcontractor in making a
determination regarding the above requirements; and
(G) The exempted subcontractor certifies in the subcontract to the
provisions in paragraphs (e)(3)(ii)(A) and (C) through (E) of this
section. The prime contractor shall review available information
concerning the subcontractor and the manner in which the subcontract
will be performed. If the prime contractor has reason to doubt the
validity of the certification, SCA stipulations shall be included in
the subcontract.
(iii) The prime contractor is responsible for compliance with the
requirements of the Service Contract Act by its subcontractors,
including compliance with all of the requirements of this exemption
(see Sec. 4.114(b) of this part). If the Department of Labor determines
that any of the above requirements for exemption has not been met with
respect to a subcontract, the exemption will be deemed inapplicable,
and the prime contractor may be responsible for compliance with the
Act, effective as of the date of contract award.
(iv) The exemption set forth in this paragraph (e)(3) does not
apply to solicitations and subcontracts subject to Section 4(c) of the
Service Contract Act.
Signed at Washington, D.C., on this 19th day of July, 2000.
T. Michael Kerr,
Administrator, Wage and Hour Division.
[FR Doc. 00-18635 Filed 7-25-00; 8:45 am]
BILLING CODE 4510-27-P
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