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Transcripts for Wage and Hour Division Prevailing Wage Conference Videos

Wednesday, October 5, 2011 Session - Afternoon

  • SCA Price Adjustments
  • SCA Compliance Principles
  • GSA Supply Schedule
  • Questions and Answers


>> Good afternoon, welcome back to the service contract act webinar contracting officials.

We have a good lineup for you this afternoon.

I'm going to go over SCA price adjustments, compliance principles and GSA supply schedule.

I would like to let everyone know this morning's broadcast will be available, will be postedden our recovery website later this afternoon.

For those who did have technical difficulties.

That website is division/recovery.

This morning's broadcast some of you had technical difficulty, it's recorded and will be posted on our website.

This morning we'll take questions throughout so submit your questions to

Right now I'm going to turn it over to Kyle Robert, labor adviser for the United States air force.

He's going over the SCA price adjustments with you.

>> Thank you, Mr. Brooks.

Before I began, a matter of clarification on an earlier question today regarding intergovernmental transactions.

After doing more investigation and research believe the service contract act would in fact apply to that question.

And that situation.

This goes to highlight the fact that the answer to everything contracting and contracting related is very rarely clear cut and in most cases the answer comes back, it depends.

So highlights that we need to really understand the specifics of the scenario and what's going on in order to make a very clear answer there.

So as Mr. Brooks pointed out I'm an air force labor advicer, specifically I cover the eastern region for the air force and that covers a geographical territory of Michigan, all the way to Maine and down to Florida.

Here is what I'm going to cover today, just a brief outline here, I'll show you where to find us on the web.

Cover some of the resources the air force put out there to help you with doing your price adjustments.

Also talk about the price adjustment clause itself, elements that we need to consider when working ourselfs through a price adjustment scenario and go through a real life sample adjustment scenario.

I also have a place holder for questions but as Mr. Brooks pointed out we'll hold the questions until the end of the session this afternoon and we'll address everything there.

So without further adieu, several people mentioned and the wonderful resource that resource is.

If you're following the slides on the screen, the big arrow points you to a hyperlink named agency laborer advisers.

If you were to click on that you find a list of all known agency labor advisers with their contact information to include name, telephone number and email.

So you ever have any questions, remember to use your agency labor adviser, their resource for you, in addition to your own agency labor adviser as well.

That being said, a bit of shameless self-promotion here for the air force.

The air force maintains a public website, hyperlink there is at the top of the slide, available to people that are outside of the air force and/or DOD firewall.

Down on the left-hand side of your screen you'll see a hyperlink to some of the desk top guys we publish to provide information an guidance to our folks out in the field.

If you follow that link you see a link on the web page deplayed to you.

Down at the bottom is a price adjustment guide from July of 2009.

I encourage you to look at this guide.

Everything I say today and will mention today is addressed in further depth and detail inside that guide.

I I should also note A disclaimer here as well, other agencies that publish price adjustment guides as well, notably aware of the department of Navy guide which is very thorough and useful and informative.

So let's press on ahead now into the body of the presentation here and the price adjustment clause.

Just what is the SCA price adjustment clause?

A lot of you are aware of clause that exists of 52222/43.

Fair hay boar standards act price adjustment clause for multiple year an option contracts.

This call applies to fixed price and labor hour contracts that contained provisions for option years and/or multiple year contracts.

Also applies to contracts that contain area prevailing wage determinations be they standard or non-standard or alternately wage determinations that are covered by collective bar gang agreements.

Andish plan another disclaimer here at this moment.

The principles for price adjustment for collective bargaining based wage determination are same as those for an area of wage determination.


So when I'm talking here about the wage determination says this or that, you can -- you almost use those terms interchangeably with the collective bargaining agreement say this is or that.

That being said, this clause does a couple of things for the government here.

Number one, subparagraph B imposes upon the contractor a duty to not include any con tin general -- contingencies in their contract price for costs allowed judgment under the auspices of this clause.

I'll explore the clause later on but in laymen's terms that means offers should be proposing essentially flat line wage an fringe benefit costs for the base year and the outyears of their contract when they propose.

Now, secondarily that comes at a cost to the the government.

That means we through the auspices of paragraph D promise to make the contractor well for any increases in wages or fringe benefits that we cause.

How do we cause that?

most common commonly imposing new wage nation contractor.

You may ask yourself when we impose wage determination?

I'm going to deviate a little bit here from the main thrust of the presentation and explore far 221007 a little bit for us.

Belief it or not this is a question I get a lot.

The most typical opportunity for contracting officer incorporate a new wage determination comes with the exercise of an option, the annual anniversary date.

When we're dealing with multi-year appropriations a bianniversary date maybe appropriate but those are the general times when we have the opportunity and incorporating determination, that gers ad adjustment under the clause.

At -- triggers an adjustment under the clause.

Because a new wage determination has been published to where the contractor sign as new collective bargaining agreement does not necessarily mean we should incorporate that into the contract at that time and allow the contractor to seek price adjustment.

The far is very, very clear on when contracting officers can incorporate wage determination and as a result of that when a wage determination adjustment is due to contractor.

That being said, this is a fairly simple contact, concept to grasp but I'm not going the lie to you the execution of this concept can be tedious.

The far clause uses an example, the examples laid out here on a slide in front of you I'm going to briefly run through to show you how easy it could be.

And to illustrate the fact we're only going to reimburse the contractor for his actual cost increase under the auspices of this clause.

For instance, let's assume the previous wage determination minimum hourly rate was $4 an hour.

The contractor paid his people $4.10 an hour over that contract period.

The new wage determination is imposed when we exercise the option and that raidses the minimum wait to $4.50 an hour.

Again, following along to adjust the contractor for his actual increases, $4.50 minus $4.10 is a 40-cent an hour differential and that's the adjustment we OWE the contractor at that point.

This is another common misconception.

What the contractor proposed his rate to be has very little bearing once performance is actually begun.

When we're doing a price adjustment only what the contractor actually paid is important because the cause is very specific we'll only reimburse for their actual increases.

Moving forward I promise a description of costs that are adjustable under this clause, here it is.

In subparagraph E, the easiest most obvious to grasp are wages and fringe benefits.

That's pretty obvious on the face of things.

Not so obvious is the fact we allow contractors an contracts to be adjusted for the accompanying increases or decreases in their so-called accompanying costs.

The payroll costs if you will.

Social Security unemployment workers comp explicit is this cause is a differential for any adjustment for DNA profit or overhead adjustment these are not allowed in the auspices of this clause.

This clause is very specific and what we're allowed to adjust under this clause.

If we're looking to adjust other costs, I would suggest we find another clause to perform that adjustment under or alternately not perform that adjustment at all.

It's not specifically listed within this clause, you may assume it is not allowed.

Again I'll highlight the tongue in cheek simplicity of this concept.

This lays out general concept of what a price adjustment would entail and how we go about doing it.

First we need to know what the new minimum wage or health and welfare benefit is.

We need to subtract from that, the contractor's actual wage and health and wellen benefit they paid the previous contract period and then add in the payroll taxes an worker's comp on the amount of increase only, not the whole wage, just the increase, just the differential and there's the price adjustment.

If you look out into right you see a very brief illustration of that.

We'll assume $15 an hour was the new minimum wage required.

Contractor actually paid $14.50 an hour over the last period.

That yields a 50 an hour wage differential.

We can assume the health and welfare benefit increased by 8 cents an hour and the total of those two, 58 cents an hour leads us to a 12-cent an hour increase in payroll and accompanying costs for a grand total of 70 cents an hour adjustment due.

I should also mention none of the examples that I'm giving you are based on real life.

There's close but the names have all been changed to protect the innocent.

Regardless, you see some similarity, it will be patently obvious to you when we role those but trying to keep it close enough to reality to make sense and be useful here.

As a reminder, no allowance for overhead, no for G&A and no allowance for profit adjustment under auspices of this clause.

As a contractor requests as part of the price adjustment the red flag should go up automatically and you have to ask yourself does the contractor understand what he's allowed to ask for, does he not understand what he's allowed to ask for.

Could lead to interesting conversation.

Two methods are available to us alluded to in this clause.

The first is the forward pricing method.

For those of you familiar with DCMA and forward pricing rate agreements this is not the same thing.

Similar concepts and that we're using actual data from a pre-seeding period to try to accurately price the current period cost but it's not exactly the same.

The second and least red method is the actual cost method.

And that -- the application of that method should be rare since the contractor has 30 days after in any case if you have gone a fullee and still haven't been able to get to the price adjustment I would actually recommend you to the actual cost method because your results will be much more accurate and tighter, maybe savings over the forward pricing method.

Regardless forward pricing method is the preferred approach.

Having covered that, let's take a little closer look at the elements I just mentioned, wages, fringe benefits, et cetera.

We'll take them apart one by one.

First and foremost is adjustment of wages, that's the simplest most obvious element of price adjustment.

Simple, down at the bottom you see sample -- sample data there we're looking at environmental effects and look at environmental in the previous period the contractor actually paid a wage of 2.89 to his employees.

New wage determination comes along duly incorporated in a contract by the contracting officer raises that minimum wage to $23.59 an hour for wage differential of 70 cents an hour due to contractor.

That's easy enough, right?

It only gets more complex from here.

I promise.

Fringe benefits is probably the most complex aspect of the price adjustment but even that can be simplified.

First we need to figure out what health and welfare benefit is due.

The example is at the bottom of the page, the actual health and welfare benefit rate paid by the contractor preceding period was $3.50 an hour yet we raised that with the new wage determination of $3.59 an hour for increase of-- 9 cents an hour.

Sorry, a little inflation there.

That part is simple.

What's not so simple is to figure out whether or not we OWE the contractor an increase in accompanying costs on top of the health and welfare benefit.

In order to answer that question we need to figure out we ask the contractor the question are you providing the health and welfare benefits in fringe benefits or paying cash to the employee?

They're referring you to the bullet point in the middle of the page.

If it's paid to the employees it's considered taxable income and therefore accompanying increase in payroll taxes ca, workman's comp, if alternately the health and welfare benefit is paid to a third party provide tore a third party fringe benefit the contractor is not incurring payroll increase this payroll taxes at all and not due an adjustment there.

The example I'm going to give you at the end I'll illustrate this point a little more and make more sense at that point.

Next up, adjusting vacation and holiday you rarely see adjustment for increase or vacation and holiday.

The reason is that requires a change in the terms of the wage determination itself, unless new wage determination increases the number of vacation hours due an employee or alternately, an increase in the number of holidays, you will ordinarily never see a price adjustment request for additional vacation.

You will, however, see and you should see vacation hours that a contractor is required to pay to his employees included as part of the price adjustment request.

The gray box object right hand side of cur screen, it will become more clear looking at typical hours over a year.

Look at employees with two years or less here, again required to be granted 80 hours of vacation and ten holidays equaling 80 hours.

Adding up 80 hours, 80 hours of vacation, holiday and 1920 hours leads to the equivalent of 2,080 hours.

Why is this as much the contractor is required to pay his employees for that vacation same as he's required to pay them for all the holidays they're taking.

If we're raising the wage that the contractor has to pay his employees, we need to apply that raids to all paid ours.

That becomes more apparent when you look at this.

Everything you said about vacation applies to holidays here as well.

You typically rarely see an adjustment for holidays on the face of things.

Only going to apply increases the number of holiday hours due the an employee.

So far that's easy.

Right now we're going to get so some parts doing a little thinking.

Unemployment taxes.

Federal unemployment taxes and state unemployment taxes.

You will rarely see a adjustment for FUDA or SUDA.

They are only paid on income up to a certain cap level.

For FUDA, up to $7,000 if memory serves, state unemployment caps vary across the states but most are at or around $20,000.

There are some notable outliers, Alaska is high, in the neighborhood of $34,000 and New Jersey in the lower 48 is around 30 I believe.

Regardless, unless your contractor is employing a large number of part time employees in all likelihood he has accounted for that maximum tax he's going to pay these employees as part of initial proposal, therefore no adjustment is due.

However from time to time you run across situations where contractor is employing part time employees and in that case go back and verify the number of hours from the previous period as well as the income and that will lead you to whether or not to make an adjustment.

At the bottom of the page there's a hyperlink to a website to give you state unemployment tax caps just if you don't already know it.

So again, re-emphasizing that point, since most employees income is exceeding that cap, the contractor should have accounted for that payroll tax as part of his initial proposal.

You should not see that.

As a corollary to that argument, just because the state increases its unemployment tax rate doesn't mean the contractor is due an adjustment either.

We're only paying adjustments when the contractor experiences an actual increase in wages or fringe benefits plus any accompanying increase in payroll taxes that is necessary to comply with that increase in wage or fringe benefits so it would follow because the state unemployment tax is raised, not necessarily entitled to an increase just for that on the face of it.

What this translates into most of the time is when the state raises their employment tax rates contractors are only able to recover a small portion as part of the price adjustments.

In many cases not at all.

Unless using a large number of part time employees.

To re-emphasize here the cause is explicit there's no adjustment due for G&A overhead or profit.

They're specifically prohibited by the clause.

You should not see these elements requested as part of the a price adjustment.

If you do see them requested, you should exclude them.

Increases in general liability insurance, state gross receipts, not allowed by the clause.

They're not specifically excluded but they are definitely not specifically included.

Therefore, they should be excluded from a price adjustment request as well.

There's no authority under the auspices of this clause to adjust for those elements.

This gets back to the definition of a fringe benefit.

Often time as contractor will request adjustment for uniforms, safety -- uniforms is the most common.

Those requests should be examined closely because we're trying to determine do they meet the definition of a bona fide fringe benefit.

In the examples that I named on the page they do not meet that definition.

Those are business expenses and they benefit the contractor rather than the employee.

That's hard to understand but if you analyze it that's where you come down to.

Again, there's no allowance for an adjustment for the regular business expenses under auspices of this clause but only wages and fringe benefits.

Now, given that, question ear running ahead of time but we'll press in to the actual price adjustment sample, I promise you.

I won't even attempt to do math in public because something will go grievously wrong and I'll transpose a number here and there but I'll run through it with you.

Here is our scenario.

We have a custodial maintenance contract pixed price performed somewhere in Indiana.

Wage determination for the next option has been incorporated by the contracting officer, it is an odd numbered wage determination so it incorporates -- determining fringe benefits but require it is $3.59 fringe benefit to be paid for all hours worked up to 40 to the employees.

At the same time we incorporate the wage determination the health and welfare benefit is bumped up from $3.50 to $3.59 an hour.

And again, I'm going to re-emphasize this again, I should have harped on it a little bit more if this were CBA we would be going through the same questions an analysis.

I can't emphasize that enough.

However, word of caution.

If you have wage determination features a collective bargaining agreement, make sure to read the collective bargaining agreement before the price request.

Know what's requested, what's enumerated and outlined as fringe benefits in that collective bargaining agreement no substitute for knowledge.

Moving forward other assumptions with this example, let's assume the contractor Schmitz the request timely within the 30 day window.

He provides some information to us, gives each employee work hours and number of vacation and holiday hours they expended last year.

Give as DCA audit or DCA approved overhead tax rate of 11.65% and new cost of T-shirts and the employee mileage as part of this request.

Notably doesn't provide payroll records so there should be a flag there.

We're missing one key ingredient right off the bat.

Contract also claims increase for janitors, lead janitor is grounds maintenance laborer, tractor operators, pest controllers, program clerks and those are all working under the contract.

So should be some flags raised.

For those that remember high school algebra, this is your classic word problem.

If everybody enjoyed them this enbe a problem.

I didn't so we need to do a little dissection and take this problem apart here.

First thing first.

Eliminate the unallowable cost.

We know for instance that we have two employees there that are exempt from the requirements of the service contract act or not directly engaged in performance of the contract work.

And so simplify things I'm going to the point, the payroll and project manager coming out of request.

Payroll clerk because he or she is not directly engaged in the performance of the work.

Secondarily, we're going to eliminate the non-wage non-benefit cost.

This is the T-shirts ab mileage.

This is a business expense of the contractor.

Not necessarily a benefit to the employee.

We're going to take that's out.

Finally there's 11.65 DCAA approved overhead or tax rate.

I don't know what that represent bus rather than asking the questions we know no specific allowance under the auspices of this clause so we can eliminate that as well.

Secondarily, we need to get information from the contractor in order to be able to determine what he actually paid his people last year.

We know how many hours the employees worked in terms of vacation, productive hours an holiday hours but we dope know what they were paid so we need the ask that question of the contractor, he needs to provide the payroll data.

We have authority under this clause to ask almost anything we need to support the price adjustment request.

See at the bottom of the screen subparagraph G is cited.

That gives a contracting officer broad authority to request anything he needs in order to evaluate the validity of this request.

I would take the tack to explain it's in their benefit to provide as much explanatory data up front to you as a contracting officer in order to help you help them.

After all that's the purpose -- the main outcome of this clause.

You're helping the contractor get well for an action that the government took.

In position of increasing wages an fringe benefitsch on the box in gray on the right are some questions the ask yourself, some things to look at looking at payroll data or supporting from a contractor.

move and assume we can get that from a contractor.

We'll set ourselves up a spreadsheet and here is where we start doing math let's start with the first classification, the grounds maintenance laborers.

The contractor expended 28,800 worth of ground maintenance labor last year so we can plug that in.

Moving to the right we know what the actual rate paid to those laborers was now.

It was $9.50 an hour.

Comparing that to the new wage determination applied in FY 11, pretend this was a year ago, not FY 1.

The wage determination raised that minimum rate to of $10 an hour: The differential is 50 cents an hour.

$10 minus $9.50, 50 cents an hour, therefore there's a 50 cents an hour wage increase due for the grounds maintenance laborers.

We multiply 50 cents times the 20,800 hours we come out with a total wage increase for the grounds maintenance laborers of $10,400.

Following the same logic along, I won't attempt to do the math here for the tractor operators an pest controllers an janitors come out with the numbers on the right.

Same equation.

Same math.

No problem.

The problem comes the lead janitors.

To harken back to things Ms. HamletT said this morning, we have an issue here.

The lead janitor wasn't classified so how can we treat them?

At a rate of $10.50 an hour.

His new preferred rate for that lead janitor and the rate he's requesting is $11.50 an hour which theoretically leads to a wage differential of $1 an hour.

Since this classification was not conformed that's a legitimate request.

In the absence of conformance the lead janitor is treated as as viewed as a janitor.

We need to compare the actual rate compared this -- paid this year to the new required rate.

In this case the new required rate for janitors is there in the middle of the page.

$10 an hour.

But lead janitor was paid $10.50 last year.

No adjustment is due for that janitor in that case.

He's being paid in excess of the new required rate.

So in this case by failing to conform this rate, the contractor has done himself a disservice and assured themselves out of a $1 an hour wage increase.

Are we moving forward to do health and treatment welfare benefits, I won't talk about the conformance.

I have already beat that one.

But let's look at health and welfare.

-- first an foremost we need to know how they're paid.

Are they paid to a third party provider, paid in cash?

For simplicity sake, this exercise back to what I said at the beginning.

That's going to simplify things for us a little bit.

Doesn't change the -- it would change the overall outcome but the math isn't any more complicated.

What this means, though, is that the contractor is still entitled to the outright increase in health and welfare benefit of 9 cents an hour but not in the accompanying cost increases if that was paid in cash so no -- FICA, FUDA or worker's comp due for health and welfare benefits.

How does this look?

I'll show you.

Following the math along out here, we know the health and welfare increase to all categories has been 9 cents an hour.

If we multiply in the instance of grounds maintenance labors, 9 cents an hour times 20,800 hours, increase of $1,872 for the health and welfare benefit.

Notable here is the lead janitor is actually due the health and welfare benefit increase.

Even though his wage rate has not been conformed and we treat him as janitor it's an SCA position and still due that 9-cent increase in health and welfare benefit so hearing the argument forward 9 cents an hour times 2,080 hours is $187.20.

S that the math over there in the far right column it all lines up.

Here is where things are complex depend hog you treat the health and welfare benefit.

In this case it's a non-starter.

The health and welfare benefit is basically put to bed at this pointch paying the a third party provider there's no additional or accompanying cost increase necessary for the health and welfare benefit.

How to we get there?

We need to know what the FICA rate is at 7.65%.

It's up there at the top of the slide for you, 6.2% for Social Security and 1.45% for Medicare to lead us to a grand total of 7.65%.

Carrying that forward, we'll take for the grounds maintenance laborers 7.65% times 10,400.

Remember we're only paying FICA on the increase so we're looking at the wage increase here.

$10,400 times 7.65% leads up to I believe $796.80.

My eyes aren't what they used to be.

Same argument is -- holds for the workman's comp increase.

Here we can assume the worker's comp rate is 4%.

How do we verify that, the contractor OWES that information as part of the supporting evidence or supporting records, if you will, that he should turn in to support his his request for price increase.

$4 per $100 of payroll.

Simple math, 4% times 10,400 because we're only paying workman's comp on the actual wage increase because this is a payroll or accompanying cost, leads us to that number.

If we total all the numbers up there you see the results displayed across the bottom of the columns.

No FICA workman's increase for the lead janitor.

Zero times any other number is still zero.

There's in wage increase due to the janitor so no matter what the FICA rate or workman's comp rate, no increase is due for that classification for those two elements.

The rest becomes a simple matter of addition at that point.

If we add we come to the grand total under this scenario of 26,360.57.

Admittedly I haveover simplified this a little bit for the purposes of presentation but the concept is that simple.

It's the execution that becomes tediousch personally as a contracting officer, as a skill that I only used once a year, it was very tedious.

I needed to relearn things again and again and again.

And I point back to the guide that I talked about at the front end of the presentation here.

Don't hesitate the look at those, use those as points of reference going through these exercises.

The hardest part is figuring what is due the contractor and what is not.

The math takes care of itself after that.

Finally though I have a place holder for questions here we're going to hold questions until the end.

How would you have questions about price adjustments contact the labor advisers or myself, that information is Vail to believe you by following the links on

With that I will turn it back to Mr. Brooks and we'll continue to compliance principles.

>> Thank you, Kyle.

We're going to move to SCA compliance principles.

I want the make note you can submit your questions to WHD

SCA compliance principles, we're going to talk how you can help your contractors inform them of their requirements under the service contract act.

We're going to talk about under the service contract act.

How do they have to pay the wages, the fringe benefits.

What is a bona fide fringe benefit?

What is the requirements under the fringe benefit.

What is the pay vacation fringe benefit?

What is paid holiday fringe benefit?

What is equivalent fringe benefits?

We'll talk about how the service contract act applies to temporary and part time employees.

Contractors pay wages promptly and no longer than one peer pay period which the wages are earned.

The wages should be calculated on a fixed regular recurring 7 consecutive work day period.

There's no certified payroll requirement under the service contract act like under the Davis-Bacon act.

There's no certified payroll requirement or weekly payroll requirement.

Pay periods semimonthly.

Anything greater than semimonthly is not recognized acceptable under the service contract act.

So we just talked about the minimum monetary wages.

Employees are entitled to the minimum monetary wages, also entitled to the health and welfare fringe benefit listed on the wage determination.

The current health and welfare fringe benefit is currently $3.59 an hour.

There's two ways the contractor can satisfy the requirement if they're going to pay cash in lieu of fringe benefits it must be included with the ploy yeah's regular paycheck.

The second way they can satisfy the health and welfare fringe benefit requirement is they can pay to a bona fide fringe benefit plan.

If they're going to pay into a bona fide fringe benefit plan this payment must be no less than quarterly.

No less than 90 days.

The health and welfare fringe benefit is separate and in addition to the minimum monetary wages.

So the employers are entitled to the minimum monetary wages and the health and welfare fringe benefit.

Employers must separately state on their payroll records the amount that's paid toward the minimum monetary wages and the amount paid toward the health and welfare fringe benefit.

So somewhere in that payroll records, doesn't have to be a stub but somewhere in their records they're required to keep they must show the amount paid toward the minimum monetary wages and health and welfare fringe benefit.

Since it's the employer's obligation to meet the health and welfare fringe benefit requirement they choose the benefits they're going to provide to the employees so they can decide they want to pay in lieu of fringe benefits or may decide they want to pay into a bona fide fringe benefit.

It's up to the employer to decide how he's going to satisfy the health and welfare fringe benefit.

The only distinction is let's assume employer is going to provide health insurance to an employee.

That pay role deduction is voluntarily consented to by the employee.

Otherwise they incur the expense of providing the bona fide benefit to the employees they provide whatever type of benefit they want to provide to the employee as long as it's a bona fide fringe benefit plan.

Remember, under the service contract act, the health and welfare fringe benefit is separate and in addition to.

There's no cross crediting under the service contract act.

Again, the employers are entitled to the minimum monetary wages an health and welfare fringe benefit.

The employer can choose what kind of fringe benefits he's going to provide to employees.

If the employer obligation he decides what benefits he'll provide to the employee, as long as it's a bona fide fringe benefit or cash in lieu of fringe benefits.

Let's look at this example on the screen.

The minimum monetary wage was $10.25.

The health and welfare fringe benefit is $3.59.

The employee was paid above and beyond his minimum monetary wage at $12 an hour.

His fringe benefit he was paid at $1.84.

Under this scenario with the employee being compliant under the service contract act?

No, he wouldn't.

Though he can pay above and by beyond the minimum monetary requirement which in this case was $10.25, that's fine.

He did not pay the full health and welfare fringe benefit.

So how can a contractor the employer come into compliance under the contract act under this scenario?

He can simply make up the difference in the fringe benefit calculation.

If his intent was part of the monetary wage go toward the welfare and fringe benefit he should state $1.75 of that minimum monetary wage is going to go to the health and welfare fringe benefit.

Again there's no cross crediting under the service contract act, the health and welfare fringe benefit is separate and in addition to the minimum monetary wage.

Hours worked.

How do we compute hours worked on service contract?

We look at the regulations under the fair labor standard act in 29-CFR-785.

Pretty much if an employee is suffered or permitted to work that's going to be hours worked.

So if an employee comes to work half an hour early, he's permitted to work, that's going to be hours worked.

If he works 30 minutes over the time he's supposed to depart, if he's suffered or permitted to work that's hours worked.

Employee must keep affirmative proof of all hours worked.

For occasions you'll see employees performing duties of more than one classification.

You may have an employee 20 hours a week performing the duties of a janitor, 20 hours a week performing the duties of a window cleaner.

Unless the employer can segregate the -- affirmative proof of time spent on both.

They have to pay the higher two wage rates.

If they can segregate the time spent performing those two duties he can pay the wage rate at the janitor rate of those 20 hours and 20 hours as the window cleaner.

He does not segregate -- if there's not affirmative proof it has to pay the higher of the two wage rates.

On occasion employee may perform -- be performing the duties on SCA cover contract and commercial work.

May maybe working for a contractor commercially and on a federal service act.

If the employee does not keep appropriate records showing time spent on both we're going to assume all the work is covered under the service contract act.

The obligation of the employer the keep appropriate records, segregating the time spent performing commercial or SCA cover work.

If not, we're going to assume when we look at the records, we'll assume the work is paid under the service contract act.

What is a bona fide fringe benefit?

We talked about the compliant with the health and welfare fringe benefit.

We talked about two ways they can satisfy the health and welfare fringe bench they can pay cash in lieu of fringe benefits or into a bona fide fringe benefit plan.

What is the bona fide fringe benefit plan?

Well, talk about a bona fide fringe benefit plan.

The employer, the contractor, can pay the state a fringe benefit amount, make that contribution, it has to be to an independent trustee or third party administrator, pursuant to a planned trust on behalf of the employee.

It has to be legally enforcement.

It has to be communicated in writing to all employees.

It has to apply systematically for the payment of benefits.

It has to contain a definitive formula for the amount of the contributions that the contractor must make and it has to also contain the benefits each employee is going to receive.

These contributions must be irrevocably to the independent trustee or third party administrator.

Meaning payment cannot revert back to the contractor in any capacity.

These plans are approved by RUSA and IRS.

Again in order to be a bona fide fringe benefit this plan has to be legally enforceable, communicated in writing to the employees, this plans should be communicated in writing to each employee.

Has to contain a definitive formula the amount the contractor is going to contribute to the plan and spell out the benefits that the employee is going to receive.

Now, self-insured.

Uninsured plans.

Typically where contractors going to make payments out of pocket as expenses arise.

Those are not considered bona fide benefit plansch these type of plans need approval from the wage and hour division before you can take credit for the health and welfare under the contract act.

If it's self assured unfunded plan, this is when a contractor is going to make payment out of pocket as expenses arise.

Some self-insured plans such as vacation and holiday are acceptable.

If something is required by the State worker's compensation, et cetera, employer cannot take credit for that under the service contract act.

It's required by the State, the ployier cannot take credit under the service contract act.

We talk about fringe benefit plans, the contractor has to provide benefits on account of the following.

You see that on your screen, disability, advanced age, retirement, illness, medical expenses, et cetera.

So the benefits must be on account of the following.

There are three type of fringe benefit requirements.

We talked about -- Sandra talked about that briefly this morning.

Depending on the wage determination in your contract, there's three fringe benefit requirements.

The first is fixed cost fringe benefit requirement.

The next is average cost fringe benefit requirement and the last is fringe benefits under collective bargaining agreements.

We're going to talk about each briefly.

Fixed costs that you're going see on 90% of SCA contracts that are let.

As Sandra spoke this morning all contracts that began after 1997 fixed costs are going to be applicable to your contract.

Fixed costs.

A fixed amount per employee of the 40 hours a week, 2080 hours a year for all hours paid including paid holiday, vacation and sick leave meaning when the employee is on paid holiday, paid sick leave and vacation, he's still entitled to the health and welfare fringe benefit amount only up to 40 hours in a week.

In the contract does not -- he has the obligation to meet the health and welfare fringe bench he's not just restricted to providing the benefits in one form or fashion.

He can pay his fringe benefit half in cash, half to a bona fide fringe benefit.

want to make that known.

Let's look at this example on the slide, fixed cost by weekly payroll.

Lack at this for a few minutes and see if you see anything is wrong with this slide.

As you can see LIBBY received benefits, to a fringe benefit and cash.

Jennie received fringe benefits and cash and -- Ann received just cash.

Tim received fringe benefits and no cash.

And Tom received fringe benefits and cash.

As you can see with jairntion overtime hours were excluded.

Because there's only up to 40 hours in a week.

On the fixed cost employee is only entitled to the health and welfare fringe benefit amount up to 40 hours a week.

When you look at this biweekly payroll there's nothing wrong with this scenario.

As I mentioned before, the contract does not restricted to providing one form of benefit.

Again he can pay half in cash, half to a bona fide fringe benefit.

Ads long as he -- he will be in compliance under the service contract act as long as he's paying cash in lieu of fringe benefits or to a bona fide fringe benefit for all hours worked.

The key with fixed cost is all hours paid.

Holiday or sick leave is entitled to the health and welfare fringe benefit, only 40 hours a week.

If an employee works 32 hours a week and on a holiday he gets eight hours -- eight hours holiday pay and 8 hours health and welfare fringe benefit.

Unless the employee only worked 40 hours in a week and the holiday occurs he's not entitled to the 8 hours on a holiday because that takes over 40 hours in a week.

Let's talk average cost.

Average cost is completely different from fixed cost.

Fixed cost apply to each individual employee on an employee basis.

Average cost is completely different.

Average cost has to be grandfathered in the contract in 1997.

Average cost is for all hours worked.

Does not include non-work hours so an employee in this case works 44 hours, he will be entitled to the health and welfare fringe benefit.

Under (indiscernible) each individual employee may or may not receive the stated health and welfare fringe benefit amount.

It's based on a group basis, compliance is determined on a group basis and is not based on an individual basis so you take the contributions the employee provides to the bona fide fringe benefit plan, provided the total number of hours the service performed in that contract.

If it equals the state of fringe benefit amount that contract employer already in compliance under the service contract act.

In this scenario he can leave certain people out.

On a group he's in compliance.

Now, let's say the contract, the employer makes the state -- makes his contributions and it does not equal or exceed the state of fringe benefit amount, if it does not come into compliance initially, once we made contributions and divide by a total number of hours, if it does not equal stated fringe benefit amount, he then has to make a cash deficiency to employees performing on the contract.

If he did not reach the stated fringe benefit amount he's going have to make up cash efficiency to employees working on that contract.

Let's look at this example.

We have an average cost contribution example.

You can see everyone receives something except Tim, Tim didn't receive a benefit.

let's look at the contributions, $2,000.

Total number of hours employees work on the contract was 800 hours.

It averaged to $2.50, the arch was $2.50.

What is the stated fringe benefit health and welfare fringe benefit?

At $3.59.

So in this case the employer is not in compliance with the stated health and welfare fringe benefit under average cost.

As I spoke about earlier, now he has to make up the cash deficiency to all employees working on that contract.

If I go back for a second, remember Tim didn't receive anything.

He didn't receive a benefit.

This will be acceptable if the stated health and welfare benefit was $2.50 an hour.

It's not.

It's $3.59 an hour.

So now the employer has to make up the cash deficiency to all employees working.

Tim didn't receive anything but now he's going to receive the difference, the cash deficiency.

Remember fixed costs is going to apply to most contracts now.

The contract began out to 1997, fixed cost is going to be applicable.

Average cost grandfathered in the contract, had to begin before 1997.

How can you tell if you have fixed cost in your contract?

It's going to be in most contracts after 1997.

Fixed cost, last two numbers of the wage determination is going to end in the odd number.

In the DC area is 2005, 2103.

That's how you know you have a fixed cost wage determination in your contract.

The last two numbers are going to end in an odd number.

And will have the following quotations, going to be hourly amount, if you look at the bottom of the screen, $3.59 an hour a weekly amount and stated monthly amount.

Fixed costs is going to end in an odd number and have that quotation you see at the bottom of your screen.

Average cost is going to -- the last two numbers end typically in the odd number.

In the DC area wage determination will be 2005, 2104.

Going to have the following quotation, going to specify the minimum employee contributions must cost an average.

If you look at the quotation under health and welfare, the middle last sentence it says minimum employee contribution must cost an average.

This is how you know you have an average cost fringe benefit requirement on your wage determination included in your contract.

The last two numbers are going to end in an odd number.

Subject to the service contract act, the successor contract has to do what?

Pay the wages and fringe benefits in that collective bargaining agreement for the first contracting period.

When he takes over a contract that was subject to a collective bargaining agreement under the service contract act does not have to provide the same fringe benefits that the provided in his collective bargaining agreement just equivalent fringe benefits, equivalent meaning equal in cost.

So again, although the successor contractor is required, when he takes over contract, that was subject to a collective bargaining agreement he has to pay the Wangs and fringe benefits in that collective bargaining agreement for that first contracting period.

As far as the fringe benefits, he does not have to provide the same fringe benefits that the predecessor contractor paid in his contract.

Vacation fringe benefits, tough minimum monetary wage, employee is entitled to the minimum monetary wages the health and welfare fringe benefit, currently $3.59, also entitled to pay vacation fringe benefits as well.

Employees entitled to paid vacation benefits, he's eligible for vacation fringe benefits and when he reaches anniversary date on the contract so once the employee reaches anniversary date on a contract he's now eligible for fringe benefits.

A fringe benefit requirements are going to vary depending on wage determinations in the contract.

Typically going to maybe two weeks after one year of service.

So once the employee reaches anniversary date on that contract, he's entitled to paid vacation fringe benefits.

He's only eligible.

Vacation does not have to be paid out at that time.

So once the employee reaches anniversary date and is eligible for fringe benefits they are not paid at that time.

The employee has until the next anniversary date of the contract, before completion of the contract or the employee quits or is terminated, whichever comes first.

Once the employee reaches anniversary date he's only eligible for vacation, he's not entitled to receive it at that time.

He has until the anniversary date of the contract, completion of contract or quits before date an employee has reached his anniversary date you will have to pay him his vacation fringe benefits before he leaves that contract.

Look at this example of vacation.

Jay Jay, he started work on July 1st, 2007.

On July 1st, 2008 Jay Jay now is entitled to vacation.

He's only entitled, he does not have to receive vacation at that time on July 1st, 2008.

will have to receive his vacation fringe benefits before July 1st 2009 or the employee loses the contract before July 1st, 2009 he will have to be paid his vacation fringe benefit.

Or Jay Jay were to quit or if terminated before July 1st, 2009, then the employee has to pay vacation fringe benefit.

Whoever employs the employee when he reaches anniversary date is the person responsible for paying the vacation fringe benefits.

And whenever the employee takes vacation,whatever his hourly wage rate is at that time, that's the rage rate the employer is going to have to pay him.

So you may have a wage increase between the time he actually takes vacation.

The determination is on continuous service, with the present contract in any capacity or the president of the contractor performing the same services at the same location.

So there's two factors.

The length of service is going to be taken into effect with the pressing contractor in any capacity or with the or contractor performing the same duties at the same location.

When I say present contract, it would include time spent performing commercial work.

Look at this example, employee works six months with the present contractor.

Six months performing commercial work as well as six months on SCA covered contract.

That equals one year of service.

His time spent performing commercial work with that present contract does count.

It does have to be continuous service.

There has to be no break in service.

There's a break in service, has to be at no fault of the employee.

Say employee is working in a cafeteria.

It closes three months for renovation.

That's a no for the employee, so that would not be a break in service.

Say an employee decides to stop working for a couple of months and come back after two months.

That will be a break in service.

There has to be continuous service, no break in service but no fault of the employee.

Now, the rule on the vacation is at least ten days before the end of the contract, the outgoing contractor must provide a list of anniversary dates of all employees working on that contract to the contracting agency.

The agency will provide their list to the incoming contractor so they can know their responsibilities as far as vacation is concerned under the service contract act.

Again, ten days before the conclusion of the contract the outgoing contractor is responsible for providing a list of anniversary dates of all employees working on the contract, will provide to the contracting agency.

The agency going to forward that to the incoming contractor, again, so he can know his responsibilities as far as vacation requirements before he takes over that contract.

Holiday fringe benefits.

We're going to talk holiday fringe benefits.

Again, employees are entitled to the minimum monetary wages.

The health and welfare fringe benefit, pay vacation, as well as paid holidays.

Typically they're going to be at least ten named holidays on a WD.

If an employee works within the work week that the holiday occurs, he's going to be entitled to the holiday fringe benefit.

So the holiday is on Wednesday and if an employee works Monday, Tuesday, Thursday, Friday, any day within that week he's entitled to that pay holiday fringe benefit.

Now it's only up to eight hours.

If an employee typically works say four ten hours days he's into only entitled to 8 hours holiday pay.

It must be a named holiday on the wage determination.

Employers can substitute a named holiday for another day off.

Say the employee wants his birthday off, if it's communicated T employee can substitute a name holiday for another day off on the WD.

It has to be a named holiday an the WD so we have a vast snowstorm and the federal building is closed, and contractors are not allowed to work that day, they're -- employer is not obligated to pay them.

If it's not a named holiday on that WD employees are not entitled to that.

Again, it's only up to 8 hours of holiday pay.

We talked about fringe benefits.

Again, the employed and contractor does not have to provide the same fringe benefits just on the WD.

They just have to provide equivalent fringe benefits meaning equal in cost.

Part time employees.

As I talked about this morning, every employee performs work on an SGA covered contract entitled to the minimum monetary wages as well as the health and welfare fringe benefit as well as vacation and holiday fringe benefits.

Regardless temporary, part time or full time.

Service contract act make difference between full time part time and temporary.

If you're on the contract you're entitled to the wages and fringe benefitsch part time employees are not entitled to someone same benefits as one working on a full time basis.

That's going to be on a pro rata basis based on hours they worked.

So you look at this example, part time employee works 20 hours a week instead of 40 hours a week, he's entitled to one half vacation.

And holiday pay typically employee works at least eight hours a day if they're full time.

Part time employee works 20 hours a week will be entitled to half that, if he works four hours a day.

So part time son a prorated basis based on hours they work.

Let's talk about overtime under the service contract act.

There's no overtime requirements undo tear service contract act itself.

We recognize the overtime under the fair labor standard act as well as contract work hour safety standard act, QASA.

So again specifically under the service contract act there's no overtime requirements.

We recognized overtime provisions children the fair labor standard act and contract work hours safety standard act.

Both are calculated the same.

One and a half times the basic hourly rate.

QASA is a little different.

It has to be the contract has to be in excess of $100,000, only applies to labors, mechanics, washmen.

So QASA, the contract has to be excess of $100,000.

And only applies to certain classifications, labors, mechanic, guards and watchmen.

If you're not one of those, QASA will not be applicable.

As I mentioned before, they're calculated the same.

One and a half time it is basic hourly rate.

QASA is a little different.

Liquidated damages can be accessed by the contracting agency at a rate of $10 a day when overtime is not properly paid.

So the big difference between QASA is liquidated damages can be accessed on the QASA, $10 a day when overtime is not properly paid for.

We have an example here, overtime compliance under fixed cost.

Remember we talked about fixed costs, fixed cost the health and welfare fringe benefit is only up to what?

40 hours in the week.

So you look at this employed, they work 44 hours in a week.

They're wage rate was 15 an hour plus $3.59 the health and welfare fringe benefit rate but the employee was only paid 40 hours in health and welfare fringe benefit because they're only entitled up to 40 hours so though the employee worked 44 hours in a week, they're only entitled to up to 40 hours health and welfare fringe benefit.

You can see the employee was paid 44 hours as straight time and then the four hours at the half time freight.

Let's look at example of average costs.

Average cost is pleatly different from fixed cost, the difference between fixed an arch, fixed is all hours paid, average is all hours worked.

In this case the employee worked 44 hours in a week and this scenario under average cost he's entitled to the full 44 hours of health and welfare fringe benefit.

Because average cost is for all hours worked.

So again you can see in this scenario employee was paid his entire 44 hours in health and welfare fringe benefit, again, 44 hours with straight time and four hours at half time rate.

Here you have an example of employee performing a duty in more than one classification.

The employee performed the duties of electrician and a painter.

What we did to come with the regular weight rate is weighted average.

The regular weight once we did the weighted average is $21.91.

You can see how overtime was calculated.

Let's look at liquidated damages.

The fair labor standard act and QASA is liquidated damages can be accessed by the contracting agencies at a rate of $10 per day when overtime is not properly paid.

You can see the employee reached the overtime hours when?

Thursday, Friday and Saturday.

So $10 a day at 3 days overtime being properly paid, liquidated damages was assessed at $30.

Again, when the employee come us one that 40 hour mark he's entitled to overtime.

Overtime is applicable ee reached more than 40 hours on Thursday.

Thursday, Friday and Saturday.

So liquidated average accessed at the rate of $10 a day for each of those days.


Contractors employers are entitled if under service -- if they take on a service contract they're entitled to certain recordkeeping requirements.

They must keep appropriate, they must keep appropriate records for at least three years upon conclusion of the contract.

Once is contract is over they must still keep those records for at least three years.

These are records they must keep.

Name, address, Social Security number and classification, wages and benefits, the daily weekly compensation, and the length of service list under predecessor contractor.

The employer, the contractor is required he has a recordkeeping requirement.

He must keep these records for three years upon conclusion of the contract.

Let's talk about the importance of the contract labor standards and stipulations being included in the contract.

As we talked this morning unlike under the Davis-Bacon act the wage and hour division has sole enforcement authority so it's very important that we have the contracting agencies incorporate the labor standard clauses an applicable wage determination into the contract.

We have no enforcement authority unless the contracting agencies incorporate the labor standard clauses and the applicable wage determination in the contract.

So it's very important when you let SCA contract, when I'm speaking to contracting officers, when you let an SCA contract that you make sure you incorporate the SCA labor standard clauses stipulations, and the applicable wage determination in the contract.

Unless you do that we have no enforcement authority.

We find out down the road that the contract was subject to SCA and stipulations are not in the contract.

Then we have to contact you and have you incorporate that into the contract.

So it's very important that you incorporate the labor standard clauses and wage determination into the contract.

Now again, we have sole enforcement authority under the service contract act.

It's also our responsibility to make sure that contractors are in compliance with the service contract act.

We conduct a good number of investigations each year.

We don't disclose the reasons of our investigation, most are driven by complaints, we keep those complaints confidential.

Again, we have the sole enforcement authority unlike Davis-Bacon where we have shared enforcement authority with the contracting agency.

Under the service contract act we had -- we have shared enforcement authority.

It's our responsibility to make sure the contractors are in compliance with the service contract.

These are some of the most typical compliance issues that we see.

The first one as I just mentioned are stipulations included in the contract.

We initiate a lot of investigations and turns out to be that the stipulations are not in the contract.

That's a big compliance issue.

Then we have to contact the agency and are have the agency incorporate labor standards in the contract.

The SCA post in WD, as I mentioned before this should be posted at the job site, employees should know the compensation they're entitled to receive.

Typically employees call us on a regular basis, they don't know what WD is in the contract, it's posted at the site T poster is not at the site.

This is another compliance issue.

Contractors should post wage determination again in an accessible location at the job site so employees know compensation they're entitled to receive.

Thus wage determination contains all necessary classes, a lot of times there are conformances that need to be done.

Contractors receive a WD, they have classes that are required to perform on a contract.

They don't have a wage rate for that class.

Conformance should be initiated.

Contracting agencies should walk through the conformance process with the contractors to inform them that you're going to need to do a conformance for classes required to perform on a contract but they're not listed on a WD.

That's another compliance issue.

Fringe benefits, are they being properly paid?

Fringe benefits have to be paid cash in lieu of fringe benefits, the health and welfare fringe benefit has to be cash in lieu of fringe benefits or to a bona fide fringe benefit plan.

Some employees feel they offer an employee a bona fide fringe benefit and they decline that's it.

They have they haven't met the obligation.

They must cur the expen of providing the benefit to the employees.

Overtime, overtime is it properly paid?


And the employee has to keep appropriate record for at least three years upon conclusion of the contract T. those are the most typical compliance issues we'll see in an investigation.

Qualified workers under qualified contractsch executive order 1395.

Department of labor we just issued our final rule under the executive order 13495.

And that's going to require contractors and their subcontractors who are awarded service contracts to provide the same or similar services at the same location in most cases to offer employment to the present contractor employed to positions in which they are qualified.

The executive order the final rule mandates inclusion of a contract clause.

Is going to be required to offer employment to those contractor employees to positions in which they're qualified.

The final rule is it not effective in the federal acquisition regulation counsel issue regulations.

So we still have no enforcement authority until the far council issues and publishes their regulations.

We're contemplating another webinar to address executive order 13495 to give guidance to the contracting community, we have talked about doing a webinar, that is discussions are taking place and I will say keep abreast, check out checking our website for more information on the department of labor doing a webinar to discuss executive order 13495.

We have issued our final rule, 's not in effect until the far council issues and publish their regulations.

Most cases when a contractor successor contractor takes over a contract providing the same services, same location, most circumstances he's going to have to offer a right of first refusal to those employees who worked on the predecessor contract.

That concludes our presentation on SCA compliance principles.

I hope you found that very informative.

We're moving right along.

Again, I want to make note again you can send your questions to

We have one more topic to discuss.

Then we're going to end everything with question and answers so please keep your questions coming at WHDPWC@D

Now I'll pass to Mahruba Uddowla and she'll go over the GSA supply schedule.

>> Good afternoon, everyone.

I want to thank the department of labor for inviting me to speak today.

Any chance to talk about our schedules program or any vehicles, that makes us really happy.

As William mentioned, I work for basically what is the policy shop within the federal acquisition service and that's the service within GSA home to schedules program.

We're the sister service to PBS, public building service you might be familiar with, they handle leasing at old buildings.

Today specifically I'm going to go over multiple award schedule program, and how the SCA kind of relates to the schedules program.

So fist I'm going to do a broad overview of SCA, I'm sure after today you guys are experts on it already so I won't belabor the issue.

And what we hope for the schedules program for the future with regards to SCA.


So service contract act basically establish standards for minimum compensation for people working on service contracts.

It applies to contracts over $2,500, the principle purpose of which contracts is to furnish service in the U.S. through use of service employees.

What it does not apply to are service contracts which are performed essentially by what are called bona fide executive administrative or professional employees.

However, in these service contracts involve the use of service employees to what is called a significant or substantial extent then SCA does apply.

Moving on to the schedules program.

The statutory name for our program is federal supply schedules.

You may also have heard it called as multiple award schedules, MAS or just plain old schedules, it's all the same thing.

What they are are basically contract vehicles for commercial products and services and solutions that will available for use government-wide.

And there are multiple indefinite delivery quantity IDIQ contracts and they consist of a five year contract base period with three five year option periods.

So we ear looking at 20 year contracts.

When we establish these, when we award these contracts we make them in accordance with far parts 1215 and 38.

Talking acquisition professionals for commercial items, 15 is for contract by negotiations and 38 is the far part dedicated to federal supply schedules.

I'm just saying this to let you know we take care of a lot of things that you normally would for what we term open market contracts.

So that you don't have to worry when you order from schedules.

When we take care of acquisition planning we make sure the solicitations are posted on fedBIZOPS and when we make an award the notices are posted on fedBIZOPSch we make the responsibility determinations so we make sure that the contractors are -- have the financial resources to perform under this contract they're not on EPLS, that they have acceptable past performance.

Al those things.

We also incorporate the terms and conditions at the contract level and basically that means we put in all the necessary required clauses and I'm going go into that more later.

We determine fair and reasonable pricing so we do negotiate pricing to the schedule contracts themselves.

A lot of people like to think of those as prices so we encourage ordering agencies to ask for discounts, price reductions.

Don't feel shy.

Those are just -- we found them reasonable because what we like to go after is what that contractor offers the what they term their most favorite customer.

That's how we like to think of it.

We're getting the best price but when we establish these contracts we're not obligating any funds.

So we're not promising them a million dollars as you would on your order.

So there's definitely opportunity to get better rates when you're placing an order.

So we have about 40 schedules total, nine Wedell gated to the department of veterans affairs VA and those are generally medical supplies and services.

Of those 40 schedules 20 are for services, 14 of those 20 service schedules are for professional services.

The rest are obviously not professional services.

And generally SCA obviously would apply to those schedules not for professional services and those aren't the lines that ones that we have issues with.

So I tend to focus these presentations more on our professional service schedules.

To let you know as I mentioned before required terms and conditions are incorporated into schedule contracts.

That includes the SCA related clauses.

Service schedule contracts including the professional services ones.

So how does SCA figure into schedules?

Historically we applied whether or not determine whether or not S CA applies at that time schedule level.

So we took our professional engineering services.

We said this schedule contract is for professional engineering services.

So we said SCA doesn't apply so don't worry ab anything.

Labor has the sole enforcement authority for SCA violations an often times they can overrule a contracting officer to determine whether SCA applies or not.

Enforcement has been happening at the order level.

So we have done I believe it start ad few years ago where a of schedule -- majority of scheduled professional services contracts where we have started saying principle purpose isn't for service employees using service employees, however we can see how some task orders placed under the schedule contract could end up being applicable which is when we started applying the clauses to our service schedule contracts so for the majority of the professional service schedule contracts we handle things where we allow the vendor to propose SEA applicable labor categories.

Again, majority of our professional service schedules allow for that, only one of them at this time doesn't and that is our IT schedule 70.

But for all other professional service schedule contracts they are allowed to propose SCA applicable labor categories.

When we award pricing for those categories we make sure they're compliant with the latest wage determinations.

We do incorporate the required terms and conditions contract as required for non-appropriated funded contracts, we do incorporate wage determinations into schedule contracts every two years.

Just to give an idea how we handle it when we award SCA applicable categories on our services contracts professional service contracts, here an excerpt from solicitation of our professional engineering schedule.

These are instructions that we give to offerers when they're submitting their proposal.

Hopefully you have a bigger version in front of you so you can read it.

The take away is that the SCA applies to all non-professional services provided under that schedule.

We told them that some of the proposed labor categories maybe subject to SCA and obviously those are non-professional once and we tell the offerer they need to verify their proposed base rates and fringe rates they pay their employee either meets or exceeds what's in the wage determination that is incorporated into the contract.

Or for the area that they think most of the work will be performed under.

As mentioned, we do incorporate an index of wage determinations so all areas.

Our contracts have a nationwide scope.

So we have to adjust for all possible offers we could get in.

Then we tell them that when you propose your SCA applicable hay boar categories, -- labor categories identify the appropriate wage determination associated with that.

The state and counties that or the wage determination from the state and counties that you use to come up with your proposed rate and basically identify -- match up what they're proposing with an SCA equivalent labor category and the wage determination.

Which ends up in a matrix such as that.

So say they're proposing secretary, they would match that to a general clerk 1, the SCA equivalent labor category and the determination they're using that's incorporated inthe that contract into that solicitation.

So they would say I'm offering $20 for my secretary.

And that's the wage determination they're using.

So we go back and look.

They're proposing $20.

General clerk is X dollars.

So oftentimes we're not close to what the wage determination is, it often exceeds whatever is in the wage determination by a lot.

So many times we don't have concerns.

So when they propose their prices we make sure that they include certain language in there.

And that basically makes it clear that hey, I'm proposing SCA applicable labor categories.

I have noted them, usually two asterisks and here is the wage determination that I use as a basis for my pricing.

Know that I'm proposing my pricing based on the area where I think I'm going to do most of the work.

But if I happen to think that area or if I -- if that area happens to be one of the high cost areas know if you place a task order in a low cost area, we need to discount our price accordingly.

Which leads me to my next slide on order level requirements.

We all like to think that everything is altruistic and always does what they should but we like to tell our schedule ordering COs that when you're ordering and you know your from a low cost area, just check to see what the schedule rate is and if it's higher than what the rate would be with a determination for your area, feel free to negotiate down.

You have that right and almost think you have that responsibility too to make sure you're spending the taxpayer's dollars as best as you can.

For orders under schedule 70 currently before we change anything on it you have to determine whether the SEA applies to your task order.

And if it does you have to negotiate pricing or renegotiate pricing for SCA labor categories.

Fortunately at this time our schedule 70 still isn't -- still doesn't apply a fee at the schedule levels so you have to handle that at the order level.

It's a little extra step for schedule 7 users.

Which leads me to where we expect or hope to be with the schedules program.

We have been working with our colleagues at labor to establish some agreement on SEA applicability, schedule level, order level, how often we incorporate wage determinations, what to tell our ordering agencies, what they have to do.

We're also trying to standardize the application or implementation of SEA across our schedules so that all are the same and it's not a different ordering procedure for different schedules.

How we're also trying to work with them to develop a more clear and con size policy so that we won't confuse or ordering agencies with what we tell them they have to do on their schedules.

We're also planning on hopefully doing more joint training efforts kind of like today where we would come to their conferences and educate people on the the properties schedules and they come educate our contracting officer especially those establishing and awarding federal contracts themselves how to properly apply a CA to -- SCA to contracts, mostly ordering agencies when when we train them they'll come along and help us make sure they don't run into trouble.

I don't think anybody wants to through what happens when it turns out that a contractor isn't doing what they're supposed to be doing or ordering agency overlooked applying the SCA when out should have.

That's where we're hoping to go in the future T. majority of contracts, you think it's pretty simple to use, do you take care of work up front at the contract level?

You need to make sure that if you need to negotiate your rate down, because there's two strategies that we use as I mention T contractor can propose pricing based on where they think they're going to do most of the work.

Or just to be on the safe side, those pick the highest wage determination out there, the highest area with the wage determination out there.

And base pricing there.

So many that case pricing is a ceiling and you should definitely negotiate those rates downwards.

I think that -- one more thing before I leave you.

For those schedule users out there, we revamped our portal based we are sites recently.

I recommend you go check it out and sign up to get new updates and what not.

There's been a lot of changes recently to the schedules program and I can tell you right now in the next two, three months it will change drastically further.

So if you're a frequent user of scheduling you use it once in a while sign up for updates because there's a lot of changes coming and that's basically the face the ordering agentsis.

You can get a lot of information that way.

That's it for me.

>> Thank you, Mahruba.

Now we'll finish everything out with questions an answers.

You have a few more minutes to submit questions an answers to us.

You can submit the questions not questions and answers.

You can submit your questions to

We have a few questions and we'll address those now.

First question, this is addressed to you, Kyle.

It's saying an example you gave price adjustment used a fixed price contract.

How would this be done if calculated on a cost reimbursement contract?

>> I hate to be the one not giving straight answers today but I'll probably not going to give you a straight answer or the answer you necessarily want to hear on this one either.

Remember that this clause for the subscription applies to fixed price lay labor and contracts.

Remember the premise behind reimburse able contract.

The government is reliable and for all costs in reality, don't really have price adjustment authority under a fixed price contract.

That being said for whatever reason, if you find yourself doing a adjustment, I would encourage you to follow the principles for a fixed price contract, verifying the contractor's rate increase was in fact necessary and actual.

Matter of fact and in practical terms the contractor should be able to supply you with payroll data and as an added safeguard, the government's risk is minimized due to the fact we are only reimbursing the contractor for actual new experiences so it's a bit of a different twist on the question there for you.

But there it is.

I would also encourage you to look at specific contract terms and conditions because contract reimbursement contracts come with a different incentive arrangements whether award fee incentive fee, fixed fee, what have you, I would take a close look at clauses you have in that contract dealing with those incentive arrangements and how they're affected by upward adjustment in cost due to wage -- it's very situation specific and some clauses are unique to the contract they're written for.

Next question come from hope in Maryland.

Are new increasessen incurred in June automatically included in the contract each year, what is process for WND increases as well?

Health and welfare Ms. Sandra talked about this morning, the health and welfare fringe benefit goes up every June, this year on June 17th.

So it's only going to apply to contracts that began June 17th and after.

Wage determination process is once a WND is incorp rayed in the contract, it will last that contracting period.

It's going to last that contracting period.

If the contract is -- every anniversary date on the contract the contracting agency must incorporate the recent WD in the contract.

If the contract funding is not pro rations every other year on the anniversary date they must incorporate the most recent WD in the contract at that time.

That is consider ad new contract and hat that time the most recent WD must be incorporated in the contract as well.

So I hope that gave hope some clarification on that issue.

Another question, will posting the WD on the contractor company website, known the the employee as posting and location satisfy the posting requirement?

That may B. if that's acceptable you know employees will look at that website, that's something that the employees are going to -- they definitely have to go on that website every day.

That could be an accessible location but it has to be somewhere employees go on a regular basis so they know it's there.

It cannot just be on the website and employees for some reason just never going on the website.

They never know the WD is posted there.

So it could be acceptable, just depends on the nature and usage of the website.

Employees are required to go on that website every day, that might be an accessible location.

Next question from MARISSA in San Antonio Texas, does this additional vacation need to be provided to a third party or trust in order to be in compliance?

The answer would be no.

Once the employer satisfy his minimum requirements under SGA requirements on the WD, say the minimal requirements are only two weeks pay vacation and the employee like to provide three weeks, one additional vacation fringe benefits, he can take credit for one week additional time under the health and welfare requirement.

In that case it doesn't have to be independent trustee or third party administrator.

Patty in Virginia had a question.

Please address when a contract requires a new wage determination.

Again, as I mentioned Patty, once the WD is incorporated in the contract, it will last for that contracting period.

Once its put in the contract starts October 1, 2011.

The WD is put in October 1, 2011, will last for that contracting period.

Now, again, if the contract funding is subject to annual appropriations then on October 1, 2011, 2012, the contracting agency incorporates the most recent WD at that time.

October 1, 2013.

The contracting agency incorporates the most recent WD.

If the contract had the option, start October 12011 and okay 1, 2012, the agency has a -- can exercise the option on a contract once they the option that's a new contract and have to incorporate the most recent WD at that time.

Patty, I hope we address your concerns.

We had a question from I believe TANELA from green belt, Maryland.

Her question, can you please clarify the ploy yeah cannot carry over vacation?

Are you referring to current contract to a successor from year-to-year?

Okay, an employee, vacation requirements, once an employee vests in a vacation he's eligible for vacation when he reaches anniversary date on a contract.

So I'll use October 1 again.

October 1, 2011, employee anniversary date on the contract.

Now he's eligible for vacation.

He's eligible October 1, 2011.

Doesn't have to be paid vacation on October 1, 2011.

The employer, the contractor has until October 1, 2012.

Or the employer loses the contract before October 1, 201, or the employee quits or is terminated.

He has to be paid that vacation within a year's time before the next anniversary date.

That vacation cannot carry over until the next year.

We have a question from MARISSA in San Antonio, Texas.

Is an employer still in compliance if he chooses to pay the vested vacation amount due prior to contract anniversary date?

There's no accruing under the service contract act.

Employee is not entitled to vacation until he reaches anniversary date.

So technically an employee is not eligible for vacation until he reaches anniversary date.

There's no accruing no recommended accrue you think the contract act.

Employee is not entitled to vacation he reaches anniversary date on the contract.

Next question comes from Vickie.

From California.

Please confirm that contractors are not allowed to use the average method on paying fringe benefits for contracts awarded after 1997.

Once the new health and welfare rate of $3.59.

Average cost as we talked about this morning.

Average cost T only way average cost is applicable to a contract is have to be grandfathered in the contract prior to 1997.

So already had to be in the contract prior to 1997 for it to be applicable.

Once the contracts incorporate the new health and welfare rate I believe the health and June 17th of this year.

So all contracts begin June 17th and after that new health and welfare rate of $3.59 will be applicable.

Vickie had another question.

When should a contracting officer incorporate a new wage determination.

I'll go over that again.

Once the WD is incorporated in the contract it will last for that contracting period.

If the contract funding is subject to annual appropriations, every year on the anniversary date on the contract, the contracting officer is going to incorporate the most recent WD in the contract.

If the contract funding is not subject to annual appropriations every other year they're required to incorporate the most recent D in the contract.

If there's options, every time the contracting agency exercises the option on that contract, that's considered a new contract and a new -- the most recent WD at that time should be incorporated in that contract.

I hope we address those -- we seem to have a lot of issues about when does the contracting agency incorporate a new WD in the contract.

Hopefully we have addressed those concerns.

We have a question from -- we have more.



Her question is, if our company provides life insurance, we pay the policy, does that count as a fringe benefit?

Can I decrease the health and welfare if it doesn't total to the employee if I demonstrate this amount is paid?

If our company provides life insurance, we pay the policy, that account is a fringe benefit.

If you have a SCA covered contract, again you can satisfy the health and welfare fringe benefit two ways, you can pay to a bona fide fringe benefit F it's a fringe benefit and you incur expense of providing that benefit to the employees, then you can take credit.

If I's life insurance, health insurance, disability, if it meets the criteria or a bona fide fringe benefit plan, I'll give a website to determine if it's a bona fide fringe benefit plan, it will be 29-CFR-4.171.

Under 29 C first quarterR 4.171 list it is criteria that meets the fringe benefit plan.

Whatever plan you offer if it meets that criteria and you're incurring the expense providing a benefit on behalf of the employees, then yes, you can take credit for that.

And it will have to equal or exceed the stated fringe benefit amount which is currently $3.59 an hour.

We have another question for Kyle.

Your example price adjustments.

You remove the Fay pais Lowell clerk from the 'e of price adjustment because not involved in the work.

However, if the payroll was done by the accounting clerk 1, 2, or 3, would this still be eliminated? The clerk sports only this contract.

Who determines which positions are involved in the service worker especially if the position is administrative?

>> Ultimately the resolution of that question comes to the contracting officer.

They have to determine whether that employee is directly engaged in the work.

To borrow Ms. HamletT's verbiage from this morning.

SCA covers -- applies when looking at a contract principle purposes for services that involves service employees.

And the extension of that is services directly involved in the requirement itself.

So in basic terms, many of your overhead functions maybe use poor turn of the wouldn't be covered necessarily by the SCA price adjustment.

They maybe necessary to support the work but not necessarily directly engaged in performing the work.

And I -- so following up on that, I would be necessarily home in on the job title or the SCA position title the contractor is using to determine compensation for those individuals.

I would look more, is this position or is the work this person doing required by the contract?

That's what I would do deciding criteria.

>> Okay.

Let me give you one more question, Kyle.

When it's determined SCA was in the -- labor standards be added to the contract, what contracting authority would the contracting officer use to make the change under the contract?

Would it be a bilateral contract modification or unilateral contract modification?

>> There's going to be a pricing action in all likelihood necessary.

All folks that taught me bilateral is best when dealing with price changes to the contract.

If necessary the contracting officer has the ability under the changes clause to impose requirements of the service contract unilaterally but it also comes with the ability for the contractor to submit a request for equitable adjustment after the imposition of that change order.

So my personal preference would be negotiate that change.

Negotiate bilaterally with the contractor, you can use the authority of the changes clause or the old fall back supplemental agreement between parties, first preference is for the changes clause last for the supplemental agreement.

>> We have a few more minutes, so you still have time again to submit further questions that can be submitted at

We have a few more questions to address so we have about five more minutes so you can still get your questions in.

We have a question and comment from Cheryl.

Cheryl says great presentation.

Thank you.

She says and your overtime example, involving weighted average, employee worked 20 hours as an electrician and 24 hours as a painter doing the same work week.

The slide shows how to compute the weighted average, one of the records show this employee worked 20 hours the first part of the week as a painter, same worked electrician on Thursday and Friday the same week.

You know the employee worked as a painter during the overtime hours but you still use weighted average to compute overtime and calculate based on the overtime hours.

You will still use the weighted average unless there's agreement if there's an agreement then it will be the rate in effect when it reaches over time period again.

Thank you,, from Birmingham, Alabama.

Questions are still coming in.

This questions comes from Vickie.

In reference of posting agency or federal contract website, this is not sufficient if employees can't read.

Therefore should it be posted on a job site available for the employees?

Requirements to be posted on a job site.

Vickie, we didn't say the poster -- that it was mandatory to be posted on a job site.

The poster or the W has to be posted in an accessible location where employees can see the compensation they're required.

The question then we receive was will the job site be an acceptable location.

So it's not mandatory that the wage determination or the poster be posted at the job site but just at an accessible location employees can view the applicable wage determination.

So it's not mandatory but the question that we got earlier was it acceptable if it was posted at the job site.

And I our answer was it could be.

If it truly acceptable.

If employees went on the website every day and that was something that on a routine regular basis they went on that website for various reasons, we say that could be an accessible location.

We didn't say definitively that would be an acceptable location.

But it could be.

We have a question from chuck from high valley, Pennsylvania.

We presently provide excellent benefits to our employees.

We are low voltage system supplier who believe that our fringe benefit program meets or exceeds the fringe benefit program as being referred to.

How do we get our benefits program certified as a fringe benefits program?

If you feel your benefit you're providing to employees is a bona fide fringe benefit plan and meets the criteria under 29-CFR-4.171.

You don't have to submit it to be approved.

If you feel it does not meet the criteria, you have some questions it will have to be submitted to the wage and hour division and we have to look and see if it truly is a bona fide fringe benefit plan.

If you're certain after you look at criteria under 29-CFR 4.171, it meets the criteria is and is a bona fide fringe benefit you done have to submit that and you can take credit for that as long as you're incurring expen of providing that benefit.

You only have to submit a bona fide fringe benefit plan to us if you feel if you're uncertain it is a bona fide fringe benefit.

one more wake determination question.

Sandra, can you come down a second?

We have a technical wage determination question so I wanted the question to be answered by Ms. HamletT.

Kayla has a question regarding moving and storage, that you talked about this morning.

She said can you clarify when you're going use non-standard rate versus the standard rate?

>> Thank you, Kayla for calling me back.

If your moving equipment throughout a building from one room to to the other, you use the area wide ways determination.

If you're moving equipment outside the building to another building perhaps another state it's the moving and storage determination.

It depends on the primary purpose of that contract as to which ways determination would be applicable.

>> Our last question to address today comes from Patty.

Patty has a lot of questions for us today from Vienna, Virginia.

A question about WDs and contract extensions.

I failed to mention contract extensions.

If the contract is going to be extended, say to give the contract additional time to complete the work, 30 days or so, a new WD isn't required but if they extend it, add additional work, change the scope of the contract or extended for certain length of time, six months or so, a new WD is required to be incorporated in the contract.

So hopefully we have addressed your WD concerns.

This concludes our presentation.

The service contract act webinar for contracting officials.

I hope everyone enjoyed or presentation.

I would like to thank our team of presenters again, Ms. Sandra hamletT branch of government contract with the branch of service contract wage determinations, Mr. Kyle Robert,ly boar adviser with the United States air force, and Ms. Mahruba Uddowla with the General Services Administration.

We have a survey online on the website, wow would like your feedback and information.

This is our first time doing a live webinar.

So there were a lot of technical issues we will work on that in the future.

Again, I hope everyone enjoyed the presentation.

Again, please fill out the evaluation and survey.

We would like your feedback and information how we can do a better job of presenting a live webinar.

Again, thank you for joining us and good evening to everyone.

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