How does one correct wage determinations?

A corporate official asked the following question: Many government solicitations use Labor Department wage determinations for certain personnel positions needed to complete work on a contract. If we believe a position is incorrectly classified is there a mechanism we can use to correct the determination? How are errors in wage determinations corrected?

The Service Contract Act (SCA) applies to a federal contract when the principal purpose of the contract is the furnishing of services by service employees. [41 U.S.C. Section 351(a)] The "service employee" category includes skilled and unskilled manual laborers and craftsmen but excludes bona fide executive and professional employees.

Each solicitation and resulting contract for services must include a standard clause that requires the contractor to pay each service worker employed under the contract not less than the minimum monetary wages and fringe benefits determined by Labor. Other provisions of the clause set forth detailed notification record keeping and other requirements (see Federal Acquisition Regulation 52.222-41).

If the contract is expected to exceed one year the contracting officer is required to include another standard clause stating that the applicable wage determinations may be revised annually after the base contract period. When a revised wage determination is made applicable the contract price can be adjusted to reflect increases in the contractor's costs. However such adjustments may not include overhead general and administrative expenses or profit (FAR 52.222-43).

Wage determinations are specific to particular geographic areas. If the contracting officer does not know in advance where the contract will be performed the officer should obtain from Labor wage determinations for all areas where the services could be performed.

The contracting officer also must include in the solicitation a notice that prospective offerors may request determinations for additional geographic areas. The notice also warns prospective offerors that failure to request a determination for the appropriate locality will not relieve them of the obligation to pay their employees in accordance with the appropriate wage determination although they will be prohibited from passing any resulting cost increase to the government (FAR 52.222-49).

If a prospective offeror believes that the contracting officer has improperly applied the SCA rules in a solicitation it should raise the matter with the contracting officer before the proposal's due date. Offerors also may complain to Labor or file a protest with the General Accounting Office.

Jurisdiction a Tricky Matter

Unfortunately the proper jurisdiction for such matters can be confusing. For example in Resource Recovery International Group Inc. (B-265880 Dec. 19 1995 95-2 CPD Paragraph 277) "When a protester challenges an agency's decision that the Service Contract Act does not apply to a particular contract the determination to be made is whether the agency acted reasonably."

In PacOrd Inc. (B-253690 Oct. 8 1993 93-2 CPD Paragraph 211) GAO denied a protest even though the agency failed to include in the solicitation the standard clause for procurements that had yet to identify where the contract work would be performed which makes it impossible to make a wage determination. Still GAO denied the protest because the contract award was based on the lowest bid and four other bids were lower than the protester's. GAO held that the protester was not prejudiced and denied the protest.

If following a contract award the contractor discovers that a wage determination attached to a contract does not cover a particular labor category that a contractor needs to complete the work the contractor must initiate a "conforming procedure" before any work conducted by the employee whose class has not been listed. Under this procedure the contractor is required to submit Standard Form 1444 Request for Authorization of Additional Classification and Rate to the contracting officer. The contracting officer reviews the form and forwards it and all pertinent information to Labor which will approve modify or disapprove the action [FAR 52.222-41(c)].

In general a wage rate redetermination made during the base year of a contract covering more than one year will not be applied to the existing contract until the commencement of the option period (Ralph Construction Inc. ASBCA No. 35633 88-2 BCA Paragraph 20 731 at 104 756). The standard SCA contract clauses do not provide a vehicle for adjusting the contract price for changes to wage rate determinations that are made during the base year of a multiple-year or option contract (Professional Services Unified Inc. ASBCA No. 45799 94-1 BCA Paragraph 26 580).

In a number of cases however contractors have received adjustments to their contract prices based upon principles of mutual mistake the changes clause or other approaches instead of the standard SCA contract clauses.

Whether an apparently erroneous wage determination may be corrected can be tricky. However if a contractor acts quickly it is possible to obtain relief in many cases.

-- Peckinpaugh is a member of the government contracts section of the law firm of Winston & Strawn Washington D.C.


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