Service contract confusion

Since 1965, the Service Contract Act has required that companies providing services to the U.S. government pay their employees wages and benefits equal to, or better than, those established by the Labor Department as "prevailing" at the place of work.

Until 1994, the SCA stood as one of the clearer laws intended for contractors. But Congress that year established as part of the Federal Acquisition Streamlining Act a broad exemption from normal procurement laws for companies providing commercial items to the government, including services. Since then, debate has been constant.

When FASA took effect, officials at the Federal Acquisition Regulation Council immediately began compiling lists of laws they thought should be considered nonbinding on contractors and subcontractors supplying commercial items. An early draft included the SCA.

In response, Labor worked heavily to keep the SCA off the final list, arguing in part that only Labor had the exclusive right to interpret the SCA. In what the council apparently saw as a compromise, it agreed in October 1995 that the SCA would continue to bind prime contractors—but not subcontractors providing commercial items.

Still, the debate continued alongside the turf war between Labor and the council. In August 2000, the council deleted the SCA from the list of laws. Simultaneously, Labor issued its own "temporary" rule adopting a substantially similar but narrower exemption.

In a request for comments, Labor proposed to expand the new exemptions to cover virtually all federal acquisitions of information technology-related services. Moreover, the department proposed providing the same exemptions for prime contractors and subcontractors.

That would have been a huge change in the law. Before, the only significant exemption for prime contractors covered acquisitions principally for the maintenance, calibration or repair of commercial computers provided by the equipment's supplier. There was no exemption for computer services or data collection.

In January 2001, Labor issued its final rule, not only retreating from the proposed rule but essentially returning to pre-1995 rules.

As if this weren't confusing enough, while the FAR Council and Labor feuded, the General Services Administration took an even more radical approach. Starting about 1995, GSA greatly expanded its multiple-award schedule program to include many services not found on those contracts.

Until then, the only services available under MAS contracts were those considered exempt from the SCA. But with MAS' expansion, many kinds of SCA-covered services became available. Yet, GSA never revised its MAS contracts to include SCA contract clauses. As a result, contractors may be left in a dilemma over how to comply with the law when performing work under an MAS deal.

Labor owes it to the contracting community, and the workers, to straighten out the confusion in this area, and to educate people affected by these rules.

Peckinpaugh is corporate counsel for DynCorp in Reston, Va. This column represents his personal views.


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