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What is the Service Contract Act?

The Service Contract Act (SCA) of 1965 provides for minimum wages and fringe benefits as well as other conditions of work for contractors under certain types of service contracts. Whether or not the SCA applies to a specific service contract will be determined by the definitions and exceptions given in the act or implementing regulations.

When does the Service Contract Act apply, and when does it not apply?

The SCA is applicable if:

The amount of the contract exceeds $2,500

The principal purpose of the contract is to furnish services

The contract is to be performed to a significant or substantial extent by other than executive, administrative, or professional employees

The contract is to be performed primarily in the United States

The contract is not otherwise exempted.

The SCA is not applicable to:

Construction contracts (the Davis-Bacon Act applies for these contracts because labor categories and conditions for construction contracts differ from those for service contracts)

Supply contracts (the Walsh-Healey Act applies for these contracts because labor categories and conditions for supply contracts are also different from those for service contracts)

Carriage of freight or personnel by vessel, airplane, bus, truck, express, railway line, or oil or gas pipeline where published tariff rates are in effect

Radio, telephone, telegraph, and cable services subject to the Communications Act of 1934

Public utility services

Employment contracts

Other types of contracts that are exempted by the Department of Labor (DOL).

What are wage determinations?

Wage determinations are made by the Secretary of Labor to establish wage rates that a contractor must pay its employees during performance of a contract. These rates are to equal the prevailing wage rates paid in the locality in which the contract is to be performed.

A CO contemplating a service contract in excess of $2,500 must request a wage determination from the Department of Labor. There are two types of wage determinations: prevailing rates and the collective bargaining agreement (CBA).

A prevailing rates wage determination will list the minimum wages and benefits to be paid to the categories of service employees listed. If the classification of a service employee is not listed in the wage determination, but that individual is performing on the subject contract, the contractor must comply with the Fair Labor Standards Act (the national minimum wage).

If the incumbent contractor has a CBA with an employee union, the CBA becomes the wage determination if the contract is awarded to that contractor or if an option is exercised. The CBA automatically becomes the wage determination unless it is determined that the CBA was not reached at arms-length negotiations or the wage rates set by it vary significantly from average local pay for similar work.

What is the COR's role in making wage determinations?

The COR may be required to:

Provide the skill classifications required by the contract technical requirements and the number of service employees in each skill class

to the CO

Assist in identifying the wage rates that would be paid to the members of each class if employed by the federal agency

Provide the CO with information regarding places of performance if some contractor service employees will be working in different locations

Assist in updating wage determinations when the contract has provisions for adjusting the contract price to reflect changes in wage rates. Some typical examples are:

- Contract modifications that change the scope of work whereby labor requirements are affected significantly

- Exercise of options or other such extensions of contract performance

- Multiple-year contracts.

 
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