What are the Service Contract Labor Standards (SCLS) and why is it important for Contractors to be aware of them when making an offer on a solicitation?
The SCLS (formally, “Service Contract Act”) is a statute that requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality or the rates (including prospective increases) contained in a predecessor contractor’s collective bargaining agreement (CBA).
If a requirement is a follow-on to an existing SCLS covered contract, then the contracting officer (CO) must determine if the predecessor contract has work being performed by a union and if a CBA exists. If a CBA does exist then the CO will acquire information about the incumbent contractor’s CBA and the successor contractor must pay wages and fringe benefits to service employees at least equal to those agreed upon by a predecessor contractor, if the conditions and limitations outlined in FAR 22.1008-2 (b) and (c) exist. If no CBA exists, then the contractor will be required to pay prevailing wage rates and fringe benefits.
Both the prevailing and CBA rates will be higher than the federal or state minimum wages and may be higher than the wages Contractors normally pay their employees. Therefore, Contractors must locate these rates in the solicitation and take them into account when developing their offer. If prevailing wages apply, then wage determination rates based on the work’s locality will be attached to the solicitation. If the predecessor contract is being performed by individuals that are part of a union, then the actual CBA for the incumbent contractor may be included in the solicitation. If only the title and duration of the CBA are stated, the offeror can locate the CBA wages using one of the means below:
- CBAs are available from the Office of Labor-Management Standards (OLMS) Online Public Disclosure Room. *Note: These CBAs may be outdated.
- Request the CBA directly from the Union stated in the solicitation
- Request the CBA directly from the incumbent contractor
- Request the CBA from the Contracting Officer listed on the solicitation
After a Contractor locates the appropriate wages, they will want to take them into account when preparing their offer. The example below demonstrates how to apply the prevailing rates and the implications a contractor may experience if it does not account for the SCLS when making an offer on an applicable solicitation/contract.
A Contractor wants to make an offer on a Government contract to maintain an aircraft in Ohio. The SCLS applies to this contract since it is estimated to exceed $2,500 and aircraft mechanics is the labor type that will be used to conduct the service. The contractor making an offer typically pays their aircraft mechanics $15.00/hr. Since the SCLS is applicable and the incumbent is not currently using a union to perform the service, the minimum prevailing wage that the Contractor must pay its mechanics is $25.00/hr. Therefore, the Contractor needs to increase the mechanics’ pay from $15.00/hr to $25.00/hr in the Contractor’s offer. If the Contractor does not increase its mechanics’ pay in their offer and they win the contract, they will still be required to pay its mechanics $25.00/hr when performing the service. Due to not accounting for the prevailing wage of $25.00/hr in the Contractor’s offer, they may have to pay out more cost than anticipated, resulting in a substantial loss in profit.
As demonstrated in the example above, Contractors need to be mindful of the SCLS when making offers on service contracts. Doing so will ensure all the contractor’s costs to perform the service are covered and they can make a reasonable profit.
Additional information can be found at the Department of Labor – FAQ or by contacting the Skyway Acquisition Team.
