The man who has fed the chicken every day throughout its life at last wrings its neck instead, showing that more refined views as to the uniformity of nature would have been useful to the chicken.
– Bertrand Russell

Mysterious things are happening with the Service Contract Act (“SCA”) and procurements initiated by the intelligence agencies.  Periodically, over the last few years, I have been consulted by clients who have inquired about strange SCA clauses found in their intelligence agency RFPs and contracts.

Here is one sample:

N52.222-002 – Exceptions to Federal Labor Requirements (Oct 2014).

The Contractor shall comply to the maximum extent practicable with the FAR clauses listed below if they are included in this contract, but with the following exceptions:

1)     No wage determinations will be obtained by the Contracting Officer;

2)     The Contractor shall not directly contact the DOL citing this contract without first obtaining the written approval of the Contracting Officer; and

3)     No price adjustments or price redeterminations will occur due to labor on wage revisions during the life of the contract.

Among the FAR clauses listed below in that RFP was the standard SCA clause (FAR 52.222-41) and the standard SCA/FLSA Price Adjustment clause (FAR 52.222-43).

This special clause is like no other clause found in government contracts. I inquired of some folks at the U.S. Department of Labor (DOL) and they are not aware of any special deal between the intelligence community and DOL, other than requirement that DOL assign someone to look at any compliance situations who has the appropriate level of security clearance. (Of course, perhaps they would have had to shoot me if they told me otherwise.) It is, as other things in the intelligence community, all a bit of a black box.

Given this situation, my clients have periodically inquired as to how they are supposed to comply with the SCA, particularly if the contracting officer is not going to furnish a wage determination. My general response can’t help focusing on the special clause language which provides that the successful offeror only has to comply with the above FAR clauses to “the maximum extent practicable,” whatever that vague phrase means.  I also note that the special clause further informs offerors that no wage determination (“WD”) will be furnished, that they cannot contact DOL without the contracting officer’s permission, and that no price adjustments will be allowed.

So what does this all mean? I am going to resist giving you a dissertation on intelligence community contracting. I am assuming it is likely that any such contract for intelligence work is outside of the FAR jurisdiction, and involves some kind of different appropriation process beyond the ordinary procurement process. If it wasn’t outside of the FAR, it would be my view that these contract provisions are improper and likely void ab initio, violating as they do mandatory provisions of the FAR and DOL SCA regulations.  At the least they would need a formal FAR deviation approval from the FAR Council to do this. But if the procurement is non-FAR, which is true for many intelligence agency procurements, the situation is murkier. However, I can’t find anyone in the wage and hour community who can tell me that the US DOL has entered into any special agreements and blessed these clauses.  I think it more likely that they represent just the intelligence community’s contractual efforts to end run DOL.

If there is no FAR jurisdiction, the question is whether these contract provisions violate some mandatory provision of statute or DOL regulation. Neither the SCA statute nor the DOL regulations require the FAR price adjustment clause, so in the absence of the FAR, I think that the contract provisions related to the price adjustment issue are likely enforceable. In that event, a contractor must build any wage and benefit escalations into their bid price. While the Government cannot use such a term in a FAR procurement, I think they probably can do so in a non-FAR context.

However, the mandatory DOL’s SCA regulations state: “The contracting agency, therefore, must obtain a wage determination prior to…” any procurement action. See, e.g., 29 C.F.R. 4.4(a)(1). This isn’t the contractor’s duty. Thus, I have always been of the opinion that the SCA statute and the DOL regulations, read as a whole, require the contracting officer (not the contractor) to obtain the WD. But I make allowances that it might be possible to contractually alter this burden. The regulation doesn’t automatically bar the agency from changing the burden contractually and redelegating and imposing obligation on the contractor instead. The point of the law is to comply with the prevailing wage and fringe benefits. I think it unlikely to matter to DOL how the agency goes about assuring that is the case.

Finally, I suppose DOL might take exception to that contract provision purporting to bar contact with DOL, particularly since DOL has always zealously defended the whistle blower privilege and has even required those with questions to seek clarification and to contact them. In the past, however, I would have been surprised to learn that DOL had backed off the enforcement and was willing to abide by such a contract clause. But, on the other hand, there may be legitimate security/secrecy concerns which must be accommodated, and I can’t tell you that DOL would absolutely, in the era of Trump, stick up for its own policy preferences in this situation. They could view the requirement to obtain the intelligence agency consent before initiating DOL contact as a reasonable accommodation to the conflicting policy concerns (wage and hour compliance vs. national security) at work here. I would not be shocked to see DOL, particularly in a Trump Administration era, give a certain amount of interagency comity and even deference to the intelligence agency mission and policy.

Accordingly, since I can’t tell you these contract provisions are void out of the box, my best advice is to comply with the contract terms which require SCA compliance to the maximum extent practicable. But how is that even possible if the contractor is not even furnished a wage determination (“WD”)? There are literally two possible answers to that question. 

The glib answer is that the FAR 52.222-43(e) clause incorporated in the contract clearly states as follows:

(e) Minimum Wage. In the absence of a minimum wage attachment for this contract, neither the Contractor nor any subcontractor under this contract shall pay any person performing work under this contract (regardless of whether the person is a service employee) less than the minimum wage specified by section 6(a)(1) of the Fair Labor Standards Act of 1938. Nothing in this clause shall relieve the Contractor or any subcontractor of any other obligation under law or contract for payment of a higher wage to any employee.

All it thus requires is that the contractor, in the absence of a SCA WD, must pay no less than the Fair Labor Standards Act (“FLSA”) minimum wage, which is currently $7.25 per hour, and it imposes no fringe benefit requirements. Thus, the successful awardee could argue that if they pay at least $7.25 an hour they have satisfied the SCA requirements to the extent practicable. 

On the other hand, the SCA WDs are available on a public website, albeit unofficial (see www.wdol.gov), and they are also being added to a new still beta SAM website (see https://beta.sam.gov/help/wage-determinations). Any offeror could grab a SCA WD from one of those websites and implement it unilaterally.  In some sense the contracting agency’s duty to incorporate the WD into the contract is ministerial, and thus the responsibility may be delegable. The FAR says that the Contracting Officer must incorporate the SCA WD into the contract. But remember these may not be FAR covered contracts. If contractor want to comply as fully as practical with the SCA prevailing wages and benefits, it could use its own best judgment to pull on its own time the appropriate WDs for the sites of the work, classify the workers in good faith, do any conformances necessary internally for missing job classifications, and make sure the SCA-covered workers receive no less than the SCA required prevailing wages and benefits. Of course, the contractor could also run any WDs selected and compliance issues by the contracting officer too.

Perhaps the national security imperatives over-power the ordinary wage and hour procedural rules here.  If the award of these contracts is not price sensitive, and thus the contractor will be paid for compliance with these higher SCA wages and benefits, maybe there is no reason contractors cannot self-police and make sure they do their best to comply. If a contractor pays well enough, including cash fringe benefits where necessary, there won’t be any major SCA noncompliance, and thus there won’t be any significant harm.

The intelligence agency contract terms say don’t ask; don’t tell; do no harm. That is apparently what the intelligence community wants.  My recommended approach would be to accommodate them, or fall back on the FLSA minimum wage defense, or take a pass on bidding for this kind of work.