Do You Hear Me Now – GAO Studies Communications Problems Arising From Service Contract Act Enforcement

“Perfectionism is the enemy of progress.”

-- Winston Churchill

As a government contracts law firm, Abrahams Wolf-Rodda works on a variety of different matters inherent in government contracting. We work on bid protests, compliance issues, claims, and price adjustments. But one of our largest drivers of legal services is our work on Department of Labor (“DOL”) investigations enforcing the Service Contract Act (“SCA”) as well as other wage and hour laws. Accordingly, we have an interest in the fair enforcement of the SCA.

In October of this year, the Government Accountability Office (“GAO”) published a study titled Federal Contracting – Actions Needed to Improve Department of Labor’s Enforcement of Service Worker Wage Protections (Oct. 2020). We were asked to participate and met with the GAO working group. We were told the purpose of this study was to take an in depth look at DOL’s practices and determine if there were any weaknesses in the enforcement and administration of the SCA. The GAO looked at fiscal data and investigation results from 2014 through 2019, they examined contracting practices at three different contracting agencies in the United States, and they interviewed relevant DOL officials and investigators. The resultant GAO report contains several factual surprises and then some pretty generic recommendations.

GAO looked at several different pieces of information to paint a compete picture of the DOL’s enforcement procedures. They reviewed data from the different reporting and data collection systems that DOL and the General Services Administration use. In addition, they did site visits to different DOL offices throughout the country and reviewed the documents and procedures that go along with DOL’s strategic plan. In addition, to determine how contracting agencies performed under DOL guidance they reviewed information and interviewed people at the Army Material Command, the National Institute of Health, and the Pension Benefit Guaranty Corporation.

The study outlines the general process of SCA enforcement by taking the reader through an overview of the laws, the process for obtaining Wage Determinations, and some of the consequences for violating the SCA. They also completed a by the numbers review which contain some interesting insights. Of the 5,261 SCA cases from 2014 to 2019, fifty-nine percent of them were initiated by employee complaints. The other forty-one percent were agency-initiated compliance actions. Back in the day, DOL had said that 95% of its wage and hour investigations were complaint driven, and perhaps that remains true for other wage and hour complaints, but apparently not for the SCA enforcement, at least in recent times.  The number of agency-initiated compliance actions has steadily increased since 2005 and was higher in 2019 than in 2014 which suggests that DOL is either encouraging the agencies to become more involved, or that it is in the agencies’ best interest to “sic” the DOL on their contractors. No surprise, the Department of Defense and the United States Postal Service account for over one-half of the SCA cases. This lines up with the amount of money appropriated for the different agencies, as the DOD was certainly in first place since it has been allocated the most dollars for the purpose of service contracting.

Additional helpful information that arose out of the study include statistics regarding the type of violations. In the overwhelming majority of cases where a violation was found, it was some kind of fringe benefit violation. It could have been health and welfare (“H&W”) related or vacation, holiday, or even Executive Order sick leave . Out of the 3,562 cases where at least one violation was found, fringe benefit violations occurred eighty-two percent of the time and a prevailing wage violation was found sixty-nine percent of the time. This is no surprise given how complicated the SCA fringe benefit rules are. We sometimes say there are few if any contractors perfectly in compliance with them.  These statistics appear to have borne out our truism.

DOL also listed several challenges that they experienced in their enforcement. Chief among them were communications troubles. These were caused by long periods between communications received by the different contracting agencies, as well as the high turnover rate of contracting officers. This meant that it took longer and was more difficult to put the right SCA provisions in the solicitation or contract. We at Abrahams Wolf-Rodda have experienced some of these communications issues when working with clients. Sometimes contracts have the correct SCA provisions but no wage determination. Other service contracts omit the required SCA clauses all together. The contracting oversight may arise from miscommunications between DOL and the contracting agency. Another challenge for DOL was the use of enforcement tools such as debarment and payment withholding. Withholding payments in particular was complicated by contracts that had mostly been completed which left limited funds to be withheld.

Overall, the GAO made six rather bland recommendations to increase the efficiency and results of the SCA. GAO suggest that: (1) DOL should standardize the data entry for all contracting agencies; (2) DOL should analyze the information contained in its enforcement actions for compliance agreements and debarment processes; (3) DOL should ensure that they improve communication and collaboration between the agencies and specifically between DOL and the U.S. Postmaster General; (4) The U.S. Postmaster General should develop and implement written protocols to improve communication and collaboration to support SCA enforcement and implementation; (5) DOL should ensure that the unique company identifier designated by the Federal Acquisition Regulation is included in the SCA debarment records; and (6) DOL should develop written procedures for consistent and reliable reporting of SCA investigations to the relevant agency. These recommendations show that it is often the case that communication and relevant data sharing is one of the largest obstacles that DOL faces in their enforcement process.

Obviously, better communications internally in the Government is better for the contracting community as well. Improved communication between both the agency and the contractor would ensure that more violations are headed off before they become a problem and cause ambiguity that costs the contractor, employee, and DOL a significant amount time and effort through the pursuit of an investigation. Where these recommendations fall short is providing specific guidance as to how to decrease the occurrence of fringe benefit violations. Agency communication is not the culprit, the agency is unlikely to be able to identify a fringe benefit violation by looking at the allocation of resources from a contractor’s proposal. Therefore, communication with an agency would not solve the root of the problem. Regardless, the pursuit of perfection should never be the enemy of progress and less ambiguity would make the lives of government contractors much easier.

To review the GAO report for yourself or if you would like to read any of the particulars, please visit U.S. GAO - Federal Contracting: Actions Needed to Improve Department of Labor's Enforcement of Service Worker Wage Protections.