One of These Things is Not Like the Other – Confusion Over the Two Different Contractor Minimum Wage Executive Orders Clauses With the Same FAR Section Number

“Very interesting, but stupid.”

—Wolfgang Busch played by Arte Johnson on Rowan & Martin’s Laugh-In

Back at the start of 2023, my colleague, Howard Wolf-Rodda, posted a blog about the increased rates specified in the two Executive Orders (“EOs”) setting different Contractor Minimum Wages. See  https://www.awrcounsel.com/blog/2023/1/4/happy-new-year-and-a-friendly-reminder . Here is what Howard said, which bears repeating:

At this point, a significant majority of contracts will be covered by the “new” Executive Order because Contracting Officers are obligated to add the new clause at the inception of a new solicitation or contract or upon the exercise of options for contracts that already were awarded before the Biden Executive Order went into effect. Nevertheless, you should check your contract to see if it has one of the clauses in it.

To do this, pull out your contract, go to Section I - Contract Clauses and look for a clause with the following number and title: 52.222-55 Minimum Wages for Contractor Workers Under Executive Order 14026 (Jan 2022). If that clause is in your contract, then it is subject to the Biden Executive Order wage rates. If, however, it has a clause with this number and title: 52.222-55 Minimum Wages for Contractor Workers Under Executive Order 13658 (Nov 2020) (or earlier), then it is covered by the Obama Executive Order wage rates.

If it does not have either of these clauses because the Contracting Officer dropped the ball and failed to update your contract, then your minimum wage rates will be those set forth in Wage Determinations included in your contract under either the Service Contract Act or the Davis Bacon Act. For supply contracts covered by the Walsh Healy Public Contracts Act, your minimum wage rate is the FLSA hourly rate, presently $7.25 an hour. Bottom line—what’s in your contract establishes your duty with respect to requirements imposed by the laws and regulations applicable to federal contractors.

Id.

The Obama-era EO 13658  provides now for a contractor minimum wage of $12.15 per hour. Meanwhile, the Biden-era EO 14026 provides for a $16.20 per hour contractor minimum wage. Exactly which EO applies can be a somewhat confusing exercise, since the EO 13658 remains in some grandfather contracts, and in other cases the contracting agencies have failed to insert the new EO 14026 in contract renewals, extensions or options when it was supposed to be added.  Indeed, the regulatory preamble to the newer EO 14206 provided:

J. Option exercise—DOL’s final rule implementing E.O. 14026 included a definition for ‘‘new contract’’ at 29 CFR 23.20. The FAR rule did not adopt this definition. However, when FAR rules apply to existing contracts, application is addressed in the Effective Date/ Applicability section of the preamble, not in the Code of Federal Regulations. Treatment of bilateral modifications to existing contracts is addressed in the Applicability section at the beginning of this preamble. As a result, in the Effective Date/Applicability section of the preamble, contracting officers are required to incorporate the clause 52.222–55 into existing contracts during option exercise via a bilateral modification. If the contracting officer is unable to incorporate the clause 52.222– 55 in an existing contract during option exercise via a bilateral modification, then the contracting officer shall decline to extend, renew, or exercise the option on the existing contract.

 87 Fed. Reg. 4117, 4119 (Jan 26, 2022). The new EO grandfathers the older contracts if they are multi-year awards. Agencies are encouraged, but not required, to insert the new clause in those procurements. Of course, the FAR tells the contracting officer to incorporate clause 52.222-55 into the contract with any new option year exercise, but it fails to explain that it means the new clause 52.222-55 under EO 14026. While contracting officers usually select the correct clause, they do not always incorporate the correct version of the clause.

Now here is the point of my blog. We have two different executive order requirements with different minimum wage levels. And while the two executive orders are implemented in the FAR by different clauses, both executive orders clauses have the exact same FAR clause section number. How can that be? I find it so confusing…. And the contractors are completely befuddled. For some older contracts, there is an existing FAR 52.222-55 clause in their contracts, but they have no idea whether it is the old or new clause. The only way to tell is to read the full name of the contract clause. The earlier clause is named: “FAR 52.222-55 Minimum Wages Under Executive Order 13658 (Nov 2020)” or some earlier date The later clause is named “52.222-55 Minimum Wages for Contractor Workers Under Executive Order 14026 (Jan 2022).” Two different clauses, with two different wage levels, but only one FAR section cite for them.

Who was the genius who thought of giving the two different clauses the same FAR section clause number and almost the same name other than the EO number and operative date? This confused situation is a form of entrapment for the contractors. It’s as if it was custom designed to confuse contractors. But if the agency errs in not adding the new EO 14026 clause to the contract in the option renewal period, we think the contractor remains entitled to a price adjustment for implementing the new required higher minimum wage. And it is clear that DOL can order the agency to retroactively correct its error and to thus trigger a price adjustment for the poor befuddled contractor.