> Applies to contracts the principal purpose of which is to provide services in the US through the use of service employees

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2 Agenda Sections > Overview of SCA and DBA > SCA vs. DBA Comparison > Roles and Responsibilities > Current Enforcement Environment > Penalties for Non-Compliance > Compliance Tips and Techniques > Q&A 2

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4 Service Contract Act Overview > McNamara-O Hara Service Contract Act created in 1965 > Provides protection of prevailing wages and benefits for workers On federal service contracts For service contracts greater than $2,500 > Applies to contracts the principal purpose of which is to provide services in the US through the use of service employees Principal purpose - simple majority of contract requirements >50% of contract effort (FTEs and/or value) US is defined as 50 states, District of Columbia, and US territories 4

5 Service Contract Act Overview > Service Contract Act does not apply to all service contracts > Contracts for leasing of space > Contracts for professional services performed almost exclusively by employees who meet the exemption under 29 CFR Part 541 > Federally-assisted contracts for services entered into by state governments (e.g., Medicaid, Medicare programs) 5

6 Covered Contract Examples > Concessionaires > Routine building maintenance services > Laundry and Dry Cleaning > Landscaping > Surveying & mapping > Contracts with hotels for meal and lodging > Guard and security guard services > Demo & dismantling of government property > Nursing home services > Contracts for intermittent labor services > Services and items provided under a single contract 6

7 SCA Overview: Employee Coverage > SCA Sec. 8(b) defines service employees: Any person engaged in performance of the contract, except Employees who qualify for exemption as executive, administrative (manager), or professional as defined by 29 CFR Part 541 > SCA does not apply to the following classes of employees: Executives/Supervisors: salaried (minimum $455/wk), supervise two or more workers, exercise authority, and spend most of their time doing so Administrative/Managers: salaried, make decisions of importance and significance using independent judgment and discretion, and spend most of their time doing so Professionals: salaried or fee-based; perform work primarily requiring advanced knowledge, predominantly intellectual, customarily acquired by a prolonged course of specialized intellectual instruction (e.g., college-level); and exercise independent judgment and discretion 7

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9 Davis Bacon Act Overview > Enacted in 1931 > Provides protection of prevailing wages and benefits for laborers and mechanics of contractors and subcontractors > Applies to contracts, in excess of $2,000, with the Federal Government or District of Columbia > Covers contracts for Construction, Alteration, or Repair 9

10 Davis Bacon Act Overview > Davis-Bacon Related Acts (DBRA) extends coverage to similar, federally-assisted contracts > Davis-Bacon Prevailing wage provisions apply to approximately 60 additional laws Where federal agencies assist in construction projects through grants, loans, loan guarantees, and insurance > Examples of these related Acts include: Federal-Aid Highway Acts Housing and Community Development Act of 1974 Federal Water Pollution Control Act 10

11 Covered Contract Examples > Construction > Alteration > Repair Includes painting and decorating of public buildings or public works Painting > 199 Square Feet is considered DBA On mixed SCA/DBA contracts, repair or alteration in excess of 32 hours is considered DBA > Applies across all agencies. For example: VA Hospital Federal Office Building (GSA) Military Base Housing (DoD) 11

12 Davis Bacon Overview: Employee Coverage > DBA covers laborers and mechanics Workers whose duties are manual or physical in nature > Examples of employee groups subject to DBA include: Apprentices and trainees Helpers Watchmen or guards (when the contract is covered by the Contract Work Hours and Safety Standards Act) > Employees whose duties are administrative, executive, or clerical as defined in 29 CFR 541 are exempt from DBA coverage 12

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18 Roles and Responsibilities: Contracting Officer >Contracting officers (not contractors) are required to determine if SCA/DBA applies Contracting officers must insert BOTH the clause and WD(s) into the solicitation and contract >Must select the proper H&W method (even vs. odd) when applying Area WDs (for SCA only) >Acts as an intermediary between the contractor and DOL when processing conformance requests 18

19 Roles & Responsibilities: Contractor > Reviews contracts for the applicable clause and incorporated WD(s) > Confirms applicability, in writing if either the clause or WD is missing, or the contractor thinks it should be a covered contract > Provides wages and bona fide benefits or cash equivalents (cash inlieu) to covered employees > Complies with work place posting and safety requirements > Submits requests for additional funding as a result of revised wage determinations incorporated by the contracting officer 19

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25 Consequences > Penalties for non-compliance: Payment of back wages and fringe benefits to employees Civil Penalties Withholding payments on active Federal contracts Contract termination (and subsequent payment for any Government reprocurement costs) Personal liability for corporate officials Debarment from all government contracts for a 3 year period False Claims Act liability 25

26 The Consequences > Penalties have been harsher as of late Investigators are less likely to negotiate a settlement than they were several years ago DOL is issuing violations and debarments at a significantly higher rate 26

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28 Key Areas of Focus > Recognize SCA & DBA covered contracts > Select the proper wage determinations > Understand who is covered by the SCA & DBA > Map to appropriate labor classifications > Subcontractor education > Distinguish between wages vs. health and welfare (SCA only) > Identify bona fide fringe benefits > Understand health and welfare compliance in Hawaii 28

29 Tips for Contractors > Include the right people At a minimum, contracts, finance, legal, human resources, project management, and accounting > Train key personnel Need to understand the key areas of risk > Implement internal controls Forms, templates, and automated system controls > Clearly communicate job responsibilities Employees should understand how they have been classified and the work that does/does not entail 29

30 Tips for Contractors > Keep excellent records Lack of documentation can result in the assumption of noncompliance > Ensure your subcontractors are in compliance and understand the requirements > Understand the REA process Avoid taking actions that may limit the ability to obtain an equitable adjustment (i.e., paying wages in excess of the WD) > Pay cash or cash equivalents Less applicable with the Affordable Care Act 30

31 Tips for Contractors > Minimize complexities Employees performing in more than one labor classification > Perform self-assessments Find and correct potential non-compliances before the Government does > Resolve compliance issues with employees quickly to build a trusting relationship Employees covered by the SCA/DBA are often knowledgeable about the requirements 31

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