While Fairly Simple On Its Face, Many Service
66Contract Management June 2013
Contract Management June 201367
avoiding the compliance pitfalls of the service contract actWhile fairly simple on its face, many servicecontractors do not fully appreciate theinherent complexities of complying with theSCA. With many nuances and unansweredquestions, the SCA is actually one of themore onerous rules to comply with, especially when considering the relative brevityof the underlying statute.A Brief HistoryThe SCA became effective in 1966, and waslater amended in 1972 and again in 1976before leaving us, by and large, with thelegislative framework and implementingregulation we have today. The intention ofthe act was to remove wages as a biddingfactor in the competition of federal servicecontracts (something that it has basically accomplished) and to provide laborprotection to service employees akin tothat of the Walsh-Healey Public ContractsAct (PCA) and the Davis Bacon Act (DBA) formanufacturing and construction workers,respectively.The McNamara-O’Hara Service Contract Act of 1965 (SCA)applies to contracts over 2,500 entered into with theUnited States or the District of Columbia for the purposeof furnishing services (e.g., security, janitorial, or cafeteria services)through the use of service employees. The definition of a “serviceemployee” includes any employee engaged in performing serviceson a covered contract other than a bona fide executive, administrative, or professional employee.1 The main tenet of the SCA requirescontractors and subcontractors to pay their service employees noless than the minimum monetary wages and fringe benefits foundprevailing in a particular locality in accordance with the applicablewage determination or collective bargaining agreement.68Contract Management June 2013The SCA aimed to solve the human dilemmacaused by new contractors underbiddingan incumbent contractor and then payingthe incumbent’s employees a lower wageto perform the work, wreaking havoc ontowns dependent on the particular contractas a major source of income. And this matterof protection persists on the government’sagenda today, as evidenced by the “Nondisplacement of Qualified Workers” rule;one of the few changes made since 1976.This rule became effective January 18, 2013,via Executive Order 13495.2 The new ruleseeks to provide service workers with furtherprotection by requiring prime contractorsand subcontractors to offer incumbentservice employees a right of first refusal toemployment on follow-on services contracts.Current EnforcementEnvironmentIn addition to the new rule this past January,there have also been fairly recent changesin the degree of oversight. The Departmentof Labor (DOL) has increased its numberof audits and investigators. FollowingAmerican Recovery and Reinvestment Act
avoiding the compliance pitfalls of the service contract actfunding, DOL added roughly 180 full-time investigators. Many of these investigators arerelatively new, yet operational in the field.Investigators have always audited complaints, but are now initiating self-audits aswell. The audits are going deeper to includethe full scope of the contract (e.g., SCAand DBA violations) and subcontractors aswell. In the last fiscal year, DOL performedover 850 investigations (of which over 630resulted in violations), collected almost 45million in SCA back pay from contractors,and issued 19 debarments.3The Consequences—A Harsh RealityThe Pitfalls of SCACompliancePitfall #1—Not Properly DeterminingSCA ApplicabilityTo avoid these penalties, it is imperativeto have robust compliance processesto handle SCA requirements. However,before a company can avoid or manage risks, it must identify them. Manycontractors are unable to recognize keyrisks because they do not have personnelwith strong knowledge of the SCA and themany challenges that can arise. To help,the following are some of the more common pitfalls we have seen when advisingcontractors on remediating DOL findings,calculating back pay, and/or implementingcompliance controls.The seemingly simple question of whetherthe SCA applies tends to challenge even thesavviest of contractors. To find the answer,start with the following: Does the contract exceed the 2,500 threshold? Is the principal purpose of the contractto furnish services? Does the contract contain the SCAclause (Federal Acquisition Regulation(FAR) 52.222-41) and one or moreincorporated wage determinations?Coupled with increased audit scrutiny aresevere consequences of noncompliance. Inaddition to paying an employee everythingthat is owed to him or her, other penaltiesfor noncompliance may include: Withholding payments on active federal contracts, Contract termination (and subsequentpayment for any government reprocurement costs), Personal liability for corporate officials, Debarment from all government contracts for a three-year period, and False Claims Act liability.What’s more, contractors may also facepenalties due to overtime violationsunder the Contract Work Hours and SafetyStandards Act (CWHSSA). Like the SCA, theCWHSSA and several other statutes are alsoenforced by the Wage and Hour Divisionwithin DOL.The penalties employed for violationsare at the sole discretion of DOL, not thecontracting officer or contracting agencyadministering the service contract. Additionally, penalties have been harsher as of late.Investigators are less likely to negotiatea settlement than several years ago, andare issuing violations and debarments at asignificantly higher rate.Contract Management June 201369
avoiding the compliance pitfalls of the service contract actapplicable to each individual agreement.However, if the contract is for servicesgenerally covered by the SCA and no wagedetermination has been incorporated, thenit is best to contact the contracting officer/prime contractor in writing to request awage determination via contract modification. Failure to make this effort to complycan be viewed unfavorably by DOL and willnot prevent DOL from requiring retroactiveSCA payments in the event a wage determination should have been incorporated.Answering the first two questions appearsstraightforward, though certain types ofservices are exempt.4 However, under indefinite delivery/indefinite quantity or taskorder contracts, you must aggregate anypurchase orders from the same customerin a given year for purposes of determiningwhether the threshold is met.5 As a result,where the guaranteed minimum contractvalue is less than 2,500, SCA applicabilitymay be unknown for a period of time.The last question, regarding the inclusionof the SCA clause and one or more wagedeterminations, is where things can reallystart to get dicey. It is not uncommon for anawarded contract to contain FAR 52.222-41,but no incorporated wage determination.Without a wage determination, there islittle to comply with except to pay theminimum wage in accordance with the FairLabor Standards Act. In the case of a subcontract, many times the prime contractor hasflowed down a set of standard terms andconditions without regard for the clausesOn the other hand, you may encounter asituation where the SCA clause is not foundin the contract, but it should be. The abilityto recognize these situations underscoresthe necessity of having knowledgeableemployees trained on the SCA because theChristian Doctrine may apply. The ChristianDoctrine, derived from the 1963 case G.L.Christian & Association v. United States,holds that mandatory government contractclauses, if excluded from the contract(either by omission or as a result of negotia-tion), are actually still a part of the contract.If you believe the SCA clause has beenomitted in error, it is best to start a dialoguewith the contracting officer.Sometimes contracting officers are hesitantto adjust contracts to include or excludethe SCA clause or wage determination, evenwhen it is the right thing to do. To prepare forthis, it is important to document all communication with the contracting officer todemonstrate a good-faith effort to complyif and when DOL becomes involved. Somecontracting officers may not be particularly knowledgeable on the SCA and may beuncomfortable making contract changes as aresult. Contractors looking for an alternativesolution can turn to DOL or the Department ofDefense labor advisor, as may be applicable.Pitfall #2—Failing to Recognize OtherApplicable Labor LawsSCA compliance may not be the extent ofyour compliance obligations with respectNationalEducationSeminarsNATIONAL CONTRACT MANAG E M E NT ASSOCIATIONNEW! Developing WinningProposals: ProposalPreparation Techniquesand TipsWorld CongressPost-Conference SeminarNational OfficeJune 5, 2013Reston, VAJuly 25, 2013Nashville, TN100 Worst Mistakes inGovernment ContractingThe COR Member of theAcquisition Team: TheContracting Officer’sRepresentative Guide toPerformance and QualityWorld CongressPost-Conference SeminarJuly 25, 2013Nashville, TNSan Fernando ValleyContract TypesJune 21, 2013Chatsworth, CAFree State ChapterWorld CongressPost-Conference SeminarJuly 25, 2013Nashville, TN70Cost Estimating andContract PricingContract Management June 2013June 18, 2013Laurel, MDLed by expert presenters, NCMA’s NationalEducation Seminars provide a full day of in-depthand in-person instruction on current issues and trendsin contract management. With important titles such as100 Worst Mistakes in Government Contracting,Contract Types, and Risk Management, it’sobvious why these seminars are in high demand.NCMA offers 8 essential education titlesnationwide. Find out about upcoming seminarsin your area.Visit www.ncmahq.org/CM/NES to view theupcoming calendar and to learn more abouteach seminar.Visit us online at www.ncmahq.org/CM/NES or call 800.344.8096 x1111.
avoiding the compliance pitfalls of the service contract actto related labor laws. As discussed, theSCA was designed to fill the gap left unaddressed by the PCA and the DBA. BecauseSCA coverage does not supersede or supplant the PCA or DBA, these labor laws mayalso apply to certain labor activities in anSCA-covered contract.The DBA covers “any contract of the UnitedStates or District of Columbia for construction,alteration, and/or repair, including paintingand decorating of public buildings or publicworks” exceeding 2,000.6 The PCA coversany contract “for the manufacture or furnishing of materials, supplies, articles, and equipment in any amount exceeding 10,000.”7The SCA does not apply to contractsprincipally for construction subject to theDBA; however, if a service contract containsa substantial and segregable8 element ofconstruction work, that component ofthe contract will likely require compliancewith the DBA and not the SCA. An examplemight include a Department of Defense basemaintenance and operations contract wherethe principal purpose of the contract is support services (e.g., janitorial services, snowremoval, etc.), but where painting and building repair also comprise a portion of thecontract scope and, thus, are covered by theDBA. Defense FAR Supplement 222.402-70provides a helpful illustration of substantialand segregable work.Similarly, contracts may arise that includeboth SCA and PCA compliance obligations.Again, these are contracts that are principally for services, but also contain a significant manufacturing or supply requirement.9These multifaceted contracts can createadditional compliance burdens and it isimportant to have clarity on the regulationsthat apply. If it is ever unclear, communicatewith the contracting officer or DOL.Pitfall #3—Obtaining the WrongWage DeterminationWhere the SCA applies, the wage determination establishes the contractor’s compliance criteria. Wage determinations aregenerally created for specific localities, butmay instead pertain to a specific industryor even a specific contract. Regardless, theonly wage determination to follow is theone incorporated into the contract by thecontracting officer. Some contractors maywrongly believe that they are responsible forselecting the wage determination to complywith from those posted on WDOL.gov. However, DOL also publishes this disclaimer onits website when selecting a wage determination: “CAUTION: Users should note thatthe only wage determinations applicableto a particular solicitation or contract arethose that have been incorporated by thecontracting officer in that contract action.”Contractors, trying to do the right thing,will often pull a wage determination off theDOL website and comply with it. This mayhappen as a result of the inclusion of theSCA clause but omission of a wage determination, a published wage determinationrevision that has not yet been incorporatedinto the contract, or because the contractis similar to another contract that containsSCA requirements. Unfortunately, by complying with a wage determination that isnot a formal part of the contract, contractors may be hurting themselves. The abilityto recover increased costs stemming froma newly incorporated wage determinationor wage determination revision only applieswhere the wages and benefits paid on thedate of incorporation are less than thosestipulated in the new wage determination.In other words, a contractor that previouslyraised wages to satisfy a wage determination they obtained from other sourcesloses the opportunity to recover that costincrease. If the contractor has alreadyincreased wage and/or benefit paymentsat the time the contracting officer incorporates the wage determination, no wage orbenefit adjustment is necessary and, thus,no contract price change is permitted.Pitfall #4—Not Understanding Who isCovered by the SCAThe SCA does not distinguish between independent contractors or full-time, part-time, ortemporary employees; all service employeesare covered by the act. Often, companiesincorrectly assume that part-time and temporary employees and independent contractorsare either exempt or someone else’s responsibility, when, in actuality, SCA compliance isthe responsibility of the prime contractor.Additionally, in evaluating an employee’sSCA coverage, the respective job description is the primary determining factor. Toapply the exemption for bona fide executive,administrative, or professional employees,the employee/independent contractor mustpass the “duties test” and also the “salarylevel and basis tests”10 (referring to the modeand amount of payment). For example, anemployee who receives a high level of paybut also meets the description of a “serviceemployee” is still covered under the act.Prime contractors are also responsible forthe compliance of covered subcontractors,and need to take steps to monitor subcontractor compliance. While the SCA clausecontains a mandatory flowdown requirement, simply flowing the clause down tosubcontractors does not absolve the primecontractor’s SCA responsibilities to the federal government. In addition to a contractual obligation to comply, prime contractorsshould consider compliance mechanismssuch as audit rights, certifications, andappropriate indemnifications in each of theirsubcontract agreements.Pitfall #5—Mapping Employees tothe Incorrect SCA Labor CategoryClassificationIn addition to employee coverage, it isequally important to determine the properlabor category classification as the associated wage requirements vary. Again, thiscritical task seems easy, but in practice isquite challenging.DOL maintains a “Directory of Occupations”to provide guidance on the functions andtasks associated with each job description.Contractors must determine the functionsand tasks each employee will performunder the contract’s statement of work tomap the individual to an appropriate laborcategory consistent with the Directory ofOccupations. For those companies using internal labor descriptions to make this determination, it is critical to ensure the internalContract Management June 201371
avoiding the compliance pitfalls of the service contract actdocumentation is current and reflective ofthat employee’s role on each SCA-coveredcontract to which they are assigned.Things become particularly challengingwhere an employee performs in multiplefunctions or tasks that align with more thanone labor category. In this case, the SCArequires that the employee’s wages reflectthe applicable pay for each function. Wisecontractors design timekeeping systems withcapability for employees to identify laborcategories associated with specific activities, thus maintaining a record of time spentand applicable wages earned in each laborclassification. Absent these records, an auditor will require the contractor to pay wagesassociated with the highest-wage-rate laborcategory applicable to the employee, regardless of the time actually worked in that role.Key Ingredientsfor ComplianceInclude the right people.Train your employees.Implement internalcontrols.Minimize complexities.Use cash or equivalents.Understand the requestfor equitable adjustmentprocess.Keep excellent records.Involve the experts.Perform self-assessments.Foster employee trust.72Contract Management June 2013requirement, contractors must show thatthe wages and health and welfare requirements are separately fulfilled.11 This meansaccounting for these costs separately andensuring any “cash payments in lieu of benefits” are shown separate from wages onthe employee’s paycheck remittance advice.Pitfall #7—Incorrectly Identifying a“Fringe Benefit” under the SCAFor a fringe benefit to satisfy the requirements of an SCA wage determination, thefringe benefit must be “bona fide.” A “bonafide” fringe benefit: Is a legally enforceable obligation, Is communicated in writing toemployees,Instances also occur where the functions anemployee performs may not be adequatelyaddressed by DOL’s Directory of Occupations.In these cases, contractors are required toobtain a “conformance” from DOL. A contractor should submit Standard Form 1444(requiring the employee’s signature) to thecontracting officer proposing a reasonablebasis for arriving at the wages due. Thisprocess should take place following awardand within 30 days of starting work on thecontract. The contracting officer will, inturn, submit the form to DOL for a finaldecision. Failing to seek a conformancemay result in adverse DOL findings. Provides benefits not required by lawunder a defined formula, and Is paid via an independent party oradministrator to a fund or plan.12Pitfall #6—Not Distinguishing BetweenWages vs. Health and WelfareThis raises an interesting question regardingthe impact of the Patient Protection andAffordable Care Act (PPACA) on fringe benefitrequirements given the mandate for individual healthcare coverage. In the future, SCAhealth and welfare compliance across thecountry may look similar to that of Hawaii,as will be described in the next section. DOLis unlikely to comment on this issue untilthe PPACA takes full effect in 2014.In addition to wages, a wage determinationalso contains fringe benefit requirementsconsisting of health and welfare, vacation,and holiday, at a minimum. While the DBAallows contractors to offset overpaymentsin wages or health and welfare with underpayments in the other, the SCA does not. Inother words, under the SCA, if a contractorpays an employee 1.50/hour more thanthe required wages, but 25 less than therequired health and welfare, the contractoris noncompliant because the overpaymentin wages does not offset the underpayment of fringe benefits. To comply with thisContractors unfamiliar with the SCA are oftenquick to assume one or both of the following: 1) a “competitive benefit package” willmeet or exceed SCA requirements; and/or 2)anything contained in the fringe benefits poolof a contractor’s indirect cost structure isa “bona fide” benefit. Neither necessarilyhold true. Federal and state unemploymenttaxes, for example, since they are requiredby law, are not “bona fide” benefits.Pitfall #8—Navigating Health andWelfare Compliance in HawaiiPerforming SCA-covered contracts in Hawaiiintroduces unique complications with the
avoidin
While fairly simple on its face, many service contractors do not fully appreciate the inherent complexities of complying with the SCA. With many nuances and unanswered questions, the SCA is actually one of the more onerous rules to comply with, espe-cially when considering the relative brevity of the underlying statute. A Brief History
WEYGANDT FINANCIAL ACCOUNTING, IFRS EDITION, 2e CHAPTER 10 LIABILITIES Number LO BT Difficulty Time (min.) BE1 1 C Simple 3–5 BE2 2 AP Simple 2–4 BE3 3 AP Simple 2–4 BE4 3 AP Simple 2–4 BE5 4 AP Simple 6–8 BE6 5 AP Simple 4–6 BE7 5 AP Simple 3–5 BE8 5 AP Simple 4–6 BE9 6 AP Simple 3–5
Many aids to woodworking were actually fairly ingenious, very efficient and simple to use because they acted as positive guides to hand tools. The shooting board in all its various forms is one such device. Making a basic shooting board is a fairly simple process requiring mini
that you are treated fairly and equitably, that your privacy is protected, and that our tax system is as simple and understandable as possible. Our challenge is to consistently deliver services to meet your needs while fairly administering the tax laws. To do that, we are modernizing our technology, while making sure that taxpayer security and
From plastic. Performance at the point of sale. While setting up. While filling. While sealing the packag-ing. While printing. While cutting. While gluing. While manufacturing cutting-dies. While laser cutting. While milling and knifing of tools. While thermoform - ing various plastics. No matter what level of the sup - ply chain you are at.
WEYGANDT FINANCIAL ACCOUNTING, IFRS EDITION, 2e CHAPTER 12 INVESTMENTS Number LO BT Difficulty Time (min.) BE1 2 AP Simple 2–4 BE2 3 AP Simple 3–5 BE3 3 AP Simple 3–5 BE4 5 AP Simple 2–3 BE5 5, 6 AN Simple 2–4 BE6 5 AN Simple 2–3 BE7 5, 6 AP Simple 2–4 .
SIMPLE PENDULUM AND PROPERTIES OF SIMPLE HARMONIC MOTION Purpose a. To investigate the dependence of time period of a simple pendulum on the length of the pendulum and the acceleration of gravity. b. To study properties of simple harmonic motion. Theory A simple pendulum is a small object that is suspended at the end of a string.
A SIMPLE IRA may be maintained in two forms, a SIMPLE IRA or a SIMPLE 401(k). Currently, PFS Investments Inc. only offers a Simple IRA. A SIMPLE Plan must be maintained on a calendar year basis (January 1st to December 31st). The Internal Revenue Service (IRS) deadline for establishing a SIMPLE Plan is October 1st.
Subclause 1.1 to 1.3 excerpted from ANSI A300 (Part 1) – Pruning 1 ANSI A300 standards 1.1 Scope ANSI A300 standards present performance stan-dards for the care and management of trees, shrubs, and other woody plants. 1.2 Purpose ANSI A300 performance standards are intended for use by federal, state, municipal and private entities
