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Thursday, March 6, 2014

SCA Contract Bids Must Account for Applicable CBA Wages and Benefits

Service employees working on a federal contract subject the Service Contract Act must be paid wages and fringe benefits not less than the prevailing wage determination or the wage rates and fringe benefits contained in a predecessor contractor’s Collective Bargaining Agreement (“CBA”). Because an existing CBA sets the floor for wages and benefits on follow-on contracts, offerors need a copy of the CBA to be able to adequately price their bid. A recent decision by the Armed Services Board of Contract Appeals confirmed that the agency is required to provide a complete copy of the CBA to offerors as part of the solicitation, so they can accurately bid for a contract.

In CAE USA Inc., ASBCA No. 58006 (Jan. 27, 2014), the Air Force posted a solicitation for services in support of the KC-135 Aircrew Training System at thirteen Air Force bases. The copy of the predecessor contractor’s CBA incorporated into the solicitation referred to but did not attach information regarding the fringe benefits the predecessor contractor provided to its employees on the current contract.

CAE USA, Inc. (CAE) was the successful bidder on the contract. During the solicitation process, CAE was aware that the copy of the CBA the agency provided to the bidders did not include details of the fringe benefits. Instead of bringing this to the attention of the contracting officer, CAE decided to base its bid on its estimate of what those benefits would cost. After award, CAE met with the Union and was provided with the missing information. CAE realized that the estimate used in its bid understated the actual fringe benefits provided in the CBA. As required by the Service Contract Act, CAE paid the higher fringe benefits. CAE then submitted a request for equitable adjustment to the contracting officer for the additional benefits that were not identified in the CBA provided during the solicitation process.

The contracting officer denied the request for equitable adjustment and CAE filed an appeal with the ASBCA. The Board addressed two questions: (1) does the Service Contract Act place an affirmative duty on the contracting officer to provide a complete copy of the CBA, including attachments, to bidders; and, (2) if so, does a bidder’s failure to advise the government of a CBA’s incompleteness and decision to formulate a bid on its own assumptions preclude it from recovery? The answer to both questions is yes.

The ASBCA held that “there can be no reasonable doubt that pursuant to FAR, it was the responsibility of the CO to provide a complete CBA.” Without the details of the fringe benefits included in the CBA, an offeror could not know the wage and fringe benefits it would be required to pay if it won the follow-on contract.

However, in this particular case, the offeror was aware that the CBA provided during the solicitation process was incomplete. Rather than asking the government to provide a complete copy, CAE chose to make assumptions about the fringe benefits in its offer. While the Service Contract Act imposes requirements on what the contractor must pay its employees, it does not dictate what an offeror must put in its offer. The Board held that “having chosen to submit an offer on the basis of its own assumptions, without notice to the government of the incompleteness of the CBA or what CAE’s assumptions were, it cannot now be heard to complain that its assumptions were not correct.

If an offeror becomes aware that an agency has not provided a complete copy of any applicable CBAs along with the solicitation, it should bring this to the attention of the contracting officer during the solicitation phase. If the offeror waits until it is awarded the contract, it will be stuck with any assumptions it made about applicable wages and benefits when submitting its bid and put at a big disadvantage.

Stephanie Wilson is an attorney at Berenzweig Leonard, LLP, a business law firm in the Washington metro area. She can be reached at