Do Not Read All FAR Clauses Literally

A literal reading of some FAR clauses can cost you money. One such clause is the Changes clause (FAR 52.243-4) requiring the contractor to give the contracting officer written notice of suspected government changes within 30 days. Although a contracting officer or COTR might want to demand strict compliance with the clause, all government contractors need to know that courts do not require strict compliance. A contractor may be entitled to an equitable adjustment for a contract change even though the contractor notifies a government employee other than the contracting officer of a suspected change long after 30 days have passed and even if the notice is oral. A recent court decision shows how broadly courts construe the Changes clause notice provision.

A construction contractor claimed that it was entitled to an equitable adjustment for design changes that the government imposed in the comments it made to the contractor’s design plans. But the first time the contractor raised the issue was in court pleadings three years after the government had made its design comments and long after the building was built. The contractor should have given the contracting officer notice of its disagreement immediately after receiving the government comments.  

Although the court concluded that this contractor’s notice was too late, its decision discusses precedents that established the defining issue in “notice” disputes. It is not whether 30 days have passed, nor whether the notice was oral, or even whether the contracting officer was the government employee who got notice. The issue is what harm has the government suffered by a contractor’s failure to give 30 days written notice? In this recent case, the harm was that timely notice would have given the parties a chance to resolve the issue years ago, making litigation unnecessary.

But in many situations, the lack of 30 days written notice to the contracting officer may not harm the government. For example, the contractor had complained orally to the COTR immediately after being told to do extra work.

Of course, the best policy is to rigidly follow the rules in the clause. However, a government contractor needs to know that all FAR clauses should not be taken literally. Nor should a government contractor be deterred from filing a request for an equitable adjustment by a contracting officer’s rigid interpretation of a notice provision.

If you believe the government has made costly change to your contract without modifying it to add money, let the Government Contracts Team at Berenzweig Leonard help you make sure you give the government proper notice. A small investment in legal advice can have a large return for you.


Terrence M. O'Connor is the Director of Government Contracts at Berenzweig Leonard LLP. He can be reached at TOConnor@BerenzweigLaw.com. 

DOL Debars Contractor for Wage and Hour Violations

The Department of Labor (“DOL”) recently debarred Garcia Forest Service LLC (“Garcia”) and its president for three years for violating the McNamara-O’Hara Service Contract Act (“SCA”) and the Contract Work Hours and Safety Standards Act (“CWHSSA”).

The SCA requires that contractors performing services on covered federal contracts pay their service workers no less than the wages and fringe benefits prevailing in the locality. Garcia violated the law by paying its employees on a production-based wage, rather than the required hourly wages that were incorporated into its Forest Services contract. Garcia failed to pay its employees working on a reforestation project the required fringe benefits, minimum wage, overtime, and holiday way. The contractor also failed to maintain accurate pay and time records.

The president testified that he made the decision to pay one of his crews on a production basis to ensure that the work would be completed on time. The DOL investigation revealed that although the workers all traveled to and from the worksite together, they had “wildly inconsistent hours of work.” The DOL determined that “it was clear from this that the time sheets had been manipulated to make it appear that they were being paid on an hourly basis.”

Although it appeared that Garcia’s decision to switch the employees to a production-based wage was motivated by a good faith attempt to incentivize the workers to complete the contract on time, the SCA requires mandatory debarment for most violations absent “unusual circumstances.” The burden of establishing unusual circumstances lies with the contractor. DOL considers the seriousness of the violation; whether the violation was deliberate, willful, or the result of deliberate neglect; whether the contractor cooperated with the investigation, repaid amounts owed, and assured future compliance; and whether the contractor has previously been investigated for non-compliance.

In recent years, the DOL has increased the number of investigators in the Wage and Hour Division workforce. While SCA audits are often initiated as a result of an employee complaint, the DOL had recently started initiating audits on its own, conducting both random audits as well as following up on previous offenders. Now more than ever, contractors must make sure that their human resources department and back office are knowledgeable about the SCA and the requirements for compliance.

Stephanie Wilson is an attorney at the Washington, DC business law firm, Berenzweig Leonard, LLP. She can be reached at SWilson@BerenzweigLaw.com. 

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 swilson@berenzweiglaw.com.

What’s the Real Impact of the New Federal Contractor Minimum Wage Increase?

On February 12, 2014, President Obama signed an Executive Order raising the minimum wage to $10.10 per hour for federal contractors, starting January 1, 2015. Although the Administration has stated that the increase will apply only to new federal contracts, in reality it may end up applying to some existing federal contracts as well. The immediate impact of the minimum wage increase will vary depending on job and locality, but there are potential long-term implications of which companies should be aware. 

The Service Contract Act requires federal contractors performing service contracts to pay service employees no less than the wage rates set forth in Department of Labor wage determinations that are based upon local prevailing wages. The Service Contract Act recognizes that prevailing wages may change during the course of a service contract, and new wage determinations are incorporated into existing contracts when option years are exercised.

It is likely that, beginning no later than January 1, 2015, the prevailing wages set in the Department of Labor’s wage determinations will be at least $10.10, as that will be the new “prevailing wage” for the lowest-paid labor categories. If this happens, then when an option period on an existing service contract is exercised following the issuance of the new wage determination, these new minimum wages will apply. As with all increases in wage determinations, contractors will be entitled to a price adjustment to reflect any increases in wages and fringe benefits required by a new wage determination.

Because the majority of federal contractors are already being paid wages greater than $10.10 an hour, the immediate impact of the wage increase is minimal for most contractors in most areas of the country. The impact will be the greatest in the middle of the country where prevailing wages are lower, and for workers throughout the country working in lower-skilled service jobs, such as janitorial and food service positions. Raising the minimum wage of these traditionally lower-paid positions will likely cause a ripple effect eventually leading to an increase in the prevailing wages for other labor classifications and nearby regions, which will in time come to be reflected in the Department of Labor’s wage determinations.

Federal contractors should keep in mind both the immediate and long-term impact this minimum wage increase may have on their existing contracts and be aware of their right to request a price adjustment for any increases to the wages and fringe benefits required by a new wage determination.  The lawyers at Berenzweig Leonard have experience helping government contractors navigate the complexities of the Service Contract Act.

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

The President’s Minimum Wage Announcement Ignores Current Rates

President Obama recently announced his intent to sign an Executive Order which would unilaterally increase the minimum wage for certain workers on federal projects. The current federal minimum wage rate is $7.25 an hour, and President Obama is looking to raise it to $10.10 per hour. At first glance, one may think that such an increase will have a widespread impact on the Washington, DC metro area, given its large concentration of federal contractors.

This will not be the case. Such a change would only apply to new or revised federal contracts, and not to current federal contracts. More significantly, the majority of federal contractors are already being paid wages that are over the proposed minimum $10.10 rate, depending on their wage classification.

For example, a bulldozer operator on a federal project in Fairfax County can make a minimum rate of $20.40 per hour, and a court security officer in Washington, D.C. can make a minimum rate of $24.72 per hour. These rates are controlled by the Department of Labor through the Davis-Bacon Act and the Service Contract Act. Additionally, many federal contractors are union members, meaning that their wage rates and benefits are controlled by collective bargaining agreements. As a result, the President is targeting an issue that is already largely covered by federal law, wage determinations and collective bargaining.

President Obama plans to highlight his Executive Order in tonight’s State of the Union address. While the potential increase may derive from good intentions, it imposes a requirement on an already heavily-regulated industry, and many business owners know that they are already in compliance with the increase.

Katie Lipp is an attorney with the Washington, DC regional business law firm Berenzweig Leonard, LLP. Katie can be reached at klipp@berenzweiglaw.com.

Know How to Enforce Your Rights For Winning Task Orders

Although task order contracts are common, the rights contractors have to win one are complex and vary widely depending on whether the task orders are under FAR Part 8, the GSA Federal Supply Schedule (FSS) or FAR Part 16, Government-wide Acquisition Contracts (GWAC). It is important, therefore, to know exactly what your rights are under your specific contract – FSS contract or a GWAC – and  how to enforce them, as a recent decision of the Armed Services Board of Contract Appeals (ASBCA or Board) shows.

The decision deals with one significant difference between FAR Part 8 and FAR Part 16 task order competitions: the GWAC holder’s significantly limited right to challenge how an agency misuses the solicitation process.  Unlike FSS contract holders that have broad rights to protest to the Government Accountability Office (GAO) and the Court of Federal Claims (CFC), GWAC holders’ right to protest to GAO or the CFC is very limited. The Board’s decision is, therefore, significant because it shows that GWAC holders still can sue the government, not as a protest but as a claim under the contract’s Disputes clause.

PAW and Associates submitted a task order proposal under its GWAC with the National Guard, but the contracting officer refused to award a task order. PAW filed a claim under the contract’s Disputes clause arguing that the government did not evaluate PAW’s task order proposal fairly and honestly and, therefore, violated PAW’s right to a “fair opportunity” to be solicited and to be fairly evaluated. The Board agreed with PAW, and concluded that GWAC holders can file a claim to enforce their “fair opportunity” right.

This decision shows just one significant difference in the task order solicitation process. There are others that contractors must be aware of. For example, GWAC contract holders must be given a “fair opportunity” to be considered for ALL task orders over $3,000.  In contrast, not all contractors on a particular GSA Federal Supply Schedule have to be solicited; although FSS Requests for Quotations over $150,000 must be posted on e-Buy, a contracting officer has the alternative of simply trying to get quotes from at least three Schedule vendors seeking a FAR Part 8 task order.

These differing and complex rules affect significant contractor rights to future business. The lawyers at Berenzweig Leonard LLP have decades of experience working with these rules and helping government contractors understand and enforce their rights.

Terry O’Connor is the Director of  Government Contracts with Berenzweig Leonard, LLP, a DC region business law firm. Terry can be reached at toconnor@BerenzweigLaw.com.

A Contractor Makes a Dangerous Gamble When Its Bid Price Assumes the Approval of Local Permitting Authorities

Should a federal government construction contractor assume that its permit request for a construction project will be approved by local state authorities? Absolutely not, according to the United States Court of Appeals for the Federal Circuit. The Federal Circuit found that the plain language of FAR’s Permits and Responsibilities Clause, which was incorporated into a Federal Bureau of Prisons contract, allocated any financial cost associated with permitting solely on the contractor.

Bell/Heery was awarded a design-build construction contract to build a new federal prison in New Hampshire. The project specifications detailed a “cut-to-fill” site, meaning that the project land had to be leveled by excavating, or “cutting” materials from one area of the work site and using the same materials to fill lower areas. Bell/Heery’s proposal incorrectly assumed that the local environmental officials, the New Hampshire Department of Environmental Sciences (NHDES), would approve the cut-to-fill operations – and as an unfortunate result, Bell/Heery had to incur approximately $7.7 million in excess costs to perform, because NHDES did not approve the anticipated efficient cut-to-fill operations.

Bell/Heery attempted to recover the excess $7.7 million from the Federal Bureau of Prisons, arguing that the agency was contractually required to engage with NHDES about the cut-to-fill specifications and that the agency breached its duty of good faith and fair dealing by failing to engage with NHDES, among other allegations. The Federal Circuit did not agree, citing the FAR Permits and Responsibilities Clause, which made the contractor responsible for all permitting costs. Contractors putting together bids for federal government work should keep this decision in mind when pricing their bids, to ensure that they account for the possibility of permitting roadblocks and how these hurdles will impact their bottom line.

Katie Lipp is an attorney with the Washington, DC regional business law firm Berenweig Leonard, LLP. Katie can be reached at klipp@berenzweiglaw.com.