Price Adjustments

Price Adjustments

Department of Navy Money Part 2 (FAR Part 22) 02/12/2020 1 Goals & Objectives Goal: Understand the application of labor laws in federal contracts Objective 1: Determining price adjustment(s) Exercise 02/12/2020 2 Price Adjustments Price Adjustment triggered by incorporation of updated WD as required in FAR 22.1007

Resources: ull/3736 Service Contract Act Price Adjustments Desk Guide 02/12/2020 3 SCA Price Adjustment FAR 52.222-43 Fair Labor Standards Act & SCA Price Adjustment (Multiple Year & Option Contracts) (Sep 2009) Area prevailing WD & contracts subject to CBA & conformed rates Contractor warrants that the prices do not contain contingencies to cover costs allowed by clause Prices were not escalated in the option years 02/12/2020

4 SCA Price Adjustment FAR 52.222-43: (d)The contract price or contract unit prices will be adjusted to reflect the contractors actual increase or decrease in applicable wages and fringe benefits to the extend that the increase is made to comply with or the decrease is voluntarily made by the contractor as a result of: (1) The Department of Labor wage determination applicable on the anniversary date of the multiple year contract, or at the beginning of the renewal option period. 02/12/2020 The contractor must provide actual payroll data. Contracting Officer

calculates the difference between the amount paid by the contractor and the new wage determination The period covered by the adjustment begins with the date the new WD is required by the terms of the new contract-Not date on WD 5 SCA Price Adjustments For example, the prior year WD required a minimum wage rate of $4.00 per hour. The Contractor chose to pay $4.10. The new WD increases the minimum rate to $4.50 per hour. Even if the Contractor voluntarily increases the

rate to $4.75 per hour, the allowable price adjustment is $.40 per hour 02/12/2020 IfIf the the contractor contractor chooses chooses to to pay pay more more than than the the WD WD Rates, Rates, the the adjustment adjustment is is based based on

on what what the the contractor contractor ACTUALLY ACTUALLY paid-NOT paid-NOT on on the the previous previous WD WD rates rates Previous WD Hourly rate: $4.00 Contractor actual: $4.10 NEW WD hourly rate $4.50 Adjustment $ 40/hr 6

SCA Price Adjustments What is allowed in the SCA labor price adjustment under FAR 52.22243? ( c) Any adjustment will be limited to increases or decreases in wages and fringe benefits and the accompanying increases in social security and unemployment taxes and workers compensation but shall not otherwise include any amounts for general and administrative costs, overhead or profit 02/12/2020 Certain Certain tax tax increases increases must must accompany(be accompany(be

caused caused by) by) the the WD WD increase. increase. The The clause clause provides provides no no relief relief from from tax tax increases increases from from other other causes causes of of tax

tax increases increases on on aa contractors contractors actual actual payroll payroll 7 Price Adjustments-CBA FAR 52.222-43 price adjustments typically more complex when using CBA Vs. standard WD Possibility of additional (complicated) fringe benefits May include Shift/lead differentials Multiple certification increases Principles remain the same

Adjustment limited to actual increase between: What the contractor actually paid in previous period 02/12/2020 compared to new minimum rates(validate-have 8 Price Adjustments-Conformed When a new classification is addedconformed Average percent of increase or decrease for all classes used on the contract [FAR 52.222-41( c) (iv)(B)] A% + B% + C% = X, divided by 3 = The average percent of increase Raise the conformed rates by this percent 02/12/2020 9

An Aside on Overtime Federal wage laws require time premium for hours worked over 40 in the work week only Contractors are not required to pay a premium for work performed after the regular shift, weekends, holidays Contractors control individual employees work hours Incurring the legally required overtime is a choice of contractor management Then Be careful about the contract terms for payment to the contractor for work outside the normal work schedule, and Contract price adjustment is not calculated at the overtime premium rate 02/12/2020 10 Check on Learning Price adjustment exercise: 02/12/2020

11 In Conclusion Thank you! Contract Industrial Relations Advisor (703) 693 2939 (DSN 223) [email protected] 02/12/2020 12

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