GRANTED:  December 21, 2010 
CBCA 1495 
W. G. YATES AND SONS CONSTRUCTION COMPANY, 
Appellant, 
v. 
GENERAL SERVICES ADMINISTRATION, 
Respondent. 
Stephen B. Hurlbut and Farah A. Khan of Akerman Senterfitt LLP, Vienna, VA, 
counsel for Appellant. 
Lesley M. Busch, Office of General Counsel, General Services Administration, 
Washington, DC, counsel for Respondent. 
Before Board Judges DANIELS  (Chairman), HYATT, and STEEL. 
HYATT, Board Judge. 
Appellant, W.G. Yates and Sons Construction Company (Yates), has appealed a 
contracting officer’s decision with respect to the calculation of an equitable adjustment for 
the impact of a revised Davis-Bacon Act wage rate adjustment that was incorporated after 
award into its contract to build the Federal Bureau of Investigation’s (FBI’s) field office in 
Houston, Texas. The revised wage rate determination had the greatest impact on the 
electrical work, and thus this appeal presents the claim of Yates’ electrical subcontractor. 
Findings of Fact 
1. On October 26, 2004, the General Services Administration (GSA) issued a 
request for proposals (RFP) for the construction of a new field office building for the FBI 

     
       
        
       
        
     
     
   
       
      
     
        
  
       
     
   
   
   
    
 
      
      
   
    
      
 
   
  
    
2 CBCA 1495 
in Houston, Texas. Appeal File, Exhibits 3, 54; Transcript at 422-23. In January 2005, 
GSA determined that all the proposals submitted to it in response to the RFP were 
significantly over budget for the project, resulting in what GSA termed a “bid bust.” Id. at 
424. 
2. In February 2005, GSA converted the RFP to a fee and general conditions 
approach with an initial value engineering phase followed by the award of a construction 
option. Appeal File, Exhibit 3. In the pre-construction value engineering services phase, 
for a stipend of $35,000, the contractor was to provide its ideas for reducing the cost of 
constructing the building. After completion of the value engineering phase, the Government 
had the option to award a contract for the construction phase. It was anticipated that the 
award would be for the firm fixed price of $54,045,000. This contract, number GS-07P-05­
URC-5007, was awarded to Yates on March 31, 2005.  Appeal File, Exhibit 3; Transcript 
at 425-28. 
3. The value engineering phase was satisfactorily completed and on August 17, 
2005, GSA issued modification PS03 to the contract and awarded the fixed price 
construction phase of the contract to Yates for the amount of $54,052,423.  Respondent’s 
Hearing Exhibit 3; Transcript at 454. Yates in turn awarded a fixed price subcontract for 
the electrical work to KenMor Electrical Company LP (KenMor). Respondent’s Hearing 
Exhibit 4. 
4. The contract contained clauses applicable to changes under fixed price 
contracts, including Federal Acquisition Regulation (FAR) 52.243-4, “Changes,” and 
General Services Administration Acquisition Regulation (GSAR) 552-243-71, “Equitable 
Adjustments.” The GSAR clause, which supplements the Changes clause, provided that an 
equitable adjustment would compensate the contractor for direct costs plus negotiated 
amounts for overhead, profit, and commission.  Appeal File, Exhibit 2.  
5. The Yates prime contract required that contractors payapplicable Davis-Bacon 
Act wages. In accordance with FAR 52.222-6(a),48 CFR 52.222-6(a) (2004), implementing 
the Davis-Bacon Act,  ch. 411, 46 Stat.1494 (1931) current version at 40 U.S.C. §§ 3141­
3144, 3146-3147 (2006)), the contract required that: 
All laborers and mechanics employed or working upon the site 
of the work will be paid unconditionally and not less often than 
once a week, and without subsequent deductions or rebates on 
any account . . . , the full amount of wages and bona fide fringe 
benefits (or cash equivalent thereof) due at the time of payment 
computed at rates not less than those contained in the wage 

       
        
     
  
    
     
         
       
       
  
       
      
     
      
       
    
        
     
       
     
        
      
     
    
    
     
    
   
       
3 CBCA 1495 
determination of the Secretary of Labor which is attached hereto 
and made a part hereof . . . . 
Appeal File, Exhibit 2. Pursuant to FAR 52.222-11, which was also incorporated in the 
contract, Yates was required to include the Davis-Bacon Act wage standards in its 
subcontracts. 
6. With respect to electricians, a Department of Labor (DOL) wage determination 
dated August 20, 2004, was incorporated into the contract, requiring a minimum total wage 
rate of $18.51 per hour, composed of a direct labor rate of $14.68 and $3.83 for fringe 
benefits.  Appeal File, Exhibits 1, 54; Transcript at 153.  
7. On July 1, 2005, DOL issued a revised wage rate determination increasing the 
minimum wage for electricians to $29.98, consisting of $22.05 for direct labor and $7.93 
for fringe benefits. The total difference between the wage rate decisions for electricians was 
$11.47 per hour ($ 29.98-$18.51). Appeal File, Exhibits 1, 4. The revised wage 
determination was not incorporated into the contract awarded on August 17, 2005. 
Respondent’s Hearing Exhibit 3. 
8. In February 2006, GSA’s Procurement Management Review Board conducted 
a routine audit of the contract and determined that the revised wage determination should 
have been incorporated into modification PS03, which awarded the construction component 
of the contract. The contracting officer was told to modify the contract to incorporate the 
proper wage determination retroactively to the time of award in August 2005. Transcript 
at 430-31, 456-57; Supplemental Appeal File, Exhibit 64. 
9. Bilateral modification PS06 to the contract, incorporating the revised wage 
determination into the contract, was executed on June 12, 2006. The modification directed 
that Yates and its subcontractors pay their workers in accordance with the revised wage 
determination retroactively and prospectively. A separate modification would be issued to 
address any cost changes resulting from the revised wage determination. The FAR Changes 
clause and the GSAR Equitable Adjustment clause were cited as authority for modifying the 
contract.  Appeal File, Exhibit 4; Transcript at 154. 
10. The contracting officer asked Yates to submit a proposal for both the past and 
future cost impact of the revised wage determination. Transcript at 433-34. Yates submitted 
a written proposal on November 8, 2006, estimating the total cost impact of the revised wage 
determination for the entire contract to be $1,420,596, including Yates’ commission on 
subcontractor costs. Of this, the lion’s share was attributable to KenMor, whose cost impact 
was projected to be approximately $1,323,959, including overhead and profit. Appeal File, 

       
     
    
   
        
      
     
     
      
     
       
  
    
 
  
 
  
   
     
   
    
    
  
    
4 CBCA 1495 
Exhibit 5. In December 2006, GSA obtained an estimate from its construction management 
contractor in the range of $1.88 million, excluding overhead and profit. This gave rise to 
concerns about the sufficiency of funds to complete the project. Transcript at 468-70, 474­
75. 
11. Subsequently, Yates and KenMor provided updated cost information 
associated with the new wage rates to GSA. In an e-mail message to a Yates employee dated 
September 13, 2007, the contracting officer stated: “Yates and GSA have agreed to use an 
actual method for the Davis-Bacon Act price adjustment.” The contracting officer added 
that, pursuant to FAR clause 52.222-32, the contractor was not entitled to overhead and 
profit associated with the wage increase. This communication acknowledged that this clause 
was not actually incorporated in the contract, but stated that it should have been when the 
original solicitation was converted to the “fee and general conditions approach.” Appeal 
File, Exhibit 9; Transcript at 278, 301.  
12. FAR 52.222-32, Davis-Bacon Act - Price Adjustment (Actual Method) (Dec 
2001), provides the following: 
(a) The wage determination issued under the Davis-Bacon Act 
by the [DOL] that is effective for an option to extend the term 
of the contract, will apply to that option period. 
. . . . 
(c) The Contracting Officer will adjust the contract price or 
contract unit price labor rates to reflect the Contractor’s actual 
increase or decrease in wages and fringe benefits to the extent 
that the increase is made to comply with, or the decrease is 
voluntarily made by the Contractor as a result of – 
(1) Incorporation of the Department of Labor’s Davis-Bacon 
Act wage determination applicable at the exercise of an option 
to extend the term of the contract; or 
(2) Incorporation of a Davis-Bacon Act wage determination 
otherwise applied to the contract by operation of law. 
(d) Any adjustment will be limited to increases or decreases in 
wages and fringe benefits as described in paragraph (c) of this 
clause, and the accompanying increases or decreases in social 

   
   
    
   
      
     
 
 
    
      
     
   
     
       
  
    
    
   
    
    
  
     
       
        
        
     
     
5 CBCA 1495 
security and unemployment taxes and workers’ compensation 
insurance, but will not otherwise include any amount for 
general and administrative costs, overhead, or profit. 
48 CFR 52.222-32; Appeal File, Exhibit 9. 
13. In September 2007, the contracting officer formally requested that the 
Regional Office of the Inspector General (OIG) audit the Davis-Bacon Act proposal. 
Appeal File, Exhibit 10; Transcript at 274, 440. The OIG reviewed its resources and 
determined that it could perform the audit.  Transcript at 274. The following information 
was requested to be made available for that purpose: 
[W]e will need, at a minimum, (1) the basis of the original bid; 
(2) any change orders issued; (3) the payroll records; (4) the 
labor hours and dollars as recorded in the contractor’s job cost 
system. The key information contained in the basis of the bid 
is the labor rate and the number of hours bid for each labor 
discipline for various components of the project. Also we are 
expecting to see a job cost system that will identify actual hours 
incurred by each labor category. We will not only identify all 
the actual labor hours bid at the Davis-Bacon wage rate that was 
in excess of the rate used in the bid, but whether or not all those 
hours were within their estimated and bid amounts - subject to 
increases or decreases resulting from change orders. Any 
incurred hours in excess of the bid hours that were not caused 
by Government change orders must be the result of the 
contractor’s own inefficiencies and therefore not subject to 
reimbursement.
 Appeal File, Exhibit 11. 
14. By letter dated October 3, 2007, the contracting officer informed Yates that 
an audit would be performed on the cost proposals submitted with respect to the wage 
increases and identifying the back-up information that would be needed from Yates and its 
subcontractors.  Appeal File, Exhibit 12. 
15. In response to concerns expressed by Yates respecting delays in processing the 
increased wage rates being paid under the contract, on November 5, 2007, GSA issued 
unilateral modification PC54 to partially compensate Yates for the cost impact of the revised 
wage determination.  The modification provided the following: 

   
      
    
   
    
    
    
        
       
      
     
     
      
      
    
    
     
      
     
      
    
       
     
       
        
     
        
   
     
6 CBCA 1495 
Subject contract is modified to include Wage Rate revised 
7/1/05 as per RFP 033. This modification is issued at a price 
not-to-exceed $75,000. The modification shall be definitized as 
to the price at a later date. 
Appeal File, Exhibit 14. The Changes clause is identified as the authority for the 
modification. 
16. In a letter dated November 21, 2007, the contracting officer requested that 
Yates provide additional information to permit the auditors to determine the price 
reasonableness of Yates’ proposal. The information sought included original proposed 
hours of the affected trades and back-up documentation such as bid sheets and estimates to 
support the proposed hours. The letter also advised that, in accordance with FAR 22.404­
12, overhead and profit on adjusted wage rates is not allowable. Finally, the contracting 
officer noted that it might be necessary for GSA auditors to visit the offices of affected 
subcontractors.  Appeal File, Exhibit 16. 
17. In a letter dated December 5, 2007, Yates objected to the request for bid 
information on the ground that it was entitled to, and the contracting officer had agreed to 
pay, actual costs incurred in complying with the change order implementing the revised 
Davis-Bacon wage determination. Nonetheless, Yates agreed that it would provide the 
requested documentation.  Appeal File, Exhibit 17. 
18. When the assigned auditor visited KenMor’s offices, he told KenMor to 
provide a proposal based on the hours KenMor had estimated to complete the project. 
KenMor had not prepared such a proposal, but in response to pressure from the auditor that 
the audit could not proceed without one, KenMor hastily prepared a proposal in accordance 
with the auditor’s directions, but made clear that it intended to submit a claim based on 
actual costs. Transcript at 181-82, 185-86, 490-91. The auditor told KenMor not to include 
any overhead or profit. The proposal, so prepared, came to the amount of $952,732.49. 
Transcript at 495; Appellant’s Hearing Exhibit 5; Supplemental Appeal File, Exhibit 65. 
19. GSA issued its final audit report on April 29, 2008, based on the proposal 
KenMor was required to provide using estimated labor hours. The audit disallowed 
$312,148 and concluded that KenMor was entitled to only $640,585 for the increased wages 
attributable to the revised wage determination. Appeal File, Exhibit 33. Although KenMor 
had offered to provide information showing its actual hours and costs, the OIG declined to 
audit this information, reasoning that, under its approach, the actual costs incurred by 
KenMor had no bearing on the proper price adjustment. Transcript at 180-81, 286-87, 491. 

     
       
   
     
     
        
        
  
        
  
    
    
  
   
     
   
  
  
      
     
   
     
   
     
    
     
   
 
  
7 CBCA 1495 
20. On May 22, 2008, the contracting officer informed Yates of the audit results 
and asked how Yates would like to proceed. Yates forwarded GSA’s e-mail message to 
KenMor. KenMor informed Yates that it would not accept this amount as full compensation 
for the adjustment it was owed as a result of paying the increased wages to its workers. 
KenMor requested that GSA either allow it to reserve its rights to additional compensation 
or issue a unilateral modification for the undisputed amount.  Appeal File, Exhibit 36. 
21. On July 18, 2008, Yates submitted a certified pass-through claim on behalf of 
KenMor, seeking an adjustment of $1,064,891 attributable to the Davis-Bacon Act wage rate 
increase.  This claim consisted of actual hours worked up to that time and projected hours 
to project completion. The claim included overhead and profit. KenMor’s letter stated that: 
KenMor has and continues to incur additional costs complying 
with this change directive. We have been keeping Yates 
apprised of these costs by providing periodic requests for 
change orders detailing, on a month-by-month basis, the 
additional expenses. These change requests are based on actual 
hours worked and actual differences between each worker’s 
regular hourly rate and the new project minimum wage scale. 
Appeal File, Exhibit 40; Appellant’s Hearing Exhibit 3.  
22. On August 7, 2008, the contracting officer executed unilateral modification 
PC87, in the amount of $939,576, including the amount of $640,585, the costs allowed in 
the OIG’s audit report, to compensate KenMor for the Davis-Bacon Act wage rate increase. 
Appeal File, Exhibit 43. On October 21, 2008, the contracting officer issued a decision on 
KenMor’s pass-through claim acknowledging entitlement to an adjustment for the wage 
increase, determining that the proper amount of the adjustment was the amount allowed in 
the OIG audit report, and otherwise denying KenMor’s claim for further compensation. 
Appeal File, Exhibit 54. 
23. The contracting officer’s decision explained the Government’s rationale in 
pricing the adjustment as follows: 
The proposed hours were used in the OIG audit: since this is 
what the Government would have been responsible to pay had 
there been no increase in the wage rates. If Yates or its 
subcontractors actually perform the work in fewer hours than 
proposed, the appropriate contractor benefits from performing 
efficiently. Conversely, if Yates or its subcontractors actually 

    
    
  
     
   
    
      
  
    
        
     
  
      
      
        
     
         
      
     
     
     
    
      
      
      
   
8 CBCA 1495 
perform the work using more hours [than] proposed, a liability 
may [be] incurred from performing less efficiently. 
Appeal File, Exhibit 54. 
24. Yates appealed the contracting officer’s decision. The amount now claimed 
to compensate KenMor for the Davis-Bacon Act wage rate increase is $550,059.02. This 
represents KenMor’s total claim offset by the partial payment made by GSA pursuant to 
modification PC87. Appeal File, Exhibit 57; Appellant’s Hearing Exhibits 1, 3; Transcript 
at 200. 
25. Yates presented considerable evidence at the hearing in support of its claimed 
costs. KenMor’s bid was formulated using the wage rate included in the original RFP. 
Transcript at 60. The increase sought by Yates represents the baseline difference between 
the wages paid under the contract as it was awarded and the increased wage rate that 
KenMor was required to pay following the adoption of the revised wage determination. The 
claimed costs were based on the incremental increase in the wage rate plus labor burden 
incurred on these costs, project management cost, project accountant cost, overhead, profit, 
and bond costs.  Appellant’s Hearing Exhibit 1; Transcript at 192-94.  
26. The contracting officer acknowledged in her testimony that she had no reason 
to challenge the accuracy of appellant’s calculations of the costs it actually incurred in 
implementing the modified wage rates. She also agreed that she had no basis to assert that 
the number of hours KenMor worked on the project were excessive. The contracting officer 
also conceded that she had no reason to believe that appellant had included any contingency 
in its bid to cover the possibility that higher rates would be substituted. Transcript at 509­
12. 
27. Profit and overhead were generally authorized on other modifications issued 
pursuant to the Changes clause of the contract. KenMor used the same markups on the wage 
rates as it did for other changes that were routinely approved. 
Discussion 
The sole issue to be decided in this appeal concerns the method for calculating a price 
adjustment to the contract that appropriately accounts for the impact of the increased wage 
determination. Appellant argues the price adjustment should be calculated based on the 
increased costs incurred with respect to all affected, actual labor hours worked and should 
include profit and overhead in accordance with applicable contract clauses. The 
Government contends that it has already fully compensated appellant for the cost impact of 

     
       
      
       
       
     
        
      
   
       
      
    
      
    
  
   
       
   
      
     
        
     
 
   
     
     
   
      
    
     
     
        
9 CBCA 1495 
the modification of the wage rate because the price adjustment must be limited to costs 
attributable to the increased wage determination based on the labor hours estimated by 
KenMor in its bid. In addition, the Government asserts that standard markups such as 
overhead and profit are not permitted in calculating an adjustment for changes to the Davis-
Bacon Act minimum wage. 
Under the Davis-Bacon Act, contracts in excess of $2000 to which the United States 
is a party, for construction, alteration, or repair of public buildings or public works within 
the United States, must provide that any laborer or mechanic employed directly upon the site 
shall be paid no less than the prevailing wage rate as determined by the Secretary of the 
Department of Labor. See also, United States v. Binghamton Construction Co., 347 U.S. 
171, 172 (1954); Twigg Corp. v. General Services Administration , GSBCA 14639, 99-1 
BCA ¶ 30,217, modified on reconsideration on other grounds, 99-1 BCA ¶ 30,310, 99-1 
BCA ¶ 30,355, 48 CFR 22.403-1. 
The Davis-Bacon Act is implemented in Part 22.4 of the FAR. The regulations 
contemplate that the prevailing wage rate in effect at the time of contract award will be 
included in the contract and will become the fixed minimum wage for laborers who perform 
under the contract for the duration of that contract. There is no requirement or expectation 
that subsequent revisions of wage determinations be made applicable to the contract. The 
Government is authorized and expected, however, to correct erroneous wage rates that are 
included in awarded contracts that are subject to the Davis-Bacon Act. FAR 22.404-6. 
When this is necessary, FAR 22.404-6(b)(5) provides that the “contracting officer shall 
modify the contract to incorporate the wage modification retroactive to the date of award and 
equitably adjust the contract price for any increased or decreased cost of performance 
resulting from any changed wage rates.” See also, Twigg Corp., 99-1 BCA at 149,496; 
Dahlstrom & Ferrell Construction Co., ASBCA 30741, 85-3 BCA ¶ 30,741; Hendry Corp., 
B-179871, 75-1 CPD ¶ 189 (Apr. 1, 1975); 37 Comp Gen 326 (1957).
1 
Appellant maintains that the retroactive application of the current wage rate was 
accomplished by a modification under the contract’s Changes clause and that under well-
developed law, it is entitled to a price adjustment that reflects its increased cost of 
performance. In appellant’s view, this requires an equitable adjustment that compensates 
it for the difference between the reasonable cost of the work required by the contract and the 
actual reasonable cost of performing the changed work, plus a reasonable amount of 
1 DOL regulations similarly provide that contracts may be amended by change 
order to provide for retroactive application of Davis-Bacon wage rates in appropriate 
circumstances. 29 CFR 1.6(f) (2005); cf. Reidell v. United States, 43 Fed. Cl. 770 (1999). 

       
     
     
    
        
       
       
      
     
    
    
    
        
      
        
         
      
     
   
    
     
      
    
      
    
   
    
     
   
      
10 CBCA 1495 
overhead and profit. 6000 Metro LLC v. General Services Administration, GSBCA 15731, 
et al., 04-1 BCA ¶ 32,510; Stroh Corp. v. General Services Administration. GSBCA 11029, 
96-1 BCA ¶ 28,265, at 141,129. 
GSA disagrees with appellant’s analysis, and asserts that, in the context of a fixed 
price contract, the proper adjustment must be to the wage rates and must be limited to the 
number of hours the contractor estimated would be needed to perform the work. This, in 
GSA’s view, puts KenMor in the same position it would have been in had it been aware of 
the revised wage rates in calculating its bid. GSA’s contention that KenMor found itself in 
a loss position because it had bid insufficient resources to perform the work, however, is 
neither here nor there in terms of the proper approach for calculating the monetary 
adjustment to which appellant is entitled. 
Although GSA is correct that this was a fixed price contract and that KenMor should 
not be permitted to use the Davis-Bacon Act adjustment to compensate it for a loss position 
in performing the contract, KenMor’s approach does not, in fact, change KenMor’s position 
with respect to its bid. GSA included a wage determination in the contract with which 
bidders were required to comply. It then modified the contract, retroactively, to require that 
wages be paid in accord with a substantially revised wage determination that was in effect 
at the time of award but had been overlooked. This caused KenMor to have to pay more 
than the base salary it offered in compliance with the initial wage determination. KenMor 
was obligated to pay the higher wages for all hours worked, whether included in the planned 
hours or not. Whether the planned hours were more or less than the actual hours is 
immaterial; both parties agree that the actual hours were reasonably devoted to the project. 
KenMor is not asking to be reimbursed anything other than the incremental increase above 
the rate for which it was responsible to pay its workers under the old determination. 
Payment of the incremental costs for all hours worked leaves KenMor’s profit or loss 
position unchanged. With that payment, KenMor is in the same position it would have been 
but for the revised wage determination.
2 
2 This disposes of GSA’s offhand assertion that KenMor’s demand to be paid 
for the wage differential for hours that were not planned at the time of bid is a separate claim 
that is not before the Board. KenMor has consistently sought to be paid for the incremental 
impact of the increased wages it incurred as a direct consequence of the Government’s 
modification of the contract to substitute the higher wage rates.  KenMor’s certified claim 
clearly sought the costs associated with all of the hours worked, Finding 21, and as such, the 
Board has jurisdiction over it. 

  
       
      
      
   
     
   
     
     
    
       
     
    
    
    
       
      
      
     
    
     
     
       
   
      
         
     
   
      
    
    
      
     
   
  
11 CBCA 1495 
This approach is consistent with settled law addressing the purpose of an equitable 
adjustment when some aspect of a contract has been modified by the Government. In 
general, when the contracting officer directs a specified change in contract terms and this 
change causes an increase or decrease in the cost of, or time required for, performance of 
contract work, the contracting officer shall make an equitable adjustment to the contract 
price. The Changes clause in the contract provides for an equitable adjustment if any change 
“causes an increase or decrease in the Contractor’s cost of, or the time required for, the 
performance of any part of the work under this contract, whether or not changed.” See 48 
CFR 52.243-4. Said another way, the formula for calculating an equitable adjustment is the 
difference between the reasonable cost of performing without the change and the reasonable 
cost of performing with the change. Sauer Inc. v. Danzig, 224 F.3d 1340, 1348 (Fed. Cir. 
2000); see also Electronic & Missile Facilities, Inc. v. United States, 416 F.2d 1345, 1361 
(Ct. Cl. 1969); Paul Hardeman, Inc. v. United States, 406 F.2d 1357, 1361-63 (Ct. Cl. 
1969). 
Because the purpose underlying an equitable adjustment is to safeguard both 
contractors and the Government against increased costs engendered by modifications, an 
equitable adjustment must be closely related to and contingent upon the altered position in 
which the contractor finds itself by reason of the modification. Nager Electric Co. v. United 
States, 442 F.2d 936, 946 (Ct. Cl. 1971); Bruce Construction Corp. v. United States, 324 
F.2d 516, 518 (Ct. Cl. 1963). An adjustment should not increase or reduce a contractor’s 
profit or loss, or convert any loss to a profit or vice versa, for reasons unrelated to a change. 
Pacific Architects & Engineers Inc. v. United States, 491 F.2d 734, 739 (Ct. Cl. 1974); Keco 
Industries, Inc. v. United States, 364 F.2d 838, 850 (Ct. Cl. 1966). Where a contractor has 
established its actual costs and correlated them to a particular modification of the contract, 
it is error to disallow, increase, or otherwise adjust those costs in the absence of specific 
evidence. Teledyne McCormick–Selph v. United States, 588 F.2d 808, 810 (Ct. Cl. 1978); 
Dawson Construction Co., GSBCA 5364, 82-1 BCA ¶ 15,701. This established body of law 
fully supports recovery of the wage differential for all hours actually worked. 
GSA also rejects appellant’s position that its equitable adjustment calculations should 
be governed by the Changes clause.  To the contrary, GSA maintains that FAR 22.404-12 
sets forth a mandatory requirement obligating the contracting officer to have included one 
of four methods for compensating a contractor for changed labor costs attributable to the 
Davis- Bacon Act. This provision, entitled “[l]abor standards for contracts containing 
construction requirements and option provisions that extend the term of the contract,” states: 
(a) Each time the contracting officer exercises an option to 
extend the term of a contract for construction, or a contract that 
includes substantial and segregable construction work, the 

   
  
  
   
  
    
      
    
  
    
      
     
      
     
        
  
     
   
     
     
   
      
        
    
   
  
12 CBCA 1495 
contracting officer must modify the contract to incorporate the 
most current wage determination. 
.  .  .  . 
(c) The contracting officer must include in fixed-price contracts 
a clause that specifies one of the following methods, suitable to 
the interest of the Government, to provide an allowance for any 
increases or decreases in labor costs that result from the 
inclusion of the current wage determination at the exercise of an 
option to extend the term of the contract: 
(1) The contracting officer may provide the offerors the 
opportunity to bid or propose separate prices for each option 
period. The contracting officer must not further adjust the 
contract price as a result of the incorporation of a new or 
revised wage determination at the exercise of each option to 
extend the term of the contract.  Generally this method is used 
in construction-only contracts (with options to extend the term) 
that are not expected to exceed a total of 3 years. 
(2) The contracting officer may include in the contract a 
separately specified pricing method that permits an adjustment 
to the contract price or contract labor unit price at the exercise 
of each option to extend the term of the contract. At the time of 
the option exercise, the contracting officer must incorporate a 
new wage determination into the contract, and must apply the 
specific pricing method to calculate the contract price 
adjustment. . . . 
(3) The contracting officer may provide for a contract price 
adjustment based solely on a percentage rate determined by the 
contracting officer using a published economic indicator 
incorporated into the solicitation and resulting contract. At the 
exercise of each option to extend the term of the contract, the 
contracting officer will apply the percentage rate, based on the 
economic indicator, to the portion of the contract price or 
contract unit price designated in the contract clause as labor 
costs subject to the provisions of the Davis-Bacon Act.  . . . 

    
   
  
  
  
     
       
    
  
  
  
  
    
        
      
          
        
       
  
        
          
     
    
   
     
         
           
  
    
  
       
      
      
     
13 CBCA 1495 
(4) The contracting officer may provide a computation method 
to adjust the contract price to reflect the contractor’s actual 
increase or decrease in wages and fringe benefits (combined) to 
the extent that the increase is made to comply with, or the 
decrease is voluntarily made by the contractor as a result of 
incorporation of, a new or revised wage determination at the 
exercise of the option to extend the term of the contract. 
Generally this method is appropriate for use only if contract 
requirements are predominately services subject to the Service 
Contract Act and the construction requirements are substantial 
and segregable. The methods used to adjust the contract price 
for the service requirements and the construction requirements 
would be similar. 
GSA maintains that subparagraph (c)(4) is applicable here. The contract clause that 
implements the actual method approach is set forth in FAR 52.222-32. Finding 12. Since 
this clause was not inserted into this contract prior to award, GSA urges that it should be 
read into the contract by operation of law in accordance with the principle enunciated by the 
Court of Claims in G. L. Christian & Associates v. United States, 312 F.2d 418, 425 (Ct. 
Cl.), rehearing denied , 320 F.2d 345, cert. denied , 375 U.S. 954 (1963). Under the 
Christian doctrine, only a mandatory contract clause that expresses a significant or deeply 
ingrained strand of public procurement policy is considered to be included in a contract by 
operation of law. S. J. Amoroso Construction Co. v. United States, 12 F.3d 1072, 1075 
(Fed. Cir. 1993); General Engineering & Machine Works v. O’Keefe , 991 F.2d 775, 779 
(Fed. Cir. 1993); 
GSA contends that this clause is mandatory and that the Davis-Bacon Act regulations 
reflect a significant public procurement policy. Appellant responds that the clause is not 
mandatory and that, even if it were, it does not apply to the situation at hand.  
The main flaw in GSA’s argument is that it focuses on a single clause, among many, 
in FAR Part 22. The particular FAR provision and the FAR clause on which it relies, when 
read as a whole, and in context, clearly apply to the exercise of an option to extend the term 
of a contract. GSA’s attempt to invoke these provisions, and the accompanying clause, is 
strained at best. There is no price adjustment clause in the contract specific to the Davis-
Bacon Act because the regulations contemplate that the prevailing wage rate will be 
incorporated into a construction contract at the time it is awarded and will establish the 
minimum wage for the duration of performance under that contract. FAR 22.404-6 provides 
guidance for the circumstances in which an outdated wage determination is mistakenly used. 
The clauses relied on by the Government apply when longer term arrangements, in which 

       
        
    
    
       
          
    
     
       
         
    
       
     
         
     
   
        
      
         
        
   
      
      
        
    
    
     
   
       
       
       
   
     
     
14 CBCA 1495 
the Government can extend the term of the contract, come into play. In those circumstances, 
the clauses added to the FAR in 2001 implement the Government’s intent to ensure that 
extensions of such contracts use the current prevailing wage and provide for a mechanism 
to compensate the contractor. Despite GSA’s valiant attempt to persuade the Board that they 
apply to this contract, we cannot find that they do, since the award of the construction phase 
of the contract was not an exercise of the type of option intended to be addressed by the 
subject clause. 
Notably, the term “option” is defined under the FAR as “a unilateral right in a 
contract by which, for a specified time, the Government may elect to purchase additional 
supplies or services called for by the contract, or may elect to extend the term of the 
contract.” 48 CFR 2.101. The fee and general conditions approach adopted by GSA 
following the bid bust, Findings 1-2, contemplated a two-phase process -- a value 
engineering process, which, if successful, would lead to the separate award of the contract 
to construct the FBI building. As appellant points out, although GSA called the construction 
phase an option, the use of the term did not create the type of option contemplated in the 
FAR. The construction contract awarded is fundamentally the contract contemplated under 
the original solicitation, with value engineering changes that adjusted the original scope of 
work so that award could be made at or near GSA’s target price. GSA had no unilateral 
right to order the construction phase of the contract at an established price. Rather, the 
parties had to work together to develop a mutually agreeable scope and price for the 
construction work. The “option” was not to extend the term of an existing contract, but to 
award or not award, depending on the circumstances.  
Against this backdrop, the Actual Method clause identified by GSA is not relevant 
to this contract, even it if might be applicable to a contract containing option periods as that 
term is defined in the FAR. As such, even assuming that the clause meets the criteria for 
application of the Christian doctrine, there is no reason to consider reading it into the 
contract by operation of law.  
The final point to address is the availability of profit and overhead on the equitable 
adjustment. Under the Changes clause, these cost elements are routinely added to the actual 
costs incurred to “make the contractor whole.” Although the specific Davis-Bacon Act 
clause applicable to the exercise of option periods excludes these cost elements, absent the 
inclusion of a similar clause in the contract that directly applies on these facts, there is no 
basis to exclude these costs. It is not disputed that the modification increased the direct 
wage and fringe benefit costs of performing the contract. Under the FAR Part 31 cost 
principles, those direct costs must bear their pro rata share of indirect costs allocated under 
generally accepted accounting principles consistently applied. See FAR 31.203(c), (d). To 
the extent the claimed indirect costs are so allocated, they are properly a part of the equitable 

       
      
      
        
       
   
   
       
     
      
    
     
        
 
      
    
       
     
         
     
      
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15 CBCA 1495 
adjustment. Similarly, consideration of profit is required in the determination of an equitable 
adjustment. This point was explained by the Armed Services Board in Professional Services 
Unified, Inc., ASBCA 45799, 94-1 BCA ¶ 26,580, at 132,249 (1993). There, the board 
stated that an “equitable adjustment” for an increase in mandated minimum hourly wages 
and fringe benefits “necessarily makes provision for increased overhead and [general and 
administrative] costs and for a reasonable profit, unless these factors are expressly excluded 
by some pertinent contract provision.” BellSouth Communications Systems, Inc., ASBCA 
45955, 94-3 BCA ¶ 27,231. There is no clause limiting appellant’s recovery of these costs 
in this case. 
Moreover, as the BellSouth decision noted, the argument for the categorical exclusion 
of indirect costs in this case assumes that such costs never increase with an increase in wage 
and fringe benefit rates; and that an increase in wage and fringe benefit rates has no effect 
on the contractor's risk, cost of financing, or other factors normally compensated by profit. 
94-3 BCA 135,699. Here, GSA has not shown that this is the case and cannot do so because 
the auditors refused to audit on the basis of actual hours and indirect costs incurred by the 
contractor.  Finding 18-19. 
On the record before us, appellant has adduced credible evidence of the hours it 
incurred in performing the work and the actual cost of the wage differential it seeks under 
an equitable adjustment. The contracting officer testified that she has no basis on which to 
question appellant’s calculations of hours and costs, and agreed that the auditors knowingly 
declined to audit actual costs. Finding 24. As such, we find that appellant has met its 
burden to prove the quantum it is owed. 
Decision 
The appeal is GRANTED. Appellant is entitled to the amount of $550,059.02, plus 
Contract Disputes Act interest from July 22, 2008, when its certified claim was received by 
respondent.  
CATHERINE B. HYATT 
Board Judge 

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16 CBCA 1495 
We concur: 
STEPHEN M. DANIELS CANDIDA S. STEEL 
Board Judge Board Judge