[Federal Register Volume 74, Number 6 (Friday, January 9, 2009)]
[Proposed Rules]
[Pages 872-874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-217]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 22 and 52

[FAR Case 2007-021; Docket 2009-0014; Sequence 1]
RIN 9000-AL14


Federal Acquisition Regulation; FAR Case 2007-021, Fair Labor 
Standards Act and Service Contract Act Price Adjustment Clauses

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) are proposing to amend the 
Federal Acquisition Regulation (FAR) to specifically require the 
incorporation of the FAR clauses regarding Fair Labor Standards Act and 
Service Contract Act-Price Adjustment (Multi-Year and Option Contracts) 
and Fair Labor Standards Act and Service Contract Act-Price Adjustment 
in time-and-materials and labor--hour service contracts that are 
subject to the Service Contract Act.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat on or before March 10, 2009 to be considered in 
the formulation of a final rule.

ADDRESSES: Submit comments identified by FAR case 2007-021 by any of 
the following methods:
    <bullet> Regulations.gov: http://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by inputting ``FAR Case 
2007-021'' under the heading ``Comment or Submission''. Select the link 
``Send a Comment or Submission'' that corresponds with FAR Case 2007-
021. Follow the instructions provided to complete the ``Public Comment 
and Submission Form''. Please include your name, company name (if any), 
and ``FAR Case 2007-021'' on your attached document.
    <bullet> Fax: 202-501-4067.
    <bullet> Mail: General Services Administration, Regulatory 
Secretariat (VPR), 1800 F Street, NW, Room 4035, ATTN: Hada Flowers, 
Washington, DC 20405.
    Instructions: Please submit comments only and cite FAR case 2007-
021 in all correspondence related to this case. All comments received 
will be posted without change to http://www.regulations.gov, including 
any personal and/or business confidential information provided.

FOR FURTHER INFORMATION CONTACT Ms. Meredith Murphy, Procurement 
Analyst, at (202) 208-6925 for clarification of content. For 
information pertaining to status or publication schedules, contact the 
Regulatory Secretariat at (202) 501-4755. Please cite FAR case 2007-
021.

SUPPLEMENTARY INFORMATION:

A. Background

    This rule proposes to amend the Federal Acquisition Regulation 
(FAR) to revise the clause prescriptions at FAR 22.1006(c)(1) and (2) 
to specifically require that time-and-materials and labor-hour service 
contracts subject to the Service Contract Act contain the appropriate 
price adjustment clauses set forth at 52.222-43 and 52.222-44.
    Despite the current prescriptions which do not require use of the 
clauses in time-and-materials or labor-hour

[[Page 873]]

contracts, there is, in fact, broad usage of the clause(s) in such 
contracts. Adoption of the proposed change would achieve consistency 
throughout the Government acquisition community and resolve potential 
inequities where the clauses have not been applied. Not only would this 
achieve an equitable result for contractors, but it would also allow 
the Government to avoid use of other means of adjusting contract unit 
price labor rates which may be more costly to the Government. Other 
means of adjusting contract labor rates, such as allowing for wage/
benefit escalation, equitable adjustment or economic price adjustment, 
would likely include profit, overhead and general and administrative 
expenses. The clauses at 52.222-43 and 52.222-44 explicitly exclude 
these additional costs.
    The clause prescriptions at FAR 22.1006(c)(1) and (c)(2) currently 
require that Service Contract Act wage determination updates be applied 
to contracts subject to the clause at 52.222-41, Service Contract Act 
of 1965, but, as required by FAR clause 52.222-41, minimum monetary 
wages and fringe benefits to be paid to service employees under the 
contract may be subject to adjustment, under wage determinations issued 
by the Department of Labor. While there may be other means permitted to 
adjust fixed labor rates on time-and-materials or labor-hour contracts, 
those other means will not achieve the consistent results that use of 
the Service Contract Act price adjustment clause(s) will achieve. 
Requirement by the prescription for the clauses will achieve that 
consistency and at the same time will allow the Government to avoid any 
adjustment to profit, overhead or general and administrative costs that 
could be incurred in addition to wage or fringe benefit costs 
increases.
    The proposed rule requires Government time-and-materials and labor-
hour service contracts to incorporate the appropriate price adjustment 
clauses.
    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    The Councils do not expect this proposed rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
because it merely clarifies the existing prescriptions relating to 
service contracts. FAR clause 52.222-41 requires contractors to comply 
with wage determinations of the Department of Labor and may require 
adjustment to wage rates during the term of the contract. Most 
contracts that include this clause therefore provide some mechanism for 
dealing with the potential required price adjustment. The Councils have 
been advised that use of these clauses for time-and-materials and 
labor-hour service contracts is already widespread. Uniform use of the 
appropriate clause will ensure consistency in the adjustment method for 
any required increase in wage rate, but should not have a significant 
cost impact.
    An Initial Regulatory Flexibility Analysis has, therefore, not been 
performed. We invite comments from small businesses and other 
interested parties. The Councils will consider comments from small 
entities concerning the affected FAR Parts 22 and 52 in accordance with 
5 U.S.C. 610. Interested parties must submit such comments separately 
and should cite 5 U.S.C. 601, et seq. (FAR case 2007-021), in all 
correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the FAR do not impose information collection requirements 
that require the approval of the Office of Management and Budget under 
44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Parts 22 and 52

    Government procurement.

    Dated: December 9, 2008.
Al Matera,
Director, Office of Acquisition Policy.
    Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 22 and 
52 as set forth below:
    1. The authority citation for 48 CFR parts 22 and 52 continues to 
read as follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 22--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS


22.1006   [Amended]

    2. Amend section 22.1006 by removing from paragraphs (c)(1) and 
(c)(2) ``fixed-price'' and adding ``fixed-price, time-and-materials, or 
labor-hour'' in its place.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


52.212-5  [Amended]

    3. Amend section 52.212-5 by removing the date of the clause and 
adding ``(DATE)'' in its place; by removing from paragraph (c)(3) 
``(Nov 2006)'' and adding ``(Date)'' in its place; and by removing from 
paragraph (c)(4) ``(Feb 2002)'' and adding ``(Date)'' in its place.
    4. Amend section 52.222-43 by revising the date of the clause, 
paragraph (d), and the third and fourth sentences of paragraph (f) to 
read as follows:


52.222-43   Fair Labor Standards Act and Service Contract Act--Price 
Adjustment (Multiple Year and Option Contracts).

* * * * *
    FAIR LABOR STANDARDS ACT AND SERVICE CONTRACT ACT--PRICE 
ADJUSTMENT (MULTIPLE YEAR AND OPTION CONTRACTS) (DATE)
* * * * *
    (d) The contract price, contract unit price labor rates, or fixed 
hourly labor rates will be adjusted to reflect the Contractor's actual 
increase or decrease in applicable 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--
* * * * *
    (f) * * * The notice shall contain a statement of the amount 
claimed and the change in fixed hourly rates (if this is a time-and-
materials or labor-hour contract), and any relevant supporting data, 
including payroll records, that the Contracting Officer may reasonably 
require. Upon agreement of the parties, the contract price, contract 
unit price labor rates, or fixed hourly rates shall be modified in 
writing. * * *
* * * * *
    (End of clause)
    5. Amend section 52.222-44 by revising the date of the clause, 
paragraph (c), and the third and fourth sentences of paragraph (e) to 
read as follows:


52.222-44   Fair Labor Standards Act and Service Contract Act--Price 
Adjustment.

* * * * *
    FAIR LABOR STANDARDS ACT AND SERVICE CONTRACT ACT--PRICE 
ADJUSTMENT (DATE)
* * * * *
    (c) The contract price, contract unit price labor rates, or fixed 
hourly labor rates will be adjusted to reflect increases or decreases 
by the Contractor in wages and fringe benefits to the extent that

[[Page 874]]

these increases or decreases are made to comply with--
* * * * *
    (e) * * * The notice shall contain a statement of the amount and 
the change in fixed hourly rates (if this is a time-and-materials or 
labor-hour contract) claimed and any relevant supporting data that the 
Contracting Officer may reasonably require. Upon agreement of the 
parties, the contract price, contract unit price labor rates, or fixed 
hourly rates shall be modified in writing. * * *
* * * * *
    (End of clause)
[FR Doc. E9-217 Filed 1-8-09; 8:45 am]
BILLING CODE 6820-EP-S