United States Government Accountability Office

GAO Report to the Subcommittee on Labor, 

Health and Human Services, Education 

and Related Agencies, Committee on 

Appropriations, U.S. Senate 

SERVICE CONTRACT 

ACT 

Wage Determination 

Process Could Benefit 

from Greater 

Transparency, and 

Better Use of Violation 

Data Could Improve 

Enforcement 

December 2005 

 

GAO-06-27 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

December 2005

SERVICE CONTRACT ACT 

Wage Determination Process Could 

Benefit from Greater Transparency, and 

Better Use of Violation Data Could 

Improve Enforcement 

Highlights of GAO-06-27, a report to the 

Subcommittee on Labor, Health and 

Human Services, Education and Related 

Agencies, Committee on Appropriations, 

U.S. Senate 

Recipients of federal government 

contracts for services are subject 

to wage, hour, benefits, and safety 

and health standards under the 

McNamara-O'Hara Service

Contract Act (SCA) of 1965, as

amended, which specifies wage

rates and other labor standards for 

employees of contractors. SCA 

requires the Department of Labor

(DOL) to set locally prevailing

wage rates and other labor

standards for employees of 

contractors furnishing services to 

the federal government. DOL’s 

Employment Standards

Administration’s Wage and Hour

Division (WHD) administers the 

SCA and each year determines 

prevailing wage and fringe benefit 

rates for over 300 standard service 

occupations in 205 metropolitan

areas. SCA also authorizes DOL to 

enforce contractor compliance

with SCA provisions. This report 

describes how DOL (1) establishes 

locally prevailing wages and fringe

benefits and (2) enforces SCA. 

What GAO Recommends

To improve the transparency of its 

wage determination process and its

SCA strategic enforcement

planning efforts, GAO recommends 

that WHD, among other things,

make publicly available the basic 

methodology it uses to issue wage 

determinations and consider 

analyzing its historical SCA 

contractor violation data to help

plan its compliance assistance and

investigative efforts. In its written 

comments, DOL agreed with all of 

the report’s recommendations. 

When making a wage determination, WHD analysts consult several sources

of information, such as its SCA directory of occupations and data collected 

through two Bureau of Labor Statistics national wage surveys, for wage data 

on occupations. Relying on these tools and their own expertise, analysts 

calculate prevailing wages and fringe benefit amounts for specific 

geographic locations. The wage determination process produces a wealth of 

nationwide wage data for service occupations that WHD makes available 

online and strives to update annually. However, stakeholders (e.g., unions, 

contractors, employees, and others) contend that the wage determination 

process is not transparent and that the resulting wages do not necessarily

reflect local wage conditions. For example, WHD does not include a 

description of the methodology used to derive the wage rates in its wage 

determinations, such as wage data sources used or the procedures analysts’ 

follow. As a result, analysts spend considerable time responding to inquiries 

about the methodology used to determine wages. 

Examples of Wages Paid to Selected Service Contract Occupations in Selected Localities 

WHD enforces SCA by conducting investigations, ensuring contractor 

payments, and providing compliance assistance to stakeholders. WHD 

investigates complaints from service contract employees, federal agencies, 

unions, and others who allege that contractors have failed to pay either the 

wages or fringe benefits, or both, specified in SCA contracts. WHD collects 

violation data, but it does not fully use these data to plan compliance

assistance, target specific service industries or geographic locations for SCA 

investigation, or set strategic enforcement goals. As a result, WHD may be

overlooking some SCA violators and industries that need further 

enforcement. A review of prior SCA violation data could provide WHD 

assurance that it is using the most effective mix of available compliance 

assistance and investigative efforts. 

www.gao.gov/cgi-bin/getrpt?GAO-06-27.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Robert 

Robertson at (202) 512-7215 or 

robertsonr@gao.gov. 
Contents 

Letter 1

Results in Brief 2

Background 4

Wage Determination Process Relies on Multiple Data Sources and 

Professional Judgment but Lacks Transparency 11 

DOL Enforces SCA by Conducting Investigations, Ensuring 

Contractor Payments, and Providing Compliance Assistance, but 

WHD Could Make Better Use of Violation Data 19 

Conclusions 27

Recommendations for Executive Action 28 

Agency Comments 29 

Appendix I Objectives, Scope, and Methodology 31 

Appendix II Examples of Standard and Non-standard Wage 

Determinations 33 

Appendix III Comments from the Department of Labor 48 

Appendix IV GAO Contact and Staff Acknowledgments 51 

Related GAO Products 52 

Tables 

Table 1: Number and Percentage of SCA Investigations by 

Category, Fiscal Years 2003 and 2004 20 

Table 2: Number of SCA Debarments, Fiscal Years 2000 through 

200425 

Figures 

Figure 1: Location of ESA’s Offices 10 

Page i GAO-06-27 Service Contract Act
Figure 2: Factors Considered in SCA Wage Determination Process 16 

Figure 3: Cases with SCA Violations, Including Those Registered 

under Other Acts 23 

Figure 4: Employees with Back Wages Due, and Employees Whom 

Contractors Agreed to Pay, Fiscal Years 2003 and 2004 24 

Abbreviations 

BLS Bureau of Labor Statistics 

DOD Department of Defense 

DOL Department of Labor 

ECEC Employer Cost for Employee Compensation 

ESA Employment Standards Administration 

FGE federal grade equivalency

FLSA Fair Labor Standards Act 

FPDS Federal Procurement Data System 

GS general schedule 

H&W health and welfare 

NAF Non-Appropriated Fund

NCS National Compensation Survey 

OES Occupational Employment Statistics 

OSHA Occupational Safety and Health Administration 

SCA Service Contract Act 

WG wage grade 

WHD Wage and Hour Division 

WHISARD Wage and Hour Investigative Support and Reporting 

 Database 

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Page ii GAO-06-27 Service Contract Act
United States Government Accountability Office

Washington, DC 20548 

December 7, 2005 

The Honorable Arlen Specter 

Chairman 

The Honorable Tom Harkin 

Ranking Member 

Subcommittee on Labor, Health and Human Services, 

 Education and Related Agencies 

Committee on Appropriations 

United States Senate 

Recipients of federal government contracts for services are subject to 

wage, hour, benefits, and safety and health standards under the 

McNamara-O’Hara Service Contract Act (SCA) of 1965, as amended, which 

specifies wage rate and other labor standards for employees of 

contractors. In fiscal year 2003, federal agencies spent over $45 billion on 

contract services covered under SCA, an increase of about $13 billion from 

fiscal year 2000.1

 In 2002, the Department of Labor (DOL) estimated there 

were about 60,000 federal service contracts. SCA requires DOL to set 

locally prevailing wage rates and other labor standards for employees of 

contractors furnishing services to the federal government. DOL’s 

Employment Standards Administration’s (ESA) Wage and Hour Division 

(WHD) administers the SCA and each year determines prevailing wage and

fringe benefit rates for approximately 300 standard service occupations, 

such as janitor and cafeteria worker, in 205 metropolitan areas. SCA also 

authorizes DOL to conduct investigations to enforce contractor

compliance with SCA provisions. 

SCA requires federal contracting agencies to include a wage determination 

from WHD in their advertisement for a service contract with the private

sector.2

 Over the years, contractors, employees, and others have raised 

 1

This information comes from agency data submitted to the Federal Procurement Data

System (FPDS), the federal repository for contracting data. 

2

A wage determination sets forth the minimum monetary wage rates to be paid and the

minimum fringe benefits to be furnished for the various classes of service employees to be

employed in furnishing services during the periods when they are engaged in the 

performance of such contracts. Each wage determination is locality specific, i.e., the wage 

and fringe benefit information therein would pertain to the specific occupations listed only

in the geographic location specified, and should reflect local labor market conditions. 

Page 1 GAO-06-27 Service Contract Act
concerns to us that WHD-determined wage and benefit rates are either too 

high or too low, and do not reflect current employment conditions in their 

vicinity. In addition, they contend that the way in which WHD arrives at its 

determinations is unclear. In this context, you asked us to describe how 

DOL (1) establishes locally prevailing wages and fringe benefits and 

(2) enforces SCA. You also asked that we identify potential areas of 

improvement found in the course of our work. 

To respond to your request, we reviewed literature on SCA and its 

corresponding regulations. We interviewed officials in DOL headquarters 

and field offices, the Bureau of Labor Statistics (BLS), and the two federal 

contracting agencies with the largest proportion of service contract 

activity—the Department of Defense (DOD) and the General Services 

Administration. In addition, we interviewed representatives from several 

service industry unions and key trade associations. We analyzed data 

obtained from DOL, including data on WHD investigations; national, 

regional and district office training and outreach efforts; and file data on 

debarments. We also reviewed BLS national wage survey data in order to 

better understand the wage determination process. In addition, we 

contacted state and private sector groups who also produce wage and 

benefit rates to better understand DOL’s method of arriving at wage 

determinations. See appendix I for detailed information on the scope and 

methodology of our work. 

We performed our work in accordance with generally accepted 

government auditing standards between November 2004 and September 

2005. 

WHD consults multiple wage data sources and relies on analysts’ 

professional judgment when issuing wage determinations, but the process 

lacks transparency and leaves wage determinations prone to criticism. 

When issuing a wage determination, WHD analysts look to match the 

occupations listed in agency contracts with its SCA directory of 

occupations. If the occupation is listed, the analysts will consult several 

sources of information, such as data collected through two BLS national 

wage surveys, for wage data on that occupation. The analysts will 

calculate a prevailing wage and fringe benefit amount for a specific 

geographic location in a way that ensures a generally consistent wage rate

from year to year within the occupation and across similar occupations. If

the BLS surveys do not have specific data for the occupation or if analysts

find that the occupation is not listed in the directory, they will apply 

professional judgment to select a comparable listed occupation upon 

Results in Brief 

Page 2 GAO-06-27 Service Contract Act
which they base the new wage rate. For example, an analyst may use the

wage data for a computer operator to derive a wage rate for a peripheral 

equipment operator, knowing that the job duties for both occupations are 

rated the same by the federal government under the system it uses to 

categorize federal employees. The wage determination process produces a 

wealth of nationwide wage data for service occupations that WHD makes 

available online and strives to update annually. However, stakeholders 

(e.g., contract employees, federal contracting agencies, unions, trade 

associations, and others) contend that the process is not transparent and 

that the wage determinations do not necessarily reflect local wage 

conditions. For example, WHD does not include a description of the 

methodology used to derive its wage rates in its wage determinations, such

as wage data sources used or the procedures analysts follow. As a result, 

WHD analysts spend considerable time responding to inquiries about the 

methodology used to determine wages. In addition, WHD has not issued a 

comprehensive edition of its SCA directory of occupations since 1993 and 

has no systematic process in place for doing so. As a result, the directory 

does not include a broad range of emerging occupations that are covered 

under SCA. 

WHD enforces SCA by conducting investigations, ensuring contractor 

payments, and providing compliance assistance to federal contracting 

agencies, contractors, and others. All SCA investigations stem from 

stakeholder complaints that contractors are not providing service 

employees with the requisite wages and benefits. WHD may, on its own 

initiative, expand the scope of the investigation beyond the original 

complaint to include additional employees, contracts or locations. In fiscal

year 2004, DOL conducted 654 SCA investigations, 13 percent of which 

were expanded investigations. Over 80 percent of those 654 investigations

found that employers operating under SCA failed to pay the wages or the 

fringe benefits or both specified in the applicable SCA wage determination 

issued for the contracts. As a result of its investigations, WHD uncovered

20,347 individual SCA violations—each instance of failure to pay a 

contract employee the proper wage counts as a separate violation of the 

act. Additionally, in fiscal year 2004, as a result of WHD’s investigations, 

contractors agreed to pay $16.4 million in unpaid back wages and fringe 

benefits to over 14,000 service contract employees. DOL also debarred 

from future federal government contract work 17 SCA contractors who 

failed to provide the requisite back wages and fringe benefits or otherwise 

met SCA and WHD conditions for debarment. WHD does not use available 

investigations data, however, to examine the extent to which specific 

service industries or geographic locations may warrant more SCA 

investigations. As a result, WHD has limited assurance it is using the most 

Page 3 GAO-06-27 Service Contract Act
effective mix of available compliance assistance and investigative efforts. 

The data on repeat SCA violators could be analyzed with a minimal 

investment of additional resources. To improve compliance with SCA, 

WHD conducts outreach efforts. For example, WHD provides training to 

federal contracting agencies and contractors on when contracts should be 

SCA-designated and how to comply with the act’s requirements. 

This report contains recommendations for improving the transparency of 

the wage determination process and for improving SCA strategic 

enforcement planning. In its written comments on our report, ESA agreed 

with the report’s recommendations. ESA provided us with written 

comments, suggesting several technical corrections, as did BLS, that we 

incorporated throughout the report, as appropriate. 

SCA was enacted to give labor standards protection to employees of 

contractors and subcontractors providing services to federal agencies in 

the United States. SCA requires that, for contracts exceeding 

$2,500, contractors pay their employees, at a minimum, the wage rates and 

fringe benefits that have been determined by DOL to be prevailing in the 

locality where the contracted work is performed. The types of service jobs

covered by the act include, for example, security guard services, food 

service, maintenance, janitorial services, clerical workers, and certain 

health and technical occupations. 

Background 

Until recently, DOL regulations required that federal contracting agencies 

complete and submit a form to DOL indicating their intention to offer a 

service contract and requesting current wage and benefit determinations 

for the occupational class(es) and geographic area(s) involved in the 

contract. Since the mid-1990s, however, some contracting agencies have 

been able to obtain wage determinations through a DOL online wage 

determination database, rather than requesting one from DOL. Many of 

their covered service contracts were renewals and the applicable SCA 

wage determinations for these contracts were already well established and 

posted online for information purposes. For these reasons, DOL entered 

into memoranda of understanding with several agencies to allow them to 

use posted standard wage determinations without first formally requesting 

a new one. On August 26, 2005, DOL issued regulations that allow all 

federal contracting agencies to use its www.wdol.gov Web site to meet 

their obligation to obtain SCA wage determinations from DOL. This final 

rule eliminates the required paper form when requesting a wage 

determination. 

Page 4 GAO-06-27 Service Contract Act
Under SCA, WHD establishes wage rates that apply to the United States,

including the District of Columbia, and certain territories. WHD issues 

SCA wage determinations that are location-specific, listing nearly all 

standard occupations on each wage determination. These wage 

determinations are generally referred to as “consolidated” wage 

determinations.3

 WHD strives to update its list of consolidated wage 

determinations annually, issuing 410 consolidated wage determinations 

covering almost 300 standard occupations in 205 geographic locations.4

These consolidated wage determinations altogether, contain 

approximately 61,500 individual wage determinations. In addition, 

between August 1, 2004, and July 31, 2005, WHD issued at least 15,786 

other wage determinations upon request, including those for non-standard 

occupations and conformance requests.5

 See appendix II for an example of 

 3

Consolidated wage determinations are those that are most frequently used for 

SCA-covered contracts, for which job descriptions are provided by the SCA directory of 

occupations. There are wage rates for 298 occupations listed in each consolidated wage 

determination. Non-standard wage determinations are issued for unique occupations. 

Contracting agencies attach job descriptions for these occupations to the specific request 

for a wage determination that is sent directly to WHD. WHD equates these job descriptions 

with similar occupations surveyed by BLS through use of the comparable federal grade 

level associated with each. WHD analysts annually update only those non-standard wage 

determinations that have widespread application, i.e., non-standard occupations very 

common to a specific area or common to only a few areas across the country. 

4

WHD issues two wage determinations for each locality, reflecting identical wages and 

rates for health and welfare fringe benefits. However, the requirements for contractor 

compliance are different. One determination reflects health and welfare benefits that are 

required to be furnished on a fixed payment per hour on behalf of each service employee;

the other requires employer contributions to cost an average of the amount specified on

the basis of all hours worked by service employees employed on the contract. The average

cost method is used only for those SCA covered contracts where this method of calculating 

health and welfare fringe benefits has been used in the past. No new SCA contract 

requiring a prevailing wage determination is allowed to have the average cost health and 

welfare fringe benefit. 

5

In addition to contracting agencies requesting formal wage determinations, contractors 

may obtain specific occupational wage determinations, through the SCA conformance

process. When wage determinations do not include an occupation in which covered

workers will be employed, the conformance process allows contractors to propose the use 

of workers in an occupation at a wage rate that is reasonable when compared with other 

occupational wage rates in the applicable wage determination (i.e., appropriate level of 

skill comparison) between such unlisted classifications and the classifications listed in the

wage determination. To prevent the possibility of any workers performing work and not

receiving the proper wages, the contractor initiates the conforming procedure before the

unlisted class of employee performs any work. The contractor submits the conformance 

request to the contracting officer, who reviews and forwards it to WHD. The final 

determination of the conformance action by WHD is transmitted to the contracting officer 

who notifies the contractor of the action taken. Each affected employee is provided with a 

written copy of the determination or it is posted as part of the wage determination. 

Page 5 GAO-06-27 Service Contract Act
a consolidated and a nonstandard wage determination for a specific 

geographic locality. 

The initial responsibility for determining SCA coverage and the need for a 

wage determination rests with the federal contracting agency.

6

 An agency

initiates the wage determination process when it determines that it has a 

need for a particular service and that the anticipated contract falls under 

the auspices of SCA. Wage provisions for construction or manufacturing 

and furnishing goods are covered under other acts.7

 In its request for a 

wage determination from WHD, the contracting agency must provide a 

description of the services to be performed under the contract and specify

the dates and location where the services are to be performed.8 In 

addition, the agency must provide information on incumbent contractors, 

the previous wage determination for the needed occupations, and any 

collective bargaining agreements that may apply.9

 It also must identify the 

occupational titles (e.g., secretary) and classes (e.g., secretary I, II, and III) 

and the number of service employees needed to perform the work on the 

contract, and the hourly wage rates that would be paid if such workers 

were federally employed. The contracting agency uses DOL’s SCA 

directory of occupations when listing the occupational titles of workers to

be employed under the contracts. Use of the directory allows the federal

Steps for Obtaining a Wage 

Determination 

 6

If a federal agency is unsure as to whether or not SCA should apply to a particular 

contract, WHD will make the final determination of coverage. 

7

The Davis-Bacon Act requires payment of prevailing wages and benefits to employees of 

contractors engaged in federal government construction projects in excess of $2,000, and 

the Walsh-Healey Public Contracts Act requires payment of minimum wages and other

labor standards by contractors providing materials and supplies to the federal government 

under contracts valued in excess of $10,000. 

8

When the location of work under a contract is unknown at the time of solicitation, the

contracting agency is supposed to contact WHD for guidance. The contracting agency will 

issue an initial solicitation with no wage determination, from which it identifies potentially 

interested bidders and the possible performance locations and then transmits this 

information to WHD. WHD will issue separate wage determinations for the various 

localities identified in the first step that are incorporated in the solicitation prior to the 

submission of final bids. The appropriate wage determination applicable to the geographic

location of the successful bidder must be incorporated in the resultant contract and must 

be observed, regardless of whether the contractor subsequently changes the place(s) of 

contract performances. 

9

For certain contracts, when a union collective bargaining agreement covers service 

employees, SCA requires that these wage and fringe benefit rates in the agreement supplant

any that may otherwise prevail in the locality for other employees. The SCA also requires 

that, except in rare circumstances, successor contractors honor earlier contractors' wage 

and fringe benefits arrived at through collective bargaining agreements. 

Page 6 GAO-06-27 Service Contract Act
contracting agency, WHD staff, and ultimately the contractor to match 

standard job descriptions with these titles. The directory contains 360 job 

classifications. 

DOL’s SCA directory of occupations contains information on the federal

civil service grade levels most likely to correspond to the listed 

occupations. For example, the directory lists the occupation of janitor as a 

wage grade (WG) 2, indicating the rate at which a janitor would be paid if

performing the work as a federal employee. WHD staff have the option to 

use such information to develop prevailing wages for occupations with no 

available survey data. Contractors and federal agency staff may utilize this

federal grade equivalency (FGE) data10 to guide wage rate proposals for 

occupations to be “conformed” (i.e., the derivation of a wage rate for an 

additional occupational class not originally included in the wage 

determination). These comparable pay rates or grade levels are used to 

apply the principles of “due consideration” required by the SCA.11

The contracting agency may also attempt to obtain a wage determination 

through DOL’s online wage determination database. The Web site provides 

guidance on, among other things: selecting the appropriate wage 

determination for each contract action, access to the most current wage 

determinations, as well as an alert service for notification of future 

revisions to particular wage determinations. Contracting agencies can use 

the Web site to identify a wage determination from the online database or

to submit an electronic request for a wage determination when one is not 

listed or if the contracting official is unsure about the applicability of the 

online selections. 

Each year DOL issues wage determinations that are specific to a selected

geographical area—sometimes for an entire state—and provide the 

minimum wages and benefits that contractors in that area must pay to 

 10FGE rates are divided into the following three classifications for purposes of SCA 

administration: (1) GS (general schedule) refers to grade rates utilized for non-supervisory 

appropriated fund “white-collar” positions; (2) WG (wage grade) refers to grade rates 

utilized for non-supervisory appropriated fund “blue-collar” positions; and (3) NAF 

(Non-Appropriated Fund schedule) refers to rates utilized for non-supervisory nonappropriated fund positions. 

11“Due consideration” must be given to federal wage rates when issuing SCA wage 

determinations, i.e., the rates applicable to service employees if directly hired by the

federal government. 

Page 7 GAO-06-27 Service Contract Act
service employees. The wage determination becomes a part of the 

solicitation and, later, part of the awarded contract. 

WHD enforces and administers laws governing legally-mandated wages 

and working conditions.12 Its responsibilities include enforcing SCA and 

related WHD enforcement policies. When WHD finds through its 

enforcement efforts that workers have been underpaid, SCA requires that 

the contractor pay the unpaid wages and benefits. WHD may also sue to 

recover wage and benefit payments or ask the federal agency to either 

withhold contract payments or terminate a contract. Although WHD has 

no legal authority to assess civil monetary penalties against contractors, 

contractors violating SCA may be debarred for 3 years from obtaining 

future government contracts.13 WHD tracks investigations, violations, and 

findings in its investigations database–the Wage and Hour Investigative 

Support and Reporting Database (WHISARD). Contractors and 

subcontractors may challenge determinations of violations and debarment 

before an administrative law judge. Contractors and subcontractors may 

appeal decisions of administrative law judges to the Administrative 

Review Board. Final Board determinations on violations and debarment 

may be appealed to and are enforceable through the federal courts. 

WHD Conducts Enforcement 

Efforts 

WHD staff are located in 5 regional and 72 district, area, and field offices 

throughout the country. Regional Administrators plan, schedule, and 

target enforcement efforts in their respective regions. Regions are 

comprised of district and area offices, each of which operates under a 

district director (see fig. 1). The district directors oversee investigators, 

who play a key role in carrying out WHD’s enforcement policies. There 

were approximately 800 investigators in district and area offices in fiscal 

year 2004. Investigators are trained to investigate a wide variety of 

workplace conditions and complaints and enforce a variety of labor laws 

 12In addition to SCA, WHD also enforces the Davis-Bacon Act, the Employee Polygraph 

Protection Act, the Family and Medical Leave Act of 1993, the Walsh-Healey Public 

Contracts Act, the Copeland Act, the Contract Work Hours and Safety Standards Act, the 

Migrant and Seasonal Agricultural Workers Protection Act, the Fair Labor Standards Act,

certain employment standards and worker protections under the Immigration and

Nationality Act, and the wage garnishment provisions of the Consumer Credit Protection 

Act. 

13For more information about federal debarment processes, see GAO, Federal 

Procurement: Additional Data Reporting Could Improve the Suspension and Debarment 

Process, GAO-05-479 (Washington, D.C.: July 29, 2005). 

Page 8 GAO-06-27 Service Contract Act
in addition to SCA.14 Each region also has a regional wage specialist who 

can provide advice on SCA matters.15

 14Complaints are a key component of DOL enforcement activities. DOL enforcement efforts 

under many federal labor laws and programs generally rely on two types of information to

identify potential violations: (1) complaints from individuals who believe they may have

suffered a violation and (2) analysis of data to specifically target problematic industries or

worksites. Complaints and targeting occur, for example, as part of DOL workforce and 

worksite protection activities under the Occupational Safety and Health Act, child labor,

day laborer, and wage protection activities under the Fair Labor Standards Act, and 

prevailing wage enforcement under the Davis-Bacon Act. 

15WHD enforces five federal laws that are generally referred to as contract labor standards 

statutes: the Davis-Bacon Act (construction), the Walsh-Healey Public Contracts Act 

(goods), the SCA (services), the Copeland Act (Davis-Bacon payroll compliance), and the

Contract Work Hours and Safety Standards Act (overtime provisions for certain workers

employed on Davis-Bacon and SCA covered contracts). 

Page 9 GAO-06-27 Service Contract Act
Figure 1: Location of ESA’s Offices 

Source: GAO. 

Western •

Southeast

* Atlanta

Midwest

*

Chicago

Southwest

*

Dallas

* San Francisco

Northeast

Philadelphia *

•

•

•

•

• •

••

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

• • • •

•

•

•

••

• •

•

•

•

• •

•

•

•

•

•

• • •

• •

• •

•

•

• • • •

•

• •

• •

• •

•

*ESA Regional Office

*

FPDS statistics indicate that federal service contracts continue to increase 

in number and total dollar volume each year. According to ESA’s fiscal 

year 2003 Annual Performance Plan, federal contractors and 

subcontractors employed nearly 25 percent of the civilian workforce—

about 26 million workers—in the U.S. economy. Although the exact 

number of workers in the subset covered by SCA is unknown, it has been 

Page 10 GAO-06-27 Service Contract Act
estimated that hundreds of thousands of federal service contract workers 

are employed annually under such contracts.16

WHD consults multiple wage data sources and relies on analysts’ 

professional judgment when making wage determinations, but the process 

lacks transparency and leaves wage determinations prone to criticism. 

When making a wage determination, WHD analysts consult several 

sources of information, such as its SCA directory of occupations and data

collected through two BLS national wage surveys, for wage data on 

occupations. Relying on these tools and their own expertise, analysts 

calculate prevailing wages and fringe benefit amounts for specific 

geographic locations. Stakeholders contend that the wage determination 

process is not transparent and that the resulting wages do not always 

reflect local wage conditions. As a result, analysts spend considerable time 

responding to inquiries about the methodology used to determine wages. 

Stakeholders with these concerns, such as unions and contractors, told us 

that they might have fewer questions about the process if WHD made more 

information available. In addition, WHD last issued a comprehensive 

edition of its SCA directory of occupations in 1993 and has no systematic 

process in place for updating it. As a result, the directory does not include 

a broad range of emerging occupations that are covered under SCA. 

WHD analysts consult the SCA directory of occupations as a first step in 

the process of determining wages. They then consult a number of different 

sources of data when calculating wage rates. Finally, analysts must also 

include the fringe benefit rate for the specific locality in each wage 

determination. 

WHD analysts use the SCA directory of occupations, a reference tool that 

describes standard service occupations typically utilized in the 

Wage Determination 

Process Relies on 

Multiple Data Sources 

and Professional 

Judgment but Lacks 

Transparency 

WHD Relies on Multiple 

Data Sources and Staff’s 

Professional Judgment 

When Making Wage 

Determinations 

Directory of Occupations 

 16FPDS does not report the number of service contract workers and WHD does not have or 

maintain such numbers. We found an estimate of 700,000 as the number of service contract

employees working on covered contracts in 1986. In 1995, WHD’s Administrator testified 

before Congress that SCA protected “roughly a million workers a year.” In addition, a 

February 2001 Congressional Budget Office document stated that the SCA in 2000 covered 

approximately 27,000 contracts valued at $33 billion, but did not comment on the number 

of service contract employees. 

Page 11 GAO-06-27 Service Contract Act
performance of SCA-covered contracts, to develop wage determinations.17

The directory is not just an information document–it is a critical part of 

the wage determination process throughout the federal contracting 

system. However, the process that WHD uses to update its SCA directory 

of occupations is not written down and is essentially ad hoc. There are 

neither written procedures that describe how or when WHD updates the 

directory, nor a required or standard time interval for how often the 

directory should be updated. 

DOL has no systematic process for updating its SCA directory of 

occupations, but instead, updates it periodically. The current edition of the 

directory was issued in 1993. Since then, there have been three 

supplements to the directory.18 According to WHD officials, when there is a 

sufficient volume of smaller-scale changes proposed by stakeholders, they

will issue a supplement to the directory. Stakeholders usually bring the 

need for supplements to WHD’s attention. Supplements can involve adding 

some classes of jobs as well as editing or removing others. WHD can make 

these changes to job classes either with or without getting stakeholder 

approval. A recent effort to update and release a new edition of the 

directory, begun in 2002, was initiated after federal contracting agencies, 

contractors, trade associations, and unions raised concerns that the 

existing directory did not meet their needs. In fact, stakeholders 

independently drafted an update to the directory and presented it to WHD. 

While WHD is not legally required to include outside parties in the update

process, WHD has encouraged stakeholders to participate, allowing them 

to review all suggested changes. According to WHD officials, the update

has been long in the making, due in part to the number of suggested 

changes received from and deliberated by the stakeholders. 

Some stakeholders, however, have expressed frustration with the length of 

time the update has taken. In response, one senior WHD official we spoke 

to explained that, in some cases, directory changes could have significant 

cost implications for both wages and fringe benefits at the local level and 

that careful consideration is necessary to make proper adjustments. 

Stakeholders, the official contended, may not realize the implications of 

 17If an occupation is not listed in the directory, it is considered a non-standard job and an

analyst would proceed in a different manner to calculate a wage determination for that 

occupation. 

18These supplements were issued on December 15, 1993; August 1, 1995; and March 10, 

1997. 

Page 12 GAO-06-27 Service Contract Act
the changes or additions that have been proposed. For example, an issue 

was raised of whether it was more appropriate to classify the occupation

“truck dispatcher” as an administrative, clerical, technical, or professional 

position, when each category brings with it a different level of wages and 

benefits. 

Throughout the update process, several job categories and occupational 

classes have been added to, or deleted from, the directory. WHD analysts 

responded to stakeholder needs for job classifications that were not 

available in the directory. For example, WHD added a job classification in 

response to a DOD need for an “unexploded ordnance technician.” WHD 

worked with DOD to develop an accurate description for placement in the 

directory. Similarly, the job category of “detention officer” was added at 

the request of U.S. Citizenship and Immigration Services because of the 

volume of hiring and the uniqueness of the duties performed. In these 

cases, WHD did not involve additional agencies in the process of changing

the directory. Ultimately, WHD has the authority to decide which jobs are 

included in the directory.

Despite recent efforts to update the directory, some common service 

occupations are still missing. Specifically, the directory does not contain 

the occupations “customer service representative” or “telemarketer.” 

Contracting agencies that need such services performed cannot acquire 

the wage rate from DOL’s online wage determination system and must 

request a separate wage determination from a WHD analyst. In addition, 

WHD officials told us that analysts sometimes receive multiple wage 

determination requests for the same unlisted occupations, thereby 

increasing their workload. The directory also does not list an occupational 

title for “call center representative.” A contractor told us that as a result, 

wage determinations for call center contracts with federal agencies 

generally listed these occupations as “general clerk I, II, and III.” 

According to this contractor, the wage determination for a general clerk is 

usually lower than the market rate for a call center representative. The 

contractor pointed out that federal agencies will likely have an increased 

need for call center representatives in the years ahead. Some contractors 

told us that, while they often must pay additional amounts to meet the 

market rate to be able to recruit qualified workers, they cannot submit the 

higher rates in their bid without risking the loss of the contract to a 

competitor. Contractors warned that, in cases like these where they lose a

contract to a lower bidder, federal agencies may be at risk of contracting 

with employers who will provide a lower quality of services. According to

these contractors, the difference in wage rates paid to workers on SCAcovered contracts and those not working on SCA-covered contracts can 

Page 13 GAO-06-27 Service Contract Act
lead to some workers feeling demoralized. WHD officials told us that after 

the current update is issued, which is expected to occur in October 2005,

no plans are underway for the next update. 

WHD analysts rely on professional judgment when calculating wage rates.

WHD provides analysts with methodology worksheets that assist them in 

determining a wage. These worksheets provide an outline of how an 

analyst should proceed when certain conditions exist (such as, when 

survey data are not available for a specific occupation). The worksheets 

are intended to guide analysts without dictating the exact determination 

process. 

Process for Determining Wages 

More specifically, to determine a wage rate, analysts review the available

wage data sources as well as previously issued wage determinations. 

Analysts base most wage determinations on nationwide survey data 

collected by BLS under the National Compensation Survey (NCS)19 and the 

Occupational Employment Statistics (OES) survey,20 or other data showing 

the rates that prevail in a specific locality.21 Analysts also take into account

previously issued wage determinations when setting a new or revised 

wage rate. For example, to maintain general consistency from year to year, 

WHD instructs its analysts to not issue a rate lower than or more than 

10 percent above the previously issued wage rate. In addition, when wages 

have been set by a collective bargaining agreement, analysts are required

by SCA to carry over those negotiated wages to contractors who take over 

 19The National Compensation Survey (NCS) provides comprehensive measures of 

occupational earnings, compensation cost trends, benefits incidence, and detailed plan 

provisions. Detailed occupational earnings are available for metropolitan and nonmetropolitan areas, broad geographic regions, and on a national basis. The July 2004 NCS

sample consisted of 152 metropolitan areas and nonmetropolitan areas that represent the 

nation’s 326 metropolitan statistical areas (as defined by the Office of Management and 

Budget) and the remaining portions of the 50 states. It included establishments 

representing nearly 81 million workers within the scope of the survey. 

20The Occupational Employment Statistics (OES) survey produces employment and wage

estimates for about 800 occupations. These are estimates of the number of people 

employed in certain occupations, and estimates of the wages paid to them. Self-employed 

persons are not included in the estimates. These estimates are available for the nation as a

whole, for individual states, and for metropolitan areas. BLS produces occupational 

employment and wage estimates for about 350 industry classifications at the national level. 

The OES program surveys approximately 200,000 establishments every 6 months, taking 3 

years to fully collect the sample of 1.2 million establishments. 

21In addition, some occupational rates on the wage determination may be taken directly 

from the Non-Appropriated Fund schedule, Federal Wage System schedule, or the General 

Schedule "white collar" pay scales. 

Page 14 GAO-06-27 Service Contract Act
ongoing contracts. Finally, analysts use the union dominant rate, when 

applicable.

22

After selecting a data source, analysts review the wage information for 

different classes of the same occupation (e.g., the different classes, I, II, 

and III, of the occupation “secretary” require successively more advanced 

skills) and the pay relationships that exist between these job classes (i.e., 

the different classes of secretary are paid successively more for their 

advanced skills), and make adjustments as needed to address data 

abnormalities or inconsistencies. For example, an analyst would make an 

adjustment if the data showed lower wages for a secretary III than for a 

secretary I or II. Analysts also review occupations in the same broad job 

category (e.g., administrative support and clerical occupations) to ensure 

that different occupations performing commensurate duties receive

similar pay. 

When data for an occupation are not included in existing wage surveys, 

analysts can establish a prevailing wage rate through a procedure called

“slotting,” which involves comparing equivalent or similar job duties and 

skills between surveyed classifications and other classifications for which 

no survey data are available. For example, analysts may adopt the rate for

a “computer operator” and use it for a “peripheral equipment operator” 

(whose duties include taking corrective actions to return equipment that 

directly supports computer operations, such as printers, to proper working 

order) because the job duties and skills required for both classifications 

are rated at the same level under the grading system for federal 

employees.23 Further, when the survey lists varying wage rates for several 

similar occupations, such as the “general maintenance trades,” analysts 

will determine the average wage and use that rate as the prevailing wage 

for the entire group of occupations. See figure 2 for a graphic illustration 

of some of the factors an analyst may consider when determining a wage

rate. 

 22A union dominant rate is considered to prevail when the rate is paid to a majority (more 

than 50 percent) of the union workers engaged in similar work in a particular locality. 

23Analysts using NCS can also use “leveling” data to determine a rate for an occupation for 

which no survey data are available. For example, if no data were available for the 

occupational classification of “secretary,” analysts could use data from the next broader 

category of “administrative support and clerical,” or use data from the even broader

category of “white collar, excluding sales,” to calculate a wage rate. 

Page 15 GAO-06-27 Service Contract Act
Figure 2: Factors Considered in SCA Wage Determination Process 

Department of Labor

Directory 

of 

Occupations

Surveys &

other wage 

information

? ?

?

?

?

?

?

?

? ? ?

?

?

?

?

?

Which wage source 

should I use?

What was last 

years rate?

No survey data 

available

Should I slot or use 

leveling data?

Can't make more 

than 10% higher 

than last years'

Is occupation 

in directory?

Source: GAO analysis.

An additional reason why analysts must rely on professional judgment 

when determining wage rates is that BLS’s wage surveys were not 

designed for the purpose of determining wages and fringe benefit rates. 

While the BLS surveys may provide the most comprehensive wage data

available, WHD analysts must perform some manipulation of BLS’s data 

when calculating wage rates. As a result, WHD’s reliance upon these data

may not ensure that the wage rates it sets reflect labor market conditions. 

For example, because the survey responses may include the wage rates for 

some SCA service contract workers whose rates are set by a wage 

determination, analysts may not be using data that fully reflect the local

labor market conditions. In other words, WHD, in trying to determine the 

market rate for certain occupations, may be referencing survey responses 

of its own derived rates. However, we did not attempt to determine the 

Page 16 GAO-06-27 Service Contract Act
extent to which BLS data includes such information. In addition, one BLS 

survey used by WHD excludes smaller employers with fewer than 

50 employees from its sample population. As a result, the survey results 

could inflate or deflate actual wages for the types of occupations typically

employed by smaller employers. Another reason that BLS survey data may 

affect WHD’s ability to set rates that reflect market conditions is that the 

occupational classifications in DOL’s SCA directory of occupations do not 

always match OES occupational classifications, making it difficult for 

WHD analysts to match the OES wage data to the SCA occupation without 

significant analysis. Because OES does not collect data for each 

classification for every locality surveyed, WHD must sometimes use the 

“slotting” procedure to derive a wage determination.24

In addition to a wage rate, each SCA wage determination also includes the 

fringe benefit rate for the specific locality. Analysts generally set a 

universal fringe benefit rate that employers must pay to all workers in a 

specific geographic area regardless of their occupational class. The fringe 

benefit amount typically includes health and life insurance coverage, sick

leave, retirement plans—items that are typically referred to as health and 

welfare (H&W) benefits25—as well as vacations and holidays. WHD 

analysts arrive at the H&W rate used in wage determinations by consulting 

nationwide data from BLS’s Employer Cost for Employee Compensation 

(ECEC) survey. In contracts awarded since new regulations became 

effective in June 1997, the fringe benefit rate has most often been 

calculated on a “fixed cost per employee” basis, where each employee 

Process for Determining Fringe 

Benefit Rates 

 24According to BLS officials, OES allows respondents to report occupational information

for every detailed non-military occupational title in the Standard Occupation Classification. 

If survey respondents do not provide any data on a particular occupation, then BLS is 

unable to publish wage data for that occupation. In addition, BLS will not publish some 

estimates for some occupations in some areas to protect confidential responses. 

25The term “health and welfare” fringe benefits refers to all benefits provided to workers

that are not otherwise required by law except vacation and holiday benefits, which are 

determined separately under SCA. The SCA H&W rate is based on employer costs per hour 

worked for all benefits. However, holidays, vacations, and benefits otherwise required by

law, such as social security, unemployment insurance, and workers' compensation 

payments are excluded from these determinations. Holidays and vacations are determined 

separately and benefits otherwise required by law are reported annually by the BLS 

Employment Cost Index study of employer costs for employee compensation in the private

sector (i.e., all workers, all industries, all establishment sizes, and all occupations). 

Page 17 GAO-06-27 Service Contract Act
receives the same benefit amount.26 Employers may meet their fringe 

benefit obligations by paying the employee the cash equivalent of the 

specified fringe benefits. In June 2005, the “fixed cost per employee” SCA

health and welfare benefit rate was increased to $2.87 per hour, which 

equates to about $497 per month. 

Lack of Transparency 

Leaves Wage 

Determinations Prone to 

Criticism 

The wage determination process requires analysts to apply professional 

judgment in selecting both the appropriate source and method for 

calculating the prevailing wage rate. Contractors and other stakeholders 

contend that the process that analysts follow when determining a wage is 

not transparent and that determinations do not necessarily reflect local 

wage conditions. In fact, WHD does not include a description of the 

methodology used to derive the wage rates in its wage determinations, 

such as the wage data source used or the procedures analysts’ follow. As a 

result, analysts spend considerable time responding to inquiries from 

contractors, employees, union representatives, and others regarding how 

they determine wages. According to WHD officials, analysts received 

about 23,000 telephone inquiries in a recent 12-month period, mostly from 

service contract employees who want to know how their wage rate was 

calculated or why their rate differed from a similar rate in a neighboring 

locality.27 Congress, unions, and others also contact WHD staff to inquire 

on behalf of their constituents or members. WHD assigns these inquiries to

analysts as they are received. WHD officials told us that the specific 

methodology of calculating a wage rate for a certain occupation in a 

certain geographic location can change from year to year based on a series

of elements, such as the availability of survey data or an analysts 

professional judgment. While analysts do provide details to those who 

inquire, WHD does not provide individual methodology worksheets in 

writing, stating that doing so would result in additional inquiries as to why 

rates are not calculated by the same method as in the previous year and 

take analysts away from their primary task of issuing new and revised 

 26Previously, contracts could contain a fringe benefit rate based on the contractor’s average

fringe benefit cost for all service employees working on the contract. Under the “average

cost method,” providing benefits must, at a minimum, cost the employer an average of

$2.87 per hour computed on the basis of all hours worked by service employees employed

on the contract. Under this method, workers receive varying levels of benefits, i.e., a

worker with no dependents may receive less in benefits than one with dependents, but the

average cost to the employer must be at least the specified rate. 

27In addition, between October 2004 and August 2005, WHD received 301 pieces of 

correspondence with this nature of inquiry.

Page 18 GAO-06-27 Service Contract Act
wage determinations. Stakeholders with concerns told us, however, that it 

would be helpful to them if more information about the process was made 

available. 

WHD receives criticism that its wage determination rates do not reflect 

market conditions. Some contractors say that private-sector wage data 

provide a more accurate measure of local labor market conditions than 

BLS survey data that were not designed for the purpose of determining 

wages and fringe benefit rates.28 However, WHD officials told us that to the 

extent its wage rates are perceived as not reflective of the market rate, one 

possible reason could be that WHD sets internal parameters for wage 

determinations (e.g., not issuing a wage rate lower than or more than 

10 percent above the previously issued rate) to ensure consistency from 

year to year. As a result, while BLS survey data may be lower or higher 

than the resulting wage determination, analysts manipulate wage rates to

ensure a consistent wage structure. 

WHD enforces SCA by conducting contractor investigations, ensuring 

contractor payments to employees, and providing compliance assistance 

to stakeholders. WHD investigates complaints from service contract 

employees, contractors, federal agencies, unions, and others who allege 

that contractors have failed to pay either the wages or fringe benefits, or 

both, specified in service contracts. WHD collects violation data, but it 

does not fully use these data to plan compliance assistance, target specific 

service industries or geographic locations for SCA investigation, or set 

strategic enforcement goals. When investigations find that contractors 

have failed to pay in accordance with contract wages or benefits, WHD 

acts to ensure that contractor payments are made to employees. WHD also 

provides compliance assistance to contractors, federal agencies, unions, 

and others to help them comply with SCA requirements and avoid SCA 

violations. 

SCA investigations originate when contract employees, federal agencies, 

competitor contractors, or employee representatives complain to WHD 

that a contractor has failed to comply with the wage or benefit 

DOL Enforces SCA by 

Conducting 

Investigations, 

Ensuring Contractor 

Payments, and 

Providing Compliance 

Assistance, but WHD 

Could Make Better 

Use of Violation Data 

WHD Conducts ComplaintDriven Investigations 

 28We did not attempt to verify current labor market conditions through a survey of our own.

Page 19 GAO-06-27 Service Contract Act
requirements in a contract.29 WHD investigators then consult and interview 

contractor officials, inspect the contract and contractor payroll records, 

and interview service contract employees. WHD records investigation 

data, such as the name of the contractor, geographic location, industry, 

and the type of violation, in its WHISARD database. 

When responding to complaints, WHD investigators review WHISARD data 

for prior contractor violations. WHD uses violation data on a case-by-case 

basis to determine whether an individual complaint warrants expansion to

a more comprehensive “directed” investigation. For example, WHD may 

decide to expand the scope of an initial complaint to encompass other 

employees under the same contract, additional contractor locations, or 

other service contracts involving the same contractor. WHD records all 

alleged SCA violations in its WHISARD database and classifies

investigations as either complaint or directed. WHD generates violation

reports from WHISARD that summarize investigation findings.

SCA violation reports for fiscal years 2003 and 2004 show that about 

87 percent of all investigations during this period were classified as 

complaint and about 14 percent were classified as directed. Table 1 shows 

the number and percentage of complaint investigations and directed 

investigations for fiscal years 2003 and 2004. 

Table 1: Number and Percentage of SCA Investigations by Category, Fiscal Years 

2003 and 2004

Number of 

investigations

Percentage of

investigations

FY 2003 FY 2004 FY 2003 FY 2004 Average

Complaint 597 570 86 87 86

WHD 

directed 101 84 14 13 14

Total 698 654 100 100 100

Source: GAO analysis of WHD data. 

 29DOL’s fiscal year 2004 Performance and Accountability Report noted that approximately 

75 percent of WHD’s resources are devoted to complaint investigations and resolution for

all program acts it enforces. Some investigations are performed in response to allegations

that a federal agency should have, but did not classify the work being performed under a 

federal contract as subject to SCA. 

Page 20 GAO-06-27 Service Contract Act
WHD headquarters and regional enforcement officials told us that a 

complaint-based enforcement strategy offers an efficient approach to 

enforcing multiple labor laws. Consequently, WHD does not analyze or use 

violations data from WHISARD to (a) examine the extent to which specific 

service industries or geographic locations may warrant increased 

compliance assistance or directed investigations under SCA or (b) develop

SCA-specific strategic goals. Concerning the latter, while ESA’s 1999–2004 

strategic plan contains specific outcome or performance goals for some 

labor acts, such as the Davis-Bacon Act and the Fair Labor Standards Act 

(FLSA), there are none for SCA. WHD has overall strategic enforcement 

goals that cut across all labor laws it enforces, such as improving 

timeliness in response to complaints and reducing the number of violators 

who have repeat or recurring violations. Moreover, ESA’s strategic plan 

uses violation data in WHISARD to focus enforcement efforts on low-wage 

industries reflective of employers that have previously violated labor laws, 

such as FLSA, minimum wage and child labor laws, and others.30 While the 

focus on low-wage industries may detect violations in some service 

contract industries, it does not assure that all service contract industries 

with serious or frequent SCA violations are identified. 

WHD Enforcement Efforts 

Result in Payment of Back 

Wages and Fringe Benefits 

and Debarment of Some 

Violators from Future 

Contract Work 

When a WHD investigation determines that a contractor has failed to pay 

wages or fringe benefits to contract employees, WHD attempts to reach 

agreement with the contractor regarding the amount of back wages and 

fringe benefits owed employees. WHD also monitors contractor activity to

ensure that the amounts owed to employees are eventually paid to them.31

In fiscal year 2004, WHD initially investigated 654 reportable cases—cases

with possible SCA violations—and ultimately found 493 cases with SCA 

violations that began as an SCA investigation. In addition, 44 other cases, 

 30Strategic planning includes developing strategic goals, outcome goals, performance goals, 

and baseline measures for certain problem industries. WHD develops outcome and 

performance goals for those industries and develops baseline measures as criteria against 

which to measure its performance in accomplishing those goals only after selecting 

specific industries that warrant attention. ESA’s strategic plan and annual performance 

plan are incorporated into DOL’s overall plans. DOL’s 2004 Performance and 

Accountability Report stated that WHD had reached its performance goals for increasing 

compliance with FLSA, in what WHD refers to as “industries with chronic violations,” such

as the garment manufacturing, long-term health care, and agricultural commodities 

industries, but had not reached its target to reduce the number of employers who had prior 

violations of the act. 

31WHD maintains a system—the Back Wage Collection and Disbursement System—to 

monitor the collection process, amounts, payments to employees, etc. 

Page 21 GAO-06-27 Service Contract Act
registered by WHD under other labor acts it enforces, had SCA violations.32

These 537 cases, more than 80 percent of the total number of SCA 

investigations, uncovered $18.7 million in contractor back wages and 

fringe benefits that were owed to employees. WHD obtained contractor 

agreements to pay $16.4 million to employees.33 Once a contractor has 

reached agreement with WHD on the amount of wages and benefits owed, 

WHD monitors contractor payments and does not conclude the case until

the contractor has made full payment. 

WHD treats each instance of failure to pay a contract employee the proper

wage to be a separate violation of the act. Likewise, WHD considers the 

failure to pay that same employee the proper fringe benefit as a separate

violation. Thus, a contractor who fails to pay the proper wage and the 

proper fringe benefit would be cited for two separate SCA violations. 

Figure 3 shows the total number of cases found to have SCA violations in

fiscal years 2003 and 2004, differentiating those cases that were registered

under other WHD acts from those that were initiated as an SCA 

investigation. 

 32In addition to complaints of alleged SCA violations, WHD may initially register a 

complaint as a possible violation of other acts such as the Contract Work Hours and Safety

Standards Act, the Davis-Bacon Act, or FLSA, and then later determine that the act violated 

was the Service Contract Act. WHD’s WHISARD database contains information on cases

with SCA violations and the registration act under which the case was initiated. As shown 

in figure 3, most cases with SCA violations are registered under SCA. 

33WHD may allow some contractors to pay less than what WHD initially determines is owed 

if the contractor negotiates with WHD and provides adequate justification for a lesser 

amount. 

Page 22 GAO-06-27 Service Contract Act
Figure 3: Cases with SCA Violations, Including Those Registered under Other Acts 

0

75

150

225

300

375

450

525

600

2003 2004

Number of cases

Fiscal year

Source: GAO analysis of WHD data.

All cases with SCA violations, including those registered under other acts

Cases registered under SCA with violations

WHD’s SCA investigations have a generally high success rate when judged

by one key measure of enforcement success—the percentage of back

wages and benefits that contractors agreed to pay—compared to the 

wages and benefits that contractors owed. WHD’s overall rate of back

wages recouped has also been high. Figure 4 shows the number of 

employees with back wages owed them, and the number of employees 

whom contractors agreed to pay for fiscal years 2003 and 2004. For these 

two periods, contractors agreed to pay about 89 percent of unpaid wages 

that they were found to owe for SCA violations. 

Page 23 GAO-06-27 Service Contract Act
Figure 4: Employees with Back Wages Due, and Employees Whom Contractors 

Agreed to Pay, Fiscal Years 2003 and 2004

0

2,500

5,000

7,500

10,000

12,500

15,000

17,500

20,000

2003 2004

Number of employees

Fiscal year

Source: GAO analysis of WHD data.

Employees with back wages due

Employees with back wages due where the contractor agreed to pay

WHD may debar contractors who refuse to pay back wages and fringe 

benefits owed to service contract employees or otherwise meet SCA and 

WHD conditions for debarment.34 WHD may also arrange with federal 

agencies to permit debarred contractors to complete the contract under 

which violations occurred, but debarred contractors may not bid on or be 

 34Conditions include a history of monetary and recordkeeping violations; willfulness of past 

violations as determined by their nature, extent, and seriousness; falsification or

concealment of records; intentional employee misclassification; or large amounts of back

wages due where there exists no reasonable excuse for the violations. According to WHD

officials, a firm’s past compliance history, which is maintained in WHISARD, is used to 

refute claims from contractors facing debarment who say that they did not repeatedly or 

seriously violate the act. The WHISARD database, however, does not provide a 

comprehensive source of debarred contractors. WHD headquarters officials told us that 

they maintain manual files with information on debarred contractors and produce internal 

WHD reports on debarments. There are lists of debarred contractors, however, that are

maintained by the General Services Administration, called the Lists of Parties Excluded

from Federal Procurement and Non-procurement Programs, that identify those parties 

excluded throughout the federal government from, among other things, receiving federal 

contracts. Contracting agencies are required to check this list before awarding a contract. 

Page 24 GAO-06-27 Service Contract Act
awarded any other federal contracts during the standard 3-year debarment 

period. WHD debarred 17 contractors in fiscal year 2004, in contrast with 

approximately 450 contractors that it investigated. Table 2 shows the 

number of debarments for fiscal years 2000 through 2004 by region. 

Table 2: Number of SCA Debarments, Fiscal Years 2000 through 2004 

Region FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 Total

Northeast 3 4 4 5 4 20

Southeast 2 4 0 1 2 9

Midwest 2 0 5 3 5 15

Southwest 4 2 5 6 4 21

West 2 8 1 4 2 17

Total 13 18 15 19 17 82

Source: WHD.

Training and Outreach 

Efforts Aim to Improve 

SCA Compliance 

WHD provides compliance assistance to federal contracting agencies and 

contractors to help improve SCA compliance. One of WHD’s basic 

missions is to provide employers and workers with clear and easy-toaccess information on how to comply with federal employment laws—

information and guidance that are often referred to as compliance 

assistance. Compliance assistance includes brochures and pamphlets, 

workplace posters, telephone consultations, on-site consultations, training 

sessions or seminars for individuals or groups, and Web-based 

information. WHD’s Web site, for example, contains an Employment Law 

Guide with details about SCA coverage, requirements, employee rights, 

penalties, and sanctions.

In fiscal year 2004, WHD provided SCA compliance assistance at national, 

regional, and local levels to federal agencies, contractors, and service 

contract employee groups. National-level training and outreach efforts 

included presentations, speeches and seminars for the National Industries 

for the Blind and the U.S. Patent and Trademark Office, and panel 

discussions with the National Star Route Mail Contractors’ Association. 

Regional offices provided similar outreach and training to officials from 

such federal agencies as the Office of Federal Contract Compliance 

Programs, Small Business Administration, Social Security Administration, 

and the U.S. Army Corps of Engineers. Local-level training and outreach 

included presentations to the Directorate of Contracting at Fort Riley, 

Kansas, and to employers that have SCA low-wage industry contracts 

under a Small Business Administration program. In fiscal year 2004, WHD 

provided training to federal agency contracting officials in the Department 

Page 25 GAO-06-27 Service Contract Act
of Defense through an arrangement with the Contract Services Association 

of America, an organization that promotes the use of private contractors 

for all federal government services. 

One of the most universal forms of day-to-day compliance assistance that 

WHD provides is its workplace poster. SCA requires contractors to post 

the poster at work sites unless the contractor has notified individual 

employees of their wages and benefits.35 WHD regulations issued to 

implement SCA state that the WHD poster (Publication WH 1313), when 

applicable, shall be posted in a prominent and accessible place at the 

worksite, and failure to comply with this requirement is a violation of the 

act and of the contract.36

WHD’s SCA workplace poster serves a dual purpose of both assistance 

and enforcement. As an assistance tool, the poster informs service 

contract employees of their wages, benefits, and other entitlements 

(overtime and safety and health conditions) under the contract with the 

federal government. As an enforcement tool, the poster provides evidence 

that the contractor is subject to SCA and DOL regulations governing 

service contracts as they relate to employee notification. WHD has 

designed the poster to be used for both SCA and the Walsh-Healey Act.

WHD’s Web site makes this Service Contract Act/Walsh-Healey Poster 

readily available to the public. 

While WHD relies heavily on complaints from employees and others to 

enforce SCA, WHD’s worksite poster does not provide a telephone number 

for employees or others to call to register complaints. Instead, the poster 

directs inquiries for information to the Wage and Hour Division offices 

located in “principal cities.” The poster also directs potential complainants

to check their telephone directory under U.S. Government, Department of 

Labor, Wage and Hour Division. WHD last revised the poster in 1996. 

A workplace poster that does not provide service contract employees and

others with a clear and easy-to-access method of filing a complaint may 

hamper their reporting of such complaints. In the absence of a telephone 

 3541 U.S.C. 351(a)(4) requires that every service contract contain a provision that the

contractor either (1) deliver to the contract employee a notice of wage and fringe benefit 

compensation under the contract or (2) post a notice of the required compensation in a 

prominent place at the worksite. 

3629 C.F.R. 4.6(e). 

Page 26 GAO-06-27 Service Contract Act
point of contact at WHD, service contract employees may not have the 

opportunity to report possible or suspected violations of the act and 

therefore may not receive the full benefit of protection authorized under 

the act. 

We reported in 2004 that DOL’s Occupational Safety and Health 

Administration (OSHA) relies heavily on complaints to enforce the 

Occupational Safety and Health Act.37 OSHA, in general, responds to 

complaints according to the seriousness of alleged hazards, a policy that

OSHA credits with conserving agency resources. Like WHD, OSHA uses 

workplace posters as part of its overall compliance assistance 

enforcement efforts.38 OSHA’s workplace posters display a universal 

national telephone number, telephone numbers for each of OSHA’s 10 

regional offices, a national number accessible to the hearing impaired, and 

instructions on how to file a complaint online through OSHA’s Web site. 

Determining locally prevailing wages for service employees working in 

hundreds of occupations throughout the nation is a tremendous 

undertaking and one that WHD is committed to performing with diligence. 

It is the only organization producing such a vast number of locally 

prevailing wage rates on a national scale. For their part, WHD analysts 

have the support of their agency in applying their professional judgment 

when setting the wage and benefit rates. However, WHD could benefit 

from greater transparency of its wage determination process. WHD 

provides limited information on the methodology used to determine SCA 

wage rates, resulting in analysts receiving numerous inquiries about how 

they determined wages. Responding to individual requests for explanation

diverts analysts from their primary duties of revising and issuing new wage 

determinations. WHD expressed concerns that providing additional 

information on its methodology may trigger additional inquiries. However, 

we believe that additional information could inform some stakeholders, 

especially those that represent contractors and employees, who could in 

turn educate their members. As a result, some individuals who otherwise 

would contact WHD for an explanation on how wages are determined 

Conclusions 

 37GAO, OSHA’s Complaint Response Policies: OSHA Credits Its Complaint System with

Conserving Agency Resources, but the System Still Warrants Improvement, GAO-04-658 

(Washington, D.C.: June 18, 2004). 

38See OSHA Publication 3165, Job Safety & Health Protection Poster (English) and OSHA

Publication 3167, Job Safety & Health Protection Poster (Spanish). OSHA’s poster Web site

notes that all covered employers are required to display and keep displayed a poster 

prepared by WHD informing employees of OSHA protections. 

Page 27 GAO-06-27 Service Contract Act
might not see the need to contact WHD. A general description of the 

methods used in the wage determination process could give SCA 

stakeholders greater confidence in the determined wage rates and possibly 

improve the quality of service that WHD provides to those who do inquire.

WHD strives to update its list of consolidated wage determinations on an

annual basis and provides this information online for the convenience of 

the contracting agencies. However, the job titles and descriptions included 

in its SCA directory of occupations have not been regularly updated to 

include emerging service occupations. WHD has been working closely

with various stakeholders over the past 3 years to make changes to the 

directory, although its ad hoc process of updating the directory calls into

question the ongoing currency of the occupations listed in the directory 

used for wage determinations. 

WHD’s reliance on complaints as the primary means to identify potential

SCA violations is a reasonable strategy to pursue, given WHD’s multiple 

enforcement responsibilities under numerous federal labor laws. However, 

that strategy currently does not examine the extent to which other 

information could be used to improve enforcement nationwide. Without 

further analysis of prior SCA violation data, WHD cannot ensure that it is 

using the most effective mix of compliance assistance, complaint-driven 

investigations, and directed investigations. WHD has readily available data

on repeat SCA violators, the analysis of which we believe could be 

performed with minimal investment of additional resources. Furthermore, 

by taking extra steps to review prior SCA violation data, WHD may find 

that its existing complaint-driven approach to SCA enforcement is sound. 

Finally, because the SCA workplace poster does not provide an easy 

method for employees to report complaints, WHD may be missing 

opportunities to get the most use from its complaint process. Improving 

the workplace poster would reinforce WHD’s complaint-based strategy 

and would help further protect the wages and benefits of service contract

workers. 

In an effort to provide stakeholders with a general understanding of how 

WHD determines wage rates, we recommend that the Secretary of Labor:

• direct WHD to make publicly available the basic methodology WHD uses 

to issue wage determinations. 

Recommendations for 

Executive Action 

Page 28 GAO-06-27 Service Contract Act
To better support WHD and federal contracting agencies in their 

implementation of SCA, we recommend that the Secretary of Labor: 

• direct WHD to develop a procedure for updating the SCA directory of 

occupations at regular intervals and include criteria for listing and 

removing occupations as the need emerges. 

To further WHD’s efforts to obtain better information concerning the 

presence of and potential for violations involving SCA contracts, we 

recommend that the Secretary of Labor: 

• direct WHD to analyze its historical SCA contractor violation data in 

WHISARD, as well as debarment information not included in WHISARD, 

and to the extent appropriate, use this information to help plan its 

compliance assistance and investigative efforts, and to identify additional

industries, if any, that WHD should establish enforcement goals similar to 

those it currently has for repeat violators and industries with chronic 

violations. 

To facilitate the reporting of SCA complaints, we recommend that the 

Secretary of Labor: 

• direct WHD to update and revise the 1996 Service Contract Act/WalshHealey worksite poster, to include national and regional office telephone 

numbers and a Web site address that complainants may use to report 

alleged SCA violations. 

DOL’s ESA provided us with written comments on a draft of this report, 

which are reproduced in appendix III. The agency agreed with all of the 

report’s recommendations. ESA noted that WHD will provide a general 

description of the methods used in the wage determination process on its 

Web site and through other avenues. The agency also commented that 

WHD will develop a plan for implementing our recommendation 

concerning its SCA directory of occupations. However, the agency

cautioned that any plan to do so must take into account the potential for 

creating confusion when multiple versions of the directory are applicable 

to various contracts. ESA acknowledged that this problem already exists 

but believes it would be exacerbated if the directory were updated more 

frequently. 

ESA further noted that WHD’s leadership will include an analysis of its 

SCA enforcement data in establishing its annual priorities at the national

Agency Comments 

Page 29 GAO-06-27 Service Contract Act
level and to specific local and regional initiatives. Finally, ESA noted that

WHD will develop and implement a plan to revise the SCA worksite poster 

by adding WHD’s toll-free telephone number and the agency’s Web site 

address. 

ESA noted several technical corrections to the report, as did BLS, which 

we incorporated as appropriate. 

As arranged with your office, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days after the 

date of this report. At that time, we will send copies of this report to the 

Secretary of Labor and the Assistant Secretary of Labor for Employment 

Standards. We will also make copies available to others upon request. In 

addition, the report will be available at no charge on GAO’s Web site at 

http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me 

at (202) 512-7215 or robertsonr@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who have made major contributions to this report 

are listed in appendix IV.

Robert E. Robertson 

Director, Education, Workforce, and

 Income Security Issues 

Page 30 GAO-06-27 Service Contract Act
Appendix I: 

Methodology 

Objectives, Scope, and 

Page 31 GAO-06-27

Appendix I: Objectives, Scope, and 

Methodology 

For this report, we described how the Department of Labor (DOL) 

(1) establishes locally prevailing wages and fringe benefits and 

(2) enforces the Service Contract Act (SCA). We also identified potential

areas of improvement found in the course of our work. To address these 

objectives, we: 

• reviewed literature on SCA and its corresponding regulations, and 

analyzed DOL documents and data; 

• interviewed officials in the Wage and Hour Division’s (WHD) headquarters 

and field offices, the Bureau of Labor Statistics (BLS), and the two federal 

contracting agencies with the largest proportion of service contract 

activity—the Department of Defense (DOD) and the General Services 

Administration. At DOD, we interviewed the agency labor advisors and 

officials from each of the four branches of service that oversee the 

military’s SCA activities. In addition, we interviewed representatives from 

several service industry unions and key trade associations; 

• analyzed data obtained from DOL, including data on WHD investigations 

from DOL’s Wage Hour Investigator Support and Reporting Database 

(WHISARD) database; national, regional and district office training and 

outreach efforts; file data on debarments; and data from the Federal 

Procurement Data System (FPDS), including information on the number 

and total dollar amount of SCA contract actions for fiscal years 2000 

through 2003; and 

• interviewed state officials and representatives from private-sector groups 

who also produce wage and benefit rates in an effort to better understand 

the relative merits of DOL’s wage determination process. 

We obtained current and background data from DOL’s WHISARD database 

for fiscal years 2003 and 2004. Data included the number of SCA 

investigations, the number of investigations that led to one or more SCA 

violations, the number of act violations, amounts of back wages and fringe 

benefits due from contractors, amounts of unpaid wages and benefits that 

contractors agreed to pay service contract employees, and the number of 

employees with unpaid wages and benefits. We also obtained file data 

from WHD on debarred contractors, including the number of debarred 

contractors, by year and region. 

We assessed the reliability of the WHISARD data by (1) interviewing 

agency and contractor officials knowledgeable about the data, and 

Reliability of WHD’s Data 

on Investigations and 

Debarments 

 Service Contract Act
Appendix I: Objectives, Scope, and 

Methodology 

(2) reviewing existing information about the data and the system that 

produced them, such as the WHISARD User Guide and Procedure Manual; 

WHISARD data dictionary of tables; and the DOL Inspector General’s 

fiscal year 2004 Performance and Accountability Review of WHD, which 

includes WHISARD. We assessed the reliability of the debarment data by 

interviewing agency officials about the debarment process and the 

methods used to produce the debarment summary report provided to us. 

We determined that the required WHISARD data elements and debarment 

summary data were sufficiently reliable for the purposes of this report. 

FPDS has been the federal government’s central database of information 

on federal procurement actions since 1978. It contains detailed 

information on contract actions over $25,000 and summary data on 

procurements of less than $25,000. We found in December 2003 that FPDS 

data were inaccurate and incomplete, and that sufficient problems existed 

with the system to warrant concern about the reliability of FPDS 

information.1

 However, in this report, we are using the FPDS data only to

provide aggregate information about SCA and to provide context for the 

report. Although we have determined that the data may be incomplete and 

certain data elements unreliable, for this report we found that it was 

sufficiently reliable for estimating a minimum number of federal contracts

and federal SCA dollars expended. A newer system, the FPDS-NG (Next 

Generation), became operational on October 1, 2003. In December 2003, 

we stated that the reliability of FPDS data was expected to improve with 

the implementation of the new system. We recently issued a 

correspondence to the Office of Management and Budget regarding the 

upgraded system.2

Reliability of FPDS Data 

 1

GAO, Reliability of Federal Procurement Data, GAO-04-295R (Washington, D.C.: Dec. 30, 

2003). 

2

GAO, Improvements Needed to the Federal Procurement Data System-Next Generation,

GAO-05-960R (Washington, D.C.: Sept. 27, 2005). 

Page 32 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Non- Appendix II: Examples of Standard and Non- standard Wage Determinations 

standard Wage Determinations 

Page 33 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 34 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 35 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 36 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 37 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 38 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 39 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 40 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 41 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 42 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 43 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 44 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 45 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 46 GAO-06-27 Service Contract Act
Appendix II: Examples of Standard and Nonstandard Wage Determinations 

Page 47 GAO-06-27 Service Contract Act
Appendix III: Comments from the Department Appendix III: Comments from the of Labor 

Department of Labor 

Page 48 GAO-06-27 Service Contract Act
Appendix III: Comments from the Department 

of Labor 

Page 49 GAO-06-27 Service Contract Act
Appendix III: Comments from the Department 

of Labor 

Page 50 GAO-06-27 Service Contract Act
Appendix IV: 

A

GAO Contact and Staff 

cknowledgments 

Page 51 GAO-06-27

Appendix IV: GAO Contact and Staff 

Acknowledgments 

Robert E. Robertson (202) 512-7215 or robertsonr@gao.gov

In addition to the contact named above, Brett S. Fallavollita, Assistant 

Director, Monika R. Gomez, and Dennis M. Gehley made significant 

contributions to this report in all aspects of the work throughout the 

review. In addition, Linda L. Siegel helped to develop our overall design 

and methodology; Margaret L. Armen and Richard P. Burkard provided 

legal support; Avrum I. Ashery and Jeremy D. Sebest designed our 

graphics; Shana B. Wallace provided technical assistance; and 

Jonathan S. McMurray assisted in report and message development. 

GAO Contact 

Staff 

Acknowledgments 

 Service Contract Act
Related GAO Products Related GAO Products 

Department of Labor, Wage and Hour Division, Employment Standards 

Administration: Service Contract Act; Labor Standards for Federal 

Service Contracts. OGC-97-14. Washington, D.C.: January 16, 1997. 

Navy Contracting: Military Sealift Command’s Contract for Operating 

Oceanographic Ships. NSIAD-90-151. Washington, D.C.: April 18, 1990. 

Department of Labor: Assessment of the Accuracy of Wage Rates Under

the Service Contract Act. HRD-87-87BR. Washington, D.C.: May 28, 1987.

Decision of the Comptroller General of the United States, B-218427.2, 

May 15, 1985, Crowley Towing & Transportation Company. 

Congress Should Consider Repeal of the Service Contract Act. 

HRD-83-4. Washington, D.C.: January 31, 1983. 

Assessment of Federal Agency Compliance with the Service Contract 

Act. HRD-82-59. Washington, D.C.: July 21, 1982. 

Service Contract Act Should Not Apply to Service Employees of ADP and 

High-Technology Companies—A Supplement. HRD-80-102 

(A). Washington, D.C.: March 25, 1981. 

Service Contract Act Should Not Apply to Service Employees of ADP and 

High-Technology Companies. HRD-80-102. Washington, D.C.: September

16, 1980. 

(130396) Page 52 GAO-06-27 Service Contract Act
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