Understanding Health and Welfare Under the Service Contract Act (SCA)

The McNamara-O’Hara Service Contract Act (SCA), aka Service Contract Labor Standards (SCLS), requires contractors and subcontractors on covered contracts to provide specified wages and fringe benefits to covered employees (i.e., “service employees”). While that may sound fairly straightforward, there are many nuances and complexities that can cause great concern and angst when working toward compliance with the SCA. At the top of the list of these administrative burdens is the appropriate distribution of Health and Welfare (H&W).

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Topics: Employee & Contractor Compensation, Small Business Compliance, Human Resources, HR Huddle, Service Contract Act

DCAA Publishes the 2024 Compensation Cap

Our friendly DCAA auditors have taken up the government requirement to calculate and publish annually the new compensation cap as provided for in Section 702 of the Bipartisan Budget Act of 2013 (BBA; Pub. L. 113-67), dated December 26, 2013. The 2024 cap amount is $646,000. Below, we have provided the compensation caps going back to 2016.

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Topics: Employee & Contractor Compensation, Incurred Cost Proposal Submission (ICP/ICE), DCAA Audit Support, Government Regulations, Federal Acquisition Regulation (FAR)

Why a Comprehensive Compensation Plan is Key to Driving Organizational Success

Over the last few years, with the uber-competitive labor market and evolving landscape of remote and hybrid work arrangements, I've had many conversations (some feeling more like counseling sessions!) with clients who had become very tired and frustrated with the rising compensation and work-related demands of candidates. These conversations included questions like: When will we see the labor market settle? How can we be profitable when paying rates such as this? What makes sense? Is there any way this would be considered reasonable? Will that be fair to my long-term employees? What we found is those with established and well-structured compensation plans were able to respond to these questions and the challenging scenarios they faced much more efficiently and effectively than those who did not.

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Topics: Employee & Contractor Compensation, Human Resources

2023 Compensation Cap Update

Executive Compensation Limit for Government Contractors

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Topics: Employee & Contractor Compensation, Incurred Cost Proposal Submission (ICP/ICE), DCAA Audit Support, Government Regulations, Federal Acquisition Regulation (FAR)

Are You SURE All of Your Workers Are Properly Classified as Employee or Independent Contractor?

In January of this year (2021), we told you that the United States Department of Labor (DOL) under the Trump administration announced a final rule clarifying the standard for whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA). This rule reaffirmed the “economic reality” test as the primary factor for determining employee status. The final rule was published in the Federal Register on January 7, 2021 and the Rule was set to have an effective date of March 8, 2021.

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Topics: Compliant Accounting Infrastructure, Employee & Contractor Compensation, Human Resources

DCAA Takes the Lead on Compensation Cap

DCAA Takes the Lead Over Office of Federal Procurement Policy (OFPP)

In 2013, Congress put in place a new process for the calculation and publication of the compensation limitation (Cap) for all federal contractor employees. The process places the responsibility to calculate and publish the cap using the Bureau of Labor Statistics (BLS) Employment Cost Index (ECI) data on the Office of Federal Procurement Policy (OFPP). OFPP has failed in this responsibility for the last few years.

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Topics: Employee & Contractor Compensation, Incurred Cost Proposal Submission (ICP/ICE), DCAA Audit Support, Government Regulations, Federal Acquisition Regulation (FAR)

DoD-IG Report Reinforces DCAA’s Interpretations of Contractor Compensation Reasonableness

A recent DoD-IG (Department of Defense-Inspector General Report (DODIG-2019-070) has unfortunately reinforced DCAA’s audit interpretations of the reasonableness of contractor compensation (reference to FAR 31.205-6(b)). The IG (apparently with help from DCAA) reviewed ACO (Contracting Officer) actions to resolve/disposition DCAA (Defense Contract Audit Agency) advisory audit reports which included assertions that contractors had claimed unreasonable compensation (primarily for contractor executives). 

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Topics: Employee & Contractor Compensation, DOD IG

FAR 31.205-6(p) Compensation “Cap”—OMB’s Unpublicized Increases for 2016 to 2018

In late 2013, the BBA (Bipartisan Budget Act) significantly changed the FAR 31.205-6(p) regulatory cap for allowable contractor employee compensation.   In a highly politicized action, the Obama Administration convinced Congress to reduce allowable compensation to $487,000 for any contractor employee effective for contracts on or after June 24, 2014.  Additionally, Section 702 of the BBA prescribed the method for annual increases to the statutory cap (based upon the change in the Employment Cost Index for all workers as calculated by the BLS (Bureau of Labor Statistics).

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Topics: Employee & Contractor Compensation, Contracts & Subcontracts Administration

DID YOU KNOW? Department of Labor announced a 2015 Rate Increase

On June 30, 2015, the U.S. Department of Labor (DOL) increased the McNamara-O’Hara Service Contract Act (SCA) Health & Welfare benefits from $4.02 to $4.27. A notice is not sent directly to contractors and unfortunately for them the importance of this change lies with timing. For those contractors that are currently working diligently on preparing cost proposals, this increase will directly affect you. According to the DOL memorandum that put this change into effect, “all invitation for bids opened, or other service contracts awarded on or after June 30, 2015, must include an updated SCA WD issued in accordance with the regulatory health and welfare (H&W) fringe benefit determination methodology.” So if you have recently submitted a proposal subject to the SCA, we suggest that you ensure that your H&W meets the SCA H&W requirement of $4.27.

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Topics: Employee & Contractor Compensation, Contracts & Subcontracts Administration

Calling All Commercial Companies: “Become a Government Contractor and be Subject to Executive Orders Dictating Your Pay and Benefits Policies”

In an Executive Orders (EO) issued on Labor Day, President Obama continued to display his willingness to manage the personnel policies of government contractors. This latest EO, one of many directed solely at Government contractors, will require contractors to provide up to seven days paid sick leave (annually) for employees. The EO comes with the typical unsupported rhetoric that “we’ve seen that many companies, including small businesses, support these policies because they understand it’s helpful with recruitment and retention” and a separate assertion “that paid sick leave will improve contractor performance”. Perhaps unintended, but it is noteworthy that the White House did not state that many companies support the notion that paid sick leave will “improve contractor performance”; by implication, the White House could not find any companies which were sufficiently naive to buy-in to that highly speculative and wholly unsupported assertion.

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Topics: Employee & Contractor Compensation, Government Compliance Training, Commercial Item Determination