Non-Standard Service Contract Act (“SCA”) Wage Determinations (“WDs”) Can Be an Unfair Trap for Unwary Contractors

"Oh, you can't help that," said the Cat. "We're all mad here. I'm mad. You're mad".

"How do you know I'm mad?" said Alice.

"You must be," said the Cat, "or you wouldn't have come here".

 -Lewis Carroll, Alice in Wonderland.

Most wage determinations (“WDs) issued under the Service Contract Act (“SCA”) are what the US Department of Labor (“DOL”) calls “standard.” Every cluster of counties and cities has two sets of standard WDs, even and odd numbered, usually covering several hundred job occupations. They both have the same wage requirements, but have different methodologies for accounting for health and welfare (“H&W”) benefits. However, some WDs are different — based either on the predecessor’s collective bargaining agreement (“CBA”), or are so-called “non-standard” WDs under the SCA, which are issued for certain specialized service contracts or contract types. It is this last category which is the focus of this blog.

These non-standard WDs may be based on different data sources or cover distinct geographic areas compared to standard SCA wage determinations. These "non-standard" determinations are often issued on a contract-by-contract basis by DOL in response to specific requests from contracting agencies and are incorporated into the contract. They are intended to address unusual procurements or situations and assure that service employees are paid prevailing local wages and fringe benefits, or the rates from a CBA.

Some of the specific contracts or service types that employ non-standard WDs include the following:

·       They are used when a standard wage determination doesn't fit the unique scope or service type of the contract, such as for services involving fast food, beautician and barber, diving, quality assurance, aircraft services (large multi-engine aircraft including CNET Postal Contracts), Covid screeners, aerial photographers/seeding/spraying, background investigations, contract field team (for maintenance or modification of weapons systems), and debt collection  

·       Some other examples of industries with non-standard WDs include specialized maritime services, forestry and logging, and certain contracts for hazardous waste removal. These industries often require unique skill sets or operate in specific, narrowly defined contexts where standard, area-wide WDs do not accurately reflect the local prevailing wages.

·       They may also be used  for occupations relevant to a specific industry or contract, which may not be found in the general SCA Directory of Occupations.

·       They may cover different geographic regions than standard determinations, which can be narrower or broader. I once had a client that did explosion testing. They had only one direct competitor in the adjacent county. but that competitor’s business location was in a more rural area  and they had a standard WD which had wage rates of about half of my client’s more urban geographic area. The result was that my client was losing work due to less competitively priced bids. DOL dealt with this competition problem by issuing a single consolidated WD for both counties covering explosion testing and thus leveling the playing field for these kinds of contracts.

·       Non-standard determinations can be based on industry-specific data sources or unique local conditions.

·       They may also be issued for individual contracts, rather than for broad categories of work, and are then incorporated into that specific contract.

You can search for wage determinations, including certain non-standard ones, on www.sam.gov. However, note that not all nonstandard WDs can be found there. DOL issues other non-standard WDs which are less common and thus not put on sam.gov.

When it comes to H&W fringe benefit requirements, non-standard WDs are a trap for the unwary. Even the most sophisticated SCA covered contractors may be unaware that DOL is ignoring its own protocols when it issues non-standard WDS. Only after 42 years of SCA practice, did I recently learned myself that this was the case. Normally there are two types of standard WDs -- odd numbered WDs with actual cost requirements and even numbered WDs with average cost requirements. See https://www.awrcounsel.com/blog/2018/9/26/service-contract-act-health-and-welfare-hampw-why-are-there-two-methods?rq=H%26amp%3BW%20.  But the rub is that these traditional even vs. odd numbered protocols are not consistently followed for non-standard WDs.

For example, I just had a client who was tripped up by an even numbered non-standard WD which, when you read it carefully, had an odd numbered actual cost H&W requirement in it. As a result, they thought the even numbered WD allowed for averaging of H&W benefits. But DOL said that wasn’t the case for non-standard WDs. Based on their misunderstanding, the contractor had overpaid some workers and underpaid others for H&W benefits, and they were not allowed by DOL to average the cost out. They ended up paying several hundred thousand dollars extra to the workers.

DOL issues both even numbered and odd number non-standard WDs. However, as best I can tell from the sam.gov website, regardless of the numbering, both kinds of WDs have an actual cost  up to 40 hours a week H&W benefit. In other words, the numbering is irrelevant and misleading. DOL’s failure to follow its own numbering protocol for non-standard WDs is not a best practice and produces unfair duplicate payment demands for payment of H&W benefits. This is a bad practice that the DOL Office of Wage Determinations needs to fix. DOL doesn’t need to mislead contractors in this manner and should handle its non-standard WDs consistently with its numbering practices used for standard WDs.