Over the last few years, government contractors have seen the rise of a new trend: 10-year service contracts with a 5-year base period of performance plus yearly options beginning in the sixth year. This prompts our clients to ask us, “So, how does that affect my wage determination?”
Agency Requirements for 10 Year Contracts
Years 6 through 10 would be business as usual. The Service Contract Act (SCA) requires the contracting agency to incorporate a wage determination whenever an option is exercised or a contract extended.
But what about that 5-year base period? If the milestones above do not apply, a new wage determination must be incorporated:
- At each “Annual anniversary date of a multi-year contract subject to annual appropriations”
- Or each “Biennial anniversary date of a multi-year contract not subject to annual appropriations.”
Additionally, the code further describes two types of situations:
- Contracts exceeding one year, but subject to the yearly appropriation of funds by Congress each fiscal year. For these types of contracts, the annual anniversary date occurs at the beginning of each fiscal year when an appropriation makes the terms of the original contract effective.
- Multi-year contracts that are not subject to annual appropriations (such as concession contracts). The contracting agency amends these contracts at least every two years to incorporate a new wage determination. The two-year period begins on the date that the contractor commences performance on the contract (i.e., anniversary date), rather than on the date of contract award.
The Role of the Contractor for 10 Year Contracts
Now that you are aware of the wage determination incorporation requirements, I must issue a word of caution: These are requirements that the SCA places on the contracting agency.
A contractor does not have to abide by any wage determination other than the one currently incorporated into their contract, even if the contracting agency fails to incorporate the most current wage determination in a timely fashion. Doing so may reduce or completely nix any price adjustment entitlements they might otherwise have.
We hope this blog was helpful in explaining some aspects of the 10-year contract renewals. If you’re hitting any issues with your proposal package or start of services, give us a call. We’re here for you 24/7, so don’t hesitate to reach out when you need us most.