Finding The Balance: Navigating WD in 10-Year Service Contracts

10 Year Contracts and Wage Determinations

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. 

As a result of this, our clients often ask us, “So, how does that affect my Wage Determination?”

As may be expected, given the fact that years 6 to 10 are subject to the exercise of an Option to Extend the contract by the Government, it will be business as usual for the contractor. DOL regulations with respect to the Service Contract Act (SCA), mandate that the Contracting Agency must incorporate a Wage Determination whenever an option is Exercised or a contract is Extended.

But what about that 5-year base period?  

We thought you would never ask! The regulations also dictate that -in case 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 at each “Biennial anniversary date of a multi-year contract not subject to annual appropriations”  

Additionally, the Code of Federal Regulations (CFR) provides additional guidance in section 4.145, which pertains to "Extended Terms Contracts". This section describes two types of scenarios: 

         1. Contracts for terms 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 will be the “date which occurs in each new fiscal year during which the terms of the original contract are made effective by an appropriation.”

         2. Multi-year contracts which are not subject to annual appropriations (such as                     concession contracts) 

The SCA requires these types of contracts to be amended at least every two years to incorporate a new Wage Determination, “The two-year period is considered to begin on the date that the contractor commences performance on the contract (i.e., anniversary date) rather than on the date of contract award.” 

Now that you are aware of the Wage Determination incorporation requirements, it is crucial to 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 that the one currently incorporated to their contract. Even if the Contracting Agency fails to incorporate the most current Wage Determination in a timely fashion, the contractor should never independently begin using a Wage Determination if it hasn’t been officially incorporated to their contract, as doing so may reduce or completely nix any price adjustment entitlements they might have otherwise have.

- Aaron Ramos, Labor Compliance Officer