Applying The New Fringe Rate To Existing Contracts

---

Since the release of All Agency Memorandum Number 225 on July 25, 2017, which provides the annual update of the Service Contract Act Health and Welfare Fringe Benefit, we have received several questions regarding the proper method to apply this change to existing contracts. Unfortunately, no additional information was provided in AAM No. 225 to explain how this rate change is applied other than to say, “Effective August 1, 2017, the SCA health and welfare benefit rate of $4.41 per hour will be posted on the Wage Determination Online and Wage and Hour Division (WHD) websites”.

However, on August 1^st the Wage Determination Online website started posting updated wage determinations which include the new fringe rate. These rates do not apply until the new wage determination is modified to the contract.

The process of modifying existing contracts should be initiated by the contracting agency and is covered by the Federal Acquisition Regulation (FAR) 52.222-43, Fair Labor Standards Act and Service Contract Labor Standards – Price Adjustment (Multiple Year and Option Contracts)

You can read more about this here: https://www.law.cornell.edu/cfr/text/48/52.222-43.

This FAR section applies to firm-fixed price and labor-hour contracts. The adjusted price must reflect the change in the updated wage determination. The adjustment occurs on the anniversary date of multiple year contracts or at the beginning of the renewal option period, but the process is initiated by the contracting agency early enough to be accomplished prior to these dates.

If you have any questions regarding a Service Contract Act price adjustment on a specific contract, the best place to start is with the contracting agency.

There are also several good references, in addition to the Federal Acquisition Regulation, that can help explain the process including:

• Fair Labor Standards Act, Service Contract Labor Standards & EO 13658 Air Force Price Adjustment Guide, March 2015
• The Navy’s Desk Guide for Service Contract Price Adjustments, Service Contract Act and Fair Labor Standards Act;
• Air Force presentation on Service Contract Act (SCA) Price Adjustment (Air Force Perspective)