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Service Contract Act & The Recent Armed Services Board of Contract Appeals’ (ASBCA) Decision

March 2, 2020


A recent Armed Services Board of Contract Appeals’ (ASBCA) decision serves as a reminder of the complexity of successor obligations on Service Contract Act-covered contracts. The appeal involves Alutiiq Commercial Enterprises LLC (ACE), which filed a claim against the Air Force for $1.7 million resulting from a higher cost arising from a Collective Bargaining Agreement.

ACE received a contract to provide base civil engineering support services and operations management at Tinker AFB, OK. Before ACE, Tinker Support Services JV (TSS) had the contract; they also had a collective bargaining agreement.

ACE’s initial contract included a two-month phase-in, in which TSS continued to perform services, and five one-year option periods. During the transition, ACE and the union were negotiating a new CBA to replace the CBA between TSS and the union. Option I of the ACE contract was exercised, but the union was not notified.

The Federal Acquisition Regulation requires interested parties under a CBA to be notified at least 30 days in advance of an option being exercised. However, the Air Force claimed the notification requirements did not apply because ACE did not have service employees during the transition.

ACE and the union eventually reached an agreement, and ACE submitted a request for equitable adjustment, in part, requesting increased costs resulting from the new CBA. The Air Force denied the adjustment.

ACE appealed to the ASBCA, which held “the contracting officer was required to provide written definitive notice of the exercise of the option to both the incumbent contractor and the collective bargaining agent.” The ASBCA recognized that the phase-in period created an unusual situation.

While successor obligations under SCA are usually clear, this was a confusing situation for several reasons. This appeal decision should serve as a reminder to be aware of the many technical issues involved when an SCA-covered contract is awarded, or an option is exercised. This is a link to the decision; https://www.asbca.mil/Decisions/2020/61503%20Alutiiq%20Commercial%20Enterprises,%20LLC%2001.09.2020.pdf