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The SCA Contractors Recession Cheat Sheet

September 17, 2019

It is always a good idea to begin an analysis of projects that may be impacted by a recession or a downturn in the market.  If you are lucky enough to have been awarded an SCA contract, you already possess one of the most stable revenue streams.  It is more important than ever you retain SCA contract(s) and bring in new ones.

For better or worse, contracts are generally awarded based on price as long as operational and experiential criteria are met. It is important you utilize all means available to squeeze every bit of fat out of your bid. One way to help do this is to fully discharge the Health and Welfare obligation inside “bona fide” fringe benefit plans.  

Below are a few tips to help win new contracts and retain current SCA contracts.

  • Do not pay the Health and Welfare obligation as an additional cash wage to employees.
    • If you pay the Health and Welfare obligation in cash, it likely could mean the difference in winning and losing new contracts and retaining current ones.
  • You must pay and account for payroll taxes on Health and Welfare funds paid to an employee as an additional wage in your bids.
  • You must also understand and account for the additional cost of Worker’s Compensation Insurance and potentially other types of insurance. When calculating insurance premiums, payroll can be a factor and by adding to payroll insurance premium may increase.
  • The Affordable Care Act (ACA) is still the law of the land. Depending upon your employee headcount, you may have to offer employee benefits in order to comply with the ACA. Based on the affordability provisions found in the ACA, you will need to offer a substantial contribution toward benefits for each of your employees. If you have paid Health and Welfare on the paycheck there is no recourse but to offer this contribution from General Assets.

The best way to eliminate these extra costs is to account for Health and Welfare in your bids and in practical application through the compliant discharge into “bona fide” fringe benefits. This saves payroll taxes, reduces insurance costs, and reduces spend from General Assets.  This will be a meaningful amount and could very well be the difference in being awarded a contract, or not.