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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


March 2014
Vol. XV, No. 3
[pdf version]

CONTENTS


President Issues Executive Order Mandating $10.10/Hour Minimum Wage
DOD Cranks Up DFARS Changes
NASA Issues Proposal Adequacy Checklist
FAR Changes Would Reflect 8(a) Program Revisions



President Issues Executive Order
Mandating $10.10/Hour Minimum Wage

On February 12, after announcing his intentions in the State of the Union address, President Obama issued Executive Order 13658 establishing a minimum wage of $10.10 per hour effective January 1, 2015, for all contractors and subcontractors performing federal contracts. According to the executive order, “Raising the pay of low-wage workers increases their morale and the productivity and quality of their work, lowers turnover and its accompanying costs, and reduces supervisory costs. These savings and quality improvements will lead to improved economy and efficiency in government procurement.”

The $10.10 amount will be adjusted every year, beginning January 1, 2016, to reflect inflation during the year as reflected in the Consumer Price Index for Urban Wage Earners and Clerical Workers. According to the executive order, the minimum wage cannot be reduced to reflect deflation.

The minimum wage set for tipped workers is $4.90, which will be adjusted annually by 95¢ per hour or to 70% of the basic minimum wage amount, whichever is less.

The secretary of labor is to issue implementing regulations by October 1, 2014, and the Federal Acquisition Regulation (FAR) is to be amended within 60 days of issuance (that is, no later than December 1, 2014) to require the inclusion of a clause mandating the payment of this minimum wage to workers under new contracts or contract-like instruments (and subcontracts) subject to the Fair Labor Standards Act, the Service Contract Act, or the Davis-Bacon Act.

EDITOR’S NOTE: This executive order does not affect very many contractor employees. First of all, it doesn’t go into effect until January 1, 2015, and then only for “new contracts or contract-like instruments” (such as task orders). Second, almost all employees who perform services are already required by the secretary of labor to be paid at least the prevailing wage rate and fringe benefit for the geographical area – these are called “wage determinations” and are available on “Wage Determinations OnLine” at http://www.wdol.gov. Most of these prevailing wage rates are based on union wages, and very few are less than $10.10/hour. While the Obama administration claims “there are hundreds of thousands of people working under contracts with the federal government to provide services or construction who are currently making less than $10.10 an hour,” likely there are far, far fewer than that.

Regarding the statement in the executive order that “raising the pay of low-wage workers increases their morale and the productivity and quality of their work, lowers turnover and its accompanying costs, and reduces supervisory costs,” the president doesn’t explain why, if this is the case, contractors hadn’t raised the wages themselves to obtain an edge over their competitors.

And how did the president determine $10.10/hour was the appropriate amount for the minimum wage? In his 2013 State of the Union address, Obama called for a $9.00/hour minimum wage. No one in the Obama administration has claimed that inflation was 12% in 2013, so it doesn’t seem that the $10.10 minimum wage is based on anything except politics.

There is one group of employees that will benefit from this: those with disabilities working under concession contracts. Current law permits these workers to be paid less than the minimum wage, so they will receive the same $10.10 per hour minimum wage as others.



DOD Cranks Up DFARS Changes

The Department of Defense (DOD) picked up some steam in February in the Defense Federal Acquisition Regulation Supplement (DFARS) revision department. DOD issued two final rules, one interim rule, three proposed rules, two requests for comments, three class deviations, and published an updated list of Federal Prison Industries (FPI) commodities that must be competed.



NASA Issues Proposal Adequacy Checklist

The National Aeronautics and Space Administration (NASA) is finalizing, without changes, the proposed rule that would add NASA FAR Supplement (NFS) 1852.215-85, Proposal Adequacy Checklist, and require contracting officers to include the provision in solicitations that require the submission of certified cost or pricing data (see FAR 15.403, Obtaining Certified Cost or Pricing Data). The intent of the proposed provision was to facilitate submission of a thorough, accurate, and complete proposal.

The Proposal Adequacy Checklist includes 34 pieces of information that the offeror must address. Each of the 34 provides a reference to the FAR provision that requires the information, a description of the information, and a place for the offeror to provide the page number in the proposal where that information is included or to provide an explanation of why the information is not included. For example, item 5 references “FAR 15.408 [Solicitation Provisions and Contract Clauses], Table 15-2 [Instructions for Submitting Cost/Price Proposals When Certified Cost or Pricing Data are Required], Section I [General Instructions], Paragraph B” [“In submitting your proposal, you must include an index, appropriately referenced, of all the certified cost or pricing data and information accompanying or identified in the proposal”]; identifies the required information (“Is an Index of all certified cost or pricing data and information accompanying or identified in the proposal provided and appropriately referenced?”); and then provides space for the offeror to identify the proposal page where the index is or explain why there is no index.

One respondent submitted comments on the proposed rule but none of the comments were adopted, so the proposed rule is finalized without changes.

For more on the proposed rule, see the November 2013 Federal Contracts Perspective article “NASA Proposes Proposal Adequacy Checklist.”


FAR Changes Would Reflect 8(a) Program Revisions

A proposed rule has been published that would revised the Federal Acquisition Regulation (FAR) to implement revisions made by the Small Business Administration (SBA) to its regulations implementing Section 8(a) of the Small Business Act (referred to as the “8(a) Business Development Program” or “8(a) program”), and to provide additional coverage regarding protesting an 8(a) participant’s eligibility or size status, procedures for releasing a requirement for non-8(a) procurements, and the ways a participant could exit the 8(a) program.

In 2011, the SBA made the first comprehensive revision of its 8(a) program regulations in more than ten years (see the March 2011 Federal Contracts Perspective article “SBA Revises 8(a) Program, Small Business Size Regulations”). This proposed rule would revise FAR subpart 19.8, Contracting with the Small Business Administration (The 8(a) Program), and other FAR parts to reflect the SBA’s 8(a) program rule changes and to provide additional clarification and guidance pertaining to the operation of the 8(a) program.

The following are the significant changes being proposed:

Comments on this proposed rule must be submitted no later than April 4, 2014, identified as “FAR Case 2012-022,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-501-4067; or (3) mail: U.S. General Services Administration, Regulatory Secretariat Division (MVCB), ATTN: Hada Flowers, 1800 F Street NW, 2nd Floor, Washington, DC 20405.



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