22.101-2 Contract pricing and administration
Source: FAR 22.101-2 on acquisition.gov
Contractors must ensure labor costs are reasonable and take proactive steps to resolve labor disputes, as unreasonable costs and avoidable delays will not be accepted by the Government.
Overview
FAR 22.101-2 addresses how contractor labor policies, compensation practices, and labor disputes impact contract pricing and administration. It clarifies that labor costs must be reasonable and not simply accepted because they are part of labor-management agreements. The section also outlines contractor accountability for delays caused by labor disputes, the treatment of costs incurred during strikes, and the continuation of government inspection activities during labor disputes.
Key Rules
- Labor Costs Must Be Reasonable
- Contractor labor policies and compensation practices are not automatically allowable; costs must be reasonable, regardless of labor agreements.
- Contractor Accountability for Delays
- Contractors are responsible for avoidable delays, including those caused by labor disputes, unless they can show the delay was not reasonably preventable.
- Excusable Delays Have Limits
- Delays due to strikes are only excusable up to the point where a diligent contractor could have acted to resolve the dispute using available remedies.
- Cost Scrutiny During Strikes
- All costs incurred during strikes must be carefully examined to ensure only necessary costs are recognized for contract performance.
- Inspection Continues During Disputes
- Government inspections should proceed during labor disputes if inspectors’ safety is not at risk.
Responsibilities
- Contracting Officers: Must ensure labor costs are reasonable, hold contractors accountable for avoidable delays, scrutinize strike-related costs, and continue inspections when safe.
- Contractors: Must maintain reasonable labor costs, act diligently to resolve labor disputes, and only claim necessary costs during strikes.
- Agencies: Oversee contract administration, cost allowability, and ensure inspection continuity.
Practical Implications
- This section ensures government funds are not used to cover unreasonable labor costs or unjustified delays. Contractors must proactively manage labor relations and document actions taken during disputes. Failure to do so can result in disallowed costs or contract penalties. Common pitfalls include assuming all labor costs are allowable or failing to act promptly during strikes.
(a) Contractor labor policies and compensation practices, whether or not included in labor-management agreements, are not acceptable bases for allowing costs in cost-reimbursement contracts or for recognition of costs in pricing fixed-price contracts if they result in unreasonable costs to the Government. For a discussion of allowable costs resulting from labor-management agreements, see 31.205-6(b).
(b) Labor disputes may cause work stoppages that delay the performance of Government contracts. Contracting officers shall impress upon contractors that each contractor shall be held accountable for reasonably avoidable delays. Standard contract clauses dealing with default, excusable delays, etc., do not relieve contractors or subcontractors from the responsibility for delays that are within the contractors’ or their subcontractors’ control. A delay caused by a strike that the contractor or subcontractor could not reasonably prevent can be excused; however, it cannot be excused beyond the point at which a reasonably diligent contractor or subcontractor could have acted to end the strike by actions such as-
(1) Filing a charge with the National Labor Relations Board to permit the Board to seek injunctive relief in court;
(2) Using other available Government procedures; and
(3) Using private boards or organizations to settle disputes.
(c) Strikes normally result in changing patterns of cost incurrence and therefore may have an impact on the allowability of costs for cost-reimbursement contracts or for recognition of costs in pricing fixed-price contracts. Certain costs may increase because of strikes; e.g., guard services and attorney’s fees. Other costs incurred during a strike may not fluctuate (e.g.,"fixed costs" such as rent and depreciation), but because of reduced production, their proportion of the unit cost of items produced increases. All costs incurred during strikes shall be carefully examined to ensure recognition of only those costs necessary for performing the contract in accordance with the Government’s essential interest.
(d) If, during a labor dispute, the inspectors’ safety is not endangered, the normal functions of inspection at the plant of a Government contractor shall be continued without regard to the existence of a labor dispute, strike, or picket line.