22.101-2
Contract pricing and administration
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.