22.1003-6 Repair distinguished from remanufacturing of equipment
Source: FAR 22.1003-6 on acquisition.gov
Properly distinguishing between repair and remanufacturing is critical, as it determines which labor standards statute applies to your contract.
Overview
FAR 22.1003-6 clarifies the distinction between repair and remanufacturing of equipment for federal contracts, which determines whether the contract is subject to the Service Contract Labor Standards (SCLS) or to 41 U.S.C. chapter 65 (Walsh-Healey Public Contracts Act). If the work is so extensive that it is equivalent to manufacturing—such as a major overhaul or major modification meeting specific criteria—the contract is considered remanufacturing and falls under manufacturing statutes. Routine repairs and maintenance, which do not require complete teardown and rebuilding, remain subject to SCLS.
Key Rules
- Remanufacturing Criteria
- Contracts involving major overhaul or modification that meet detailed criteria (e.g., complete teardown, reworking/replacing most parts, reassembly, use of manufacturing processes, restoration to original life expectancy, and work performed at contractor facilities) are considered remanufacturing.
- Repair and Maintenance
- Contracts for routine repair, maintenance, or servicing (not requiring complete teardown or rebuild) are subject to SCLS, not manufacturing statutes. Examples include vehicle repair, office equipment repair, and furniture reconditioning.
Responsibilities
- Contracting Officers: Must correctly classify contracts as repair or remanufacturing to apply the appropriate labor standards statute.
- Contractors: Must understand the scope of work and ensure compliance with the correct labor standards based on contract classification.
- Agencies: Should provide oversight to ensure proper classification and compliance with applicable statutes.
Practical Implications
- This section exists to prevent misclassification of contracts, which can lead to noncompliance with labor standards and potential legal or financial penalties.
- Accurate classification impacts wage determinations, contract clauses, and compliance obligations.
- Common pitfalls include underestimating the extent of work or misapplying the labor standards statute, especially in contracts involving significant equipment overhaul or modification.
(a) Contracts principally for remanufacturing of equipment which is so extensive as to be equivalent to manufacturing are subject to http://uscode.house.gov/view.xhtml?req=granuleid%3AUSC-prelim-title41-chapter65&saved=%7CZ3JhbnVsZWlkOlVTQy1wcmVsaW0tdGl0bGU0MC1jaGFwdGVyMzctZnJvbnQ%3D%7C%7C%7C0%7Cfalse%7Cprelim&edition=prelim" target="_blank">41 U.S.C. chapter 65, rather than to the Service Contract Labor Standards statute. Remanufacturing shall be deemed to be manufacturing when the criteria in either paragraphs (a)(1) or (a)(2) of this section are met.
(1) Major overhaul of an item, piece of equipment, or material which is degraded or inoperable, and under which all of the following conditions exist:
(i) The item or equipment is required to be completely or substantially torn down into individual component parts.
(ii) Substantially all of the parts are reworked, rehabilitated, altered and/or replaced.
(iii) The parts are reassembled so as to furnish a totally rebuilt item or piece of equipment.
(iv) Manufacturing processes similar to those which were used in the manufacturing of the item or piece of equipment are utilized.
(v) The disassembled components, if usable (except for situations where the number of items or pieces of equipment involved are too few to make it practicable) are commingled with existing inventory and, as such, lose their identification with respect to a particular piece of equipment.
(vi) The items or equipment overhauled are restored to original life expectancy, or nearly so.
(vii) Such work is performed in a facility owned or operated by the contractor.
(2) Major modification of an item, piece of equipment, or material which is wholly or partially obsolete, and under which all of the following conditions exist:
(i) The item or equipment is required to be completely or substantially torn down.
(ii) Outmoded parts are replaced.
(iii) The item or equipment is rebuilt or reassembled.
(iv) The contract work results in the furnishing of a substantially modified item in a usable and serviceable condition.
(v) The work is performed in a facility owned or operated by the contractor.
(b) Remanufacturing does not include the repair of damaged or broken equipment which does not require a complete teardown, overhaul, and rebuild as described in subparagraphs(a)(1) and (a)(2) of this subsection, or the periodic and routine maintenance, preservation, care, adjustment, upkeep, or servicing of equipment to keep it in usable, serviceable, working order. Such contracts typically are billed on an hourly rate (labor plus materials and parts) basis. Any contract principally for this type of work is subject to the Service Contract Labor Standards statute. Examples of such work include the following:
(1) Repair of an automobile, truck, or other vehicle, construction equipment, tractor, crane, aerospace, air conditioning and refrigeration equipment, electric motors, and ground powered industrial or vehicular equipment.
(2) Repair of typewriters and other office equipment (but see 22.1003-4(c)(1) and (d)(1)(iv)).
(3) Repair of appliances, radios, television sets, calculators, and other electronic equipment.
(4) Inspecting, testing, calibration, painting, packaging, lubrication, tune-up, or replacement of internal parts of equipment listed in subparagraphs(b)(1), (b)(2), and (b)(3) of this subsection.
(5) Reupholstering, reconditioning, repair, and refinishing of furniture.