22.404-12
Labor standards for contracts containing construction requirements and option provisions that extend the term of the contract
When extending construction contracts with options, contracting officers must update wage determinations and use specified methods to adjust contract prices for labor cost changes.
Overview
FAR 22.404-12 establishes requirements for incorporating current wage determinations into construction contracts with option provisions that extend the contract term. It ensures that labor standards remain up-to-date when options are exercised, protecting workers’ wages and benefits in line with the Construction Wage Rate Requirements statute. The regulation also provides specific methods for adjusting contract prices to account for wage determination changes, particularly in fixed-price contracts.
Key Rules
- Incorporation of Current Wage Determinations
- Each time an option to extend a construction contract is exercised, the contracting officer must update the contract with the most current wage determination.
- Application to Task Orders
- For indefinite-delivery or indefinite-quantity contracts, the wage determination in effect at option exercise applies to all task orders during that option period.
- Contract Price Adjustment Methods
- Fixed-price contracts must include a clause specifying one of several approved methods for adjusting prices due to wage determination changes, such as separate pricing for option periods, unit pricing books, economic indicators, or actual wage/benefit changes.
Responsibilities
- Contracting Officers: Must ensure current wage determinations are incorporated at each option exercise, select and specify an appropriate price adjustment method, and include required clauses in contracts.
- Contractors: Must comply with updated wage determinations and understand the contract’s price adjustment method.
- Agencies: Oversee compliance with labor standards and proper contract modifications.
Practical Implications
- This section ensures fair labor standards are maintained throughout the contract’s life, even as options are exercised. Contractors must be prepared for wage determination updates and understand how contract prices may be adjusted. Common pitfalls include failing to update wage determinations or misunderstanding the price adjustment method, which can lead to compliance issues or disputes.