37.115-2 General policy
Source: FAR 37.115-2 on acquisition.gov
Contractors must fully disclose and properly price uncompensated overtime in proposals for hourly-based professional or technical services to ensure transparency and maintain technical quality.
Overview
FAR 37.115-2 establishes the general policy regarding the use of uncompensated overtime in government contracts for professional or technical services, particularly when services are acquired based on hours worked rather than tasks completed. The regulation discourages the use of uncompensated overtime and sets forth requirements for solicitations, proposal evaluation, and contract pricing to ensure transparency and maintain the quality of technical expertise.
Key Rules
- Discouragement of Uncompensated Overtime
- The use of uncompensated overtime is not encouraged in federal contracts.
- Solicitation Requirements
- Solicitations for hourly-based professional or technical services must require offerors to disclose uncompensated overtime hours and rates for FLSA-exempt personnel, including those in indirect cost pools.
- Evaluation and Risk Assessment
- Contracting officers must assess the risk that uncompensated overtime could degrade technical expertise and evaluate proposals for unrealistically low labor rates or unbalanced overtime distribution.
- Adjusted Hourly Rate Application
- When uncompensated overtime is present, the adjusted hourly rate (factoring in uncompensated overtime) must be applied to all proposed hours for pricing purposes.
Responsibilities
- Contracting Officers: Ensure solicitations require disclosure of uncompensated overtime, conduct risk assessments, and evaluate proposals for cost realism and technical adequacy.
- Contractors: Disclose uncompensated overtime hours and rates in proposals, and ensure accurate calculation of adjusted hourly rates.
- Agencies: Oversee compliance and ensure contract awards do not compromise technical quality due to uncompensated overtime practices.
Practical Implications
- This policy exists to prevent contractors from using uncompensated overtime to artificially lower labor rates, which can lead to reduced quality or technical expertise. Contractors must be transparent about overtime practices, and contracting officers must scrutinize proposals for potential risks. Common pitfalls include failing to disclose uncompensated overtime or proposing unrealistically low rates that could impact performance quality.
(a) Use of uncompensated overtime is not encouraged.
(b) When professional or technical services are acquired on the basis of the number of hours to be provided, rather than on the task to be performed, the solicitation shall require offerors to identify uncompensated overtime hours and the uncompensated overtime rate for direct charge Fair Labor Standards Act-exempt personnel included in their proposals and subcontractor proposals. This includes uncompensated overtime hours that are in indirect cost pools for personnel whose regular hours are normally charged direct.
(c) Contracting officers must ensure that the use of uncompensated overtime in contracts to acquire services on the basis of the number of hours provided will not degrade the level of technical expertise required to fulfill the Government’s requirements (see 15.305 for competitive negotiations and 15.404-1(d) for cost realism analysis). When acquiring these services, contracting officers must conduct a risk assessment and evaluate, for award on that basis, any proposals received that reflect factors such as-
(1) Unrealistically low labor rates or other costs that may result in quality or service shortfalls; and
(2) Unbalanced distribution of uncompensated overtime among skill levels and its use in key technical positions.
(d) Whenever there is uncompensated overtime, the adjusted hourly rate (including uncompensated overtime) (see definition at 37.101), rather than the hourly rate, shall be applied to all proposed hours, whether regular or overtime hours.