52.222-32 Construction Wage Rate Requirements-Price Adjustment (Actual Method)
Source: FAR 52.222-32 on acquisition.gov
FAR 52.222-32 requires contractors to request price adjustments based only on actual wage and benefit changes due to new wage determinations, with strict documentation and notification requirements.
Overview
FAR 52.222-32 establishes the procedures for adjusting contract prices on construction contracts when wage determinations under the Construction Wage Rate Requirements (formerly Davis-Bacon Act) change, specifically using the "actual method." This clause applies when an option to extend the contract is exercised and a new wage determination is issued. It details how contractors and contracting officers must handle wage and fringe benefit increases or decreases, ensuring that only actual changes in labor costs (and related taxes/insurance) are considered for price adjustments, not overhead or profit.
Key Rules
- Applicability of Wage Determinations
- The wage determination effective at the time of exercising an option applies to that option period.
- Exclusion of Allowances
- Contractors must not include any pre-allowed wage or benefit increases in their price adjustment requests.
- Documentation Requirement
- Contractors must certify that their price adjustment requests do not include previously allowed increases and provide supporting data.
- Scope of Adjustments
- Adjustments are limited to actual changes in wages, fringe benefits, and associated taxes/insurance, excluding overhead and profit.
- Notification and Timeliness
- Contractors must notify the Contracting Officer of increases within 30 days of receiving a revised wage determination and promptly for decreases.
- Computation Method
- The clause provides detailed formulas for calculating adjustments for both single and multiple craft hour unit prices, including an example.
Responsibilities
- Contracting Officers: Must verify documentation, compute adjustments per the clause, and modify contract prices accordingly.
- Contractors: Must submit timely, accurate requests with required certifications and supporting payroll data, and continue performance during adjustment negotiations.
- Agencies: Oversee compliance and ensure proper application of wage determinations and price adjustments.
Practical Implications
- This clause ensures fair compensation for labor cost changes due to updated wage determinations, protecting both contractors and the government from unanticipated wage fluctuations. Failure to follow notification or documentation requirements can delay or invalidate price adjustments. Contractors must maintain accurate payroll records and understand the computation methods to avoid disputes.
As prescribed in 22.407(g), insert the following clause:
Construction Wage Rate Requirements-Price Adjustment (Actual Method) (Aug 2018)
(a) The wage determination issued under the Construction Wage Rate Requirements statute by the Administrator, Wage and Hour Division, U.S. Department of Labor, that is effective for an option to extend the term of the contract, will apply to that option period.
(b)
(1) The Contractor states that if the prices in this contract contain an allowance for wage or benefit increases, such allowance will not be included in any request for contract price adjustment submitted under this clause.
(2) The Contractor shall provide with each request for contract price adjustment under this clause a statement that the prices in the contract do not include any allowance for any increased cost for which adjustment is being requested.
(c) The Contracting Officer will adjust the contract price or contract unit price labor rates to reflect the Contractor’s actual increase or decrease in wages and fringe benefits to the extent that the increase is made to comply with, or the decrease is voluntarily made by the Contractor as a result of—
(1) Incorporation of the Department of Labor’s Construction Wage Rate Requirements wage determination applicable at the exercise of an option to extend the term of the contract; or
(2) Incorporation of a Construction Wage Rate Requirements wage determination otherwise applied to the contract by operation of law.
(d) Any adjustment will be limited to increases or decreases in wages and fringe benefits as described in paragraph (c) of this clause, and the accompanying increases or decreases in social security and unemployment taxes and workers’ compensation insurance, but will not otherwise include any amount for general and administrative costs, overhead, or profit.
(e) The Contractor shall notify the Contracting Officer of any increase claimed under this clause within 30 days after receiving a revised wage determination unless this notification period is extended in writing by the Contracting Officer. The Contractor shall notify the Contracting Officer promptly of any decrease under this clause, but nothing in this clause precludes the Government from asserting a claim within the period permitted by law. The notice shall contain a statement of the amount claimed and any relevant supporting data, including payroll records that the Contracting Officer may reasonably require. Upon agreement of the parties, the Contracting Officer will modify the contract price or contract unit price in writing. The Contractor shall continue performance pending agreement on or determination of any such adjustment and its effective date.
(f) Contract price adjustment computations shall be computed as follows:
(1) Computation for contract unit price per single craft hour for schedule of indefinite-quantity work. For each labor classification, the difference between the actual wage and benefit rates (combined) paid and the wage and benefit rates (combined) required by the new wage determination shall be added to the original contract unit price if the difference results in a combined increase. If the difference computed results in a combined decrease, the contract unit price shall be decreased by that amount if the Contractor provides notification as provided in paragraph (e) of this clause.
(2) Computation for contract unit price containing multiple craft hours for schedule of indefinite-quantity work. For each labor classification, the difference between the actual wage and benefit rates (combined) paid and the wage and benefit rates (combined) required by the new wage determination shall be multiplied by the actual number of hours expended for each craft involved in accomplishing the unit-priced work item. The product of this computation will then be divided by the actual number of units ordered in the preceding contract period. The total of these computations for each craft will be added to the current contract unit price to obtain the new contract unit price. The extended amount for the line item will be obtained by multiplying the new unit price by the estimated quantity. If actual hours are not available from the preceding contract period for computation of the adjustment for a specific contract unit of work, the Contractor, in agreement with the Contracting Officer, shall estimate the total hours per craft per contract unit of work.
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Example: Asphalt Paving-Current Price $3.38 per Square Yard |
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|---|---|---|---|---|---|---|---|---|---|---|
| DBA Craft | New WD | Hourly rate paid | Diff. | Actual Hrs | Actual units (sq.yard) | Increase/sqyard | ||||
| Equip. Opr. | $18.50 | – | $18.00 | = | $.50 | x | 600 hrs./ | 3,000 sq. yrd. | = | $.10 |
| Truck Driver | $19.00 | – | $18.25 | = | $.75 | x | 525 hrs./ | 3,000 sq. yrd. | = | $.13 |
| Laborer | $11.50 | – | $11.25 | = | $.25 | x | 750 hrs./ | 3,000 sq. yrd. | = | $.06 |
| Total increase per square yard = | $.29* | |||||||||
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* Note: Adjustment for labor rate increases or decreases may be accompanied by social security and unemployment taxes and workers’ compensation insurance. |
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| Current unit price (per square yard) | $3.38 | |||||||||
| Add DBA price adj. | +.29 | |||||||||
| New unit price (per square yard) | = | $3.67 | ||||||||
(End of clause)