52.222-44 Fair Labor Standards Act and Service Contract Labor Standards-Price Adjustment
Source: FAR 52.222-44 on acquisition.gov
FAR 52.222-44 allows contract price adjustments strictly for legally mandated wage and benefit changes, but requires prompt notification and excludes overhead or profit from such adjustments.
Overview
FAR 52.222-44 establishes the requirements for contract price adjustments due to changes in wage determinations or amendments to the Fair Labor Standards Act (FLSA) that affect minimum wages and fringe benefits. This clause applies to contracts subject to area prevailing wage determinations and those with contractor collective bargaining agreements. It ensures that contractors can seek price adjustments when legally mandated wage or benefit increases (or decreases) occur after contract award, but limits adjustments strictly to those costs and related taxes/insurance, excluding overhead or profit.
Key Rules
- Applicability
- Applies to contracts with area wage determinations or collective bargaining agreements.
- No Allowance for Contingency
- Contractors must not include contingency allowances for potential wage increases covered by this clause in their pricing.
- Price Adjustment Triggers
- Adjustments are allowed only for increases/decreases in wages and fringe benefits due to new wage determinations or FLSA amendments affecting minimum wage.
- Adjustment Limitations
- Adjustments are limited to wage/fringe benefit changes and related taxes/insurance, not overhead or profit.
- Notification and Documentation
- Contractors must notify the Contracting Officer of increases within 30 days of the wage change and provide supporting data; decreases must also be reported promptly.
- Record Access
- The government has the right to examine relevant contractor records for three years after final payment.
Responsibilities
- Contracting Officers: Review and approve price adjustments, extend notification periods if needed, and access records for verification.
- Contractors: Exclude contingency allowances, notify and document wage-related price changes, and maintain accessible records for three years.
- Agencies: Oversee compliance and assert claims as permitted by law.
Practical Implications
This clause protects both contractors and the government from unforeseen wage law changes, ensuring fair compensation for labor cost changes while preventing windfalls. Timely notification and accurate documentation are critical for compliance. Common pitfalls include late notifications, insufficient supporting data, or including unallowable costs in adjustment requests.
As prescribed in 22.1006(c)(2), insert the following clause:
Fair Labor Standards Act and Service Contract Labor Standards-Price Adjustment (May 2014)
(a) This clause applies to both contracts subject to area prevailing wage determinations and contracts subject to Contractor collective bargaining agreements.
(b) The Contractor warrants that the prices in this contract do not include any allowance for any contingency to cover increased costs for which adjustment is provided under this clause.
(c) The contract price, contract unit price labor rates, or fixed hourly labor rates will be adjusted to reflect increases or decreases by the Contractor in wages and fringe benefits to the extent that these increases or decreases are made to comply with-
(1) An increased or decreased wage determination applied to this contract by operation of law; or
(2) An amendment to the Fair Labor Standards Act of1938 that is enacted subsequent to award of this contract, affects the minimum wage, and becomes applicable to this contract under law.
(d) Any such adjustment will be limited to increases or decreases in wages and fringe benefits as described in paragraph (c) of this clause, and to the accompanying increases or decreases in social security and unemployment taxes and workers’ compensation insurance; it shall 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 the effective date of the wage change, unless this period is extended by the Contracting Officer in writing. The Contractor shall promptly notify the Contracting Officer of any decrease under this clause, but nothing in the clause shall preclude the Government from asserting a claim within the period permitted by law. The notice shall contain a statement of the amount and the change in fixed hourly rates (if this is a time-and-materials or labor-hour contract) claimed and any relevant supporting data that the Contracting Officer may reasonably require. Upon agreement of the parties, the contract price, contract unit price labor rates, or fixed hourly rates shall be modified in writing. The Contractor shall continue performance pending agreement on or determination of any such adjustment and its effective date.
(f) The Contracting Officer or an authorized representative shall, until the expiration of 3 years after final payment under the contract, have access to and the right to examine any directly pertinent books, documents, papers, and records of the Contractor.
(End of clause)