Fair Labor Standards Act and Service Contract Labor Standards-Price Adjustment
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.