Identification of Uncompensated Overtime
Contractors must accurately disclose and account for uncompensated overtime in proposals, using adjusted hourly rates and consistent accounting practices, or risk losing award consideration.
Overview
FAR 52.237-10 requires offerors to clearly identify and account for uncompensated overtime in their proposals for certain service contracts. The provision ensures that labor rates and hours are presented accurately, reflecting any hours worked beyond the standard 40-hour work week by exempt employees without additional pay. This transparency is crucial for cost realism and fair evaluation during the contract award process.
Key Rules
- Adjusted Hourly Rate Calculation
- When uncompensated overtime is proposed, offerors must use an adjusted hourly rate that accounts for all hours worked, not just the standard 40.
- Labor Hour Identification
- All proposed labor hours must be categorized as regular or overtime and detailed by labor category, including at both prime and subcontractor levels.
- Consistency in Accounting Practices
- The methods used to estimate uncompensated overtime must align with the offeror’s established cost accounting practices.
- Cost Realism Evaluation
- Proposals with unrealistically low labor rates or lacking cost realism will be assessed for risk and may impact award decisions.
- Policy Submission Requirement
- Offerors must submit their uncompensated overtime policy with their proposal.
Responsibilities
- Contracting Officers: Ensure proposals comply with the provision, verify cost realism, and assess risk related to uncompensated overtime.
- Contractors: Accurately calculate and report adjusted hourly rates, categorize labor hours, maintain consistent accounting practices, and submit their uncompensated overtime policy.
- Agencies: Oversee compliance and evaluate proposals for cost realism and risk.
Practical Implications
This provision exists to prevent manipulation of labor rates through uncompensated overtime, ensuring fair competition and realistic pricing. Contractors must be diligent in their proposal preparation, as failure to comply or demonstrate cost realism can jeopardize award eligibility. Common pitfalls include inconsistent accounting practices, inadequate detail in labor hour reporting, and failure to submit required policies.