Contractor’s appeal of a claim for costs incurred after the Department of Labor determined that the contracts at issue were covered by the Service Contract Act is granted. The agency argued that under the FAR, contractors are responsible for identifying labor categories covered by the SCA, so the contractor should have eaten the costs of any newly-identified SCA positions. But the board found that the IDIQ contract in this case shifted the responsibility of identifying SCA positions to the government, so the government was responsible for the contractor’s SCA costs.
The National Institute of Health awarded an IDIQ contract to Sotera Defense Solutions for information technology services. The contract was a government-wide acquisition contract against which any federal contracting officer could place orders. The IDIQ contract stated that it was exempt from the Service Contract Act, which requires that contractors performing under a service contract pay their employees a minimum wage. Although the IDIQ contract was exempt, the contract advised that contracting officers should individually determine whether the SCA applied to task orders issued under the IDIQ.
The Department of Agriculture issued a task order to Sotera under the NIH IDIQ. Six months after the order was issued, the Department of Labor notified the parties that the order included positions covered by the SCA and that the contract had to be amended to include FAR 52.222-41, the standard SCA clause. DOL investigated Sotera and determined the company owed $550,000 in back wages to its employees.
A few months later, USDA issued another task order to Sotera under the NIH IDIQ. This order included the standard SCA clause, and it identified one SCA position. But DOL determined the task order had other positions covered by the SCA. Sotera asked USDA to include language in the new task order that would allow an equitable adjustment for the newly-identified SCA positions. But USDA refused to include the language.
Sotera submitted claims to USDA for (1) $550,000 in back wages it had paid under the first task order, and (2) $3.3 million for the increased cost of performance for the SCA-covered employees under the second task order. USDA denied the claims, and Sotera appealed to CBCA.
The board first addressed the claim under the first task order. FAR 22.1015 provides that when DOL determines that the SCA applies to a contract, and the contract is modified to include the standard SCA clause, the contracting officer shall make an equitable adjustment to reflect any changes in the cost of performance.
Here, the contracting officer incorporated the SCA clause into the contract, but did not provide Sotera with an equitable adjustment. The board noted that the NIH IDIQ obligated the contracting officer to identify labor categories subject to the SCA. The board reasoned that if USDA had properly evaluated whether the SCA applied, it would have identified the SCA labor categories before award and incorporated the applicable wage rates into offer. Thus, USDA was responsible for the amount of back wages Sotera had to pay under the first order.
The second task order required a slightly different analysis because it actually included the standard SCA clause. That clause states that once an agency has determined that the SCA applies, the contractor is responsible for identifying labor categories covered by the SCA. USDA argued that because the second task order included the SCA clause, Sotera was responsible — under the terms of the SCA clause — for the increased costs of performance.
But again, the board noted, the IDIQ contract assigned responsibility to the contracting officer for identifying SCA positions. To the extent this conflicted with the SCA clause, the more specific requirements of the contract controlled. The board reasoned that nothing in the FAR precludes an agency from voluntarily assuming, through contract, the responsibility to identify SCA positions through contract.
The board determined that the government was liable for the costs of the SCA covered positions under both task orders. The board, however, found that Sotera had not presented sufficient evidence of quantum or for its claim preparation costs. Thus, the board ordered further proceeding to determine the amount owed to Sotera.
Sotera is represented by Nathanael D. Hartland and Katherine B. Burrows of Nelson Mullins Riley Scarborough LLP. The government is represented by Antonio Robinson of the Department of Agriculture.
