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What is the Service Contract Act? Blog Feature
Stephanie Hagan

By: Stephanie Hagan on August 3rd, 2020

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What is the Service Contract Act?

Resources and Insight | 5 Min Read

As a GSA Schedule contractor, you know there are a multitude of laws, regulations, and guidelines you need to follow to remain compliant. If you provide services through your contract, one of the laws you may have heard of is the McNamara O’Hara Service Contract Act (SCA). Enacted in 1965, the SCA’s main purpose is to protect employees performing work for contractors and subcontractors. At Winvale, we have a lot of clients asking us if the SCA impacts them as GSA Schedule contractors so let’s review the SCA, SCA exemptions and compliance, and why it’s relevant for several GSA Schedule contractors.

What is the Service Contract Act (SCA)?

The SCA was created to close the gap in labor standards protection by ensuring all major categories of government procurement are included.

The SCA requires contractors and subcontractors providing services on prime contracts greater than $2,500 to pay service employees no less than the wage rates and fringe benefits found in the locality, or the rates contained in a predecessor contractor’s Collective Bargaining Agreement (CBA). For contracts equal to or less than $2,500, contractors must pay the federal minimum wage determined in the Fair Labor Standards Act.

There are several names for this legislation, so you may hear it referred to as the McNamara-O’Hara Service Contract Act (SCA), Service Contract Act (SCA), Service Contract Labor Standards (SCLS), and the Service Contract Act of 1965, but they all mean the same thing.

Does the Service Contract Act Impact Me as a Government Contractor?

If your contract follows the criteria below then the SCA impacts you unless a specific exemption applies. 

  • The contract is made by the federal government or the District of Columbia
  • The contract involves an amount exceeding $2,500
  • The contract has as its principal purpose the furnishing of services in the U.S. using services employees

Service Contract Act Exemptions

Just like any other law, there are always exemptions. The Fair Labor Standards Act (FLSA) exempts both minimum wage and overtime pay for workers employees as bona fide executive, administrative, professional, outside sales, and certain computer employees.

Section 7 of the SCA exempts seven types of contracts from the SCA:

  1. Any contract of the US subject to the Defense Base Act (DBA) for construction, alteration, and/or repair, including painting and decorating, of public buildings or public works.
  2. Walsh-Healy Public Contracts Act (PCA)
  3. Any contract for the carriage of freight or personnel by vessel, airplane, bus, truck, express, railway line, or oil or gas pipeline where published tariff rates are in effect.
  4. Any contract for the furnishing of services by radio, telephone, telegraph, or cable companies, subject to the Communications Act of 1934.
  5. Public Utility Services
  6. Any employment contract providing for direct service to a federal agency by an individual or individuals.
  7. U.S. Postal Service

Even if your company falls under one of these exemptions, employees must meet specific salary requirements and meet certain tests regarding their job duties to qualify as exempt employees. You should consult with your attorney or HR professional to make sure your exempt employees meet the requirements because the Department of Labor can conduct audits.

Service Contract Act Compliance

Contract compliance—an alliterative term you’re probably very familiar with as a GSA Schedule contractor. We know it may seem like a lot to keep track of so let’s break it down into three main sections. 

To maintain compliance with the Service Contract Act you must:

  1. Have specified minimum wage and fringe benefits determined by the Secretary of Labor
  2. Make sure working conditions meet safety and health standards
  3. Give notice to employees of compensation due under the minimum wage and fringe benefits provisions of the contract on the day they begin work

Additional items that could be reinforced by the Department of Labor (DOL) include record keeping, summary of liabilities and penalties for violations, and subcontractor compliance.

If a contractor violates the SCA, the DOL has the authority to have contract funds withheld to reimburse underpaid employees, terminate the contract, hold the contractor liable for associated costs to the government, and debar the contractor from future government contracts for a period of three years. To avoid these consequences, it’s important to make sure you’re complying with the current wage determinations.

Service Contract Act Wage Determinations

The Department of Labor has to issue a wage determination for every service contract that employs more than five service employees and exceeds $2,500. If the contract requires less than five service employees, the contracting agency must obtain a wage determination from beta.SAM or submit an E98 request. An E98 form allows agencies to request a wage determination from the Department of Labor.

Types of wage determinations include: Standard, Non-standard, and Collective Bargaining Agreements (CBAs).

Wage determinations are based on geography. If the geographic scope for your contract is nationwide, there will be different locality rates and fringe benefit requirements depending on the location of the services. Depending on the scope of work required by a specific contract, multiple wage determinations may need to be incorporated into a contract.

How Does the Service Contract Act Apply to My GSA Schedule?

When we discuss services in terms of the Service Contract Act, it’s not just the Professional Services Schedule (PSS). The Multiple Award Schedule offers a wide array of services such as consulting, facilities, and IT.

When you are proposing labor categories or a fixed price service, whether on a new Schedule offer or through an Add Modification on an existing Schedule, you should ask yourself: Could these services fall under the SCA?

To answer this question, you should reference the SCA Directory of Occupations to see if any of your labor category descriptions meet any in the directory. To do this, type “SCA Directory of Occupations 5th Edition” into a search engine to find a list of all the occupation codes, titles, and descriptions for standard wage determinations.

It’s important to note that you should not try to match your labor category titles to the titles in the directory. The match is solely based on the descriptions of the occupation. 

For example, you could have an employee with the title Accounting Clerk that is not an SCA applicable category even though the title matches perfectly. The descriptions could be very different, so you need to pay attention to the job responsibilities listed.

What GSA Requirements Do I Need to Follow Under the Service Contract Act?

GSA requires that you include a Service Contract Act Matrix outlining each SCA applicable labor category with the corresponding code from the SCA Directory of Occupations as well as the wage determination number.

The SCA matrix should be included on your GSA Advantage!®/eLibrary published pricelist. You will need to update this list each time the wage determination is updated, which is usually once per year via a Mass Modification from GSA. You will need to accept that Mass Mod and then submit a separate modification via the eMod system, which must be reviewed and awarded by your contracting officer before it’s officially added to your GSA pricelist.

We know following these requirements and making sure you are compliant can seem overwhelming, but if you have any questions about the SCA or how it applies to you as a GSA Schedule contractor, our Winvale team is here to help

For more in-depth information on the SCA, check out our Lunch & Learn webinar: Introduction to the Service Contract Act.

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About Stephanie Hagan

Stephanie Hagan is the Content Writer and Digital Editor for Winvale where she helps the marketing department continue to develop and distribute GSA and government contracting content. Stephanie grew up in Sarasota, Florida, and earned her Bachelor's of Arts in Journalism and Rhetoric/Communications from the University of Richmond.