(Editor’s Note. More and more contractors are coming under the wage guidelines of the Service Contract Act (SCA). Increasing use of service contracting along with increased privatization of many government functions means the SCA will become more significant than ever. Though the provisions of the Davis Bacon Act appear to be widely known, we find a significant lack of understanding of the requirements under the SCA. As the SCA clause and wage determinations find their way into more contracts, there will be more and more traps for unwary contractors to fall into with onerous consequences for noncompliance. We came across a good article in the November 1998 issue of the Government Contract Audit Report written by Schlomo Katz and Daniel Abrahams of the firm Epstein Becker & Green, P.C. that we thought would provide a good basic understanding of the SCA. We recommend this article be distributed to human resources personnel as well as others concerned with cost and pricing issues.)

The purpose of the McNamara-O’Hara Service Contract Act (SCA) of 1965 is to prevent service workers from becoming casualties in the competitive wars between government contractors. The SCA requires payment of specified minimum wage rates and fringe benefits to employees working on government service contracts and subcontracts.

A federal agency intending to award a contract covered by SCA must notify the Department of Labor (DOL), which then must issue one or more wage determinations (WDs). The WD become a part of the awarded contract and specifies the minimum wages and benefits a contractor must pay. The penalties for violation of the SCA – even for unknowing violations – are stiff including three-year debarments from government contracting unless "unusual circumstances" exist. Several parties are on the lookout for compliance including not only the DOL but also the contracting agency and unions having jurisdiction.

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