In spite of their comprehensive requirements, DCAA has resisted even more stringent proposals occasionally put forth by other government bodies. In 1996, the DOD Inspector General questioned DCAA’s policy of not requiring total time reporting of all contractors. Both DOD procurement officials and DCAA responded that such a requirement is unwarranted and that it is incorrect to assume that since a contractor does not account for all hours inequities automatically result. Their reply also pointed out that such a requirement would impose an additional administrative burden without providing a corresponding benefit. Because of the DODIG report, however, DCAA has been advised to conduct additional work regarding UOT. More in-depth audits are to be made to determine if an eight hour contractor’s allocations are materially inequitable and if this is not the case, the auditor is to fully document their conclusion.

Inclusion of uncompensated overtime frequently makes it difficult to evaluate proposals because high levels of UOT results in lower costs in the proposals but can adversely

affect the ability of contractors to attract and retain qualified personnel which puts performance at risk. There have been successful protests because government evaluators did not consider the impact of reduced wages and fringe benefits on employees’ willingness to work voluntary overtime in the future. Congress and some procurement agencies have drafted regulations requiring consideration of potential performance risk but has not taken a definitive position regarding use of UOT or mandatory total labor reporting. Rather, as of now, it leaves these issues to the individual agencies. Limited regulations include:

1. FAR 37.115-2 has been added to incorporate similar changes made earlier by DOD. No definitive stand has been taken on the use of UOT other than to state "use of uncompensated overtime is not encouraged". Because of the difficulty in evaluating proposals with UOT, procurements for technical and professional services are, to the maximum extent possible, to be acquired on the basis of task to be performed rather than on the basis of the number of hours. When hours are used, solicitations for both prime and subcontracts will require identification of UOT for direct labor personnel. A point is made that UOT charged to indirect cost pools for these direct labor personnel is to be required.

2. FAR 52.237-10, "Identification of Uncompensated Overtime" is now required on all government solicitations for services estimated at $100,000 or more if they are to be acquired on the basis of number of hours provided. The clause provides (a) a definition of UOT (b) calls for its identification (c) requires that the accounting practices used to estimate UOT for bidding purposes be consistent with those for accumulating and reporting UOT in accounting records and (d) "unrealistically low labor rates" be considered a potential risk and an assessment be made before an award.

3. A governmentwide rule has been proposed to have contracting officers make sure that UOT on contracts will not degrade the level of technical expertise required to fulfill contract requirements. They will have to conduct a risk assessment and evaluate any proposals received that reflect (1) unrealistically low labor rates and (2) unbalanced distribution of UOT among skill levels.

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