Basics of Uncompensated Overtime - Worry About “Gaming”
Both the government and contractors competing for awards are concerned. The government has long been concerned that improper treatment of uncompensated overtime provides the potential for “gaming” where the contractor can overcharge cost type contracts and undercharge commercial, fixed type or overfunded cost type contracts or some offerors can create inappropriate advantages over others. Lets consider an exempt employee who earns $1,000 per week and worked 50% of their time on cost type federal contracts and 50% on commercial work. During a normal 40 hour work week the exempt employee would likely charge $25 per hour to both projects ($1,000 divided by 40 hours equals $25 per hour).
Now consider the same exempt employee who works 50 hours during the week, 25 hours on the cost type job and 25 hours on the commercial job. The contractor may intentionally or unintentionally charge the same $25 per hour to both jobs resulting in $1,250 being allocated to direct projects while the exempt employee receives only $1,000. Alternatively, if the contractor charges only eight hours per day to projects no matter how many hours its employees work, the firm may allocate all five hours worked to the cost type contract and only three hours to the commercial contract.
Contractors also need to be concerned if some of its competitors are likely to have their employees work ten hours per day and hence bid and pay them at $20 per hour. Your firm may need to match this ten hours or continue the eight hour day and either lower benefits or risk a non-competitive price.
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