New FAC Issued

The Federal Acquisitions councils issued a final rule Federal Acquisition Circular 2005-36 where two are of particular interest to our government contractor readers:

1. Time-and-material and labor-hour contracts that are subject to the Service Contract Act will incorporate FAR clauses 52.222-43, Fair Labor Standards Act and Service Contract Act- Price Adjustments and 52.22244, Fair Labor Standards Act and Service Contract Act – Price Adjustment. The rule writers have stated the changes will avoid more cost by means of adjusting contract unit price labor rates. Contracts covered by the SCA allow contractors to adjust contract prices for labor and fringe benefit cost increases determined by the Labor Department to ensure “prevailing wages” are paid to contractor employees. Certain contractual methods of adjusting for contract labor rates such as allowing for wage and benefit escalations, equitable adjustments or economic price adjustments will also allow for corresponding increases in profit, overhead and general administrative costs because those rates are applied to the increased labor and fringe benefit amounts. The FAR clauses above provide for the relevant increases in labor and fringe benefits but explicitly prohibit any increase in profit, overhead or G&A that is associated with the wages and fringe benefits. Of course in the unlikely event of a decrease in wages or fringe benefits, the profit, overhead and G&A will also not be lowered.

2. The FAR will be revised to reflect Cost Accounting Standards clauses to make the CAS applicability threshold the same as the threshold for compliance with the Truth in Negotiations Act (currently $650,000).

{TAG_FORM_TITLE}