B-165493, MAY 1, 1969, 48 COMP. GEN. 719

B-165493, MAY 1, 1969, 48 COMP. GEN. 719

CONTRACTS--LABOR STIPULATIONS--SERVICE CONTRACT ACT OF 1965--CONTRACT TERM EXTENDED WHEN THE AUTHORITY OF THE POSTMASTER GENERAL PRESCRIBED IN 39 U.S.C 6407 (A) TO "CONTINUE IN FORCE" FOR A PERIOD NOT TO EXCEED 6 MONTHS ANY CONTRACT FOR THE TRANSPORTATION OF MAIL UNTIL "A NEW CONTRACT IS MADE" IS EXERCISED TO EXTEND CONTRACTS FOR STAR ROUTE MAIL SERVICE THAT ARE NOT SUBJECT TO THE SERVICE CONTRACT ACT OF 1965, NEW CONTRACTS ARE NOT CREATED, THE EXERCISE OF THE AUTHORITY MERELY OPERATING TO EXTEND THE TERM OF THE ORIGINAL AGREEMENT, AND THE PROVISIONS OF THE ACT ARE NOT REQUIRED TO BE INCORPORATED TO COVER THE EXTENDED PERIOD OF THE CONTRACT, NOR NEW WAGE RATES PROMULGATED UNDER THE ACT IMPOSED DURING THE LIMITED PERIOD WHILE A NEW CONTRACT IS BEING NEGOTIATED OR ADVERTISED. CONTRACTS--LABOR STIPULATIONS--SERVICE CONTRACT ACT OF 1965--CONTRACT MODIFICATIONS THE MODIFICATION OF A STAR ROUTE SERVICE CONTRACT THAT IS NOT SUBJECT TO THE SERVICE CONTRACT ACT OF 1965, TO EXTEND DELIVERY ROUTES OR PROVIDE FOR ADDITIONAL SERVICES PERSUANT TO 37 U.S.C. 6424, OR TO ADJUST UNDER THE AUTHORITY IN SECTION 6423, THE COMPENSATION PRESCRIBED IN THE CONTRACT, CANNOT BE EFFECTED UNILATERALLY BUT REQUIRING THE CONSENSUAL AGREEMENT OF BOTH PARTIES TO THE CONTRACT, THE MODIFICATION CREATES A NEW CONTRACT, AND THE CONTRACT SHOULD, THEREFORE, INCORPORATE THE PROVISIONS OF THE ACT, OR THE WAGE RATES IN EFFECT AT THE TIME THE NEW CONTRACT IS NEGOTIATED.

TO THE POSTMASTER GENERAL, MAY 1, 1969:

REFERENCE IS MADE TO THE LETTER OF OCTOBER 17, 1968, WITH ENCLOSURES, FROM YOUR DEPUTY GENERAL COUNSEL, REQUESTING OUR DECISION AS TO WHETHER THE DEPARTMENT OF LABOR BY ITS REGULATIONS AND INTERPRETATIONS UNDER THE SERVICE CONTRACT ACT OF 1965, PUBLIC LAW 89 286, 79 STAT. 1034, 41 U.S.C. 351, ET.SEQ. (SUPP II), MAY PROPERLY IMPOSE THE REQUIREMENT TO INCLUDE CURRENT WAGE AND FRINGE BENEFIT DETERMINATIONS IN POST OFFICE DEPARTMENT CONTRACTS FOR STAR ROUTE MAIL SERVICE WHEN THE CONTRACTS ARE EXTENDED IN TIME FOR A PERIOD NOT TO EXCEED 6 MONTHS PURSUANT TO 39 U.S.C. 6407 (A); WHEN THE ONE WAY LENGTH OF A ROUTE IS EXTENDED DURING A CONTRACT TERM FOR NOT MORE THAN 100 MILES UNDER AUTHORITY OF 39 U.S.C. 6424 (A), (B), AND (C); AND WHEN COMPENSATION IS ADJUSTED UNDER AUTHORITY OF 39 U.S.C. 6423 (A).

THE RELEVENT SECTIONS OF TITLE 39 OF THE U.S.C. READ, RESPECTIVELY, AS FOLLOWS: SEC. 6407. EXTENSION OF CONTRACTS.

(A) THE POSTMASTER GENERAL MAY CONTINUE IN FORCE BEYOND ITS EXPRESS TERMS ANY REGULAR CONTRACT FOR THE TRANSPORTATION OF MAIL UNTIL A NEW CONTRACT IS MADE, BUT NOT LONGER THAN 6 MONTHS.

** * * * * * SEC. 6423. READJUSTMENT OF COMPENSATION OF CONTRACTORS AND MAIL MESSENGERS.

(A) THE POSTMASTER GENERAL WITH THE CONSENT OF THE CONTRACTOR MAY READJUST THE COMPENSATION UNDER A STAR ROUTE, MOTOR VEHICLE SERVICE OR WATER ROUTE CONTRACT FOR INCREASED OR DECREASED COSTS OCCASIONED BY CHANGED CONDITIONS OCCURRING DURING THE CONTRACT TERM WHICH COULD NOT REASONABLY HAVE BEEN ANTICIPATED AT THE TIME---

(1) THE ORIGINAL BID WAS MADE; OR EXECUTED IN ACCORDANCE WITH SECTION 6416 OF THIS TITLE.

* * * * * * * SEC. 6424. ADDITIONAL COMPENSATION FOR EXTENSION OF ROUTE OR ADDITIONAL SERVICE.

(A) THE POSTMASTER GENERAL, IN CASES WHERE THE MAIL SERVICE WOULD BE IMPROVED, MAY OBTAIN ADDITIONAL SERVICE OR EXTEND ROUTES UNDER CONTRACT. EXTENSIONS ORDERED DURING A CONTRACT TERM MAY NOT, IN THE AGGREGATE, INCREASE THE ONE-WAY LENGTH OF A ROUTE MORE THAN ONE HUNDRED MILES.

(B) THE POSTMASTER GENERAL MAY NOT ALLOW ADDITIONAL COMPENSATION UNDER THIS SECTION AT A RATE PROPORTIONATELY GREATER THAN THE RATE ESTABLISHED BY THE CONTRACT INVOLVED.

(C) WHEN ADDITIONAL SERVICE IS ORDERED, THE POSTMASTER GENERAL SHALL STATE THE SUM ALLOWED THEREFORE IN THE ORDER, AND ENTER IT IN THE RECORDS OF THE DEPARTMENT. HE MAY NOT PAY COMPENSATION FOR ADDITIONAL REGULAR SERVICE RENDERED BEFORE HE ISSUES THE ORDER.

THE PERTINENT LABOR DEPARTMENT REGULATIONS 29 CFR 4.143 AND 4.145, RESPECTIVELY, PUBLISHED AT 33 F.R. 9892 AND 9893, READ AS FOLLOWS:

CHANGES IN CONTRACT COVERAGE SEC. 4.143. EFFECTS OF CHANGES OR EXTENSIONS OF CONTRACTS, GENERALLY.

SOMETIMES AN EXISTING SERVICE CONTRACT IS MODIFIED, AMENDED, OR EXTENDED IN SUCH A MANNER OR AT SUCH A TIME THAT, IF ORIGINALLY ENTERED INTO IN ITS CHANGED FORM AT SUCH TIME, THE APPLICATION OF PROVISIONS OF THE ACT TO IT WOULD BE DIFFERENT AT SUCH TIME FROM THE APPLICATION OF THE ACT'S PROVISIONS TO THE ORIGINAL CONTRACT AT THE TIME IT WAS ENTERED INTO. ONE EXAMPLE IS A CONTRACT TO WHICH THE ACT DID NOT ORIGINALLY APPLY BECAUSE INVITATIONS FOR BIDS THEREON WERE ISSUED PRIOR TO JANUARY 20, 1966, WHICH IS SUBSEQUENTLY EXTENDED. ANOTHER EXAMPLE IS A CONTRACT WHICH, WHEN ORIGINALLY EXECUTED, WAS EXEMPTED FROM THE PROVISIONS OF SECTION 2 (A) OF THE ACT AND SEC. 4.6 REQUIRING SPECIFICATION IN THE CONTRACT OF PREDETERMINED MONETARY WAGE RATES AND FRINGE BENEFITS, BECAUSE NO WAGE DETERMINATION HAD BEEN MADE PRIOR TO THE INVITATION FOR BIDS; AND THEN, AT A LATER TIME, CONTRACT AMENDMENTS RELATIVE TO THE SCOPE OF THE WORK ARE INCORPORATED AFTER PREVAILING WAGE AND FRINGE BENEFIT DETERMINATIONS HAVE BEEN MADE FOR CLASSES OF SERVICE EMPLOYEES IN THE LOCALITY WHICH WILL BE ENGAGED IN THE CONTRACT WORK. THE GENERAL RULE WITH RESPECT TO SUCH CONTRACTS IS, THAT WHENEVER CHANGES ARE MADE IN THE TERMS OF THE CONTRACT, THE PROVISIONS OF THE ACT AND THE REGULATIONS THEREUNDER WILL APPLY TO THE CHANGED CONTRACT IN THE SAME MANNER AND TO THE SAME EXTENT AS THEY WOULD TO A WHOLLY NEW CONTRACT IN THE SAME TERMS IF SUCH A CONTRACT WERE ENTERED INTO AT THE TIME OF THE CHANGE. UNDER THIS RULE, THE CONTRACT IN THE FIRST EXAMPLE WOULD BECOME SUBJECT TO THE ACT AND REGULATIONS WHEN THE CHANGES WERE EFFECTED IN IT, ALTHOUGH IT WAS NOT ORIGINALLY COVERED. SIMILARLY, THE SPECIFIED MONETARY WAGES AND FRINGE BENEFITS WOULD HAVE TO BE INCORPORATED IN THE AMENDED CONTRACT IN THE SECOND EXAMPLE, ALTHOUGH NOT REQUIRED IN THE CONTRACT ORIGINALLY ENTERED INTO. HOWEVER, CONTRACT MODIFICATIONS OR AMENDMENTS (OTHER THAN CONTRACT EXTENSIONS) THAT ARE UNRELATED TO THE LABOR REQUIREMENTS OF A CONTRACT WILL NOT BE DEEMED TO CREATE A NEW CONTRACT FOR PURPOSES OF THE ACT. IN ADDITION, ONLY SIGNIFICANT CHANGES RELATED TO LABOR REQUIREMENTS WILL BE CONSIDERED AS CREATING NEW CONTRACTS. THIS LIMITATION ON THE APPLICATION OF THE ACT HAS BEEN FOUND TO BE A REASONABLE ONE AND NECESSARY AND PROPER IN THE PUBLIC INTEREST AND TO AVOID SERIOUS IMPAIRMENT OF THE CONDUCT OF GOVERNMENT BUSINESS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4 (B) OF THE ACT. ALSO, A CONTRACT WILL BE DEEMED ENTERED INTO WHEN THE TERM OF AN EXISTING CONTRACT IS EXTENDED, PURSUANT TO AN OPTION CLAUSE OR OTHERWISE, SO THAT THE CONTRACTOR FURNISHES SERVICES OVER AN EXTENDED PERIOD OF TIME, RATHER THAN BEING GRANTED EXTRA TIME TO FULFILL THE ORIGINAL COMMITMENT.

* * * * * * * SEC. 4.145. EXTENDED TERM CONTRACTS.

SOMETIMES SERVICE CONTRACTS ARE ENTERED INTO FOR A TERM OF YEARS; HOWEVER, THEIR CONTINUATION IN EFFECT IS SUBJECT TO THE APPROPRIATION BY CONGRESS OF FUNDS FOR EACH NEW FISCAL YEAR. IN SUCH EVENT, FOR PURPOSES OF THIS ACT, A CONTRACT SHALL BE DEEMED ENTERED INTO AT THE BEGINNING OF EACH NEW FISCAL YEAR DURING WHICH THE TERMS OF THE ORIGINAL CONTRACT ARE MADE EFFECTIVE BY AN APPROPRIATION FOR THE PURPOSE. IN OTHER CASES A SERVICE CONTRACT, ENTERED INTO FOR A SPECIFIED TERM BY A GOVERNMENT AGENCY, MAY CONTAIN A PROVISION SUCH AS AN OPTION CLAUSE UNDER WHICH THE AGENCY MAY UNILATERALLY EXTEND THE CONTRACT FOR A PERIOD OF THE SAME LENGTH OR OTHER STIPULATED PERIOD. IF A NEW APPROPRIATION IS REQUIRED TO FINANCE SUCH EXTENSION, THE RULE JUST STATED WILL APPLY. IN ANY EVENT, HOWEVER, SINCE THE EXERCISE OF THE OPTION RESULTS IN THE RENDITION OF SERVICES FOR A NEW OR DIFFERENT PERIOD NOT INCLUDED IN THE TERM FOR WHICH THE CONTRACTOR IS OBLIGATED TO FURNISH SERVICES OR FOR WHICH THE GOVERNMENT IS OBLIGATED TO PAY UNDER THE ORIGINAL CONTRACT IN THE ABSENCE OF SUCH ACTION TO EXTEND IT, THE CONTRACT FOR THE ADDITIONAL PERIOD IS WITHIN THE INTENDMENT OF THE ACT IN THE SAME POSITION AS A WHOLLY NEW CONTRACT WITH RESPECT TO APPLICATION OF THE ACT'S PROVISIONS AND THE REGULATIONS THEREUNDER.

THE SERVICE CONTRACT ACT, IN PERTINENT PART, PROVIDES AS FOLLOWS:

SEC. 9. THIS ACT SHALL APPLY TO ALL CONTRACTS ENTERED INTO PURSUANT TO NEGOTIATIONS CONCLUDED OR INVITATIONS FOR BIDS ISSUED ON OR AFTER NINETY DAYS FROM THE DATE OF ENACTMENT OF THIS ACT (JANUARY 20, 1966).

IN THE LIGHT OF THE QUOTED PROVISION, THE ONLY BASIS UPON WHICH THE ACT COULD BE CONSIDERED TO BECOME APPLICABLE TO A CONTRACT NOT SUBJECT TO IT WHEN MADE WOULD BE THAT THE EXTENSION CREATES A NEW CONTRACT, WHICH WOULD UPON ITS CREATION BECOME SUBJECT TO THE ACT. SEE 42 COMP. GEN. 562. INCORPORATION OF A NEW OR DIFFERENT MINIMUM WAGE SCHEDULE INTO A CONTRACT ALREADY INCLUDING ONE WOULD APPEAR TO BE PROPER ONLY ON THE SAME BASIS.

IN 17A C.J.S; CONTRACTS, SECTION 449, THE RULE IS STATED THAT "GENERALLY AN OPTION TO RENEW A CONTRACT IS THE RIGHT TO REQUIRE THE EXECUTION OF A NEW CONTRACT WHILE AN OPTION TO EXTEND THE TIME MERELY OPERATES TO EXTEND THE TERM OF THE ORIGINAL AGREEMENT." UNDER THIS RULE WE BELIEVE THAT EXERCISE OF THE AUTHORITY OF THE POSTMASTER GENERAL TO "CONTINUE IN FORCE" ANY REGULAR CONTRACT "UNTIL A NEW CONTRACT IS MADE" COULD NOT BE CONSIDERED AS CREATING A NEW CONTRACT. BOTH THE WORDS "CONTINUE IN FORCE" AND THE LIMITATION "UNTIL A NEW CONTRACT IS MADE" ARE COMPLETELY INCONSISTENT WITH SUCH A VIEW, AND WE DO NOT BELIEVE THAT THE EXERCISE OF THIS AUTHORITY, INTENDED ONLY TO INSURE THE CONTINUITY OF SERVICE, FOR NOT MORE THAN 6 MONTHS WHILE A NEW CONTRACT IS BEING NEGOTIATED OR ADVERTISED, COULD REASONABLY BE CONSIDERED TO REQUIRE THE IMPOSITION OF THE SERVICE CONTRACT ACT PROVISIONS, OR NEW RATES PROMULGATED UNDER THAT ACT, DURING THAT LIMITED PERIOD.

HOWEVER, WITH RESPECT TO THE AUTHORITY OF THE POSTMASTER GENERAL TO READJUST THE COMPENSATION OF A CONTRACTOR UNDER 39 U.S.C. 6423, SINCE SUCH READJUSTMENT CANNOT BE EFFECTED UNILATERALLY BUT ONLY WITH THE CONSENT OF THE CONTRACTOR, THE REQUIRED CONSENSUAL AGREEMENT OF THE PARTIES MUST BE REGARDED AS A NEW CONTRACT WHICH SHOULD THEREFORE INCORPORATE THE SERVICE CONTRACT ACT PROVISIONS OR RATES IN EFFECT AT THE TIME IT IS NEGOTIATED.

AS TO EXTENSIONS OF ROUTES OR PROVISIONS FOR ADDITIONAL SERVICE PURSUANT TO THE AUTHORITY OF 31 U.S.C. 6424, WE DO NOT CONSTRUE THE LANGUAGE OF THAT SECTION AS VESTING IN THE POSTMASTER GENERAL POWER TO EFFECT SUCH MODIFICATIONS OF CONTRACTS BY UNILATERAL ACTION WITHOUT THE CONSENT OF THE CONTRACTOR. IT APPEARS RATHER THAT THIS PROVISION WAS INTENDED TO ENABLE THE POSTAL AUTHORITIES TO NEGOTIATE LIMITED MODIFICATIONS OF SUCH CONTRACTS WITHOUT THE NECESSITY OF READVERTISING THE ENTIRE SERVICE REQUIREMENT, AS MIGHT HAVE BEEN REQUIRED IN THE ABSENCE OF SUCH AUTHORITY. SEE H. REPT. NO. 2270, 87TH CONGRESS, ACCOMPANYING H.R. 10936, AND TESTIMONY OF POST OFFICE DEPARTMENT OFFICIALS AT HEARINGS BEFORE THE POST OFFICE AND CIVIL SERVICE COMMITTEE ON JUNE 28, 1952, ON THAT BILL, THE PROVISIONS OF WHICH WERE INCLUDED IN THE ACT OF OCTOBER 23, 1952, PUBLIC LAW 87-865, WHICH INCREASED THE PERMISSIBLE LENGTHENING OF ROUTES FROM 50 TO 100 MILES. MR. BATRUS, DEPUTY ASSISTANT POSTMASTER GENERAL, BUREAU OF TRANSPORTION, IN ANSWER TO A SPECIFIC QUESTION, STATED THAT AN EXTENSION UNDER 39 U.S.C. 6424 WOULD BE "COMPLETELY DISCRETIONARY ON OUR PART, AND IT WOULD HAVE TO BE BY MUTUAL AGREEMENT ON HIS (CONTRACTOR'S) PART." WE THEREFORE REACH THE SAME CONCLUSION WITH RESPECT TO EXTENSIONS UNDER THAT SECTION AS STATED ABOVE WITH RESPECT TO ADJUSTMENTS UNDER SECTION 6423.

WE ARE TRANSMITTING A COPY OF THIS DECISION TO THE SECRETARY OF LABOR.