B-159353, OCTOBER 10, 1966, 46 COMP. GEN. 278

B-159353, OCTOBER 10, 1966, 46 COMP. GEN. 278

CONTRACTS - LABOR STIPULATIONS - SERVICE CONTRACT ACT OF 1965 - EXEMPTION PROPRIETY. THE EXEMPTION OF A PROPOSED CONTRACT FOR TRASH COLLECTION SERVICES FROM THE MINIMUM WAGE AND FRINGE BENEFIT PROVISIONS IN THE SERVICE CONTRACT ACT OF 1965, 41 U.S.C. 351-357, ON THE BASIS THAT THE WORK IS TO BE PERFORMED IN AN AREA WHERE WAGE DATA ARE NOT CURRENTLY AVAILABLE AND WHERE A DELAY IN AWARD UNTIL EVALUATION OF SUCH DATA WOULD NOT BE FEASIBLE CONSTITUTES A REASONABLE BASIS FOR SUCH EXEMPTION AND, THEREFORE, A PROTEST AGAINST AWARD OF THE CONTRACT TO A LOWER NONUNION BIDDER WHO DID NOT OFFER THE MINIMUM WAGE AND FRINGE BENEFITS IN THE ACT MUST BE DENIED.

TO REFUSE SERVICE, INC; OCTOBER 10, 1966:

REFERENCE IS MADE TO YOUR LETTERS DATED JUNE 1 AND 20, 1966, WITH ENCLOSURES, PROTESTING AGAINST AN AWARD WHICH WAS MADE TO THE BLUE LINE DISPOSAL COMPANY OF KALAMAZOO, MICHIGAN, UNDER INVITATION FOR BIDS NO. 20- 602-66-1191 ISSUED MARCH 17, 1966, BY THE BASE PROCUREMENT OFFICE, SELFRIDGE AIR FORCE BASE, MICHIGAN, FOR REFUSE COLLECTION SERVICES AT THE CUSTER AIR FORCE STATION, BATTLE CREEK, MICHIGAN.

BIDS WERE OPENED ON APRIL 6, 1966, AND IT APPEARS THAT THE BID OF BLUE LINE WAS $1,115.76 LOWER THAN THE BID OF YOUR CONCERN, THEIR BID BEING $11,625, AND YOUR BID BEING $12,740.76. IN YOUR LETTER OF JUNE 1, 1966, YOU SAY THAT IN MAKING YOUR BID YOU HAD TO USE A BASE WAGE SCALE OF $2.75 PER HOUR PLUS FRINGE BENEFITS AMOUNTING TO $0.645, MAKING A TOTAL OF $3.395 PER HOUR, SINCE YOU HAVE A UNION CONTRACT. HOWEVER, YOU ADVISE THAT BLUE LINE IS NONUNION AND HAS A BASE WAGE SCALE OF APPROXIMATELY $1.50 PER HOUR WITH FEW OR NO FRINGE BENEFITS. IN YOUR LETTER OF JUNE 20, 1966, YOU VARY THESE FIGURES, SAYING THAT $3.39 PER HOUR INCLUDING FRINGE BENEFITS IS YOUR MAXIMUM AND NOT YOUR BASE RATE OF PAYMENT, AND THAT BLUE LINE USES A WAGE SCALE PLUS FRINGE BENEFITS OF $2.37 MAXIMUM. IN VIEW THEREOF, IT IS YOUR CONTENTION THAT THE AWARD TO BLUE LINE IS ILLEGAL BECAUSE THE SERVICE CONTRACT ACT OF 1965 REQUIRES THAT ALL CONTRACTS OF THIS TYPE CONTAIN A MINIMUM WAGE-FRINGE BENEFIT DETERMINATION MADE BY THE SECRETARY OF LABOR, AND THE IFB IN QUESTION DID NOT CONTAIN SUCH A DETERMINATION.

THE SERVICE CONTRACT ACT OF 1965, PUBLIC LAW 89-286, 79 STAT. 1034, 41 U.S.C. 351-357 (SUPP.I), PROVIDES, IN PART, AS FOLLOWS:

SEC. 2. (A) EVERY CONTRACT (AND ANY BID SPECIFICATION THEREFORE) ENTERED INTO BY THE UNITED STATES OR THE DISTRICT OF COLUMBIA IN EXCESS OF $2,500, EXCEPT AS PROVIDED IN SECTION 7 OF THIS ACT, WHETHER NEGOTIATED OR ADVERTISED, THE PRINCIPAL PURPOSE OF WHICH IS TO FURNISH SERVICES IN THE UNITED STATES THROUGH THE USE OF SERVICE EMPLOYEES, AS DEFINED HEREIN, SHALL CONTAIN THE FOLLOWING:

(1) A PROVISION SPECIFYING THE MINIMUM MONETARY WAGES TO BE PAID THE VARIOUS CLASSES OF SERVICE EMPLOYEES IN THE PERFORMANCE OF THE CONTRACT OR ANY SUBCONTRACT THEREUNDER, AS DETERMINED BY THE SECRETARY, OR HIS AUTHORIZED REPRESENTATIVE, IN ACCORDANCE WITH PREVAILING RATES FOR SUCH EMPLOYEES IN THE LOCALITY, WHICH IN NO CASE SHALL BE LOWER THAN THE MINIMUM SPECIFIED IN SUBSECTION (B).

(2) A PROVISION SPECIFYING THE FRINGE BENEFITS TO BE FURNISHED THE VARIOUS CLASSES OF SERVICE EMPLOYEES, ENGAGED IN THE PERFORMANCE OF THE CONTRACT OR ANY SUBCONTRACT THEREUNDER, AS DETERMINED BY THE SECRETARY OR HIS AUTHORIZED REPRESENTATIVE TO BE PREVAILING FOR SUCH EMPLOYEES IN THE LOCALITY. SUCH FRINGE BENEFITS SHALL INCLUDE MEDICAL OR HOSPITAL CARE, PENSIONS ON RETIREMENT OR DEATH, COMPENSATION FOR INJURIES OR ILLNESS RESULTING FROM OCCUPATIONAL ACTIVITY, OR INSURANCE TO PROVIDE ANY OF THE FOREGOING, UNEMPLOYMENT BENEFITS, LIFE INSURANCE, DISABILITY AND SICKNESS INSURANCE, ACCIDENT INSURANCE, VACATION AND HOLIDAY PAY, COSTS OF APPRENTICESHIP OR OTHER SIMILAR PROGRAMS AND OTHER BONA FIDE FRINGE BENEFITS NOT OTHERWISE REQUIRED BY FEDERAL, STATE, OR LOCAL LAW TO BE PROVIDED BY THE CONTRACTOR OR SUBCONTRACTOR. THE OBLIGATION UNDER THIS SUBPARAGRAPH MAY BE DISCHARGED BY FURNISHING ANY EQUIVALENT COMBINATIONS OF FRINGE BENEFITS OR BY MAKING EQUIVALENT OR DIFFERENTIAL PAYMENTS IN CASH UNDER RULES AND REGULATIONS ESTABLISHED BY THE SECRETARY.

(B) (1) NO CONTRACTOR WHO ENTERS INTO ANY CONTRACT WITH THE FEDERAL GOVERNMENT THE PRINCIPAL PURPOSE OF WHICH IS TO FURNISH SERVICES THROUGH THE USE OF SERVICE EMPLOYEES AS DEFINED HEREIN AND NO SUBCONTRACTOR THEREUNDER SHALL PAY ANY OF HIS EMPLOYEES ENGAGED IN PERFORMING WORK ON SUCH CONTRACTS LESS THAN THE MINIMUM WAGE SPECIFIED UNDER SECTION 6/A) (1) OF THE FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED (52 STAT. 1060; 29 U.S.C. 201, ET SEQ.).

SEC. 4. (A) SECTIONS 4 AND 5 OF THE ACT OF JUNE 30, 1936 (49 STAT. 2036), AS AMENDED, SHALL GOVERN THE SECRETARY'S AUTHORITY TO ENFORCE THIS ACT, MAKE RULES, REGULATIONS, ISSUE ORDERS, HOLD HEARINGS, AND MAKE DECISIONS BASED UPON FINDINGS OF FACT, AND TAKE OTHER APPROPRIATE ACTION HEREUNDER.

(B) THE SECRETARY MAY PROVIDE SUCH REASONABLE LIMITATIONS AND MAY MAKE SUCH RULES AND REGULATIONS ALLOWING REASONABLE VARIATIONS, TOLERANCES, AND EXEMPTIONS TO AND FROM ANY OR ALL PROVISIONS OF THIS ACT AS HE MAY FIND NECESSARY AND PROPER IN THE PUBLIC INTEREST OR TO AVOID SERIOUS IMPAIRMENT OF THE CONDUCT OF GOVERNMENT BUSINESS. * * *

AS INDICATED ABOVE, SECTION 4/B) OF PUBLIC LAW 89-286, 41 U.S.C. 353/B), AUTHORIZES THE SECRETARY OF LABOR TO MAKE SUCH RULES AND REGULATIONS ALLOWING REASONABLE VARIATIONS, TOLERANCES, AND EXEMPTIONS TO AND FROM ALL OR ANY PROVISIONS OF THE ACT AS HE MAY FIND NECESSARY AND PROPER. SECRETARY'S ORDER NO. 36-65, THAT AUTHORITY WAS DELEGATED TO THE ADMINISTRATOR OF THE WAGE AND HOUR AND PUBLIC CONTRACTS DIVISIONS. F.R. 15,305. PURSUANT THERETO THE ADMINISTRATOR HAS ISSUED THE REGULATION SET OUT AT 29 CFR 4.5/B), WHICH EXEMPTS FROM THE WAGE AND FRINGE BENEFITS SECTION OF THE ACT THOSE CONTRACTS FOR WHICH NO SUCH WAGE AND FRINGE BENEFITS HAVE BEEN DETERMINED FOR ANY CLASS OF SERVICE EMPLOYEES TO BE EMPLOYED THEREUNDER.

29 CFR 4.5/B) READS, IN PART, AS FOLLOWS:

TO AVOID SERIOUS IMPAIRMENT OF THE CONDUCT OF GOVERNMENT BUSINESS, IT IS HEREBY FOUND NECESSARY AND PROPER TO PROVIDE EXEMPTION (1) FROM THE DETERMINED WAGE AND FRINGE BENEFITS SECTION OF THE ACT (2/A) (1) AND (2/), BUT NOT THE MINIMUM WAGE SPECIFIED UNDER SECTION 6/A) (1) OF THE FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED (2/B) OF THIS ACT), OF ALL CONTRACTS FOR WHICH NO SUCH WAGE HAS BEEN DETERMINED FOR ANY CLASS OF SERVICE EMPLOYEES TO BE EMPLOYED THEREUNDER AND (2) FROM THE FRINGE BENEFITS SECTION (2/A) (2/) OF ALL CONTRACTS AND OF ALL CLASSES OF SERVICE EMPLOYEES EMPLOYED THEREUNDER FOR WHICH SUCH BENEFITS HAVE NOT BEEN DETERMINED. ACCORDINGLY, SUCH EXEMPTIONS ARE HEREBY PROVIDED.

BY LETTER TO THIS OFFICE DATED SEPTEMBER 6, 1966, THE ADMINISTRATOR OF THE WAGE AND HOUR AND PUBLIC CONTRACTS DIVISIONS OF THE DEPARTMENT OF LABOR REPORTS AS FOLLOWS:

UNDER THE MCNAMARA-O-HARA SERVICE CONTRACT ACT, THIS OFFICE IS DELEGATED AUTHORITY TO DETERMINE THE MINIMUM MONETARY WAGES AND FRINGE BENEFITS TO BE PAID SERVICE EMPLOYEES ENGAGED IN THE PERFORMANCE OF FEDERAL SERVICE CONTRACTS EXCEEDING $2,500 IN VALUE, IN ACCORDANCE WITH PREVAILING WAGE RATES AND FRINGE BENEFITS IN THE LOCALITY. GENERALLY, THE PREVAILING WAGE RATE FOR A CLASS OF SERVICE EMPLOYEES HAS BEEN DETERMINED TO BE THAT RATE RECEIVED BY A MAJORITY OF THE EMPLOYEES IN THE CLASS.

WHERE NO WAGE DETERMINATION HAS BEEN MADE WHICH WOULD APPLY TO ANY OF THE CLASSES OF SERVICE EMPLOYEES PERFORMING ON A CONTRACT, SUCH CONTRACT IS EXEMPTED BY THE TERMS OF SECTION 4.5/B) OF THE REGULATIONS, 29 CFR PART 4 FROM THE DETERMINED WAGE AND FRINGE BENEFITS PROVISIONS OF SECTIONS 2/A) (1) AND (2) OF THE ACT. IN SUCH CASE, EACH EMPLOYEE ENGAGED IN THE PERFORMANCE OF THE CONTRACT MUST BE PAID NOT LESS THAN THE RATE PRESCRIBED UNDER SECTION 6/A) (1) OF THE FAIR LABOR STANDARDS ACT, CURRENTLY $1.25 AN HOUR.

A WAGE DETERMINATION APPLICABLE TO REFUSE COLLECTION AT CUSTER AIR FORCE STATION, CALHOUN COUNTY, MICHIGAN, WAS NOT MADE DUE TO A LACK OF DATA ON PREVAILING WAGE RATES AND FRINGE BENEFITS. THERE ARE A NUMBER OF AREAS IN VARIOUS PARTS OF THE COUNTRY WHERE WAGE DATA ARE NOT PRESENTLY AVAILABLE. THIS OFFICE IS WORKING WITH THE BUREAU OF LABOR STATISTICS TO OBTAIN WAGE DATA IN SUCH AREAS.

THE DIVISIONS ENDEAVOR TO ISSUE DETERMINATIONS OF MINIMUM MONETARY WAGES AND FRINGE BENEFITS WHENEVER DATA ARE AVAILABLE. IF SUCH DATA ARE OBTAINED FOR THE CALHOUN COUNTY, MICHIGAN AREA, PROMPT AND CAREFUL CONSIDERATION WILL BE GIVEN TO ISSUING DETERMINATIONS APPLICABLE TO REFUSE COLLECTION AND OTHER SERVICES. HOWEVER, ANY DETERMINATION FOR REFUSE COLLECTION WOULD NOT NECESSARILY REFLECT THE RELATIVELY HIGHER RATES PAID BY REFUSE SERVICE, INC; SINCE THE WAGE RATES PAID ALL OF THE EMPLOYEES IN A CLASS OF SERVICE EMPLOYEES IN THE LOCALITY MUST BE CONSIDERED IN DETERMINING THE PREVAILING RATE.

FROM THE FOREGOING, IT IS CLEAR THAT SECTION 4/B) OF PUBLIC LAW 89 286 AUTHORIZES THE SECRETARY OF LABOR TO MAKE RULES AND REGULATIONS ALLOWING REASONABLE EXEMPTIONS FROM THE ACT, AND THAT THE REGULATION SET OUT AT 29 CFR 4.5/B) WAS PROMULGATED PURSUANT TO SUCH STATUTORY AUTHORIZATION. THE EXEMPTIONS GRANTED BY 29 CFR 4.5/B) APPEAR TO BE BASED UPON A DETERMINATION BY THE DEPARTMENT OF LABOR THAT THE AWARD AND EXECUTION OF SERVICE CONTRACTS (WHICH ARE TO BE PERFORMED IN AREAS WHERE NO MINIMUM WAGES AND FRINGE BENEFITS DETERMINATIONS FOR THE TYPE OF SERVICE CONTRACTS INVOLVED HAVE BEEN MADE AS OF THE DATE INVITATIONS FOR BIDS ARE ISSUED OR NEGOTIATIONS COMMENCED) WOULD BE UNDULY DELAYED, IF THE SOLICITATION OF BIDS OR THE COMMENCEMENT OF NEGOTIATIONS FOR SUCH CONTRACTS WERE DELAYED UNTIL THE DEPARTMENT HAD GATHERED THE NECESSARY WAGE AND FRINGE BENEFITS INFORMATION, EVALUATED SUCH INFORMATION, AND ISSUED THE DETERMINATIONS SPECIFIED IN THE ACT. WE ARE UNABLE TO CONCLUDE THAT THE FOREGOING DOES NOT CONSTITUTE A REASONABLE BASIS, SUCH AS IS CONTEMPLATED BY SECTION 4/B) OF THE ACT, FOR THE EXEMPTION SET OUT IN 29 CFR 4.5/B).

ACCORDINGLY, WE MUST CONCLUDE THAT THE CONTRACT FOR REFUSE COLLECTION SERVICES AT FORT CUSTER WAS PROPERLY EXEMPTED FROM THE ACT, AND YOUR PROTEST AGAINST THE FAILURE TO INCLUDE A SCHEDULE OF MINIMUM WAGES AND FRINGE BENEFITS THEREIN MUST BE DENIED.