B-162904, NOVEMBER 27, 1967, 47 COMP. GEN. 313

B-162904, NOVEMBER 27, 1967, 47 COMP. GEN. 313

CONTRACTS - INCREASED COSTS - LABOR COSTS UNDER A PERSONAL SERVICE CONTRACT WITH THE GOVERNMENT, A CONTRACTOR WHO PURSUANT TO THE SERVICE CONTRACT ACT OF 1965 IS REQUIRED TO PAY THE MINIMUM WAGE RATES SPECIFIED IN THE FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED, IS NOT ENTITLED TO A PRICE ADJUSTMENT FOR THE SUBSEQUENT WAGE INCREASE PRESCRIBED BY THE FAIR LABOR STANDARDS AMENDMENT OF 1966, NEITHER THE AMENDMENT NOR THE CONTRACT PROVIDING FOR AN ADJUSTMENT TO COVER THE WAGE INCREASE, AND THE CONTRACTOR HAVING BASED ITS BID ON THE ASSUMPTION THAT LABOR COULD BE OBTAINED FOR THE PERIOD OF THE CONTRACT AT NO MORE THAN THE THEN CURRENT MINIMUM WAGE FIXED BY THE ACT, VOLUNTARILY ASSUMED THE RISK OF INCREASED COSTS, WHETHER OCCASIONED BY A CHANGE IN LAW OR OTHERWISE, AND THE FACT THAT THE INCREASE IN THE WAGE RATES WAS THE RESULT OF GOVERNMENT ACTION DOES NOT AFFORD THE CONTRACTOR GREATER RIGHTS THAN IF THE CONTRACT HAD BEEN WITH ANY OTHER PARTY.

TO THE OLSTEN TEMPORARY SERVICES, NOVEMBER 27, 1967:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 6, 1967, REQUESTING RELIEF IN A MATTER ARISING IN CONNECTION WITH YOUR PERFORMANCE OF GENERAL SERVICES ADMINISTRATION CONTRACT NO. GS-07S-10872 FOR MATERIAL HANDLING SERVICES WHICH WAS AWARDED JUNE 13, 1966.

UNDER THE SERVICE CONTRACT ACT OF 1965, 41 U.S.C. 351 ET. SEQ., CONTRACTORS FOR PERSONAL SERVICES TO THE GOVERNMENT ARE REQUIRED TO PAY THEIR SERVICE EMPLOYEES NO LESS THAN THE MINIMUM WAGES SPECIFIED IN THE FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED, 29 U.S.C. 201 ET. SEQ. AT THE TIME YOUR FIRM SUBMITTED ITS BID AND UNDERTOOK TO PERFORM ITS CONTRACT, THE STATUTORY MINIMUM WAGE RATE WAS $1.25 PER HOUR. HOWEVER, UNDER THE FAIR LABOR STANDARDS AMENDMENT OF 1966, 80 STAT. 830, WHICH WAS APPROVED SEPTEMBER 23, 1966, AND BECAME EFFECTIVE FEBRUARY 1, 1967, THE MINIMUM WAGE RATE WAS INCREASED TO $1.40 PER HOUR. THE GENERAL SERVICES ADMINISTRATION REFUSED YOUR REQUEST FOR AN ADJUSTMENT IN YOUR CONTRACT PRICE TO COMPENSATE YOU FOR THE INCREASED LABOR COST, AND YOU ARE CLAIMING THE AMOUNT WHICH YOU COMPUTE TO BE THE DIFFERENCE BETWEEN THE CONTRACT RATE AND WHAT YOU CONSIDER A PROPER RATE, FOR THE PERIOD FROM FEBRUARY 1, 1967, TO THE EXPIRATION OF YOUR CONTRACT.

IN THE ABSENCE OF A CONTRACT PROVISION FOR PRICE ADJUSTMENT TO COMPENSATE FOR CHANGES IN LABOR RATES, THIS OFFICE IS WITHOUT AUTHORITY TO EITHER AUTHORIZE OR DIRECT AN INCREASE IN CONTRACT PRICE ON THE BASIS OF AN AMENDMENT TO THE MINIMUM WAGE LAW, SINCE THE STATUTE DID NOT AUTHORIZE SUCH ADJUSTMENT. WHATEVER MAY APPEAR TO BE THE EQUITIES OR ETHICS OF THE CASE, WE ARE REQUIRED TO SETTLE CLAIMS AGAINST THE GOVERNMENT ON THE BASIS OF LAW, AND IN THIS SITUATION WE FIND THE LAW TO BE CLEAR THAT A PARTY ENTERING INTO A CONTRACT TO FURNISH CERTAIN SPECIFICALLY DESCRIBED SERVICES FOR A DEFINITE PERIOD OF TIME AT A FIXED RATE OF CHARGE BEARS THE RISK OF SUBSEQUENT EVENTS WHICH MAY AFFECT HIS COST OF PERFORMANCE, UNLESS THE CONTRACT PROVIDES OTHERWISE. IN THE CASE OF COLUMBUS RAILWAY, POWER AND LIGHT CO. V. THE CITY OF COLUMBUS, 249 U.S. 399, THE SUPREME COURT HELD THAT A FIFTY PERCENT WAGE INCREASE ORDERED BY THE WAR LABOR BOARD IN 1918 DID NOT ABSOLVE THE COMPANY FROM ITS OBLIGATION, UNDER A 25 YEAR FRANCHISE GRANTED IN 1901, TO CONTINUE TO OPERATE A STREET RAILWAY SYSTEM AT RATES OF FARE FIXED IN THE FRANCHISE. IN ANOTHER WORLD WAR I CASE, CONVERSE V. UNITED STATES, 61 C. CLS. 672, THE COURT OF CLAIMS DENIED RECOVERY TO A GOVERNMENT CONTRACTOR WHOSE LABOR COSTS HAD BEEN INCREASED AS THE RESULT OF A PRESIDENTIAL PROCLAMATION.

IT HAS ALSO BEEN HELD THAT A STIPULATION IN A GOVERNMENT CONTRACT REQUIRING THE CONTRACTOR TO PAY NOT LESS THAN A STIPULATED SCALE OF WAGES IS NOT A REPRESENTATION BY THE GOVERNMENT THAT THE CONTRACTOR WILL BE ABLE TO OBTAIN LABOR AT THE STIPULATED RATES (UNITED STATES V. BINGHAMTON CONSTRUCTION CO., 347 U.S. 171) AND ON THIS PRINCIPLE IT IS CLEAR THAT IF YOU CHOSE TO BASE YOUR BID FOR YOUR CONTRACT ON THE ASSUMPTION THAT YOU WOULD BE ABLE TO OBTAIN LABOR THROUGHOUT THE TERM OF THE CONTRACT AT NO MORE THAN THE THEN CURRENT MINIMUM WAGE FIXED BY THE FAIR LABOR STANDARDS ACT YOU VOLUNTARILY ASSUMED THE RISK OF ANY INCREASED COSTS, WHETHER OCCASIONED BY A CHANGE IN THE LAW OR OTHERWISE. YOU MUST HAVE BEEN AWARE THAT THE MINIMUM WAGE RATE FIXED BY THE STATUTE HAD ALREADY BEEN INCREASED SEVERAL TIMES SINCE ITS ENACTMENT IN 1938 AND THAT FURTHER INCREASES WERE NOT UNLIKELY.

THE FACT THAT THE INCREASE WAS THE RESULT OF GOVERNMENT ACTION AFFORDS YOU NO GREATER RIGHTS THAN IF YOUR CONTRACT HAD BEEN WITH ANY OTHER PARTY, SINCE THE LAW WAS OF GENERAL APPLICATION AND NOT DIRECTED PARTICULARLY AT YOU OR YOUR CONTRACT. INASMUCH AS THE CONGRESS DID NOT SEE FIT TO PROVIDE IN THIS LAW FOR ANY ADJUSTMENT OF CONTRACT PRICES WHERE THE COSTS OF PERFORMANCE OF GOVERNMENT CONTRACTS WERE INCREASED BY THE CHANGE IN THE MINIMUM WAGE, AND YOUR CONTRACT CONTAINED NO PROVISION FOR SUCH ADJUSTMENT, NO OFFICIAL OF THE GOVERNMENT IS AUTHORIZED TO MAKE ANY ADJUSTMENT.

IN VIEW OF THE FOREGOING YOUR CLAIM MUST BE REJECTED AS HAVING NO LEGAL BASIS.