B-175356, APR 13, 1972

B-175356, APR 13, 1972

PROCUREMENT LAW - SERVICE CONTRACT ACT OF 1965 - INCREASED MINIMUM WAGE RATE - REQUEST FOR NEGOTIATED ADJUSTMENT CONCERNING WHETHER THE GENERAL SERVICES ADMINISTRATION IS REQUIRED TO NEGOTIATE AN EQUITABLE ADJUSTMENT ON CONTRACTS WITH RICE CLEANING SERVICES, INC., AND WORLD WIDE SERVICES, INC., DUE TO THE SECRETARY OF LABOR'S DETERMINATION OF AN INCREASE IN THE DISTRICT OF COLUMBIA MINIMUM WAGE RATE. ESSENTIALLY, IT IS ALLEGED THAT THE ACTION OF THE SECRETARY, AS AN AGENT OF THE FEDERAL GOVERNMENT, CONSTITUTES A MATERIAL ALTERATION OF THE CONTRACT REQUIREMENTS. SECTION 2(A)(1) OF THE SERVICE CONTRACT ACT OF 1965, WHICH REQUIRES THE PAYMENT OF THE PREVAILING MINIMUM WAGE ON ALL GOVERNMENT CONTRACTS, DOES NOT GUARANTEE THAT THE CONTRACTOR WILL BE ABLE TO OBTAIN LABOR AT SUCH MINIMUM RATES. UNITED STATES V BINGHAMPTON CONSTRUCTION CO., 347 U.S. 171 (1954). NO MODIFICATION IS REQUIRED SINCE THE ORIGINAL CONTRACT ONLY BINDS THE CONTRACTOR TO THE ORIGINAL RATE. HOWEVER, IT IS THE OPINION OF THE COMP. GEN. THAT RICE AND WORLD ARE REQUIRED TO ABIDE BY THE NEWLY- ENACTED RATE IN THE DISTRICT OF COLUMBIA JUST AS THEY WOULD BE REQUIRED TO DO IN ANY OTHER STATE'S JURISDICTION B 161312, MAY 5, 1967. SINCE IT IS WELL-SETTLED THAT AN AMENDMENT TO THE LAW IS A SOVEREIGN ACT FOR WHICH THE GOVERNMENT, AS A CONTRACTOR, IS NOT RESPONSIBLE, THE COMP. GEN. MUST CONCLUDE THAT RICE AND WORLD ARE REQUIRED TO BEAR THE BURDEN OF THE NEW WAGE RATE.

TO ISRAEL & MANESS:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 29, 1972, WITH ENCLOSURES, REQUESTING A RULING, ON BEHALF OF RICE CLEANING SERVICES, INC. (RICE) AND WORLD WIDE SERVICES, INC. (WORLD), SMITHVILLE, TENNESSEE, AS TO WHETHER THE GENERAL SERVICES ADMINISTRATION (GSA) IS REQUIRED TO NEGOTIATE AN EQUITABLE ADJUSTMENT TO FOUR GSA CONTRACTS (GS 03B-12872, GS-03B- 12836(NEG), GS-03B-12879 AND GS-03B-12890) DUE TO AN INCREASE IN THE DISTRICT OF COLUMBIA MINIMUM WAGE RATE, EFFECTIVE AUGUST 9, 1971, FROM $1.94 PER HOUR TO $2.05 PER HOUR.

YOU ALLEGE THAT THE ENACTMENT OF THE DISTRICT OF COLUMBIA'S NEW MINIMUM WAGE RATE WAS NOT THE ACT OF AN INDEPENDENT SOVEREIGN BUT THE DEED OF AN AGENT OF THE FEDERAL GOVERNMENT. IN THIS REGARD, YOU CONTEND THAT FOR GOVERNMENT CONTRACTS, TO BE PERFORMED IN THE DISTRICT OF COLUMBIA, THE SECRETARY OF LABOR'S DETERMINATION OF THE NEW PREVAILING WAGE RATE, WHICH WAS MADE PURSUANT TO 41 U.S.C. 351(A)(1) AND WHICH ADOPTS THE NEW RATE OF $2.05 AS THE PREVAILING RATE, MUST BE CONSIDERED AS AN ORDER OF THE FEDERAL GOVERNMENT. YOU STATE, THEREFORE, THAT THE SECRETARY OF LABOR'S DECISION, AS AGENT OF THE FEDERAL GOVERNMENT, HAD THE EFFECT OF REQUIRING RICE AND WORLD TO PAY A NEW AND HIGHER PREVAILING WAGE RATE TO THEIR EMPLOYEES, COSTING THEM APPROXIMATELY $50,000 MORE THAN WAS ORIGINALLY CONTEMPLATED AT THE TIME THE CONTRACTS WERE AWARDED. AS A RESULT, YOU ALLEGE THAT THE GOVERNMENT'S DETERMINATION REQUIRING AN ADDITION TO THE COST OF PERFORMANCE, IS AN UNAUTHORIZED, SUBSTANTIAL AND MATERIAL ALTERATION IN THE CONTRACT REQUIREMENTS. YOU CONTEND THAT THIS GOVERNMENTAL ACTION CONSTITUTES A RETROACTIVE CONFISCATION OF THE CONTRACTOR'S PROFITS AND THAT REFUSAL TO NEGOTIATE AN ADJUSTMENT TO REFLECT THE INCREASED COSTS OF PERFORMANCE, MADE NECESSARY BY THE SECRETARY OF LABOR'S DETERMINATION OF THE PREVAILING WAGE RATE, CONSTITUTES A TAKING OF THE CONTRACTOR'S CONTRACTUAL RIGHT TO A FAIR AND JUST PROFIT WITHOUT DUE PROCESS OF LAW.

WE CANNOT AGREE WITH YOUR CONTENTION THAT THE ENACTMENT OF A NEW DISTRICT OF COLUMBIA WAGE RATE, COUPLED WITH A SUBSEQUENT DETERMINATION BY THE SECRETARY OF LABOR THAT THE NEW RATE WILL BE THE PREVAILING RATE FOR FUTURE GOVERNMENT CONTRACTS TO BE PERFORMED IN THE DISTRICT OF COLUMBIA, REQUIRES AN EQUITABLE ADJUSTMENT OF EXISTING CONTRACTS. IT SHOULD BE NOTED THAT SECTION 2(A)(1) OF THE SERVICE CONTRACT ACT OF 1965 PROVIDES THAT "EVERY CONTRACT," WITH CERTAIN EXCEPTIONS, ENTERED INTO BY THE UNITED STATES OR THE DISTRICT OF COLUMBIA, THE PRINCIPAL PURPOSE OF WHICH IS TO FURNISH SERVICES THROUGH THE USE OF SERVICE EMPLOYEES, SHALL CONTAIN "A PROVISION SPECIFYING THE MINIMUM MONETARY WAGES TO BE PAID THE VARIOUS CLASSES OF SERVICE EMPLOYEES *** AS DETERMINED BY THE SECRETARY (OF LABOR) *** IN ACCORDANCE WITH PREVAILING RATES FOR SUCH EMPLOYEES IN THE LOCALITY *** ." WE BELIEVE IT IS SETTLED THAT THIS TYPE OF CONTRACT PROVISION DOES NOT CONSTITUTE A REPRESENTATION OR COMMITMENT BY THE GOVERNMENT THAT THE CONTRACTOR WILL BE ABLE TO OBTAIN LABOR AT SUCH MINIMUM RATES. SEE UNITED STATES V BINGHAMPTON CONSTRUCTION CO., 347 U.S. 171 (1954); 50 COMP. GEN. 648 (1971).

IN 49 COMP. GEN. 186 (1969), WE STATED THAT ONLY RATES DETERMINED TO BE THE PREVAILING RATES BY THE SECRETARY OF LABOR AND INCLUDED IN THE CONTRACT WHEN SIGNED, HAVE ANY LEGAL EFFECT DURING THE LIFE OF THE CONTRACT FOR PURPOSE OF FULFILLING THE SERVICE CONTRACT ACT OF 1965 REQUIREMENTS. ACCORDINGLY, WHILE IT IS OUR VIEW THAT THE SECRETARY OF LABOR'S DETERMINATION OF THE NEW PREVAILING RATE, SUBSEQUENT TO SIGNING OF THE CONTRACTS, DOES NOT REQUIRE A MODIFICATION OF THE ORIGINAL CONTRACTS SINCE IT HAS NO LEGAL EFFECT ON THEM, WE ARE NEVERTHELESS OF THE OPINION THAT RICE AND WORLD MUST ABIDE BY THE NEWLY ENACTED DISTRICT OF COLUMBIA MINIMUM WAGE RATE AS THEY WOULD BE REQUIRED TO DO IN ANY OTHER STATE'S JURISDICTION. SEE N. Y. LABOR LAW SEC 652 (MCKINNEY 1970). SEE ALSO 29 U.S.C. 206; 47 COMP. GEN. 313 (1967); B 161312, MAY 5, 1967.

THE DECISIONS OF THIS OFFICE CITED ABOVE, COPIES ENCLOSED, ENUNCIATE OUR POSITION THAT AN AMENDMENT TO THE LAW IS A SOVEREIGN ACT, AND THE GOVERNMENT, AS A CONTRACTOR, IS NOT RESPONSIBLE FOR THE CONSEQUENCES OR EFFECT THEREOF. SEE HOROWITZ V UNITED STATES, 267 U.S. 458 (1925); THE SUNSWICK CORP. V UNITED STATES, 75 F. SUPP. 221, 109 CT. CL. 772 (1948). IN ADDITION, IN 47 COMP. GEN. 313 (1967), WE STATED 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 VIEW OF THE CASES CITED ABOVE, WE MUST CONCLUDE THAT RICE AND WORLD ARE REQUIRED TO BEAR THE BURDEN OF THE NEW DISTRICT OF COLUMBIA MINIMUM WAGE, AND YOUR REQUEST FOR A RULING WHICH WOULD PERMIT GSA TO NEGOTIATE AN ADJUSTMENT TO THE SUBJECT CONTRACTS MUST THEREFORE BE DENIED.