[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR22.404-12]

[Page 408-409]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 22_APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS--Table of Contents
 
    Subpart 22.4_Labor Standards for Contracts Involving Construction
 
Sec.  22.404-12   Labor standards for contracts containing construction 
requirements and option provisions that extend the term of the contract.

    (a) Each time the contracting officer exercises an option to extend 
the term of a contract for construction, or a contract that includes 
substantial and segregable construction work, the contracting officer 
must modify the contract to incorporate the most current wage 
determination.
    (b) If a contract with an option to extend the term of the contract 
has indefinite-delivery or indefinite-quantity construction 
requirements, the contracting officer must incorporate the wage 
determination incorporated into the contract at the exercise of the 
option into task orders issued during that option period. The wage 
determination will be effective for the complete period of performance 
of those task orders without further revision.
    (c) The contracting officer must include in fixed-price contracts a 
clause that specifies one of the following methods, suitable to the 
interest of the Government, to provide an allowance for any increases or 
decreases in labor costs that result from the inclusion of the current 
wage determination at the exercise of an option to extend the term of 
the contract:
    (1) The contracting officer may provide the offerors the opportunity 
to bid or propose separate prices for each option period. The 
contracting officer

[[Page 409]]

must not further adjust the contract price as a result of the 
incorporation of a new or revised wage determination at the exercise of 
each option to extend the term of the contract. Generally, this method 
is used in construction-only contracts (with options to extend the term) 
that are not expected to exceed a total of 3 years.
    (2) The contracting officer may include in the contract a separately 
specified pricing method that permits an adjustment to the contract 
price or contract labor unit price at the exercise of each option to 
extend the term of the contract. At the time of option exercise, the 
contracting officer must incorporate a new wage determination into the 
contract, and must apply the specific pricing method to calculate the 
contract price adjustment. An example of a contract pricing method that 
the contracting officer might separately specify is incorporation in the 
solicitation and resulting contract of the pricing data from an annually 
published unit pricing book (e.g., the R.S. Means Cost Estimating 
System, or the U.S. Army Computer-Aided Cost Estimating System), which 
is multiplied in the contract by a factor proposed by the contractor 
(e.g., .95 or 1.1). At option exercise, the contracting officer 
incorporates the pricing data from the latest annual edition of the unit 
pricing book, multiplied by the factor agreed to in the basic contract. 
The contracting officer must not further adjust the contract price as a 
result of the incorporation of the new or revised wage determination.
    (3) The contracting officer may provide for a contract price 
adjustment based solely on a percentage rate determined by the 
contracting officer using a published economic indicator incorporated 
into the solicitation and resulting contract. At the exercise of each 
option to extend the term of the contract, the contracting officer will 
apply the percentage rate, based on the economic indicator, to the 
portion of the contract price or contract unit price designated in the 
contract clause as labor costs subject to the provisions of the Davis-
Bacon Act. The contracting officer must insert 50 percent as the 
estimated portion of the contract price that is labor unless the 
contracting officer determines, prior to issuance of the solicitation, 
that a different percentage is more appropriate for a particular 
contract or requirement. This percentage adjustment to the designated 
labor costs must be the only adjustment made to cover increases in wages 
and/or benefits resulting from the incorporation of a new or revised 
wage determination at the exercise of the option.
    (4) The contracting officer may provide a computation method to 
adjust the contract price to reflect the contractor's actual increase or 
decrease in wages and fringe benefits (combined) to the extent that the 
increase is made to comply with, or the decrease is voluntarily made by 
the contractor as a result of incorporation of, a new or revised wage 
determination at the exercise of the option to extend the term of the 
contract. Generally, this method is appropriate for use only if contract 
requirements are predominately services subject to the Service Contract 
Act and the construction requirements are substantial and segregable. 
The methods used to adjust the contract price for the service 
requirements and the construction requirements would be similar.

[66 FR 53481, Oct. 22, 2001]