[Code of Federal Regulations]

[Title 48, Volume 1]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 48CFR22.404-12]



[Page 424-425]

 

            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 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



[[Page 425]]



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]