Page images

which appellant had to pay with respect to all labor classi-
fications within the coverage of the Fair Labor Standards Act
for labor performed in September, October and November 1961
(a period subsequent to the period covered by the clain in
ASBCA No. 8136), after the amendment effective 3 September
1961 of the Fair Labor Standards Act increasing the minimum
wage rate fixed by the Act. The contract did not prescribe
any wage rate for custodial labor. There is no contention
or evidence that payment of the increased wages was caused
or directed by the contracting officer or any other repre-
sentative of the Government acting in a contractual capacity,
under the 'changes'clause or otherwise, or was due to any
Governmental action other than a public and general Act of
Congress increasing the statutory minimum wage rate. The
contract contains no express provision for increasing the
contract price on account of the statutory increase in the
statutory minimum wage rate (or] for otherwise shifting the
burden of that increase to the Government, under the circum-
stances present. Appellant contends that subparagraph (c)
of the default clause in the general provisions has that
effect but the contention is without merit. Subparagraph
(c) merely provides that where the contractor's failure to
perform is due to causes beyond the control and without
the fault or negligence of the contractor, including, but
not restricted to, among other things, acts of the Govern-
ment in either its sovereign or contractual capacity, the
contractor will then not be obligated to pay the Government
the excess costs incurred by the Government in procuring
the services elsewhere as authorized by subparagraph (b)
of the default clause. Subparagraph (c) contains no express
or implied undertaking by the Government to increase the
contract price or otherwise make payment on account of
costs incurred by the contractor for any reason. In short,
the record discloses no contractual commitment on behalf
of the Government to assume in any form the claimed in-
creased costs of performance attributable to the general
and public Act of Congress increasing the statutory mini-
mum wage rate after the present contract had been entered

STATES, 108 Ct1. Cls. 718 (19470; FRANCIS J. KIRCHOF ET AL.
v. UNITED STATES, 121 Ct. Cls. 476 (1952); CF. A. J. Paretta
110 Ct, Cls. 527 (1948). Accordingly, the appeal in ASBCA
No. 8156 is denied."

The appeal is dismissed in part and otherwise remanded, as indicated


[blocks in formation]

Decision of Department of Labor, Wages and Hours Division, dated March 19, 1974, submitted pursuant to the directive contained in the opinion of the District Court of New Jersey, Curti 88-Wright Corp. 0. McLucas, Civil Action No. 807-73, September 14, 1973.

This is in response to your letter of October 19, 1973, with attachments, submitted pursuant to the directive contained in the court's opinion filed in the above referenced case on September 14, 1973. Specifically, the court instructed: "The defendant will be directed to submit an SF-98 to the Secretary along with LRFP F34601-73-R-6000 for his consideration * * *." The consideration alluded to by the court is explained in the opinion wherein the court noted that:

The Court wholeheartedly agrees with the Comptroller General that coverage under the Service Contract Act ought to be determined by the Secretary of Labor. Had the Secretary issued a decision as to the particular contract at hand, the Court would have been bound to accept his conclusion * * The Court therefore is of the opinion that pursuant to the doctrine of "primary jurisdiction," compulsory referral of this matter to the Secretary of Labor is warranted.


On the issue of Service Contract Act coverage of this particular contract, described in the SF-98 as one for "repair, overhaul or modification of J57-55/59W engines," the Air Force contends that services are only incidental to the principal contract work which it considers to be a rebuilding effort amounting to manufacturing since major repairs, which constitute the overwhelming bulk of the contract work, produce a "like new" engine with full life expectancy restored. In the view of the Air Force, it follows that the contract is subject to the Walsh-Healey Act and is exempt from the provisions of the Service Contract Act' by virtue of section 7(2) of that Act.

Southwest Airmotive Company similarly argues against Service Contract Act coverage, asserting that the contract is one for "remanufacturing" and that it cannot be considered as principally for services since there is an end product sought by the Government. This, in its view, distinguishes the contract from the

, normal service-type contracts alluded to by Congress in the legislative history of the Service Contract Act. Southwest concurs in

the Air Force's position that contracts subject to the WalshHealey Act are exempt from the Seryice Contract Act but adds that eyen if the exemption is limited to "work" subject to the WalshHealey Act the facts warrant a finding.that all but a minuscule portion of the contract work is of the type intended to be covered by the Walsh-Healey Act.

Curtiss-Wright Corporation, on the other hand, contends that principal purpose of the contract should be considered to be the furnishing of services inasmuch as bids were based exclusively on Labor and overhead costs, all materials being supplied by the Government where replacements are needed. It argues that the contractor manufactures or supplies nothing, merely installing

, parts furnished by the Government or servicing existing components which are retained. In its view, the term "remanufacture" is meaningless, appearing nowhere in the Walsh-Healey Act or departmental regulations, and in any event is a concept that can only apply to one who originally manufactures the engine, in this case, Pratt & Whitney.

Any consideration of whether one labor standards statute or the other, or both, apply to a particular contract must, of course, proceed on the basis of an analysis of the facts in light of the specific statutory language and the Congressional purposes sought to be achieved in enacting it. We acknowledge the difficulty often inherent in such a task but, as the court held, this is a responsibility with which the Secretary of Labor is charged when disputes of the nature now in question arise. We are, of course, aware of the Comptroller General's recent opinion in the matter of Lockheed Aircraft Service Company (B 178773), wherein it was held that on the record as submitted the Air Force acted in good faith and without any deliberate, arbitrary attempt to circumvent any statutory or regulatory provision in not including the Service Contract Act requirements in the contract there involved for maintenance and modification of the Special Air Mission Fleet based at Andrews Air Force Base. Nevertheless, the court has placed upon us in this case the duty of determining coverage, aware of the fact that our opinion was not heretofore sought and that we had not been given the opportunity of reviewing the specifications involved.

The criteria for determining Service Contract Act coverage of the procurement in the instant case, as in the case of other such procurements, are prescribed by the language of section 2(a) of the Act requiring that provisions specifying minimum monetary wages to be paid and fringe benefits to be furnished shall be contained in "[e]very contract (and any bid specification therefor) entered into by the United States' * * * 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."

Under this language, every Federal contract in excess of $2,500 (and any bid specification therefor) calling for the furnishing of seryices in the United States is covered by the Act, so long as the furnishing of such seryices

(1) is the principal purpose of the procurement, and

(2) will involve the use of "service employees" as defined in the Act, and

(3) is not excluded from coverage by any of the specific exemptions in section 7 of the Act.

Based upon a full consideration of all that has been submitted by the Air Force, Curtiss-Wright, and Southwest Airmotive concerning the procurement in question, the application of the foregoing statutory criteria to the facts and circumstances here presented has been given most careful scrutiny in the light of the declared "remedial purpose of this Act to protect prevailing labor standards" and to assure a determination in this matter which is in full accord with the intent of the statute as evidenced by its terms and legislative history.

Our conclusions with regard to the coverage issues presented for our decision, arrived at following our thorough study of the presentations made and for the reasons and upon the principles hereinafter set forth, may be summarized as follows:

(a) The subject procurement is covered by the Service Contract Act and is subject to its requirement that the contract contain provisions for compensation of service employees employed in the contract work as determined by the Secretary of Labor;

[ocr errors]

(b) The application of the Service Contract Act and such compensation provisions to this procurement extends to all employment in the furnishing of the services called for by the contract except employment in any of the contract work which is required to be done in accordance with the proviprovisions of the Walsh-Healey Public Contracts Act;

(c) The Walsh-Healey Act is as the Air Force correctly concluded, applicable to this procurement, but it is settled that its application to work performed on a contract within its coverage is limited to that performed by employees while engaged in or directly connected with the manufacture, fabrication, assembling, handling, supervision, or shipment of materials, supplies, articles, or equipment required under the contract. 41 CÁR 50-201.102; 29 CFR 4.122.

(d) Because we conclude that the principal purpose of this procurement is the furnishing of seryices through the use of seryice employees, we hold that the Seryice Contract Act applies

, in accordance with its terms and that Walsh-Healey coverage is concurrent rather than exclusive. See 29 CFR 4.122.


Consonant with the stated purpose of Congress (See H. Rept. No. 948 and S. Rept. No. 798, 89th Cong., 1st sess.) "to provide much needed labor standards protection for employees of contractors furnishing services to or performing maintenance service for federal agencies, section 2(a) of the Act, as noted previously,

ion requires every contract over $2,500 "except as provided in section 7" to contain the SCA provisions if its principal purpose is to furnish services through the use of service employees. It is plain from the statute that its broad concept of a "contract * * * to furnish services" is comprehensive enough, in the view of its legislative draftsmen, to include even contracts for the manufacture or furnishing of materials, supplies, articles, or equipment covered by the prior provisions of the Walsh-Healey Act; else Congress would not have found it necessary specifically to exempt, in section 7 "work required to be done in accordance with the provisions of the Walsh-Healey Public Contracts Act."

[ocr errors]

In requiring, for coverage, that the principal purpose of the contract or bid specification be the furnishing of services through the use of service employees, the Service Contract Act differs from the Walsh-Healey Public Contracts Act. Thus, prior to the enactment of the Service Contract Act, the general criteria for coverage of the Walsh-Healey Act were stated in a published opinion of the Administrator (October 7, 1964, published, inter alia, in BNA Wage-Hour Manual at 99:204), as follows:

It may be said generally that if any substantial procurement of materials, supplies, articles, or equipment is called for by the prime contract, or if the procurement of such items is an independent purpose or a significant part of the purpose of the contracting agency in entering into the contract, the contract would be subject to the Act if it is in the requisite amount.

(Emphasis added.) This traditional construction of Walsh-Healey coverage was restated in the regulations issued following enactment of the Service Contract Act, in 29 CFR 4,122 where, in distinguishing the coverage of the two statutes, it is stated that the Walsh-Healey Act

applies to contracts in the required amount, irrespective of their principal purpose, if the furnishing of materials, supplies, articles, or equipment in a substantial amount is called for by the contract or is a significant or independent purpose of the contract. (Emphasis added.)

« PreviousContinue »