My firm has been bidding on federal service contracts, mostly janitorial work under NAICS code 561720. We've won county and school contracts for years, but federal is different. We just put in for a Request for Quotation (RFQ) for a federal building, a small set-aside for small businesses. I know the Service Contract Act (SCA) applies to these, and I've seen the wage determinations in the solicitations. It seems like the SCA sets a floor for what we can pay our staff, but it's more complicated than just minimum wage. How does the SCA actually impact our pricing strategy for federal service contracts, especially with those prevailing wage requirements? Are there specific costs, like benefits, that we need to factor in differently compared to our state or county bids?
How does the Service Contract Act (SCA) affect pricing for federal service contracts?
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The Service Contract Act (SCA) directly impacts your pricing strategy for federal service contracts by establishing minimum wages and fringe benefits that must be paid to employees, which differs from state and local procurement rules. The SCA clause at FAR 52.222-41 is inserted in service contracts over $2,500, and the Service Contract Labor Standards apply only to service contracts performed in the United States. This means you must factor in the specific wage rates and benefit costs, such as health and welfare, as outlined in the Department of Labor wage determination attached to the solicitation. These prevailing wage rates can be significantly higher than state or local minimum wages, and they often include specific benefit requirements that you might not encounter in non-federal contracts. You need to ensure your price volume fully accounts for these mandated labor costs to avoid underbidding and potential compliance issues.