FedSubK Feature: Service Contract Labor Standards (SCLS) - Payment of Wages and Fringe Benefits (Part 3 of 3)
Updated: May 4, 2024
In this last installment of our three-part series on the Service Contract Labor Standards (SCLS, formerly known as the Service Contract Act (or SCA)), we are going to talk about the payment of fringe benefits and recordkeeping. This is an area where there is much discussion related to what constitutes an employee’s wage versus a fringe benefit payment, what constitutes a “fringe benefit”, and the timing or frequency of payments. Fringe benefits are separate from wages and salary and must be tracked as such.
Knowledge Baseline. For this topic, keep in mind–
- SCLS applies to contracts entered into by the U.S. or the District of Columbia (DC), the principal purpose of which is to furnish services in the U.S. through the use of service employees.
- Contractors performing on Federal service contracts in excess of $2,500 must observe minimum monetary wage and safety and health standards, and maintain certain records. (These are known as “covered contracts”.)
- Service employees on covered contracts must be paid not less than the monetary wages and fringe benefits contained in wage determinations issued by the Department of Labor (DOL) Wage and Hour Division (WHD) for the contract work. Wage determinations will be incorporated as a material part of the contract to ensure compliance.
- DOL wage and fringe benefit determinations may reflect what has been determined to be prevailing in the locality or may reflect the wage rates and fringe benefits contained in the predecessor contractor’s collective bargaining agreement (CBA), if any, as allowable under the SCLS.
- DOL wage and fringe benefit determinations also apply to subcontractors at all tiers.
- The SCLS makes no distinction, with respect to its compensation provisions, between temporary, part-time, and full-time employees, and the wage determination minimum monetary wages and fringe benefits apply equally to such service employees engaged in SCLS-covered work, absent an express limitation.
Payment of Wages
Specific things to keep in mind that apply to the payment of wages are:
- Monetary wages specified under the SCLS must be paid to employees promptly and in no event later than one (1) pay period following the end of the regular pay period in which such wages were earned or accrued.
- The duration of a pay period under the SCLS may not be longer than semi-monthly.
- Wages must be paid free and clear and without subsequent rebate, or kickback on any account, except deductions permitted by law.
- If participation in a fringe benefit plan requires a contribution from the employee’s wages, whether through payroll deduction or otherwise, the employee’s concurrence is necessary before such payroll deduction can be made.
- The contractor must comply with the highest of all applicable wage requirements. Executive Order 14026 Minimum Wage states that contractors must pay the highest of all applicable rates (federal minimum wage, state minimum wage, or DOL wage determination). NOTE: Compliance with one law does not excuse non-compliance with another law.
Contractors cannot offset an amount of fringe benefits paid in excess of the fringe benefits required under a wage determination in order to satisfy its minimum monetary wage obligations, (see also info on payment of fringe benefits below).
Example: The employee was paid $2.36 more in wages per hour and the employer credited that wage payment toward its fringe benefit obligation, in violation of the SCLS.
Wage Determination/Hr: Employee Paid/Hr:
Wage $10.25 Wage $12.61
Fringe $ 4.80 Fringe $ 2.44
Total $15.05 Total $15.05
The contractor still owes the employee the difference between the fringe in the wage determination ($4.80) and the fringe benefit paid ($2.44) for each hour worked.
Employees That Do Work Subject to Different Rates. Employees must be paid either (1) the highest rate for all hours worked; unless (2) the employer’s payroll records or other affirmative proof shows periods spent in each class of work.
Work on SCLS-covered and Non-SCLS-covered Contracts in the Same Workweek.
If such a contractor has employees who spend a portion but not all of their workweek in performing work on SCLS-covered contracts, it is necessary to accurately identify in its records, or by other means, those periods when SCLS-covered work and non-SCLS-covered work was performed. When contractors are not exclusively engaged in SCLS-covered contract work, and there are adequate records segregating the periods in which work was performed between SCLS-covered and non-SCLS-covered work, the SCLS wage rate does not need to be paid for hours spent on non-SCLS-covered work. However, in the absence of such records, all employees working in the establishment or department where such covered work is performed shall be presumed to have worked on or in connection with the contract during the period of its performance, unless affirmative proof to the contrary is provided. Similarly, in the absence of such records, an employee performing any work on or in connection with the contract in a workweek shall be presumed to have continued to perform such work throughout the workweek, unless affirmative proof to the contrary is presented.
How are Hours Computed? The computation of hours is determined under the FLSA pursuant to 19 CFR Part 785 (link: https://www.ecfr.gov/current/title-29/subtitle-B/chapter-V/subchapter-B/part-785). Hours included must count all periods in which the employee is “suffered or permitted” to work. Hours subject to the SCLS wage determination are those performed on SCLS-covered contracts. Employees must be paid for all work, including work that is unauthorized such as working through a lunch or starting work early. While this may violate company policy, the employer may discipline the employee in accordance with such policy but cannot withhold wages for the time worked.
Payment of Fringe Benefits
It is the contractor’s responsibility to satisfy the fringe benefit obligations set forth in an SCLS wage determination for all occupations listed. The fringe benefits will be specified in the applicable wage determination included in the contract documents. In the wage determination, fringe benefits information is found following the list of SCLS-covered job titles and wages.
Example:
Fringe benefits must be paid in cash per hour or put toward a bona fide fringe benefit plan. Specific things to keep in mind related to the payment of fringe benefits are:
- Any administrative costs (e.g., recordkeeping costs associated with payroll administration) directly incurred by a contractor in providing fringe benefit plans are considered business expenses of the firm and not contributions made on behalf of the employees. As such, administrative costs cannot be credited toward meeting the fringe benefit obligations of the applicable wage determination.
- However, the cost incurred by a Contractor’s insurance carrier (or third-party trust fund) in its administration and delivery of benefits to covered employees can be credited toward the Contractor’s fringe benefit obligations required by an SCLS wage determination. However, adequate recordkeeping is required to show the costs incurred and credited.
- No contribution toward fringe benefits made by employees, or deducted from their wages, may be included or used by an employer in satisfying any part of any fringe benefit obligation.
- Fringe benefit obligations may be discharged by furnishing any equivalent combination of cash or bona fide fringe benefits.
- The terms “equivalent fringe benefit” and “cash equivalent” mean equal in terms of monetary cost to the Contractor.
- Contractors may choose the fringe benefits to be provided, whether an employee accepts or refuses the fringe benefits offered. If an employee desires cash payments or benefits other than those chosen by the Contractor, it must be resolved as part of the employer-employee relationship.
- If a Contractor furnishes a lesser amount of the fringe benefit than called for by the applicable wage determination, the Contractor must furnish the employee with the difference between the amount stated in the wage determination and the actual cost of the fringe benefit provided. This difference can be made up in cash to the employee, or furnish equivalent benefits, or a combination thereof. Cash payments in lieu of fringe benefits must be paid on a regular pay date.
- Stop loss insurance payments that provide coverage in the event that claims paid from an unfunded self-insured plan exceed specified limits both in the individual and the aggregate can be credited against the fringe benefit obligations.
- Contractors may not take credit for any benefit required by federal, state, or local law such as workers’ compensation, unemployment compensation, and social security contributions as a fringe benefit payment.
For contracts subject to a wage determination with fIxed cost per employee health and welfare, paid vacation, and holiday benefits, service employees employed by a single employer are entitled to fringe benefit payments only up to a maximum of 40 hours per week, regardless of the number of contracts on which they work, unless otherwise specified by the applicable wage determination. However, service employees who work for a single employer on multiple contracts which may have other requirements, such as collectively bargained fringe benefits or an “average cost” health and welfare fringe benefit, may be entitled to fringe benefit payments in excess of 40 hours per week. (Dantran, Inc. v. U.S. DOL, 171 F.3d 58 (1st Cir. 1999).)
For fringe benefit requirements under successor contracts, the terms of the Collective Bargaining Agreement (CBA) will dictate eligibility requirements and the amount and extent of such fringe benefits. Since a successor contractor’s obligations are governed by the terms of the CBA, any interpretation of the wage and fringe benefit provisions of the CBA where they are unclear must be based on the intent of the parties, provided that such interpretation does not violate the law. A contractor that is not a signatory to the CBA does not need to provide the specific fringe benefits stipulated in the CBA, but can provide any equivalent combinations of fringe benefits or by making equivalent or differential payments in cash.
What is a “Bona Fide Fringe Benefit Plan”? To be considered “bona fide” for SCLS purposes, a fringe benefit plan, fund, or program must constitute a legally enforceable obligation which meets certain criteria. The plan, fund, or program must be compliant with the Employment Retirement Income Security Act (ERISA), laws and regulations enforced by the Internal Revenue Service (IRS), and state insurance laws, and contributions must be made irrevocably to a trustee or third person pursuant to an insurance agreement, trust, or other funded arrangement. The primary purpose of a fringe benefit plan under the SCLS must be to provide systematically for the payment of benefits to employees on account of death, disability, advanced age, retirement, illness, medical expenses, hospitalization, supplemental employment benefits, and the like. While not specifically identified in the regulations, supplemental unemployment plans and prepaid legal plans are considered bona fide fringe benefits for purposes of the SCLS. Bona fide fringe benefits must also be communicated in writing to employees and contain a definite formula for determining the amount of contribution and benefits provided to constitute a legally enforceable obligation. Payments into bona fide fringe benefits plans must be made no less often than quarterly.
NOTE: Unfunded, self-insured fringe benefit plans under which a contractor allegedly makes out-of-pocket payments to provide benefits for employees as costs are incurred, rather than making irrevocable contributions to a trust or other funded arrangements, are not normally considered bona fide plans or equivalent benefits except for plans to provide paid vacation and holiday fringe benefits. Under certain conditions, a contractor may request approval by the Administrator of an unfunded self-insured plan in order to allow credit for payments under such a plan in meeting the fringe benefit requirements of the SCLS. The purpose of seeking advance approval is to avoid situations involving unfunded plans where monies allegedly allocated by a contractor to provide fringe benefits are used for other purposes or are recouped without actually furnishing any benefits. This procedure is not intended to prohibit self-insured plans where irrevocable payments are made pursuant to a trust or other funded arrangement and other conditions are met.
Vacation Fringe Benefits. Vacation fringe benefits count as a fixed cost fringe benefit and are vested and become due after the employee’s 12-month anniversary date of employment. These benefits do not need to be paid immediately after the anniversary but the entire vacation amount must be made available to the employee before (1) the next anniversary date; (2) the completion of the contract; or (3) the employee terminates employment, whichever occurs first. Payout of unused vacation fringe benefits should be made in cash. Wage determinations may require an accrual of vacation fringe benefits.
Example: Joe starts work on 7/01/2017. His 12-month anniversary is 6/20/2018. On 7/1/2018, Joe is entitled to vacation fringe benefits.
Holiday Fringe Benefits. Employees are entitled to holiday pay if they work in the holiday workweek, even if not all days are worked. A paid holiday can be traded for another day off if this is communicated to the employee. An employee is not entitled to holiday pay if the holiday is not named in the wage determination, such as a government-proclaimed closure, etc.
Part-Time Employees and Fringe Benefits. Part-time employees are entitled to a proportionate amount of fringe benefits. For example, a part-time employee who works 20 hours per week is eligible for a one-half week of vacation and one-half day of holiday pay but must receive the full amount of health and welfare fringe benefit.
Recordkeeping
Contractors must record and retain wage and fringe benefits payment records for three (3) years from the completion of the work containing the following information:
- Name, address, and social security number of each employee;
- Correct classification(s);
- Rate(s) of monetary wages paid and fringe benefits provided;
- Rate(s) of fringe benefits paid in lieu thereof;
- Total daily and weekly compensation of each employee;
- Number of daily and weekly hours worked by each employee;
- Any deductions, rebates, or refunds from the total daily or weekly compensation of each employee;
- List of monetary wages and fringe benefits for those classes of service employees not included in the wage determination attached to the contract but for which such wage rates or fringe benefits have been conformed (if applicable);
- List of predecessor contractor’s employees which had been furnished to the contractor (if applicable).
When health and welfare fringe payments are made in cash, this must be noted on payroll separately (i.e., separate base hourly rate and separately stated cash for fringe benefits). Bona Fide Fringe Benefit Plan payments must also be noted separately. These details should also be listed on the employee's pay stub.
Employee Notifications.
Each employee working on an SCLS-covered contract must be notified of the wage rates and fringe benefits required to be paid for work performed on the contract. WH Publication 1313 (as found on the DOL Wage and Hour Division website) and the applicable wage determination should be used for this purpose. The notice can be delivered to each employee or posted in a prominent and accessible place at the worksite, per SCLS guidance.
Where Can I Find Out More? Here are a few great references for service contractors to have at hand in case the need arises:
DOL’s WHD Compliance Assistance Webpage: https://www.dol.gov/agencies/whd/compliance-assistance
DOL McNamara-O’Hara Service Contract Act (SCA) site:
https://www.dol.gov/agencies/whd/government-contracts/service-contracts
Frequently Asked Questions on SCLS (SCA):
https://www.dol.gov/agencies/whd/government-contracts/service-contracts/faq
Fair Labor Standards Act (FLSA):
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The FAR is Changing. So Is the Way We Learn (Weathering the RFO - Part 7)
When I first became a contracting officer, there wasn't one place you learned federal acquisition.
You learned a little from the FAR. You learned from your supervisor. You learned from legal counsel after asking what felt like a hundred questions. You learned from experienced contracting officers who had already made the mistakes you were trying to avoid. You learned from GAO decisions, Inspector General reports, policy memoranda, training courses, and occasionally from acquisitions that didn't go quite the way anyone planned.
Over time, those experiences came together to form something that's difficult to define but easy to recognize. Professional judgment.
That's what separates someone who knows the FAR from someone who knows how to apply it.
As I work through reading the proposed rules on the Revolutionary FAR Overhaul (RFO), I keep coming back to one thought – which is something I learned as a Team Lead, a Branch Chief, a Chief, and an Acquisition Workforce Training Coordinator –
It’s not about writing a shorter FAR.
Throughout this series I’ve said it’s easy to focus on what has been removed from the FAR. Yes, we see a leaner document. But that’s not the biggest change.
The RFO separated regulatory requirements from implementation knowledge.
Today, acquisition professionals are working within a broader knowledge ecosystem than many of us grew up with.
1) While the FAR establishes the regulatory framework, the FAR Companion now provides the context for implementation of that framework.
2) Practitioner Albums now explain all of the thinking behind the changes and illustrate how the revised framework is intended to work in practice.
3) Agency deviations implement the revised structure while revisions continue and the RFO moves through the formal rulemaking process.
4) Agency supplements, policy memoranda, training resources, and professional education fill in the gaps.
It's a different model for how acquisition professionals access information.
Let Me Tell You A Story…
When I arrived at GSA in 2012, part of my job was training and developing a contracting staff of more than 50 people at different stages of experience and certification. In fact, part of the application process was developing an Acquisition Workforce Training and Development Plan. Apparently, that requirement scared everyone else away. I was the only person who applied.
My first few weeks taught me something else: GSA's acquisition policy and workforce information was scattered EVERYWHERE. Shared drives. Policy sites. Old documents. Poorly labeled documents. Finding what you needed was a nightmare.
About that time, GSA Administrator Dan Tangherlini launched the Great Ideas Hunt. I submitted an idea for an Acquisition Portal where GSA could bring workforce, career development, policy, FAR, DOL, small business and other acquisition information together. The idea took off, and I served on the working group that developed the site's hierarchy. The value was pretty simple: people could find the information they needed in one place.
The RFO just took that model and said – naw.
Instead it says, “We believe in you, Acquisition Workforce! While there is less of you and you’ve lost some of your historical knowledge, we know you can read and you will find the information you need no matter where we put it. Happy hunting!”
The Bigger Change Isn’t the FAR
For most of my federal career, if someone asked me where to start researching a procurement issue, my answer was relatively straightforward. "Let's start with the FAR." It didn’t mean that the FAR had the full answer, but it gave everyone a common starting point with enough context and process to get you going quickly. But today, I don't think that's enough.
Today, based on conversations with Contracting Officers I know still on the job, it sounds more like this: "Let's start with the FAR. Then let's see what the Companion says. Let's look at the Practitioner Album. Was there an Executive Order on this? Has OFPP issued guidance? Is there an agency deviation that applies? Has GAO weighed in? Has anyone done this in our group yet?"
That's not necessarily a bad thing. Eventually it could be a better way of supporting an acquisition workforce that has to learn to adapt more quickly than traditional rulemaking allows. But it does change some important things.
It changes how they learn. And it adds time and risk.
From the Contracting Officer’s Chair
Putting information somewhere the workforce can access it is not the same thing as developing the workforce. A Practitioner Album can explain something. A course can teach it. Neither necessarily teaches a GS-11 contract specialist when to question the answer, when discretion is appropriate, when to elevate something, or what downstream consequence a seemingly small acquisition-planning decision may create.
Some of the best contracting officers I've known couldn't quote FAR citations from memory. But they knew the questions to ask. They could see risk in an underdeveloped requirement before it became a solicitation problem. They understood how an acquisition-planning decision could affect competition months later. And they knew when to bring in legal counsel, small business, or technical experts.
That's judgment. And judgment comes from experience, mentorship, continuous learning and professional discussion, not simply knowing where to find the rule.
I do have some optimism about this new knowledge model. It can make acquisition guidance far more responsive than regulation alone ever could. I've seen firsthand how long FAR rulemaking can take. It can take YEARS. Meanwhile, technology changes, commercial practices evolve, GAO issues decisions, agencies act, and new buying techniques emerge. The FAR Companion and Practitioner Albums give the acquisition community a way to capture some of that evolution much faster. That's a positive.
But it also creates a challenge: Knowledge is only valuable if people know where to find it, what authority it carries, and when to rely on it.
One of the strengths of the FAR has always been consistency. Whether you worked at the DHS, U.S. Army Corps of Engineers, GSA, or another agency, everyone started from the same regulation. Today, knowledge is intentionally distributed across multiple resources. That means consistency depends less on where information is published and more on how effectively the acquisition workforce understands the relationship among those resources. That's a leadership challenge. And it's a training challenge.
Contractors, consultants, attorneys, and proposal professionals are adapting to the same knowledge ecosystem. Understanding where acquisition thinking now lives is becoming just as important as understanding the regulation itself.
Frankly, understanding the regulation, processes, and people all connect is one reason I’m still active in this field – even if I’m sitting on the industry side now. I could go chase my dream of being a photog, sell my prints, or get back to the art I've set aside for too long. But one of the things I enjoyed most about supervising contracting professionals was watching the moment when someone stopped looking for answers and started asking better questions. That's when I knew they were growing into their craft.
The FAR can teach requirements, but experience teaches judgment. And good supervisors accelerate that process. And if the RFO expects contracting professionals to exercise more judgment and discretion, then supervisors need tools specifically designed to help them develop that judgment in others. Give a developing specialist an acquisition and make them explain not just what they would do, but where they found the authority, what discretion exists, what alternatives they considered, and why they made the recommendation. Build that thought process into acquisitions at the lowest levels.
As I think about the RFO, personally, I don't worry nearly as much about whether a paragraph moved from the FAR to the FAR Companion. What I think about is the next generation of contracting officers.
How do we help them develop judgment in this new environment?
How do we make sure they understand not just what the regulation says, but why it says it?
To me, that's one of the most important leadership questions raised by the RFO. And who will help them. Too often, leadership does what it it has always done – writes the change and tosses it over the fence. That won’t cut it this time if they expect real change and innovation.
Moving so much of that practical knowledge outside of the FAR is a significant shift. How will we know how well the workforce is taking it all in? We need a structured mechanism for practitioners to identify recurring interpretation problems, conflicting implementation, useful practices, or places where the FAR Companion and Practitioner Albums need clarification.
That turns the workforce from passive recipients into part of the learning system.
Handled well, shifting process out of the FAR could create a more agile workforce. But handled poorly, it could create uncertainty, inconsistent implementation, and uneven professional development. At this point, I don't think we've seen enough to know which outcome is more likely. Jaime Gracia has been raising similar concerns about acquisition workforce development, including his recent article, “The Procurement Workforce Problem No One Wants to Fund” at https://www.linkedin.com/pulse/copy-procurement-workforce-problem-one-wants-fund-jaime-gracia-vdmke/?trackingId=BVgMVDCyRY6vwzJDfBYkwQ%3D%3D. There still aren’t enough people having this conversation.
It deserves more attention than it's receiving. And the acquisition workforce deserves more training and leadership support than it is getting.
Three Things Leadership Needs to Think About Now
• Create a common learning framework.
• Develop supervisors as the bridge between guidance and judgment.
• Measure whether implementation is actually producing consistent professional practice.
The RFO may have made the FAR leaner. It did not make federal acquisition simpler to learn.
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What’s next? Weathering the RFO will be back as we work through the latest RFO proposed rules covering several “meaty” FAR parts. Watch for more soon on LinkedIn and Substack.
Author: Shauna Weatherly, President, Federal Subcontract Solutions LLC (dba FedSubK). Shauna is a small business advocate and owner of FedSubK. FedSubK exists to simplify federal contracting, empowering small businesses with practical, understandable resources. We bring first-hand experiences in Federal contracting from multiple perspectives derived from roles held both in and out of Government over almost four decades of Federal service.
Visit us at fedsubk.com to learn more about--
Getting Started in Federal Contracting: fedsubk.com/begin-your-journey-here
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When Judgement Carries More Weight (Weathering the RFO - Part 6)
You've probably heard some version of this complaint about federal acquisition: "If they would just let the Contracting Officer use some judgment..."
Okay. I get that. But then what?
I bring this up because the Revolutionary FAR Overhaul (RFO) is stripping away some of the detailed implementation language that generations of acquisition professionals grew up with.
The idea, at least in part, is to create more room for acquisition professionals to exercise discretion and sound business judgment. I understand the theory. But as a former Chief of Contracting who was responsible for developing this employees with my limited training budget and limited resources but with more work than I could handle, what I can't stop thinking about is what happens when a Contracting Officer actually tries to use that discretion...but maybe doesn't have the experience or training to do so yet. As a Chief and having been responsible for acquisition workforce development, something I've seen is that process has a way of growing back.
Sometimes it comes from regulation. Sometimes it comes from agency policy. Legal counsel wants another review. A policy office creates another template. A contracting office develops a local procedure because something went wrong once five years ago.
And sometimes Contracting Officers do it to ourselves.
We keep doing something because that's how we've always done it. Because the template is already there. Because another approval makes everyone a little more comfortable. Or because trying something different means being the person who has to explain why (and right now, not many want to be THAT person).
That's where I think the "revolution" of the RFO is going to be tested. Having discretion and being COMFORTABLE exercising it are not the same thing. Neither is having discretion and being ALLOWED to exercise it.
A Contracting Officer may look at the RFO and see room for a different approach, but that CO/KO doesn't operate in isolation. There is a supervisor. Legal counsel. Program leadership. Agency policy. Review boards. Local procedures. Templates. Sometimes headquarters. Every one of those layers can influence how much of that theoretical flexibility survives an actual acquisition. That's not bad because checks and balances exist for a reason. I've spent enough time in those types of acquisition reviews to appreciate the value in a respected member of the team and leadership asking, "Have you thought about this?"
But there is a difference between oversight that improves an acquisition and the process that exists simply because it has always existed. And that raises a question I think agencies need to consider as the RFO moves forward: If we remove prescriptive process from the FAR and then recreate it through agency policy, local procedures, mandatory templates and layers of review, what exactly did we accomplish?
We could end up with a shorter FAR and essentially the same acquisition system. Or we could end up with something else entirely. We could have agencies and contracting offices rebuilding different versions of the processes that used to reside in one common regulation. That isn't flexibility. It could simply lead to more fragmentation.
From the Contracting Officer's Chair
What's not getting enough traction in this discussion is that detailed process provides training when no other training sources are available or exist. It gives the CO/KO something besides bureaucracy to hang their hat on. It also provides cover. Being able to say, "The FAR says..." is a pretty comfortable place for a CO/KO to stand when someone challenges an acquisition strategy.
But it's different when the answer becomes, "The FAR gives me discretion, and based on the market research, risk, requirement and facts of this acquisition, this is the approach I determined was appropriate right now." Now the CO's/KO’s judgment carries more weight. So does their signature. And that can freak out some less experienced COs/KOs.
I don't say that as a criticism of Contracting Officers. I've been one with an unlimited warrant for all types and dollar values of contracts. There is a reason experienced COs/KOs sometimes become cautious or risk averse. Acquisition decisions can be reviewed by a supervisor, legal counsel, an Inspector General, GAO, a court, or someone several years later who has the luxury of knowing how everything turned out. The experienced ones know that. That experience teaches you to think about not only whether you can make a decision, but whether you can explain and support it later in a way that the rationale is plainly understood by a "prudent person" at some future point in time. (Don't ask me how many times I still get calls asking if I remember why we wrote a period of performance or Section H term the way we did....it's a steady stream.)
That's why I don't think simply telling the workforce, "You have more flexibility now," will necessarily change acquisition behavior.
The system around the Contracting Officer has to permit that flexibility, too. And leadership has some decisions of its own to make related to that.
If we really want Contracting Officers exercising reasonable discretion, we have to accept something that comes with it: reasonable people will occasionally make different decisions. Two experienced Contracting Officers looking at similar acquisitions may choose different approaches. One may engage industry differently. One may structure the competition differently. One may decide a particular procedural step adds value while another decides it does not. That doesn't automatically mean one of them is wrong. It really comes down to whether the decision was lawful, reasonable, supported by the facts, and documented well enough that someone who wasn't sitting in the room can understand why it was made.
That's a different acquisition culture from one built primarily around procedural uniformity. And I'm not convinced yet that the Government is entirely comfortable with that distinction. Out of one side of its mouth as it touts this new "innovative thinking", procurement leaders and Think-Tanks say, "We trust you. Go forth and do great things." But out of the other is a culture that hasn't made the shift yet. Why? Because it's THE GOVERNMENT.
There is a natural tendency in large organizations to standardize. Something goes wrong, so we add a review. Someone makes a poor decision, so we create a template. An audit finds a weakness, so we establish another procedure. Individually, each response may make perfect sense. Collectively, that's how process grows back. That’s how we ended up with the FAR we had before the RFO. It grew the way it did because the FAR Council literally wanted to fix common mistakes through regulation and purposefully included detailed process and training for the sake of CONSISTENCY -- at the FAR level -- to avoid protests, risk, and a wild west culture in buying.
Five years from now, we could still find ourselves with a much shorter FAR but have it be surrounded by layers and layers of agency policy, local procedures, templates and unwritten rules that recreated much of what was removed.
If that happens, did we really change federal acquisition all that much? Or did we just inject chaos and inconsistency?
Industry should be watching, too. This isn't just an internal Government issue. If the RFO works as intended, industry will definitely encounter more variation among agencies, contracting offices and even individual acquisition teams as they make greater use of the discretion available to them. That makes meaningful market engagement even more important. And industry has already been complaining about the inconsistency in the application of the "old FAR" for decades. Just today we saw a small business set-aside announced on SAM.gov for 14 minutes from issuance to proposal cut-off. I mean, THAT'S WHAT WE ARE TALKING ABOUT HERE.
What does it mean for industry? Don't just tell the Government what you sell. You are going to have to help the acquisition team understand the market it is buying from. Explain what drives competition. Explain commercial practices. Explain what happens when requirements are bundled or structured a particular way. Explain where an acquisition strategy may unintentionally create cost, schedule, performance or competition risk for both parties. Give the Contracting Officer useful information on which to exercise judgment. Then let the Government (hopefully) make a good decision.
Industry can (and should) give the Government better information on which to base its acquisition decisions. I believe that will start to endear you to them. Not tell them what to do but what is going on in your world realistically and not just centered around you and your goals. Open their eyes.
As the RFO moves from rewriting regulations to changing actual acquisitions, I'm going to be really curious about what "grows back" and where when it comes to process -- way more than the number of pages the FAR may add down the road. (Oh, and I don't propose that -- or really care if -- every old procedural sentence eventually finds a new home somewhere else, either. That's not the point here.)
But you have to ask yourself--
• Will agencies resist the temptation to recreate deleted process through agency or local policy?
• Will contracting offices allow experienced COs/KOs to use the discretion the revised framework gives them?
• Will supervisors and reviewers support a reasonable decision even when it isn't the decision they personally would have made?
• Will Contracting Officers themselves become comfortable enough with that discretion -- and the accountability that comes with it -- to stop reaching for an old process simply because it feels safer?
Those answers will tell us if the RFO really "revolutionized" federal acquisition. (I still hate that adjective -- "revolutionary". It's so cheesy to use before you actually know; like saying it makes it so.)
And we can't forget how this is closely coupled with what is going on with the workforce in general with recent OPM changes. New organizations, reorganizations, new performance metrics, changed RIF structure, NDAs, and a culture of extreme politics in some organizations. We can't forget how those stressors and rules will weigh in on who steps up and goes first and who wants to be the test case for innovative judgement calls that may not go according to a clean E.O. or leadership vision. I don't see a lot of people raising their hands and where they are, what happens when things don't go "revolutionary" on the first try?
We've spent years saying federal acquisition needs more judgment and less process. Now we may finally get to find out whether the acquisition system -- and the culture -- is willing to or can live with what that actually means.
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What’s next? The RFO isn’t only changing the text of the regulation, it’s changing where knowledge sits. How does that impact learning a complex profession on the inside, and what does it mean to you in industry as you work with the acquisition workforce? Watch for the link to that article soon on LinkedIn.
Author: Shauna Weatherly, President, Federal Subcontract Solutions LLC (dba FedSubK). Shauna is a small business advocate and owner of FedSubK. FedSubK exists to simplify federal contracting, empowering small businesses with practical, understandable resources. We bring first-hand experiences in Federal contracting from multiple perspectives derived from roles held both in and out of Government over almost four decades of Federal service.
Visit us at fedsubk.com to learn more about--
Getting Started in Federal Contracting: fedsubk.com/begin-your-journey-here
Solutions and Our Trusted Support Provider Network: fedsubk.com/solutions-services
Insights from a Contracting Officer: fedsubk.com/insights
Free Webinars and Resources: fedsubk.com/webinars-training
How Early is "Early"? (Weatherly the RFO - Part 5)
"We need to engage the agency early."
It's hard to argue with that.
But what does "early" mean, actually? I mean – in Government terms and from their viewpoint.
Most companies are going to say “early” means before the solicitation is released. A lot of GovCons on LinkedIn talk all about getting in there while acquisition planning is going on. They say that’s the window when key decisions are made about contract types, competition pools, and evaluation factors. Others say it has to be well before acquisition planning.
Listen to those people!
They are the ones in industry that “get it”!
The best market research – and industry’s best opportunity to help inform the discussion – happens before acquisition planning formally begins.
Reading through the Revolutionary FAR Overhaul (RFO), and as a former KO/CO, I had hoped it would catch up and understand that “early" is too narrowly defined. Maybe I get it now from being out here in industry for a number of years fully immersed in the talk of capture and pipeline development.
Knowing the federal marketplace should be an ongoing acquisition competency, not an activity tied to a single procurement.
Technically, FAR Part 10 is gone but experienced contracting officers understand that market research and acquisition planning belong together. They influence each other constantly. From that perspective, integrating the regulatory text of FAR Part 10 into Part 7 recognizes that connection.
But putting market research in Part 7 may reinforce another problem; treating it as something that begins when acquisition planning begins. Market knowledge should lead acquisition planning, not begin with it.
A good requirement starts with knowing the market well. It’s when your Program Manager starts talking to you a good six months before the purchase request hits that a project is coming, prepping you for the drop. They give you intel on who the major players are, how commercial buying might fit, and outside influences like economic conditions or materials shortages.
From there, I can start talking to the Small Business Specialist and looking at the likely small business pool. I can talk with the estimator about likely dollar values and start thinking about contract type, pricing structure, clauses, and ways to streamline the procurement.
Right there.
Did you see that?
I’m already thinking about the competition pool, contract type, and pricing structure and there isn’t any talk about a purchase request or acquisition strategy yet. That’s what EARLY is. And when contracting is included in programmatic budget discussions, those wheels turn even earlier. And even with that six-month head start, it’s only useful if I’m not starting from zero.
And one thing the RFO is telling us very clearly now is that there is no requirement to conduct market research using a specific method or set of methods. There is no mandate to issue a Sources Sought or Request for Information (RFI).
The RFO doesn’t prescribe a method. It tells the acquisition team to conduct market research appropriate to the circumstances under certain scenarios, and to engage in responsible and constructive exchanges without creating an unfair competitive advantage or violating procurement integrity requirements. (Proposed rule RFO 7.201(b)).
The method isn’t the point anymore. The quality of the information and the judgment applied to it is.
With that I think a mindset shift needs to take place for the RFO to be successful. And when the FAR prescribes less about how to get that information, what the acquisition team already knows becomes more important, not less.
Look at market research as continuous learning, not a one-time action.
Industry watches markets continuously because it has to. Government acquisition teams tend to examine them one procurement at a time. Hopefully it's not just me that sees how that creates an information gap about the market before acquisition planning ever begins.
The market research contracting personnel are all familiar with is done to support an individual acquisition. It informs the strategy, contract type, commerciality determination, competition pool, pricing approach, and documentation supporting those decisions.
Continuous market learning does something different. It builds knowledge before there is an acquisition that demands it. It means understanding how an industry, its suppliers, technologies, pricing practices, and commercial business models are changing before a requirement forces us to ask.
So let’s get back to that word – “Early”
Earlier and more continuous engagement raises the obvious question about how does the Government keep it fair? The answer hasn’t changed. Engage ethically, document, protect procurement integrity, and don’t give individual firms an unfair competitive advantage.
Continuous market learning should never become continuous market favoritism.
In fact, broader and more continuous market awareness should make acquisition teams less dependent on what they learn from the handful of vendors who happen to show up for a particular procurement.
From the Contracting Officer's Chair
Using continuous market learning would create a focused ongoing procurement effort to understand industries, technologies, suppliers, and commercial business practices, whether or not an active procurement is immediately on the horizon.
Because of lumbering procurement timelines, many believe starting market research two years out is ample time to adjust to the market changes.
Yeah, I’ve fallen into that trap. It doesn’t work like that. Continuous market learning moves some of that discovery upstream, before changing direction becomes an acquisition problem. Or, as we call it in Contracting -- our problem.
Well-seasoned COs and KOs know instinctively continuous market learning is a much-needed best practice, but they aren’t always allowed to go to key industry events (because no travel funds), they don’t have time to meet with vendors (because of an end of fiscal year that goes on for an entire quarter), and they don’t have access to trade publications (because the Government won’t buy them a subscription). They try to pay attention to how markets are changing. But by the time the acquisition team discovers how much the market has changed, changing course can mean rethinking the solicitation, evaluation approach, competition strategy, and/or pricing structure. And anyone who has sat in the CO/KO chair knows the lift required to make those changes on an already compressed schedule.
The RFO’s FAR Companion says that “…acquisition teams should approach market research as an incremental process that builds understanding step-by-step.” That’s still looking at market research tied to an individual acquisition. The RFO writers had an opportunity to take the next step and distinguish procurement specific market research from continuous market learning. And they didn’t.
Ugh – heartbreaking!
But by integrating market research into acquisition planning in the text, and by relying more heavily on professional judgment, it creates space for the acquisition workforce to -- themselves -- think beyond procurement specific research to the possibility of continuous market learning. That gives agencies and programmatic teams within agencies a lot of leeway to create their own best practices.
If / how that happens is something to watch. BUT…
What the RFO Missed
RFO writers put their confidence in the acquisition workforce. Less prescription in process = more reliance on professional judgment. But judgment doesn't develop automatically with a new reg; I’ve been doing this long enough to know and live that. It comes from trusted and experienced leaders across the acquisition workforce – and by workforce I mean Contract Specialists (CS), COs, KOs, Contracting Officer’s Representatives (CORs), PMs, and Small Business Specialists. Those leaders step up and teach newer team members how to ask better questions, recognize bias, separate market understanding from vendor preference, and remain curious without compromising fairness in their research and engagements.
But the tools the RFO FAR Companion suggests aren’t starting points, not market knowledge. SAM.gov, CPARS.gov, FPDS.gov (which is now SAM Contract Awards and SAM Data Bank Reports), SBS, and other tools and datasets on Acquisition.gov and the GSA Acquisition Gateway don’t fully hit the mark. Talking to counterparts in other agencies, reviewing existing contract databases, reading industry publications, and examining vendor websites or online product literature are sources of information. They aren’t a substitute for market knowledge.
Useful? Absolutely. Enough? Not even close.
Tools provide data. Engagement provides information. Experience turns both into market knowledge.
A couple of things…
The question “Have we conducted market research yet?" isn't the same as "What do we know about the current market?"
The first asks whether an acquisition step has been completed. The second asks whether the acquisition team is informed.
The first is a report. The second can change an acquisition.
See the difference?
One of the unintended consequences of organizing market research as a separate FAR part was that it became easy to think of it as another acquisition milestone. Complete the market research, write it up, and move on and don't think about the market until the next buy.
The RFO has created an opportunity to break that habit. If we do break it, acquisition teams can begin acquisition planning informed by the market instead of using the start of acquisition planning to begin learning about it.
But, will we?
Acquisition Leaders – you have a challenge!
Five years from now, should market research still be something we conduct for an acquisition or will market knowledge finally be treated as a continuous learning acquisition workforce competency?
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Author: Shauna Weatherly, President, Federal Subcontract Solutions LLC(dba FedSubK). Shauna is a small business advocate and owner of FedSubK. FedSubK exists to simplify federal contracting, empowering small businesses with practical, understandable resources. We bring first-hand experiences in Federal contracting from multiple perspectives derived from roles held both in and out of Government over almost four decades of Federal service.
Visit us at fedsubk.com to learn more about--
Getting Started in Federal Contracting: fedsubk.com/begin-your-journey-here
Solutions and Our Trusted Support Provider Network: fedsubk.com/solutions-services
Insights from a Contracting Officer: fedsubk.com/insights
Free Webinars and Resources: fedsubk.com/webinars-training
