FedSubK Feature: Service Contract Labor Standards (SCLS) - The "Very" Basics (Part 1 of 3)
Updated: Dec 6, 2024
Wages are a hot topic these days with the post-COVID economy and hybrid work environment now prevalent in many industries. It's important for contractors providing services to the Federal government to familiarize themselves with the Service Contract Labor Standards (SCLS). These standards govern labor requirements for certain service contracts awarded by the federal government. You may see the SCLS also referred to as the McNamara-O’Hara Service Contract Act (SCA) or “Act”, particularly by the Department of Labor, since it is the originating statute of the SCLS; they are all one and the same.
How do I know if my contract is a covered contract? The Government will determine if the contract is covered by the SCLS, based on the scope of services. The SCLS typically applies to contracts–
- valued over $2,500,
- entered into by the Federal Government, and
- the principal purpose of which is to furnish services in the U.S. through the use of service employees. (NOTE: The SCLS applies to the 50 states, DC, Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as defined in the Outer Continental Shelf Lands Act, American Samoa, Guam, Wake Island, Eniwetok Atoll, Kwajalein Atoll, Johnston Island, Canton Island, and the Northern Marianas.)
If the services of the contract are covered by the SCLS, the contract will contain the FAR Clause 52.222-41, Service Contract Labor Standards, and a Department of Labor (DOL) Wage Determination will be provided as part of the contract, based on the location of performance.
What types of services are typically subject to the SCLS? The following examples, while not definitive or exclusive, illustrate some of the types of services that have been found to be covered by the Service Contract Labor Standards statute (see 29 CFR4.130 for additional examples):
- Motor pool operation, parking, taxicab, and ambulance services.
- Packing, crating, and storage.
- Custodial, janitorial, housekeeping, and guard services.
- Food service and lodging.
- Laundry, dry-cleaning, linen-supply, and clothing alteration and repair services.
- Snow, trash, and garbage removal.
- Aerial spraying and aerial reconnaissance for fire detection.
- Some support services at installations, including grounds maintenance and landscaping.
- Certain specialized services requiring specific skills, such as drafting, illustrating, graphic arts, stenographic reporting, or mortuary services.
- Electronic equipment maintenance and operation and engineering support services.
- Maintenance and repair of all types of equipment, for example, aircraft, engines, electrical motors, vehicles, and electronic, office, and related business and construction equipment, with some exceptions found at FAR 22.1003-4(c)(1) and (d)(1)(iv).
- Operation, maintenance, or logistics support of a Federal facility.
- Data collection, processing, and analysis services.
Are any services excepted from the SCLS or any industries excluded? Yes, they include:
- Contracts outside the U.S. The term “United States” excludes any U.S. base or possession within a foreign country. Work performed outside the geographic limits of the U.S., even if pursuant to a contract for services that are performed in part in the U.S., is not subject to the requirements of the SCLS.
- Contracts performed exclusively by bona fide professional employees. The Fair Labor Standards Act (FLSA) sets parameters for the exclusion of employees that perform certain executive, professional, administrative, or other duties such as IT or outside sales duties. However, if the contract involves any covered work outside of those areas, the performance of that work must still comply with the SCLS requirements.
- Construction, alteration, or repair of public buildings or public works, including painting and decorating services;
- Services for transporting freight or personnel by vessel, aircraft, bus, truck, express, railroad, or oil or gas pipeline where published tariff rates are in effect;
- Furnishing services by radio, telephone, or cable companies subject to the Communications Act of 1934;
- Public utility services;
- Employment contracts providing for direct services to a Federal agency by an individual or individuals; and
- Services to operate postal contract stations for the U.S. Postal Service.
The Secretary of Labor has also exempted from the SCLS statute the following service contracts and subcontracts in which the primary purpose is to provide the following, under certain circumstances.
- Automobile or other vehicle (e.g., aircraft) maintenance services (other than contracts or subcontracts to operate a Government motor pool or similar facility).
- Financial services involving the issuance and servicing of cards (including credit cards, debit cards, purchase cards, smart cards, and similar card services).
- Hotel/motel services for conferences, including lodging and/or meals, that are part of the contract or subcontract for the conference (which must not include ongoing contracts for lodging on an as-needed or continuing basis).
- Maintenance, calibration, repair, and/or installation (where the installation is not subject to the Construction Wage Rate Requirements statute, as provided in 29 CFR 4.116(c)(2)) services for all types of equipment where the services are obtained from the manufacturer or supplier of the equipment under a contract awarded on a sole source basis.
- Transportation by common carrier of persons by air, motor vehicle, rail, or marine vessel on regularly scheduled routes or via standard commercial services (not including charter services).
- Real estate services, including real property appraisal services, related to housing Federal agencies or disposing of real property owned by the Government.
- Relocation services, including services of real estate brokers and appraisers to assist Federal employees or military personnel in buying and selling homes (which shall not include actual moving or storage of household goods and related services).
It's important to note that the applicability of the SCLS depends on the specific terms and conditions of each federal service contract. Not all service contracts will be considered “covered contracts” nor may all services under a covered contract require compliance with the SCLS.
What are the Minimum Wage Requirements for SCLS-covered Contracts? The SCLS requires contractors pay their covered employees no less than the prevailing wage rates and fringe benefits, as determined by the DOL and found in the DOL Wage Determination incorporated as a material part of the contract and provided to the contractor. These rates are specific to various job classifications and geographic areas. It's crucial to review the wage determinations applicable to your contract to ensure compliance. The first few pages of wage determinations look like this:
You'll see the employee job classification (as defined in the DOL SCA Directory of Occupations at https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/SCADirectVers5.pdf). Employers should review the Directory and classify each non-exempt employee. The prevailing wage for the position is also shown and is based on a DOL survey of wages for the performance location annotated on page one. In the absence of a wage determination, the minimum wage set forth in the Fair Labor Standards Act must be paid.
What are Fringe Benefits? In addition to the basic hourly wage, contractors are required to provide certain fringe benefits to covered employees. These benefits may include health insurance, retirement plans, vacation and holiday pay, and other provisions. The exact fringe benefits are specified in the applicable wage determinations (illustration shown below).
Fringe benefit obligations may be discharged by furnishing any equivalent combination of cash or bona fide fringe benefits (see below). If the contractor furnished a lesser amount of the fringe benefit 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 which the contractor provided. The contractor may make up the difference in cash to the employee, or furnish equivalent benefits, or a combination thereof.
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 under the SCLS. A contractor 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, and vice versa.
The cost incurred by a government contractor’s insurance carrier (or third-party trust fund) in its administration and delivery of benefits to service employees can be credited toward the contractor’s fringe benefit obligations under an SCLS wage determination. But, 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.
Bona Fide Fringe Benefit Plans. To be considered bona fide for SCLS purposes, a fringe benefit plan, fund, or program must constitute a legally enforceable obligation that meets certain criteria. 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. Supplemental unemployment plans and prepaid legal plans are considered bona fide fringe benefits for purposes of the SCLS. However, 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.
What Recordkeeping is Required for SCLS Compliance? Contractors must maintain accurate records of their employees' hours worked, wages paid, and fringe benefits provided. 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, that is a matter for discussion and resolution between the employee and the employer. Records must be kept for a specified period, usually three years (unless otherwise indicated in the contract), and be available for inspection by authorized representatives, such as the Contracting Officer, Contracting Officer’s Representative (COR), or DOL.
Do I Need to Notify My Employees? The SCLS mandates contractors to inform their employees of the applicable wage rates and fringe benefits. This can be accomplished by prominently displaying the applicable wage determination at the worksite. Additionally, contractors must provide each covered employee with a wage statement detailing the hours worked, wages paid, and fringe benefits provided.
Are SCLS-covered Contracts Subject to Compliance Monitoring? The DOL's Wage and Hour Division (WHD) is responsible for enforcing the SCLS. They may conduct investigations, audits, or interviews to ensure compliance with SCLS. It's essential to cooperate with WHD representatives and provide them with the requested information during compliance assessments. Non-compliance with the SCLS can result in penalties, including back wages, liquidated damages, and potential contract termination. In severe cases of willful violations, contractors may be debarred from future federal contracting opportunities.
What about Subcontracts? If you subcontract any portion of the work covered by the SCLS, you are responsible for ensuring that your subcontractors comply with the labor standards. It's important to include appropriate clauses in your subcontracts that reflect the SCLS requirements and monitor subcontractor compliance.
Where Can I Find Out More? To ensure compliance with the Service Contract Labor Standards, it's advisable to seek guidance from legal counsel or consult the resources provided by the DOL. Here are a few comprehensive references for service contractors to have at hand:
- 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): https://www.dol.gov/agencies/whd/flsa
Watch FedSubK for future installments of this series that will cover the SCA Directory of Occupations, Fair Labor Standards Act (FLSA) exemptions for bona fide professional services, and more! And as a subscriber, you'll receive exclusive notification when they are available!
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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
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
When Judgement Carries More Weight (Weathering the RFO - Part 6)
For years I've heard some version of the same complaint about federal acquisition: "Just let the Contracting Officer use some judgment."
Okay. Now what?
Because removing process from the FAR and actually changing the way federal agencies buy are two very different things.
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. What I'm interested in now is what happens when a Contracting Officer actually tries to use that discretion. Because here's something almost 40 years in federal acquisition taught me: 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. That's where I think a key test of the RFO is going to occur.
From the Contracting Officer's Chair
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 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 necessarily bad. Checks and balances exist for a reason, and I've spent enough time on both sides of acquisition reviews to appreciate the value of another experienced person asking, "Have you thought about this?"
But there is a difference between oversight that improves an acquisition and 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: agencies and contracting offices rebuilding different versions of the processes that used to reside in one common regulation. That isn't necessarily flexibility. It could simply be fragmentation.
There is another part of this that I don't think gets enough attention. Detailed process provides something besides bureaucracy. It can also provide cover.
"The FAR requires it."
That's a pretty comfortable place for a Contracting Officer to stand when someone challenges an acquisition strategy. 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."
Now the CO's/KO’s judgment carries more weight. So does the signature. I don't say that as a criticism of Contracting Officers. I've been one. There is a reason experienced COs/KOs sometimes become cautious. 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. That experience teaches you to think about not only whether you can make a decision, but whether you can explain and support it later.
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. This is where leadership has some decisions of its own to make.
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.
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 wanted to fix common mistakes through regulation versus process and training.
Five years from now, we could find ourselves with a much shorter FAR surrounded by 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?
Industry should be watching, too. This isn't just an internal Government issue. If the RFO works as intended, industry may 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.
Don't just tell the Government what you sell. 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. Give the Contracting Officer useful information on which to exercise judgment. Then let the Government make the decision.
That's an important distinction, especially in this environment. Industry isn't making federal acquisition decisions. But industry can—and should—give the Government better information on which to base them.
As the RFO moves from rewriting regulations to changing actual acquisitions, this is what I'm going to be watching. I'm not particularly interested in counting how many fewer pages are in the FAR. I'm much less interested in whether every old procedural sentence eventually finds a new home somewhere else, either.
I'm watching what grows back.
• Will agencies resist the temptation to recreate deleted process through 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?
• And will Contracting Officers themselves become comfortable enough with that discretion to stop reaching for an old process simply because it feels safer?
Those answers will tell us much more about whether the RFO changed federal acquisition than the page count of the new FAR ever will.
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 that will weigh in to who 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 plan.
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 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.
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