Overview
FAR 22.103 establishes the government's policy to minimize the use of overtime and provides the specific procedures and approval requirements for when overtime premiums are necessary. It ensures that the government only pays for overtime when it is economically advantageous or essential to meet urgent program requirements.
Key Rules
- Definition of Normal Workweek: Generally defined as 40 hours; however, for work performed outside the U.S., a workweek may exceed 40 hours if it aligns with local customs and does not involve premium pay.
- Policy of Minimization: Contractors are required to perform contracts without overtime whenever practicable, except to lower overall government costs or meet urgent needs.
- Negotiation Requirements: Contracting Officers (COs) must attempt to negotiate contract prices that exclude overtime premiums and should avoid solicitations that mandate overtime-dependent schedules.
- Approval Criteria: To approve overtime premiums, an agency official must determine in writing that it is necessary to meet essential schedules, compensate for delays beyond the contractor’s control, or eliminate production bottlenecks.
- Mandatory Clauses: FAR clause 52.222-2 (Payment for Overtime Premiums) is required in cost-reimbursement contracts exceeding the simplified acquisition threshold (with specific exceptions for vessels and certain incentive-fee contracts).
- Contract Type Specifics: Specific CO approval for overtime is required for Time-and-Materials and Labor-Hour contracts, whereas other contract types may not require formal pre-approval for premium payments.
Practical Implications
- Contractors performing cost-reimbursement or T&M contracts must secure written authorization for overtime premiums before the work is performed to ensure the costs are allowable and reimbursable.
- Failure to manage overtime effectively can lead to audit findings under FAR Part 31, as auditors and administrative offices are tasked with periodically reviewing the necessity and allowability of premium pay.