Overview
FAR 22.1003 defines the scope and reach of the Service Contract Labor Standards (SCLS) statute, establishing that it applies to all federal contracts and subcontracts where the "principal purpose" is to provide services in the United States through the use of service employees. It provides a framework for distinguishing service contracts from construction or manufacturing and outlines specific statutory and administrative exemptions.
Key Rules
- Principal Purpose Test: The SCLS applies only if the primary goal of the contract is services; it does not apply to contracts where services are incidental to the main requirement.
- Geographic Limitation: Coverage is strictly limited to services performed within the United States (including its territories and possessions).
- Statutory Exemptions: The statute expressly excludes contracts for construction/repair of public works (subject to the Construction Wage Rate Requirements), manufacturing or furnishing materials (subject to 41 U.S.C. chapter 65), and certain regulated utility or transportation services.
- Administrative Exemptions for Commercial Services: Certain commercial services—such as maintenance of automated data processing (ADP) equipment, financial services, and hotel/lodging for conferences—are exempt, provided the contractor certifies they meet specific conditions:
- The items/services are sold regularly to the general public.
- Services are furnished at established catalog or market prices.
- The contractor uses the same compensation plan for both government and commercial employees.
- For specific services, employees spend less than 20% of their time on the government contract.
- Repair vs. Remanufacturing: "Remanufacturing" (extensive teardown and rebuilding) is classified as manufacturing rather than service. Routine "repair" and maintenance (typically billed on an hourly basis) are classified as services and fall under SCLS.
- Resolution of Doubt: If applicability is unclear, the Contracting Officer must consult the agency labor advisor or the Department of Labor (DOL) Wage and Hour Division.
Practical Implications
- Certification Requirements: Contractors seeking to avoid SCLS requirements via commercial service exemptions must be prepared to provide formal certifications regarding their commercial pricing and internal compensation structures.
- Cost Risk: Failure to correctly identify SCLS applicability at the solicitation stage can lead to significant retroactive liability for back wages and fringe benefits if the DOL later determines the contract was covered.
- Contract Classification: Contracting Officers must carefully analyze the "Statement of Work" to determine if the work constitutes a major overhaul (Manufacturing/Walsh-Healey) or routine maintenance (Service/SCLS), as this dictates which labor clauses and wage determinations are required.