Overview
FAR 37.115 establishes policies for identifying and evaluating uncompensated overtime (UCOT) when acquiring professional or technical services on an hourly basis. It ensures that the use of unpaid additional hours by FLSA-exempt personnel does not degrade technical quality or create unrealistic cost projections.
Key Rules
- Identification Requirement: Offerors must disclose uncompensated overtime hours and the resulting adjusted hourly rates for FLSA-exempt personnel (including subcontractors) when services are acquired based on hours provided rather than specific tasks.
- Mandatory Risk Assessment: Contracting officers must evaluate proposals for risks associated with UCOT, such as unrealistically low labor rates that could lead to service shortfalls or an unbalanced distribution of overtime across skill levels.
- Adjusted Hourly Rates: Whenever UCOT is utilized, the adjusted hourly rate—which accounts for the total hours worked relative to the salary paid—must be applied to all proposed hours in the cost analysis.
- Solicitation Provision: The provision at 52.237-10, Identification of Uncompensated Overtime, is mandatory for solicitations exceeding the simplified acquisition threshold when professional or technical services are acquired on an hourly basis.
- Technical Integrity: The policy explicitly discourages the use of UCOT and requires the government to ensure that its use does not compromise the level of technical expertise required for the contract.
Practical Implications
- Contractors must maintain accounting systems capable of tracking "total hours worked" for exempt employees to accurately calculate adjusted hourly rates during the proposal process.
- Extensive reliance on uncompensated overtime can lead to negative cost realism adjustments or higher technical risk ratings if the government determines the workload is unsustainable or likely to result in personnel turnover.