Overview
FAR Subpart 22.1 establishes the fundamental policies governing the relationship between the Federal Government, contractors, and labor. It emphasizes maintaining government impartiality in labor-management disputes while ensuring that contract performance is protected and that contractors comply with all applicable Federal and State labor laws, particularly regarding overtime management.
Key Rules
- Government Impartiality: Agencies must remain strictly neutral in labor disputes and are prohibited from conciliating, mediating, or arbitrating disputes between contractors and labor unions.
- Excusable Delays & Accountability: While strikes may be considered excusable delays, contractors are held accountable for "reasonably avoidable" delays. A strike is only excusable if the contractor can demonstrate they took diligent steps to resolve it (e.g., filing NLRB charges).
- Overtime Policy: Contractors are required to perform contracts without the use of overtime whenever practicable. Overtime premiums are generally only authorized for urgent program needs or when they result in lower overall costs to the Government.
- Labor Cost Reasonability: Labor costs resulting from labor-management agreements are not automatically allowable; they must be reasonable and are subject to examination under FAR Part 31.
- Removal of Items: If a work stoppage occurs, the Government may remove critical items or "urgently required" supplies from a contractor's facility, provided it does so without the appearance of force.
- Standard Workweek: Defined generally as 40 hours. Work performed beyond this must be justified and, in many contract types, requires specific Government approval to be reimbursable.
Responsibilities
- Contracting Officers (CO):
- Responsible for negotiating contract prices that exclude unnecessary overtime premiums.
- Must "impress upon contractors" their accountability for avoidable delays.
- Insert required labor clauses (e.g., 52.222-1 and 52.222-2) based on contract type and threshold.
- Review and seek approval for contractor requests for overtime premiums.
- Contract Administration Office:
- Must report potential or actual labor disputes to the agency.
- Coordinates the removal of Government property from struck facilities.
- Periodically reviews overtime usage to ensure it remains within authorized limits.
- Head of Contracting Activity (HCA):
- Designates specific programs where contractors must notify the Government of any potential labor disputes.
- Contractors:
- Must notify the Government of labor disputes if the contract includes FAR 52.222-1.
- Must maintain documentation justifying the need for overtime and obtain prior approval for premiums in cost-reimbursement contracts.
- Agency Approving Official:
- Must provide written determination for the necessity of overtime based on specific criteria (e.g., eliminating production bottlenecks).
Practical Implications
- Strike Management: In the event of a strike, a contractor cannot simply claim "Force Majeure" and stop performance without consequences. They must prove they utilized all available legal and administrative remedies (like the Federal Mediation and Conciliation Service) to end the stoppage.
- Audit Risk: Because "fixed costs" like rent and depreciation continue during a strike while production drops, the unit cost of items can spike. Auditors and COs will scrutinize these costs to ensure the Government doesn't overpay due to contractor inefficiency during a dispute.
- Overtime as a Last Resort: For Time-and-Materials (T&M) or Labor-Hour contracts, contractors should be aware that overtime premium approval is usually prospective. Working unauthorized overtime and seeking "retroactive" approval is only permitted in genuine emergencies, creating a high financial risk for the contractor if denied.
- Physical Inspection: Even during a strike or picketing, Government inspectors are expected to continue their duties at the plant as long as their safety is not endangered, ensuring quality control remains uninterrupted.