(a) Wage determinations issued pursuant to the Service Contract Act
ordinarily contain provisions for vacation and holiday benefits
prevailing in the locality. In addition, wage determinations contain a
prescribed minimum rate for all other benefits, such as insurance,
pension, etc., which are not required as a matter of law (i.e.,
excluding Social Security, unemployment insurance, and workers'
compensation payments and similar statutory benefits), based upon the
sum of the benefits contained in the U.S. Bureau of Labor Statistics,
Employment Cost Index (ECI), for all employees in private industry,
nationwide (and excluding ECI components for supplemental pay, such as
shift differential, which are considered wages rather than fringe
benefits under SCA). Pursuant to Section 4(b) of the Act and Sec. 4.123,
the Secretary has determined that it is necessary and proper in the
public interest, and in accord with remedial purposes of the Act to
protect prevailing labor standards, to issue a variation from the Act's
requirement that fringe benefits be determined for various classes of
service employees in the locality.
(b) The minimum rate for all benefits (other than holidays and
vacation) which are not legally required, as prescribed in paragraph (a)
of this section, shall be phased in over a four-year period beginning
June 1, 1997. The first year the rate will be $.90 per hour plus one-
fourth of the difference between $.90 per hour and the rate prescribed
in paragraph (a) of this section; the second year the rate will be
increased by one-third of the difference between the rate set the first
year and the rate prescribed; the third year the rate will be increased
by one-half of the difference between the rate set in the second year
and the rate prescribed; and the fourth year and thereafter the rate
will be the rate prescribed in paragraph (a) of this section.
(c) Where it is determined pursuant to Sec. 4.51(b) that a single
fringe benefit rate is paid with respect to a majority of the workers in
a class of service employees engaged in similar work in a locality, that
rate will be determined to prevail notwithstanding the rate
which would otherwise be prescribed pursuant to this section.
Ordinarily, it will be found that a majority of workers receive fringe
benefits at a single level where those workers are subject to a
collective bargaining agreement whose provisions have been found to
prevail in the locality.
(d) A significant number of contracts contain a prevailing fringe
benefit rate of $2.56 per hour. Generally, these contracts are large
base support contracts, contracts requiring competition from large
corporations, contracts requiring highly technical services, and
contracts solicited pursuant to A-76 procedures (displacement of Federal
employees), as well as successor contracts thereto. The $2.56 benefit
rate shall continue to be issued for all contracts containing the $2.56
benefit rate, as well as resolicitations and other successor contracts
for substantially the same services, until the fringe benefit rate
determined in accordance with paragraphs (a) and (b) of this section
equals or exceeds $2.56 per hour.
(e) Variance procedure. (1) The Department will consider variations
requested by contracting agencies pursuant to Section 4(b) of the Act
and Sec. 4.123, from the methodology described in paragraph (a) of this
section for determining prevailing fringe benefit rates. This variation
procedure will not be utilized to routinely permit separate fringe
benefit packages for classes of employees and industries, but rather
will be limited to the narrow circumstances set forth herein where
special needs of contracting agencies require this procedure. Such
variations will be considered where the agency demonstrates that because
of the special circumstances of the particular industry, the variation
is necessary and proper in the public interest or to avoid the serious
impairment of government business. Such a demonstration might be made,
for example, where an agency is unable to obtain contractors willing to
bid on a contract because the service will be performed at the
contractor's facility by employees performing work for the Government
and other customers, and as a result, paying the required SCA fringe
benefits would cause undue disruption to the contractor's own work force
and pay practices.
(2) It will also be necessary for the agency to demonstrate that a
variance is in accordance with the remedial purpose of the Act to
protect prevailing labor standards, by providing comprehensive data from
a valid survey demonstrating the prevailing fringe benefits for the
specific industry. If the agency does not continue to provide current
data in subsequent years, the variance will be withdrawn and the rate
prescribed in paragraph (a) of this section will be issued for the
contract.
[61 FR 68664, Dec. 30, 1996]
