[Federal Register Volume 60, Number 116 (Friday, June 16, 1995)]
[Proposed Rules]
[Pages 31660-31661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14780]



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DEPARTMENT OF LABOR

Office of the Secretary

29 CFR Part 4

RIN: 1215-AA98


Service Contract Act; Labor Standards for Federal Service 
Contracts

AGENCY: Office of the Secretary, Labor.

ACTION: Notice of proposed rulemaking; request for comments.

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SUMMARY: The Department of Labor (DOL) is proposing to delete the 
requirement in Sec. 4.7 of 29 CFR part 4 that any service contract of 
the Federal Government in an amount less than $2,500 that is subject to 
the McNamara-O'Hara Service Contract Act of 1965, as amended (SCA), 
must contain a clause specifying that the contractor or any 
subcontractor shall pay the minimum wage under the Fair Labor Standards 
Act (FLSA) to employees engaged in the performance of the contract. 
This proposed revision is being made to conform the regulations to a 
new class of Federal government purchases established by the Federal 
Acquisition Streamlining Act of 1994 (FASA). Requirements otherwise 
applicable to Federal contracting are eliminated for purchases under 
$2,500 for the purpose of facilitating the use of government credit 
cards for the making of low dollar value purchases of supplies and 
services. The streamlining objectives of the new procurement procedures 
contemplated by FASA are impeded by contract clause requirements in 
Sec. 4.7, which were intended for use in contracts awarded traditional 
procurement procedures.

DATES: Comments are due on or before July 17, 1995.

ADDRESSES: Submit written comments to Maria Echaveste, Administrator, 
Wage and Hour Division, Employment Standards Administration, U.S. 
Department of Labor, Room S-3502, 200 Constitution Avenue, NW, 
Washington, DC 20210. Commenters who wish to receive notification of 
receipt of comments are requested to include a self-addressed, stamped 
post card, or to submit them by certified mail, return receipt 
requested. As a convenience to commenters, comments may be transmitted 
by facsimile (``FAX'') machine to (202) 219-5122 (this is not a toll-
free number). If transmitted by facsimile and a hard copy is also 
submitted by mail, please indicate on the hard copy that it is a 
duplicate copy of the facsimile transmission.

FOR FURTHER INFORMATION CONTACT: Raymond L. Kamrath, Division of 
Policy and Analysis, Wage and Hour Division, Employment Standards 
Administration, U.S. Department of Labor, Room S-3506, 200 
Constitution Avenue, NW, Washington, DC 20210; telephone (202) 219-
8412. This is not a toll-free number.

SUPPLEMENTARY INFORMATION:

I. Paperwork Reduction Act

    This proposed rule contains no reporting or recordkeeping 
requirements subject to the Paperwork Reduction Act of 1980 (Pub. L. 
96-511). The existing information collection requirements contained in 
Regulations, 29 CFR part 4 were previously approved by the Office of 
Management and Budget under OMB control number 1215-0150. The general 
Fair Labor Standards Act (FLSA) recordkeeping requirements which are 
restated in Part 4 were approved by the Office of Management and Budget 
under OMB control number 1215-0017.

II. Background

    The Federal Acquisition Streamlining Act of 1994 (Pub. L. 103-355, 
108 Stat. 3243) was enacted into law on October 13, 1994. Section 4001 
of this Act amends the Office of Federal Procurement Policy Act (41 
U.S.C. 403(11)) to establish a ``simplified acquisition threshold'' of 
$100,000. In addition, Sec. 4301 of FASA amends the Office of Federal 
Procurement Policy Act to establish a new class of purchases referred 
to as ``micro purchases,'' and a micro purchase threshold of $2,500. 
Under this section, among other things, purchases not exceeding $2,500 
are not subject to the Small Business Act reservation requirement, Buy 
American Act, the requirement to secure competitive quotations, and 
Federal employees making such purchases are not deemed ``procurement 
officials.'' The new micro purchase authority, based on a 
recommendation of The National Performance Review (NPR), facilitates 
the use of credit cards by Federal agencies on small dollar purchases 
of supplies and services. For such purchases, the credit card procedure 
becomes both the method of payment and a method of contracting. Because 
the inclusion of contract clauses in small purchases hinder 
implementation of the new micro purchase authority, the Office of 
Federal Procurement Policy in the Office of Management and Budget asked 
the Department to review the contract clause requirement in Sec. 4.7 of 
29 CFR part 4 for service contracts under $2,500.

[[Page 31661]]

    Section 2(b) of the Service Contract Act of 1995 (SCA) (41 U.S.C. 
351(b)(1)) generally obligates all contractors and subcontractors who 
are awarded contracts principally for the furnishing of services 
through the use of service employees, regardless of contract amount, to 
pay not less than the Federal minimum wage under Sec. 6(a)(1) of the 
Fair Labor Standards Act (FSLA) to the employees engaged in the 
performance of such contracts. Unlike Sec. 2(a) of the SCA which 
requires every service contract in excess of $2,500 to include 
particular stipulations relating to the Act's prevailing wage and 
fringe benefit provisions and other labor standard protections, 
Sec. 2(b) does not statutorily require a ``clause'' to implement the 
obligation of covered service contractors or subcontractors to pay 
service employees not less than the minimum wage under Sec. 6(a)(1) of 
the FLSA. Because the clause mandated by Sec. 2(a) of the SCA for 
covered contracts in excess of $2,500 advises contractors and 
subcontractors of the obligation to pay FLSA minimum wages in the 
absence of prevailing wage attachment for the contract (see paragraph 
(d)(1) of Sec. 4.6), a counterpart minimum wage clause was considered 
appropriate for contracts not exceeding $2,500, and the requirement has 
been a part of the regulations since their inception.
    The Department believes that the deletion of the requirement for a 
minimum wage clause in SCA-covered contracts not exceeding $2,500 will 
not adversely affect labor standards protections afforded service 
employees engaged in the performance of such contracts. Although the 
proposal removes the obligation of contractors and subcontractors to 
pay not less than minimum wages to their service employees as a 
condition of contract, the obligation to pay at least the minimum wage 
to any service employee performing on an SCA-covered contract is 
specifically contained in Sec. 2(b) of the SCA, and is also set forth 
in Sec. 6(e)(1) of the FLSA. This statutory obligation is defined 
further in the existing regulations at Sec. 4.2 of 29 CFR part 4. 
Accordingly, the proposal is considered necessary and proper to 
facilitate the streamlining objectives of FASA's Sec. 4301.

Executive Order 12866/Sec. 202 of the Unfunded Mandates Reform Act of 
1995

    This proposed rule is not a ``significant regulatory action'' 
within the meaning of Executive Order 12866, nor does it require a 
Sec. 202 statement under the Unfunded Mandates Reform Act of 1995. It 
will facilitate the handling of Federal agency purchases of $2,500 or 
less. The proposed change eliminates a contract clause, which impedes 
the efficiency contemplated by the use of purchase cards on small 
purchases authorized by the micro-purchase authority under the Federal 
Acquisition Streamlining Act of 1994. The proposed revision, however, 
will not eliminate the obligation of contractors and subcontractors to 
pay employees on such contracts not less than the minimum wage under 
Sec. 6 of the FLSA.
    Because the deletion of the contract clause would not affect 
contractor's responsibilities, the proposed change is not expected to 
result in a rule that may: (1) have an annual effect on the economy of 
$100 million or more or adversely affect in a material way the economy, 
a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
governments or communities; (2) create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
Executive Order 12866. Furthermore, deletion of the clause would 
facilitate credit card purchases (thereby resulting in savings in 
paperwork processing) of services--estimated to be about 12 percent of 
all credit card purchases. Therefore, no regulatory impact analysis has 
been prepared.
Regulatory Flexibility Analysis

    This proposed rule will not have a significant economic impact on a 
substantial number of small entities. The rule simplifies the handling 
of small purchases of services and will primarily affect Federal 
agencies through reductions in burdensome paperwork. While small 
entities will benefit from less burdensome procurement procedures, the 
impact is believed to be insignificant because the purchase of services 
appropriate for credit card use is relatively small, i.e., the bulk of 
purchases appropriate for credit card use is supplies. Thus, this 
proposal is not expected to have a ``significant economic impact on a 
substantial number of small entities'' within the meaning of the 
Regulatory Flexibility Act, and the Department has certified to this 
effect to the Chief Counsel for Advocacy of the Small Business 
Administration. A regulatory flexibility analysis is not required.

Document Preparation

    This document was prepared under the direction and control of Maria 
Echaveste, Administrator, Wage and Hour Division, Employment Standards 
Administration, U.S. Department of Labor.

List of Subjects in 29 CFR Part 4

    Administrative practice and procedures, Employee benefit plans, 
Government contracts, Investigations, Labor, Law enforcement, Minimum 
wages, Penalties, Recordkeeping requirements, Reporting requirements, 
Wages.

    Signed at Washington, D.C., on this 13th day of June, 1995.
Maria Echaveste,
Administrator, Wage and Hour Division.

    For the reasons set forth in the preamble, subtitle A of title 29 
is proposed to be amended as follows:

PART 4--LABOR STANDARDS FOR FEDERAL SERVICE CONTRACTS

    1. Authority citation for part 4 continues to read as follows:

    Authority: 41 U.S.C. 351, et seq., 79 Stat. 1034, as amended in 
86 Stat. 789, 90 Stat. 2358; 41 U.S.C. 38 and 39; and 5 U.S.C. 301.


Sec. 4.7  [Removed and Reserved]

    2. In subpart A, Sec. 4.7 is proposed to be removed and reserved.
[FR Doc. 95-14780 Filed 6-15-95; 8:45 am]
BILLING CODE 4510-27-M