[Federal Register Volume 65, Number 144 (Wednesday, July 26, 2000)]
[Rules and Regulations]
[Pages 45903-45908]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18635]


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DEPARTMENT OF LABOR

Office of the Secretary

29 CFR Part 4

RIN 1215-AB26


Service Contract Act; Labor Standards for Federal Service 
Contracts

AGENCY: Wage and Hour Division, Employment Standards Administration, 
Labor.

ACTION: Final rule.

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SUMMARY: Pursuant to Section 4(b) of the McNamara-O'Hara Service 
Contract Act (SCA), the Department of Labor (DOL or the Department) is 
issuing a temporary exemption from coverage for certain subcontracts 
for commercial services. On this same date, the Department of Labor is 
separately proposing a similar exemption for both prime contracts and 
subcontracts. This exemption mirrors the subcontract portion of the 
proposed rule and will remain in effect for the period of one year or 
until final action is taken on the DOL proposed exemption for both 
prime and subcontracts, whichever occurs first. The exemption for 
subcontracts was determined to be necessary and proper in the public 
interest to avoid the serious impairment of government business, and is 
in accord with the remedial purpose of the SCA to protect prevailing 
labor standards.

EFFECTIVE DATE: August 25, 2000.

FOR FURTHER INFORMATION CONTACT: William W. Gross, Director, Office of 
Wage Determinations, Wage and Hour Division, Employment Standards 
Administration, U.S. Department of Labor, Room S-3028, 200 Constitution 
Avenue, N.W., Washington, D.C. 20210; telephone (202) 693-0062. This is 
not a toll-free number.

SUPPLEMENTARY INFORMATION:

I. Paperwork Reduction Act

    This 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.

II. Background

    On October 1, 1995, the Federal Acquisition Regulations were 
amended to implement provisions of the Federal Acquisition Streamlining 
Act (FASA). One provision of the final regulation, 48 CFR 
12.504(a)(10)), provided that the requirements of the McNamara-O'Hara 
Service Contract Act (SCA) are not applicable to subcontracts at any 
tier for the acquisition of commercial items or services.
    After a subsequent review of the issue by the FAR Council, the 
Administrator for Federal Procurement Policy wrote to the Secretary of 
Labor and requested that the Department propose an exemption for a more 
limited group of commercial service contracts (both prime contracts and 
subcontracts). The Administrator stated that the FAR Council had 
concluded that a blanket exemption of all subcontracts for commercial 
items may not adequately serve the Administration's policy of 
supporting exemptions of the SCA only where they do not undermine the 
purposes for which the SCA was enacted. Therefore the FAR Council 
agreed that any exemption from the coverage of SCA for subcontracts for 
the acquisition of commercial items or components should be 
accomplished under the Secretary of Labor's authority in the SCA, and 
stated that it would withdraw the FAR provision.
    The FAR Council indicated that the adoption of their 
recommendations will further the commitment of the Administration to be 
more commercial-like, encourage broader participation in government 
procurement by companies doing business in the commercial sector, and 
reinforce their commitment to reduce government-unique terms and 
conditions from their contracts. Furthermore, the FAR Council 
represented that the limited exemptions that they proposed would be in 
accord with the remedial purpose of the SCA to protect prevailing labor 
standards.
    The Department of Labor on this date has issued a Notice of 
Proposed Rulemaking (NPRM) to amend the SCA Regulations to implement 
the exemptions requested by the FAR Council. The FAR Council is 
contemporaneously withdrawing its current rule that exempts commercial 
subcontracts from the application of SCA (48 CFR 12.504(a)(10)). As a 
result of the FAR Council's actions, a small group of commercial 
subcontracts that were previously exempted under the FAR rule and that 
also meet the requirements of DOL's proposed rule could change from 
exempt to nonexempt and back to exempt if the DOL proposal becomes 
final as it is currently proposed. The Department, pursuant to its 
authority under section 4(b) of the SCA, finds that a temporary, 
limited exemption from the SCA is necessary and proper in the public 
interest to avoid the serious impairment of government business. This 
exemption is necessary to prevent the disruption that could be caused 
by such changes, including the possible disruption of services if the 
current subcontractor does not agree to continue the subcontract 
services under the requirements of SCA. Furthermore, the Department 
finds that as a result of the criteria applied to the exempt services, 
this temporary, limited exemption is in accord with the remedial 
purpose of the Act to protect prevailing labor standards.
    This exemption does not apply to all commercial subcontracts that 
may have been exempt under the now withdrawn FAR rule nor does it apply 
to any prime contracts. The exemption is limited solely to those 
subcontracts that (1) were or would have been exempt under the now 
withdrawn FAR rule and (2) would be exempt under the DOL proposed rule 
if that rule becomes final in its current form. The exemption will be 
in effect for one year or until final action is taken on the NPRM 
issued this date, whichever occurs first. The Department notes that it 
intends to proceed expeditiously with this

[[Page 45904]]

rulemaking and anticipates that a final rule, after review of all of 
the comments, will be issued within six months.
    The Department also finds that there is good cause to issue this 
temporary final rule without prior notice and comment. Prior notice and 
comment would be contrary to the public interest because of the 
disruption to contractors and to the provision of services to the 
Government caused by such changes from SCA-exempt, to SCA-covered, to 
SCA-exempt over the period of less than one year.

III. Summary of the Exemptions

    This rule addresses two separate but somewhat related issues. 
First, the current exemption for the maintenance and repair of 
Automated Data Processing (ADP) equipment, 29 CFR 4.123(e)(1), is 
modified to apply the exemption to subcontracts, and with respect to 
subcontracts, reflects terminology changes in law that have occurred, 
and applies the exemption to installation services. Second, a new 
exemption, similar to the current ADP exemption, is added to 4.123(e) 
to exempt subcontracts for a specified subset of commercial services 
that also meet certain criteria.

Revision of the current ADP exemption

    This final rule retains the current language of the ADP exemption 
for application to prime contracts and adds a new subparagraph (2) to 
Sec. 4.123(e) for application to subcontracts. The new subparagraph 
first reflects changes in terminology stemming from the passage of the 
Clinger-Cohen Act of 1996, 40 U.S.C. 1401 et seq., which set forth a 
new framework for the management and acquisition of information 
technology and replaced the ``ADP'' terminology originally in the 
Brooks Automatic Data Processing Act, 40 U.S.C. 759, with ``information 
technology'' to reflect the convergence of ADP and telecommunications 
equipment and technology.
    As defined at 40 U.S.C. 1401(3) and incorporated in the FAR, 48 CFR 
2.101, the term ``information technology,'' with respect to an 
executive agency, means ``any equipment or interconnected system or 
subsystem of equipment that is used in the automatic acquisition, 
storage, manipulation, management, movement, control, display, 
switching, interchange, transmission, or reception of data or 
information.'' Under this definition, equipment is considered to be 
used by an executive agency if the agency uses the equipment directly 
or if the equipment is used by a contractor under a contract which 
requires the use of such equipment, or requires the use of such 
equipment to a significant extent in the performance of a service or 
the furnishing of a product. The term ``information technology'' does 
not include any equipment that is acquired by a contractor incidental 
to a contract; or any equipment that contains imbedded information 
technology that is used as an integral part of the product, but the 
principal function of which is not the acquisition, storage, 
manipulation, management, movement, control, display, switching, 
interchange, transmission, or reception of data or information. For 
example, HVAC (heating, ventilation, and air conditioning) equipment 
such as thermostats or temperature control devices and medical 
equipment where information technology is integral to its operation, is 
not information technology.
    In addition, the final rule applies to installation services (where 
those services are not subject to the requirements of the Davis-Bacon 
Act).

New exemption for Certain Commercial Service Subcontracts

    In certain situations, an employee's work on a government contract 
represents a small portion of his or her time and the balance of the 
time is spent on commercial work. In such cases, the FAR Council 
represents that the Government loses the full benefits of competition 
for its service contracts because some contractors decline to compete 
for Government work due to specific government requirements. Consistent 
with the recommendation of the FAR Council, this exemption is limited 
to those subcontracts where the services being procured are such that 
it would be more efficient and practical for the subcontractor to 
perform the services with a workforce that is not primarily assigned to 
the performance of government work. In addition, in order that the 
exemption comport with the statutory requirement that it be in accord 
with the remedial purposes of the Act to protect prevailing labor 
standards, a number of criteria must be satisfied. First, the proposed 
exemption would apply only when the subcontract award is not determined 
primarily upon the factor of cost. Therefore, the subcontractor 
providing the best service at a somewhat higher or lower cost would not 
be at a competitive disadvantage. Second, the criteria would limit the 
application of the exemption to circumstances where the nature of the 
procurement dictates that the most efficient and practical performance 
of the workload can be accomplished with a workforce that is not 
dedicated to working primarily on the Government contract. Thus, the 
competitive pressures upon employee wages that might exist if the 
services were performed by a workforce dedicated to the Government 
contract would not come into play on the subcontracts within the scope 
of the exemption. Furthermore, even if a subcontractor might be 
inclined to reduce wages to secure the subcontract, the criteria would 
forbid that practice.
    Under this rule, the following criteria for exemption are applied 
to a short list of services. The exemption applies only if the services 
under the subcontract meet all of the following criteria.
    (1) The services under the subcontract are commercial--i.e., they 
are offered and sold regularly to non-Governmental customers, and are 
provided by the subcontractor to the general public in substantial 
quantities in the course of normal business operations.
    The basic underlying purpose of the exemption is to permit a 
prospective subcontractor to utilize its commercial compensation 
practices for both Government and private commercial work. If the 
prospective subcontractor does not currently perform the solicited 
services, then conforming to the SCA requirements would not cause the 
subcontractor to alter its commercial compensation practices.
    (2) The subcontract will be awarded on a sole source basis or the 
subcontractor will be selected for award on the basis of other factors 
in addition to price. In such cases, price must be equal to or less 
important than the combination of other non-price or cost factors in 
selecting the subcontractor.
    One of the basic purposes of the Service Contract Act is to 
counteract the negative impact that competition based on price alone 
may have upon wages. If a subcontract is awarded on a sole source 
basis, there is no competition and price is clearly not the basis for 
awarding the subcontract.
    For the majority of other subcontracts that are competitively 
awarded, this criterion would attempt to largely remove wages from 
consideration by making quality of service and other non-cost factors 
equal to or more important than the bottom line price. If one assumes 
that the best employees (contractors) are paid (pay) higher wages, then 
this criterion would allow these employees (contractors) to compete on 
the basis of the employees' increased productivity and higher quality 
service. These employees/contractors should not be disadvantaged even 
though the employee wages and possibly the resulting subcontract price 
are somewhat higher than the lowest offer.

[[Page 45905]]

    (3) The subcontract services are furnished at prices which are, or 
are based on, established catalog or market prices. An established 
price is a price included in a catalog, price list, schedule, or other 
form that is regularly maintained by the subcontractor, is either 
published or otherwise available for inspection by customers, and 
states prices at which sales are currently, or were last, made to a 
significant number of buyers constituting the general public. An 
established market price is a current price, established in the usual 
course of trade between buyers and sellers free to bargain, which can 
be substantiated from sources independent of the manufacturer or 
subcontractor. Normally, market price information is taken from 
independent market reports, but market price could be established by 
surveying the firms in a particular industry or market.
    This criterion ensures that the subcontractor will provide the 
services to the Government on the same basis that the subcontractor 
services commercial accounts. Combined with the other criteria, this 
requirement should ensure that subcontractors do not decrease employee 
compensation as a part of the competitive contracting process.
    (4) All of the service employees who will perform the services 
under the subcontract spend only a small portion of their time (a 
monthly average of less than 20 percent of the available hours on an 
annualized basis, or less than 20 percent of available hours during the 
contract period if the contract period is less than a month) servicing 
the Government subcontract.
    If the employees spend only a small portion of their available work 
hours on the Government contract, the subcontractor would not likely be 
willing to alter its compensation practices simply to obtain the 
subcontract. (Note: Criterion 5 would also specifically preclude any 
such change in compensation practices.) Furthermore, the criteria for 
exemption will not be satisfied by rotating the workforce and having 
different employees work on the contract each day of the week. In the 
Department's experience it would be extraordinary for a contractor to 
staff a contract in this manner. Therefore in such a case, although 
each individual employee would spend less than 20% of his/her work 
hours on the Government contract, a prime contractor could not 
certify--as required by Criterion 6--that all or nearly all offerors 
would staff the contract with service employees who spend only a small 
portion of their time on the project.
    (5) The subcontractor utilizes the same compensation (wage and 
fringe benefits) plan for all service employees performing work under 
the subcontract as the subcontractor uses for these employees and for 
equivalent employees servicing commercial customers.
    This criterion ensures that the employees servicing the government 
contract will be compensated exactly as they would be if they were 
servicing a commercial account. Thus, the prevailing labor standards 
for private work would not be impacted in any way by the award of the 
subcontract. Furthermore, because subcontract award is not determined 
primarily on the basis of cost (Criterion 2), the subcontractor paying 
the lowest wages will not have a competitive advantage over other 
employers who pay average or above average wages. These subcontractors 
will compete for the subcontract work on the same basis that they 
compete for private work: quality of service and overall value.
    (6) The prime contractor determines in advance, based on the nature 
of the subcontract requirements and knowledge of the practices of 
likely offerors, that all or nearly all offerors will meet the above 
requirements. If the services are currently being performed under a 
contract or subcontract, the prime contractor shall consider the 
practices of the existing contractor or subcontractor in making a 
determination regarding the above requirements.
    This requirement is designed to ensure that all subcontractors 
compete on an equal basis, and eliminate the possibility that a 
subcontractor subject to SCA would be forced to compete against a 
subcontractor that would be exempt from SCA. Furthermore, as noted in 
the discussion of Criterion 4, this requirement, which takes into 
consideration not only the practices of likely offerors but also the 
nature of the subcontract requirements, is a necessary safeguard to 
prevent individual offerors from juggling staffing patterns simply in 
an effort to avoid SCA coverage. This criterion also serves to protect 
those employees (either contractor or Federal employees) who might 
currently be engaged in performing the solicited services on a full-
time basis.
    (7) The exempted subcontractor certifies in the subcontract to the 
provisions in paragraphs (1), and (3) through (5). The prime contractor 
shall review available information concerning the subcontractor and the 
manner in which the subcontract will be performed. If the prime 
contractor has reason to doubt the validity of the certification, SCA 
stipulations shall be included in the subcontract.
    This criterion provides a mechanism for addressing and correcting 
situations where the exemption may have been misapplied. (It is not 
anticipated that the prime contractor will do a complete investigation 
into the application of the exemption to the subcontractor, but rather 
will do a review based on known information regarding the 
subcontractor, including information submitted in the solicitation 
process.) Furthermore, if the Department of Labor, in its enforcement, 
determines that the subcontract is not in fact exempt, it shall require 
that SCA stipulations be included in the subcontract. The prime 
contractor, who in almost all cases will have SCA stipulations included 
in its contract, will be ultimately responsible for compliance with the 
requirements of the Act. The Department may therefore require that the 
SCA requirements be effective as of the date of contract award. The 
Department notes that an exempt subcontractor is not required to keep 
any particular records to meet its burden of showing that the criteria 
are satisfied.
    These criteria will be applied only to the following small group of 
commercial services. In order for the exemption to apply, the 
subcontract must meet all of the required criteria and must be for one 
of the specified services listed below. Subcontracts for services that 
are not within the scope of the services specifically listed, will not 
be exempt from coverage of SCA even though the subcontract meets all of 
the required criteria. Furthermore, subcontracts subject to section 
4(c) of the SCA are not exempt.
    For each of the services included on the list of services to which 
the exemption would apply, the type of services covered is explained. 
The difficulties which the FAR Council stated have been encountered in 
procuring the services are discussed in the NPRM.

Automatic Data Processing and Telecommunications Services

    For several years the Department of Labor regulations implementing 
the Service Contract Act have contained an exemption for contracts 
principally for the maintenance, calibration and/or repair of 1) 
automated data processing and office information/word processing 
systems; 2) scientific equipment and medical apparatus or equipment of 
microelectronic circuitry or other technology of at least similar 
sophistication; and 3) office/business machines not otherwise exempt 
where services are performed by the

[[Page 45906]]

manufacturer or supplier of the equipment. In short, the current 
exemption applies exclusively to hardware maintenance when certain 
criteria are met. In addition to the expansion of the current ADP 
exemption to subcontracts for installation services as well as hardware 
maintenance, an exemption for subcontracts for software and other ADP 
support services is added in conjunction with the criteria listed 
above.
    Provided the specified criteria are met, the exemption covers a 
broader range of automatic data processing and telecommunications 
services including: ADP facility operation and maintenance services 
provided at the contractor's facility, ADP telecommunications and 
transmission services, ADP teleprocessing and timesharing services, ADP 
systems analysis services, information and data broadcasting or data 
distribution services, ADP backup and security services, ADP data 
conversion services, computer aided design/computer aided manufacturing 
(CAD/CAM) services, digitizing services (including cartographic and 
geographic information), telecommunications network management 
services, automated news services, data services or other information 
services (e.g., buying data, the electronic equivalent of books, 
periodicals, newspapers, etc.) and data storage on tapes, compact 
disks, etc. This exemption does not apply to ADP data entry services or 
ADP optical scanning services.
    Automobile or other vehicle (e.g., aircraft) maintenance services 
(other than contracts to operate a Government motor pool or similar 
facility).
    Contractors operating automobiles or other vehicles have a need for 
services such as normal maintenance (e.g., changing oil and filters, 
rotating tires, etc.), mechanical repairs, paint and body work, glass 
replacement, and other repairs needed to maintain the automobile or 
other vehicle. Unless the contractor has its own repair shop for such 
work, it is subcontracted to commercial firms.
    Financial services involving the issuance and servicing of cards 
(including credit cards, debit cards, purchase cards, smart cards, and 
similar card services).
    Although these services are not typically required by most service 
contracts and therefore any subcontracts for these services would not 
typically be covered by the wage determination requirements of the 
prime contract, any subcontract for such financial services would be 
exempt if all the required criteria are met.
    Lodging at hotels/motels and contracts with hotels/motels for 
conferences, including lodging and/or meals, which are part of the 
contract for the conference.
    Prime contractors may contract with hotels/motels for meeting rooms 
for conferences of limited duration (e.g., one to five days). These 
subcontracts may be for conferences where attendance is limited to 
Government employees or may involve attendance by other organizations 
and/or the public. These subcontracts may also involve furnishing 
lodging and meals to those participating in the conference.
    In other cases, the prime contractor establishes contractual 
arrangements with hotels/motels to obtain special rates for lodging 
when the contractor has a large number of employees that frequently 
travel to a particular location. The hotel/motel agrees to special 
reduced rates in exchange for being designated a preferred provider for 
the agency travelers to that city/location.
    Maintenance services for all types of specialized building or 
facility equipment such as elevators, escalators, temperature control 
systems, security systems, smoke and/or heat detection equipment, etc.
    Prime contractors that operate and maintain Government owned 
buildings often subcontract for services related to specialized 
equipment. Subcontracts for these services would be exempt if all of 
the required criteria are met.
    Installation, maintenance, calibration or repair services for all 
types of equipment where services are obtained from the equipment 
manufacturer or supplier of the equipment.
    Sometimes prime contractors are required to provide equipment and 
the prime contractors may have a need to acquire services to install, 
maintain, calibrate, service or repair the equipment from the 
manufacturer or original supplier in order to avoid compromising a 
warranty or because proprietary information needed to perform the work 
is only available from the manufacturer, an authorized representative 
of the manufacturer or the supplier of the equipment. These 
subcontracts may involve sophisticated equipment that requires access 
to proprietary information or requires employees involved in performing 
the work to have extensive training that is often only available 
through the manufacturer or equipment supplier. Examples of the type of 
equipment include automated building control systems, HVAC equipment, 
building security systems, and elevators or escalators.
    Transportation of persons by air, motor vehicle, rail, or marine on 
regularly scheduled routes or via standard commercial services (not 
including charter services).
    The General Services Administration (GSA) enters into contracts 
with airlines called ``City Pairs'' so that Federal employees and 
contract employees traveling on Government business can get discount 
airfares. Where contract employees travel on official business at 
reduced government fares, it is not considered an SCA-covered 
subcontract for transportation services.
    Real estate services, including real property appraisal services, 
related to housing federal agencies or disposing of real property owned 
by the Federal Government.
    To the extent that these services may be required, a subcontract 
for real estate services, including lease acquisition, real property 
appraisal, broker, space planning, lease re-negotiation, tax abatement, 
and real property disposal services, would be exempt if the required 
criteria are met.
    Relocation services, including services of real estate brokers and 
appraisers, to assist federal employees or military personnel in buying 
and selling homes.
    Subcontracts are not generally awarded for employee relocation 
services. To the extent that relocation services may be required, 
subcontracts for these services would be exempt if the required 
criteria are met.

IV. Executive Order 12866 and 13132; Sec. 202 of the Unfunded 
Mandates Reform Act of 1995; Small Business Regulatory Enforcement 
Fairness Act

    This final rule is being treated as a ``significant regulatory 
action'' within the meaning of Executive Order 12866 because of the 
significant impact of this rule on other agencies. Therefore, the 
Office of Management and Budget has reviewed the final rule. However, 
the Department has determined that this rule is not ``economically 
significant'' as defined in section 3(f)(1) of E.O. 12866, and 
therefore it does not require a full economic impact analysis under 
section 6(a)(3)(C) of the Order. Under this rule, subcontracts would 
not be exempt unless price is equal to or less important than the 
combination of other non-price or cost factors in selecting the 
subcontractor. Therefore it is not anticipated that the changes 
proposed by this rule will 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, jobs, the environment,

[[Page 45907]]

public health or safety, or State, local, or tribal governments or 
communities.
    The Department has similarly concluded that this rule is not a 
``major rule'' requiring approval by the Congress under the Small 
Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et 
seq.). It will not likely result in (1) an annual effect on the economy 
of $100 million or more; (2) a major increase in costs or prices for 
consumers, individual industries, Federal, State or local government 
agencies, or geographic regions; or (3) significant adverse effects on 
competition, employment, investment, productivity, innovation, or on 
the ability of U.S.-based enterprises to compete with foreign-based 
enterprises in domestic or export markets.
    For purposes of the Unfunded Mandates Reform Act of 1995, this rule 
does not include any federal mandate that may result in excess of $100 
million in expenditures by state, local and tribal governments in the 
aggregate, or by the private sector. Furthermore, the requirements of 
the Unfunded Mandates Reform Act, 2 U.S.C. 1532, do not apply here 
because the rule does not include a ``Federal mandate.'' The term 
``Federal mandate'' is defined to include either a ``Federal 
intergovernmental mandate'' or a ``Federal private sector mandate.'' 2 
U.S.C. 658(6). Except in limited circumstances not applicable here, 
those terms do not include an enforceable duty which is ``a duty 
arising from participation in a voluntary program.'' 2 U.S.C. 
658(7)(A). A decision by a subcontractor to bid on Federal service 
contracts is purely voluntary in nature, and the subcontractor's duty 
to meet Service Contract Act requirements arises ``from participation 
in a voluntary Federal program.''
    The Department has also reviewed this rule in accordance with 
Executive Order 13132 regarding federalism, and has determined that it 
does not have ``federalism implications.'' The rule does not ``have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government.''

V. Document Preparation

    This document was prepared under the direction and control of John 
R. Fraser, Deputy 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.
    Accordingly, for the reasons set out in the preamble, 29 CFR Part 4 
is amended as set forth below:

PART 4--LABOR STANDARDS FOR FEDERAL SERVICE CONTRACTS

    1. The 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; 5 U.S.C. 301; and 
108 Stat. 4101(c).

    2. New paragraphs (e)(2) and (3) are added to Sec. 4.123(e), to 
read as follows:


Sec. 4.123  Administrative limitations, and exemptions.

* * * * *
    (e) * * *
    (2) The following exemptions shall expire no later than July 26, 
2001:
    (i) Subcontracts principally for the maintenance, calibration, 
repair, and/or installation (where the installation is not subject to 
the Davis-Bacon Act, as provided in Sec. 4.116(c)(2) of this part) of 
information technology. The term information technology means any 
equipment or interconnected system or subsystem of equipment that is 
used in the automatic acquisition, storage, manipulation, management, 
movement, control, display, switching, interchange, transmission, or 
reception of data or information. The term information technology does 
not include equipment that contains imbedded information technology 
that is used as an integral part of the product, but the principal 
function of which is not the acquisition, storage, manipulation, 
management, movement, control, display, switching, interchange, 
transmission, or reception of data or information. For example, HVAC 
(heating, ventilation, and air conditioning) equipment such as 
thermostats or temperature control devices and medical equipment where 
information technology is integral to its operation, are not 
information technology.
    (ii) The exemptions set forth in this paragraph (e)(2) shall apply 
only under the following circumstances:
    (A) The items of equipment are commercial items which are used 
regularly for other than Government purposes, and are sold or traded by 
the subcontractor in substantial quantities to the general public in 
the course of normal business operations;
    (B) The subcontract services are furnished at prices which are, or 
are based on, established catalog or market prices for the maintenance, 
calibration, repair, and/or installation of such commercial items. An 
``established catalog price'' is a price included in a catalog, price 
list, schedule, or other form that is regularly maintained by the 
manufacturer or the contractor, is either published or otherwise 
available for inspection by customers, and states prices at which sales 
currently, or were last, made to a significant number of buyers 
constituting the general public. An ``established market price'' is a 
current price, established in the usual course of trade between buyers 
and sellers free to bargain, which can be substantiated from sources 
independent of the manufacturer or contractor; and
    (C) The subcontractor utilizes the same compensation (wage and 
fringe benefits) plan for all service employees performing work under 
the contract as the subcontractor uses for these employees and 
equivalent employees servicing the same equipment of commercial 
customers;
    (D) The subcontractor certifies in the subcontract to the 
provisions in this paragraph (e)(2)(ii).
    (iii) Determinations of the applicability of this exemption to 
subcontracts shall be made by the prime contractor prior to subcontract 
award. In making a judgment that the exemption applies, the prime 
contractor shall consider all factors and make an affirmative 
determination that all of the above conditions have been met.
    (iv) The prime contractor is responsible for compliance with the 
requirements of the Service Contract Act by its subcontractors, 
including compliance with all of the requirements of this exemption 
(see Sec. 4.114(b) of this part). If the Department of Labor determines 
that any of the above requirements for exemption has not been met with 
respect to a subcontract, the exemption will be deemed inapplicable, 
and the prime contractor may be responsible for compliance with the 
Act, effective as of the date of contract award.
    (3) The following exemptions shall expire no later than July 26, 
2001:
    (i) Subcontracts for the following services where the services 
under the subcontract meet all of the criteria set forth in paragraph 
(e)(3)(ii) and are not excluded by paragraph (e)(3)(iii):
    (A) Automated data processing and telecommunications services, 
including ADP facility operation and maintenance services provided at 
the subcontractor's facility, ADP telecommunications and transmission 
services, ADP teleprocessing and timesharing services, ADP systems 
analysis services,

[[Page 45908]]

information and data broadcasting or data distribution services, ADP 
backup and security services, ADP data conversion services, computer 
aided design/computer aided manufacturing (CAD/CAM) services, 
digitizing services (including cartographic and geographic 
information), telecommunications network management services, automated 
news services, data services or other information services (e.g., 
buying data, the electronic equivalent of books, periodicals, 
newspapers, etc.) and data storage on tapes, compact disks, etc. This 
category does not include ADP data entry services or ADP optical 
scanning services;
    (B) Automobile or other vehicle (e.g., aircraft) maintenance 
services (other than subcontracts to operate a Government motor pool or 
similar facility);
    (C) Financial services involving the issuance and servicing of 
cards (including credit cards, debit cards, purchase cards, smart 
cards, and similar card services);
    (D) Lodging at hotels/motels and contracts with hotels/motels for 
conferences, including lodging and/or meals, which are part of the 
subcontract for the conference;
    (E) Maintenance services for all types of specialized building or 
facility equipment such as elevators, escalators, temperature control 
systems, security systems, smoke and/or heat detection equipment, etc;
    (F) Maintenance, calibration, repair, or installation (where the 
installation is not subject to the Davis-Bacon Act, as provided in 
Sec. 4.116(c)(2) of this part) services for all types of equipment 
where the services are obtained from the manufacturer or supplier of 
the equipment;
    (G) Transportation of persons by air, motor vehicle, rail, or 
marine vessel on regularly scheduled routes or via standard commercial 
services (not including charter services);
    (H) Real estate services, including real property appraisal 
services, related to housing federal agencies or disposing of real 
property owned by the Federal Government; and
    (I) Relocation services, including services of real estate brokers 
and appraisers to assist federal employees or military personnel in 
buying and selling homes.
    (ii) The exemption set forth in this paragraph (e)(3) shall apply 
to the services listed in paragraphs (e)(3)(i) of this seciton only 
when all of the following criteria are met:
    (A) The services under the subcontract are commercial--i.e., they 
are offered and sold regularly to non-Governmental customers, and are 
provided by the subcontractor to the general public in substantial 
quantities in the course of normal business operations;
    (B) The subcontract will be awarded on a sole source basis or the 
subcontractor will be selected for award on the basis of other factors 
in addition to price. In such cases, price must be equal to or less 
important than the combination of other non-price or cost factors in 
selecting the subcontractor.
    (C) The subcontract services are furnished at prices which are, or 
are based on, established catalog or market prices. An established 
price is a price included in a catalog, price list, schedule, or other 
form that is regularly maintained by the subcontractor, is either 
published or otherwise available for inspection by customers, and 
states prices at which sales are currently, or were last, made to a 
significant number of buyers constituting the general public. An 
established market price is a current price, established in the usual 
course of trade between buyers and sellers free to bargain, which can 
be substantiated from sources independent of the manufacturer or 
subcontractor. Normally, market price information is taken from 
independent market reports, but market price could be established by 
surveying the firms in a particular industry or market;
    (D) All of the service employees who will perform the services 
under the subcontract spend only a small portion of their time (a 
monthly average of less than 20 percent of the available hours on an 
annualized basis, or less than 20 percent of available hours during the 
contract period if the contract period is less than a month) servicing 
the government subcontract;
    (E) The subcontractor utilizes the same compensation (wage and 
fringe benefits) plan for all service employees performing work under 
the subcontract as the subcontractor uses for these employees and for 
equivalent employees servicing commercial customers;
    (F) The prime contractor determines in advance, based on the nature 
of the subcontract requirements and knowledge of the practices of 
likely offerors, that all or nearly all offerors will meet the above 
requirements. If the services are currently being performed under a 
contract or subcontract, the prime contractor shall consider the 
practices of the existing contractor or subcontractor in making a 
determination regarding the above requirements; and
    (G) The exempted subcontractor certifies in the subcontract to the 
provisions in paragraphs (e)(3)(ii)(A) and (C) through (E) of this 
section. The prime contractor shall review available information 
concerning the subcontractor and the manner in which the subcontract 
will be performed. If the prime contractor has reason to doubt the 
validity of the certification, SCA stipulations shall be included in 
the subcontract.
    (iii) The prime contractor is responsible for compliance with the 
requirements of the Service Contract Act by its subcontractors, 
including compliance with all of the requirements of this exemption 
(see Sec. 4.114(b) of this part). If the Department of Labor determines 
that any of the above requirements for exemption has not been met with 
respect to a subcontract, the exemption will be deemed inapplicable, 
and the prime contractor may be responsible for compliance with the 
Act, effective as of the date of contract award.
    (iv) The exemption set forth in this paragraph (e)(3) does not 
apply to solicitations and subcontracts subject to Section 4(c) of the 
Service Contract Act.

    Signed at Washington, D.C., on this 19th day of July, 2000.
T. Michael Kerr,
Administrator, Wage and Hour Division.
[FR Doc. 00-18635 Filed 7-25-00; 8:45 am]
BILLING CODE 4510-27-P