Wage Determination Penalties

October 10, 2012

What happens if you get caught not using Service Contract Act (SCA) or Davis Bacon wages when you are contractually obligated to?

This is a good question, and it took some digging to find the answer. These findings apply to any federal government contract, whether it be through GSA, Open Market, etc. I based the majority of my findings on a DOL document I found titled “INVESTIGATIVE PROCESS UNDER SCA/CWHSSA/FLSA” (Source 1), which is obviously related to SCA only. In researching the specific process and penalties for Davis Bacon violations, I found them to be in line with SCA (Source 3).

The Hearing Process. The Department of Labor (DOL) handles these cases with a hearing process, which includes appeal rights:

In accordance with section 4(a) of SCA, DOL is authorized to hold hearings and
make decisions based upon findings of fact as deemed necessary to enforce the
provisions of SCA. (Source 1)

It is noteworthy that this is an avoidable process, the hearing is held by a Regional Solicitor in “situations where the contractor refuses to agree to future compliance, fails to make back wage restitution, or debarment action is indicated” (Source 1). Therefore, a Contractor caught paying non-compliant wages will have the opportunity to make restitution before a hearing, and possible debarment from government contracts.

The Penalties. Aside from withholding of funds for the project, penalties include contract cancellation, forced corrective compensation to employees, and even debarment. In the debarment scenario, a contractor will be unable to win government contracts for a three year period (Source 1). Their name will appear in the Excluded Parties List System (EPLS), which may be consolidated into SAM over the next year.

Avoiding this Altogether. As my grandpa would say “An ounce or prevention is worth a pound of cure.” Therefore, if you would like to assure Wage Determination compliance, you must (1) understand it, (2) have a Compliance Plan in place, and (3) follow it.

If you are unsure if SCA or Davis Bacon apply to your services, then the place to start is the Wage Determinations OnLine website (Source 2). Here, you can isolate the labor types for each, and determine if they apply to your services. If you are wondering which one applies to a Government Contract you have, then read the contract, it should be in there. Otherwise talk to your Contracting Officer (CO), they will know.

Developing a Compliance Plan is a much larger undertaking than just wage determinations, but if you are a service company and contract with the federal government, then this is a vital component to your Compliance Plan. Include the wage minimums you are to use when completing a Wage Determination project, and list any informative details that will help you properly identify and administer these wages. Also, check back regularly because Wage Determinations are updated occasionally (Source 2).



Josh Ladick is the President of GSA Focus, Inc., and has been immersed in GSA Contracts and Government Contracting for over 8 years. I explain the complex GSA and FAR clauses in simple terms that anyone can understand, as well as keep government contractors informed on a broad group of GSA Contract related topics. More about Josh Ladick. My Google Profile+

  • Your information is solid and your recommendations are good to. I have been involved in this area for over thirty years and could have saved you some time in this exploration. One thing to remember is that as a contractor you are only responsible for implementing Wage Determinations (SCA or DBA) that have been incorporated into your contract. While Wage Determinations are all updated on a schedule, they are not an issue for compliance until they have been made a part of the contract. This is usually accomplished with the onset of option years, or new contract years. If you have any questions or disagreements that you would like to explore feel free to contact me. – Kevin

  • Thanks Kevin. I will keep you in mind for the future. This need comes up from time to time, and I am glad to have an expert to refer clients to. – Josh

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