and not more than 5 days after completion of the hearing under this paragraph, render his decision.

(d) Decision of hearing officer. The hearing officer shall render a decision as provided in paragraph (c) (4) or (5) of this section based on findings of fact set forth in the decision, which shall have the finality accorded to a decision of the Secretary under the provisions of 41 U.S.C. 39. Such decision shall be filed with the case record and copies shall be transmitted promptly to the parties and to the Administrator, who shall cause to be issued any necessary wage determinations in conformance thereto. [37 FR 25472, Nov. 30, 1972]

Subpart B-Equivalents of Determined Fringe Benefits

§ 4.51 Discharging fringe benefit obligations by equivalent methods.

Section 2(a) (2) of the Act, which provides for fringe benefits that are separate from and additional to the monetary compensation required under section 2(a) (1), permits an employer to discharge his obligation to provide the specified fringe benefits by furnishing any equivalent combinations of "bona fide" fringe benefits or by making equivalent or differential payments in cash. However, credit for such payments is limited to the employer's fringe benefit obligations under section 2(a) (2), since the Act does not authorize any part of the monetary wage required by section 2(a) (1) and specified in the wage determination and the contract, to be offset by the fringe benefit payments or equivalents which are furnished or paid pursuant to section 2(a) (2).

§ 4.52 Equivalent fringe benefits.

Under this Act, fringe benefit obligations may be discharged by furnishing, in lieu of those fringe benefits determined by the Secretary and specified in the contract, other bona fide fringe benefits which the contractor or subcontractor is not required by statute to provide, or any combination of such bona fide fringe benefits: Provided, That they are “equivalent” in terms of monetary cost to the employer. Thus, if an applicable determination specifies that 10 cents per hour is to be paid into a pension fund, this fringe benefit obligation will be deemed to be met if instead, hospitalization benefits costing not less than 10

cents per hour are provided. The same obligation will be met if hospitalization benefits costing 5 cents an hour and holiday pay equal to 5 cents an hour in cash are provided. No benefit required to be furnished the employee by any other law, such as workmen's compensation, may be credited toward satisfying the fringe benefit requirements of the Act.

§ 4.53 Cash equivalents.

(a) Fringe benefit obligations may be discharged by paying, in addition to the monetary wage required, a cash amount per hour in lieu of the specified fringe benefits provided such amount is equivalent to the cost of the fringe benefits required. If, for example, an employee's monetary rate under an applicable determination is $2.50 an hour, and the fringe benefits to be furnished are hospitalization benefits costing 10 cents an hour and retirement benefits costing 10 cents an hour, the fringe benefit obligation is discharged if instead of furnishing the required fringe benefits the employer pays the employee, in cash, 20 cents per hour as the cash equivalent of the fringe benefits in addition to the $2.50 per hour required under the applicable wage determination.

(b) The hourly cash equivalent of those fringe benefits which are not listed in the applicable determination in terms of hourly cash amount may be obtained by mathematical computation through the use of pertinent factors such as the monetary wages paid the employee and the hours of work attributable to the period, if any, by which fringe benefits are measured in the determination. If the employee's regular rate of pay is greater than the minimum monetary wage specified in the wage determination and the contract, the former should be used for this computation, and if the fringe benefit determination does not specify any daily or weekly hours of work by which benefits should be measured, a standard 8-hour day and 40-hour week will be considered applicable. The application of these rules in typical situations is illustrated in paragraphs (c), (d), and (e) of this section.

(c) Where fringe benefits are stated as a percentage of the monetary rate, the hourly cash equivalent is determined by multiplying the stated percentage by the employee's regular or basic rate of pay. For example, if the determination calls for a 5 percent pension fund pay

ment, and the employee is paid a monetary rate of $2.50 an hour, or if he earns $2.50 an hour on a piece-work basis in a particular workweek, the cash equivalent of that payment would be 121⁄2 cents an hour.

(d) If the determination lists a particular fringe benefit in such terms as $25 a year, or as $2 a week, the hourly cash equivalent is determined by dividing the amount stated in the determination by the number of working hours to which the amount is attributable. For example, if a determination lists a fringe benefit as "pension-$2 a week," and does not specify weekly hours, the hourly cash equivalent is 5 cents per hour, 1.e., $2 divided by 40, the number of standard working hours in a week.

(e) In determining the hourly cash equivalent of those fringe benefits which are not listed in a determination in terms of hourly cash amount, but are stated, for example, as "six paid holidays per year" or "1-week paid vacation," the employee's hourly monetary rate of pay is multipled by the number of hours making up the paid holidays or vacation. Unless the hours contemplated in the fringe benefit are specified in the determination, a standard 8-hour day and 40-hour week will be considered applicable. The total annual cost so determined will be divided by 2,080, the typical number of nonovertime hours in a year of work, to arrive at the hourly cash equivalent. To illustrate, if a particular determination lists as a fringe benefit "six paid holidays per year," and the employee's hourly rate of pay is $2.50, the $2.50 is multiplied by 48 (6 days of 8 hours each) and the result, $120.00, is then divided by 2,080 to arrive at the hourly cash equivalent, $.0577 an hour. Similarly, where a determination requires 1-week's paid vacation during the year, a computation of this kind for a short term employee who does not receive the vacation with pay would be necessary to determine the cash equivalent payment to which he is entitled for the proportionate part of the vacation earned during his period of employment.

[33 FR 9880, July 10, 1968, as amended at 39 FR 14943, Apr. 29, 1974]

§ 4.54 Combination of equivalent fringe benefits and cash payments.

Fringe benefit obligations may be discharged by furnishing any combination

of cash or fringe benefits as illustrated in §§ 4.52 and 4.53, in amounts the total of which is equivalent, under the rules there stated, to the determined fringe benefits specified in the contract.

§ 4.55 Effect of equivalents in computing overtime pay.

The Act (section 6) excludes from the regular or basic hourly rate of an employee, for purposes of determining the overtime pay to which he is entitled under any other Federal law, those fringe benefit payments computed under the Act which are excluded from the regular rate under the Fair Labor Standards Act by provisions of section 7(e) of that Act (29 U.S.C. 207 (e)). Fringe benefit payments which qualify for such exclusion are described in Subpart C of Part 778 of this title. When such fringe benefits have been determined by the Secretary to be prevailing for service employees in the locality and are specified in the contract to be furnished to service employees engaged in its performance, the right to compute overtime pay in accordance with the above rule is not lost to a contractor or subcontractor because he discharges his obligation under this Act to furnish such fringe benefits through alternative equivalents as provided in this Subpart B. If he furnishes equivalent benefits or makes cash payments, or both, to such an employee as authorized herein, the amounts thereof, to the extent that they operate to discharge the employer's obligation to furnish such specified fringe benefits, may be excluded pursuant to this Act from the employee's regular or basic rate of pay in computing any overtime pay due the employee under any other Federal law. It is not necessary to consider in such a case whether such amounts would themselves be excludable under section 7(e) of the Fair Labor Standards Act. No such exclusion can operate, however, to reduce an employee's regular or basic rate of pay below the monetary wage rate specified as his minimum wage rate under section 2(a) (1) or 2(b) of this Act or under other law or by employment contract. The application of the rules set out in the regulations in this part will be considered and illustrated in the rulings and interpretations on application of this

Act.

Subpart C-Application of the McNamara-O'Hara Service Contract

Act

§ 4.101

INTRODUCTORY

Official rulings and interpretations in this subpart.

The purpose of this subpart is to provide, pursuant to the authority cited in § 4.104, official rulings and interpretations with respect to the application of the McNamara-O'Hara Service Contract Act for the guidance of the agencies of the United States and the District of Columbia which may enter into and administer contracts subject to its provisions, the persons desiring to enter into such contracts with these agencies, and the contractors, subcontractors, and employees who perform work under such contracts. This subpart supersedes all prior rulings and interpretations issued under the Act to the extent, if any, that they may be inconsistent with rules herein stated. Principles governing the application of the Act as set forth in this subpart are clarified or amplified in particular instances by illustrations and examples based on specific fact situations. Since such illustrations and examples cannot and are not intended to be exhaustive, no inference should be drawn from the fact that a subject or illustration is omitted. If doubt arises, inquiries may be directed to the Administrator of Workplace Standards, U.S. Department of Labor, Washington, D.C. 20210, or to any Regional Office of the WSA. Safety and health inquiries may be addressed directly to the Director, Bureau of Labor Standards, WSA, U.S. Department of Labor, Washington, D.C. 20210, or to any WSA Regional Office. A full description of the facts and any relevant documents should be submitted if an official ruling is desired.

[36 F.R. 286, Jan. 8, 1971] § 4.102

The Act.

The McNamara-O'Hara Service Contract Act of 1965 (Public Law 89-286, 79 Stat. 1034, 41 U.S.C. 351 et seq.), hereinafter referred to as the Act, was approved by the President on October 22, 1965 (1 Weekly Compilation of Presidential Documents 428). It establishes standards for minimum compensation and safety and health protection of employees performing work for contractors and sub

The provisions of the Act apply to contracts, whether negotiated or advertised, the principal purpose of which is to furnish services in the United States through the use of service employees. Under its provisions, every contract subject to the Act (and any bid specification therefor) entered into by the United States or the District of Columbia in excess of $2,500 must contain stipulations requiring (a) that specified minimum monetary wages and fringe benefits determined by the Secretary of Labor (based on wage rates and fringe benefits prevailing in the locality) be paid to service employees employed by the contractor or any subcontractor in performing the services contracted for; (b) that working conditions of such employees which are under the control of the contractor or subcontractor meet safety and health standards; and (c) that notice be given to such employees of the compensation due them under the minimum wage and fringe benefits provisions of the contract. The Act does not permit the monetary wage rates specified in such a contract to be less than the minimum wage specified under section 6(a) (1) of the Fair Labor Standards Act, as amended (29 U.S.C. 206 (a) (1)). In addition, it is a violation of the Act for any contractor or subcontractor under a Federal contract subject to the Act, regardless of the amount of the contract, to pay any of his employees engaged in performing work on the contract less than such Fair Labor Standards Act minimum wage (or, in the case of certain linen supply contractors, the alternative minimum wage provided under sec. 6(e) (2) of such Act). Contracts of $2,500 or less are not, however, required to contain the stipulations described above. These provisions of the Service Contract Act are implemented by the regulations contained in Subparts A and B of this Part 4, and are discussed in more detail in subsequent sections of this subpart.

§ 4.104 Administration of the Act.

As provided by section 4 of the Act and under provisions of sections 4 and 5 of the Walsh-Healey Public Contracts Act (49 Stat. 2036, 41 U.S.C. 38, 39) which are made expressly applicable for the purpose, the Secretary of Labor is authorized and directed to administer and enforce the provisions of the McNamara-O'Hara Service Contract Act, to make rules and regulations, issue orders, make decisions, and take other appropriate action under the Act, including the provision of reasonable limitations and the making of such rules and regulations allowing reasonable variations, tolerances, and exemptions to and from provisions of the Act as he may find necessary and proper in the public interest or to avoid serious impairment of the conduct of Government business. AGENCIES WHOSE CONTRACTS MAY BE

(a) Section 2(a) of the Act covers contracts (and any bid specification therefor) "entered into by the United States" and section 2(b) applies to contracts entered into "with the Federal Government." Within the meaning of these provisions, contracts entered into by the United States and contracts with the Federal Government include generally all contracts to which any agency or instrumentality of the U.S. Government becomes a party pursuant to authority derived from the Constitution and laws of the United States. The Act does not authorize any distinction in this respect between such agencies and instrumentalities on the basis of their inclusion in or independence from the executive legislative, or judicial branches of the Government, the fact that they may be corporate in form, or the fact that payment for the contract services is not made from appropriated funds. Thus, contracts of wholly owned Government corporations, and those of nonappropriated fund instrumentalities under the jurisdiction of the Armed Forces, are included among those subject to the general coverage of the Act. Contracts with the Federal Government and contracts entered into "by the United States" within the meaning of the Act do not, however, include contracts for services entered into on their own behalf by agencies or instrumentali

ties of other Governments within the United States such as those of the several States and their political subdivisions, or of Puerto Rico, the Virgin Islands, Guam, or American Samoa.

(b) Where a Federal agency exercises its contracting authority to procure services for the Government or Government personnel, the method of procurement utilized by the contracting agency is not controlling in determining coverage of the contract as one entered into by the United States. Such contracts may be entered into by the United States either through a direct award by a Federal agency or through the exercise by another agency (whether governmental or private) of authority granted to it to procure services for or on behalf of a Federal agency. Thus, sometimes authority to enter into service contracts of the character described in the Act for and on behalf of the Government and on a cost-reimbursable basis may be delegated, for the convenience of the contracting agency, to a prime contractor with the Government under the terms of a contract having a principal purpose other than the furnishing of services through the use of service employees (as, for example, a contract to operate or manage a Federal installation or facility or a Federal program). The contracts entered into by such a prime contractor with secondary contractors for and on behalf of the Federal agency pursuant to such delegated authority, which have such services as their principal purpose, are deemed to be contracts entered into by the United States and contracts with the Federal Government within the meaning of the Act. However, service contracts entered into by Federal contractors or State or local public bodies with purveyors of services are not deemed to be entered into by the United States merely because such services are paid for with funds of the contractor or public body which have been received from the Federal Government as payment for contract work or as a grant under a Federal program. For example, a contract entered into by a municipal housing authority for tree trimming, tree removal, and landscaping for an urban renewal project financed by Federal funds is not a contract entered into by the United States and is not covered by the Service Contract Act.

§ 4.108 District of Columbia contracts.

*

Section 2(a) of the Act covers contracts (and any bid specification therefor) in excess of $2,500 which are "entered into by the * * District of Columbia." The contracts of all agencies and instrumentalities which procure contract services for or on behalf of the District or under the authority of the District Government are contracts entered into by the District of Columbia within the meaning of this provision. Such contracts are also considered contracts "entered into with the Federal Government" within the meaning of section 2(b) of the Act. The legislative history indicates no intent to distinguish District of Columbia contracts from the other contracts made subject to the Act, and traditionally, under other statutes, District Government contracts have been made subject to the same labor standards provisions as contracts of other agencies and instrumentalities of the United States.

COVERED CONTRACTS GENERALLY

§ 4.110

What contracts are covered.

The Act covers service contracts of the Federal agencies described in §§ 4.1074.108. Except as otherwise specifically provided (see §§ 4.115 et seq.), all such contracts, the principal purpose of which is to furnish services in the United States through the use of service employees, are subject to its terms. This is true of contracts entered into by such agencies with States or their political subdivisions, as well as such contracts entered into with private employers; however, contracts between a Federal or District of Columbia agency and another such agency are not within the purview of the Act. It makes no difference in the coverage of a contract whether the contract services are procured through negotiation or through advertising for bids. Also, the mere fact that an agreement is not reduced to writing does not mean that the contract is not within the coverage of the Act. The amount of the contract is not determinative of the Act's coverage, although the requirements are different for contracts in excess of $2,500 and for contracts of a lesser amount. The Act is applicable to the contract if the principal purpose of the contract is to furnish services, if such services are to be furnished in the United States, and if service employees will be used in providing such services. These elements of

coverage will be discussed separately in the following sections.

§ 4.111 Contracts "to furnish services".

(a) “Principal purpose” as criterion. Under its terms, the Act applies to a "contract (and any bid specification therefor) * * *the principal purpose of which is to furnish services * * *" If the principal purpose is to provide something other than services of the character contemplated by the Act and any such services which may be performed are only incidental to the performance of a contract for another purpose, the Act does not apply. However, as will be seen by examining the illustrative examples of covered contracts in §§ 4.130 et seq., no hard and fast rule can be laid down as to the precise meaning of the term "principal purpose." Whether the principal purpose of a particular contract is the furnishing of services through the use of service employees is largely & question to be determined on the basis of all the facts in each particular case. Even where tangible items of substantial value are important elements of the subject matter of the contract, the facts may show that they are of secondary import to the furnishing of services in the particular case.

(b) Determining whether a contract is for "services", generally. Except indirectly through the definition of "service employee" the Act does not define, or limit, the types of "services" which may be contracted for under a contract "the principal purpose of which is to furnish services". As stated in the congressional committee reports on the legislation, the types of service contracts covered by its provisions are varied. Among the examples cited are contracts for laundry and dry cleaning, for transportation of the mail, for custodial, janitorial, or guard service, for packing and crating, for food service, and for miscellaneous housekeeping services. Covered contracts for services would also include those for other types of services which may be performed through the use of the various classes of service employees included in the definition in section 8(b) of the Act (see § 4.113). Examples of some such contracts are set forth in §§ 4.130 et seq. In determining questions of contract coverage, due regard must be given to the apparent legislative intent to include generally as contracts for "services" those contracts which have as their principal purpose the procurement