Many federal service and construction contracts come with a wage determination: a Department of Labor schedule of minimum wages and fringe benefits you must pay workers in specific job classifications in a specific place. Underestimating it is one of the most expensive mistakes a first-time bidder can make. This guide covers the basics.
What a wage determination is
As SAM.gov puts it, a wage determination is a set of wages, fringe benefits and work rules that the Department of Labor has ruled to be prevailing for a given labor category in a given locality. Wage determinations are published on SAM.gov, and the applicable one is usually attached to the solicitation (often listed in Section J).
Service contracts: the Service Contract Labor Standards statute
The statute formerly known as the Service Contract Act (41 U.S.C. chapter 67) is implemented in FAR subpart 22.10. Key points:
- Under FAR 22.1002-1, service contracts over $2,500 must contain provisions on minimum wages and fringe benefits, safe and sanitary working conditions, notice to employees of their minimum compensation, and equivalent federal employee classifications and wage rates.
- Under FAR 22.1002-2, contractors on covered service contracts over $2,500 where no predecessor contractor's collective bargaining agreement applies must pay at least the wages and fringe benefits the Department of Labor found prevailing in the locality.
- Where a predecessor contractor had a collective bargaining agreement, the successor's wage determination may be based on that agreement's wages and benefits (FAR 22.1002-3).
- The statute limits covered service contracts to five years (FAR 22.1002-1).
Certain services are exempt or handled differently; FAR 22.1003 explains applicability and exemptions.
Construction: Davis-Bacon and Related Acts
FAR subpart 22.4 covers construction labor standards. Contracts in excess of $2,000 for construction, alteration or repair — including painting and decorating — of public buildings or public works in the United States must contain the Davis-Bacon clause (FAR 52.222-6), requiring that laborers and mechanics be paid at least the prevailing wages in the applicable wage determination. Covered contracts also carry payroll recordkeeping and submission requirements (see FAR 52.222-8).
Reading a wage determination
- Find the right one. Check the wage determination number and revision listed in the solicitation; that is the one that applies to your bid.
- Match your positions to its classifications. Each worker must be paid at least the rate for the classification of work they actually perform.
- Read the fringe benefit requirements. Service wage determinations typically specify health and welfare amounts, vacation and holidays. Construction determinations list fringe amounts by classification.
- Look for missing classifications. If you need a job not listed, there is a conformance process to add it after award — SF 1444 for service contracts and a separate request process for Davis-Bacon contracts. SAM.gov's wage determination pages explain both.
Pricing with wage determinations
- Map every position in your staffing plan to a wage determination classification.
- Use the higher of the wage determination rate or the rate you actually need to pay to hire and keep qualified people.
- Add required fringe benefits, plus payroll taxes, insurance and other costs.
- Price option years with realistic escalation; wage determinations are revised over time, and the FAR has price adjustment clauses for some covered contracts — read what your contract includes.
See pricing a services bid for building fully burdened labor rates.
Compliance after award
- Post required notices and give employees the information the clauses require.
- Keep accurate payroll and time records.
- Flow the clauses down to covered subcontractors — primes can be responsible for subcontractor violations.
- Watch for revised wage determinations when options are exercised.
The Department of Labor's Wage and Hour Division enforces these laws and publishes guidance for contractors at dol.gov.
Common mistakes
- Using the wrong wage determination — for example, a different county or an outdated revision instead of the one in the solicitation.
- Mismatching job titles. Workers must be paid according to the work they actually do, not the title you give them.
- Forgetting fringe benefits. Health and welfare, vacation and holiday requirements are part of the minimum, not optional extras.
- Not escalating option years. Revised wage determinations can raise your costs when options are exercised; read your contract's price adjustment provisions.
- Ignoring subcontractors. Labor standards clauses flow down, and primes need to make sure covered subcontractors comply.
Where to get help
For questions about whether a contract is covered or how to classify a worker, ask the contracting officer in writing during the questions period. The Department of Labor's Wage and Hour Division also offers compliance assistance for government contractors, and APEX Accelerators can help you read a wage determination for a specific bid.
Frequently asked questions
When does the Service Contract Labor Standards statute apply?
To covered federal service contracts; contracts over $2,500 must include the wage determination and labor standards provisions described in FAR subpart 22.10, subject to listed exemptions.
When does Davis-Bacon apply?
To contracts in excess of $2,000 for construction, alteration or repair, including painting and decorating, of public buildings or public works in the United States (FAR subpart 22.4).
Where do I find the wage determination for a solicitation?
It is usually attached to the solicitation. You can also search wage determinations on SAM.gov by number, state, county and type.
What if a job I need is not on the wage determination?
There is a conformance process to add a classification and rate after award. SAM.gov's wage determination pages describe the forms and steps for service and construction contracts.
This guide is general information, not legal advice. Rules change — always check the solicitation and the official sources linked here.