A recent decision in Sotera Defense Solutions, Inc. v. Department of Agriculture, CBCA 6029, 6030, by the United States Civilian Board of Contract Appeals (CBCA), upheld a contract provision that imposed greater obligations on the government than required by the Service Contract Act (SCA). The validity of this contract provision ultimately proved dispositive in the outcome of the case with the CBCA holding the government liable for costs.

In 2012, the National Institutes of Health (NIH) awarded Sotera a contract for the provision of information technology (IT) services. The contract stated that the positions in the contract were exempt from the SCA but advised that a contracting officer would have to determine whether the SCA applied to any positions requested within the task order. The Department of Agriculture (USDA) issued three task orders against the NIH contract to Sotera in which the USDA sought IT operations and maintenance support for offices located throughout the United States.

The Department of Labor (DOL) subsequently notified the USDA that the first of the three task orders included positions covered by the SCA. Following this notification about the first task order, Sotera sought to revise the price proposals of the other task orders to reflect the increase in costs associated with the SCA designation. The contracting officer refused to adjust the second and third task orders until he received a finalized determination from the DOL about the first task order, which rendered the second and third task orders non-compliant. These three task orders were the subject of the dispute.

The CBCA determined that, if the USDA had properly performed its designated role of SCA evaluator and identified the SCA applicable labor categories, Sotera would have incorporated the SCA mandated higher wages into the task order or faced liability for its failure to do so. Therefore, the USDA was responsible for Sotera’s inability to do so prior to the first task order award. Moreover, because the contract put the burden on the contracting officer to determine which positions were covered by the SCA, the CBCA reasoned that the USDA is responsible for the SCA deficiencies of the second and third task orders for having failed to undertake the effort following the initial notification from the DOL about the first task order.

Additionally, the CBCA held that nothing in the Federal Acquisition Regulation (FAR) would preclude an agency from voluntarily assigning responsibility to the contracting officer to identify SCA-covered positions or additional responsibilities through contract. In this case, the contract between USDA and Sotera assigned responsibility to the contracting officer to identify the labor categories subject to the SCA and, to the extent that this provision conflicted with the requirements of the FAR (52.222-41), the specific requirements of this contract control. Therefore, based on the terms of the contract between Sotera and the USDA, the government was liable for Sotera’s costs associated with the SCA adjustments to the task orders.

For more information on this decision and how it could affect your business, please contact me or any member of our Government Contracts Practice Group.