What a wage determination means for your bid

Most of what goes wrong on a federal bid costs you the bid. This one costs you the work. A firm that prices a five-year services contract using the rates it pays on commercial jobs, on a contract where the government has already decided what those roles pay, discovers the gap after award, when the price is fixed and the obligation is not.

What it is

A wage determination is a schedule issued by the Department of Labor setting minimum hourly wages and fringe benefit amounts for named labor categories in a named geographic area. On a covered contract it is a floor, not a benchmark. It applies whatever you bid, whatever your employees currently earn, and whatever you assumed.

Two regimes cover most of what a small contractor will meet:

• The Service Contract Act, for service contracts. Cleaning, grounds maintenance, security, IT support, medical support, transcription, food service. It is the one most small firms run into.
• Davis-Bacon, for construction, alteration and repair of public buildings and public works.

How to tell whether a solicitation is covered

Read the clause list

The clauses are the definitive signal, and they are in the solicitation rather than in any summary of it.

• FAR 52.222-41, Service Contract Labor Standards. Service Contract Act coverage.
• FAR 52.222-6, Construction Wage Rate Requirements. Davis-Bacon coverage.

Look for a determination number in the attachments

Covered solicitations usually attach or reference the determination itself, identified by a number and a revision, alongside the county it applies to. The revision matters: determinations are updated, and the one attached to your solicitation is the one you are bound by.

Check the labor categories against your actual crew

This is the step people skip. The determination lists categories with official titles that may not match what you call the job. Mapping your people onto those categories honestly, before you price, is the whole exercise. Getting the mapping wrong in your favor is how a compliant-looking bid becomes a back-wages problem.

What it does to your pricing

Three consequences, in the order they bite.

• Your labor line is not yours. The wage plus the health and welfare amount is a floor per hour per category. Your margin has to come from somewhere above that, not from paying less.
• Multi-year contracts move. Determinations are revised, and an option exercised in a later year brings in the revision in force then. Who carries the rise depends on the price adjustment clause. On a service contract with options, FAR 52.222-43 adjusts the price for the higher wages and fringe benefits, but not for overhead, general and administrative costs or profit on them. On a construction contract, FAR 52.222-30 can leave the whole rise with you.
• Your incumbent competitor already knows the number. On a recompete, the company currently doing the work has been paying these rates for years. If your price is well below theirs, the likeliest explanation is not efficiency.

What InstantSam does with this

When a document review finds either of those clauses in the attachments, the notice page shows a wage determination warning naming the regime and any determination numbers the documents cite, so that “this contract is wage-determination covered” is something you learn while deciding whether to bid rather than while pricing it.

It tells you the contract is covered and where to look. It does not calculate your rates, and no software should: the mapping from your crew to the government’s labor categories is a judgment about your own business.

Questions people ask

What is a wage determination?

A government-issued schedule of minimum hourly wages and fringe benefits for specific labor categories in a specific geographic area. On covered contracts it is not a guideline: it is the floor you must pay, whatever you told the customer you would charge.

How do I know if a solicitation is wage determination covered?

Look at the clause list. FAR 52.222-41, Service Contract Labor Standards, indicates Service Contract Act coverage on a service contract. FAR 52.222-6, Construction Wage Rate Requirements, indicates Davis-Bacon coverage on construction. A wage determination number will usually also be listed among the attachments.

Where do I find the actual wage rates?

On SAM.gov, in the Wage Determinations area, which is a separate system from the opportunity listings. The solicitation references a determination number and revision; the rates themselves live there.

What happens if I pay less than the wage determination?

You are non-compliant on a federal contract, which can mean back wages, withheld payments and worse. This is a Department of Labor matter rather than a contracting inconvenience, which is why it is worth getting right before you price rather than after you win.

General information about how these rules work, not legal or labor law advice. Coverage, categories and rates depend on your specific contract, and the Department of Labor and your own counsel are the authorities on it. See also: how to read a federal solicitation.