Federal Acquisition Regulation; Establishing a Minimum Wage for Contractors

AGENCIES:

Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION:

Interim rule.

SUMMARY:

DoD, GSA, and NASA are issuing an interim rule amending the Federal Acquisition Regulation (FAR) to implement the Executive Order, Establishing a Minimum Wage for Contractors, and a final rule issued by the Department of Labor.

DATES:

Effective: February 13, 2015.

Comment Date: Interested parties should submit written comments to the Regulatory Secretariat Division on or before February 13, 2015 to be considered in the formation of the final rule.

Applicability: This rule applies to solicitations issued on or after the effective date of the rule. Applicability of the clause at 52.222-55, Minimum Wages Under Executive Order 13658, to existing contracts that do not contain a class deviation clause implementing the Executive Order (E.O.), is as follows—

(1) Contracting officers shall include the clause in bilateral modifications extending the contract when such modifications are individually or cumulatively longer than six months.

(2) In accordance with FAR 1.108(d)(3), contracting officers are strongly encouraged to include the clause in existing indefinite-delivery indefinite-quantity contracts, if the remaining ordering period extends at least six months and the amount of remaining work or number of orders expected is substantial.

ADDRESSES:

Submit comments identified by FAC 2005-79, FAR Case 2015-003 by any of the following methods:

• Regulations.gov: http://www.regulations.gov. Submit comments via the Federal eRulemaking portal by searching for “FAR Case 2015-003”. Select the link “Comment Now” that corresponds with “FAR Case 2015-003”. Follow the instructions provided at the “Comment Now” screen. Please include your name, company name (if any), and “FAR Case 2015-003” on your attached document.
• Fax: 202-501-4067.
• Mail: General Services Administration, Regulatory Secretariat Division (MVCB), ATTN: Ms. Hada Flowers, 1800 F Street NW., 2nd Floor, Washington, DC 20405-0001.

Instructions: Please submit comments only and cite “FAR Case 2015-003” in all correspondence related to this case. All comments received will be posted without change to http://www.regulations.gov,, including any personal and/or business confidential information provided.

FOR FURTHER INFORMATION CONTACT:

Mr. Edward Loeb, Procurement Analyst, at 202-501-0650 for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat Division at 202-501-4755. Please cite FAC 2005-79, FAR Case 2015-003.

SUPPLEMENTARY INFORMATION:

Applicability

I. Background

DoD, GSA, and NASA are issuing an interim rule amending the FAR to implement E.O. 13658, Establishing a Minimum Wage for Contractors. The E.O. was signed February 12, 2014, and published in the Federal Register at 79 FR 9851, on February 20, 2014. The FAR is also implementing a final rule issued by the Wage and Hour Division of the Department of Labor (DOL), published at 79 FR 60634, on October 7, 2014, also entitled “Establishing a Minimum Wage for Contractors.” The DOL rule added a new 29 CFR part 10. The DOL rule covers both FAR-based contracts, and non-FAR-based contracts and contract-like instruments; this interim rule only applies to FAR-based contracts.

The E.O. seeks to increase efficiency and cost savings in the work performed by parties who contract with the Federal Government by raising the hourly minimum wage paid to workers on specified Federal contracts. Beginning January 1, 2015, the hourly rate will be $10.10, and beginning January 1, 2016, and annually thereafter, an amount determined by the Secretary of Labor. The E.O. explains that “[r]aising the pay of low-wage workers increases their morale and the productivity and quality of their work, lowers turnover and accompanying costs, and reduces supervisory costs,” and that “[t]hese savings and quality improvements will lead to improved economy and efficiency in Government procurement.” The E.O. directed DOL to issue regulations by October 1, 2014, and for the FAR Council to issue regulations within 60 days of the DOL regulations.

Section 8(c) of the E.O. strongly encouraged agencies to take all reasonable and legally permissible steps to ensure individuals working on Federal contracts subject to the E.O. would be paid an hourly wage of at least $10.10 as of January 1, 2015. This paragraph intended that agencies would apply the E.O. minimum wage to contracts awarded between the issuance of the E.O. and the effective date of the FAR rule. OMB and DOL issued a joint memorandum on June 12, 2014 to the Executive Departments and Agencies providing guidance for implementing the requirements of the E.O. prior to January 1, 2015 and prior to the issuance of final DOL regulations. This memorandum requested that the FAR Council provide standard wording for a clause to be included in solicitations and contracts pursuant to a deviation from the FAR pending issuance of a FAR rule implementing DOL regulations. The FAR Council, in coordination with DOL, drafted matching class deviations with a contract clause to implement Section 8(c) of the E.O. DoD and NASA issued the class deviations. GSA issued CAAC Letter 2014-03 on June 25, 2014 to the Civilian Agency Acquisition Council (CAAC) agencies which constituted consultation with the CAAC Chair, as required by FAR 1.404(a)(1), for use of a model deviation clause.

Discussion and Analysis

A. This FAR interim rule only applies to acquisitions subject to the FAR. The DOL rule applies to FAR acquisitions as described in FAR 1.104, and actions that are not governed by the FAR such as contracts for concessions and contracts entered into with the Federal Government in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.

B. The DOL regulatory requirements included in the FAR rule:

1. Require that the minimum hourly wage rate paid to workers performing on, or in connection with, contracts and subcontracts covered by the Service Contract Labor Standards statute or the Wage Rate Requirements (Construction) statute, is at least $10.10 per hour beginning January 1, 2015, and beginning January 1, 2016, and annually thereafter an amount determined by the Secretary of Labor (Secretary) (29 CFR 10.1) (FAR 22.1902 and 52.222-55(b)).

2. Define a “worker” to whom the rule applies (29 CFR 10.2) (FAR 22.1901 and 52.222-55(a)).

3. Apply to construction contracts covered by the Wage Rate Requirements (Construction) statute (formerly known as the Davis Bacon Act, FAR subpart 22.4), and to contracts for services covered by the Service Contract Labor Standards statute (formerly known as the Service Contract Act, FAR subpart 22.10), and workers whose wages are governed by those statutes or the Fair Labor Standards Act (FLSA) (29 CFR 10.2 and 10.3) (FAR 22.1903, 22.1906 and 52.222-55(c)).

4. Only apply to contracts with the Federal Government requiring performance in whole or in part within the United States (the 50 states and the District of Columbia) (29 CFR 10.2 and 10.3) (FAR 22.1903, 22.1906 and 52.222-55 (a), (b)(1), and (k)).

5. Provide that the rule does not excuse a contractor's noncompliance with any applicable Federal or State prevailing wage law or any applicable law or municipal ordinance establishing a minimum wage higher than the minimum established under the E.O. (29 CFR 10.5 and 10.22) (FAR 22.1902(b) and 52.222-55(b)(8)).

6. Exempt the following individuals from the requirements of the rule (29 CFR 10.2 and 10.4) (FAR 22.1901 and 22.1903(b)(2), and 52.222-55(a) and (c)):

a. Employees who are not entitled to the minimum wage set forth at 29 U.S.C. 206(a)(1) of the FLSA pursuant to 29 U.S.C. 213(a) and 214(a)-(b), except for workers who are otherwise covered by the Wage Rate Requirements (Construction) statute and the Service Contract Labor Standards statute. These individuals include but are not limited to:

i. Learners, apprentices, or messengers whose wages are calculated pursuant to special certificates issued under 29 U.S.C. 214(a).

ii. Students whose wages are calculated pursuant to special certificates issued under 29 U.S.C. 214(b).

iii. Individuals employed in a bona fide executive, administrative, or professional capacity as those terms are defined in 29 CFR part 541.

b. FLSA-covered individuals performing in connection with covered contracts, i.e., those workers who perform work duties necessary to the performance of the contract but who are not directly engaged in performing the specific work called for by the contract, and who spend less than 20 percent of their hours worked in a particular workweek performing in connection with such contracts.

7. Prohibit any person from discriminating against any worker because the worker has filed a complaint, instituted or caused to be instituted a proceeding under the DOL rule, or has testified or is about to testify in any such proceeding (29 CFR 10.6 and 10.44) (FAR 22.1905(d) and 52.222-55(i)).

8. Provide that the clause flows down to all covered subcontracts at any tier. The DOL rule provides that the contractor and any upper-tier subcontractor are responsible for the compliance by any subcontractor or lower-tier subcontractor with the E.O. minimum wage requirements, whether or not the contract clause was included in the subcontract (29 CFR 10.21) (52.222-55(j) and (k)).

9. Provide that the Government may withhold payment from the contractor to reimburse unpaid wages and shall withhold payment for failure to comply with the recordkeeping requirement under the contract or any other Federal contract with the same contractor (29 CFR 10.11, 10.44, and Appendix A(g)(3)) (FAR 22.1905(a) and (d) and 52.222-55(e) and (g)).

10. Provide that a contracting agency is responsible for forwarding relevant information to the DOL, within 14 calendar days of receipt of a complaint alleging contractor noncompliance with the E.O. or the DOL rule or of being contacted by DOL (29 CFR 10.11) (FAR 22.1905(b)).

11. Describe the methodology for determining the new E.O. minimum wage and for notifying the public of the new applicable minimum wage rate on an annual basis at least 90 days before any new minimum wage is to take effect. (29 CFR 10.5(b) and 10.12) (FAR 22.1904 and 52.222-55(b)).

12. Prohibit a contractor from discharging any part of minimum wage obligation under the E.O. by furnishing fringe benefits or, with respect to workers whose wages are governed by the Service Contract Labor Standards statute, the cash equivalent thereof. (29 CFR 10.22(b)) (FAR 52.222-55(b)).

13. Provide that a contractor may satisfy the wage payment obligation to a tipped employee through a combination of an hourly cash wage (which, in accordance with the E.O. and DOL's regulation, must be at least $4.90 an hour, beginning January 1, 2015, and an amount determined in accordance with the E.O. in future years) and a credit based on tips received by such employee. (29 CFR 10.24(b) and 10.28) (FAR 22.1902(c) and 52.222-55(b)).

14. Permit a contractor to make deductions that reduce a worker's wages below the E.O. minimum wage rate only if the deduction qualifies as a deduction required by Federal, State, or local law, such as Federal or State withholding of income taxes, or in other limited circumstances specified in the DOL rule. (29 CFR 10.23) (FAR 52.222-55(b)).

15. Establish that wage payments to workers are to be made no later than one pay period following the end of the regular pay period in which the wages were earned, and that a pay period under the E.O. may not be longer than semi-monthly. (29 CFR 10.25) (FAR 52.222-55(b)).

16. Delineate the records to be kept by contractors. These requirements are consistent with existing requirements under the Service Contract Labor Standards statute and the Wage Rate Requirements (Construction) statute. (29 CFR 10.26) (FAR 52.222-55(e)).

17. Require the contractor to notify all workers performing work on, or in connection with, a covered contract of the applicable minimum wage rate under the E.O. The rule details the authorized means of doing so. (29 CFR 10.29) (FAR 52.222-55(d)).

18. Address enforcement of the E.O. requirements and details the process for filing complaints, investigating complaints, and the remedies and sanctions available for violations. (29 CFR 10.41-10.44) (FAR 22.1905 and 52.222-55(f) and (g)).

19. Address the handling of disputes concerning contractor compliance and identifies the DOL procedures for adjudication. (29 CFR 10.51-10.58) (FAR 52.222-55(h)).

C. FAR implementation of the DOL rule by DoD, GSA, and NASA is discussed below, as well as those instances where the FAR rule differs from the DOL rule, and the rationale for those differences:

1. A new part 22 subpart, FAR 22.19, Establishing a Minimum Wage for Contractors, is added to include the following sections:

a. Scope of subpart. FAR 22.1900 gives the authority citations for the E.O. and DOL regulation.

b. Definition of “Worker”. FAR 22.1901 incorporates the DOL definition, updating the statutory references to reflect the recodification of Titles 40 and 41 of the United States Code (see FAR 1.110).

c. Policy. FAR 22.1902 describes the E.O. minimum wage requirements and the relationship to other wage rates, including other Federal or State prevailing wage rates and collective bargaining agreements that provide a higher wage rate, and to wages of tipped workers. The DOL preamble discussed the relationship of the E.O. minimum wage to minimum wages required in collective bargaining agreements. DoD, GSA, and NASA determined that this information is critical to both contractors and contracting officers and included this information in this policy section and in the contract clause. This issue is addressed, although not in the same manner, in the clause for Service contracts, 52.222-41, Service Contract Labor Standards, but it is not addressed in the clause for Construction contracts, 52.222-6, Construction Wage Rate Requirements.

The DOL rule included a definition of “tipped employees” at 29 CFR 10.2 as well as a discussion of treatment of tipped employees at 29 CFR 10.28. DoD, GSA, and NASA determined that a detailed discussion of tipped employees or a definition is not needed because tipped employees are infrequently employed under FAR-based contracts, and concluded that reference to 29 CFR 10.24(b) and 10.28 in the FAR rule is adequate coverage.

d. Applicability. FAR 22.1903(a) provides applicability to contracts governed by the Service Contract Labor Standards statute or the Wage Rate Requirements (Construction) statute, and to performance in whole or in part in the United States. The FAR 2.101 definition of “United States,” as used in the geographic sense, is used in this rule—the 50 states and the District of Columbia.

FAR 22.1903(b) delineates individuals to whom the subpart applies or does not apply. The subpart does not apply to an individual who performs solely “in connection with” covered contracts for less than 20% of hours worked in a given work week. DOL, in its final rule preamble (79 FR 60634 at 60661), gave helpful examples.

e. Annual Executive Order Minimum Wage Rate. FAR 22.1904, describes DOL's processes to notify the public of the annual E.O. minimum wage rates. The coverage at 22.1904 establishes FAR policy for how price adjustments will be made by contracting officers, when appropriate, after requests for such price adjustments are received from contractors. This coverage provides detail and direction, including examples of how price adjustments are calculated.

The price adjustment language used in the class deviations, which were crafted prior to formal DOL rulemaking, was adequate for that purpose. However, given the fully developed DOL regulation, the price adjustment language in this rule is significantly revised from the deviation language.

The language in this rule will ensure price adjustments under the E.O. minimum wage clause do not duplicate other price adjustments made under the same contract. Only those labor costs, associated labor costs, and relevant subcontract costs directly resulting from the increase in the E.O. minimum wage will be subject to adjustment.

f. Enforcement of Executive Order Minimum Wage Requirements. FAR 22.1905 provides information on enforcement authority, filing complaints, reporting and investigating complaints, remedies and sanctions, and retroactive inclusion of the contract clause when an agency fails to include the clause in a contract to which the E.O. applies.

g. FAR 22.1906 establishes a contract clause prescription for clause 52.222-55, Minimum Wages under Executive Order 13658, when the contracts include 52.222-6, Construction Wage Rate Requirements, ($2,000 threshold), or 52.222-41, Service Contract Labor Standards, ($2,500 threshold) and performance is in whole or in part in the United States.

2. Coverage is added to 22.403-5 and 22.1002-5 by adding new sections discussing the new minimum wage subpart.

3. Coverage is added to part 52 to—

a. Revise the clause at 52.212-5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders—Commercial Items, to include 52.222-55, Minimum Wages Under Executive Order 13658;

b. Revise the clause at 52.213-4, Terms and Conditions—Simplified Acquisitions (Other than Commercial Items), to include 52.222-55, Minimum Wages Under Executive Order 13658; and

c. Add 52.222-55, Minimum Wages Under Executive Order 13658. This includes coverage of the following:

i. Paragraph (a) definitions of “Worker” and “United States” are provided.

ii. Paragraph (b) includes particular requirements regarding payment to workers of the E.O. minimum wage. It informs contractors that the minimum wage rate may be adjusted annually, beginning January 1, 2016 and that they are required to pay workers the adjusted rate. The Contractor may request a price adjustment to reflect an increase in wages due to the annual wage rate adjustment. The Contractor must warrant that the prices in the contract do not include any allowance for contingency to cover increased costs for such adjustments. Language for warranting contract price is adapted from existing price adjustment clauses applicable to Service Contract Labor Standards and the FLSA. Other subjects covered in this paragraph (b) are: subcontractor price adjustments, length of pay period, deductions, fringe benefits, relationship to higher minimum wages imposed by other statutes, ordinances, or collective bargaining agreements, and workers who regularly receive tips.

iii. Paragraph (c) informs the contractor which workers the E.O. minimum wage requirement applies to, and to which individuals it does not apply.

iv. Paragraph (d) addresses the requirement for the contractor to notify employees of the E.O. minimum wage rate.

v. Paragraph (e) identifies payroll recordkeeping requirements. It includes a requirement to make such records available to DOL and the contracting officer; noncompliance with this requirement will result in withholding of contract payment.

vi. Paragraph (f) informs the contractor that it must permit access to DOL to conduct investigations.

vii. Paragraphs (g), (h), and (i) provides information on enforcement of E.O. Minimum Wage requirements including withholding of payment for unpaid wages, resolution of disputes, and a prohibition on retaliation.

viii. Paragraph (j) states that the contractor is responsible for subcontractor compliance with the requirements of the clause and may be held liable for unpaid wages due subcontractor workers. Although the DOL regulation, at 29 CFR 10.21(b) states that the contractor and any upper-tier subcontractors are responsible for subcontractor compliance and shall be liable for any unpaid wages for its workers or its subcontractor workers, DoD, GSA, and NASA have not placed this responsibility on upper-tier subcontractors in this rule because the Government does not have privity of contract with subcontractors.

ix. Paragraph (k) states that the Contractor shall include the substance of the clause, including this paragraph (k) in all subcontracts, regardless of dollar value, that are subject to Service Contract Labor Standards statute or the Wage Rate Requirements (Construction) statute, and are to be performed in whole or in part in the United States. The requirement to include the substance of the clause allows only for ministerial changes to the clause. The substance of the clause will be consistent with the requirements of the clause, and will not permit substantive changes such as to the rights and responsibilities of the parties.

4. DoD, GSA, and NASA reviewed the regulations at 29 CFR part 10 including the Appendix A contract clause and determined that adequate coverage for the following issues is accomplished by existing FAR coverage and clauses that are applied to contracts subject to the E.O., therefore inclusion of the following items into FAR clause 52.222-55, Minimum Wages Under Executive Order 13658, is unnecessary:

a. Appendix A, paragraph (d) Contract Suspension/Contract Termination/Contractor Debarment. Suspension and debarment is independently covered in FAR subpart 9.4. Termination is addressed in individual applicable contract clauses.

b. Appendix A, paragraph (i), Certification of Eligibility. This paragraph duplicates coverage in paragraph (p) of FAR clause 52.222-41, Service Contract Labor Standards, for service and 52.222-15, Certification of Eligibility, for construction contracts. 41 U.S.C. 1304 discourages adding certifications to the FAR.

c. Waiver of Rights, states that rights under the DOL rule at 29 CFR 10.7, Waiver of rights, cannot be waived or induced to be waived. With respect to the FAR, the FAR clause requirements become contract requirements, which likewise cannot be waived, thus separate inclusion is unnecessary.

d. 29 CFR 10.24, Overtime payments, restates requirements of the Fair Labor Standards Act and the Contract Work Hours and Safety Standards Acts and thus, it is unnecessary to restate existing requirements.

e. Terms defined in 29 CFR 10.2, Definitions, include “new contract”. The FAR rule did not adopt this definition as not all the elements of the definition apply to or are consistent with FAR principles. When FAR rules apply to existing contracts, application is addressed in the Effective Date/Applicability section of the preamble, not in the Code of Federal Regulations; treatment of bilateral modifications to existing contracts is addressed in the Applicability section at the beginning of this preamble. In discussing treatment of existing contracts DOL stated in the preamble of its rule, “if parties bilaterally negotiate a modification that is outside the scope of the contract, the agency will be required to create a new contract, triggering solicitation and/or justification requirements, and thus such a modification after January 1, 2015 should be addressed as a new contract subject to the Executive Order”. We understand this to refer to the long-standing requirement for any out-of-scope modification to be addressed as a new procurement and conducted in accordance with the requirements of FAR part 6, Competition Requirements.

III. Executive Orders 12866 and 13563

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is a significant regulatory action and, therefore, was subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

IV. Regulatory Flexibility Act

DoD, GSA, and NASA do not expect this rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. However, an Initial Regulatory Flexibility Analysis (IRFA) has been performed, and is summarized as follows:

This rule revises the Federal Acquisition Regulation (FAR) to include procurement policy implementing Executive Order 13658, Establishing a Minimum Wage for Contractors, dated February 12, 2014, and associated Department of Labor regulatory requirements at 29 CFR Part 10. The Department of Labor (DOL) published an initial regulatory flexibility analysis of the minimum wage requirement in its Notice of Proposed Rulemaking (79 FR 34568 at 34602) June 17, 2014. On October 7, 2014 DOL published the final regulatory flexibility analysis in the final rule (79 FR 60634 at 60704).

This rule applies to contracts awarded under FAR procedures and covered by the Service Contract Labor Standards statute (41 U.S.C. chapter 67; see FAR subpart 22.10), including contracts for the acquisition of commercial services, and the Wage Rate Requirements (Construction) statute (40 U.S.C. chapter 31 subchapter IV; see FAR subpart 22.4). The FAR rule does not apply to certain contracts, such as concession contracts, which may be covered by the DOL rule and the E.O. but are not FAR contracts. FAR 1.104 addresses the applicability of the FAR to Federal acquisitions. FAR 2.101 states “acquisition” means the “acquiring by contract with appropriated funds of supplies or services . . .”.

The objective of this rule is to implement Executive Order 13658, Establishing a Minimum Wage for Contractors, dated February 12, 2014, and associated Department of Labor regulatory requirements at 29 CFR part 10.

The rule establishes requirements for contractors under contracts containing the clauses at 52.222-6, Construction Wage Rate Requirements, or 52.222-41, Labor Standards, i.e. “covered contracts”, to pay no less than the applicable E.O. minimum wage to workers for all hours worked on or in connection with a covered contract. Contractors must also include a minimum wage contract clause in covered subcontracts and require covered subcontractors to include the substance of the clause in covered lower-tier contracts.

This rule applies to contracts and subcontracts at all tiers covered by the Service Contract Labor Standards statute, or the Wage Rate Requirements (Construction) statute, which require performance in whole or in part within the United States. When performance is in part within and in part outside the United States, the rule applies to the part of the contract or subcontract performed within the United States.

This rule applies to workers as defined at 22.1901. As provided in that definition—

1. Workers are covered regardless of the contractual relationship alleged to exist between the contractor or subcontractor and the worker;

2. Workers with disabilities whose wages are calculated pursuant to special certificates issued under 29 U.S.C. 214(c) are covered; and

3. Workers who are registered in a bona fide apprenticeship program or training program registered with the Department of Labor's Employment and Training Administration, Office of Apprenticeship, or with a State Apprenticeship Agency recognized by the Office of Apprenticeship, are covered.

This rule does not apply to—

Fair Labor Standards Act (FLSA)-covered individuals performing in connection with covered contracts, i.e. those individuals who perform duties necessary to the performance of the contract, but who are not directly engaged in performing the specific work called for by the contract, and who spend less than 20 percent of their hours worked in a particular workweek performing in connection with such contracts;

Individuals exempted from the minimum wage requirements of the FLSA under 29 U.S.C. 213(a) and 214(a) and (b), unless otherwise covered by the Service Contract Labor Standards statute, or the Wage Rate Requirements (Construction) statute. These individuals include but are not limited to—

a. Learners, apprentices, or messengers whose wages are calculated pursuant to special certificates issued under 29 U.S.C. 214(a);

b. Students whose wages are calculated pursuant to special certificates issued under 29 U.S.C. 214(b); and

c. Those employed in a bona fide executive, administrative, or professional capacity (29 U.S.C. 213(a)(1) and 29 CFR part 541).

Small businesses in the service or construction industry with FAR-based contracts or subcontracts awarded after the effective date of this rule will be impacted unless an exclusion listed above applies. The rule will require these contractors and subcontractors to raise their employees' minimum hourly rate to $10.10 per hour, beginning January 1, 2015, then annually adjust it thereafter, if necessary, based on the annual minimum wage rate determined by the DOL.

Data available through the Federal Procurement Data System (FPDS) for Fiscal Year 2013, reveals 16,264 contracts were awarded to unique small business vendors for services which contained the clause at 52.222-41, Labor Standards. Additionally, 5,211 contracts were awarded to unique small business vendors for construction which contained the clause at 52.222-6, Construction Wage Rate Requirements, for a total of 21,475 unique small businesses. Subcontract data is available from the USASpending Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS), however this system does not distinguish small businesses from other than small businesses. Data for Fiscal Year 2013 shows there were a total of 20,127 subcontracts for services and construction reported and of those 5,391 were unique DUNS. These 5,391 first tier unique subcontracts are approximately 25% of the 21,475 unique contracts. Given that first tier subcontracts account for 25%, then for estimating purposes, 20% of subcontracts have a second-tier, 10% of second tier have a third tier, and 5% of third tier have a fourth tier. This calculation estimates the total number of subcontracts is 6,631. However, since the FSRS does not distinguish small businesses, this number is overestimated. Data from FPDS has shown that typically, approximately 60% of a contractor population is small.

The DOL noted in their final rule (79 FR 60634 at 60691) that the rule did not impose any additional notice or recordkeeping requirements on contractors and therefore, the burden for complying with the recordkeeping requirements was not adjusted. However, DOL submitted a revised information collection request (ICR), to OMB to revise the existing ICR for control number 1235-0018 to incorporate the recordkeeping regulatory citations in its final rule.

The rule does not duplicate, overlap, or conflict with any other Federal rules.

There are no known significant alternatives to the rule that would meet the requirements of the E.O. and DOL regulation and minimize any significant economic impact of the rule on small entities.

DOL, in its final rule, estimated the average wage for affected employees is $8.79; thus affected firms must raise the hourly wage for affected employees by $1.31 per hour. Additionally, contractors must adjust related payroll and unemployment taxes and fringe benefits. Under covered contracts, contractors are entitled to recover increases in labor costs resulting from the E.O. minimum wage requirements by including such costs in offers and when requesting contract price adjustment under existing and future contracts for the additional costs related to the increase in the minimum wage rate for workers performing under the contract. DOL notes increases in economy and efficiency and expects these added costs to be offset by an increase in employee morale and productivity, reduced absenteeism, reduced supervisory costs, and reduced turnover.

To remind contractors of their obligation in ensuring subcontractor workers are paid in compliance with the minimum wage requirement, the following was added at the FAR clause 52.222-55:

1. The contractor is responsible for subcontractor compliance with the requirements of this subpart, and may be held liable for unpaid wages due subcontractor's workers.

2. The rule provides that subcontractors may be entitled to adjustments due to the new minimum wage and that contractors shall consider any subcontractor(s) requests for such price adjustment.

The rule does not address late payments to small business subcontractors, however pending FAR case 2014-004 implements section 1334 of the Small Business Jobs and Credit Act of 2010 (Public Law 111-240) and the Small Business Administration's final rule at 78 FR 42391. The rule will require a contractor to self-report to the contracting officer when the contractor makes late or reduced payments to small business subcontractors.

The Regulatory Secretariat Division has submitted a copy of the IRFA to the Chief Counsel for Advocacy of the Small Business Administration. A copy of the IRFA may be obtained from the Regulatory Secretariat Division. DoD, GSA, and NASA invite comments from small business concerns and other interested parties on the expected impact of this rule on small entities.

DoD, GSA, and NASA will also consider comments from small entities concerning the existing regulations in subparts affected by the rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C 610 (FAR Case 2015-003), in correspondence.

V. Paperwork Reduction Act

The Paperwork Reduction Act (44 U.S.C chapter 35) does apply; however, these changes to the FAR do not impose additional information collection requirements to the paperwork burden previously approved for the DOL regulations under OMB Control Number 1235-0018, Records to be kept by Employers—Fair Labor Standards Act.

VI. Determination To Issue an Interim Rule

A determination has been made under the authority of the Secretary of Defense (DoD), the Administrator of General Services (GSA), and the Administrator of the National Aeronautics and Space Administration (NASA) that urgent and compelling reasons exist to promulgate this interim rule without prior opportunity for public comment. This action is necessary because the E.O. requires DoD, GSA, and NASA to issue regulations within 60 days of the DOL rule, and include a clause which specifies the new $10.10 per hour minimum wage will be paid to workers beginning January 1, 2015. The DOL final rule was published October 7, 2014. The DOL rule was published for public comment prior to publication of the final rule. However, pursuant to 41 U.S.C. 1707, DoD, GSA, and NASA will consider public comments received in response to this interim rule in the formation of the final rule.

List of Subjects in 48 CFR Parts 1, 22, and 52

• Government procurement

Therefore, the DoD, GSA, and NASA amend 48 CFR parts 1, 22, and 52 as set forth below:

1. The authority citation for 48 CFR parts 1, 22, and 52 continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 U.S.C. 20113.

PART 1—FEDERAL AQUSITION REGULATIONS SYSTEM

2. Amend section 1.106, in the table following the introductory text, by—

a. Removing the FAR Segment “52.222-8” and its corresponding OMB control numbers “1215-0149 and 1215-0017” and adding “52.222-8” and “1235-0008 and 1235-0018” in their places, respectively;

b. Removing the FAR segment “52.222-41” and its corresponding OMB control numbers “1215-0017 and 1215-0150” and adding “52.222-41” and “1235-0018 and 1235-0007” in their places, respectively; and

c. Adding in numerical sequence, FAR segment “52.222-55” and its corresponding OMB Control No. “1235-0018”.

PART 22—APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS

3. Amend section 22.001 by adding, in alphabetical order, the definition “Agency labor advisor” to read as follows:

4. Amend section 22.403 by revising the heading to read as follows:

5. Add section 22.403-5 to read as follows:

6. Amend section 22.1001 by removing the definition “Agency labor advisor.”

7. Amend section 22.1002 by revising the section heading to read as follows:

8. Add section 22.1002-5 to read as follows:

9. Add subpart 22.19 to read as follows:

Subpart 22.19—Establishing a Minimum Wage for Contractors

This subpart prescribes policies and procedures to implement Executive Order (E.O.) 13658, Establishing a Minimum Wage for Contractors, dated February 12, 2014, and Department of Labor (DOL) implementing regulations at 29 CFR part 10.

PART 52—SOLICITATION PROVISIONS AND CONTRACT CLAUSES

10. Amend 52.212-5 by—

a. Revising the date of the clause;

b. Adding paragraph (c)(10);

c. Adding paragraph (e)(1)(xvii); and

d. Revising the date of Alternate II; and adding paragraph (e)(1)(ii)(O).

The revisions and additions read as follows:

11. Amend 52.213-4 by revising the date of the clause; and adding paragraph (b)(1)(xv) to read as follows:

12. Add section 52.222-55 to read as follows: