SCA: What Is It and How Do You Comply?

Government service contractors everywhere know the looming letters, S-C-A. This small acronym packs a big punch and can have a huge impact on government contractors and their projects. At The Boon Group®, we’re here to support our clients, not just in providing excellent, competitive benefits packages but in the nuts and bolts of this rapidly changing industry. Read on for your crash course in SCA standards and compliance, and how Boon is here to help you!

The McNamara – O’Hara Service Contract Act of 1965, as amended, also known as the “SCA,” is a US labor law and implementing regulations that dictates the wage, hour, and benefit standards that service contractors and subcontractors must adhere to when performing services on contracts valued in excess of $2500. This is the basis for compliance that binds the vast majority of government contractors. Generally, service contractors have minimum requirements that must be met for their employees’ wages and benefits. The hourly requirement for benefits is called a fringe rate and, because benefits are required to be tracked on an hourly basis, fringe rates can be a source of anxiety for contractors who are trying to fit more traditional monthly benefit plans into the hourly requirements associated with government contracts.

(Boon Tip: Fringe Rates are set, on a national scale, and change each summer. The current rate for 2017/2018 is either $4.41 or $4.13 depending upon applicability of EO 13706. Keep up with our blog for the latest industry updates.)

So what are the rules and requirements laid out n the SCA? The terms reside in Title 41 § 6702 of the U.S. Code and in the Code of Federal Regulations (29 CFR § 4.01, et seq.) but we’re going to break it down for you here!

At the most basic level, the SCA applies to any federal government or District of Columbia contract that involves a monetary value exceeding $2500 and its purpose is providing services in the US through the performance and use of service employees. Construction projects do not apply and adhere to chapter 65 of Title 41, but that’s another blog post! The SCA requires that service employees performing within an eligible government contract must be paid monetary wages and must be provided with fringe benefits in specified amounts. The following is a breakdown of requirements for contractors, with respect to how they satisfy the SCA’s fringe benefit obligation:

  • That fringe benefits be furnished separately from and in addition to specific wages;
  • The requirement may be discharged by providing equivalent benefits or direct cash payment in lieu of benefits;
  • Tracking and maintaining proof of fringe benefit compliance;
  • Benefits must be bona fide;
  • And payments must be segregated as benefits, not wages.

If a contractor is found to be in violation, the SCA provides the authority to withhold contract funds, hold the contractor liable for any associated costs to the government, terminate the contract, and (worst of all) debar that contractor from future government contracts for three years!

At The Boon Group, we are here to help you navigate your way to the health and welfare benefit plan that best suits your needs and the needs of your employees. Government contractors choose Boon for three reasons: 1) Cost Savings, 2) Competitiveness, and 3) Compliance. We offer competitive rates and comprehensive care, with affordability and flexibility in mind. Boon has dedicated account representatives and counselors on call to help you choose the plan that is right for you. A little goes a long way and Boon recognizes that lowering costs on a contract today means bigger savings tomorrow.

Not only is The Boon Group competitive in our industry, but we want to help you be competitive in yours by offering you benefit plans that facilitate the savings that lead to lower contractor bids and more opportunity. At Boon, we understand that benefits are more than just solutions; when it comes to employee care, they are a boon to contractors, themselves.

Which brings us full circle to compliance. Boon’s in-house compliance department is there to provide support for any compliance issues that may arise, handling each situation with the utmost discretion and efficiency. Our team is here, adjusting to each new executive order and change in legislation and offering full support in the constantly evolving field of compliance and government contract standards.

Curious about EO 13706? Stay tuned.

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