[Federal Register Volume 61, Number 208 (Friday, October 25, 1996)]
[Proposed Rules]
[Pages 55239-55247]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27402]
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DEPARTMENT OF LABOR
Office of the Secretary
29 CFR Part 4
RIN 1215-AA78
Service Contract Act; Labor Standards For Federal Service
Contracts
AGENCY: Office of the Secretary, Labor.
ACTION: Proposed rule; notice of publication of regulatory impact
analysis; request for comments.
-----------------------------------------------------------------------
SUMMARY: By notice of proposed rulemaking published in the Federal
Register on May 2, 1996 (61 FR 19770), the Department of Labor (DOL or
the Department) proposed alternative approaches for procedures to
establish minimum health and welfare benefits requirements in the
regulations issued under the McNamara-O'Hara Service Contract Act
(SCA). As was explained in the proposed rule, it was not feasible to
publish a regulatory impact analysis for comment with the proposed rule
due to judicially imposed time constraints.
In the meantime, the Department has developed data on the
occupational mix of service contract employees in order to provide a
basis for the impact analysis and to aid in the selection of the most
appropriate methodology. The analysis has been completed and is now
being published for comment. Comments may also be submitted on the
various alternatives set forth previously for comment. Comments on this
document will be reviewed together with comments submitted on the May
2, 1996 proposed rule prior to promulgation of a final rule.
DATES: Comments are due on or before November 25, 1996.
ADDRESSES: Submit written comments to Maria Echaveste, Administrator,
Wage and Hour Division, Employment Standards Administration, U.S.
Department of Labor, Room S-3502, 200 Constitution Avenue, NW.,
Washington, DC 20210. Commenters who wish to receive notification of
receipt of comments are requested to include a self-addressed, stamped
post card, or to submit them by certified mail, return receipt
requested. As a convenience to commenters, comments may be transmitted
by facsimile (``FAX'') machine to (202) 219-5122 (this is not a toll-
free number). If transmitted by facsimile and a hard copy is also
submitted by mail, please indicate on the hard copy that it is a
duplicate copy of the facsimile transmission.
FOR FURTHER INFORMATION CONTACT: William Gross, Director, Division of
Wage Determinations, Wage and Hour Division, Employment Standards
Administration, U.S. Department of Labor, Room S-3506, 200 Constitution
Avenue, NW., Washington, DC 20210; telephone (202) 219-8353. This is
not a toll-free number.
SUPPLEMENTARY INFORMATION:
Survey of Occupational Employment Covered by the McNamara-O'Hara
Service Contract Act; Health and Welfare Benefit Level Impact Analysis
Survey Description and Findings
Background
The McNamara-O'Hara Service Contract Act of 1965 (SCA) requires
that contracts over $2,500 (if the predecessor contract was not subject
to a collective bargaining agreement) contain wage determinations
issued by DOL that specify the minimum monetary wages and fringe
benefits that must be paid to the various classes of workers who
perform work on the service contract, based upon rates determined by
DOL to be prevailing in the locality where the work is to be performed.
However, because fringe benefit data are not generally available on an
occupation-specific or locality basis, DOL has issued fringe benefit
determinations for health and welfare based on nationwide data ever
since SCA was enacted.
Following a challenge by the Service Employees International Union
(SEIU) to the methodology utilized by DOL to determine health and
welfare benefits, the DOL's Board of Service Contract Appeals remanded
the matter to the Wage and Hour Division to consider alternative
methodologies for implementing the statutory objectives. Accordingly,
the Administrator of the Wage and Hour Division, by Notice published in
the Federal Register on May 2, 1996 (61 FR 19770), proposed for public
comment various alternative methodologies.
In the meantime, the Department has developed data to determine the
occupational mix of service employees engaged in the performance of
SCA-covered contracts. Based on data collected by the Federal
Procurement Data System for Fiscal Year 1994, the Department has
conducted a survey to obtain specific information on service contract
employment by occupation within SIC industry classifications. The
information collected provides a basis for the following estimates of
the economic impact of the various proposed alternatives.
In an action filed by the SEIU in the U.S. District Court for the
District of Columbia, the court has set a deadline
[[Page 55240]]
for publication of the final rule of December 24, 1996. SEIU v. Reich,
CA No. 91-0605 (August 27, 1996).
Purpose and Process
In the Fall of 1995, the Wage and Hour Division of the Employment
Standards Administration conducted a survey of occupational employment
under the McNamara-O'Hara Service Contract Act (SCA). Primary
objectives of the survey were to: (1) Assist in the development of a
process to determine prevailing health and welfare benefit levels under
the SCA; and (2) furnish data that may be useful in assessing the costs
of various health and welfare benefit alternatives.
The survey population consisted of almost 20,000 contracts, and
includes all contracts identified as SCA-covered in the Federal
Procurement Data System (FPDS) automated data base. These contracts
represented $20.5 billion in procurement actions during FY 1994. The
sample, which was selected by contract value within industry group,
consisted of 7,084 contracts, awarded by 129 Federal agencies, and
administered by 1,039 agency contracting offices. Contracts represented
by the sample included 35 percent of the number of contracts in the
population, and 63 percent of population contract value.
With the assistance of designated Federal procurement agency Survey
Coordinators, and procurement officers who were responsible for the
contracts in the sample, 1,430 usable survey responses were received
and processed. This represented a usable response rate of 20.2 percent.
The usable response contained 7.2 percent of all contracts in the
targeted population and 19.0 percent of population contract value.
For additional information on the survey design, survey sample and
population, the sampling technique utilized, use of the sample to
estimate the population, and the data collection process and response
rate, see the Technical Note, following the Impact Analysis.
Findings
Employment by Occupation. Based upon the Wage and Hour Division
survey of occupational employment under the SCA, there were 275,800
full-time equivalent positions (FTEs) under the FPDS universe of
contracts in FY 1994 . Utilizing survey data, estimated FTEs by broad
occupational group are presented in Table 1, below.
Table 1.--Estimate of Full-time Equivalent Positions by Broad
Occupational Group
------------------------------------------------------------------------
Percent of
Group title Number total
------------------------------------------------------------------------
Professional, Specialty, & Technical 36,900 13.4
Administrative Support/Clerical..... 48,300 17.5
Precision Production, Craft, & 88,200 32.0
Repair.
Transportation & Material Moving.... 11,200 4.1
Handlers, Cleaners, Helpers, & 33,200 12.0
Laborers.
Service Workers..................... 58,000 21.0
Total, All Groups............... 275,800 100.0
------------------------------------------------------------------------
By far, the occupational group with the largest numbers of FTEs was
Precision Production, Craft, and Repair occupations, representing
almost one-third of total employment. The Service Worker group was next
in order of significance, having over one-fifth of total employment.
Three broad occupational groups each accounted for close to 15 percent
of the FTE total: Administrative Support and Clerical occupations, 17.5
percent; Professional, Specialty, and Technical occupations, 13.4
percent; and Handlers, Cleaners, Helpers, and Laborers, 12.0 percent.
The broad group with the fewest positions was Transportation and
Material Moving occupations, 4.1 percent. The most frequently listed
occupations, under each broad occupational group, are listed in order
of employment, in Table 2, below.
Table 2.--Frequently Listed Occupations Within Broad Occupational Groups
Administrative Precision
Professional, Technical, & Support & Clerical Production, Craft,
Specialty (13.4%) (17.5%) Repair (32.0%)
Engineering Technician.......... General Clerk..... Electronic Tech,
Maintenance.
Licensed Practical Nurse........ Secretary......... Aircraft Mechanic.
Computer Programmer............. Key Entry Operator Telecommunication
Mechanic.
Instructor...................... Computer Operator. Gen Maintenance
Worker.
Medical Lab Technician.......... Word Processor.... Maintenance
Electrician.
Systems Analyst................. Accounting Clerk.. Maintenance
Carpenter.
Drafter......................... Supply Technician. Maintenance
Painter.
Switchboard Op/ Maintenance
Receptionist. Plumber.
................ Heavy Equip
Mechanic.
................ Heating, Refrig, &
AC Mechn.
................ Welder.
................ Mach Maintenance
Mechanic.
------------------------------------------------------------------------
Handlers/Cleaners/
Transportation/Material Moving Helpers/ Laborers Service Workers
(4.1%) (12.0%) (21.0%)
------------------------------------------------------------------------
Truck Driver.................... Stock Clerk....... Nursing Assistant.
Heavy Equipment Operator........ Laborer........... Janitor.
Forestry Equip Operator......... Laborer Ground Food Service
Maintenance. Worker.
Driver Messenger................ Housekeeping Aide. Guard.
Tree Planter...... Court Security
Officer.
.................. Cook.
.................. Dishwasher.
------------------------------------------------------------------------
Information by Industry. According to survey data, more than two-
thirds of all the contract FTEs were located in five broad industry
groups: Engineering, Accounting, Research, Management, and Related
Services; Business Services; Health Services; Miscellaneous Repair
Services; and Electronic & Other Electrical Equipment & Components,
Except Computer Equipment. Specific industries included under each of
these groups are listed in Table 3, below.
[[Page 55241]]
Table 3.--Frequently Listed Industries within Broad SIC Industry Groups
Engineering, Accounting,
Research, Management, and Business Services Health Services
Related Services
Engineering, Architectural, Computer Hospitals.
& Surveying Services. Programming, Data
Processing, & other
Computer Related
Services.
Research, Development, & Miscellaneous Doctor & Dentist
Testing Services/ Business Services/ Offices & Clinics.
Laboratories. Guard Services.
Management & Public Services to Medical & Dental
Relations Services/Base Dwellings & other Laboratories.
Maintenance. Buildings/Cleaning
& Maintenance.
------------------------------------------------------------------------
Electronic & other
Miscellaneous Repair Electrical Equipment
Services & Components, except
Computer Equipment
------------------------------------------------------------------------
Miscellaneous & Electrical Communications
Repair Shops. Equipment.
Electronic
Components &
Accessories.
Miscellaneous
Electrical
Equipment &
Supplies..
------------------------------------------------------------------------
Also accounting for two percent or more of total FTEs were Eating
and Drinking Places, Miscellaneous Services/Weather Forecasting,
Transportation Equipment, Special Trade Contractors, and Forestry.
Health and Welfare Benefit Level Impact Analysis
Purpose and Process
Utilizing the survey data described above, and other relevant
information, cost estimates have been developed for each of eight
alternative methods for determining health and welfare benefit levels
under the McNamara-O'Hara Service Contract Act. These alternatives were
published for comment in the Federal Register on May 2, 1996 (61 FR
19769).
The cost estimates provided apply to the almost 20,000 SCA-covered
contracts reported to be active in FY 1994, by the Federal Procurement
Data System of the General Services Administration. Where required, the
number of full-time equivalent positions (FTEs) estimated through the
use of survey data, less the estimate of FTEs whose wages and benefits
are determined by collective bargaining agreements (CBAs), pursuant to
Section 4(c) of the SCA, were utilized in the development of
alternative cost estimates. (See Table 4, below.)
Table 4.--Estimate of FTEs by SCA Health & Welfare Benefit Level
----------------------------------------------------------------------------------------------------------------
Contracts Employment
----------------------------------------------------------------------------------------------------------------
Percent of Percent of Average
Type* Number total FTEs total FTEs
----------------------------------------------------------------------------------------------------------------
Insurance...................................... 16,129 80.7 94,048 34.1 5.8
Total Benefits................................. 2,858 14.3 117,215 42.5 41.0
4(c)........................................... 999 5.0 64,537 23.4 64.6
----------------------------------------------------------------
All Types, Total........................... 19,986 100.0 275,800 100.0 13.8
----------------------------------------------------------------------------------------------------------------
* These levels are currently utilized for the issuance of SCA wage determinations. The ``Insurance'' level is
based upon the cost of life, accident, and health insurance for establishments employing less than 100
workers. The ``Total Benefits'' level is based upon the cost of insurance, retirement and savings, sick leave,
other leave, and other benefits for establishments employing 100 or more workers. Assignment of health and
welfare benefit level was based upon wage determination information provided by survey respondents.
Findings
The eight alternative methods being considered to compute SCA
health and welfare benefit levels are fully explained in 61 FR 19770,
published May 2, 1996. Full understanding of the implications of the
following impact analysis requires reference to that document. However,
a statement of each alternative in summary follows:
Alternative I: Issue a single benefit level based upon ECI data for
workers in private industry.
Alternative II-A: Issue a single benefit level for each of six
major occupational groupings based on ECI data for all workers in each
grouping in private industry.
Alternative II-B: Issue a single benefit rate adjusted to reflect
the difference between the BLS ECI occupational universe and the actual
mix of comparable occupations on SCA-covered contracts.
Alternative II-C: Issue two benefit levels, based on a combination
of the occupational groupings: white collar and production occupations.
Alternative III: Issue a single benefit rate for each of four
geographic regions based on ECI data for all workers in private
industry.
Alternative IV: Issue a single fringe benefit rate (as a percent of
wages) based on the relationship between the ECI all-private industry
``total benefit'' rate and the ECI all private industry average wage
rate.
Alternative V-A: Issue two fringe benefit levels--``Insurance'' and
``Total Benefits''--(see Table 5 note), based on BLS ECI size-of-
establishment data for all workers in private industry. Apply these
levels based upon the nature of the contract; i.e., routine contracts
receive the Insurance level and the Total Benefits level is provided
for large base support contracts, solicitations based on OMB circular
A-76, solicitations for highly technical services typically provided by
large corporations, and other selected solicitations without regard to
size of contract.
Alternative V-B: Issue two fringe benefit levels, using the BLS ECI
all
[[Page 55242]]
industry Total Benefits data for (1) establishments with fewer than 100
workers and (2) establishments with 100 or more workers. Apply these
levels based upon the employment size of respective contracts.
These alternatives appear to offer a narrow range of annual health
and welfare benefit costs for FTEs whose rates are not determined by
collective bargaining agreement (CBA). The range computed is from
$3,551.45 for Alternative V-A to $4,100.63 for Alternative II-A. This
range of $549.18 is just 14.1 percent of the average cost of all eight
alternatives, $3,908.74. (See Table 5, below.) Similarly, the total
non-CBA estimated cost for all SCA-covered contracts included in the
FPDS data base ranges from about $750 million (V-A) to $866 million
(II-A). As discussed in the Technical Note below, the FPDS system
contains the best available data for determining the SCA-covered
universe. However, the data in the system understates the size of the
SCA-covered universe. This is due to such factors as exclusion of most
contracts under $25,000, exclusion of contracts of the U.S. Postal
Service and the Air Force/Army Exchange System, and possible under-
reporting of SCA-covered contracts in the FPDS system, as well as
possible errors in determinations as to whether contracts are covered
by SCA.
Table 5.--Estimation of Annual Costs Per FTE of Eight Alternative SCA
Health & Welfare Methods
------------------------------------------------------------------------
Cost Per
Alternative Rank* FTE--1995
data
------------------------------------------------------------------------
I. Single Benefit/ECI/Private Industry............ 4 $3,931.20
II-A. Single Benefit/Six Occupational Groups...... 8 4,100.63
II-B. Single Benefit/ Adjusted to Employment
Composition...................................... 7 4,097.60
II-C. White Collar & Production Workers........... 6 4,095.98
III. Single Rate/Four BLS Regions................. 2 3,676.73
IV. Single Benefit Rate As A Percent of Wages..... 3 3,872.67
V-A. Insurance & Total Benefits Rates/Based upon
Size of Establishment/Applied by Nature of
Contract......................................... 1 3,551.45
V-B. Total Benefits Rates/Based upon Size of
Establishment/Applied by Employment Size of
Contract......................................... 5 3,943.67
------------------------------------------------------------------------
* Rank, 1 to 8, is from least to most costly. Alternative V-A is the
current methodology. Current costs per FTE ($3,787.05) are based upon
the use of Alternative V-A and 1994 ECI data. Note that cost
differences between Alternatives II-A, II-B, and II-C, are due to
rounding.
Based upon the use of survey data, Alternatives I, IV, and V-B, the
first two utilizing single benefit ECI data, approximate the average
alternative cost per FTE of about $3,909. Alternatives
II-A, II-B, and II-C, each of which is controlled by occupational
criteria, appear to be higher cost options, at about $4,100.
Alternatives V-A and III, determined by size-of-establishment and
regional data, are relatively lower cost options, each falling below
$3,700. Note that the relative costs by alternative may change over
time as FTE distribution by industry and occupation changes. For
example, if the distribution of FTEs by occupation were to change
significantly, one would expect corresponding changes in Alternative-II
costs.
As noted in the notice of proposed rule making, 61 FR 19770, each
alternative offers certain advantages and disadvantages. The cost
estimates provided in Table 5 furnish additional information for use in
considering how each alternative meets relevant evaluation criteria,
such as statistical accuracy, enforceability, administrative
feasibility for contractors and contracting agencies, and conformance
with statutory requirements and intent.
The notice of proposed rulemaking (60 FR 19770), fully discusses
the advantages and disadvantages which the Department of Labor
currently perceives in the various alternatives. Comments were
solicited on a number of issues to assist in preparing a final
regulatory impact analysis and in making a determination of the
alternatives which should be selected, including in particular
information regarding administrative and/or recordkeeping burdens;
economic and budgetary impact from the point of view of service
contractors, service employees and Federal procurement agencies;
transitional difficulties if the rule departs from the current
methodology; the nature of SCA-covered contracts and the fringe benefit
practices typical of service contractors; and the effects on
contracting activity and employment.
Without input from the commenters the Department was unable to
include in this analysis a discussion of the administrative costs to
contractors and to the Government of the various alternatives.
Presumably, all alternatives except Alternative V-A would involve the
burden of changing fringe benefit programs because of increased or
decreased fringe benefit levels. Several alternatives (II-A and -C, IV,
and to lesser extent III) may require that employers either provide
different fringe benefits to different employees in their work force or
make up the difference in cash. Because of this issue, the Department
also requested comments on the administrative feasibility and
recordkeeping burden of the average cost approach, which would allow
employers to average fringe benefits costs across the work force. These
issues will be addressed more fully in the final rule, after review of
the comments received.
The Department lacks sufficient data to be able to quantify the
benefits to the affected workers and to society of providing workers
prevailing fringe benefits, or any indirect effects on jobs,
productivity, or the Federal deficit. The Service Contract Act was
enacted in order to protect service employees from the practices of
contractors who undercut prevailing wages and benefits in order to be
the low bidder on service contracts. These workers are especially
vulnerable since wages and benefits are frequently the predominant cost
of service contracts. With regard to fringe benefits in particular, the
Department believes that most contractors provide workers benefits only
at the level provided on the wage determination. Thus SCA permits
workers to receive fringe benefits--including in particular health
benefits--which might not otherwise be provided because of the pressure
of being the low bidder on the Government contract.
A preliminary regulatory flexibility analysis discussing the
anticipated impact of the proposed rule on small businesses was also
included in the notice of proposed rulemaking. In most respects the
impact on small businesses will be the same as the impact on other
businesses, although it is anticipated that any administrative
difficulty may be greater for smaller firms. As discussed above, some
alternatives appear to have greater administrative difficulty than
others. It is anticipated that any impact could be mitigated by
[[Page 55243]]
the statutory authority for SCA-covered contractors to discharge their
obligations to furnish prevailing fringe benefits by furnishing any
equivalent combinations of fringe benefits or by making equivalent or
differential payments in cash. Impact may also be minimized because (1)
Such businesses with SCA-covered contracts are currently required to
pay their employees prevailing fringe benefits; and (2) SCA contractors
will continue to be reimbursed by the Federal procurement agencies for
fringe benefit expenditures.
Tables 6 through 9 provide many of the key statistics required to
compute cost estimates for the eight alternative methodologies.
Following these tables are detailed presentations of each methodology's
data requirements and computations.
Table 6.--Occupational Group ECI Total Benefit Rates & SCA FTE
Distribution
------------------------------------------------------------------------
1995 ECI rates
---------------------- SCA FTE
Occupational group Total distribution
benefits Wage* (percent)
------------------------------------------------------------------------
Professional, Specialty, & Technical $3.03 $20.65 13.4
Administrative Support/Clerical..... 1.87 10.47 17.5
Precision Production/Craft/Repair... 2.71 14.72 32.0
Transportation & Material Moving.... 2.09 11.42 4.1
Handlers/Cleaners/Helpers/ Laborers. 1.24 8.18 12.0
Service Workers..................... 0.65 6.35 21.0
------------------------------------------------------------------------
* Provided for information only.
Table 7.--ECI Total Benefits Rates, 1995
------------------------------------------------------------------------
------------------------------------------------------------------------
All Private Industry........................................... $1.89
SCA Occupational Distribution*................................. 1.97
White Collar................................................... 2.37
Production Worker.............................................. 1.79
Northeast...................................................... 2.30
South.......................................................... 1.64
Midwest........................................................ 1.83
West........................................................... 1.84
Estabs of 100 or more Workers.................................. 2.42
Estabs 1-99 Workers............................................ 1.29
------------------------------------------------------------------------
* Rate weighted by FTEs in 6 broad occupational groups. Utilized in
Alternative II-B.
Table 8.--ECI Wage & Salary Levels*
------------------------------------------------------------------------
------------------------------------------------------------------------
Private Industry............................................... $12.25
SCA Weighted................................................... 12.09
------------------------------------------------------------------------
* Utilized in Alternative IV.
Table 9.--SCA Expenditures and FTEs by Region
------------------------------------------------------------------------
Expenditures Percent of Estimate of
(billions) total SCA FTEs *
------------------------------------------------------------------------
Northeast.................... 2.0 9.9 20,919
South........................ 11.9 58.6 123,822
Midwest...................... 1.4 6.9 14,580
West......................... 5.0 24.6 51,980
------------------------------------------------------------------------
* Excludes workers under CBAs. Source: FPDS universe data.
Alternative Data Requirements & Cost Computations
Alternative I:
Single benefit level based upon ECI data for workers in private
industry.
Data Requirements
------------------------------------------------------------------------
------------------------------------------------------------------------
1995:
Sick leave....................... 0.14 ........................
Other leave...................... 0.05 ........................
Insurance........................ 1.15 ........................
Retirement & savings............. 0.52 Hours=2,080/FTE.
Other benefits................... 0.03 ........................
1.89 ........................
------------------------------------------------------------------------
Cost Computations
Cost per FTE=Hours Worked x Benefit Rate per Hour
=2,080 x 1.89=$3,931.20
Alternative II-A
Single benefit level for each of six major occupational groups.
Data Requirements
ECI H&W Benefit Levels of Occupational Group
----------------------------------------------------------------------------------------------------------------
Sick Other Retire
Occupational group leave leave Insurance & Other Total
* * savings benefits
----------------------------------------------------------------------------------------------------------------
Prof., spec., & tech......................................... N.P. N.P. 1.67 0.91 0.05 3.03
Adm. support/clerical........................................ N.P. N.P. 1.22 0.42 0.02 1.87
Precision, prod./craft/repair................................ N.P. N.P. 1.67 0.82 0.06 2.71
Trans. & material moving..................................... N.P. N.P. 1.31 0.65 0.01 2.09
Handlers, cleaners, & helpers................................ N.P. N.P. 0.83 0.35 0.01 1.24
[[Page 55244]]
Service workers.............................................. N.P. N.P. 0.45 0.11 0.01 0.65
----------------------------------------------------------------------------------------------------------------
*Not publishable.
Survey Distribution of Employment
------------------------------------------------------------------------
Percent
Occupational group of Number of
total FTEs
------------------------------------------------------------------------
Professional.................... 13.4 28,314 Hours = 2,080.
Administrative.................. 17.5 36,978 ..................
Precision....................... 32.0 67,616 ..................
Transportation.................. 4.1 8,663 ..................
Handlers........................ 12.0 25,356 ..................
Service......................... 21.0 44,373 ..................
------------------------------------------------------------------------
Cost Computations
Cost per occupation=
FTEs x Hours x Occupation H&W Rate:
Prof., Specialty, & Tech.--$28,314 x 2080 x $3.03=$178,446,154
Admin. Support & Clerical--$36,978 x 2080 x $1.87=$143,829,629
Precision Prod./Craft & Repair--$67,616 x 2080 x $2.71=$381,137,869
Transp. & Material Moving--$8,663 x 2080 x $2.09=$37,659,794
Handlers, Cleaners, Helpers & Laborers--
$25,356 x 2080 x $1.24=$65,398,195
Service Workers--$44,373 x 2080 x $0.65=$59,992,296
Sum=$866,463,937
Cost per FTE=Total Cost/211,300=$4,100.63
Alternative II-B
Single benefit rate adjusted to employment composition of covered
contracts.
Data Requirements
FTEs by Occupational Group: See II-A Data requirements. ECI H & W
benefit levels by Occupational Group: See II-A data requirements.
Cost Computations
Total cost=FTEs for each Occupational Group x Corresponding H & W
Rate; Sum and Divide by Total FTEs; Multiply Product by Total FTEs and
then by Hours.
------------------------------------------------------------------------
H & W
Occupational group FTE's rate Product
------------------------------------------------------------------------
Prof., spec., & technical................... 28,314 3.03 85,791
Admin. support/clerical..................... 36,978 1.87 69,149
Precision prod/craft/rep.................... 67,616 2.71 183,239
Trans. & material movers.................... 8,663 2.09 18,106
Handlers/cleaners/helpers/ laborers......... 25,356 1.24 31,441
Service workers............................. 44,373 0.65 28,842
Sum..................................... 416,568
------------------------------------------------------------------------
416,568 divided by 211,300=1.97
Cost per FTE=1.97 x 2080=$4,097.60
Alternative II-C
Reconfigure II-A rates into two groups: white-collar and production
occupation rates.
Data Requirements
White Collar=Summation of Professional, Specialists, & Technical
Grouping and Administrative Support/Clerical Grouping.
Production=Summation of Precision, Transportation, Handler, and
Service Groupings.
Cost Computations
For each combined group, obtain a weighted rate as in II-B;
multiply each combination rate by the FTEs included and the hours
worked; then sum the costs for the two combination groups.
----------------------------------------------------------------------------------------------------------------
White collar FTEs H & W rate Product
----------------------------------------------------------------------------------------------------------------
Prof, Specialists And Technicians........................................ 28,314 3.03 85,791
Admin. Support/Clerical.................................................. 36,978 1.87 69,149
------------- ------------
Sum................................................................ 65,292 ........... 154,940
----------------------------------------------------------------------------------------------------------------
Combined Rate=154,940 divided by 65,292 = 2.37.
Cost=2.37x65,292x2080 = 321,863,443.
----------------------------------------------------------------------------------------------------------------
Production worker FTEs H & W rate Product
----------------------------------------------------------------------------------------------------------------
Precision Prod./Craft/Rep................................................ 67,616 2.71 183,239
Transportation And Material Movers....................................... 8,663 2.09 18,106
Handlers/Cleaners/Helpers/ Laborers...................................... 25,356 1.24 31,441
Service Workers.......................................................... 44,373 0.65 28,842
Sum................................................................ 146,008 ........... 261,628
----------------------------------------------------------------------------------------------------------------
Combined Rate=261,628/146,008 = 1.79.
Cost=1.79x146,008x2080 = 543,616,986.
Total Cost=321,863,443+543,616,986 = 865,480,429.
Cost per FTE=865,480,429/211,300 = $4,095.98.
Note: Alternative II-C also could be computed by weighting in
accordance with the national incidence of the various occupational
groups. No cost data are provided for this option.
[[Page 55245]]
Alternative III
Single benefit rate for each of four Bureau of Labor Statistics
regions.
Data Requirements
[FPDS Distribution of SCA-Covered Contract Expenditures by Region *]
------------------------------------------------------------------------
Percent Billion FTEs
------------------------------------------------------------------------
Northeast................................. 9.9 $2.0 20,919
South..................................... 58.6 11.9 123,822
Midwest................................... 6.9 1.4 14,580
West...................................... 24.6 5.0 51,980
Total................................... 100.0 20.3 211,301
------------------------------------------------------------------------
*Based upon FPDS universe data.
H & W Benefit Levels by Region
----------------------------------------------------------------------------------------------------------------
Other
Sick leave Other leave Insurance R & S benefits Total
----------------------------------------------------------------------------------------------------------------
Northeast......................... 0.19 0.07 1.39 0.62 0.03 2.30
South............................. 0.11 0.04 1.01 0.46 0.02 1.64
Midwest........................... 0.11 0.04 1.15 0.49 0.04 1.83
West.............................. 0.15 0.04 1.11 0.51 0.03 1.84
----------------------------------------------------------------------------------------------------------------
Cost Computations
Total Cost=For each Region, FTEs x H & W Rate x Hours, then Sum for
Total Cost.
Northeast-- 20,919x2.30x2080=100,076,496.
South--123,822x1.64x2080=422,381,606.
Midwest--14,580x1.83x2080=55,497,312.
West--51,980x1.84x2080=198,937,856 Sum=776,893,270.
Cost per FTE=776,893,270/211,300=$3,676.73.
Alternative IV
Single fringe benefit rate as a percent of wages.
Data Requirements
Single total benefits rate=$1.89 (See Alternative I)
ECI Ave. Wage & Salary for 1995=$12.25
ECI Ave. Wage & Salary weighted to SCA for 1995=$12.09
ECI Average Wage Weighted to SCA Occupations Distribution
------------------------------------------------------------------------
(2)--ECI (3)--SCA (4)--Product
(1)--Occupational group rate FTE's (2) x (3)
------------------------------------------------------------------------
Professional, specialty &
technical...................... 20.65 28,314 584,684
Administrative support/clerical. 10.47 36,978 387,160
Precision production, craft &
repair......................... 14.72 67,616 995,308
Transportation & material movers 11.42 8,663 98,931
Handlers, cleaners, helpers, &
laborers....................... 8.18 25,356 207,412
Service workers................. 6.35 44,373 281,769
211,300 2,555,264
------------------------------------------------------------------------
Average SCA Wage=2,555,264211,300=$12.09
Total benefits level/Average wages and salaries:
1.8912.25=15.4%
Cost Computations
Cost per FTE=(Hours x Average SCA Wage) (15.4%)
=(2080 x 12.09) (.154)
=$3,872.67
Note: This alternative may provide for application of the 15.4
percent to each occupational group wage. However, for the purpose of
this cost analysis, the 15.4 percent was applied to the all-
occupational group average wage.
Alternative V-A
``Insurance'' and ``Total Benefits'' levels based upon size-of-
establishment ECI data but applied according to the ``nature of the
contract.''
Data Requirements
Insurance level=Insurance for establishments of 1-99 workers=0.82
Total benefits=Summation of Insurance, Sick Leave, Other Leave,
Retirement and Savings, and Other Benefits for establishments of 100
workers or more:
Ins.......................... 1.45 FTEs by National Health and
Welfare Level:
SL........................... 0.17 ..................................
OL........................... 0.06 Insurance=94,048
R & S........................ 0.69 ..................................
OB........................... 0.05 Total Benefits=117,215
2.42 ..................................
Source: See Table 4.
Cost Computations
Cost: For each level, multiply FTEs x Benefit Rate X Hours; then
sum to obtain total costs.
Insurance Cost=FTEs x Benefit Rate x Hour
=94,048 x 0.82 x 2080
=160,408,269
Total Benefit Cost = FTEs x Benefit Rate x Hours
=117,215 x 2.42 x 2080
=590,013,424
Cost per FTE=(160,408,269+590,013,424)/211,300
=$3,551.45
Note: For comparison purposes, 1995 data are utilized. Actual
Health and Welfare benefit levels for FY 1996 continue to utilize
1994 ECI data.
Comparable computations utilizing rates currently issued, based
upon 1994 ECI data:
Insurance=94,048 x 0.90 x 2080 = 176,057,856
Total Benefits=117,215 x 2.56 x 2080 = 624,146,432
Cost per FTE=(176,057,856 + 624,146,432)/211,300
=$3,787.05
[[Page 55246]]
Alternative V-B
Total Benefit levels, based upon size of establishment data,
applied by employment size of establishments.
Data Requirements
Total Benefits
------------------------------------------------------------------------
Establishments Establishments
of 1-99 of 100 workers
workers or more
------------------------------------------------------------------------
SL...................................... 0.10
OL...................................... 0.03 $2.42
Ins..................................... 0.82
R&S..................................... 0.33
OB...................................... 0.01
$1.29
------------------------------------------------------------------------
FTEs for contracts not subject to Section 4(c) collective
bargaining agreements, 1-99 workers and 100 workers or more:
Distribution of employment for known 4(c) contracts by
establishment size--1-99: 13.6%; 100 & over: 86.4%.
Obtain distribution of employment for 4(c) contracts by
establishment size by multiplying the above percents by 64,537.
Subtract 4(c) employment for each establishment category
from the corresponding employment total.
100 & over: 169,084-55,760=113,324
1-99: 106,746-8,777=97,969
Compute percent distribution of non-4(c) contracts by establishment
category:
100 & over: 113,324--53.6%
1-99: 97,969--46.4%
Total: 211,293--100.0%
Cost Computations
Cost = For each size group, FTEs x Corresponding Benefit Rate x
Hours
Sum two size group totals:
100 & over: 113,324 x 2.42 x 2080=570,427,686
1-99: 97,969 x 1.29 x 2080=262,870,421
Cost per FTE=(579,427,686 + 262,870,421)/211,300
=$3,943.67
Technical Note
Survey Design
Design of the survey benefited from guidance provided by
representatives of the U.S. Army, the Bureau of Labor Statistics, the
Office of Federal Procurement Policy, and the Federal Procurement Data
System. In addition, a pilot test of the survey instruments and
procedures was conducted with the assistance of the General Services
Administration and the U.S. Air Force. Design of the survey's
proportionate, systematic sampling, mailing of the survey materials,
and data collection and processing were accomplished by the University
of Tennessee, under contract to the Wage and Hour Division.
Sample and Population
The most comprehensive universe of detailed information about
contracts under the McNamara-O'Hara Service Contract Act is the Federal
Procurement Data System (FPDS) operated by the General Services
Administration. This automated system is routinely and continually
updated by information provided by Federal procurement officers on the
contracts they administer. While the FPDS represents a rich source of
statistical information, it is recognized that this data base is not
all-inclusive. For example, it does not contain data from the U.S.
Postal Service, the Air Force/Army Exchange Service, and most contracts
under $25,000. Therefore, since the Impact Analysis is based upon a
sample drawn from the FPDS population, estimates made only represent
the covered contracts included in the FPDS, and should not be
considered as representing the universe of all covered contracts. For
this reason, the focus of the Impact Analysis is on the relative
differences among costs likely to be generated by each alternative
listed. It should be noted that although contracts for which the
required wages and fringe benefits were determined by collective
bargaining agreements in accordance with Section 4(c) of the SCA were
included in the universe and survey to determine contract employment,
these contracts were excluded from the cost computations. Since fringe
benefits on these contracts are not determined on the basis of
prevailing fringe benefits, the cost of these contracts is not affected
by the methodology selected.
Sample Selection
Sample selection was proportional and systematic, by two-digit
Standard Industrial Classification (SIC) Major Group. For example,
assume that out of $20 billion in covered contracts, total contract
value in SIC 01 was $100 million. A sample ratio of 0.005 (100,000,000/
20,000,000,000) is computed for SIC 01. If we further assume that the
survey sample within the FPDS data base includes a total of 7,000
covered contracts, then 7,000 X 0.005 or 35 would be the number of
contracts selected for SIC 01. To randomly select the 35 contracts,
first, the total number of FPDS contracts in SIC 01--further assumed to
be 105--are arranged sequentially from most to least costly. One of the
first three contracts is selected by chance, and then every third
contract (105/35) is systematically selected.
Using Sample Data to Estimate the Population
Population estimates were developed by computing the ratio of Full
Time Equivalent positions (FTEs) by occupation to total contract value
for each SIC Major Group; population estimates by occupation for all
SICs were added together to compute occupational population estimates;
and population estimates for all occupations were added together to
provide industry totals, and the all industry sum.
Continuing the above example, assume that six usable responses to
the survey were received in SIC 01. Further assume that the employment
data provided on the completed questionnaires revealed FTEs in six
occupations. To obtain population estimates for employment in
Occupation #1 for SIC 01, the total employment reported on the six
questionnaires--8--is divided by the total contract value for the six
contracts represented ($10,000,000). The resulting ratio--0.0000008--is
then multiplied by the total contract value of all contracts in SIC 01
in the FPDS population--$100,000,000. The product of this
multiplication--80--is the population estimate for Occupation #1, SIC
01. Like calculations for the other five occupations found in SIC 01
would be completed to permit the estimation of the remaining population
employment in SIC 01. Once these calculations are completed for all
SICs and occupations, employment totals by occupation, industry, and
total employment may be obtained.
Note that the survey data were collected by occupational groupings
and definitions contained in the Service Contract Act Directory Of
Occupations, a resource tool utilized in the issuance of Service
Contract Act wage determinations, and generally familiar to contractors
with covered contracts. For those contractors not familiar with the
Directory's standard job titles and definitions, copies were made
available. Once the survey data were received and verified, the
occupational entries were reclassified into the six Census groups for
which health and welfare benefit information is available from the
Bureau of Labor Statistics. FTEs represent the number of annual full-
time equivalents budgeted to the contract in FY 1994 from the obligated
funds for each occupation listed. Since FTEs represent 2080 work hours
per year, and sample data were collected and population estimates
developed on this basis, and cost estimates developed reflect this
definition.
[[Page 55247]]
Data Collection and Response Rate
Collection of survey data was through a network of Federal
Procurement Executives and Federal agency Data Collection Coordinators
designated for this survey. Survey introductory materials were
transmitted to the Federal Procurement Executives in September 1995. In
October, all Data Collection Coordinators were provided with a
comprehensive package of survey orientation materials. Later in
October, and early November, agency procurement offices responsible for
contracts selected for the sample were provided with survey
questionnaires and materials. From December through March, Data
Collection Coordinators were provided with their agency response rates
and the list of contracts for which data were not yet received; an
additional mailing was made to the Federal Procurement Executives;
copies of the Service Contract Act Directory Of Occupations were
provided on request; and data review and follow-up with submitting
offices were carried-out.
The survey usable response rate--20.2 percent--varied somewhat by
industry and Federal agency. In general the highest response rates,
weighted by value, were for those industries that account for the
majority of covered employment. For example, for the four industries
that account for over two-thirds of population contract value (SICs 87,
73, 37, and 89), the sample contracts represented in the responses were
valued at over $3.4 billion, or 39.7 percent of the total value in the
sample for those industries, and averaged over $850 million per SIC
(and not falling below $303 million). The responses therefore appear to
be similar to the FPDS data in the universe by industry, providing a
measure of external validity that appears to limit the potential for
bias of the estimates obtained from the sample data. For this reason it
is believed that the responses received follow the general industry
framework and represent the best picture the Department was able to
obtain of employment in the various industries that make up the SCA
universe. The process whereby FTE/contract value ratios (by
occupational group within industry group), once established, are
applied to the population (not the sample) to estimate FTE totals (as
explained more fully in ``Using Sample Data to Estimate the
Population'', above), is another factor that would tend to limit the
potential for bias caused by the low response rate. However, the low
response rate does not allow for a reasonable measure of internal
validity to be assigned to the sample data.
Document Preparation: This document was prepared under the
direction and control of Maria Echaveste, Administrator, Wage and
Hour Division, Employment Standards Administration, U.S. Department
of Labor.
List of Subjects in 29 CFR Part 4
Administrative practice and procedures, Employee benefit plans,
Government contracts, Investigations, Labor, Law enforcement, Minimum
wages, Penalties, Recordkeeping requirements, Reporting requirements,
Wages.
Signed in Washington, DC, on this 21st day of October, 1996.
Maria Echaveste,
Administrator, Wage and Hour Division.
[FR Doc. 96-27402 Filed 10-24-96; 8:45 am]
BILLING CODE 4510-27-P
