7-7.1 Federal Laws Applicable to the Postal Service

Congress afforded the Postal Service broad powers of operation in the marketplace, excluding it from most Federal laws and regulations concerning contracts, property, works, officers, employees, budgets, and funding; as well as the establishment, adjudication, and judicial review of administrative procedures and determinations. Most important, the Postal Service is not subject to the FAR, which is the primary regulation governing all Federal executive agencies in their purchasing of goods and services with appropriated funds. Please see Clauses and Provisions for a complete list of clauses and provisions applicable to the Postal Service.

There are a number of laws governing purchasing and material management at the Postal Service. Some of those laws are mandated in 39 CFR either as enacted or since amended, and others are applied to the Postal Service by its own terms. SM must comply with those requirements in all activities.

The followings laws are applicable to the Postal Service:

7-7.1.1 Service Contract Act (Public Law 89-286, 41 U.S.C. 6701 et seq.)

7-7.1.1.1 Applicability

7-7.1.1.1.a The Service Contract Act (“the Act”) applies to any contract whose principal purpose is to provide services to be performed by service employees. Many types of services are covered by the Act, which attempts to cover contract workers who do not fall under the Davis-Bacon Act for construction and the Walsh-Healey Public Contracts Act for supplies. The Department of Labor’s regulations implementing the Act are contained in 29 CFR 4, Subpart C, and 29 CFR 4 110 therein describes what contracts are covered by the Act. The Act applies only to contracts “the principal purpose of which is to furnish services,” so if services are only incidental to the performance of a contract, the Act does not apply.

7-7.1.1.1.b The Act applies generally to all service employees on a covered contract entered into by the supplier who, on or after the date of award, are engaged in working on or in connection with the contract, either in performing the specific services called for by its terms or in performing other duties necessary to the performance of the contract. The Act does not cover persons employed in a bona fide executive, administrative, or professional capacity as those terms are defined in 29 CFR Part 541.

7-7.1.1.1.c The Act also applies to subcontracts under covered contracts, and suppliers must include the Act’s provisions in subcontracts for services. Except where indicated, in this part the terms “contract” and “supplier” include “subcontracts” and “subcontractors,” respectively.

7-7.1.1.2 Exemptions

7-7.1.1.2.a Statutory Exemptions

The statutory exemptions in section 7 of the Act are as follows:

  1. Any contract of the United States or District of Columbia for construction, alteration, and/or repair, including painting and decorating of public buildings or public works;
  2. Any work required to be done in accordance with the provisions of the Walsh-Healey Public Contracts Act (49 Stat. 2036);
  3. Any contract for the carriage of freight or personnel by vessel, airplane, bus, truck, express, railway line, or oil or gas pipeline where published tariff rates are in effect;
  4. Any contract for the furnishing of services by radio, telephone, telegraph, or cable companies, subject to the Communications Act of 1934;
  5. Any contract for public utility services, including electric light and power, water, steam, and gas;
  6. Any employment contract providing for direct services to a Federal agency by an individual or individuals;
  7. Any contract with the Post Office Department, (now the U.S. Postal Service) the principal purpose of which is the operation of postal contract stations.

7-7.1.1.2.b Secretary of Labor Exemptions

The following types of contracts have also been exempted from all the provisions of the Act, pursuant to section 4(b) of the Act, by the Secretary of Labor for reasons found to be necessary and proper in the public interest or to avoid serious impairment of the conduct of Government business:

  1. Contracts entered into by the United States with common carriers for the carriage of mail by rail, air (except air star routes), bus, and ocean vessel, where such carriage is performed on regularly scheduled runs of the trains, airplanes, buses, and vessels over regularly established routes and accounts for an insubstantial portion of the revenue therefrom;
  2. Any contract entered into by the U.S. Postal Service with an individual owner-operator for mail service where it is not contemplated at the time the contract is made that such owner-operator will hire any service employee to perform the services under the contract except for short periods of vacation time or for unexpected contingencies or emergency situations such as illness, or accident; and
  3. Contracts for the carriage of freight or personnel subject to rates covered by section 10721 of the Interstate Commerce Act.

7-7.1.1.2.c Exemption for the Maintenance, Calibration, or Repair of Certain Equipment

7-7.1.1.2.c(1) General

By exemptions published at 29 CFR 4.123(e)(1)(A)-(C), the Secretary of Labor has also exempted from the Act contracts and subcontracts in which the primary purpose is to furnish maintenance, calibration, or repair of the following types of equipment, if the conditions set out below are met:

7-7.1.1.2.c(2) Conditions

The above exemption applies if all of the following conditions are met for a contract or subcontract:

7-7.1.1.2.c(3) Determination and Contract Award

The contracting officer must determine the applicability of the exemption to the contract and that all of the above conditions and certifications are met before contract award. If the contracting officer finds otherwise, he or she must identify the deficiency to the supplier. Unless the supplier provides a revised offer either (1) acknowledging the applicability of the Act or (2) demonstrating to the contracting officer’s satisfaction its ability to meet all of the above conditions for an exemption, the supplier’s offer will not be considered for award. If the supplier does not provide the certification required in the conditions above, the contract will be subject to the Act, and the contracting officer will ensure compliance with the Act.

7-7.1.1.2.c(4) Department of Labor (DOL) Determination

After contract award, if DOL determines that any of the above conditions have not been met, it will deem the exemption inapplicable and the contract will become subject to the Act, effective on the date of the DOL’s determination. In such a case, the contracting officer must include Clause 9-10 or Clause 9-11 in the contract and any applicable wage determinations issued by the DOL within thirty days of the DOL notification. If DOL determines that any of the above conditions have not been met with regard to a subcontract, the exemption will not apply and the supplier may be responsible for ensuring that the subcontractor complies with the Act, effective as of the date of contract award.

7-7.1.1.2.d Other Conditionally Exempted Contracts

7-7.1.1.2.d(1) General

By exemptions published at 29 C.F.R 4.123(e)(2)(i)(A) (H), the Secretary of Labor has also exempted from the Act contracts for the following services if the conditions below are met:

7-7.1.1.2.d(2) Conditions

The exemptions above apply if all of the following are met for a contract or subcontract:

  • The services under the prime contract are commercial, i.e., they are offered and sold regularly to non-governmental customers, and are by provided by the supplier (or subcontractor in the case of an exempt subcontract) to the general public in substantial quantities in the course of normal business operations.
  • The prime contract or subcontract will be selected for award on the basis of multiple factors where price is equal to or less important than the combination of non-cost factors, or the supplier or subcontractor will be awarded on a noncompetitive basis.
  • The prime contract or subcontract services are furnished at prices that are, or are based on, established catalog or market prices. An established price is a price included in a catalog, price list, schedule, or other form that is regularly maintained by the supplier or subcontractor, is either published or otherwise available for inspection by customers, and states prices at which sales are currently, or were last made to a significant number of buyers constituting the general public. An established market price is a current price, established in the usual course of trade between buyers and sellers free to bargain, which can be substantiated from sources independent from the manufacturer or supplier.
  • Each service employee who will perform service under the contract or subcontract will spend only a small portion of his or her time (a monthly average of less than twenty percent of the available hours on an annualized basis, or less than twenty percent of available hours during the contract period if the contract period is less than a month) servicing the contract or subcontract.
  • The supplier uses the same compensation (wage and fringe benefits) plan for all service employees performing work under the contract or subcontract as the supplier uses for these employees and equivalent employees servicing commercial customers.
  • The contracting officer (or supplier with respect to a subcontract) determines in advance, based on the nature of the contract requirements and knowledge of the practices of likely offerors, that all or nearly all offerors will meet the conditions above. Where the services are already being performed under contract, the contracting officer or supplier will consider the practices of the existing supplier or subcontractor in making a determination regarding whether the conditions above have been met. If, after receipt of proposals, the contracting officer finds that he or she did not correctly determine that all or nearly all of the offerors would meet the requirements above, the Act will apply to the purchase, even if the successful offeror has certified to these conditions. The supplier or subcontractor certifies to these conditions. Certification by the supplier as to its compliance also constitutes its certification as to compliance by its subcontractor if it subcontracts out the exempt services. The certification must be included in the proposal or its subcontract proposal, using Provision 9-4: Exemption from Application of the Service Contract Act to Contracts for Maintenance, Calibration, or Repair of Certain Equipment and Other Conditionally Exempted Contracts – Certification. If the contracting officer or supplier has reason to doubt the validity of the certification, clauses implementing the Act must be included in the contract or subcontract.

7-7.1.1.2.d(3) DOL Determination

After contract award, if DOL determines that any of the above conditions have not been met, it will deem the exemption inapplicable and the contract will become subject to the Act, effective on the date of the DOL determination. In such a case, the contracting officer must include Clause 9-10 or Clause 9-11 in the contract and any applicable wage determinations issued by DOL within thirty days of the DOL notification. If DOL determines that any of the above conditions have not been met with regard to a subcontract, the exemption will not apply and the supplier may be responsible for ensuring that the subcontractor complies with the Act, effective as of the date of contract award.

7-7.1.1.2.e Nonexempt Contracts

The exemptions listed above do not apply to solicitations and contracts that are:

7-7.1.1.3 Price Adjustments

7-7.1.1.3.a General

For all multiyear service contracts and service contracts with renewals or options, except when the DOL wage determination has not changed, new wage determinations must be incorporated into the contract as follows:

7-7.1.1.3.b Clause 9-12: Fair Labor Standards Act and Service Contract Act Price Adjustments

Multiyear service contracts and service contracts with renewals or options must include Clause 9-12: Fair Labor Standards Act and Service Contract Act — Price Adjustment, specifying the procedures for price adjustments when an increase or decrease in a wage determination is applied to the contract. In accordance with Clause 9-12, suppliers may not include in their offered price any contingency to cover possible future increases in wage rates. In the event of a change in a wage determination, the supplier and contracting officer will engage in negotiations as to whether and to what extent the parties will absorb the costs of the adjustment.

7-7.1.1.3.c Wage Determinations

The contracting officer will obtain a new wage determination from DOL prior to the events listed in 7.1.1.3.a. The contracting officer must notify the supplier of the new wage rate thirty days prior to its effective date. The supplier will then have thirty days from the effective date, or any extension of that time allowed by the contracting officer pursuant to that clause, to make a request for price adjustment. In instances where a price adjustment is considered appropriate, if the contracting officer and the supplier do not reach an agreement within thirty days of the request, the contracting officer should issue a unilateral change order in the amount considered to be a fair and equitable adjustment. The supplier may then either accept the amount, or the supplier may file a claim under Clause B-9: Claims and Disputes.

7-7.1.1.3.d Price Negotiations

Price adjustment negotiations should be handled on a case-by-case basis. In such negotiations, the contracting officer should consider whether the supplier has attained new efficiencies allowing it to absorb additional wage costs, whether it is possible to decrease hours or consolidate scheduling, changed market conditions, the complexity of the type of service being purchased, and other factors affecting the supplier’s ability to absorb all or any portion of the adjustment costs.

7-7.1.1.4 Provisions and Clauses

7-7.1.1.4.a Provision for Maintenance, Calibration, or Repair of Certain Equipment and Other Conditionally Exempted Contracts

Provision 9-4: Exemption from Application of the Service Contract Act to Contracts for Maintenance, Calibration, or Repair of Certain Equipment and Other Conditionally Exempted Contracts – Certification must be included in all solicitations for contracts which the contracting officer has determined are likely to be exempted from the Act. (See 7-7.1.1.2.c & 7-7.1.1.2.d).

7-7.1.1.4.b Contracts Over $2,500

Clause 9-10: Service Contract Act must be included in every contract for services covered by the Act that is over $2,500 or is modified to exceed $2,500. This includes indefinite-delivery contracts and ordering agreements when orders are expected to aggregate more than $2,500. The clause is incorporated by reference in Clause 4-2: Contract Terms and Conditions Required to Implement Policies, Statutes or Executive Orders when checked off by the contracting officer.

7-7.1.1.4.c Contracts of $2,500 or Less

Every contract of $2,500 or less for services covered by the Act must include Clause 9-11: Service Contract Act — Short Form. The clause is incorporated by reference in Clause 4-2: Contract Terms and Conditions Required to Implement Policies, Statutes or Executive Orders when checked off by the contracting officer.

7-7.1.1.4.d Multiyear Service Contracts and Service Contracts with Renewals or Options

Multiyear service contracts and service contracts with options or renewals that include Clause 9-10: Service Contract Act or Clause 9-11: Service Contract Act — Short Form, must also include Clause 9-12: Fair Labor Standards Act and Service Contract Act — Price Adjustment. These clauses are incorporated by reference in Clause 4-2: Contract Terms and Conditions Required to Implement Policies, Statutes or Executive Orders when checked off by the contracting officer.

7-7.1.1.4.e Maintenance, Calibration, or Repair of Certain Equipment and Other Conditionally Exempted Contracts

If exemption conditions are met, contracts for maintenance, calibration, or repair of certain equipment, and other conditionally exempted contracts in 7-7.1.1.2 must include Clause 9-15: Exemption from Application of the Service Contract Act to Contracts for Maintenance, Calibration, or Repair of Certain Equipment and Other Conditionally Exempted Contracts – Requirements. If exemption conditions are not met, contracts must include either Clause 9-10: Service Contract Act or Clause 9-11: Service Contract Act — Short Form as applicable. These clauses are incorporated by reference in Clause 4-2: Contract Terms and Conditions Required to Implement Policies, Statutes or Executive Orders, when checked off by the contracting officer.

7-7.1.1.5 Minimum Wage Determinations

7-7.1.1.5.a Wage determinations may be obtained by submitting an e98, the electronic version of Standard Form 98 Notice of Intention to Make a Service Contract, from http://www.dol.gov/whd/contracts/sca/sf98/index.asp, describing the proposed contract and the occupations expected to be employed on the contract. DOL will respond with the wage determinations. Alternatively, wage determinations may be obtained from the following website: www.wdol.gov.

7-7.1.1.5.b If more than five service employees will be involved in performing work covered by the Act, the contract may not be awarded without a DOL wage determination. The contracting officer must obtain a wage determination prior to any request for proposals, commencement of negotiations, exercise of an option or renewal, and on each biennial anniversary date of a multi-year contract valued at more than $2,500.

7-7.1.1.5.c If the place of performance is unknown when the solicitation is issued, a wage determination need not be included in the original solicitation. Instead, when proposals are received, the contracting officer must obtain a wage determination for each location where the contract might be performed, as indicated by potential suppliers. The wage determination that applies to the successful potential supplier must be included in the contract. If DOL finds this impracticable, it may issue a composite wage determination.

7-7.1.1.5.d If circumstances require that a contract be awarded before a wage determination is obtained, the contract must include Clause 9-10: Service Contract Act and provide for equitable adjustment of the contract terms when the wage determination is incorporated, effective from the date of issuance unless another effective date is specified in the determination. The e98, if not already submitted, must be submitted promptly and explain the need for immediate award.

7-7.1.1.5.e The contracting officer must submit a revised e98 to find out whether a wage determination is still current when a solicitation or negotiation has been delayed for more than sixty days from the anticipated date of award. Any wage determination received in response must replace the earlier wage determination.

7-7.1.1.5.f If the contract will be for substantially the same services as are being furnished at the same location by an incumbent supplier whose contract the proposed contract will succeed and the wages and fringe benefits of the service employees are determined by a collective bargaining agreement, the contracting officer must reference the union and the collective bargaining agreement on the e98. The contracting officer will receive an e-mail giving instructions to submit a copy of each collective bargaining agreement along with any related documents specifying wages and fringe benefits that will apply to the contract. If the contracting officer believes that the collective bargaining agreement was not the result of “arm's-length” negotiations, a statement of the facts leading the contracting officer to that conclusion must accompany the agreement, and the DOL Wage and Hour Division must be advised if the wages and fringe benefits vary substantially from those for similar services.

7-7.1.1.5.g Any revision of a wage determination received less than ten days before proposals are due is not effective unless there is enough time to notify potential suppliers. If the contract action involves noncompetitive procedures or the exercise of an option or renewal, any revision of a wage determination received after award is not effective if performance begins within thirty days after award; otherwise, any revision received at least ten days before performance begins is effective.

7-7.1.1.5.h The DOL Wage and Hour Division may require that a wage determination be applied to a contract retroactively, if the contract is subject to the Act and more than five service employees are involved in performing the work. If the contracting officer questions the applicability of the Act to the contract, the contracting officer must forward the matter for resolution to assigned counsel. If it is determined that the Act is not applicable to the contract, the contracting officer must advise DOL of the basis for this determination. No further action is needed unless the Secretary of Labor disagrees and issues a final determination that the contract is in fact subject to the Act. In that case, the contracting officer must incorporate the applicable wage determination and attempt to negotiate an equitable price adjustment.

7-7.1.1.5.i If a wage determination does not contain all the classifications and rates requested in the e98, those classifications for which no determinations were received must be deleted from the attachment to the solicitation incorporating the wage determination. When omitted classifications or classifications not previously contemplated are found necessary after award, they, along with the appropriate wage determination, must be incorporated into the contract following the procedures in Clause 9-10: Service Contract Act.

7-7.1.1.6 Award

The following requirements apply to contract awards under the Act: