Service Contract Act: The Federal Wage Law Affecting Service Contracts and Some Construction-Adjacent Work
The McNamara-O'Hara Service Contract Act (SCA), enacted in 1965 (29 USC 351-358), governs federal service contracts. SCA requires payment of prevailing wages and fringe benefits to service workers on federal service contracts over $2,500. Davis-Bacon Act covers most construction work; SCA covers service work. The line between can blur — facility maintenance, landscaping, janitorial, and similar work may be SCA-covered. Construction contractors holding service contracts or doing construction-adjacent work navigate SCA.
SCA compliance has specific requirements similar to but distinct from Davis-Bacon. Wage determinations differ. Fringe benefit calculations differ. Understanding SCA helps contractors comply on federal service contracts. This post covers SCA fundamentals.
Different acts cover different work:
SCA vs Davis-Bacon
- Davis-Bacon — federal construction over $2,000
- SCA — federal service contracts over $2,500
- Construction work covered by Davis-Bacon
- Service work (non-construction) covered by SCA
- Some work could be either depending on character
- Different wage determination systems
- Different administrative requirements
Davis-Bacon covers federal construction projects. SCA covers federal service contracts. Most construction is clearly Davis-Bacon; most service contracts clearly SCA. Some work is ambiguous — maintenance work might be either. Department of Labor determines coverage in disputed cases.
SCA covers various services:
SCA-covered services
- Building maintenance
- Janitorial services
- Landscaping and grounds maintenance
- Security guards
- Food service
- Trash collection
- Repair services (specific)
- Facility operations
SCA covers services performed at federal facilities. Maintenance, janitorial, security, food service, landscaping all common SCA work. Repair services may be SCA or Davis-Bacon depending on character. Facility operations contracts SCA-covered.
WDs specify required wages:
SCA wage determinations
- Standard or non-standard WDs
- Geographic basis (county or area)
- Occupational classifications
- Prevailing wages by occupation
- Fringe benefit rates
- Updated annually typically
- Specific to contract
DOL issues SCA wage determinations specific to contract location and occupations. Contracting officer obtains WD before solicitation. WD specifies prevailing wages and fringe benefits by occupation. Updated annually. WD effective at contract award binds for term.
Fringe benefits required:
SCA fringe benefits
- Health and welfare benefits
- Vacation pay
- Holiday pay
- Specific dollar amount per hour typically
- Paid in cash or bona fide benefits
- Not all benefits qualify
- Trust funds for specific benefits
SCA fringe benefits typically expressed as hourly amount (e.g., $4.80/hr in 2024). Paid in cash or as bona fide benefits. Health insurance, retirement contributions count toward fringe. Bona fide plans require trust or contractual arrangement — employer-discretionary doesn't qualify.
Specific holiday and vacation:
Holiday and vacation
- 10 named federal holidays
- Vacation per length of service
- Vacation accrual per WD
- Holiday pay if scheduled
- Federal employee equivalents
- Specific tracking required
SCA mandates specific holiday and vacation. 10 named federal holidays paid if employee scheduled. Vacation accrues based on years of service — typically 1 week after 1 year, 2 weeks after 5 years, more after longer service. Tracking accrual important.
EO 13706 adds sick leave:
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EO 13706 sick leave
- Up to 7 days paid sick leave annually
- Earned at 1 hour per 30 worked
- Use for own illness, family care, etc.
- Carryover up to 56 hours
- Documentation requirements
- Federal contracts after Jan 2017
Executive Order 13706 (2017) requires up to 7 days paid sick leave for federal contractors. Accrued by hours worked. Use for various reasons. Carryover allowed. Documentation required for absences. Adds requirement on top of standard SCA.
SCA classification of work as 'service' vs 'construction' is sometimes contested. The line affects wage determinations and benefit calculations — substantially different requirements. When ambiguous, getting Department of Labor determination before contract execution prevents disputes during performance. Contractor's classification can be challenged years later by employees or DOL audits.
Certified payroll documents compliance:
SCA certified payroll
- Form WH-347 (similar to Davis-Bacon)
- Worker hours by classification
- Wages paid
- Deductions
- Fringe benefits paid in cash or to plans
- Submitted to contracting agency
- Available for DOL inspection
Certified payroll documents wages paid. Form similar to Davis-Bacon. Submitted to contracting agency. Available to DOL for audit. Certification under perjury. Errors create liability. Records retention typically 3 years.
Conformance for unlisted occupations:
SCA conformance
- Occupations not on WD
- Process to add occupation
- Submitted to contracting officer
- DOL review
- Wage and benefit determined
- Required before paying
- Worker rights protected
When SCA work involves occupations not listed on WD, conformance process adds. Submitted to contracting officer who forwards to DOL. DOL determines appropriate wage and benefits. Until conformance, worker protected by interim rate. Process can take weeks.
DOL enforces SCA:
DOL enforcement
- DOL investigators audit
- Worker complaints initiate investigations
- Back wages required for violations
- Liquidated damages
- Possible debarment
- Civil penalties
- Records review
DOL Wage and Hour Division enforces SCA. Audits routine and complaint-driven. Back wages plus liquidated damages for underpayments. Repeat or willful violators face debarment from federal contracting. Civil penalties for specific violations. Records review during audits.
Service Contract Act governs federal service contracts requiring prevailing wages and fringe benefits to service workers. Distinct from Davis-Bacon which covers construction. SCA-covered services include maintenance, janitorial, landscaping, security, food service. Wage determinations specify required wages and fringe benefits. Holidays and vacation per specific provisions. EO 13706 adds sick leave. Certified payroll documents compliance. Conformance for unlisted occupations. DOL enforces with significant penalties. Construction contractors holding service contracts navigate SCA — different from Davis-Bacon but conceptually similar. For contractors pursuing federal service work or construction-adjacent work, SCA understanding is essential. Compliance protects business; non-compliance creates substantial liability.
Written by
Jordan Patel
Compliance & Legal
Former corporate counsel specializing in construction contracts and tax compliance. Writes about the documentation layer — COIs, W-8/W-9, certified payroll, notice-to-owner deadlines — and the legal backbone behind audit-ready AP.
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