Labor law sets the floor under your price
On a federal custodial, grounds or facilities contract, most of the price is people, and the Service Contract Act decides the minimum those people are paid. Bid under it and you will either lose money on every hour or violate the contract. Bid without understanding it and you will carry costs your competitors priced correctly.
The statute is 41 U.S.C. chapter 67. It reaches service contracts above $2,500, and the contracting officer must obtain a wage determination for each new solicitation and contract in that range. The clause that carries the obligations into the contract is FAR 52.222-41, and the wage determination is attached to the solicitation.
This guide works through a wage determination the way an estimator should: one line at a time, turned into cost, then checked against the clauses that govern what happens in later years.
Find the wage determination that actually applies
Wage determinations are published on SAM.gov, and the solicitation should attach the one for the place of performance. Use the one attached, and read it for your location, because rates vary by locality. If the work could happen in several places, the contracting officer must obtain a determination for each locality where services may be performed, so a multi-site bid may mean several rate tables.
Check the wage determination number and revision date against the solicitation and every amendment. Amendments can bring in a revised determination, and a price built on the earlier revision is built on the wrong floor.
Then match your people to the listed occupations by the work they will do. The job title on your payroll does not decide the classification. If you need a classification the determination does not list, the 52.222-41 clause sets a conforming process. The contractor classifies the unlisted job so it bears a reasonable relationship to the listed classifications, and starts that process before the employee performs contract work, with the submission due to the contracting officer no later than 30 days after that employee begins. Plan the conformed rate into your price before you bid.
The clause covers service employees, which leaves out people employed in a bona fide executive, administrative or professional capacity. Sort your staffing plan into those two groups first, because the wage determination floor applies to one and your own payroll sets the price of the other.
Turn each line into an hourly cost
A wage determination gives you a cash wage, a health and welfare amount and a set of paid time off terms. Each one becomes a cost per hour. Here is the shape of it for one worker, using an illustrative $18.00 wage, the current general health and welfare rate, 10 paid holidays and 2 weeks of vacation.
| Line | How to compute it | Per hour |
|---|---|---|
| Cash wage | From the wage determination for that occupation | $18.00 |
| Health and welfare | The hourly amount on the determination | $5.92 |
| Holidays | 10 days x 8 hours x $18.00 = $1,440, divided by 2,080 | $0.69 |
| Vacation | 2 weeks x 40 hours x $18.00 = $1,440, divided by 2,080 | $0.69 |
| Subtotal before burden | Sum of the lines above | $25.30 |
The method in the holiday and vacation lines comes from the Labor Department's rules in 29 CFR part 4, which multiply the worker's rate by the hours of paid time off and divide by 2,080, the standard non-overtime hours in a year. Then add your payroll taxes, workers' compensation, supervision, overhead and profit on top. Your own figures for those lines come from your books.
Read the table as cost per paid hour. On a fixed post that must stay staffed all day, a worker on paid leave still costs the contract while someone else covers the post, so a covered position usually needs more paid hours than the 2,080 a single worker provides. Build the relief hours into the labor count before you apply the rates.
Health and welfare is the line most bids get wrong
The Labor Department raised the general health and welfare rate to $5.92 an hour, from $5.55, effective August 10, 2026, in its annual All Agency Memorandum. For contractors that must provide paid sick leave under Executive Order 13706, the rate went to $5.42, from $5.09. Which rate applies comes from the wage determination in your solicitation, and you should price that number.
The wage determination in your solicitation decides which rate you owe, and that is the number you price.
The wage determination in your solicitation decides which rate you owe, and that is the number you price. Unless the determination says otherwise, health and welfare is owed for all hours paid, including vacation, sick leave and holiday hours, up to 40 hours a week and 2,080 hours a year. A worker on paid leave still earns it, so your holiday and vacation hours carry the benefit too. Add it to the labor cost of those hours.
On a contract already running, a new rate does not reach you by itself. It applies when the revised wage determination is added to your contract by modification, typically at an option period.
Successor contracts and the predecessor's union agreement
If the work is substantially the same as a contract ending now, in the same locality, and the incumbent's employees are covered by a collective bargaining agreement, the wage floor can come from that agreement. Under 41 U.S.C. 6707(c), a successor must pay at least the wages and fringe benefits agreed by the predecessor, including accrued wages and benefits and prospective increases.
This is the check that catches estimators who priced the published determination. Ask early whether a predecessor contract exists and whether a union agreement covers its workers. If 6707(c) applies, the contracting officer must obtain a copy of the agreement.
Vacation can follow workers across contracts too. Under the regulations, most vacation determinations require paid vacation after a set length of service with a contractor or successor. Budget for the workforce you will really inherit, including how long they have been on the job.
Minimum wage orders in force today
Executive Order 14026, the higher federal contractor minimum wage, was revoked by Executive Order 14236. The Labor Department says it is no longer enforcing it and plans to rescind its implementing rule. If a solicitation still carries a clause referencing it, ask the contracting officer how it applies.
Executive Order 13658 is still in place for a narrower group: contracts entered into, renewed or extended between January 1, 2015 and January 29, 2022, and not renewed or extended on or after January 30, 2022. Its rate rose to $13.65 an hour on May 11, 2026. Paid sick leave under Executive Order 13706 remains in the overhaul FAR text at clause 52.222-62, with accrual of at least 1 hour for every 30 hours worked under 29 CFR 13.5.
Know what the price adjustment clauses pay back
Multiple-year and option contracts use FAR 52.222-43. Other covered contracts use 52.222-44. Read 52.222-43 before you decide how to escalate your option-year pricing, because it changes the math in three ways.
- Your prices may not include a contingency for these increases. The contractor warrants that the prices contain no allowance for increased costs the clause covers
- The adjustment covers the required increase and no more. It reflects actual increases made to comply with the new determination, up to the amount the determination requires
- The adjustment is limited. It covers wages, fringe benefits and the related social security, unemployment tax and workers' compensation, and excludes general and administrative costs, overhead and profit
- Notice has a clock. You must notify the contracting officer within 30 days after receiving a new determination unless that period is extended in writing
Escalation inside your option-year prices is still needed for everything the clause does not cover, such as supplies, supervision above the determination and overhead. Keep those two kinds of escalation separate on your worksheet.
A worksheet check before you file
Run these tests on the labor build before the price leaves the building.
- A wage determination revision that does not match the latest amendment
- An occupation priced under the wrong classification
- Health and welfare applied to worked hours only, leaving out paid leave and holiday hours
- No cost for the relief worker who covers vacation and holiday hours on a post that must stay staffed
- A successor contract priced from the published wage determination when a union agreement sets the floor
Where the wage floor meets your competitive price
Because every bidder on the same wage determination owes the same minimums, the room to compete sits above the floor: supervision, how you staff the work, productivity, overhead and profit. Show that thinking in your staffing plan, and make sure the price and the plan describe the same workforce.
Be careful bidding at the floor with nothing above it. Workers who can get better pay elsewhere leave, and the turnover shows up in your quality numbers. If a post needs an experienced person to perform, price the experienced person and say why in your technical volume.
Frequently asked questions
No. It applies to covered service contracts above $2,500, and there are exemptions. If 52.222-41 and a wage determination are in the solicitation, price as if it applies and ask the contracting officer about anything unclear.
Yes. The determination is a floor. The price adjustment clause, however, may not pay you back for raises above the required level, as the clause's own example shows.
No. It applies once a revised wage determination is added to your contract by modification, typically at the next option period.
Ask the contracting officer whether 41 U.S.C. 6707(c) applies. If it does, the predecessor's agreement sets the floor, including accrued benefits and scheduled increases, so get the agreement and price from it.