FAR 22.1002-2—Wage determinations based on prevailing rates.
Plain-English Summary
FAR 22.1002-2 explains how wage determinations work for service contracts when there is no predecessor contractor collective bargaining agreement to carry forward. It covers service contracts over $2,500, the requirement to pay at least the wages and fringe benefits the Department of Labor (DOL) finds to prevail in the locality, and the fallback rule that applies when no wage determination is available: the Fair Labor Standards Act (FLSA) minimum wage. In practice, this section is the basic wage-setting rule under the Service Contract Labor Standards framework for new or non-successor service contracts, ensuring service employees receive locally prevailing compensation rather than only the federal minimum wage. It matters because the wage determination becomes a contract pricing and administration requirement, affects labor costs, and can trigger compliance issues if the contractor underpays covered employees. The section also signals that the contracting officer must obtain and incorporate the correct DOL wage determination, and that contractors must build their pay practices around that determination from contract start.
Key Rules
Applies to covered service contracts
The rule applies to service contracts in excess of $2,500. If the contract is not a covered service contract or does not exceed that threshold, this section does not control the wage-setting requirement.
Use DOL prevailing wages
When no predecessor contractor collective bargaining agreement applies, contractors must pay employees at least the wages and fringe benefits determined by the Department of Labor to prevail in the locality. The DOL wage determination sets the minimum compensation floor for covered service employees.
No CBA means no carryover wage floor
This section specifically addresses situations where there is no predecessor contractor collective bargaining agreement that would otherwise govern wage and fringe benefit treatment. In those cases, the applicable wage determination comes from DOL rather than from a predecessor labor agreement.
FLSA minimum wage is the fallback
If there is no wage determination available, the contractor must pay at least the minimum wage required by the Fair Labor Standards Act. This is a fallback rule, not the normal standard, and it applies only in the absence of a wage determination.
Fringe benefits are included
The required compensation floor is not limited to hourly wages. Contractors must also provide the fringe benefits identified in the wage determination, which are part of the required labor cost for covered employees.
Responsibilities
Contracting Officer
Obtain and include the correct DOL wage determination in the solicitation and contract when required, and ensure the contract reflects the applicable wage and fringe benefit requirements for covered service employees.
Contractor
Pay covered employees at least the prevailing wages and fringe benefits in the applicable wage determination, or at least the FLSA minimum wage if no wage determination exists. The contractor must also price and administer the contract consistent with those labor costs.
Department of Labor
Determine the wages and fringe benefits that prevail in the locality and issue the wage determination used for covered service contracts.
Agency
Support acquisition planning and contract administration so the solicitation and award use the proper labor standards requirements and the contractor’s performance remains compliant.
Practical Implications
This section directly affects bid and proposal pricing because labor rates must be built around the applicable DOL wage determination, not just the federal minimum wage.
A common pitfall is assuming the FLSA minimum wage is enough; for covered service contracts, the prevailing wage determination usually sets a higher floor.
Contractors should verify whether a predecessor collective bargaining agreement exists, because that can change the wage-setting analysis and the applicable labor obligations.
Contracting officers should confirm the correct wage determination is attached and current, since using the wrong determination can create underpayment and contract administration problems.
If no wage determination is available, the FLSA minimum wage applies only as a fallback, so parties should not treat it as the normal standard for covered service work.
Official Regulatory Text
Contractors performing on service contracts in excess of $2,500 to which no predecessor contractor’s collective bargaining agreement applies shall pay their employees at least the wages and fringe benefits found by the Department of Labor to prevail in the locality or, in the absence of a wage determination, the minimum wage set forth in the Fair Labor Standards Act.