FAR 22.1002-3—Wage determinations based on collective bargaining agreements.
Plain-English Summary
FAR 22.1002-3 explains how wage determinations are set when a service contract is reprocured and the incumbent workforce is covered by a bona fide collective bargaining agreement (CBA). It addresses successor contractor obligations on contracts over $2,500 for substantially the same services in the same locality, including the duty to pay wages and fringe benefits that are at least equal to the CBA terms, as well as accrued benefits and prospective increases. The section also makes clear that this obligation is self-executing, meaning it applies by operation of law even if the contract does not expressly include the wage determination or the predecessor’s CBA terms. In addition, it identifies the limited circumstances in which the requirement does not apply: when the Secretary of Labor determines, after a hearing, that the CBA rates are substantially at variance with local prevailing rates, or that the agreement was not the result of arm’s-length negotiations. Finally, paragraph (b) points readers to related FAR provisions on notice to contractors and bargaining representatives, late receipt of a CBA, and challenges based on variance or lack of arm’s-length bargaining, showing how this rule fits into the broader Service Contract Labor Standards framework.
Key Rules
Successor contractor coverage
A successor contractor on a contract over $2,500 must comply when the work is substantially the same services performed in the same locality. The rule is aimed at preserving wage and benefit continuity for service employees when contracts change hands.
CBA wages and benefits control
The successor must pay at least the wages and fringe benefits contained in any bona fide CBA entered into under the predecessor contract. This includes accrued wages and benefits and any prospective increases required by the agreement.
Self-executing obligation
The requirement applies automatically and does not depend on whether the contracting officer includes a wage determination or reproduces the predecessor CBA terms in the successor contract. Contractors cannot avoid the obligation simply because the solicitation or contract is silent.
Limited exceptions by Labor Secretary
The rule does not apply if the Secretary of Labor determines, after a hearing, that the CBA rates are substantially at variance with local prevailing rates or that the wages and benefits were not the result of arm’s-length negotiations. These are narrow, formal exceptions.
Related notice and challenge provisions
Paragraph (b) directs users to related FAR sections covering notice to contractors and bargaining representatives, late receipt of a CBA by the contracting officer, and procedures for challenging application of a CBA based on variance or lack of arm’s-length bargaining. These provisions govern timing and dispute handling.
Responsibilities
Contracting Officer
Identify when a service reprocurement may trigger successor wage obligations, provide required notices to contractors and bargaining representatives, and follow the related FAR procedures when a CBA is received late or when a challenge to the CBA’s applicability is raised.
Successor Contractor
Pay covered service employees wages and fringe benefits at least equal to the bona fide predecessor CBA, including accrued benefits and prospective increases, when performing substantially the same services in the same locality on a contract over $2,500.
Predecessor Contractor
Maintain and document the applicable collective bargaining agreement and related wage and benefit terms that may carry over to the successor contract, and participate in any required transition or notice process as applicable.
Bargaining Representative / Union
Provide or assert the applicable bona fide CBA terms, respond to notices, and, where appropriate, support or contest the application of the agreement under the related FAR and Department of Labor procedures.
Secretary of Labor
Determine, after a hearing, whether the CBA wages and fringe benefits are substantially at variance with local prevailing rates or were not the result of arm’s-length negotiations, and decide whether the statutory requirement should not apply.
Practical Implications
Successor contractors should assume CBA wage and benefit obligations may carry over automatically, even if the solicitation does not spell them out. Failing to account for these costs can lead to underpricing, payroll violations, and contract performance problems.
Contracting officers need to watch the timing of CBA receipt and the notice requirements closely. A late-received agreement or missed notice can change whether and how the CBA applies to the successor contract.
The phrase “substantially the same services” is important in practice; if the scope changes materially, the successor rule may not apply in the same way. Contractors should compare the predecessor and successor work carefully before bidding.
The exceptions are narrow and require Department of Labor action, not a contractor’s unilateral judgment. Contractors should not self-determine that local rates are lower or that bargaining was not arm’s length without following the formal challenge process.
Because accrued benefits and prospective increases are included, contractors must evaluate not just current hourly rates but also vacation, health, pension, and scheduled step increases. These items often create the biggest compliance and pricing surprises.
Official Regulatory Text
(a) Successor contractors performing on contracts in excess of $2,500 for substantially the same services performed in the same locality must pay wages and fringe benefits (including accrued wages and benefits and prospective increases) at least equal to those contained in any bona fide collective bargaining agreement entered into under the predecessor contract. This requirement is self-executing and is not contingent upon incorporating a wage determination or the wage and fringe benefit terms of the predecessor contractor’s collective bargaining agreement in the successor contract. This requirement will not apply if the Secretary of Labor determines- (1) After a hearing, that the wages and fringe benefits are substantially at variance with those which prevail for services of a similar character in the locality; or (2) That the wages and fringe benefits are not the result of arm’s length negotiations. (b) Paragraphs in this subpart 22.10 which deal with this statutory requirement and the Department of Labor’s implementing regulations are 22.1010 , concerning notification to contractors and bargaining representatives of procurement dates; 22.1012-2 , explaining when a collective bargaining agreement will not apply due to late receipt by the contracting officer; and 22.1013 and 22.1021 , explaining when the application of a collective bargaining agreement can be challenged due to a variance with prevailing rates or lack of arm’s length bargaining.