FAR 22.1003-4—Administrative limitations, variations, tolerances, and exemptions.
Plain-English Summary
FAR 22.1003-4 explains when and how the Secretary of Labor may grant administrative limitations, variations, tolerances, and exemptions from the Service Contract Labor Standards (SCLS) statute, and it identifies several specific categories of contracts that are exempt from SCLS coverage. It covers the legal standard for granting special relief, the process for submitting requests through contracting channels and the agency labor advisor to the Wage and Hour Administrator, and the Secretary’s listed exemptions for certain mail carriage and freight/personnel carriage contracts. It also addresses a separate exemption for maintenance, calibration, or repair contracts involving certain equipment, including automated data processing equipment, office information/word processing systems, scientific equipment, medical apparatus, and certain office/business machines when performed by the manufacturer or supplier. For that equipment exemption, the rule lays out detailed conditions involving commercial use, established catalog or market pricing, consistent compensation plans, and contractor certification. It further requires the contracting officer to make an affirmative written determination before award and to notify offerors of deficiencies in competitive procurements when the exemption may not apply. In practice, this section matters because it determines whether SCLS wage and fringe benefit requirements apply at all, and it creates a pre-award screening and documentation process that can affect competition, pricing, and award timing.
Key Rules
Labor Secretary may grant relief
The Secretary of Labor may allow reasonable limitations, variations, tolerances, and exemptions from SCLS provisions, except for 41 U.S.C. 6707(f). Relief is allowed only in special circumstances and only when it is in the public interest, necessary to avoid serious impairment of Government business, and consistent with the statute’s remedial purpose.
Requests must follow channels
Requests for limitations, variances, tolerances, and exemptions must be submitted in writing through contracting channels and the agency labor advisor to the Wage and Hour Administrator. This ensures the request is reviewed and processed through the proper labor-standards chain.
Specific contract exemptions listed
The Secretary has exempted certain contracts from all SCLS provisions, including specified mail carriage contracts with common carriers, certain U.S. Postal Service owner-operator mail service contracts, and freight or personnel carriage contracts subject to Interstate Commerce Act section 10721 rates.
Equipment maintenance exemption
Contracts and subcontracts whose primary purpose is maintenance, calibration, or repair of certain equipment may be exempt, including ADP and office information systems, scientific and medical equipment using micro-electronic circuitry or similar technology, and some office/business machines when serviced by the manufacturer or supplier.
Commercial-use and pricing conditions
The equipment exemption applies only if the equipment is regularly used for non-Government purposes and sold or traded in substantial quantities to the general public, and if services are priced using established catalog or market prices. The regulation defines both established catalog price and established market price.
Uniform compensation plan required
To qualify for the equipment exemption, the contractor must use the same wage and fringe benefit plan for all service employees on the contract that it uses for those employees and equivalent employees servicing the same equipment for commercial customers.
Offeror certification and CO review
The apparent successful offeror must certify that the exemption conditions are met. In competitive source selections, if the contracting officer believes one or more conditions will not be met, the deficiency must be identified before final proposal revisions, and the offeror must either revise its offer or show it can meet the exemption conditions.
Written affirmative determination before award
The contracting officer must determine in writing whether the exemption applies before award. If the apparent successful offeror meets all conditions, the contracting officer makes an affirmative determination and awards without applying SCLS coverage for that exempt contract.
Responsibilities
Secretary of Labor
May issue reasonable limitations, variations, tolerances, and exemptions from SCLS in special circumstances, and may exempt specified categories of contracts from all SCLS provisions.
Agency labor advisor
Receives and helps route written requests for limitations, variances, tolerances, and exemptions through the proper labor-standards process to the Wage and Hour Administrator.
Wage and Hour Administrator
Reviews requests submitted through contracting channels and the agency labor advisor for possible administrative relief under SCLS.
Contracting Officer
Identifies whether an exemption may apply, ensures the offeror’s certification is reviewed, notifies offerors of deficiencies in competitive procurements, makes a written pre-award determination, and awards only when the exemption conditions are satisfied.
Offeror / Apparent Successful Offeror
Certifies that the exemption conditions are met, and if notified of a deficiency in a competitive range procurement, revises the offer or demonstrates the ability to satisfy all exemption requirements.
Contractor
If relying on the equipment exemption, maintains the required commercial-use, pricing, and compensation practices and applies the same wage and fringe benefit plan to covered service employees and equivalent commercial-service employees.
Agency
Supports the routing and review of exemption requests and ensures contracting personnel apply the correct SCLS coverage or exemption analysis before award.
Practical Implications
This section can remove a contract from SCLS wage and fringe benefit requirements, but only if the exact exemption criteria are met; contractors should not assume an exemption applies just because the work sounds commercial or technical.
The equipment-maintenance exemption is highly fact-specific. Contractors need documentation for commercial sales, catalog or market pricing, and compensation practices, and contracting officers need enough evidence to support a written affirmative determination.
In competitive procurements, exemption issues must be resolved before final proposal revisions, so a late discovery that the exemption does not apply can force an offeror back into SCLS coverage or eliminate it from award consideration.
A common pitfall is confusing a product or equipment service contract with an exempt contract; the primary purpose, the type of equipment, and the pricing/compensation conditions all matter.
Because requests for administrative relief must go through contracting channels and the agency labor advisor, parties should build in time for review rather than waiting until just before award or performance start.
Official Regulatory Text
(a) The Secretary of Labor may provide reasonable limitations and may make rules and regulations allowing reasonable variations, tolerances, and exemptions to and from any or all provisions of the Service Contract Labor Standards statute other than 41 U.S.C. 6707(f) . These will be made only in special circumstances where it has been determined that the limitation, variation, tolerance, or exemption is necessary and proper in the public interest or to avoid the serious impairment of Government business, and is in accord with the remedial purpose of the Service Contract Labor Standards statute to protect prevailing labor standards ( 41 U.S.C. 6707(b) ). See 29 CFR 4.123 for a listing of administrative exemptions, tolerances, and variations. Requests for limitations, variances, tolerances, and exemptions from the Service Contract Labor Standards statute shall be submitted in writing through contracting channels and the agency labor advisor to the Wage and Hour Administrator. (b) In addition to the statutory exemptions cited in 22.1003-3 of this subsection, the Secretary of Labor has exempted the following types of contracts from all provisions of the Service Contract Labor Standards statute: (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 if it is not contemplated at the time the contract is made that the 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. (3) Contracts for the carriage of freight or personnel if such carriage is subject to rates covered by section 10721 of the Interstate Commerce Act. (c) Contracts for maintenance, calibration or repair of certain equipment .- (1) Exemption . The Secretary of Labor has exempted from the Service Contract Labor Standards statute contracts and subcontracts in which the primary purpose is to furnish maintenance, calibration, or repair of the following types of equipment, if the conditions at paragraph (c)(2) of this subsection are met: (i) Automated data processing equipment and office information/word processing systems. (ii) Scientific equipment and medical apparatus or equipment if the application of micro-electronic circuitry or other technology of at least similar sophistication is an essential element (for example, Product or Service Code (PSC) 6515, "Medical and Surgical Instruments, Equipment, and Supplies;" PSC 6525, "Imaging Equipment and Supplies: Medical, Dental, Veterinary;" PSC 6630, "Chemical Analysis Instruments;" and PSC 6655, "Geophysical Instruments," are largely composed of the types of equipment exempted in this paragraph). (iii) Office/business machines not otherwise exempt pursuant to paragraph (c)(1)(i) of this subsection, if such services are performed by the manufacturer or supplier of the equipment. (2) Conditions . The exemption at paragraph (c)(1) of this subsection applies if all the following conditions are met for a contract (or a subcontract): (i) The items of equipment to be serviced under the contract are used regularly for other than Government purposes and are sold or traded by the contractor in substantial quantities to the general public in the course of normal business operations. (ii) The services will be furnished at prices which are, or are based on, established catalog or market prices for the maintenance, calibration, or repair of such equipment. As defined at 29 CFR 4.123(e)(1)(ii)(B) - (A) An established catalog price is a price included in a catalog price list, schedule, or other form that is regularly maintained by the manufacturer or the contractor, is either published or otherwise available for inspection by customers, and states prices at which sales currently, or were last, made to a significant number of buyers constituting the general public. (B) 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 of the manufacturer or contractor. (iii) The contractor will use the same compensation (wage and fringe benefits) plan for all service employees performing work under the contract as the contractor uses for these employees and equivalent employees servicing the same equipment of commercial customers. (iv) The apparent successful offeror certifies to the conditions in paragraph (c)(2)(i) through (iii) of this subsection. (See 22.1006 (e).) (3) Affirmative determination and contract award . (i) For source selections where the contracting officer has established a competitive range, if the contracting officer determines that one or more of the conditions in paragraphs 22.1003-4 (c)(2)(i) through (iii) of an offeror’s certification will not be met, the contracting officer shall identify the deficiency to the offeror before receipt of the final proposal revisions. Unless the offeror provides a revised offer acknowledging applicability of the Service Contract Labor Standards statute or demonstrating to the satisfaction of the contracting officer an ability to meet all required conditions for exemption, the offer will not be further considered for award. (ii) The contracting officer shall determine in writing the applicability of this exemption to the contract before contract award. If the apparent successful offeror will meet all conditions in paragraph (c)(2) of this subsection, the contracting officer shall make an affirmative determination and award the contract without the otherwise applicable Service Contract Labor Standards clause(s). (iii) If the apparent successful offeror does not certify to the conditions in paragraph (c)(2)(i) through (iii) of this subsection, the contracting officer shall incorporate in the contract the Service Contract Act clause (see 22.1006 (a)) and, if the contract will exceed $2,500, the appropriate Department of Labor wage determination (see 22.1007 ). (4) Department of Labor determination . (i) If the Department of Labor determines after award of the contract that any condition for exemption in paragraph (c)(2) of this subsection has not been met, the exemption shall be deemed inapplicable, and the contract shall become subject to the Service Contract Labor Standards statute, effective as of the date of the Department of Labor determination. In such case, the procedures at 29 CFR 4.123(e)(1)(iv) and 29 CFR 4.5(c) shall be followed. (ii) If the Department of Labor determines that any conditions in paragraph (c)(2) of this subsection have not been met with respect to a subcontract, the exemption shall be deemed inapplicable. The contractor may be responsible for ensuring that the subcontractor complies with the Service Contract Labor Standards statute, effective as of the date of the subcontract award. (d) Contracts for certain services .- (1) Exemption . Except as provided in paragraph (d)(5) of this subsection, the Secretary of Labor has exempted from the Service Contract Labor Standards statute contracts and subcontracts in which the primary purpose is to provide the following services, if the conditions in paragraph (d)(2) of this subsection are met: (i) Automobile or other vehicle ( e.g ., aircraft) maintenance services (other than contracts or subcontracts to operate a Government motor pool or similar facility). (ii) Financial services involving the issuance and servicing of cards (including credit cards, debit cards, purchase cards, smart cards, and similar card services). (iii) Hotel/motel services for conferences, including lodging and/or meals, that are part of the contract or subcontract for the conference (which must not include ongoing contracts for lodging on an as needed or continuing basis). (iv) Maintenance, calibration, repair, and/or installation (where the installation is not subject to the Construction Wage Rate Requirements statute, as provided in 29 CFR 4.116(c)(2) ) services for all types of equipment where the services are obtained from the manufacturer or supplier of the equipment under a contract awarded on a sole source basis. (v) Transportation by common carrier of persons by air, motor vehicle, rail, or marine vessel on regularly scheduled routes or via standard commercial services (not including charter services). (vi) Real estate services, including real property appraisal services, related to housing Federal agencies or disposing of real property owned by the Government. (vii) Relocation services, including services of real estate brokers and appraisers to assist Federal employees or military personnel in buying and selling homes (which shall not include actual moving or storage of household goods and related services). (2) Conditions . The exemption for the services in paragraph (d)(1) of this subsection applies if all the following conditions are met for a contract (or for a subcontract): (i) (A) Except for services identified in paragraph (d)(1)(iv) of this subsection, the contractor will be selected for award based on other factors in addition to price or cost, with the combination of other factors at least as important as price or cost; or (B) The contract will be awarded on a sole source basis. (ii) The services under the contract are offered and sold regularly to non-Governmental customers, and are provided by the contractor (or subcontractor in the case of an exempt subcontract) to the general public in substantial quantities in the course of normal business operations. (iii) The contract services are furnished at prices that are, or are based on, established catalog or market prices. As defined at 29 CFR 4.123(e)(2)(ii)(C) - (A) An established catalog price is a price included in a catalog, price list, schedule, or other form that is regularly maintained by the contractor, 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; and (B) 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 of the manufacturer or contractor. (iv) Each service employee who will perform the services under the contract will spend only a small portion of his or her time (a monthly average of less than 20 percent of the available hours on an annualized basis, or less than 20 percent of available hours during the contract period if the contract period is less than a month) servicing the Government contract. (v) The contractor will use the same compensation (wage and fringe benefits) plan for all service employees performing work under the contract as the contractor uses for these employees and equivalent employees servicing commercial customers. (vi) The contracting officer (or contractor with respect to a subcontract) determines in advance before issuing the solicitation, 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 in paragraph (d)(2)(ii) through (v) of this subsection. If the services are currently being performed under contract, the contracting officer (or contractor with respect to a subcontract) shall consider the practices of the existing contractor in making a determination regarding the conditions in paragraphs (d)(2)(ii) through (v) of this subsection. (vii) (A) The apparent successful offeror certifies that the conditions in paragraphs (d)(2)(ii) through (v) will be met; and (B) For other than sole source awards, the contracting officer determines that the same certification is obtained from substantially all other offerors that are- (1) In the competitive range, if discussions are to be conducted (see FAR 15.306 (c)); or (2) Considered responsive, if award is to be made without discussions (see FAR 15.306 (a)). (3) Contract award or resolicitation . (i) If the apparent successful offeror does not certify to the conditions, the contracting officer shall insert in the contract the applicable Service Contract Labor Standards clause(s) (see 22.1006 ) and, if the contract will exceed $2,500, the appropriate Department of Labor wage determination (see 22.1007 ). (ii) The contracting officer shall award the contract without the otherwise applicable Service Contract Labor Standards clause(s) if- (A) The apparent successful offeror certifies to the conditions in paragraphs (d)(2)(ii) through (v) of this subsection; (B) The contracting officer determines that the same certification is obtained from substantially all other offerors that are- (1) In the competitive range, if discussions are to be conducted (see FAR 15.306 ); or (2) Considered responsive, if award is to be made without discussions (see FAR 15.306 (a)); and (C) The contracting officer has no reason to doubt the certification. (iii) If the conditions in paragraph (d)(3)(ii) of this subsection are not met, then the contracting officer shall resolicit, amending the solicitation by removing the exemption provision from the solicitation as prescribed at 22.1006 (e)(3). The contract will include the applicable Service Contract Labor Standards clause(s) as prescribed at 22.1006 and, if the contract will exceed $2,500, the appropriate Department of Labor wage determination (see 22.1007 ). (4) Department of Labor determination . (i) If the Department of Labor determines after award of the contract that any conditions for exemption at paragraph (d)(2) of this subsection have not been met, the exemption shall be deemed inapplicable, and the contract shall become subject to the Service Contract Labor Standards statute. In such case, the procedures at 29 CFR 4.123(e)(2) (iii) and 29 CFR 4.5 (c) shall be followed. (ii) If the Department of Labor determines that any conditions in paragraph (d)(2) of this subsection have not been met with respect to a subcontract, the exemption shall be deemed inapplicable. The contractor may be responsible for ensuring that the subcontractor complies with the Service Contract Labor Standards statute, effective as of the date of the subcontract award. (5) Exceptions . The exemption at paragraph (d)(1) of this subsection does not apply to solicitations and contracts (subcontracts)- (i) Awarded under , 41 U.S.C. chapter 85 , Committee for Purchase from People Who Are Blind or Severely Disabled (see subpart 8.7 ). (ii) For the operation of a Government facility, or part of a Government facility (but may be applicable to subcontracts for services); or (iii) Subject to 41 U.S.C. 6707(c) (see 22.1002-3 ).