FAR 52.222-32—Construction Wage Rate Requirements-Price Adjustment (Actual Method).
Plain-English Summary
FAR 52.222-32, Construction Wage Rate Requirements-Price Adjustment (Actual Method), explains how to adjust contract prices when a revised Davis-Bacon/Construction Wage Rate Requirements wage determination applies to an option period or is otherwise incorporated into the contract by operation of law. It covers when the new wage determination applies, how the contractor must handle any allowance already built into the contract price, what costs are eligible for adjustment, how and when the contractor must notify the contracting officer, what supporting data must be submitted, and how the parties must continue performance while the adjustment is being resolved. The clause also sets out the actual-method computation rules for unit-priced work, including both single-craft-hour and multiple-craft-hour pricing structures, and provides an example of how the adjustment is calculated. In practice, this clause is important because it prevents double recovery, limits adjustments to actual labor-related cost changes required by the wage determination, and gives both parties a process for timely price modification without stopping performance. It is especially significant on construction contracts with options or other situations where a new wage determination may change labor costs during performance.
Key Rules
New wage determination applies to option
The wage determination effective for an option to extend the contract term applies to that option period. If the option is exercised, the contractor must comply with the updated wage rates and fringe benefits for that period.
No double counting of allowances
If the contract price already includes an allowance for wage or benefit increases, the contractor may not include that allowance again in a request for adjustment. The contractor must also certify that the contract prices do not already include the increased cost being claimed.
Adjustment limited to actual labor costs
The contracting officer adjusts the contract price or unit labor rates only for the contractor’s actual increase or decrease in wages and fringe benefits caused by the applicable wage determination. The adjustment also includes related increases or decreases in Social Security, unemployment taxes, and workers’ compensation insurance, but not general and administrative costs, overhead, or profit.
Timely notice and supporting data required
The contractor must notify the contracting officer of any increase claim within 30 days after receiving the revised wage determination, unless the contracting officer extends that period in writing. For decreases, the contractor must notify the contracting officer promptly, and the notice must state the amount claimed and include supporting data such as payroll records if reasonably required.
Performance continues during dispute
The contractor must continue performance while the parties work out the adjustment and its effective date. The contract price or unit price is modified in writing once the parties agree, or after the adjustment is otherwise determined.
Actual-method computation rules
For single-craft-hour unit pricing, the difference between actual paid labor rates and required wage determination rates is added to or subtracted from the unit price. For multiple-craft-hour unit pricing, the rate differences are multiplied by actual hours for each craft, divided by the number of units in the prior period, and then added to the current unit price.
Estimated hours may be used if needed
If actual hours from the preceding period are unavailable for a specific unit-priced work item, the contractor and contracting officer may agree on estimated total hours per craft per contract unit of work. This keeps the adjustment process workable when exact historical labor data is not available.
Responsibilities
Contracting Officer
Apply the effective wage determination to the option period or other legally applicable period; review the contractor’s request and supporting data; determine the allowable price or unit-rate adjustment; ensure the adjustment excludes disallowed costs such as overhead and profit; extend the 30-day notice period in writing if appropriate; and issue a written contract modification once the adjustment is agreed to or determined.
Contractor
Comply with the revised wage determination; avoid claiming any wage or benefit allowance already included in the contract price; submit a timely notice for any increase claim; promptly notify the contracting officer of any decrease; provide the amount claimed and supporting records, including payroll data if requested; continue performance while the adjustment is being resolved; and apply the correct actual-method computation for unit-priced work.
Agency / Department of Labor wage determination system
Issue the applicable Construction Wage Rate Requirements wage determination that becomes effective for the option period or otherwise applies by operation of law. That determination drives the labor cost changes that may trigger a contract price adjustment.
Practical Implications
This clause is mainly about preserving fairness when labor rates change, but it is not a blank check: only actual wage, fringe, and certain payroll-tax/insurance impacts are recoverable.
Contractors need good payroll and labor-hour records. Without them, it can be difficult to prove the amount of the adjustment, especially under the multiple-craft-hour method.
The 30-day notice deadline for increases is a common trap. Missing it can jeopardize recovery unless the contracting officer extends the period in writing.
Contractors should not build the same wage escalation into both the original price and the adjustment request. The clause expressly prevents double recovery.
For unit-priced work, the calculation method depends on whether the item is priced by a single craft hour or multiple craft hours, so estimating or allocating hours incorrectly can materially change the adjustment amount.
Official Regulatory Text
As prescribed in 22.407 (g) , insert the following clause: Construction Wage Rate Requirements-Price Adjustment (Actual Method) (Aug 2018) (a) The wage determination issued under the Construction Wage Rate Requirements statute by the Administrator, Wage and Hour Division, U.S . Department of Labor, that is effective for an option to extend the term of the contract, will apply to that option period. (b) (1) The Contractor states that if the prices in this contract contain an allowance for wage or benefit increases, such allowance will not be included in any request for contract price adjustment submitted under this clause. (2) The Contractor shall provide with each request for contract price adjustment under this clause a statement that the prices in the contract do not include any allowance for any increased cost for which adjustment is being requested. (c) The Contracting Officer will adjust the contract price or contract unit price labor rates to reflect the Contractor’s actual increase or decrease in wages and fringe benefits to the extent that the increase is made to comply with, or the decrease is voluntarily made by the Contractor as a result of— (1) Incorporation of the Department of Labor’s Construction Wage Rate Requirements wage determination applicable at the exercise of an option to extend the term of the contract; or (2) Incorporation of a Construction Wage Rate Requirements wage determination otherwise applied to the contract by operation of law. (d) Any adjustment will be limited to increases or decreases in wages and fringe benefits as described in paragraph (c) of this clause, and the accompanying increases or decreases in social security and unemployment taxes and workers’ compensation insurance, but will not otherwise include any amount for general and administrative costs, overhead, or profit. (e) The Contractor shall notify the Contracting Officer of any increase claimed under this clause within 30 days after receiving a revised wage determination unless this notification period is extended in writing by the Contracting Officer. The Contractor shall notify the Contracting Officer promptly of any decrease under this clause, but nothing in this clause precludes the Government from asserting a claim within the period permitted by law. The notice shall contain a statement of the amount claimed and any relevant supporting data, including payroll records that the Contracting Officer may reasonably require. Upon agreement of the parties, the Contracting Officer will modify the contract price or contract unit price in writing. The Contractor shall continue performance pending agreement on or determination of any such adjustment and its effective date. (f) Contract price adjustment computations shall be computed as follows: (1) Computation for contract unit price per single craft hour for schedule of indefinite-quantity work . For each labor classification, the difference between the actual wage and benefit rates (combined) paid and the wage and benefit rates (combined) required by the new wage determination shall be added to the original contract unit price if the difference results in a combined increase. If the difference computed results in a combined decrease, the contract unit price shall be decreased by that amount if the Contractor provides notification as provided in paragraph (e) of this clause. (2) Computation for contract unit price containing multiple craft hours for schedule of indefinite-quantity work . For each labor classification, the difference between the actual wage and benefit rates (combined) paid and the wage and benefit rates (combined) required by the new wage determination shall be multiplied by the actual number of hours expended for each craft involved in accomplishing the unit-priced work item. The product of this computation will then be divided by the actual number of units ordered in the preceding contract period. The total of these computations for each craft will be added to the current contract unit price to obtain the new contract unit price. The extended amount for the line item will be obtained by multiplying the new unit price by the estimated quantity. If actual hours are not available from the preceding contract period for computation of the adjustment for a specific contract unit of work, the Contractor, in agreement with the Contracting Officer, shall estimate the total hours per craft per contract unit of work. Example: Asphalt Paving-Current Price $3.38 per Square Yard DBA Craft New WD Hourly rate paid Diff. Actual Hrs Actual units (sq.yard) Increase/sqyard Equip. Opr. $18.50 – $18.00 = $.50 x 600 hrs./ 3,000 sq. yrd. = $.10 Truck Driver $19.00 – $18.25 = $.75 x 525 hrs./ 3,000 sq. yrd. = $.13 Laborer $11.50 – $11.25 = $.25 x 750 hrs./ 3,000 sq. yrd. = $.06 Total increase per square yard = $.29* * Note: Adjustment for labor rate increases or decreases may be accompanied by social security and unemployment taxes and workers’ compensation insurance. Current unit price (per square yard) $3.38 Add DBA price adj. +.29 New unit price (per square yard) = $3.67 (End of clause)