Sign In
  • Question

    The FUSRAP contract has the Services Contract Act FAR that requires the contractor to provide the hourly employees on this contract a 10th holiday. The contractor stated the cost for this additional holiday is not burdened like regular labor (it does not have overhead or fringe rates applied to it). Is this an allowable cost?


    Based on some additional information you provided via telephone conversation; the short answer is: there is a high probability that this would be an allowable cost.  Rationale and advice is:
    In accordance with Department of labor rules; on a government contract to which the labor standards of the McNamara O'Hara Service Contract Act (SCA) apply, holiday and/or vacation fringe benefit requirements are stated in the SCA wage determinations in contracts that exceed $2,500.
    (a link is provided here:
    Suggest you do the following first:
    1) If you have a copy of the Wage Determination (WG) that is in the contract, read it to see if the WD contains language similar to what the contractor stated.  It should be in clear and unambiguous language; it may use the term “unnamed holiday”.  If it is in there, then yes this would be an allowable and allocable cost.  You’ll have to see what the calculation is to determine what actual dollar amount should be “reasonable”.
    (note to readers: it was confirmed during a telephone conversation with the submitter scenario the contractor had a normal policy of providing 9 annual holidays, the WD on contract and the contract had 10 annual holidays).
    2) Then, we highly suggest you consult the U. S. Army Corps of Engineers Labor Advisor (Every DoD Agency has an assigned labor advisor).  They should be able to concur with our analysis and assessment.
    A list and contact information for your organization’s labor advisor can be found at this link:
    3) Additional sources of research and information are as follows:
    Service Contract Labor Standards (May 2014)
    52.222-41 (d) Obligation to furnish fringe benefits.  The Contractor or subcontractor may discharge the obligation to furnish fringe benefits specified in the attachment or determined under subparagraph (c)(2) of this clause by furnishing equivalent combinations of bona fide fringe benefits, or by making equivalent or differential cash payments, only in accordance with Subpart D of 29 CFR Part 4.
    31.205-6 (m) Fringe benefits.
    (1) Fringe benefits are allowances and services provided by the contractor to its employees as compensation in addition to regular wages and salaries. Fringe benefits include, but are not limited to, the cost of vacations, sick leave, holidays, military leave, employee insurance, and supplemental unemployment benefit plans. Except as provided otherwise in Subpart 31.2, the costs of fringe benefits are allowable to the extent that they are reasonable and are required by law, employer-employee agreement, or an established policy of the contractor.
    Note: bold and italics added for emphasis. 

    The DOL citation we provided above and the code of federal regulations (Subpart D of 29 CFR Part 4) provide the legal requirement.  A link to this section of the code of federal regulations (warning, very voluminous) is

    Conclusion: we reached our assessment/answer after conducting a thorough review of the FAR, DOL web site and CFR.

    Open full Question Details