DENIED: December 2, 1992 GSBCA 11788 OGDEN ALLIED GOVERNMENT SERVICES, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. William A. Roberts, III, Brian A. Darst, J. Lloyd Horwich, Howrey & Simon, Washington, DC, counsel for Appellant. Martin A. Hom, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges LaBELLA, Acting Chief Judge, and PARKER. PARKER, Board Judge. Ogden Allied Government Services, appellant, contests the decision of respondent, the General Services Administration (GSA), to deny its request for an equitable adjustment in its service contract to cover an unexpected increase in worker's compensation premiums. On May 8, 1992, appellant asked the Board to review the case under its accelerated procedures, Rule 14, and submitted the case for decision on the record, Rule 11. Because we find that the Department of Labor's wage determination did not address worker's compensation insurance premiums, and that the contract specifically limited annual contract price adjustments to amounts set forth in such wage determinations, we deny the appeal. Findings of Fact 1. On August 28, 1988, respondent awarded Contract No. GS- 07P-87-HTC-0260 to appellant. This firm-fixed-price agreement required appellant to provide maintenance services at both the Bob Casey Federal Building and United States Customs House in Houston, Texas, from September 1, 1988, through August 31, 1989, with four one-year options. 2. On February 25, 1991, appellant and its employees' union, ITPE, entered into a collective bargaining agreement. Appeal File, Exhibit 1 at 12th-28th unnumbered pages. Concerning "employee injury," the agreement did not refer to worker's compensation insurance, although it stated that "[a]n employee injured during working hours shall receive the rest of the day off without loss of pay, provided, that the injuries are such that a doctor orders the employee not to return to work." Id. at 26th unnumbered page. Appellant did carry worker's compensation insurance, although the collective bargaining agreement did not require it to do so. Prior to September 1991, appellant's worker's compensation insurance carrier raised its premiums to $13.61 per $100 in wages paid, for an effective rate of 13.61 percent. Appeal File Supplement, Exhibit 9. 3. To exercise Option III of the contract, to run from September 1, 1991, through August 31, 1992, respondent, on July 19, 1991, issued Modification PO15. Complaint, 11, 13. The Department of Labor had adopted the Ogden/ITPE collective bargaining agreement as the prevailing wage determination applicable to the period, pursuant to 41 U.S.C. 351(a)(2) (1988). Appeal File, Exhibit 1 at 10. Respondent incorporated the agreement's wage and benefit adjustments into the modification. On October 11, 1991, appellant filed a claim with the contracting officer for $45,379.80 in costs not addressed in the exercise of Option III; $36,266 of that claim concerned the unexpected worker's compensation premium increase. Id., Exhibit 3 at 1. However, the contracting officer denied any adjustment linked to the rise in worker's compensation premiums on January 6, 1992, Appeal File Supplement, Exhibit 4 at 1, and appellant appealed that decision on April 6, 1992, id., Exhibit 5. 4. This contract is subject to the Service Contract Act of 1965, as amended (SCA), 41 U.S.C. 351 et seq. Appeal File, Exhibit 2 at 1. Concerning fringe benefits, the SCA requires that every Federal service contract in excess of $2,500 that covered employees are performing contain a provision "specifying" that the employees will receive all of the fringe benefits mentioned in the operative collective bargaining agreement, "including prospective fringe benefits increases provided for in such agreement as a result of arm's-length negotiations." 41 U.S.C. 351(a)(2) (emphasis added). The SCA adds that fringe benefits in a federal service contract "shall include": compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the foregoing . . . or other similar programs and other bona fide fringe benefits not otherwise required by Federal, State, or local law to be provided by the contractor or subcontractor. Id. 5. In addition, the contract included an insurance clause specifying the "kinds and minimum amounts" of insurance that appellant was to provide, which read as follows: Insurance Requirement. Liability insurance coverage, written on the comprehensive form of policy, is required in the amount of $500,000 per occurrence for bodily injury, $50,000 per occurrence for property damage, and $100,000 for workmen's compensation . . . NOTE; The Contractor agrees to insert the substance of this clause, including this subparagraph, in all subcontracts hereunder. Appeal File, GSBCA 11467[foot #] 1, Exhibit 1 (emphasis added). The contract further provided that: [t]he contractor shall, at its own expense, provide and maintain during the entire performance period of this contract at least the kinds and minimum amounts of insurance required in the Schedule or elsewhere in the contract. Id. 6. Although the contract was a fixed price one, it authorized certain price adjustments. Among the provisions was GSAR 552.222-43 (JUNE 1986), the standard clause respondent then included in its option-type service contracts, which read as follows: (a) The Contractor warrants that the prices in this contract do not include an allowance for any contingency to cover increased costs for which adjustment is provided under this clause. (b) The minimum prevailing wage determination, including fringe benefits, issued under the Service Contract Act of 1965 (41 U.S.C. 351-358) by the Administrator, Wage and Hour Division, Employment Standards Administration, U.S. Department of Labor, current at the beginning of each renewal option period, shall apply to any renewal of this contract . . . . (c) The monthly and/or hourly option price(s) will be adjusted upward or downward by the contracting officer, ----------- FOOTNOTE BEGINS --------- [foot #] 1 Respondent submitted the entire contract as part of the appeal file in a different appeal involving the same contract. ----------- FOOTNOTE ENDS ----------- using the formula in paragraph (e) of this clause, when each option is exercised with the adjusted price to be effective beginning the first day of the option period. The Contracting Officer shall notify the Contractor of the adjusted price and incorporate, by contract modification, the most recent wage determination issued under the Service Contract Act of 1965. (d) In determining the percentage of increase or decrease in labor costs, the wage determination being applied to the option period will be compared with the wage determination that applied during the initial contract period . . . . (e) . . . . The monthly and/or hourly option price(s) will be adjusted using the formula contained herein,[foot #] 2 provided that the monthly and/or hourly contract price(s) for the first option period as adjusted does not exceed the monthly and/or hourly price(s) for the initial contract period by more than 10 percent. If the monthly and/or hourly price(s) after adjustment exceed the initial period by more than 10 percent, the ceiling price(s) (the monthly and/or hourly price(s) for the initial period increased by 10 percent), will be the contract price(s) for the first option period. Similarly, the contract price(s) for the second, third, and fourth option periods as adjusted may not exceed the monthly and/or hourly price(s) for the preceding option period by more than 10 percent. Appeal File, Exhibit 2 at 5th unnumbered page (emphasis added). 7. On November 30, 1990, respondent, pursuant to Federal Acquisition Regulation (FAR) 1.404, 48 CFR 1.404 (1992), obtained a class deviation from FAR 52.222-43, allowing it to substitute GSAR 552.222-43 for the FAR price adjustment clause. Ace Services, Inc. v. General Services Administration, GSBCA 11331, 92-2 BCA 24,943, at 124,324. The deviation was effective for all contracts awarded and options exercised after September 13, 1990. Id. at 124,327. Discussion Appellant seeks to have the Government pay for its increase in worker's compensation insurance costs through application of the contract's price adjustment clause, GSAR 552.222-43. See ----------- FOOTNOTE BEGINS --------- [foot #] 2 The formula calls for an annual upward or downward adjustment of 75-80 percent of each class of employees' wages. Thus, any wage increase will apply to about three- quarters, rather than the full amount, of an employee's annual take-home pay. ----------- FOOTNOTE ENDS ----------- Finding 6. Appellant first notes that the Service Contract Act requires all Government contracts to include a provision specifying the fringe benefits to be furnished to union employees, as set forth in the relevant collective bargaining agreement, "including prospective fringe benefit increases provided for in such [collective bargaining] agreement as a result of arm's-length negotiations." Finding 4. Appellant next cites the SCA's statement that "fringe benefits shall include . . . compensation for injuries or illness resulting from occupational activity, or insurance to provide the foregoing," not otherwise required by Federal, State or local law to be provided by the contractor or subcontractor. Id. Appellant then concludes that any fringe benefit which it must provide pursuant to the SCA is subject to upward adjustment. The core question is straightforward: whether increases in worker's compensation insurance premium rates, which the contractor must provide, Finding 4, are subject to increase under the price adjustment clause, GSAR 552.222-43. See Finding 6. We find that they are not in this case. All of the increase mechanisms in GSAR 552.222-43 refer only to changes in the relevant collective bargaining agreement adopted as the year's "wage determination"; the adjustment clause, by its very terms, simply does not apply to any wage or fringe benefit element not included in the wage determination. First, the "warrant" clause, GSAR 552.222-43(a), requires the contractor to "warrant" that its prices "do not include an allowance for any contingency to cover increased costs for which adjustment is provided under this clause." Finding 6. GSAR 552.222-43(b) then states that the minimum prevailing "wage determination, including fringe benefits" applicable at the beginning of the option renewal period will govern contract wages for that year. Id. Next, GSAR 552.222-43(c) instructs the contracting officer to apply rather a baroque formula set forth in GSAR 552.222-43(e) to the "most recent wage determination" available. Id. Finally, GSAR 552.222-43(d) instructs the contracting officer to compare the "wage determination" being applied at the beginning of the option period to that of the initial contract period. Because the contract's adjustment clause refers only to the wages and benefits set forth in the wage determination, we interpret it to allow upward or downward adjustment only of the items addressed in that determination. Again, the wage determination before us, the contents of which were determined in part by appellant as a party to the collective bargaining agreement, does not refer to worker's compensation insurance at all. Finding 2. This Board cannot change that fact; pursuant to other provisions of the contract, disputes involving the contents of wage determinations are properly before the Department of Labor, not this Board. See Emerald Maintenance v. United States, 925 F.2d 1425, 1429 (Fed. Cir. 1991) (wage, job classification disputes subject to Department of Labor jurisdiction). In the absence of a wage determination covering such costs, appellant's responsibility to pay for the worker's compensation insurance premiums is analogous to its obligation to cover the inevitable price increases over a five-year period for cleaning supplies and other such items. Again, we note that both parties knew in 1988 that they were entering into a fixed-price arrangement which could run up to five years. Finding 1. Outside of the adjustment clause, which allows an increase of the great bulk (but not all) of appellant's costs, we find that appellant must bear the risk of price increases, even for such items of importance as worker's compensation protection for its employees. Admittedly, we read the adjustment clause more narrowly than the Claims Court read a somewhat different one in Aleman Food Services, Inc. v. United States, 25 Cl.Ct. 201 (1992). We simply are unable to read the relatively straightforward price adjustment clause here to include increases not provided for in the Department of Labor's applicable wage determination.[foot #] 3 If appellant believes that the Department of Labor's wage determination is somehow defective, the law requires that he take the matter up with the Department of Labor. This Board simply has no authority to decide such matters. ----------- FOOTNOTE BEGINS --------- [foot #] 3 We note that on June 1, 1992, GSA revised GSAR clause 552.222-43. The new clause requires adjustments for increases in worker's compensation insurance associated with applicable wage determination wage increases but specifically prohibits any adjustments due to rate increases in such _______________ insurance. The new clause should go a long way toward eliminating the confusion that exists in this area. We do not, however, as appellant asks us to do, interpret GSA's decision to revise the clause to mean that such rate increases were subject to adjustment under the old clause. ----------- FOOTNOTE ENDS ----------- Decision For the reasons stated above, this appeal is DENIED. _______________________ ROBERT W. PARKER Board Judge I concur: _______________________ VINCENT A. LaBELLA Acting Chief Board Judge