Successor Contractors and CBA Wage Rates Under the SCA

David Gul · Last updated November 3, 2026

ExcelGurus is not affiliated with, endorsed by, or acting for the U.S. Department of Labor, the U.S. General Services Administration or any other federal agency. This guide describes the regulations, clauses and decisions it cites as read on October 30, 2026; they change, so check them, the clauses in your own contract and its current wage determination before you rely on it. It is not legal advice.

When a service contract succeeds one for substantially the same services in the same locality, and the predecessor’s employees were paid under a collective bargaining agreement (CBA), the successor must pay at least that CBA’s wages and fringe benefits, including its scheduled increases, whether or not it hires those employees and whether or not a CBA wage determination is in the contract. A contractor becomes its own successor when the agency exercises an option, so the predecessor’s CBA stays the floor for the whole contract, and a later CBA of the contractor’s own, reached at arm’s length, can set the next period’s rates above it. A short-form CBA wage determination lists no wages: the agreement itself is the rate sheet. When a wage determination is built on a CBA, EG SCA Wage Pack (52.222-43), an Excel workbook from ExcelGurus, opens a grid you fill in from the agreement instead of reading it.

What section 4(c) requires

Section 4(c) of the Service Contract Act, quoted in 29 CFR 4.163(a), says no contractor under a contract “which succeeds a contract subject to this Act and under which substantially the same services are furnished” may pay a service employee less than the wages and fringe benefits, “including accrued wages and fringe benefits, and any prospective increases”, that the predecessor’s CBA provided “as a result of arm’s-length negotiations”. The regulation states the successor’s “sole obligation” plainly: every service employee is paid no less than under the predecessor’s CBA, “irrespective of whether the successor’s employees were or were not employed by the predecessor contractor.”

The same section sets its limits:

• Wages and fringe benefits only. The obligation “does not extend to other items such as seniority, grievance procedures, work rules, overtime, etc.” (4.163(a)).
• The CBA must have applied to the predecessor contract’s employees. Section 4(c) operates “only if the employees who worked on the predecessor contract were actually paid in accordance with” the CBA. A first CBA that took effect only after the predecessor contract ended, or one that covered only other employees of the firm, does not carry over (4.163(f)).
• Substantially the same services in the same locality. A change of contracting agency, a gap between contracts, an interim contract, or a later move of the work to another place does not end it (4.163(h), (i)).

It applies without a wage determination, with one exception

“Section 4(c) is self-executing” (4.163(b)). The duty “is not contingent or dependent upon the issuance or incorporation in the contract of a wage determination based on the predecessor contractor’s collective bargaining agreement.”

The exception is about timing. Under 29 CFR 4.1b(b), a new or changed CBA reached during the predecessor contract does not bind the successor if the agency receives notice of its terms too late: after the award or the option exercise, when performance starts within 30 days of it, or otherwise less than 10 days before performance starts. FAR 22.1012-2(a) and (b) say the same. Those limits apply “only if timely notification required in 22.1010 has been given” (FAR 22.1012-2(c)): written notice from the contracting officer to both the incumbent contractor and its employees’ union, at least 30 days before the earliest applicable date, such as an option exercise or a contract anniversary (FAR 22.1010). The FAR overhaul’s model deviation text keeps both rules, renumbered as 22.1004-6 and 22.1003(b).

Your own successor at every option

Under 29 CFR 4.163(e), “A contractor may become its own successor because it was the successful bidder on a recompetition of an existing contract, or because the contracting agency exercises an option or otherwise extends the term of the existing contract”. The Federal Circuit applied it in Lear Siegler Services v. Rumsfeld (2006): the contractor was a successor in its base year and again in its first option year, “because LSI succeeded itself.” Two things follow.

The predecessor’s CBA is a floor for the whole contract. In HD Inc. (ASBCA 63794, 2025), an Air Force grounds maintenance contract whose predecessor had a CBA, the board held that the contractor “remained a successor contractor during the option years because it succeeded itself”, so it owed covered employees at least the predecessor CBA’s wages and fringe benefits throughout performance, and its own option-year CBAs “could not fall below the floor set in the predecessor contractor’s CBA.” Classes the CBA did not cover followed the locality wage determination. The regulation says the same from the other side: a successor’s own CBA does not negate the predecessor CBA’s wages and fringe benefits as “the minimum payable” (4.163(d)).

Your own CBA can set the next period’s rates. A CBA you reach with the union at arm’s length, and actually pay under, carries into the next option as the predecessor’s agreement. In SecTek v. NARA (CBCA 5084, 2016) it did not: the contractor signed a new CBA in the base year but paid nothing under it until the first option, and the wage determination for that option did not include it, so the board allowed no price adjustment.

What a CBA wage determination looks like

A wage determination for a successor contract is “intended to accurately reflect the rates and fringe benefits set forth in the predecessor’s collective bargaining agreement” (4.163(j)). Some list the agreement’s occupations and rates in the usual layout (see how to read an SCA wage determination). Many do not. DOL’s training material describes “a short form wage determination that contains the geographical scope, the parties to the collective bargaining agreement, and the type of work being performed. The short form WD does not list wages. You have to have a copy of the CBA to see the wages and the fringe benefits.”

Either way the agreement governs. Leaving a classification, wage rate or fringe benefit out of the wage determination “does not relieve the successor contractor of the statutory requirement to comply at a minimum with the terms of the collective bargaining agreement insofar as wages and fringe benefits are concerned” (4.163(j)).

The CBA’s own fringe rules

A standard wage determination’s fringe benefits follow 29 CFR 4.170 to 4.177: health and welfare by the hour up to 40 hours a week, vacation by years of service, holidays by the workweek. Under a CBA the agreement decides. Where its terms are unclear, they are read by “the intent of the parties to the collective bargaining agreement”, so “some of the principles discussed in §§ 4.170 through 4.177” may not apply (4.163(j)). DOL’s Field Operations Handbook gives an example: employees with collectively bargained fringe benefits “may be entitled to fringe benefit payments in excess of 40 hours per week” (14j00(f)), and the terms of the CBA dictate who is eligible and the amount and extent of the benefits (14j00(g)).

Two rules still hold. A contractor may meet a fringe obligation “by furnishing any equivalent combinations of fringe benefits or by making equivalent or differential payments in cash” under 4.177 (4.163(j)). And a successor may not take a credit, such as a tip credit, that the predecessor’s agreement did not allow (4.163(k)).

Arm’s length, and the variance hearing

Only a CBA reached at arm’s length binds a successor. In Guardian Moving and Storage v. Hayden (Fed. Cir. 2005), DOL found that a contingency clause in a new CBA violated that requirement, which took the agreement outside section 4(c); the contractor had not appealed DOL’s finding, and the court held that the higher wages it paid under that agreement in one extension were not an increase applied “by operation of law” under 52.222-43.

The other way a CBA’s rates stop binding is a variance hearing: DOL can find them “substantially at variance” with those prevailing in the locality and issue a new wage determination. It applies from the date of the decision, not before: “variance decisions do not have application retroactive to the commencement of the contract” (4.163(c); 4.1b(a)).

CBA increases and the 52.222-43 price adjustment

FAR 52.222-43(a): “This clause applies to both contracts subject to area prevailing wage determinations and contracts subject to collective bargaining agreements.” A CBA increase that a wage determination brings into an option period is priced like any other, from what you actually paid; see what the adjustment covers. The CBA decisions add three points.

• Measured from the previous CBA period, not from the bid. In HD Inc. the contractor priced its option years at the lower locality wage determination for every class, the CBA-covered ones included, and then asked $174,874.08 for the second option year: the new CBA’s wages minus the locality rates it had bid. The board held that 52.222-43(b) “requires offerors to base their option year prices on the applicable wage determination”, and that the measure was the second option year’s CBA wages minus the first’s, plus any change in the locality wage determination for classes the CBA did not cover.
• Earlier increases are usually carried forward. The same decision notes that “the government automatically carries forward the prior year’s adjustment before adding the additional adjustment for the new CBA”, so the new adjustment “is usually calculated as the difference between the two option years.” Whether that had happened in HD’s contract was left to the parties.
• A higher cost of the same benefit counts. In Lear Siegler, the CBA required a defined-benefit health plan whose cost rose while the benefit level stayed the same. The Federal Circuit held that the clause “is triggered by changes in an employer’s cost of compliance with the terms of a wage determination”, and reversed the board.

A CBA signed during an option period

A wage determination does not reach back. In Guardian, a wage determination issued in March 2003 for an amended CBA effective October 1, 2002 could not apply to extensions that began before it was issued: “wage determinations issued by DOL are not retrospective, regardless of the effective date of the underlying CBA.” The court did allow an adjustment for a December extension, because a wage determination carrying the new CBA was in effect when that extension began, even though DOL withdrew it later that month. So a new CBA normally reaches the price from the first period whose wage determination includes it.

The exception is the notice of FAR 22.1010. In Alutiiq Commercial Enterprises (ASBCA 61503, 2020), the contracting officer exercised the first option without giving the union the written 30-day notice. The contractor signed a new CBA in November 2016, during that option, with health and welfare increases from January 1, 2017, and asked for them in the same option year. The majority held that, without the notice, the receipt limits of FAR 22.1012-2 did not apply, and that “the contracting officer cannot reject a price adjustment resulting from a new CBA executed during the option period when it fails to provide the mandatory notice under FAR 22.1010.” One judge dissented: an option is “a unilateral right”, so in his view the notice applies only to a unilateral exercise, and the new CBA would have counted from the second option. It is a 2-1 decision of one board.

What the cases say about bilateral modifications

In Alutiiq, the first option was exercised by bilateral modification because the preliminary notice of intent had come late; the majority held that signing it waived that late notice but not the separate FAR 22.1010 notice, absent “a clear and unequivocal intention to do so in the document”. The dissent said the contractor “could have refused to sign Modification No. P00001 until the matter of the new CBA was resolved.” In Air Masters Corp. v. GSA (GSBCA 16327, 2004), a bilateral price modification signed without reserving the right to ask for an increase counted against the contractor; in Stobil Enterprise v. Department of Veterans Affairs (CBCA 5698, 2019), releases in bilateral modifications were enforced except where the contractor’s request was expressly reserved. These are the facts of those cases, not rules for your own contract.

Sources

Primary sources, as read on October 30, 2026. They change; the current versions are the ones that count.

• 29 CFR Part 4 (www.ecfr.gov), sections 4.1b and 4.163, and 4.170 to 4.177 for the standard fringe rules
• FAR 52.222-43 (AUG 2018) (www.acquisition.gov), paragraphs (a), (b) and (d)
• FAR 22.1010, Notification to interested parties under collective bargaining agreements (www.acquisition.gov)
• FAR 22.1012-2, Wage determinations based on collective bargaining agreements (www.acquisition.gov)
• Revolutionary FAR Overhaul, Part 22 model deviation text (www.acquisition.gov), 22.1003(b) and 22.1004-6
• DOL Wage and Hour Division, SCA WDs and Conformances (PDF) (www.dol.gov), the short form CBA wage determination
• DOL Field Operations Handbook, Chapter 14 (PDF) (www.dol.gov), 14j00(f) and (g)
• HD Inc., ASBCA No. 63794 (2025) (PDF) (www.asbca.mil)
• Alutiiq Commercial Enterprises, LLC, ASBCA No. 61503 (2020) (PDF) (www.asbca.mil), majority and dissent
• Lear Siegler Services, Inc. v. Rumsfeld, No. 06-1080 (Fed. Cir. 2006) (PDF) (www.cafc.uscourts.gov)
• Guardian Moving and Storage Co. v. Hayden, No. 05-1086 (Fed. Cir. 2005) (PDF) (www.cafc.uscourts.gov)
• SecTek, Inc. v. National Archives and Records Administration, CBCA 5084 (2016) (PDF) (www.cbca.gov)
• Air Masters Corp. v. GSA, GSBCA 16327 (2004) (gsbca.gsa.gov)
• Stobil Enterprise v. Department of Veterans Affairs, CBCA 5698 (2019) (PDF) (cbca.gov)

More Service Contract Act guides: FAR 52.222-43 Price Adjustments for Service Contract Act Contractors · SCA Health and Welfare: The 2026 Rate and the Hours That Earn It · The SCA Price Adjustment Letter: What a 52.222-43 Notice Says · How to Read an SCA Wage Determination · Common SCA Payroll Mistakes, and How to Catch Them · SCA Holiday Pay: Who Earns It, How Much, and a Holiday Worked · SCA Vacation: Service, Vesting and the Deadline to Give It · SCA Conformance: When an Occupation Is Not on the Wage Determination · Service Contract Act vs. Davis-Bacon: Which Applies, and What Changes · Executive Order Minimum Wage and Paid Sick Leave on SCA Contracts · All SCA guides