Service Contract Act (McNamara-O'Hara)

The McNamara-O'Hara Service Contract Act of 1965 (41 U.S.C. §§ 6701–6707) requires contractors providing services to the federal government to pay their workers at least the prevailing wage and fringe benefits for the locality where the work is performed. If Davis-Bacon is the prevailing wage law for federal construction, the Service Contract Act (SCA) is its counterpart for federal services — covering the janitors who clean federal buildings, the security guards at government facilities, the food service workers in federal cafeterias, the IT support staff on government contracts, and hundreds of other service occupations. The Department of Labor determines prevailing wages through wage determinations published for each locality and occupation. The SCA affects approximately 350,000 service contracts worth over $200 billion annually, protecting an estimated 2 million workers from being undercut by contractors who win bids by paying poverty wages.

Current Law (2026)

Legal Authority

• 41 U.S.C. § 6702 — Contracts covered (the Act applies to every contract entered into by the federal government for services, the principal purpose of which is to furnish services through the use of service employees, where the contract exceeds $2,500)
• 41 U.S.C. § 6703 — Required contract terms (every covered contract must contain provisions specifying minimum monetary wages and fringe benefits based on DOL's prevailing wage determination for the locality; also requires safe and sanitary working conditions)
• 41 U.S.C. § 6705 — Violations (the federal government may withhold contract payments to satisfy wage underpayments; DOL may direct payments to affected workers)
• 41 U.S.C. § 6706 — Three-year prohibition (contractors or subcontractors found in violation may be debarred from all federal contracts for 3 years — a "death sentence" for companies dependent on government work)
• 41 U.S.C. § 6707 — Enforcement and administration (Secretary of Labor administers and enforces the Act; Wage and Hour Division conducts investigations; wage determinations are published and incorporated into contracts)

How It Works

Wage determinations are the SCA's regulatory engine. For each geographic area, DOL publishes prevailing wage and fringe benefit rates by occupation — based on collective bargaining agreements, Bureau of Labor Statistics data, and DOL surveys. A wage determination specifies the minimum hourly wage and fringe benefit rate that contractors must pay for each service occupation (janitor, guard, food service worker, computer operator, etc.) on the specific contract. There are two types: area-wide wage determinations (covering common services in a geographic area) and contract-specific wage determinations (tailored to particular contracts).

The successor contractor rule prevents the "low-ball rebid" problem. When a service contract is rebid and a new contractor wins, the successor must pay workers at least the rates the predecessor was paying (as reflected in the predecessor's collective bargaining agreement or the prior wage determination) during the first period of the new contract. This prevents contractors from winning bids by slashing wages for an incumbent workforce — a practice that would create a race to the bottom.

Fringe benefits must be provided at prevailing rates. The SCA requires both monetary wages and fringe benefits — including health insurance, pension contributions, paid vacation, paid holidays, and sick leave. Contractors may either provide these benefits directly or pay the equivalent amount in cash ("fringe benefit cash equivalents"). The fringe benefit requirement significantly increases total compensation beyond the base wage rate.

Executive orders (beginning with EO 13658 in 2014 and expanded by EO 14026 in 2021) established a $15+ per hour minimum wage for federal contractor employees, including SCA-covered workers — a floor that applies even when the DOL wage determination for a particular occupation would otherwise allow a lower rate. This executive minimum applies even when the DOL wage determination for a particular occupation would otherwise allow a lower rate. As of 2026, the contractor minimum wage is indexed to inflation and exceeds $17/hour.

Enforcement operates through DOL investigations, contract payment withholding, and debarment. When DOL finds SCA violations, it may direct the contracting agency to withhold contract payments in the amount of the underpayment and distribute those funds to affected workers. The 3-year debarment — barring a violating contractor from all federal contracts — is one of the most severe sanctions in federal procurement law.

How It Affects You

If you work as a janitor, security guard, food service worker, IT support tech, or in another service role on a federal contract: You are almost certainly covered by the Service Contract Act, and your employer is required to pay you the prevailing wage for your occupation and locality as published in the DOL wage determination for your contract — not the bare federal minimum wage. SCA prevailing wages typically run 30-60% above the federal minimum wage for common service occupations, and your employer must also provide prevailing fringe benefits — health insurance, pension contributions, paid vacation, and paid holidays at rates matching local market standards, or pay you the cash equivalent. If your employer isn't paying SCA rates, the remedy is a complaint to the DOL Wage and Hour Division (dol.gov/agencies/whd). WHD can compel your employer to pay back wages by withholding contract payments — a powerful lever because most service contractors depend on continuous government payments for cash flow. The 3-year debarment threat means large contractors take SCA compliance seriously. Look up the wage determination for your contract at sam.gov or ask your agency's contracting officer — the wage determination is incorporated into the contract and should specify minimum rates for your occupation.

If you run a company bidding on or performing federal service contracts: SCA compliance isn't optional and it isn't cheap — prevailing wages plus fringe benefits can add $8-15/hour to total compensation costs compared to a non-SCA workforce. The critical mistake contractors make is failing to request the correct DOL wage determination before bidding, then winning a contract priced at below-SCA labor costs. You must request the current wage determination for the location and occupations covered by the contract; incorporating an outdated or wrong determination doesn't protect you from liability. The successor contractor rule is particularly important: if you're winning a rebid of an existing service contract, you must pay workers at least the predecessor contractor's rates (from the prior wage determination or CBA) for the first year. DOL actively enforces the successor contractor rule — contractors who slash wages when winning a rebid face debarment. Maintain payroll records by employee, by contract, by occupation — WHD investigators review records at the contract level, not just company-wide.

If you're a government contracting officer managing service contracts: Including the correct SCA wage determination and contract clause (FAR 52.222-41) in every covered service contract is your mandatory obligation under both the FAR and the Act itself — but the contract's validity and the contractor's SCA obligations don't depend on whether you included it correctly. Failure to include SCA clauses doesn't eliminate the contractor's liability to workers; it creates an additional headache for your agency when WHD investigates. For contracts in geographic areas or occupations where DOL hasn't published a standard wage determination, you must request a specific determination from WHD before issuing the solicitation — this process takes several weeks, so build it into your acquisition timeline. The contract threshold is $2,500 — far lower than most people assume, which means virtually every service contract of any significance is covered.

If you're a labor advocate or policy researcher tracking wage standards for government workers: The SCA covers an estimated 2 million workers across 350,000 federal service contracts worth over $200 billion annually — making it one of the largest wage-setting mechanisms in the U.S. economy. Together with Davis-Bacon (construction) and Walsh-Healey (supply), the SCA is part of a statutory framework that says federal purchasing power should not be used to undercut community wage standards. The EO 14026 contractor minimum wage (now indexed to inflation, exceeding $17/hour in 2026) applies as a floor on top of SCA rates — meaning service workers on federal contracts effectively have the highest minimum wage of any private-sector workers in the country, regardless of state minimum wage laws. DOL's enforcement capacity for SCA is limited relative to the scale of covered contracts, which means self-reporting and complaint-driven enforcement drives most compliance — particularly for smaller contractors where DOL doesn't proactively audit.

State Variations

The SCA is exclusively federal, but state prevailing wage laws provide parallels:

• Many states have their own prevailing wage laws for state-funded service contracts
• State requirements may apply to the same contracts if state funds are also involved
• State minimum wage laws provide a floor that interacts with SCA rates
• Some states have enacted their own contractor debarment provisions
• State benefit requirements (paid sick leave, family leave) may supplement SCA fringe benefit obligations

Implementing Regulations

• 29 CFR Part 4 — DOL Service Contract Act regulations (labor standards for federal service contracts, prevailing wage determinations, fringe benefit requirements, contract clauses, covered/exempted contracts)
• 29 CFR Part 6 — DOL rules of practice for SCA administrative proceedings
• 29 CFR Part 8 — Practice before the Administrative Review Board (ARB) for federal service contracts: when DOL's Wage and Hour Division finds an SCA violation and a contractor contests the finding, the case goes to the ARB under these procedural rules. The ARB is DOL's highest internal review body for labor standards enforcement — its decisions establish precedent on what constitutes a prevailing wage violation, what defenses are available, and when debarment is warranted. Key provisions:
  • § 8.1 — Scope: governs ARB review of ALJ decisions in SCA enforcement proceedings, Davis-Bacon cases (40 U.S.C. §§ 327–332), and Walsh-Healey Public Contracts Act matters
  • § 8.10 — Filing: all papers filed in original plus one copy; service on all parties must be documented; non-compliant filings may be rejected
  • § 8.11 — Interested persons: any person with a direct interest in an ARB review may submit briefs after filing a petition explaining their interest
  • § 8.12 — Intervention: the ARB may allow any interested party (union, trade association, successor contractor) to intervene on a showing of good cause
  • § 8.13 — Right to counsel: all parties have the right to representation by an attorney; ARB proceedings are formal APA adjudications; decisions are judicially reviewable in federal circuit courts

Pending Legislation

No standalone Service Contract Act reform bills have been introduced in the 119th Congress. Related federal procurement provisions appear in the Federal Acquisition Regulation. Wage-and-hour questions about when SCA-covered workers are on the clock are governed by the Portal-to-Portal Act and the FLSA overtime threshold.

Recent Developments

• Trump rescinded Biden contractor minimum wage executive order (2025): President Biden had raised the federal contractor minimum wage to approximately $17.75/hour (indexed from $15/hour in 2022, EO 14026). President Trump rescinded this executive order in early 2025, returning the contractor minimum wage floor toward the level established by President Obama's EO 13658 — approximately $13.30/hour — or potentially lower depending on the implementing guidance. Service Contract Act wage determinations still apply for covered contracts, but the executive-order floor no longer elevates those rates above the statutory SCA minimums. For contract workers paid at the Biden-era executive-order rate, this rollback meant downward wage pressure at contract renewals and recompetitions.
• Federal contracting workforce reduction under DOGE: The Department of Government Efficiency's (DOGE) federal contract spending review in 2025 canceled or delayed billions in federal service contracts, directly affecting SCA-covered workers. Contracts for IT services, administrative support, facilities management, and professional services were terminated or reduced. SCA-covered workers whose contracts were canceled have rights to notice under the SCA's successor contractor obligations (new contractors on the same contracts must offer employment to incumbent workers for a specified period), but outright contract cancellation — rather than recompetition — does not trigger these successor obligations. DOL received increased inquiries about SCA rights during DOGE-related contract terminations.
• Wage determination modernization: DOL's Wage and Hour Division has ongoing efforts to modernize SCA wage determination processes — improving occupational classification accuracy, updating survey methodology, and digitizing the System for Award Management (SAM.gov) integration for contractors accessing wage determinations. The scope of SCA coverage continues to evolve as federal contracts increasingly cover IT, cybersecurity, and specialized technical services that require occupational classification updates beyond the traditional service worker categories.
• State and local prevailing wage laws: Several states have enacted their own service contract labor standards laws that apply to state-funded service contracts in parallel with (or independent of) the federal SCA. These state laws interact with federal contracts in states where both governments fund the same contractor — compliance requires tracking both sets of requirements.