Service Contracts in the Aerospace Industry
How many service contracts are there?
Literally billions of dollars are spent every year on “service contracts”. These contracts can range in size, scope, and variety, from cleaning services of federal buildings to maintenance and repair of military hardware. They could be as simple as providing coaching services for a sports team, to maintaining our nation’s defense products. The list of possibilities is endless.
How long are these contracts?
Service contracts can range from 1 to 5 years, but in special circumstances, can be 10 year contracts. Some service contracts can go out for bid every 5 years and in some cases can be awarded to another company that was initially awarded such contract. Therefore, it is not uncommon for an employee of the company to work for multiple employers throughout their career under service contracts.
How much money do employees make at a company working under a service contract?
Similar to “Prevailing Wage” laws (laws that govern how much a company must pay people to perform a task), contracts awarded under the Service Contract Act must pay the “Area Wage Determination” (AWD) generated by the Department of Labor (DOL). This AWD also provides for a Health and Welfare package range.
Some can go for 8-10 years before seeing an increase, others have even gone backwards.
Local AWD for Snohomish County Washington State 6/13/19
How do employees get wage increases under a service contract?
The ONLY way for non-represented employees to get a wage increase under a service contract is when the DOL revises the AWD for that county. This could be yearly or it could be years before a wage increase is seen in the AWD. It is most often the latter.
How do wage increases work for represented (Union) workers?
Union workers working for an employer under a service contract can and do negotiate wage increases on a yearly basis. Union represented workers can also negotiate better Health and Welfare benefits than provided for in the AWD.
What other benefits can unionized workers negotiate that may not be provided by their employer under a service contract?
Pension plans, 401k plans, grievance procedures, seniority provisions, and any other items the members feel are a priority.
Who pays for increases in wages and benefits when they are negotiated into a union contract?
The increase of wages and benefits is passed through to the Government Customer once a year so as not to have a negative impact on the Company’s profits, yet still supply the skilled workforce needed to accomplish the contract. So long as those wages and benefits are not at “variance” to the norm for that locality, and the Government has the confidence that private sector contractors and their employees who engage in collective bargaining will reach the very best rate therefore stabilizing employment. Good wage increases and many other benefits are common in newly organized members working for company’s under service contracts.
What if the service contract is awarded to another Company while I am employed at the previous Company who did the work?
What is great about being in a union working under a union contract a.k.a. Collective Bargaining Agreement (CBA) and the Service Contract Act, the “New” awarded owner of the contract MUST pay the same wage and benefit package established by the terms of the union contract.
Normally when a service contract is re-bid, the competing contractor(s) will contact the Union Representative and attempt to reach an agreement on the “conversion” and indicate so in their bid insuring labor peace prevails.
Section 4(c) provides that no such contractor or subcontractor shall pay any service employee employed on the contract work less than the wages and fringe benefits provided for in a collective bargaining agreement as a result of arms-length negotiations, to which such service employees would have been entitled if they were employed under the predecessor contract, including accrued wages and fringe benefits and any prospective increases in wages and fringe benefits provided for in such collective bargaining agreement.
What does “bargain at arms length” mean?
Due to the increases in wages and benefits being “passed through” to the Governmental Customer, companies and union negotiators must bargain fairly as to not gouge the government by being too agreeable at the table.
Example: There may have been instances where a previous Company agreed to items in the CBA, and because they were losing the contract to a successor, gave many items that would have otherwise been harder to negotiate into the contract.
Why would anyone not want to form a union under a service contract?
We believe it is due to people not knowing all of the benefits of working under a union contract and the Service Contract Act. Knowledge is power, and the more workers that understand what is available to them, the better the chances of raising their standard of living.
What is the Service Contract Act?
Basically, it is the Act that governs government contracts for services performed for the Federal Government by individuals or companies awarded these contracts.
How does it work?
- The government advertises for a bid to provide a service they need, and individuals or companies bid on those contracts.
- The government accepts a bid and awards the contract to the individual or company.
- This individual or company now is conducting business under, and subject to, the Service Contract Act.