OFFICE OF MANAGEMENT AND BUDGET
OFFICE OF FEDERAL PROCUREMENT POLICY

ANTI-INFLATION MEASURES

Invitation for Public Comment.

AGENC Y: Office of Federal Procurement Policy (OFPP), Office of Management

and Budget.

ACTION: Notice of proposed rules concerning anti-inflation measures affecting
Federal contracts.

SUMMARY: The President has determined that the Government will benefit

by contracting only with firms which cooperate in the fight against inflation.
This means that whenever possible, the Government will refrain from awarding
Contracts to business units which do not cooperate in anti-inflation efforts by
keeping price and wage increases within established standards. Proposed regulations
and procedures are set forth.
DATE: Comments must be received on or before December 7,1978.
ADDRESSES: Comments are to be submitted to the Office of Federal Procurement

Policy, 0MB,726 Jackson Place, N.W., Room 9013, Washington, D. C. 20503.
FOR FURTHER INFORMATION CONTACT: Mr. LeRoy J. Haugh
Associate Administrator f(^
and Proced®es
(202) 39feOT66

Lester A. Fettig
Administrator

lations

OFPP Policy Letter 78-^

Subject: Wage and Price Standards for Federal Contractors

A program of voluntary wage and price standards was announced by President
Carter on October 24, 1978. The President directed that Federal procurement of
property and services be conducted so as to recognize anti-inflationary efforts and

to benefit Federal contracting by doing business with those firms which limit wage

and price increases.

Accordingly, the following regulations are furnished for

compliance by all executive agencies.

The following provisions will be added to General Policies in Section I, Part 3, of

the Defense Acquisition Regulation (BAR) and the Federal Procurement
Regulations (FPR):

" Wage and Price Standards for Federal Contractors:
(a) The Government will; to the maximum practicable extent, purchase goods

and services only from those firms in compliance with the wage and price
standards. Firms in noncompliance with the standards will.be ineligible for Federal
contracts or subcontracts except in accordance with paragraph h below..

(b) Solicitation Provision. All solicitations issued on or after January 1, 1979

expected to result in new contracts, orders under existing contracts, or

supplemental agreements to existing contracts, in excess of $5 million will contain
the foDowing provision:

The offerer hereby certifies that he is in compliance with the wsige and
' .price standards announced by the President on October 24, 1978.
(c) Contract Provision. All new contracts, orders under existing contracts,

and supplemental agreements to existing contracts, in excess of $5 million,
resulting'/from solicitations issued on or after January 1, 1979, will contain the
following,provision:

The contractor hereby certifies that he is in compliance with the'wage
and price standards announced by the President on October 24, 1978. If it

is later determined that the contractor was in fact not in compliance as
of the date of this action, and knew or should have known that he was not

in compliance, then this contract may be terminated in accordance with
the provisions of the Termination for Default Clause.

(d) Compliance Determinations. For purposes of certification, companies will

determine for themselves whether or not they are in compliance, unless they

are listed as noncompliant. The Council on Wage and' Price Stability (CWPS),has
established procedures to monitor overall compliance with the Federal Wage and
Price Standards. CWPS will from time to time publish a list of companies which it

determines to be in noncompliance. The Office of Federal Procurement Policy

(OFPP) will disseminate to all procuring agencies a current list of noncompliant
companies.
(e)

^

Effect on Prior Awards.

Contractors who are: determined.rto't)e

noncompliant, but are already performing under Federal contracts wiU be treated
as follows:

, ^ : ;c, :-

1. If their contracts do not contain the certification provision, they will

continue to perform those contracts, but will be ineligible for any further awards
until they are removed from the noncompliance list.

2. If they were awarded contracts with a compliance certification, but
are later found by CWPS not be in compliance, such contracts may be terminated
for default in accordance with the contract provision in paragraph (c) above.
■ 3. If they were awarded contracts with a compliance certification, but it
is determined that they become noncompliant after the award of such contracts,
they win continue to perform those contracts, but will be ineligible for any further
awards until they are removed from the noncompliance list.

(f)

Application to Subcontractors.

'

Certification requirements shall be

included in all subcontracts over $5 million. The same penalties provided with
reSpect to prime contractors shall also apply to subcontractors Who-are determined

by CWPS not to be in compliance. Any waiver Or relaxation of these penalties with
respect to subcontractors can only be made by the head of the procuring agency

involved.

(g) Reduced Penalties. .
(1) Termination for default of contractors or subcontractors who were

hot in compliance at the time of certification may be waived by the agency head if
he determines in writing that:

1.

The agency's need for the product or service is essential to

2.

There are ho alterhative sources of supply, or that seeking

National security or public safety, and

alternative sources is not feasible because of:

a. urgency of requirements, or

b. diwuptioh of essential program functions

(2) Termination for default may also be waived by the agency head if he
determines that such action would result in severe financial hardship, particularly

for small and rhinority business firms. Such waivers should be limited to those
contractors or subcontractors whose ability to survive, if terminated for default, is
in question.

(3)

In any case in which termination for default is determined to be

feasible the agency shall consider negotiating a reduction in the contract price to
ensure that the contractor does not profit from his failure to comply with the wage
and price standards.

(h) Waiver of Certification.

(1) Waiver of the contract certification should be considered only in
situations Where the Government cannot forgo or postpone a procurement tecause

of an urgent National security or public safety and where there are no alternative

sources.

(2) Such waivers, will be granted only by the head of the procuring agency
invoived, and only after thoroughly exhausting all reasonable alternatives.

(3) Waivers shail be in writing, and a copy of such waiver shall be
forwarded within 10 days to the Administrator for Federal Procurement Policy.
Ct) A contractor's refusal to accept the certification provision shall be

considered in future determinations of responsibility until such time as the

contractor accepts the certification provision or is otherwise determined to be in

compliance.

(i) Contract Pricing Actions. While determinations of noncompliance are the

concern of CWPS, all procuring agencies must be cognizant of the wage and price
standards and make every effort to stay within these standards in pricing actions

under negotiated contracts. Such pricing actions include,cost and price analyses,
forward pricing rate agreements, price negotiation objectives, and contract pricing
structures,"

Lester A. Fettig
Administrator