WASHINGTON — For several months, call center workers for Maximus have been organizing to demand better pay and benefits from the federal contractor that operates help lines for Medicare beneficiaries and Affordable Care Act customers.

In June, more than 40 employees protested outside company headquarters in Tysons, Virginia. A month earlier, Maximus workers in Louisiana and Mississippi staged two-day strikes and planned meetings to discuss forming a union.

The workers are seeking higher wages and lower health care insurance deductibles. Maximus said it has addressed the demands by honoring President Joe Biden’s Executive Order calling for $15 federal minimum wage for federal contract workers, which went into effect in January. The company also halved deductibles to $2,500 in April. Workers still say the moves are not enough to combat rising costs due to inflation.

Maximus said it is limited in its ability to offer more by the McNamara-O’Hara Service Contract Act.

“Maximus’ ongoing efforts to improve employee wages and benefits are limited by the outdated provisions of the Service Contract Act,” said Eileen Rivera, a Maximus spokesperson, in a statement.

“As the SCA was last updated in 1976, we continue to strongly urge Congress and the Biden Administration to make improvements including: aligning health benefits with Affordable Care Act health plans; addressing wage compression for jobs paying above the minimum wage; and adjusting wage rules so teleworkers can be paid prevailing wages based on where they live instead of where the business is located,” she said.

The act affects other federal service contracts, not just Maximus’, which has recently been at the center of union organizing efforts by employees. The SCA was passed in 1965 to set a floor for compensation to protect workers. That floor can also become a de facto ceiling in some cases.

“In a nutshell, what makes some of these SCA-governed contracts difficult is that they’re relatively rigid and inflexible,” said Stephanie Kostro, executive vice president for policy for the Professional Services Council, a trade group for the government technology and professional services industry.

The act requires businesses performing services on contracts in excess of $2,500 to pay employees no less than the wage rates and fringe benefits found prevailing in the location where work is being performed. It incorporates the Department of Labor’s wage determinations, which are usually updated annually but don’t always reflect the latest inflation rate.

“Everything in there is a minimum,” said Todd Whay, a Virginia-based attorney who represents contracting issues. “They’ll have a minimum number of sick days, a minimum number of holidays, vacation and other fringe benefits.”

Though the SCA does not bar contractors from exceeding minimum compensation, Whay said price is often paramount in a competitive environment, so contractors may choose to stick closely to the minimum determined wage.

“The government is looking for the cheapest contractor,” Whay said. “What your competitors are likely going to offer is going to be the bare minimum in terms of wages.”

Maximus also said that it’s the role of contracting officers to achieve “best value,” defined as the trade-off between cost and performance, and often influenced by competition.

“Because of the legal requirement that contracts be awarded to the lowest responsible bidder … contractors who wish to maintain an enlightened wage policy may find it almost impossible to compete for government service contracts,” according to a report from the House Education and Labor Committee when the SCA became law.

If a contractor elects to increase compensation, it won’t necessarily be reimbursed because the government, as the buyer, has already budgeted for the value of labor under the contract, PSC’s Kostro said. Contractors who expect to recover costs from boosting wages go through the process of requesting an equitable adjustment.

“When you have a wage determination and given wage rates that are relatively rigid, whether you can ask for a price adjustment depends on whether you have that ability already written into your contract,” she said.

In March, the General Services Administration placed a moratorium on limiting requests for adjustments, acknowledging the impact of inflation and supply chain disruptions. That remains in effect until September. Kostro said it acts as a relief valve for some of the economic and workforce pressure imposed by costs-of-living and employees opting for higher-paying jobs in the commercial sector.

Other agencies have also responded to inflation’s warping of costs.

In May, the Department of Defense issued an acquisition memo generally discouraging contracting officers from granting adjustments due solely to inflation. It did, however, preserve modest options for fixed-price contracts that contain an economic price adjustment clause. The Pentagon also said it encourages contracting officers to consider inserting economic price adjustment clauses in new solicitations.

“Inflation is far outpacing anything that was anticipated or planned for within the federal government’s budget,” Kostro said.

Molly Weisner is a reporter for Federal Times where she covers industry issues pertaining to the government workforce. She's made previous stops at USA Today and McClatchy as a producer and worked on The New York Times's print desk as a copy editor. Molly majored in journalism and French at the University of North Carolina at Chapel Hill.

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