Service Contract Labor Standards Threshold
over $2,500
Also known as: Service Contract Act (SCA) threshold, McNamara-O'Hara threshold
At a Glance
- Current amount
- Over $2,500
- Where it is set
- 41 U.S.C. § 6702, implemented by FAR Subpart 22.10
- What it requires
- Payment of prevailing wages and fringe benefits per a DOL wage determination
- Applies to
- Contracts principally for services performed in the U.S. by service employees
- Below the line
- Service contracts of $2,500 or less are exempt from the wage-determination requirement
What It Is
The Service Contract Labor Standards threshold is the dollar line above which a federal service contract must pay its service employees no less than the wages and fringe benefits prevailing in the locality, as set by a Department of Labor wage determination. Governed by the McNamara-O'Hara Service Contract Act (41 U.S.C. § 6702) and implemented in FAR Subpart 22.10, the standards attach to any contract whose principal purpose is to furnish services in the United States through the use of service employees and whose value exceeds $2,500. When they apply, the contract incorporates a wage determination listing minimum hourly wages and fringe benefit amounts by labor category, and the contractor must pay at least those rates. Contracts of $2,500 or less are exempt. The threshold matters to pricing and compliance: on a covered contract, labor costs are floored by the wage determination rather than set by the market, so a contractor cannot win by underpaying labor, and must track and prove compliance for every service employee.
What Changes at This Dollar Level
- Above $2,500, a service contract must pay prevailing wages and fringe benefits set by a Department of Labor wage determination.
- The contract incorporates a wage determination that floors hourly wages and fringe amounts by labor category.
- The contractor must track hours by labor category and be able to prove it paid at least the determined rates.
- Below $2,500, the wage-determination requirement does not attach.
Key Features
| Feature | What It Means |
|---|---|
| A wage floor, not a market rate | On a covered contract, the Department of Labor wage determination sets the minimum wages and fringe benefits — a contractor cannot bid below them. |
| Low dollar trigger | The threshold is only $2,500, so nearly every real service contract is covered — it functions as a near-universal floor for service work. |
| By labor category and locality | The wage determination lists minimum rates by labor category for the place of performance, so pricing must be built around the local determination. |
| Compliance you must prove | Covered contractors must track hours by category and demonstrate they paid at least the determined wages and fringes. |
What It Means for an SDVOSB
For a service-disabled veteran-owned small business that competes on labor-based service contracts — staffing, base operations, facilities, IT support — the Service Contract Labor Standards threshold is effectively always crossed, so the wage determination, not your internal rates, sets the floor for your bid. That is actually leveling: because every competitor on the same set-aside must honor the same wage determination, you cannot be undercut by a rival that underpays labor, and price competition shifts to indirect rates, efficiency, and management rather than wages. The discipline it demands is real, though — you must map every labor category to the determination, price fringes correctly, and keep records to prove compliance, because a wage-and-hour finding can wipe out a contract's profit and your past performance. Build the wage determination into your price-to-win from the start rather than discovering it after award.
Watch Out For
- Bidding below the wage determination — the determined wages and fringes are a floor you cannot price under on a covered contract.
- Ignoring fringe benefits — the determination sets both an hourly wage and a fringe amount, and both must be paid or furnished.
- Assuming a small contract is exempt — the threshold is only $2,500, so almost every service contract is covered.
- Overlooking a new wage determination on option exercise or extension, which can raise required rates mid-performance.
Run the Numbers
Frequently Asked
What is the Service Contract Labor Standards threshold?
It is the dollar line — over $2,500 — above which a federal service contract must pay its service employees at least the wages and fringe benefits prevailing in the locality, as set by a Department of Labor wage determination. The requirement comes from the McNamara-O'Hara Service Contract Act (41 U.S.C. § 6702), implemented in FAR Subpart 22.10, and applies to contracts principally for services performed in the United States by service employees. Contracts of $2,500 or less are exempt.
How does the SCA threshold affect an SDVOSB's pricing?
On any covered service contract — which, because the threshold is only $2,500, is nearly all of them — the wage determination sets a floor on wages and fringe benefits by labor category. That means an SDVOSB cannot win by underpaying labor and must build the determined rates into its price. Competition shifts to indirect rates, efficiency, and management approach rather than base wages, and the contractor must keep records to prove it paid at least the required amounts.
Is this the same as the Davis-Bacon threshold?
No. The Service Contract Labor Standards (over $2,500) apply to service contracts, while the Construction Wage Rate Requirements — the Davis-Bacon Act (over $2,000) — apply to construction contracts. Both require paying locally prevailing wages set by Department of Labor determinations, but they cover different kinds of work and have different dollar triggers.
Primary Sources
- 41 U.S.C. § 6702 — Service Contract Labor Standards
- FAR 22.1003 — Applicability (Service Contract Labor Standards)
- FAR 52.222-41 — Service Contract Labor Standards clause
Plain-English reference, not legal advice. Acquisition-related dollar thresholds are periodically re-indexed for inflation and the underlying FAR sections and statutes are amended from time to time — always confirm the current figure and its exceptions against the FAR and the actual solicitation before relying on it, and consult qualified counsel for your specific situation.
Change log (1)
- LaunchedPublished the federal procurement dollar thresholds reference covering the dollar lines that shape an SDVOSB set-aside — the micro-purchase threshold (FAR 2.101), the simplified acquisition threshold and the automatic small-business reserve (FAR 2.101 / 19.203), the commercial simplified-procedures ceiling (FAR 13.500), the SDVOSB sole-source ceiling (FAR 19.1406), the subcontracting-plan threshold (FAR 52.219-9), the certified cost or pricing data / TINA threshold (FAR 15.403-4), the Cost Accounting Standards threshold (48 CFR 9903.201-1), the Service Contract Labor Standards (41 U.S.C. § 6702) and Davis-Bacon (40 U.S.C. § 3142) labor thresholds, and the FFATA subaward reporting threshold (FAR 52.204-10) — each with an at-a-glance quick-facts card showing the current dollar amount, a what-changes-at-the-line list, a key-features table, an SDVOSB-specific angle, watch-outs, FAQPage, Article, Dataset, and BreadcrumbList structured data, primary-source citations, and cross-links into the glossary, regulation explainers, clauses, how-to guides, FAQ, and the size-standard, set-aside eligibility, subcontracting, and price-to-win calculators.