FAR 52.222-43 and option-year price adjustments
The clause that lets you recover wage determination increases when an option year starts — and, just as importantly, the two parts of it that quietly leave money on your side of the table.
What the clause does
FAR 52.222-43 — Fair Labor Standards Act and Service Contract Labor Standards — Price Adjustment (Multiple Year and Option Contracts)— handles a problem specific to contracts that run past a single year: wage determinations get revised, but your contract price was fixed before that happened.
It appears in fixed-price, time-and-materials and labor-hour service contracts that carry the Service Contract Labor Standards clause and either run multiple years or contain options to renew, above the simplified acquisition threshold.
Its sibling, FAR 52.222-44, does the equivalent job for contracts that are not multiple-year or option contracts. If you are searching for one and find the other, the difference is the term structure of the contract, not the kind of relief available.
Which determination applies
Paragraph (c) is explicit: the determination current on the anniversary date of a multiple-year contract, or at the beginning of each renewal option period, applies. Not the one you bid against. Not the one in force when you signed.
So the rates you must pay in option year three are whatever DOL has published by the time option year three begins — a number that did not exist when you priced the work.
The warranty you already gave
Paragraph (b) is one sentence and it is easy to sign past:
“The Contractor warrants that the prices in this contract do not include any allowance for any contingency to cover increased costs for which adjustment is provided under this clause.”
In other words, you cannot pad the bid against expected determination increases and claim the adjustment when they arrive. The clause is the remedy, and taking it means you warranted you did not also price for it. Contractors who build a three-percent-a-year escalation cushion into option pricing on an SCA contract should know which side of that sentence they are standing on.
What it will and will not reimburse
This is where the money is, and it is worth being precise. There are two separate haircuts, and most people know about the first one only.
Haircut one: only the movement in the minimum
The adjustment covers the change in the minimum required amounts. It does not cover what you chose to pay above them.
Worked example, adapted from the clause itself: the old determination required $4.00. You actually paid $4.10. The new determination requires $4.50, and you raise the wage to $4.75. Your allowable adjustment is $0.40 — the movement in the minimum, $4.00 to $4.50. The extra $0.35 you pay above the floor is yours to absorb.
Haircut two: no overhead, no G&A, no profit
Paragraph (e) limits the adjustment to the wage and fringe movement plus the accompanying social security and unemployment taxes and workers’ compensation insurance, and then adds that it shall not otherwise include any amount for general and administrative costs, overhead, or profit.
Every other dollar in your contract carries your wrap. These do not. If you price at a 25% wrap, the adjusted dollars come back bare, and the wrap on them is gone for the remaining life of the contract.
What the two haircuts cost, in dollars
Illustrative only, with round numbers. Ten employees at 2,080 hours each, so 20,800 contract hours in the option year. The determination moves the base rate from $14.00 to $14.75 and health & welfare from $5.36 to $5.50. You actually pay $16.50 and decide to raise it to $17.40.
| Component | Per hour | × 20,800 hours |
|---|---|---|
| WD base rate movement ($14.00 → $14.75) | $0.75 | $15,600 |
| H&W movement ($5.36 → $5.50) | $0.14 | $2,912 |
| Accompanying payroll taxes and workers’ comp | $0.0776 | $1,614 |
| Recoverable under the clause | $0.9676 | $20,126 |
| What it would be with a 25% wrap applied | $1.2095 | $25,158 |
| Wrap you do not get back — paragraph (e) | $0.2419 | $5,032 |
And separately: your own rise from $16.50 to $17.40 is $0.90, but only the $0.75 movement in the determination is the basis for any of the above. The other $0.15 an hour — about $3,120 a year here — never enters the calculation at all.
Two notes on the arithmetic, because the detail matters when you do it for real. Payroll taxes are applied to the wage movement rather than the full amount, since health & welfare furnished as bona fide benefits is generally not wages for tax purposes — paid as cash in lieu, the treatment differs. And the tax percentage is your own composite of FICA, FUTA/SUTA and workers’ compensation, not a standard figure.
The 30-day notice
Paragraph (f): you must notify the contracting officer of any increase claimed under the clause within 30 days of receiving a new wage determination, unless the CO extends that in writing.
Which raises an obvious question: how do you know a new determination has been issued? DOL does not write to you. If the first you hear of it is a modification landing on your desk, your 30 days may already be running.
Why this makes forecasting matter
A typical SCA contract is one base year plus four option years. You are effectively asked to price labor five years out, against rates that will be revised annually by someone else, with only the movement in the minimum recoverable and no wrap on top of it.
Underestimate the escalation and you carry the difference for four years. Overestimate it and you lose the award to someone who guessed lower — and, per paragraph (b), you may have warranted that you did not build in the cushion anyway. There is no way to make that risk disappear, but you can make it an informed estimate rather than a guess, by looking at how rates for your occupations and locality have actually moved.
What to do about it
- Know which determination governs each option year, and check it at each anniversary.
- Diarise the 30-day notice window the moment a revision appears.
- Price the wrap you will not recover into the base year, where it is still recoverable, rather than assuming it comes back with the adjustment.
- Price option years from evidence of past movement, not a flat percentage — historical escalation data is the input for that.
- Track the determinations you are bidding against so a revision reaches you when it happens rather than months later.
The pricer is free and always will be. Rates here are refreshed weekly from SAM.gov, so the determination you check is the one currently in force.
Questions
What is FAR 52.222-43?
It is the price adjustment clause for multiple-year and option service contracts carrying the Service Contract Labor Standards. When a new wage determination raises the minimum you must pay, the clause lets you recover that increase — but only the movement in the minimum, and with no overhead or profit added to it.
What is the difference between FAR 52.222-43 and 52.222-44?
52.222-43 applies to multiple-year contracts and contracts with renewal options, where a new determination lands at an anniversary or option exercise. 52.222-44 does the equivalent job for contracts that are not multiple-year or option contracts. The recovery mechanics are similar; which one is in your contract depends on its term structure.
Does FAR 52.222-43 reimburse overhead and profit on the increase?
No. Paragraph (e) limits the adjustment to the wage and fringe benefit movement plus the accompanying social security and unemployment taxes and workers’ compensation insurance, and states it shall not otherwise include any amount for general and administrative costs, overhead, or profit. If you carry a 25 percent wrap, that wrap does not come back on the adjusted dollars.
How long do I have to claim a price adjustment?
Paragraph (f) requires you to notify the contracting officer of any increase claimed under the clause within 30 days of receiving a new wage determination, unless the contracting officer extends that period in writing.
Which wage determination applies to an option year?
The determination current on the anniversary date of a multiple-year contract, or at the beginning of each renewal option period. Not the one you bid against, and not the one in force when the contract was signed.
Can I price a contingency for expected wage increases into my bid?
Not for increases this clause covers. Paragraph (b) is a warranty that your prices contain no allowance for any contingency covering costs the clause adjusts for. Padding the bid for expected determination movement and then also claiming the adjustment is the thing that warranty exists to prevent.
Informational only, and not legal advice. The wage determination incorporated into your solicitation governs, and coverage turns on the facts of your particular contract. When real money rides on the answer, confirm it with the contracting officer or counsel.