DHS considers rule change to protect subcontractors

Homeland Security Department officials may retool some of their rules to avoid a bonanza for prime contractors at the expense of their subcontractors.

DHS officials are proposing to amend the Homeland Security Acquisition Regulation--the department's supplement to the governmentwide Federal Acquisition Regulation-- in two ways.

First, companies bidding for work would have to "propose separate, individual labor hour rates for each category of labor to be performed by the prime contractor, each subcontractor, and other divisions or subsidiaries or affiliates of the prime contractor under common control," reads a Federal Register notice published Aug. 21.

They also want to require their contractors and subcontractors to describe their process for accounting for overtime labor hours for employees exempt from the Fair Labor Standards Act.

DHS wants “to eliminate unintentional windfall payments to the prime contractor" that can come when work done by subcontractors is billed at the prime contractor's labor rate, according to the notice.

In fiscal 2010, DHS awarded 1,779 contracts based on labor hours, which were worth more than $652 million in total. That same year, the department awarded 4,160 time-and-materials contracts, worth more than $1.9 billion.

DHS officials are accepting comments on a proposed rule change until Oct. 22.