Why It Matters

A new Congressional Research Service report on the McNamara-O'Hara Service Contract Act (SCA) lands at a moment when the Trump administration is actively reshaping federal contracting, and the collision between a decades-old labor protection and a deregulatory agenda is becoming harder to ignore.

The SCA is the legal backbone ensuring that workers who clean federal buildings, staff government cafeterias, and answer phones at federal call centers are paid locally prevailing wages, not whatever the lowest-bidding contractor can get away with. The law covers any federal service contract above $2,500, and its reach is vast.

But enforcement has been diminishing. According to the CRS report, compliance actions by the Department of Labor's Wage and Hour Division (WHD) dropped from 916 in fiscal year 2013 to 387 in fiscal year 2025. That's more than a 57 percent decline over roughly a decade, spanning multiple administrations. The trend is not new, but it is accelerating into a political environment where the federal workforce is shrinking, contracts are being cut, and the administration has already rolled back Biden-era wage enhancements for federal contractors.

The central tension: a law designed to prevent the federal government from becoming an instrument of wage depression is being administered by an executive branch that has signaled limited appetite for contractor labor mandates.

The Big Picture

What the McNamara-O'Hara Service Contract Act Actually Does

Passed in 1965 during the Johnson Administration, the SCA was a direct response to a structural problem in federal procurement. Because contracts were typically awarded to the lowest bidder and labor was the dominant cost in service work, companies that paid the least wages had a built-in competitive advantage. Congress, backed by the Johnson White House, moved to take wages out of that competition by requiring contractors to meet locally prevailing wage standards.

Today, the WHD sets those prevailing wages using median or mean wages from the Bureau of Labor Statistics' Occupational Employment and Wage Statistics program. Fringe benefit requirements are set separately. As of July 2025, the required fringe benefit rate is $5.55 per hour, a figure employers can either pay directly to workers or channel to a third party providing benefits. Employers subject to Executive Order 13706, which requires paid sick leave for certain federal contractors, face a slightly lower rate of $5.09 per hour.

Federal agencies are required to obtain wage determinations for every new service contract, extension, or major modification. Those determinations are available through sam.gov, and contracting officers are expected to incorporate them into the contract before it is awarded.

The Threshold Problem

One structural issue the CRS report flags is the SCA's coverage threshold. The law kicks in for contracts above $2,500, a number set in 1965 and never adjusted for inflation. Legislation introduced in both the 117th and 118th Congresses, the Service Contract Modernization Act, would have updated that threshold to reflect current dollar values, but neither version advanced. The practical effect of leaving the threshold unchanged is that the law's trigger point is, in real terms, far lower than Congress originally intended, potentially pulling in contracts that were never meant to be covered while the nominal figure remains frozen in time.

Who Is and Isn't Covered

The law covers workers in roles like security guards, janitors, cafeteria workers, and call center employees handling federal program inquiries. It does not cover workers classified as bona fide executive, administrative, or professional employees under the Fair Labor Standards Act, nor does it apply to contracts for transportation, public utility services, or direct personal services to a federal agency by an individual.

In the 119th Congress, the Strengthening Job Corps Act of 2025 would extend SCA coverage to Job Corps operators and, notably, to academic and career technical instructional employees on federal contracts, a category currently excluded because of their FLSA-exempt status. That bill represents a meaningful expansion of the law's reach.

Political Stakes

For the Administration

The Trump administration revoked Executive Order 14026 in March 2025, eliminating the Biden-era contractor minimum wage that had been set above the SCA's prevailing wage floor in many localities. That action directly affects SCA-covered workers who had been earning more under the Biden order than the SCA alone would require. With that wage floor gone, the SCA's prevailing wage determination becomes the operative standard again, and in some localities, that means lower pay for affected workers.

The administration's broader effort to reduce federal contract spending, driven in part by the Department of Government Efficiency, adds another layer of complexity. When contracts are terminated or restructured, SCA compliance obligations don't simply disappear. Successor contractor rules, which govern what happens to workers when a contract changes hands, can create legal exposure for agencies and contractors alike if the transition isn't handled carefully.

The declining enforcement numbers also raise a structural question: the WHD is responsible for investigating SCA violations, but the agency's capacity to do so depends on staffing and resources. In an environment where federal agency headcount is under pressure, enforcement of federal service contract regulations may continue to erode.

For Democrats

The falling enforcement trend and the rollback of Biden-era wage enhancements give Democrats a concrete policy argument about who bears the cost of deregulation. The workers most affected by SCA prevailing wage requirements are disproportionately low-wage, and the 2020 Government Accountability Office report cited in the CRS analysis found that the most common SCA violation during fiscal years 2014 through 2019 was underpayment of fringe benefits. The average back pay owed per employee in identified violations was approximately $2,750, affecting an average of 30 workers per case. Those are modest individual amounts, but they add up across hundreds of violations annually.

For Congress

The CRS report arrives as Congress is navigating a series of questions about the scope of federal labor protections. The Strengthening Job Corps Act of 2025 is the only active SCA-related legislation in the 119th Congress identified in the report. Its prospects in a Republican-controlled Congress are uncertain, given that it expands rather than limits coverage.

The inflation-adjustment legislation, which had bipartisan logic behind it, failed to advance in two consecutive Congresses. Whether it resurfaces in the current session is an open question.

One enforcement mechanism worth noting: the SCA gives employees no private right of action. This means that workers cannot sue their contractor directly for unpaid wages or fringe benefits. Instead, all enforcement runs through the WHD. If the WHD isn't investigating, workers have no independent legal remedy. That structural gap is not new, but it becomes more significant when compliance actions are declining in use.

The Bottom Line

The McNamara-O'Hara Service Contract Act is a 60-year-old law that most Americans have never heard of, but it governs the pay of a large slice of the low-wage workforce that keeps federal operations running. The CRS report is a timely reminder that the law's protections are only as strong as the enforcement behind them, and that enforcement has been weakening for more than a decade.

The current administration's rollback of Biden-era contractor wage requirements, combined with a broader push to cut federal contracts and reduce agency capacity, puts additional pressure on a system that was already showing strain. For Congress, the report offers a clear picture of where the gaps are; what it does with that picture is another matter.

Access the Legis1 platform for comprehensive political news, data, and insights.