Cap on Wage Rates

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Q.  We are in negotiations with the most qualified firm for a general planning consultant with A/E services included. Our contract administrator is of the opinion that we cannot include a cap on wage rates in the contract. I agree that overhead cannot be capped, but find no prohibition on a wage rate cap. Under our agreement, certain key personnel will be excluded from the cap. Is there a problem with this approach?

A.   We can find no regulatory problem with your negotiation position to cap wage rates. There is of course a problem with capping overhead rates on A&E contracts, as you note. (Reviewed: May 2010)


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