Labor Rates for Government Contracts are determined using the Services Contract Act (SCA) of 1965. The premise of this, to make sure people are paid at a rate that is comparable to the locality, is excellent. The way this is implemented costs the government and tax payers a great deal of money.
The SCA rates are calculated in arrears, often several years after the work is completed. This causes government contractors to have to hold back (often 10-15%) a portion of each Cost Plus Fixed Fee contract to wait for the SCA determination to be made. Then contract costs are recalculated and old Delivery Orders closed out. The snowball effect of this is the money is held back, then a tremendous amount of labor is expended by the contractors and government Contracting and Accounting employees closing out these Delivery Orders. Sometimes money is deobligated back to the government and sometimes additional funds are needed. The money that comes back is usually already expired and therfore unusable.
All of this cost and inefficiency could be saved if the SCA Rates were calculated in advance of each new Fiscal Year (or some other agreed upon interval). Then when a Delivery Order is completed, it can be closed out almost immediately.