S 2963119th CongressIn Committee

Fair Pay for Federal Contractors Act of 2025

Introduced: Oct 1, 2025

Sponsor: Sen. Smith, Tina [D-MN] (D-Minnesota)

Labor & Employment

Standard Summary

Comprehensive overview in 1-2 paragraphs

S. 2963, the Fair Pay for Federal Contractors Act of 2025, would create a process for federal agencies to reimburse or “back pay” private contractors for certain costs they incur when a lapse in federal appropriations causes contractor employees to be furloughed, laid off, or otherwise not work (including reduced hours or reduced pay) during the lapse. The bill directs agencies to adjust contract prices to cover these costs and to restore paid leave used due to the lapse. It places a cap on the weekly compensation that can be adjusted and requires contractors to provide documentation to agency heads, with involvement from the Office of Federal Procurement Policy (OFPP). The act authorizes a specific appropriation for 2026 to fund these adjustments and requires a public report within one year detailing the adjustments and affected employees. The policy aim is to protect contractor workers and stabilize contractor costs during funding gaps, potentially reducing disruptions and financial harm caused by government shutdowns.

Key Points

1Back pay adjustments for contractors: Agencies must adjust contract prices to reimburse contractors for reasonable costs incurred to compensate furloughed, laid-off, non-working, or payroll-reduced employees, and to restore paid leave taken during the lapse.
2Notwithstanding contract terms: Adjustments may be made even if the contract terms would ordinarily limit or prohibit incurring such costs or receiving this type of adjustment.
3Weekly cap: The maximum weekly adjustment is the lesser of the employee’s actual weekly compensation or $1,442 (pro-rated for part-time workers).
4Proof and oversight: Contractors must provide evidence of the costs to the agency head, with input from the OFPP, to justify the adjustments.
5Timing and reporting: Adjustments should be made as soon as practicable after enactment. Within one year, the Administration of OFPP must report to Congress and publish data on which agencies made adjustments and the affected employees and compensation.
6Temporary funding and scope: The bill appropriates funds for fiscal year 2026 to cover these adjustments for agencies subject to lapses in funding, available through December 31, 2026, and applies to service employees and laborers/mechanics (as defined in federal statute).

Impact Areas

Primary group/area affected- Federal contractors and their employees who were furloughed, laid off, or otherwise paid less during a lapse in appropriations, including those who used paid leave during the lapse. The bill would provide a mechanism for those employers to recoup costs through higher contract prices.Secondary group/area affected- Federal agencies that award and manage contracts (subject to funding lapses) would bear the back-pay adjustments, potentially increasing contract costs during lapse periods.- The Office of Federal Procurement Policy (OFPP) would play a key role in overseeing cost documentation and the adjustment process.Additional impacts- Increased transparency via the required one-year report detailing the scope and effect of adjustments (number of employees affected, amounts paid, leave used, etc.).- Potential budgetary impact on federal procurement and annual contracting costs during lapse periods, which could influence agency budgeting and contracting strategies.- The cap on weekly compensation and the requirement for proof may affect how contractors forecast and price labor costs during funding gaps.

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