Updating the Davis-Bacon and Related Acts Regulations, 57526-57747 [2023-17221]
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487–9243) between 8 a.m. and 5 p.m. in
your local time zone, or log onto WHD’s
website at https://www.dol.gov////
offices for a nationwide listing of WHD
district and area offices.
SUPPLEMENTARY INFORMATION:
DEPARTMENT OF LABOR
Office of the Secretary
29 CFR Parts 1, 3, and 5
RIN 1235–AA40
Updating the Davis-Bacon and Related
Acts Regulations
Wage and Hour Division,
Department of Labor.
ACTION: Final rule.
AGENCY:
In this final rule, the
Department of Labor (Department or
DOL) updates regulations issued under
the Davis-Bacon and Related Acts. As
the first comprehensive regulatory
review in nearly 40 years, revisions to
these regulations will promote
compliance, provide appropriate and
updated guidance, and enhance their
usefulness in the modern economy.
DATES:
Effective date: This final rule is
effective on October 23, 2023.
Applicability date: The provisions of
this final rule regarding wage
determination methodology and related
part 1 provisions prescribing the content
of wage determinations may be applied
only to wage determination revisions
completed by the Department on or after
October 23, 2023. Except with regard to
§ 1.6(c)(2)(iii), the provisions of this
final rule are applicable only to
contracts entered into after October 23,
2023. Contracting agencies must apply
the terms of § 1.6(c)(2)(iii) to existing
contracts of the types addressed in that
regulatory provision, without regard to
the date a contract was entered into, if
practicable and consistent with
applicable law. For additional
information, see the discussion of
Applicability Date in section III.C.
below.
SUMMARY:
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FOR FURTHER INFORMATION CONTACT:
Amy DeBisschop, Director, Division of
Regulations, Legislation, and
Interpretation, Wage and Hour Division,
U.S. Department of Labor, Room S–
3502, 200 Constitution Avenue NW,
Washington, DC 20210; telephone: (202)
693–0406 (this is not a toll-free
number). Alternative formats are
available upon request by calling 1–
866–487–9243. If you are deaf, hard of
hearing, or have a speech disability,
please dial 7–1–1 to access
telecommunications relay services.
Questions of interpretation or
enforcement of the agency’s existing
regulations may be directed to the
nearest WHD district office. Locate the
nearest office by calling the WHD’s tollfree help line at (866) 4US–WAGE ((866)
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I. Executive Summary
In order to provide greater clarity and
enhance their usefulness in the modern
economy, on March 18, 2022, the
Department published a notice of
proposed rulemaking (NPRM), 87 FR
15698, proposing to update and
modernize the regulations at 29 CFR
parts 1, 3, and 5, which implement the
Davis-Bacon Act and the Davis-Bacon
Related Acts (collectively, the DBRA).
The Davis-Bacon Act (DBA or Act),
enacted in 1931, requires the payment
of locally prevailing wages and fringe
benefits on Federal contracts for
construction. See 40 U.S.C. 3142. The
DBA applies to workers on contracts
entered into by Federal agencies and the
District of Columbia that are in excess
of $2,000 and for the construction,
alteration, or repair of public buildings
or public works. Congress subsequently
incorporated DBA prevailing wage
requirements into numerous statutes
(referred to as ‘‘Related Acts’’) under
which Federal agencies assist
construction projects through grants,
loans, loan guarantees, insurance, and
other methods.
The Supreme Court has described the
DBA as ‘‘a minimum wage law designed
for the benefit of construction workers.’’
United States v. Binghamton Constr.
Co., 347 U.S. 171, 178 (1954). The Act’s
purpose is ‘‘to protect local wage
standards by preventing contractors
from basing their bids on wages lower
than those prevailing in the area.’’
Univs. Research Ass’n, Inc. v. Coutu,
450 U.S. 754, 773 (1981) (quoting H.
Comm. on Educ. & Lab., Legislative
History of the Davis-Bacon Act, 87th
Cong., 2d Sess., 1 (Comm. Print 1962)).
By requiring the payment of minimum
prevailing wages, Congress sought to
‘‘ensure that Government construction
and federally assisted construction
would not be conducted at the expense
of depressing local wage standards.’’
Determination of Wage Rates Under the
Davis-Bacon & Serv. Cont. Acts, 5 Op.
O.L.C. 174, 176 (1981) (citation and
internal quotation marks omitted).1
Congress has delegated authority to
the Department to issue prevailing wage
determinations and prescribe rules and
regulations for contractors and
subcontractors on DBA-covered
1 Available at: https://www.justice.gov/sites/
default/files/olc/opinions/1981/06/31/op-olc-v005p0174_0.pdf.
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construction projects.2 See 40 U.S.C.
secs. 3142, 3145. It has also directed the
Department, through Reorganization
Plan No. 14 of 1950, to ‘‘prescribe
appropriate standards, regulations and
procedures’’ to be observed by Federal
agencies responsible for the
administration of the Davis-Bacon and
Related Acts. 15 FR 3173, 3176 effective
May 24, 1950, reprinted as amended in
5 U.S.C. app. 1 and in 64 Stat. 1267.
These regulations, which have been
updated and revised periodically over
time, are primarily located in parts 1, 3,
and 5 of title 29 of the Code of Federal
Regulations.
The Department last engaged in a
comprehensive revision of the
regulations governing the DBA and the
Related Acts in a 1981–1982
rulemaking.3 Since that time, Congress
has expanded the reach of the DavisBacon 4 labor standards 5 significantly,
adding numerous Related Act statutes to
which these regulations apply. The
Davis-Bacon Act and now more than 70
active Related Acts 6 collectively apply
to an estimated $217 billion in Federal
and federally assisted construction
spending per year and provide
minimum wage rates for an estimated
1.2 million U.S. construction workers.7
The Department expects these numbers
to continue to grow as Federal and State
governments seek to address the
significant infrastructure needs of the
country, including, in particular, the
energy and transportation infrastructure
necessary to mitigate climate change.8
2 The DBA and the Related Acts apply to both
prime contracts and subcontracts of any tier
thereunder. In this final rule, as in the regulations
themselves, where the terms ‘‘contracts’’ or
‘‘contractors’’ are used, they are intended to include
reference to subcontracts and subcontractors of any
tier.
3 See 46 FR 41444 (1981 NPRM); 47 FR 23644
(1982 final rule); 48 FR 19532 (1983 revised final
rule).
4 The term ‘‘Davis-Bacon’’ is used in this final
rule as a shorthand reference for the Davis-Bacon
and Related Acts.
5 In this final rule, the term ‘‘Davis-Bacon labor
standards’’ means, as defined in § 5.2 of the final
rule, ‘‘the requirements of the Davis-Bacon Act, the
Contract Work Hours and Safety Standards Act
(other than those relating to safety and health), the
Copeland Act, and the prevailing wage provisions
of the other statutes referenced in § 5.1, and the
regulations in parts 1 and 3 of this subtitle and this
part.’’
6 The Department maintains a list of the Related
Acts at https://www.dol.gov/agencies/whd/
government-contracts/.
7 These estimates are discussed below in section
V (Executive Order 12866, Regulatory Planning and
Review et al.).
8 See Executive Order 14008, ‘‘Tackling the
Climate Crisis at Home and Abroad,’’ section 206
(Jan. 27, 2021), available at: https://
www.whitehouse.gov/briefing-room/presidentialactions/2021/01/27/executive-order-on-tacklingthe-climate-crisis-at-home-and-abroad/.
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In addition to the expansion of the
prevailing wage rate requirements of the
DBA and the Related Acts, the Federal
contracting system itself has undergone
significant changes since the 1981–1982
rulemaking. Federal agencies have
dramatically increased spending
through interagency Federal schedules
such as the Multiple Award Schedule
(MAS). Contractors have increased their
use of single-purpose entities, such as
joint ventures and teaming agreements,
in construction contracts with Federal,
State and local governments. Federal
procurement regulations have been
overhauled and consolidated in the
Federal Acquisition Regulation (FAR; 48
CFR chapter 1), which contains a
subpart on the Davis-Bacon Act and
related contract clauses. See 48 CFR
22.400 et seq. Court and agency
administrative decisions have
developed and clarified myriad aspects
of the laws governing Federal
procurement.
During the past 40 years, the
Department’s DBRA program also has
continued to evolve. Where the program
initially was focused on individual
project-specific wage determinations,
contracting agencies now incorporate
the Department’s general wage
determinations for the construction type
in the locality in which the construction
project is to occur. The program also
now uniformly uses wage surveys to
develop general wage determinations,
eliminating an earlier practice of
developing wage determinations based
solely on other evidence about the
general level of unionization in the
targeted area. In a 2006 decision, the
Department’s Administrative Review
Board (ARB) identified several surveyrelated wage determination procedures
as inconsistent with the 1982 final rule.
See Mistick Constr., ARB No. 04–051,
2006 WL 861357, at *5–7 (Mar. 31,
2006).9 As a consequence of these
developments, the use of averages of
wage rates from survey responses has
increasingly become the methodology
used to issue new wage
determinations—notwithstanding the
Department’s long-held interpretation
that the DBA allows the use of such
averages only as a methodology of last
resort.
The Department has also received
significant feedback from stakeholders
and others since the last comprehensive
rulemaking. In a 2011 report, the
Government Accountability Office
(GAO) reviewed the Department’s wage
survey and wage determination process
9 Decisions of the ARB from 1996 to the present
are available on the Department’s website at https://
www.dol.gov/agencies/arb/decisions.
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and found that the Department was
often behind schedule in completing
wage surveys, leading to a backlog of
wage determinations and the use of outof-date wage determinations in some
areas.10 The report also identified
dissatisfaction among regulated parties
regarding the rigidity of the
Department’s county-based system for
identifying prevailing rates,11 and
missing wage rates requiring an overuse
of ‘‘conformances’’ for wage rates for
specific job classifications.12 A 2019
report from the Department’s Office of
the Inspector General (OIG) made
similar findings regarding out-of-date
wage determinations.13
Ensuring that construction workers
are paid the wages required under the
DBRA also requires effective
enforcement in addition to an efficient
wage determination process. In the last
decade, enforcement efforts at the
Department have resulted in the
recovery of more than $229 million in
back wages for over 76,000 workers.14
But the Department has also
encountered significant enforcement
challenges. Among the most critical of
these is the omission of DBRA contract
clauses from contracts that are clearly
covered by the DBRA. In one recent
case, a contracting agency agreed with
the Department that a blanket purchase
agreement (BPA) it had entered into
with a contractor had mistakenly
omitted the Davis-Bacon clauses and
wage determination, but the omission
still resulted in an 8-year delay before
the workers were paid the wages they
were owed.
Through this rulemaking, the
Department seeks to address a number
of these outstanding challenges in the
program while also providing greater
clarity in the DBRA regulations and
enhancing their usefulness in the
modern economy. In the NPRM, the
Department proposed to update and
10 See Gov’t Accountability Office, GAO–11–152,
‘‘Davis-Bacon Act: Methodological Changes Needed
to Improve Wage Survey’’ (2011) (2011 GAO
Report), at 12–19, available at: https://www.gao.gov/
assets/gao-11-152.pdf.
11 Id. at 23–24.
12 Id. at 32–33.
13 See Department of Labor, Office of the
Inspector General, ‘‘Better Strategies Are Needed to
Improve the Timeliness and Accuracy of DavisBacon Act Prevailing Wage Rates’’ (2019) (2019 OIG
Report), at 10, available at: https://
www.oversight.gov/sites/default/files/oig-reports/
04-19-001--Davis%20Bacon.pdf.
14 The listed figures have been corrected from the
NPRM. The updated figures reflect the sum of the
annual enforcement statistics from 2010–2019 in
Gov’t Accountability Office, GAO–21–13, ‘‘Fair
Labor Standards Act: Tracking Additional
Complaint Data Could Improve DOL’s
Enforcement’’ (2020) (2020 GAO Report), at 39,
available at: https://www.gao.gov/assets/gao-2113.pdf.
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modernize the regulations
implementing the DBRA at 29 CFR parts
1, 3, and 5. In some of these proposed
revisions, the Department had
determined that changes it made in the
1981–1982 rulemaking were mistaken or
ultimately resulted in outcomes that are
increasingly in tension with the DBA
statute itself. In others, the Department
sought to expand further on procedures
that were introduced in that last major
revision, or to propose new procedures
that will increase efficiency of
administration of the DBRA and
enhance protections for covered
construction workers. The Department
invited comments on these proposed
updates and received 40,938 timely
comments after a 60-day comment
period.
The comments were from a broad
array of constituencies, including
contractors, unions, employer and
industry associations, worker advocacy
groups, non-profit organizations, social
scientists, law firms, think tanks,
Members of Congress, a state attorney
general, a state department of labor, and
other interested members of the public.
All timely received comments may be
viewed on the regulations.gov website,
docket ID WHD–2022–0001. Some of
the comments the Department received
were general statements of support or
opposition, and the Department also
received approximately 40,200
‘‘campaign’’ comments sent in response
to organized initiatives. Commenters
expressed a wide variety of views on the
merits of particular aspects of the
Department’s proposal; however, most
commenters favored some, if not all, of
the changes proposed in the NPRM. The
Department has considered the timely
submitted comments addressing the
proposed changes.
The Department also received a
number of comments that are beyond
the scope of this rulemaking. These
included requests that would require
Congress to amend statutory language in
the DBRA. For example, many
commenters suggested a change to the
$2,000 threshold for DBA and certain
Related Acts to apply. Others suggested
eliminating or changing the weekly
certified payroll requirement that is
expressly required by 40 U.S.C. sec
3145.
Other comments beyond the scope of
the rulemaking included those that
suggested significant new regulatory
provisions or changes that were not
proposed in the NPRM. Among these,
for example, the Iron Workers
International Union suggested the
codification of the requirement to
thoroughly investigate ‘‘area practice’’
issues that arise during the wage survey
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process. See Fry Bros. Corp., WAB No.
76–06, 1977 WL 24823, at *6 (June 14,
1977), aff’d sub nom. Fry Bros. Corp. v.
Dep’t of Hous. & Urb. Dev., 614 F.2d
732, 732–33 (10th Cir. 1980). The Iron
Workers also suggested creation of a
new administrative process for issuing
‘‘right to sue’’ notices to workers to
pursue rights of action authorized by 40
U.S.C. sec 3144(a)(2). As noted in the
comment, such an initiative would be
better proposed in a separate and
subsequent notice-and-comment
rulemaking.
The Department reviewed the
comments submitted in particular for
assertions by interested parties of their
reliance on the existing regulations in a
way that would be adversely affected by
the proposed rule. Although many
comments stated that the current
regulations had been in place for many
years, few specified that parties had
relied on the regulations so as to raise
questions about the fairness or
reasonableness of amending them in the
current rulemaking. Nonetheless, the
Department considered whether the rule
as a whole, as well as its individual
proposed provisions, could plausibly
implicate significant and legitimate
reliance interests, and the Department
has concluded that the proposed
amendments to the regulations do not
raise reliance interests that would
outweigh the agency objectives
discussed throughout this preamble.
The Department did not identify
significant reliance interests among
contractors or others in the existing part
1 regulations. The part 1 regulations
involve the Department’s methodology
for determining the prevailing wage
rates that are required on covered
contracts. Some of the changes the
Department proposed to this part may
lead to higher required wage rates in
places and lower wage rates in others,
and the new periodic adjustments of
certain non-collectively bargained wage
rates will result in a smoother increase
in such wage rates over time instead of
longer periods of the same wage rates
for an area followed by steeper increases
after the publication of new survey
rates. Similarly, the new language
clarifying the procedure for
incorporating prevailing wage rates into
multiple award schedules and other
similar contracts may result in more
frequent updates to prevailing wage
rates on such contracts when options
are executed. These types of changes,
however, should not be significantly
different in their effect on contractors
than the fluctuations in prevailing wage
rates that already occur between wage
surveys as a result of changes in local
economies and shifts in regional labor
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markets. Even if the part 1 changes were
to have significant effects on prevailing
wage rates in certain local areas, any
reliance interests of local contractors,
governmental agencies, or workers on
prior prevailing wage rates would be
limited, given that the changes to the
wage determination processes generally
will not affect current contracts—which
will continue to be governed by the
wage determinations incorporated at the
time of their award, with limited
exceptions. Most of the revisions to part
1 will only apply to wage surveys that
are finalized after the rule becomes
effective, and thus they will generally
apply only to contracts awarded after
such new wage determinations are
issued.15 Contractors will therefore be
able to factor any new wage rates into
their bids on future contracts.
Many of the amendments to part 5 of
the regulations are regulatory changes
that codify the Department’s current
practices and interpretations of existing
regulations. As a result, such changes do
not, in practical terms, impose new
obligations on contractors or contracting
agencies. Other changes, such as the
new anti-retaliation provision, provide
new remedies to address conduct that
already may subject contractors to
potential debarment. Any reliance
interest in the ability to carry out such
conduct with lesser potential
consequences is particularly weak.
Regardless, these new amendments to
part 5 will generally only apply to
contracts that are awarded after the
effective date of this final rule.
Contractors entering into new contracts
issued after the rule is published and
becomes applicable will have notice of
the regulatory changes and will be able
to take the changes into consideration as
they analyze internal controls and
15 As explained in § 1.6(c), whenever a new wage
determination is issued (either after the completion
of a new wage survey or through the new periodic
adjustment mechanism), that revision as a general
matter does not and will not apply to contracts
which have already been awarded, with three
exceptions. These exceptions are explained in
§ 1.6(c)(2)(iii), and they include where a contract or
order is changed to include substantial covered
work that was not within the original scope of
work, where an option is exercised, and also certain
ongoing contracts that are not for specific
construction, for which new wage determinations
must be incorporated on an annual basis under
§ 1.6(c)(2)(iii)(B) of the final rule. The final rule
instructs contracting agencies to apply the terms of
§ 1.6(c)(2)(iii) to all existing contracts, without
regard to the date of contract award, if practicable
and consistent with applicable law. The
Department does not anticipate that the application
of the amended wage determination methodologies
in these situations will result in unfair harm to
reliance interests in a manner sufficient to outweigh
the benefits of the final rule implementation as
planned. See also section III.C. (‘‘Applicability
Date’’) below.
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develop their bids or negotiate contract
pricing.
ABC argued that the Department’s
denial of requests to extend the public
comment period beyond the 60 days
provided was arbitrary and capricious,
and other commenters expressed
disappointment that the comment
period had not been extended. As
explained in the Department’s public
response to the extension requests in
regulations.gov, the Department
concluded that the 60-day period
provided the public with a meaningful
opportunity to comment on the
proposed rule. The Davis-Bacon and
Related Acts’ applicability is limited to
Federal and federally assisted
construction projects, and therefore
applies to a defined group of
stakeholders. Additionally, various
elements of the proposed and final rules
codify or clarify longstanding policies,
practices, and interpretations. As a
result, stakeholders were familiar with
many of the issues addressed in the
NPRM. The public had additional time
to review the NPRM, which was
available on the Department’s website
on March 11, 2022, seven days in
advance of its publication in the Federal
Register. The comprehensive nature and
substance of the comments received—
both in favor of and opposing the
proposed rule—support the
Department’s view that the 60-day
period was appropriate and sufficient.
Finally, the Department and the Office
of Management and Budget have
participated in several meetings
pursuant to E.O. 12866 at which
stakeholders have had opportunities to
elaborate on their public comments.
Finally, some commenters raised
concerns about the administrative or
paperwork burdens contractors might
face while adjusting to, and under, the
Department’s final rule. The Department
considered such concerns in its
economic analyses and concluded that
the paperwork burdens associated with
the rule are limited and are outweighed
by the benefits of the regulation.
Having considered all of the
comments, the Department has decided
to adopt the NPRM’s proposed changes
with some modifications. Significant
issues raised in the comments are
discussed in more detail below in
section III (‘‘Final Regulatory
Revisions’’), along with the
Department’s responses to those
comments.
This final rule includes several
elements targeted at increasing the
amount of information available for
wage determinations and speeding up
the determination process. In particular,
the final rule amends § 1.3 of the
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regulations by outlining a new
methodology to expressly give the Wage
and Hour Division (WHD)
Administrator authority and discretion
to adopt State or local wage
determinations as the Davis-Bacon
prevailing wage where certain specified
criteria are satisfied. Such a change will
help improve the currentness and
accuracy of wage determinations, as
many States and localities conduct
surveys more frequently than the
Department and have relationships with
stakeholders that may facilitate the
process and foster more widespread
participation. This revision will also
increase efficiency and reduce
confusion for the regulated community
where projects are covered by both
DBRA and local or State prevailing wage
laws and contractors are already
familiar with complying with the local
or State prevailing wage requirement.
The Department also amends the
definition of ‘‘prevailing wage’’ in § 1.2,
and in § 1.7, the scope of data
considered to identify the prevailing
wage in a given area. To address the
overuse of weighted average rates, the
Department returns to the definition of
‘‘prevailing wage’’ in § 1.2 that it used
from 1935 to 1983.16 Currently, a wage
rate may be identified as prevailing in
the area only if it is paid to a majority
of workers in a classification on the
wage survey; otherwise, a weighted
average is used. The Department returns
instead to the ‘‘three-step’’ method that
was in effect before 1983. Under that
method (also known as the 30-percent
rule), in the absence of a wage rate paid
to a majority of workers in a particular
classification, a wage rate will be
considered prevailing if it is paid to at
least 30 percent of such workers. The
Department also returns to a prior
policy on another change made during
the 1981–1982 rulemaking related to the
delineation of wage survey data
submitted for ‘‘metropolitan’’ or ‘‘rural’’
counties in § 1.7(b). Through this
change, the Department will more
accurately reflect modern labor force
realities, allow more wage rates to be
determined at smaller levels of
geographical aggregation, and will
increase the sufficiency of data at the
statewide level.
Revisions to §§ 1.3 and 5.5 are aimed
at reducing the need for the use of
‘‘conformances’’ where the Department
has received insufficient data to publish
a prevailing wage for a classification of
worker—a process that currently is
burdensome on contracting agencies,
contractors, and the Department. This
final rule codifies a new procedure
through which the Department may
identify (and list on the wage
determination) wage and fringe benefit
rates for certain classifications for which
WHD received insufficient data through
its wage survey program. The procedure
will reduce the need for conformances
of classifications for which
conformances are now often required.
The Department also revises
§ 1.6(c)(1) to provide a mechanism to
regularly update certain noncollectively bargained prevailing wage
rates based on the Employment Cost
Index (ECI) published by the Bureau of
Labor Statistics (BLS).17 The mechanism
is intended to keep such rates more
current between surveys so that they do
not become out-of-date and fall behind
prevailing rates in the area.
The Department also strengthens
enforcement in several critical ways.
The Department addresses the
challenges caused by the omission of
contract clauses. In a manner similar to
its rule under Executive Order 11246
(Equal Employment Opportunity), the
Department designates the DBRA
contract clauses in § 5.5(a) and (b), and
applicable wage determinations, as
effective by ‘‘operation of law’’
notwithstanding their mistaken
omission from a contract. This is an
extension of the retroactive modification
procedures that were put into effect in
§ 1.6 by the 1981–1982 rulemaking, and
it will expedite enforcement efforts to
ensure the timely payment of prevailing
wages to all workers who are owed such
wages under the relevant statutes.
In addition, the Department finalizes
new anti-retaliation provisions in the
Davis-Bacon contract clauses in new
paragraphs at § 5.5(a)(11) (DBRA) and
(b)(5) (Contract Work Hours and Safety
Standards Act (CWHSSA)), and in a
new section of part 5 at § 5.18. The
language ensures that workers who raise
concerns about payment practices or
assist agencies or the Department in
investigations are protected from
termination or other adverse
employment actions.
Finally, to reinforce the remedies
available when violations are
discovered, the Department clarifies and
strengthens the cross-withholding
procedure for recovering back wages by
including new language in the
withholding contract clauses at
§ 5.5(a)(2) (DBRA) and (b)(3) (CWHSSA)
to clarify that cross-withholding may be
accomplished on contracts held by
agencies other than the agency that
awarded the contract. The Department
16 The 1981–1982 rulemaking went into effect on
Apr. 29, 1983. 48 FR 19532.
17 Available at: https://www.bls.gov/news.release/
eci.toc.htm.
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also creates a mechanism through which
contractors will be required to consent
to cross-withholding for back wages
owed on contracts held by different but
related legal entities in appropriate
circumstances—if, for example, those
entities are controlled by the same
controlling shareholder or are joint
venturers or partners on a Federal
contract. The revisions also include a
harmonization of the DBA and Related
Act debarment standards.
II. Background
A. Statutory and Regulatory History
The Davis-Bacon Act, as enacted in
1931 and subsequently amended,
requires the payment of minimum
prevailing wages determined by the
Department to laborers and mechanics
working on Federal contracts in excess
of $2,000 for the construction,
alteration, or repair, including painting
and decorating, of public buildings and
public works. See 40 U.S.C. 3141 et seq.
Congress has also included the DavisBacon requirements in numerous other
laws, known as the Davis-Bacon Related
Acts (the Related Acts and, collectively
with the Davis-Bacon Act, the DBRA),
which provide Federal assistance for
construction projects through grants,
loans, loan guarantees, insurance, and
other methods. Congress intended the
Davis-Bacon Act to ‘‘protect local wage
standards by preventing contractors
from basing their bids on wages lower
than those prevailing in the area.’’
Coutu, 450 U.S. at 773 (quoting H.
Comm. on Educ. and Lab., Legis.
History of the Davis-Bacon Act, 87th
Cong., 2d Sess., 1 (Comm. Print 1962)).
The Copeland Act, enacted in 1934,
added the requirement that contractors
working on Davis-Bacon projects must
submit weekly certified payrolls for
work performed on the contract. See 40
U.S.C. 3145. The Copeland Act also
prohibits contractors from inducing any
worker to give up any portion of the
wages due to them on such projects. See
18 U.S.C. 874. In 1962, Congress passed
CWHSSA, which, as amended, requires
an overtime payment of additional halftime for hours worked over 40 in the
workweek by laborers and mechanics,
including watchpersons and guards, on
Federal contracts or federally assisted
contracts containing Federal prevailing
wage standards. See 40 U.S.C. 3701 et
seq.
As initially enacted, the DBA did not
take into consideration the provision of
fringe benefits to workers. In 1964,
Congress expanded the Act to require
the Department to include an analysis of
fringe benefits as part of the wage
determination process. The amendment
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requires contractors and subcontractors
to provide fringe benefits (such as
vacation pay, sick leave, health
insurance, and retirement benefits), or
the cash equivalent thereof, to their
workers at the level prevailing for the
labor classification on projects of a
similar character in the locality. See Act
of July 2, 1964, Public Law 88–349, 78
Stat. 238.
Congress has delegated broad
rulemaking authority under the DBRA
to the Department. The DBA, as
amended, contemplates regulatory and
administrative action by the Department
to determine the prevailing wages that
must be paid and to ‘‘prescribe
reasonable regulations’’ for contractors
and subcontractors. 40 U.S.C. 3142(b);
40 U.S.C. 3145. Congress also, through
Reorganization Plan No. 14 of 1950,
directed the Department to ‘‘prescribe
appropriate standards, regulations and
procedures’’ to be observed by Federal
agencies responsible for the
administration of the Davis-Bacon and
Related Acts. 15 FR 3176; 5 U.S.C. app.
1.
The Department promulgated its
initial regulations implementing the Act
in 1935 and has since periodically
revised them. See U.S. Department of
Labor, Regulations No. 503 (Sept. 30,
1935). In 1938, these initial regulations,
which set forth the procedures for the
Department to follow in determining
prevailing wages, were included in part
1 of Title 29 of the new Code of Federal
Regulations. See 29 CFR 1.1 et seq.
(1938). The Department later added
regulations to implement the payroll
submission and anti-kickback
provisions of the Copeland Act—first in
part 2 and then relocated to part 3 of
Title 29. See 6 FR 1210 (Mar. 1, 1941);
7 FR 687 (Feb. 4, 1942); 29 CFR part 2
(1942); 29 CFR part 3 (1943). After the
Reorganization Plan No. 14 of 1950, the
Department issued regulations setting
forth procedures for the administration
and enforcement of the Davis-Bacon and
Related Acts in a new part 5. 16 FR 4430
(May 12, 1951); 29 CFR part 5. The
Department made significant revisions
to the regulations in 1964, and again in
the 1981–1982 rulemaking.18
18 See 29 FR 13462 (Sept. 30, 1964); 46 FR 41444–
70 (NPRM parts 1 and 5) (Aug. 14, 1981); 47 FR
23644–79 (final rule parts 1, 3, and 5) (May 28,
1982). The Department also proposed a significant
revision of parts 1 and 5 of the regulations in 1979
and issued a final rule in 1981. See 44 FR 77026
(Dec. 28, 1979) (NPRM Part 1); 44 FR 77080 (Dec.
28, 1979) (NPRM part 5); 46 FR 4306 (Jan. 16, 1981)
(final rule part 1); 46 FR 4380 (Jan. 16, 1981) (final
rule part 5). The 1981 final rules, however, were
delayed and subsequently replaced by the 1981–
1982 rulemaking. The 1982 final rule was delayed
by litigation and re-published with amendments in
1983 and 1985. 48 FR 19532–53 (Apr. 29, 1983)
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While the Department has made
periodic revisions to the regulations in
recent years, such as to better protect
the personal privacy of workers, 73 FR
77511 (Dec. 19, 2008); to remove
references to the ‘‘Employment
Standards Administration,’’ 82 FR 2225
(Jan. 9, 2017); and to adjust Federal civil
money penalties, 81 FR 43450 (July 1,
2016), 83 FR 12 (Jan. 2, 2018), 84 FR 218
(Jan. 23, 2019), 87 FR 2328 (Jan. 14,
2022), 88 FR 2210 (Jan. 13, 2023), the
Department has not engaged in a
comprehensive review and revision
since the 1981–1982 rulemaking.
B. Overview of the Davis-Bacon Program
WHD, an agency within the U.S.
Department of Labor, administers the
Davis-Bacon program for the
Department. WHD carries out its
responsibilities in partnership with the
Federal agencies that enter into direct
DBA-covered contracts for construction
and/or administer Federal assistance to
State and local governments and other
funding recipients that is covered by the
Related Acts. The State and local
governmental agencies and authorities
that receive covered financial assistance
also have important responsibilities in
administering Related Act program
rules, as they manage programs through
which covered funding flows or the
agencies themselves directly enter into
covered contracts for construction.
The DBRA program includes three
basic components in which these
government entities have
responsibilities: (1) wage surveys and
wage determinations; (2) contract
formation and administration; and (3)
enforcement and remedies.
1. Wage Surveys and Determinations
The DBA delegates to the Secretary of
Labor the responsibility to determine
the wage rates that are ‘‘prevailing’’ for
each classification of covered laborers
and mechanics on similar projects ‘‘in
the civil subdivision of the State in
which the work is to be performed.’’ 40
U.S.C. 3142(b). WHD carries out this
responsibility for the Department
through its wage survey program and
derives the prevailing wage rates from
survey information that responding
contractors and other interested parties
voluntarily provide. The program is
carried out in accordance with the
program regulations in part 1 of Title 29
of the Code of Federal Regulations, see
29 CFR 1.1 through 1.7, and its
procedures are described in guidance
documents such as the ‘‘Davis-Bacon
Construction Wage Determinations
(final rule parts 1 and 5); 50 FR 4506 (Jan. 31, 1985)
(final rule §§ 1.3(d) and 1.7(b)).
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Manual of Operations’’ (1986) (Manual
of Operations) and ‘‘Prevailing Wage
Resource Book’’ (2015) (PWRB).19
Although part 1 of the regulations
provides the authority for WHD to
create project-specific wage
determinations, such project wage
determinations, once more common,
now are rarely employed. Instead,
nearly all wage determinations are
general wage determinations issued for
general types of construction (building,
residential, highway, and heavy) and
applicable to a specific geographic area.
General wage determinations can be
incorporated into the vast majority of
contracts and create uniform application
of the DBRA for that area.
2. Contract Formation and
Administration
The Federal agencies that enter into
DBA-covered contracts or administer
Related Act programs have the initial
responsibility to determine whether a
contract is covered by the DBA or one
of the Related Acts and identify the
contract clauses and the applicable
wage determinations that must be
included in the contract. See 29 CFR
1.6(b). In addition to the Department’s
regulations, this process is also guided
by parallel regulations in part 22 of the
FAR for those contracts that are subject
to the FAR. See 48 CFR part 22. Federal
agencies also maintain their own
regulations and guidance governing
agency-specific aspects of the process.
See, e.g., 48 CFR subpart 222.4
(Defense); 48 CFR subpart 622.4 (State);
U.S. Department of Housing and Urban
Development (HUD), HUD Handbook
1344.1, Federal Labor Standards
Requirements in Housing and Urban
Development Programs (2013).20
Where contracting agencies or
interested parties have questions about
such matters as coverage under the
DBRA or the applicability of the
appropriate wage determination to a
specific contract, they are directed to
submit those questions to the
Administrator of WHD (the
Administrator) for resolution. See 29
CFR 5.13. The Administrator responds
to such questions and provides periodic
guidance on other aspects of the DBRA
program to contracting agencies and
other interested parties, particularly
through All Agency Memoranda
19 The Manual of Operations is a 1986 guidance
document that is still used internally for reference
within WHD. The PWRB is a 2015 document that
is intended to provide practical information to
contracting agencies and other interested parties,
and is available at https://www.dol.gov/agencies/
whd/government-contracts/prevailing-wageresource-book.
20 Available at: https://www.hud.gov/sites/dfiles/
OCHCO/documents/Work-Schedule-Request.pdf.
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(AAMs) and ruling letters. In addition,
the Department maintains a guidance
document, the Field Operations
Handbook (FOH), to provide guidance
for the regulated community and for
WHD investigators and staff on contract
administration and enforcement
policies.21
During the administration of a DBRAcovered contract, contractors and
subcontractors are required to provide
certified payrolls to the contracting
agency to demonstrate their compliance
with the incorporated wage
determinations on a weekly basis. See
generally 29 CFR part 3. Contracting
agencies have the duty to ensure
compliance by engaging in periodic
audits or investigations of contracts,
including examinations of payroll data
and confidential interviews with
workers. See 29 CFR 5.6. Prime
contractors have the responsibility for
the compliance of all the subcontractors
on a covered prime contract. 29 CFR
5.5(a)(6). WHD conducts investigations
of covered contracts, which include
determining if the DBRA contract
clauses or appropriate wage
determinations were mistakenly omitted
from the contract. See 29 CFR 1.6(f). If
WHD determines that there was such an
omission, it will request that the
contracting agency either terminate and
resolicit the contract or modify it to
incorporate the required clauses or wage
determinations retroactively. Id.
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3. Enforcement and Remedies
In addition to WHD, contracting
agencies have enforcement authority
under the DBRA. When a contracting
agency’s investigation reveals
underpayments of wages of the DBA or
one of the Related Acts, the Federal
agency generally is required to provide
a report of its investigation to WHD, and
to seek to recover the underpayments
from the contractor responsible. See 29
CFR 5.6(a), 5.7. If violations identified
by the contracting agency or by WHD
through its own investigation are not
promptly remedied, contracting
agencies are required to suspend
payment on the contract until sufficient
funds are withheld to compensate the
workers for the underpayments. 29 CFR
5.9. The DBRA contract clauses also
provide for ‘‘cross-withholding’’ if
sufficient funds are no longer available
on the contract under which the
21 The FOH reflects policies established through
changes in legislation, regulations, significant court
decisions, and the decisions and opinions of the
WHD Administrator. It is not used as a device for
establishing interpretive policy. Chapter 15 of the
FOH covers the DBRA, including CWHSSA, and is
available at https://www.dol.gov/agencies/whd/
field-operations-handbook/Chapter-15.
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violations took place. Under this
procedure, funds may be withheld from
any other covered Federal contract or
federally assisted contract held by the
same prime contractor in order to
remedy the underpayments on the
contract at issue. See 29 CFR 5.5(a)(2),
(b)(3). Contractors that violate the DBRA
may also be subject to debarment from
future Federal contracts and federally
assisted contracts. See 29 CFR 5.12.
Where WHD conducts an
investigation and finds that violations
have occurred, it will notify the affected
prime contractor(s) and subcontractor(s)
of the findings of the investigation—
including any determination that
workers are owed back wages and
whether there is reasonable cause to
believe the contractor may be subject to
debarment. See 29 CFR 5.11(b).
Contractors can request a hearing
regarding these findings through the
Department’s Office of Administrative
Law Judges (OALJ) and may appeal any
ruling by the OALJ to the Department’s
ARB. Id.; see also 29 CFR parts 6 and
7 (OALJ and ARB rules of practice for
Davis-Bacon proceedings). Decisions of
the ARB are final agency actions that
may be reviewable under the
Administrative Procedure Act (APA) in
Federal district court. See 5 U.S.C. 702,
704.22
III. Final Regulatory Revisions
A. Legal Authority
The Davis-Bacon Act, as enacted in
1931 and subsequently amended,
requires the payment of certain
minimum ‘‘prevailing’’ wages
determined by the Department to
laborers and mechanics working on
Federal contracts in excess of $2,000 for
the construction, alteration, or repair,
including painting and decorating, of
public buildings and public works. See
40 U.S.C. 3141 et seq. The DBA
authorizes the Secretary of Labor to
develop a definition for the term
‘‘prevailing’’ wage and a methodology
for setting it based on wages paid on
similar projects in the civil subdivision
of the State in which a covered project
will occur. See 40 U.S.C. 3142(b); Bldg.
& Constr. Trades’ Dep’t, AFL–CIO v.
Donovan, 712 F.2d 611, 616 (D.C. Cir.
1983).
22 In addition to reviewing liability
determinations and debarment, the ARB, the
Secretary (when exercising discretionary review),
and the courts also have jurisdiction in certain
circumstances to review general wage
determinations. Judicial review, however, is strictly
limited to any procedural irregularities, as there is
no jurisdiction to review the substantive correctness
of a wage determination under the DBA. See
Binghamton Constr. Co., 347 U.S. at 177.
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57531
The Secretary of Labor has the
responsibility to ‘‘prescribe reasonable
regulations’’ for contractors and
subcontractors on covered projects. 40
U.S.C. 3145. The Secretary, through
Reorganization Plan No. 14 of 1950, also
has the responsibility to ‘‘prescribe
appropriate standards, regulations and
procedures’’ to be observed by Federal
agencies responsible for the
administration of the Davis-Bacon and
Related Acts ‘‘[i]n order to assure
coordination of administration and
consistency of enforcement of the labor
standards provisions’’ of the DBRA. 15
FR 3176; 5 U.S.C. app. 1.
The Secretary has delegated authority
to promulgate these regulations to the
Administrator and to the Deputy
Administrator of the WHD if the
Administrator position is vacant. See
Secretary’s Order No. 01–2014, 79 FR
77527 (Dec. 24, 2014); Secretary’s Order
No. 01–2017, 82 FR 6653 (Jan. 19, 2017).
B. Overview of the Final Rule
The Department finalizes its
proposals to update and modernize the
regulations at 29 CFR parts 1, 3, and 5,
which implement the DBRA. The
sections below address these regulatory
revisions as adopted in the final rule.
1. 29 CFR Part 1
The procedures for determining the
prevailing wage rates and fringe benefits
applicable to laborers and mechanics
engaged in construction activity covered
by the Davis-Bacon and Related Acts are
set forth in 29 CFR part 1. The
regulations in this part also set forth the
procedures for the application of such
prevailing wage determinations to
covered construction projects.
i. Section 1.1 Purpose and Scope
The Department proposed technical
revisions to § 1.1 to update the statutory
reference to the Davis-Bacon Act, now
recodified at 40 U.S.C. 3141 et seq. The
Department also proposed to eliminate
outdated references to the Deputy Under
Secretary of Labor for Employment
Standards at the Employment Standards
Administration. The Employment
Standards Administration was
eliminated as part of an agency
reorganization in 2009, and its
authorities and responsibilities were
devolved into its constituent
components, including the WHD. See
Secretary’s Order No. 09–2009 (Nov. 6,
2009), 74 FR 58836 (Nov. 13, 2009), 82
FR 2221 (Jan. 9, 2017). The Department
further proposed to revise § 1.1 to reflect
the removal of Appendix A of part 1, as
discussed below. The Department also
proposed to add new paragraph (a)(1) to
reference the WHD website (https://
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www.dol.gov/agencies/whd/
government-contracts, or its successor
website) on which a listing of laws
requiring the payment of wages at rates
predetermined by the Secretary of Labor
under the Davis-Bacon Act is currently
found.
The Department received one
comment in favor of this proposal. The
United Association of Journeymen and
Apprentices of the Plumbing and Pipe
Fitting Industry of the United States &
Canada (UA) commented in support of
the proposal, noting that the current
information was outdated. The final rule
therefore adopts this change as
proposed, with one technical edit to
delete an unnecessary conjunction that
is not intended to reflect a change in the
substance of this section.
ii. Section 1.2
Definitions
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(A) Prevailing Wage
Section 1.2 contains the definition of
the term ‘‘prevailing wage.’’ The DBA
and the Related Acts require laborers
and mechanics on covered projects to be
paid a prevailing wage as set by the
Secretary of Labor, but the statutes do
not define the term ‘‘prevailing.’’ The
Department’s regulatory definition of
the term ‘‘prevailing wage’’ in 29 CFR
1.2 specifies the basic methodology with
which the Department determines
whether a certain wage rate is prevailing
in a given geographic area. The
Department uses this methodology to
prepare wage determinations that are
incorporated into DBRA-covered
contracts to set minimum wage rates for
each classification of covered workers
on a project.
In the NPRM, the Department
proposed to redefine the term
‘‘prevailing wage’’ in § 1.2 to return to
the original methodology for
determining whether a wage rate is
prevailing. This original methodology
has been referred to as the ‘‘three-step
process.’’
Since 1935, the Secretary has
interpreted the word ‘‘prevailing’’ in the
Davis-Bacon Act to be consistent with
the common understanding of the term
as meaning ‘‘predominant’’ or ‘‘most
frequent.’’ From 1935 until the 1981–
1982 rulemaking, the Department
employed a three-step process to
identify the most frequently used wage
rate for each classification of workers in
a locality. See Regulation 503 section 2
(1935); 47 FR 23644.23 This process
identified as prevailing: (1) any wage
rate paid to a majority of workers; and,
if there was none, then (2) the wage rate
paid to the greatest number of workers,
23 Implemented
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provided it was paid to at least 30
percent of workers, and, if there was
none, then (3) the weighted average rate.
The second step has been referred to as
the ‘‘30-percent rule.’’
The three-step process relegated the
average rate to a final, fallback method
of determining the prevailing wage. In
1962 congressional testimony, Solicitor
of Labor Charles Donahue explained the
reasoning for this sequence in the
determination: An average rate ‘‘does
not reflect a true rate which is actually
being paid by any group of contractors
in the community being surveyed.’’
Instead, ‘‘it represents an artificial rate
which we create ourselves, and which
does not reflect that which a
predominant amount of workers are
paid.’’ 24
In 1982, the Department published a
final rule that amended the definition of
‘‘prevailing wage’’ by eliminating the
second step in the three-step process—
the 30-percent threshold. See 47 FR
23644. The new process required only
two steps: first identifying if there was
a wage rate paid to more than 50 percent
of workers, and then, if not, relying on
a weighted average of all the wage rates
paid. Id. at 23644–45.
In eliminating the 30-percent
threshold, however, the Department did
not change its underlying interpretation
of the word ‘‘prevailing’’—that it means
‘‘the most widely paid rate’’ must be the
‘‘definition of first choice’’ for the
prevailing wage. 47 FR 23645. While the
1982 rule continued to allow the
Department to use an average rate as a
fallback, the Department rejected
commenters’ suggestions that the
weighted average could be used in all
cases. See 47 FR 23644–45. As the
Department explained, this was because
the term ‘‘prevailing’’ contemplates that
wage determinations mirror, to the
extent possible, those rates ‘‘actually
paid’’ to workers. 47 FR 23645.
This interpretation—that the
definition of first choice for the term
‘‘prevailing wage’’ should be an actual
wage rate that is most widely paid—has
now been shared across administrations
for over 85 years. In the intervening
decades, Congress has amended and
expanded the reach of the Act’s
prevailing wage requirements dozens of
times without altering the term
‘‘prevailing’’ or the grant of broad
authority to the Secretary of Labor to
define it.25 In addition, the question was
24 Administration of the Davis Bacon Act:
Hearings before the Spec. Subcomm. of Lab. of the
H. Comm. on Educ. & Lab., 87th Cong. 811–12
(1962) (testimony of Charles Donahue, Solicitor of
Labor).
25 See, e.g., Act of Mar. 23, 1941, ch. 26, 55 Stat.
53 (1941) (applying the Act to alternative contract
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also reviewed by the Office of Legal
Counsel (OLC) at the Department of
Justice, which independently reached
the same conclusions: ‘‘prevailing
wage’’ means the current and
predominant actual rate paid, and an
average rate should only be used as a
last resort. See Determination of Wage
Rates Under the Davis-Bacon & Serv.
Cont. Acts, 5 Op. O.L.C. 174, 176–77
(1981).26
In the 1982 final rule, when the
Department eliminated the 30-percent
threshold, it anticipated that this change
would increase the use of artificial
average rates. 47 FR 23648–49.
Nonetheless, the Department believed a
change was preferable because the 30percent threshold could in some cases
not account for up to 70 percent of the
remaining workers. See 46 FR 41444.
The Department also stated that it
agreed with the concerns expressed by
certain commenters that establishing a
prevailing wage rate based on 30percent of survey wage rates was
‘‘inflationary’’ and gave ‘‘undue weight
to collectively bargained rates.’’ 47 FR
23644–45.
After reviewing the development of
the Davis-Bacon Act program since the
1981–1982 rulemaking, the Department
has concluded that eliminating the 30percent threshold has ultimately
resulted in an overuse of average rates.
On paper, the weighted average remains
the fallback method to be used only
when there is no majority rate. In
practice, though, it has become a central
mechanism to set the prevailing wage
rates included in Davis-Bacon wage
determinations and covered contracts.
Prior to the 1982 rule change, the use
of averages to set a prevailing wage rate
was relatively rare. In a Ford
Administration study of Davis-Bacon
Act prevailing wage rates in
commercial-type construction in 19
cities, none of the rates were based on
averages because all of the wage rates
were ‘‘negotiated’’ rates, i.e., based on
collective bargaining agreements (CBAs)
that represented a predominant wage
rate in the locality.27 The Department
types); CWHSSA of 1962, Public Law 87–581, 76
Stat. 357 (1962) (requiring payment of overtime on
contracts covered by the Act); Act of July 2, 1964,
Public Law 88–349, 78 Stat. 238 (1964) (extending
the Act to cover fringe benefits); 29 CFR 5.1
(referencing 57 Related Acts into which Congress
incorporated Davis-Bacon Act requirements
between 1935 and 1978).
26 Available at: https://www.justice.gov/sites/
default/files/olc/opinions/1981/06/31/op-olc-v005p0174_0.pdf.
27 See Robert S. Goldfarb & John F. Morrall, ‘‘An
Analysis of Certain Aspects of the Administration
of the Davis-Bacon Act,’’ Council on Wage and
Price Stability (May 1976), reprinted in Bureau of
Nat’l Affs., Construction Labor Report, No. 1079, D–
1, D–2 (1976).
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estimates that prior to the 1982 final
rule, as low as 15 percent of
classification rates across all wage
determinations were based on averages.
After the 1982 rule was implemented,
the use of averages may have initially
increased to approximately 26 percent
of all wage determinations.28
The Department’s current use of
weighted averages is now significantly
higher than this 26 percent figure. To
analyze the current use of weighted
averages and the potential impacts of
this rulemaking, the Department
compiled data for select classifications
for 19 recent wage surveys—nearly all of
the completed surveys that WHD began
in 2015 or later. The data show that the
Department’s reliance on average rates
has increased significantly, and now
accounts for 63 percent of the observed
classification determinations in this
recent time period.29
Such an overuse of weighted averages
is inconsistent with the Department’s
longstanding interpretation of
Congress’s use of the word ‘‘prevailing’’
in the text of the Act—including the
Department’s statements in the
preamble to the 1982 rule itself that the
definition of first choice for the
‘‘prevailing’’ wage should be the most
widely paid rate that is actually paid to
workers in the relevant locality. If
nearly two-thirds of rates that are now
being published based on recent surveys
are based on a weighted average, it is no
longer fair to say that it is a fallback
method of determining the prevailing
wage.
The use of averages as the dominant
methodology for issuing wage
determinations is also in tension with
the recognized purpose of the Act ‘‘to
28 See Oversight Hearing on the Davis-Bacon Act,
Before the Subcomm. on Lab. Standards of the H.
Comm. on Educ. & Lab., 96th Cong. 58 (1979)
(statement of Ray Marshall, Secretary of Labor)
(discussing study of 1978 determinations showing
only 24 percent of classification rates were based
on the 30-percent rule); Jerome Staller,
‘‘Communications to the Editor,’’ Policy Analysis,
Vol. 5, No. 3 (Summer 1979), pp. 397–98 (noting
that 60 percent of determinations in the internal
Department 1976 and 1978 studies were based on
the 30-percent rule or the average-rate rule). The
authors of the Council on Wage and Price Stability
study, however, pointed out that the Department’s
figures were for rates that had been based on survey
data, while 57 percent of rates in the mid-1970’s
were based solely on CBAs without the use of
surveys (a practice that the Department no longer
uses to determine new rates). See Robert S. Goldfarb
& John F. Morrall II., ‘‘The Davis-Bacon Act: An
Appraisal of Recent Studies,’’ 34 Indus. & Lab. Rel.
Rev. 191, 199¥200 & n.35 (1981). Thus, the actual
percentage of annual classification determinations
that were based on average rule before 1982 may
have been as low as 15 percent, and the percent
based on the average rule after 1982 would have
been expected to be around 26 percent.
29 See below section V (Executive Order 12866,
Regulatory Planning and Review et al.).
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protect local wage standards by
preventing contractors from basing their
bids on wages lower than those
prevailing in the area.’’ Coutu, 450 U.S.
at 773 (internal quotation marks and
citation omitted). Using an average to
determine the minimum wage rate on
contracts allows a single low-wage
contractor in the area to depress wage
rates on Federal contracts below the
higher rate that may be generally more
prevalent in the community—by
factoring into (and lowering) the
calculation of the average that is used to
set the minimum wage rates on local
Federal contracts.30
To address the increasing tension
between the current methodology and
the purpose and definition of
‘‘prevailing,’’ the Department proposed
in the NPRM to return to the original
three-step process. The Department
expects that re-introducing the 30percent threshold will reduce the use of
average rates roughly by half—from 63
percent to 31 percent. The data from the
regulatory impact analysis included in
section V suggests that returning to the
three-step process will continue to
result in 37 percent of prevailing wage
rates based on the majority rule, with
the balance of 32 percent based on the
30-percent threshold, and 31 percent
based on the weighted average.
As part of its review of the wage
determination definition and
methodology, the Department also
considered, but decided against,
proposing to use the median wage rate
as the ‘‘prevailing’’ rate. The median,
like the average (mean), is a number that
can be unrelated to the wage rate paid
with the greatest frequency to
employees working in the locality.
Using either the median or the average
as the primary method of determining
the prevailing rate is not consistent with
the Department’s long-held
interpretation of the meaning of the
term ‘‘prevailing’’ in the Davis-Bacon
Act. See 47 FR 23645. The Department
therefore proposed to return to the
three-step process and the 30-percent
threshold, and did not propose as
alternatives the use of either the median
or mean as the primary or sole methods
for making wage determinations.
30 For example, the 2001 wage determination for
electricians in Eddy County, New Mexico, was an
average rate based on responses that included
lower-paid workers that had been brought in from
Texas by a Texas electrical contractor to work on
a single job. As the ARB noted in reviewing a
challenge to the wage determination, the result was
that ‘‘contract labor from Texas, where wages
reportedly are lower, effectively has determined the
prevailing wage for electricians in this New Mexico
county.’’ New Mexico Nat’l Elec. Contractors Ass’n,
ARB No. 03–020, 2004 WL 1261216, at *8 (May 28,
2004).
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(1) Comments on the Definition of
‘‘Prevailing Wage’’
The Department received many
comments regarding the definition of
the term ‘‘prevailing wage’’ and the
proposed return to the three-step
process and the 30-percent threshold.
These included comments in favor of
the proposal, comments in favor of
keeping the current definition,
comments suggesting that the
Department abandon the ‘‘modal’’
methodology entirely and use only an
average, and comments suggesting the
Department should use data from
sources other than its wage surveys
before applying any specific
methodology. Having reviewed and
considered all the comments, the
Department has decided that the best
course is to adopt the re-definition of
‘‘prevailing wage’’ as proposed and
return to the three-step process that was
in effect from 1935 to 1983.
The Department continues to believe,
as it has consistently for over 85 years,
that the best methodology for
determining the ‘‘prevailing wage’’
under the Davis-Bacon Act is one that
uses a mathematical mode to determine
‘‘the most widely paid rate’’ as the
‘‘definition of first choice.’’ 47 FR
23645. The modal definition of
prevailing as ‘‘the most widely paid
rate’’ is the methodology that is most
consistent with Congress’s use of the
word ‘‘prevailing’’ in the statutory text.
Commenters in support of the
Department’s proposal cited to various
dictionary definitions of the word
‘‘prevailing’’ that support this
conclusion. The Construction
Employers of America (CEA), for
example, noted the definition of
‘‘prevailing’’ as ‘‘most frequent’’ or
‘‘generally current’’ and descriptive of
‘‘what is in general or wide circulation
or use’’ from Webster’s Third New
International Dictionary (1976). Accord
5 Op. O.L.C. at 175. The Department
agrees that this and other similar
dictionary definitions support the use of
a modal methodology as the method of
first choice.
Although the legislative history of the
Act does not suggest that Congress
understood there to be only one possible
way of determining the prevailing
wage,31 there is no question that a
modal methodology was within the
common and ordinary public meaning
of the term ‘‘prevailing’’ at the time. One
31 See, e.g., 74 Cong. Rec. H6516 (daily ed. Feb
28, 1931) (statement of Rep. William Kopp) (noting
that some might argue ‘‘the term ‘prevailing rate’
has a vague and indefinite meaning,’’ but that this
was not an obstacle because ‘‘the power will be
given . . . to the Secretary of Labor to determine
what the prevailing rates are’’).
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contemporaneous exchange from 1932
is particularly instructive. During an
early debate over potential amendments
to the Act, the Associated General
Contractors (AGC) explained that union
representatives believed the prevailing
rate should always be a collectively
bargained union wage, while the
contractors, many members of Congress,
and Federal contracting agencies
believed it should be ‘‘the rate paid to
the largest number in a particular
locality at a given time’’—in other
words, the modal rate.32
Several commenters on the
Department’s current proposal also
argued that a modal methodology is
generally more consistent with the
purpose of Davis-Bacon Act. These
commenters, including the National
Black Worker Center, the International
Union of Bricklayers and Allied
Craftworkers, and others, argued that
the use of a modal methodology results
in a prevailing wage rate that is
‘‘actually paid’’ to workers in the area.
These commenters said that average
rates are less preferable because they are
‘‘artificial’’ and may not mirror any of
the actual wage rates paid in the
community. North America’s Building
Trade Union (NABTU), among others,
asserted that ‘‘average rates paid to no
one are not ‘prevailing[.]’ ’’ Many unions
and contractor associations, including
the Washington State Building and
Construction Trades Council (WA
BCTC) and NABTU, noted that the use
of wage rates that are actually paid to
workers in the community is more
likely to protect local construction firms
from being underbid by unscrupulous
low-wage contractors, which is the
purpose of the Act.33 Accordingly,
commenters in favor of the proposal
said averages should only be used as a
fallback method when there is no clear
rate prevailing in a given area.
32 See Regulation of Wages Paid to Employees by
Contractors Awarded Government Building
Contracts: Hearings before the Committee on Labor,
House of Representatives, 72nd Cong., 1st Sess., on
S. 3847 and H. R. 11865 (Apr. 28, 1932) at 34–35.
The National Association of Manufacturers,
similarly, argued that the prevailing wages should
be ‘‘considered as that being paid to the largest
number in the particular locality at a particular
time.’’ Id. at 71–72. See also 5 Op. O.L.C. at 175–
76 (noting that this testimony leading up to the
1935 amendments ‘‘indicates a common
understanding by spokesmen for labor and
management, as well as individual legislators, that
the ‘prevailing’ wage was the wage paid to the
largest number of workers in the relevant
classification and locality’’).
33 See also Staff of the H. Subcomm. on Lab., 88th
Cong., Administration of the Davis-Bacon Act, Rep.
of the Subcomm. on Lab. of the Comm. on Educ.
& Lab. (Comm. Print 1963) (1963 House
Subcommittee Report), at 7–8; 5 Op. O.L.C. at 177
(quoting the 1963 House Subcommittee Report).
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A wide range of commenters that
supported the proposal agreed with the
Department that the use of an average—
rather than a ‘‘modal’’ number
identifying the most prevalent wage
rate—is less preferable because the use
of an average allows outlier wage rates
paid to very few workers to influence
the prevailing wage. The Leadership
Conference on Civil and Human Rights
(LCCHR), the National Women’s Law
Center, Oxfam America, and several
other civil rights and worker advocacy
organizations similarly commented that
‘‘reliance on weighted averages creates
the potential for a single employer’s
rates that are exceptionally high or
exceptionally low having outsize
influence in determining the prevailing
wage.’’ Commenters noted that this
feature of averages makes the overuse of
averages less consistent with the Act’s
purposes of limiting the depressive
effect of low-wage contractors on the
wage rates in the local community.
Commenters supportive of the
Department’s proposal also argued that
this characteristic of average rates is
particularly problematic for maintaining
prevailing local construction standards
where the use of an average results in
a prevailing wage rate that is lower than
a modal rate. As a Professor of
Economics at the University of Utah
commented, ‘‘[b]ecause the mean is
sensitive to a long tail of lower wages
compared to the mode, the mode is less
likely to undercut local labor standards,
including fringe benefits which
underpin training and apprenticeship
programs.’’ Conversely, the commenter
noted, ‘‘the modal wage will deter
market failures associated with shortrun bidding practices that incentivize
bidders to jettison all but the most
necessary short-run costs of specific
projects.’’
In addition to determining that a
modal methodology continues to be
preferable, the Department proposed to
return to the lower 30-percent threshold
for using the mode, before falling back
to the use of an average rate. Several
commenters, including think tanks such
as Americans for Prosperity and
Institute for the American Worker
(AFP–I4AW) and Competitive
Enterprise Institute (CEI), opposed this
proposal because they asserted that only
a wage rate paid to a ‘‘majority’’ of
workers fits the term ‘‘prevailing.’’ The
National Federation of Independent
Business (NFIB) asserted that 30 percent
did not fall within the meaning of
‘‘prevailing’’ when Congress enacted the
DBA in 1931 and the Department’s
initial regulation was ‘‘erroneous’’ at the
time. CEI cited to a definition of
‘‘prevailing’’ as meaning ‘‘accepted,
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used, or practiced by most people.’’ 34
CEI asserted that the term ‘‘most
people’’ used in that context ‘‘can only
mean ‘a majority’ ’’ and therefore that
‘‘30 percent is not ‘prevailing’ under any
meaningful sense of the term.’’
On the other hand, many commenters
supported the Department’s proposal
and criticized the 1982 rule for seeming
to conflate the dictionary definitions of
‘‘prevailing’’ with a ‘‘majority.’’ These
commenters, including Mechanical
Contractors Association of America
(MCAA), National Electrical Contractors
Association (NECA), and the UA, argued
that the term ‘‘prevailing’’ is properly
understood and defined as the most
common or prevalent—which may be,
but is not necessarily, a ‘‘majority.’’ If
Congress had intended for the
Department to determine only a
‘‘majority’’ wage, they argue, Congress
would have explicitly stated as much in
the statutory text. NECA and CEA noted
that the interpretation of ‘‘prevailing’’ as
not necessarily a majority was
supported by the 1963 report of the
House Subcommittee that examined the
30-percent threshold in depth before the
passage of the 1964 amendments to the
Act.35 A joint comment from the
Pennsylvania Attorney General and the
Pennsylvania State Department of Labor
and Industry (PAAG and PADLI)
supported the reversion to the original
definition, noting that it ‘‘aligns with
the underlying interpretation of the
word ‘prevailing’ as the ‘most widely
paid rate.’ ’’
The Department agrees with these
commenters that the 30-percent
threshold is consistent with the
meaning of the word ‘‘prevailing’’
because ‘‘prevailing’’ is not coextensive
with ‘‘majority.’’ A statute is normally
interpreted with reference to the
ordinary public meaning of its terms ‘‘at
the time of its enactment.’’ Bostock v.
Clayton Cnty., 140 S. Ct. 1731, 1738
(2020). Dictionaries from around the
time of the 1935 amendments to the Act,
when Congress revised the DBA to
require the Secretary to predetermine
prevailing wage rates, had definitions
similar to the one cited in the 1981 OLC
opinion. See, e.g., Prevailing, MerriamWebster, Webster’s Collegiate Dictionary
(5th ed. 1936) (‘‘Very generally current;
most frequent; predominant’’ with
synonyms of common, widespread,
34 The comment raising this language cited to an
entry for ‘‘prevailing’’ in the online version of
Merriam-Webster’s dictionary. The Department was
not able to find that language at the cited location,
but was able to find it in an online version of a
thesaurus from the same publisher. See Prevailing,
Merriam-Webster’s Thesaurus, https://
www.merriam-webster.com/thesaurus/prevailing.
35 1963 House Subcommittee Report, at 8.
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extensive, and prevalent); Prevailing,
Oxford English Dictionary, Vol. VIII
(1933) at 1334 (‘‘2. Predominant in
extent or amount; most widely
occurring or accepted; generally
current’’); 5 Op. O.L.C. at 175. When
there are only two kinds being
compared, the ‘‘most frequent’’ or ‘‘most
widely occurring’’ of the two kinds will
be a majority, and thus only a majority
will be prevailing. But the same is not
true when a variety of kinds are
compared. In such circumstances, even
if a majority will still necessarily be
prevailing, it does not follow that
anything less than a majority cannot be
considered prevailing. Rather, as the
1963 House Subcommittee Report
concluded, ‘‘ ‘prevailing’ means only a
greater number. It need not be a
majority.’’ 36
In opposing the proposal, AFP–I4AW
noted that in the 1981–1982 rulemaking
the Department had agreed with
commenters that stated ‘‘a rate based on
30 percent does not comport with the
definition of ‘prevailing[.]’ ’’ 37 The
Department did not provide further
explanation of this argument in the 1982
final rule, but had stated in the 1981
NPRM that the 30-percent rule ‘‘ignores
the rate paid to up to 70 percent of the
workers.’’ See 46 FR 41444. Several
commenters that opposed the return to
the 30-percent rule, including AFP–
I4AW, Associated Builders and
Contractors (ABC), and Clark Pacific,
stated that they still found this
reasoning persuasive.38
The Department disagrees. As an
initial matter, the characterization of the
30-percent threshold as ‘‘ignoring’’ rates
is not unique to that specific threshold.
Rather, it is a feature of any rule based
on a mathematical ‘‘mode,’’ in which
the only value that is ultimately used is
the value of the number that appears
most frequently. This is in contrast to
using a mean (average), in which the
values of all the numbers are averaged
36 1963
House Subcommittee Report, at 8.
FR 23644.
38 Similarly, CEI opposed the use of the 30percent rule because it stated that the fact that other
workers may earn less than the wage determined to
be the prevailing wage is ‘‘highly significant,’’
because it indicates that the labor market is ‘‘more
competitive in terms of wages.’’ Under this
reasoning, however, only an average rate would be
sufficient, because any modal (or median) rate
would not include all of the wage rates paid. Using
only an average is not consistent with the
Department’s long-held understanding of the
meaning of the term ‘‘prevailing.’’ See 47 at FR
23644–45. Neither the text nor the legislative
history of the Act suggests that the term prevailing
wage was intended to necessarily capture and
reflect all of the wage rates that are paid in an area.
Instead, the Department has understood the statute
as better carried out with a methodology that seeks
to determine which among those wage rates is
prevailing.
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together, or a median, which uses only
the midpoint value. Both the 30-percent
threshold and the majority rule are
modal rules in which the values of the
non-prevailing wage rates do not factor
into the final analysis. This feature of a
modal analysis can be viewed as
particularly helpful for avoiding an
unwarranted downward or upward
impact from outlier wage rates. As the
International Association of Sheet
Metal, Air, Rail and Transportation
Workers and the Sheet Metal and Air
Conditioning Contractors National
Association (SMART and SMACNA)
noted in a joint comment, ‘‘[w]hen using
the mean, unusually low or high values
distort the data; the mode, by contrast,
eliminates from the analysis data that
grossly deviate from what workers are
actually paid and, therefore, would
depress labor standards if included.’’
Moreover, the characterization of the
30-percent threshold as ignoring up to
70 percent of wage rates distorts how
the analysis is applied in practice. In the
three-step process, the first step is to
adopt the majority rate if there is one.
Under both the proposed three-step
process and the current majority-only
rule, any wage rate that is paid to a
majority of workers would be identified
as prevailing. Under either method, the
weighted average will be used whenever
there is no wage rate that is paid to more
than 30 percent of employees in the
survey response. The difference
between the current majority process
and the three-step methodology is solely
in how a wage rate is determined when
there is no majority, but there is a
significant plurality wage rate paid to
between 30 and 50 percent of workers.
In that circumstance, the current
‘‘majority’’ rule uses averages instead of
the rate that is actually paid to that
significant plurality of the survey
population. This is true, for example,
even where the same wage rate is paid
to 45 percent of workers and no other
rate is paid to as high a percentage of
workers. In such circumstances, the
Department believes that a wage rate
paid to between 30 and 50 percent of
workers—instead of an average rate that
may be actually paid to few workers or
none at all—is more of a ‘‘prevailing’’
wage rate.39
NABTU and other commenters in
favor of the Department’s proposed
return to the 30-percent threshold noted
39 As the OLC concluded in 1981, the use of an
average instead of the 30-percent rule may be
particularly inappropriate in circumstances where
‘‘there is a wide variation in rates of wages and a
large minority of persons paid significantly lower
wages; use of an average in such a case might result
in a contract wage well below the actual wages paid
a majority of employees.’’ 5 Op. O.L.C. at 177 n.3.
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57535
that Congress specifically considered on
numerous occasions whether to abolish
the 30-percent rule and declined to do
so.40 Similarly, CEA commented that
Congress’s repeated expansion and
amendment of the Act from 1935 to
1982 without changing or addressing
the definition of prevailing wage should
be interpreted as ‘‘persuasive evidence
that the interpretation is the one
intended by Congress.’ ’’ CFTC v. Schor,
478 U.S. 833, 846 (1986) (quoting NLRB
v. Bell Aerospace Co., 416 U.S. 267,
274–75 (1974) (footnotes omitted)). The
Department agrees that this legislative
acquiescence is significant. It may not
necessarily mean that the 30-percent
rule was the only interpretation that was
intended by Congress—especially in
light of the subsequent Congressional
acquiescence to the imposition of the
majority-only rule.41 However, the
expansion of the Act, particularly in
1964 after the extensive hearings
regarding the 30-percent rule, suggests
that Congress did not believe that the
30-percent rule was ‘‘erroneous’’ at the
time of its enactment or otherwise
believe that it ‘‘did not comport’’ with
the definition of prevailing. Cf. 5. Op.
O.L.C. at 176 (noting Congress had
acquiesced to the Department’s
interpretation of the term prevailing as
embodied in its 1935 regulations).
In addition to considering questions
regarding Congressional acquiescence,
the Department has also considered
whether the length of time that the
majority-only rule has been in place has
led to reliance interests among regulated
entities that would counsel against
reversion to the three-step process.
While some commenters referred to the
length of time the rule had been in
effect, their comments generally did not
focus on related reliance interests. The
Department does not believe that any
potential reliance interests would be so
significant as to outweigh the objectives
of seeking to align the prevailing wage
methodology better with the
longstanding meaning of the term
prevailing and of seeking to better
protect workers against the depressive
40 See, e.g., Federal Construction Costs Reduction
Act of 1977 (S. 1540, H.R. 6100); Davis-Bacon Act—
Fringe Benefits (H.R. 404): Hearings Before the
General Subcomm. on Labor of the H. Comm. on
Educ. & Labor, 88th Cong. at 38–39, 125, 219, 225–
230 (Mar. 1, 7, 12, 21, 22, and 26, 1963).
41 One individual commenter opposing the
Department’s proposal asserted that Congress’s
inaction in reimposing the 30-percent rule should
be considered evidence that the 30-percent rule
‘‘contravenes, rather than is required by, the
statutory text.’’ But given the wide discretion the
courts have found the DBA affords to the Secretary
of Labor, the Department does not believe that the
acquiescence to the Department’s decision to use
one specific modal threshold can be understood as
barring it from using another.
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effect on wage rates of low-wage
contractors. The Department’s
illustrative study of the proposed
methodology change, in section V.D.
below, suggests that the change may
lead to higher required prevailing wage
rates in some places and lower wage
rates in others. The magnitude and
direction of changes, however, should
not be significantly different in their
effect on contractors than the
fluctuations in prevailing wage rates
that already occur between wage
surveys as a result of changes in local
economies and shifts in regional labor
markets. Even if the part 1 changes were
to have significant effects on wage rates
in certain local areas, any reliance
interests of local contractors,
governmental agencies, or workers on
prior wage rates would be minimal,
given that the changes to the wage
determination processes generally will
not affect current contracts—which will
continue to be governed by the wage
determinations incorporated at the time
of their award, with limited exceptions.
Most of the revisions to part 1 will only
apply to wage surveys that are finalized
after the rule becomes effective, and
thus they will generally apply only to
contracts awarded after such new wage
determinations are issued.42 Contractors
will therefore be able to factor any new
wage rates into their bids or negotiations
on future contracts.
The Department received many
comments in favor of and opposed to
the use of the 30-percent threshold for
other reasons. A number of commenters
commented favorably on the use of 30
percent specifically as a reasonable
modal threshold to choose. As the
LCCHR, the National Women’s Law
Center, Oxfam America, and several
other civil rights and worker advocacy
organizations commented, the choice of
42 As explained in § 1.6(c), whenever a new wage
determination is issued (either after the completion
of a new wage survey or through the new periodic
adjustment mechanism), that revision as a general
matter does not and will not apply to contracts
which have already been awarded, with three
exceptions. These exceptions are explained in
§ 1.6(c)(2)(iii), and they include where a contract or
order is changed to include substantial covered
work that was not within the original scope of
work, where an option is exercised, and also certain
ongoing contracts that are not for specific
construction, for which new wage determinations
must be incorporated on an annual basis under
§ 1.6(c)(2)(iii)(B) of the final rule. The final rule
instructs contracting agencies to apply the terms of
§ 1.6(c)(2)(iii) to all existing contracts, without
regard to the date of contract award, if practicable
and consistent with applicable law. The
Department does not anticipate that the application
of the amended wage determination methodologies
in these situations will result in unfair harm to
reliance interests in a manner sufficient to outweigh
the benefits of the final rule implementation as
planned. See also section III.C. (‘‘Applicability
Date’’) below.
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the 30-percent threshold appropriately
aligns the rate selected with the actual
wages paid to ‘‘significant shares’’ of
workers in a covered job classification.
The Dakotas Mechanical Contractors
Association (DMCA) and the Sheet
Metal, Air Conditioning and Roofing
Contractors Association stated that if 30
percent are paid the same rate, it is
likely the prevailing rate for skilled
workers in the area. The Center for
American Progress Action Fund noted
that the 30-percent rule is also followed
by some states in the implementation of
their own State prevailing wage
programs.43 Some commenters argued
that a 50-percent threshold for using a
modal rate is simply too high for many
geographic areas. The DMCA, for
example, noted that when there are
multiple large construction projects
going on in the Dakotas, many
contractors travel from outside the area,
and counting wage rates from these outof-town contractors can make it difficult
for the actual local rate to satisfy a 50percent threshold.
Several commenters opposing the
proposed reversion to the 30-percent
rule asserted that a reversion to the 30percent rule would result in rates that
are less accurate or less likely to reflect
the actual wage and fringe benefit rates
in a locality, and therefore are
inherently not ‘‘prevailing’’ under the
meaning of the statute. ABC stated that
a survey of its Federal contractor
members showed that only 12.6 percent
of its respondents stated that the
reversion to the 30-percent rule would
increase the accuracy of wage
determinations. The Modular Building
Institute (MBI) commented that a 30percent threshold is too small a sample
on which to base a prevailing wage.
According to the Taxpayers Protection
Alliance, returning to the 30-percent
rule ‘‘invites cherry-picking rather than
serious analysis.’’ On the other hand,
several commenters in favor of the
Department’s proposal asserted, similar
to the minority of respondents to ABC’s
survey, that returning to the 30-percent
rule would increase the accuracy of
wage determinations.
In making arguments about accuracy,
most commenters for and against the
43 See, e.g., Haw. Code R. section 12–22–2(b) (30percent threshold in Hawaii); 820 Ill. Comp. Stat.
130/4 section 4(a) (30-percent threshold in Illinois).
Wyoming uses a version of the three-step process
in which the prevailing wage is a majority, or 30percent, unless more than one wage rate reaches the
30-percent threshold, in which case a weighted
average is used. See https://dws.wyo.gov/wpcontent/uploads/2022/04/Labor-Standards-2022Prevailing-Wage-Rates.pdf. Minnesota and
California use modal methodologies, but do not
have specific thresholds. See Minn. Stat. section
177.42; Cal. Lab. Code section 1773.9(b)(1).
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proposal did not reference data or
evidence to support their views.
Commenters opposing the proposal that
did cite data compared potential
outcomes under the 30-percent
threshold—or any modal determinations
based on voluntary wage surveys—with
average rates calculated by other sources
or by reference to studies that found
increases in total costs from the use of
any prevailing wage at all. Commenters
also argued that accuracy can be judged
by the potential for the percentage of
wage determinations based on CBAs to
be higher than the union density in the
local area.44 The Department does not
agree with these measurements of
accuracy and instead understands these
arguments as fundamentally about what
the meaning of ‘‘prevailing’’ should be,
or whether prevailing wage laws are
good policy in the first place. While a
comparison of costs in jurisdictions in
which a State prevailing wage law
applies with those where there is no
such requirement may be helpful to
understanding the cost impacts of
prevailing wage requirements, that
comparison is not helpful in
understanding whether a certain
prevailing wage methodology results in
wage determinations that are ‘‘accurate’’
or not, because the point of the
prevailing wage law is to eliminate the
payment of substandard wage rates that
may be paid in the absence of the law.
For similar reasons, a comparison with
average rates or union density does not
reflect accuracy—rather it reflects
different understandings of the term
‘‘prevailing.’’ 45
AFP–I4AW asserted that it is arbitrary
to choose 30 percent instead of one of
the other ‘‘infinite percentages that
might be chosen between 0 and 50
percent.’’ The Department disagrees
with the premise that the 30-percent
threshold is arbitrary and therefore
44 ABC and the National Association of Home
Builders (NAHB) cited data from a 2010 GAO report
and subsequent data showing that as of 2010, a
union rate prevailed in 63 percent of all thenexisting wage determinations; in 2018, a union rate
prevailed in 48 percent of determinations; and in
2022, a union rate prevailed in 42 percent of
determinations. The commenters contrasted these
numbers with data from the BLS that shows union
density currently at less than 20 percent of the
construction labor market.
45 The Department also notes that, while the
percentage of overall wage determinations based on
collective bargaining rates nationwide has been
higher than measures of union density in the
construction industry generally, the percentage of
wage determinations based on collectively
bargained rates has significantly declined in recent
years. NAHB and ABC pointed out that the 2011
GAO report stated that at the time 63 percent of
published wage rates were union prevailing. See
2011 GAO Report, at 20. ABC notes current
statistics from the Department show 42 percent are
based on collectively bargained rates.
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impermissible. As one commenter in
favor of the proposal, the Iron Workers
International Union (Iron Workers),
stated, the ‘‘30 percent’’ rule can be seen
as a ‘‘middle position’’ that the
Department adopted in 1935. Among
modal rates, the wage rate based on a 20
percent modal rate or even lower might
also have been considered a reasonable
interpretation of the term ‘‘prevailing
wage,’’ rendering 30-percent a
compromise among all of the different
definitions being advanced at the time.
See Bldg. & Constr. Trades Dep’t v.
Donovan, 553 F. Supp. 352, 354 (D.D.C.
1982) (‘‘There is nothing intrinsically
appropriate or inappropriate to the
thirty percent rule or to any other figure
as representing the ‘prevailing
wage.’ ’’).46 The fact that the Department
could have chosen an even lower
number, or no modal threshold at all,
does not make the choice of 30 percent
impermissible. The number is a familiar
one that the Department used over five
decades; as commenters noted, it
represents at least a significant share of
workers in a survey; and the Department
has tested the potential outcome of
returning to the number and found that
it will alleviate concerns about overuse
of average rates. Cf. Ralph Knight, Inc.
v. Mantel, 135 F.2d 514, 518–19 (8th
Cir. 1943) (holding the percentage
threshold in an FLSA regulation was not
arbitrary because it was reasonable).
The ABC and several other
commenters criticized the Department
for proposing to return to the 30-percent
threshold without addressing concerns
they have about the methodology of the
wage survey program that produces the
underlying numbers to which the threestep process would be applied.
According to ABC and others, the
Department should use more
sophisticated representative sampling
and statistical regression methods to
come up with prevailing rates because
of low response rates, low sufficiency
thresholds and therefore small sample
sizes, and response bias in the
Department’s voluntary Davis-Bacon
wage survey program. ABC and the
National Association of Home Builders
(NAHB) referenced reports by the
Department’s OIG expressing concern
about low response rates to WHD’s wage
surveys, including a 2019 report in
which OIG calculated that as many as
53 percent of eligible contractors had
46 The 1982 Donovan district court decision
enjoined several elements of the 1981–1982
rulemaking but upheld the Department’s decision to
eliminate the 30-percent threshold. In affirming the
district court’s decision on the 30-percent
threshold, the D.C. Circuit stated that it affirmed
‘‘generally for the reasons stated in [the district
court’s] opinion.’’ Donovan, 712 F.2d at 616.
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not provided wage data on 7 surveys
that were analyzed.47 ABC and others
argued that union contractors have a
higher interest in responding to the
wage surveys, and so the surveys tend
to disproportionately reflect union rates
and are therefore unreliable.48 In a joint
comment, a group of housing industry
associations and entities stated that
certain segments of the residential
building industry have ‘‘no incentive to
participate in a survey method that
provides no direct benefit to their
business.’’ Without making changes to
the survey process to better account for
non-union contractors, ABC argued, the
Department should not be changing the
threshold for identifying the prevailing
wage. ABC stated that the survey
process in its current form is ‘‘incapable
of accurately determining whether a
single rate is paid to 30% (or a majority)
of local construction workers.’’
ABC, NAHB, and other commenters
stated that the Department should have
considered using data from the BLS,
which performs representative sampling
on surveys with higher response rates
and larger sample sizes and uses other
more sophisticated regression methods,
and therefore would be more accurate.
According to ABC and an individual
commenter, the use of BLS data would
result in more timely wage
determinations and decrease the costs of
Federal construction, making more
projects viable and increasing
construction employment. ABC
acknowledged that the Department has
previously declined to use BLS data for
DBA wage determinations for a number
of reasons, including that BLS data does
not have the same benefits information,
data by county level, or by construction
type. But ABC asserted that none of
these reasons entirely foreclose the use
of such data, and it cited the fact that
the Department already uses BLS data
47 See OIG, U.S. Department of Labor, No. 04–19–
001–15–001, ‘‘Better Strategies are Needed to
Improve the Timeliness and Accuracy of DavisBacon Act Prevailing Wage Rates,’’ 8, 15 (2019).
Available at https://www.oig.dol.gov/public/reports/
oa/2019/04-19-001-15-001.pdf.
48 As evidence that the Department’s Davis-Bacon
wage surveys are statistically unrepresentative of
the construction workforce, ABC asserted that
average wages—both economywide and in specific
occupations (construction or otherwise)—are
consistently higher than median wages in the
United States and most industrialized economies.
For example, ABC points to BLS’s May 2021
Occupational Employment and Wage Statistics
(OEWS) survey showing that, nationally, average
wages exceed median wages in 51 of 64 detailed
construction occupations. ABC argues that the
Department’s surveys are unrepresentative because,
in the wage determinations developed using the
survey data and using the majority rule, the
majority rate (which should be the same as the
median) consistently exceeds wages calculated as
survey averages.
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for wage determinations under the
Service Contract Act (SCA), which has
similar statutory parameters, as well as
the Foreign Labor Certification Program,
and with some statistical modeling, for
Federal employee pay under the Federal
Employee Pay Comparability Act. ABC
also argued that the Department’s
current use of larger county groupings to
identify wage rates for counties with
insufficient data and the proposal in the
NPRM to remove the bar on crossconsideration of rural and metropolitan
data both undercut the Department’s
arguments against using BLS data.
NAHB and the Mortgage Bankers
Association (MBA) also suggested that
the Department should consider
outsourcing the wage data collection
process to third-party organizations they
believe would be better equipped to
collect greater quantities of data.
A joint comment from the National
Asphalt Pavement Association, National
Ready Mixed Concrete Association, and
National Stone, Sand & Gravel
Association (NAPA, NRMPCA, and
NSSGA) suggested that reverting to the
use of a 30-percent threshold is
‘‘unnecessary’’ because there are other
ways to improve the survey process.
They suggested using the certified
payrolls that are submitted on DBRA
projects to help identify prevailing
wages.49 They also suggested updating
and standardizing classifications that
are ‘‘outdated’’ and confusing where
they differ across political subdivisions.
AGC suggested that the Department
should revise the wage survey process
to allow contractors to report wage
information by individual craft
classifications in each county by
construction type, instead of brokendown project-by-project.
Several commenters stated that even
if the 30-percent rule had been
permissible previously, the Department
could not reasonably return to it
because the construction labor market
has changed and prevailing rates ‘‘rarely
occur in the modern economy.’’ ABC
noted that union density has declined in
the construction labor market from 34
percent in 1981 to under 14 percent in
recent years. The Association of
Washington Housing Authorities
(AWHA) stated that the increase in
49 The Department appreciates this suggestion,
but notes that using certified payrolls instead of the
wage survey process would result in prevailing
rates based entirely on data from DBRA-covered
projects. While such data could be helpful in
certain circumstances in which there is not
sufficient data from private sources, it could not be
used instead of the wage survey process because the
DBA contemplates a wider analysis of wage rates
that includes those on wholly privately funded
projects where such data is available. See generally
infra section III.B.1.iii.(B) (‘‘29 CFR 1.3(d)’’).
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reliance on weighted averages actually
reflects reality in certain construction
types where union participation is
lacking. AWHA also stated that there is
no need to return to the 30-percent rule
because there is better labor market
wage information now available than
there was when the 30-percent rule was
last in effect, with both proprietary and
public databases now containing ‘‘up-todate wage and salary information on
thousands of job classifications at
varying geographic levels.’’
Finally, comments from ABC and a
group of U.S. Senators asserted that the
Department’s reasoning for its proposal
is contrary to the D.C. Circuit’s decision
in Building & Construction Trades’
Department v. Donovan, 712 F.2d 611,
616–17 (D.C. Cir. 1983). In that decision,
the Department’s 1981–1982 rulemaking
eliminating the 30-percent threshold
had been challenged. The D.C. Circuit
stated that the Department’s new
definition of ‘‘prevailing’’ as, first, the
majority rate, and second, a weighted
average, was ‘‘within a common and
reasonable reading of the term’’ and
‘‘would not defeat the essential purpose
of the statute, which was to ensure that
federal wages reflected those generally
paid in the area.’’ Id. at 616–17. ABC
stated that this holding allowing the
Department to eliminate the 30-percent
threshold could not be squared with the
Department’s reasoning in the NPRM
that the overuse of averages was
inconsistent with the text and purpose
of the Act. See 87 FR 15704.
Considering these comments, the
Department agrees with the commenters
in favor of the proposal that the 30percent threshold is a reasonable
threshold that represents the best course
for making wage determinations based
on wage rates that are actually paid to
workers in the relevant area. The
Department also believes that returning
to the use of the 30-percent threshold at
the second step in the wage
determination process is preferable for
the same reasons that it is preferable to
use a modal methodology at all instead
of using averages or the median for all
wage determinations. The mode is more
consistent with the term ‘‘prevailing,’’
and it is in general more protective of
prevailing wage rates against the
depressive effect of low-wage
contractors. Even when adopting the
current majority threshold for modal
wage determinations in 1982, the
Department reiterated this long-held
interpretation that the ‘‘most widely
paid rate’’ should be the ‘‘definition of
first choice’’ for the prevailing wage,
and that wage determinations should
‘‘mirror, to the extent possible, those
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rates actually paid in appropriate labor
markets.’’ 47 FR 23645.
The Department disagrees that the
D.C. Circuit’s Donovan decision
precludes a return to the 30-percent
threshold or prevents the Department
from concluding that an overuse of
averages is in tension with the
Department’s long-held interpretation of
the Act. In Donovan, the court stated
that the majority-only rule was ‘‘within
a common and reasonable reading’’ of
the term prevailing, and ‘‘would not
defeat the essential purpose of the
statute.’’ 712 F.2d at 616–17. The court
did not, however, state or even suggest
that the majority rule represented the
only proper reading of the statute. To
the contrary, the court stated that it was
upholding the new rule because ‘‘the
statute delegates to the Secretary, in the
broadest terms imaginable, the authority
to determine which wages are
prevailing.’’ 712 F.2d at 616.
As the Department explained in the
NPRM, there has been a significant
increase in the use of weighted averages
between 1983 and the present—from as
low as 15 percent prior to the
implementation of the current
regulations to 63 percent in the
Department’s review of 19 recent
surveys. Several commenters noted that
this increase in the use of averages
appears to be far beyond what was
expected at the time the Department
implemented the majority-only rule and
at the time of the D.C. Circuit opinion.
For example, the unions that opposed
the 1981–1982 rulemaking in court
argued that it could result in ‘‘a third or
more’’ of wage rates based on weighted
averages. Donovan, 712 F.2d at 616.
Now, nearly double that number—two
thirds—of prevailing wage rates
published from recent surveys have
been based on weighted averages. These
new circumstances represent a
departure from the Department’s
longstanding interpretation of the Act. 5
Op. O.L.C. at 176–77.
The Department also disagrees with
comments suggesting the Department
can only justify its return to the 30percent threshold by finding that the
current majority rule is per se not
allowed by the statute and suggesting
furthermore that the Donovan decision
bars the Department from reaching that
conclusion. As noted, however, the
decision in Donovan reflects that there
can be more than one possible threshold
for determining whether a wage rate is
prevailing, and that the statute delegates
the decision about methodology to the
Secretary of Labor. 712 F.2d at 616. The
Department has concluded that the
original three-step process is preferable
to the majority-only rule because it is
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more consistent with the meaning of the
word ‘‘prevailing’’ and will be more
protective against the depression of
wage rates by low-wage contractors.
Under these circumstances, the
Department does not need to find that
the current overuse of averages renders
the majority-only rule effectively barred
by the statute.
The Department also considered the
comments critiquing the interface
between the wage survey program and
the Department’s use of a modal
methodology to determine prevailing
wages and the use of the 30-percent
modal threshold in particular. The
Department does not believe it is
necessary or preferable to abandon the
current Davis-Bacon wage survey
process, or to require by regulation that
survey data be adjusted with regression
or other similar statistical analyses. The
process of adjusting survey data using
weighting, imputation, or other
representative sampling methods would
require additional data regarding the
universe of projects and classifications
of workers—divided by construction
type—that does not currently exist and
would be overly burdensome and costly
to obtain.50 Moreover, other
commenters on the rule specifically
opposed the use of sampling or other
similar methodologies because the
decisions about the underlying
assumptions used in the calculations or
modeling would give the Department
too much discretion that would be
difficult for stakeholders to scrutinize.
Finally, such sampling or other
statistical methods could also
significantly increase the likelihood that
the wage rates the Department publishes
would be akin to weighted averages and
would not be wage rates that are
actually paid to workers in the relevant
areas. The Department declines to
impose such requirements in this final
rule.
The Department also considered
ABC’s and others’ arguments that it
should entirely discontinue the DavisBacon wage surveys and instead use
data from BLS surveys to determine
prevailing wages in the first instance. As
ABC recognized in its comment, the
Department has explored this possibility
on various occasions in the past at the
recommendation of the GAO and others.
For example, ABC cited a 2004 letter
50 Similarly, the 2019 OIG report noted WHD
officials’ concern that using statistical sampling
during the clarification process instead of manual
reviews of survey data might be less efficient and
effective than current processes, and that ‘‘use of
statistical sampling in lieu of comprehensive
clarification would likely result in the publication
of fewer, and less robust, wage determinations.’’
Report at 7, 43.
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from the Assistant Secretary for
Employment Standards, to the
Department’s OIG, noting the actions
the Department had taken to consider
this option, including funding pilot
surveys to determine the feasibility of
collecting fringe benefit data as part of
BLS’s National Compensation Survey
(NCS), and working with BLS to
examine the extent to which the
Occupational Employment and Wage
Statistics (OEWS) survey might provide
detailed construction industry wage rate
information by locality and
occupation.51
The Department has repeatedly
concluded that relying on BLS data
sources to determine prevailing wages
instead of continuing to conduct DavisBacon wage surveys is not preferable,
and the Department again reaches this
conclusion. No BLS survey publishes, at
a county level, the wage data, fringe
benefit data, data for sufficiently
specific construction craft
classifications, and data by construction
type, that would align with the
Department’s interpretations of the
statutory requirements to determine
prevailing wages for ‘‘corresponding
class[es]’’ of workers on ‘‘projects of a
character similar’’ within ‘‘civil
subdivisions of the State’’ in which the
work is to be performed. 40 U.S.C.
3142(b).52 The Department does not
agree with ABC that the Department’s
current use of larger geographic
groupings under certain conditions
suggests that the Department should
adopt BLS data that is compiled for
areas larger than a county. The scope of
consideration regulations at § 1.7 allow
51 Letter from Victoria A. Lipnic, Assistant
Secretary for Employment Standards, to Elliot P.
Lewis, Assistant Inspector General for Audit (Feb.
18, 2004). Available at: https://www.oig.dol.gov/
public/reports/oa/2004/04-04-003-04-420x.pdf.
52 The BLS OEWS program produces employment
and wage estimates for the nation as a whole, for
individual states, for metropolitan areas delineated
by the Office of Management and Budget (OMB),
and nonmetropolitan areas, but it does not produce
wage estimates at the county level, which is the
default ‘‘civil subdivision’’ that the Department
uses to determine prevailing wages. See Michael K.
Lettau and Dee A. Zamora, BLS, ‘‘Wage estimates
by job characteristic: NCS and OES program data’’
(2013). Available at: https://doi.org/10.21916/
mlr.2013.27. Additionally, the data for metropolitan
and nonmetropolitan areas do not allow for wage
rates for occupations by industry. The NCS program
provides measures of compensation trends and the
incidence of employer-sponsored benefits, but only
at the national and Census region levels. The BLS’s
Quarterly Census of Employment and Wages has
data at the county level, but the data are not
available by craft. Both the OEWS and NCS
programs classify occupations based on job duties
and responsibilities that apply nationwide in
accordance with the Standard Occupational
Classification system. WHD’s survey program, on
the other hand, has always considered local area
practice in determining how work is classified for
each occupation.
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the Department to consider data from
larger geographic areas only when there
is insufficient wage survey data in a
given county. This reflects the
Department’s long-established position
that the county level is the appropriate
level at which to determine prevailing
wage rates where possible, and as such
that the wholesale adoption of BLS data
compiled for larger areas generally
would not be appropriate. The
Department also considered whether it
would be possible to combine BLS
surveys or use underlying BLS
microdata instead of the Department’s
wage surveys but determined that the
BLS’s methodology does not allow such
a procedure because, among other
reasons, BLS does not collect data on a
project-by-project basis and therefore
does not capture circumstances in
which employees may be paid different
hourly rates for work based on the type
of project. Finally, the Department’s
conclusion is bolstered by the
widespread practice of states, many of
which have adopted prevailing wage
laws, that have likewise determined that
wage surveys are an appropriate
mechanism to set prevailing wages.53
ABC is correct that the Department
uses BLS data for wage determinations
under the SCA, which has important
statutory similarities with the DBA in
that it requires payment of wages ‘‘in
accordance with prevailing rates in the
locality.’’ 41 U.S.C. 6703(1). There are
several reasons, however, why the
Department’s decisions have been
different under the SCA than under the
DBA. The first is that the SCA does not
contain the same statutory text as the
DBA requiring prevailing wages to be
based on ‘‘projects of a character
similar.’’ 40 U.S.C. 3142(b). This
distinction underscores the
Department’s need to survey DBA wage
rates by construction type, a level of
detail that does not exist in any BLS
data source. In addition, the SCA
contains an alternative mechanism that
gives weight to collectively bargained
rates by requiring them to govern certain
successor contracts where the
predecessor contract was covered by a
CBA. 41 U.S.C. 6703(1).
53 See, e.g., 26 Me. Rev. Stat. Ann. section 1308
(requiring the Maine Bureau of Labor Standards to
determine prevailing wages through a regularly
conducted wage and benefits survey); Minn. R.
section 5200.1020 (providing for annual surveys to
calculate prevailing wages on covered highway and
construction projects); Mont. Code Ann. section 18–
2–414 (authorizing the Montana Commission of
Labor and Industry to either perform a wage survey
or adopt the rates set by the United States
Department of Labor); Tex. Gov’t Code Ann. section
2258.022 (setting the state prevailing wage either
through wage surveys or by incorporating the rates
set by the United States Department of Labor).
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Comparisons between the DBA and
SCA can also be fraught because
construction work is significantly
different from most service work. As a
Professor of Economics at the University
of Utah commented on this rulemaking,
the construction industry is based on a
‘‘craft classification’’ model—in which
crafts are understood to be a collection
of related skills that allow a craft worker
to address a range of jobs as that worker
goes from project to project, and which
can only be supported with proper
investment and skills training.
Protecting craft classifications where
they prevail was one of the core original
purposes of the Davis-Bacon Act. See
Charles Donahue, ‘‘The Davis-Bacon Act
and the Walsh-Healey Public Contracts
Act: A Comparison of Coverage and
Minimum Wage Provisions,’’ 29 Law &
Contemp. Probs. 488, 508 (1964) (noting
the Department’s deference to local craft
organization in wage determinations
because ‘‘[t]o do otherwise would
destroy craft lines which the statute
seeks to preserve’’); see also Donovan,
712 F.2d at 625 (noting that Congress
was ‘‘quite clear’’ in 1935 that it was an
‘‘evasion of the Act’’ to break down craft
classifications where they prevail). This
industrial organization and the
legislative history support the
Department’s stricter approach under
the DBRA to protecting actual wage
rates that prevail because when those
rates are higher than the average wage,
they are often higher because they are
incorporating apprenticeship and other
training costs that are critical for the
maintenance of the craft organization of
the local construction market.54 It also
explains why the Department does not
agree with ABC’s suggestions that the
Davis-Bacon program should adopt the
standardized national Standard
Occupational Classification system for
identifying construction worker
classifications and also abandon the
division of wage rates by ‘‘construction
type,’’ so as to align all Davis-Bacon
classifications with the format of BLS
program data. Similarly, the differences
between the SCA and the DBA and the
industry sectors they cover, and the
craft-protection focus of the DBA, also
explain why the Department does not
believe it is appropriate, as ABC
suggests, to adopt a single nationwide
54 Notwithstanding these differences, under the
SCA regulations, the Department also may publish
prevailing collectively bargained rates rather than
rely on BLS data. See 29 CFR 4.51(b) (‘‘Where a
single rate is paid to a majority (50 percent or more)
of the workers in a class of service employees
engaged in similar work in a particular locality, that
rate is determined to prevail.’’).
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fringe benefit rate under the DBRA in
the same way that it has under the SCA.
ABC commented that the Department
should be more flexible with how it
analyzes the statutory requirements and
find that the statute permits the use of
averages or modal approximations
derived from statistical modeling rather
than revert to the three-step process and
retain the current wage survey process.
ABC and other commenters also
suggested the use of BLS data would
have other important benefits. ABC
stated that directly using BLS data
would improve the timeliness of wage
determinations because BLS surveys are
updated annually. ABC and the group of
U.S. Senators stated that using BLS data
would eliminate an impediment
preventing small firms from bidding on
Davis-Bacon contracts because it would
eliminate the problem of missing
classifications on wage determinations.
The commenters said that such missing
classifications can be an impediment for
small firms because it is costly and
complicated to request conformances.
ABC suggested that the Department
should consider transferring funding
from WHD to BLS by contracting with
BLS to provide data, with the additional
funding to BLS going to address any
ways in which BLS methods are
deficient for DBRA purposes.
Having considered these arguments,
the Department continues to believe that
the best course of action is to adopt the
proposed reversion from the majority
rule to the three-step process as the
methodology for making wage
determinations. The Department agrees
that it is important to continue seeking
ways to improve contractor
participation in its voluntary wage
surveys, which will have the benefit of
increasing sample sizes for wage
determinations and making wage
determinations possible for more
classifications. The Department has
initiated a process to revise the wage
survey form (WD–10 form) that is used
during wage surveys. In that process, it
proposed a number of changes in order
to decrease the burden on contractors of
responding to the survey and lead to
higher survey response rates. See 87 FR
36152, 36152–53 (June 15, 2022). The
Department, through that process, is
also considering updates to the
directory of classifications that is listed
on the form, and to procedures to assist
in capturing information about local
area practice and industry changes in
classifications over time. Thus, the
Department does not believe NAPA,
NRMPCA, and NSSGA’s concerns about
outdated classifications is a persuasive
reason not to adopt the changes to the
methodology of determining prevailing
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wages from survey data. Collecting more
accurate data and returning to the 30percent threshold are supplementary,
not mutually exclusive, means to
determining appropriate wage rates. The
Department is therefore not only
returning to the use of the 30-percent
threshold in this final rule, but also will
continue to promote greater
participation in its surveys and take
related steps, such as its revision to the
WD–10 form outside this rulemaking, in
order to increase the pool of data that
is available to determine accurate
prevailing wage rates.
While the Department appreciates
AGC’s suggestions regarding revising
the wage survey process to allow
contractors to report data for workers
more generally instead of on a projectby-project basis, the Department notes
that the statute discusses the
determination of the prevailing wage on
the basis of ‘‘projects of a similar
character,’’ 40 U.S.C. 3142(b), and that
project-by-project reporting promotes
accuracy in the survey process because
it more readily enables the Department
to identify the number of workers that
were paid each reported rate (and hence
to properly calculate the prevailing
wage) in a given area. A data submission
consisting solely of the wages and fringe
benefits paid generally to a particular
classification, particularly if such a
submission did not identify how many
workers received each identified rate,
would at a minimum create challenges
and inefficiencies in determining the
prevailing wage rate.
The Department also agrees with
commenters that addressing timeliness
issues and the overuse of conformances
are important goals. The use of BLS
data, however, could cause its own
problems with missing classifications.
BLS’s OEWS program, for example, uses
the Office of Management and Budget’s
(OMB) Standard Occupational
Classification (SOC) system when
publishing wage estimates. The SOC
system does not include a number of
individual classifications that the
Department commonly uses to
appropriately account for local area
practice and the craft system. For
example, the Department often issues
separate wage rates for Plumbers,
Pipefitters, and Steamfitters. The OEWS
program only issues a single wage rate
in a given locality under SOC code 47–
2152 (‘‘Plumbers, Pipefitters, and
Steamfitters’’). For this reason, the
Department believes that ABC’s
proposal to directly use the SOC system
would result in less accurate craft
classifications. As discussed further
below, in this rulemaking, the
Department is adopting new methods of
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reducing the need for conformances and
more frequently updating wage
determinations, including through the
limited use of BLS data where it can
reasonably be used to estimate wage-rate
increases in between voluntary surveys.
The Department believes these changes,
once implemented, will improve the
wage determination program without
making a significant departure from
longstanding interpretations of the
statutory text and purpose of the DBRA.
(2) Comments Regarding Costs of the 30Percent Threshold
In proposing the return to the 30percent threshold, the Department also
considered the other explanations it
provided in 1982 for eliminating the
rule in the first place—in particular, the
potential for a possible upward pressure
on wages, contract costs, or prices. In
the 1982 final rule, the Department
summarized comments stating that the
rule is ‘‘inflationary because it
sometimes results in wage
determination rates higher than the
average.’’ 47 FR 23644. The Department
did not explain exactly what the
commenters meant by the term
‘‘inflationary.’’ See id. Later, the
Department stated simply that it
‘‘agree[d] with the criticisms of the 30percent rule,’’ without specifically
referencing the wage-inflation concerns.
Id. at 23645. Later still, in a discussion
of the final regulatory impact and
regulatory flexibility analysis, the
Department estimated that eliminating
the 30-percent rule could result in a cost
savings of $120 million per year. Id. at
23648. The Department then stated that
it was adopting the new rule ‘‘not only
because it will result in substantial
budgetary savings, but also because it is
most consistent with the ‘prevailing
wage’ concept contemplated in the
legislation.’’ Id.
In the current rulemaking, many
commenters opposing the Department’s
proposed reversion to the 30-percent
threshold, including several housing
industry associations and entities,
referenced and restated the earlier
concerns about an ‘‘inflationary effect.’’
ABC and the group of Senators
referenced criticism of the 30-percent
rule by the GAO in the 1960’s and
1970’s, including the 1979 report that
urged the repeal of the Act as a whole
and related congressional hearings in
which the GAO referred to the 30percent rule as resulting in ‘‘inflated
wage rates.’’ 55 Several commenters
55 See Administration of the Davis-Bacon Act,
Hearings before the Spec. Subcomm. on Lab. of the
H. Comm. on Educ. & Lab., 87th Cong. 283 (1962)
(testimony of J.E. Welch, Deputy General Counsel,
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pointed to two studies finding that
prevailing wages under the DBA
increase costs to taxpayers. The NAHB
pointed to a 2008 study by the Beacon
Hill Institute, finding that Davis-Bacon
wage determinations increase the cost of
Federal construction by ‘‘nearly 10
percent,’’ 56 and a study by the
Congressional Budget Office (CBO) that
estimated a $12 billion reduction in
Federal spending from 2019 through
2028 if DBA requirements were not
applied to covered projects.57 CEI,
stating that no more recent data is
available on the economic impact of the
30-percent rule, cited a 1983 CBO
estimate that the DBA’s requirements
added 3.7 percent to the overall cost of
Federal construction projects.58 They
also cited a later estimate from after
implementation of the majority rule,
estimating that DBA requirements
added 3.4 percent to the cost of Federal
construction projects.59 Comparing
these two studies, CEI claimed, shows
the difference between the 30-percent
threshold and the majority-only rule
accounts for about 8 percent in the
overall cost of complying with the Act
(or, presented differently, about 0.3
percent in the total cost of Federal
construction projects).
Several commenters, in particular in
the residential building industry,
expressed general concern that higher
labor costs could put some projects at
risk of being financially infeasible. The
NAHB stated that ‘‘relatively small price
increases can have an immediate impact
on low-to moderate-income homebuyers
and renters who are more susceptible to
being priced out of the market.’’
General Accounting Office) (‘‘Our experience
indicates that the methods and procedures by
which minimum wage requirements for Federal and
federally assisted construction contracts are
established and enforced under present law have
not kept pace with the expansion and increased use
of such requirements.’’); Oversight Hearing on the
Davis-Bacon Act, Before the Subcomm. on Lab.
Standards of the H. Comm. on Educ. & Lab., 96th
Cong. 4 (1979) (testimony of Comptroller General
Elmer Staats) and 60–64 (testimony of Secretary of
Labor Ray Marshall criticizing GAO methodology).
56 Paul Bachman, Michael Head, Sarah Glassman,
& David G. Tuerck, Beacon Hill Inst., ‘‘The Federal
Davis-Bacon Act: The Prevailing Mismeasure of
Wages,’’ (2008). ABC cited this 2008 report, as well
as a subsequent Beacon Hill report, which updated
it. See William F. Burke & David G. Tuerck, Beacon
Hill Inst., ‘‘The Federal Davis-Bacon Act:
Mismeasuring the Prevailing Wage,’’ (2022).
57 CBO, ‘‘Repeal the Davis-Bacon Act,’’ Dec. 13,
2018, https://www.cbo.gov/budget-options/54786.
58 CBO, ‘‘Modifying the Davis-Bacon Act:
Implications for the Labor Market and the Federal
Budget,’’ July 1983, https://www.cbo.gov/sites/
default/files/98th-congress-1983-1984/reports/
doc12-entire_0.pdf.
59 CBO, ‘‘Toll Funding of U.S. Highways,’’ Dec.
1985, https://www.cbo.gov/sites/default/files/99thcongress-1985-1986/reports/1985_12_
tollfinancing.pdf.
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According to NAHB, there are already a
number of other current difficulties with
building housing that the proposed
change does not address, including
rising costs for materials, an
increasingly transient and aging
workforce, and the economic impact of
COVID–19. The National Association of
Housing and Redevelopment Officials
(NAHRO) stated that Congress has
underfunded affordable and public
housing, and that because there is a
limited amount of funding for such
efforts, the number of units built will go
down if costs go up. Because of this, the
organization recommended that the
HUD programs be excluded from the
final rule.
Some commenters stated their
opposition to the proposed reversion to
the three-step process but appeared to
misunderstand that the rule does not
require, or always result in, the highest
wage rate being identified as prevailing.
AFP–I4AW, for example, stated that the
30-percent rule would ‘‘serve to inflate
the wage determination by relying only
on the highest wage earners in the
locality.’’ This assumption is not
correct. The 30-percent threshold does
not distinguish between rates based on
whether they are higher or lower.
Rather, under the rule, the Department
will determine that a wage rate is
prevailing if that wage rate is earned by
the most workers in a wage survey and
if that number is also more than 30
percent of workers in the survey—
whether that wage rate is higher or
lower than any other wage rate in the
survey, and whether it is collectively
bargained or not. The Department’s
review of recent wage surveys suggests
that the return to the 30-percent
threshold will in some cases result in
wage rates that are higher than the
currently used average and in other
cases lower rates. See section V.D.1.ii.
This is consistent with the results of the
30-percent threshold when it was last in
effect before the 1981–1982 rulemaking.
See 1979 GAO Report, at 53 (noting the
data showed that under the 30-percent
rule, where a lower hourly rate
prevailed, the Department identified the
lower rate as the prevailing rate).
In contrast to the commenters that
opposed the proposal, many
commenters that supported the proposal
argued that the rule would not
significantly increase project costs or
increase inflation. Several of these
commenters noted studies regarding the
cost effects of prevailing wage
regulations in general. For example, the
III–FFC noted that the ‘‘economic
consensus’’ today is that prevailing
wage requirements generally do not
raise total construction costs. III–FFC
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57541
cited a literature review that analyzed
the 19 peer-reviewed studies that have
been published since 2000 about the
impacts of prevailing wage regulations
in public construction (together
covering more than 22,000 public works
projects). See Kevin Duncan & Russell
Ormiston, ‘‘What Does the Research Tell
Us About Prevailing Wage Laws,’’ 44
Lab. Stud. J. 139, 141–42 (2018). A
significant majority of those peerreviewed studies did not find evidence
that prevailing wages affected overall
construction costs. As III–FFC noted, a
key driver of this outcome is that
contractors on covered projects will
tend to hire higher-skilled workers and
utilize more capital equipment. See
William Blankenau & Steven Cassou,
‘‘Industry Differences in the Elasticity of
Substitution and Rate of Biased
Technological Change between Skilled
and Unskilled Labor,’’ 43 Applied Econ.
3129–42 (2011); Edward Balistreri,
Christine McDaniel, & Eina V. Wong,
‘‘An Estimation of U.S. Industry-Level
Capital-Labor Substitution Elasticities:
Support for Cobb-Douglas,’’ 14 N. Am.
J. of Econ. & Fin 343–56 (2003). Other
commenters submitted similar research
showing that prevailing wages are
associated with higher productivity and
that labor costs are only a small part of
overall project costs in many segments
of the construction industry, limiting
the impact of any increased wage costs
on overall project costs. See Frank
Manzo & Kevin Duncan, Midwest Econ.
Policy Inst., Examination of Minnesota’s
Prevailing Wage Law: Effects on Costs,
Training, and Economic Development 4
(2018); Nooshin Mahalia, Econ. Policy
Inst., Prevailing Wages and Government
Contracting Costs 3–4 (2008).
Several of these commenters
specifically criticized the Department’s
apparent reliance in 1982 on arguments
that the 30-percent rule had an
‘‘inflationary effect.’’ These commenters
noted that the concerns about an
‘‘inflationary effect’’ at the time were
drawn from the same 1979 GAO report
on which the opponents of the proposal
now rely.60 The Iron Workers, for
60 The GAO issued a report in 1979 urging
Congress to repeal the Act because of ‘‘inflationary’’
concerns. See Gov’t Accountability Office, HRD–7918, ‘‘The Davis Bacon Act Should be Repealed’’
(1979) (1979 GAO Report). Available at: https://
www.gao.gov/assets/hrd-79-18.pdf. The report
argued that even using only weighted averages for
prevailing rates would be inflationary because they
could increase the minimum wage paid on
contracts and therefore result in wages that were
higher than they otherwise would be. The House
Subcommittee on Labor Standards reviewed the
report during oversight hearings in 1979, but
Congress did not amend or repeal the Act, and
instead continued to expand its reach. See, e.g.,
Cranston-Gonzalez National Affordable Housing
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example, noted that in 1979 the
Department had strongly criticized the
GAO report’s statistical methods. In
1979, the Department maintained that
the GAO’s conclusions lacked
‘‘statistical validity’’ because it was
methodologically flawed and failed to
consider important variables, such as
productivity. See 1979 GAO Report, at
15. However, in its 1982 rulemaking, the
Department did not acknowledge other
evidence undermining the GAO’s
conclusions, or the Department’s own
prior position that the 1979 GAO report
could not be relied upon. Another
commenter noted that the GAO itself
had conceded that its sample size was
insufficient for projecting results with
statistical validity. Id.
The commenters supporting the
Department’s current proposed
reversion to the 30-percent rule also
noted that, whatever its persuasiveness
at the time, the 1979 GAO report cannot
be relied on now because of its outdated
statistical methods and because of the
existence of other, more contemporary,
evidence undermining its conclusions.
Commenters noted that the three main
studies relied on by opponents of the
30-percent threshold, including the
GAO report, the Department’s 1981–
1982 regulatory flexibility analysis, and
the Beacon Hill studies, were all based
on a ‘‘wage differential’’ calculation
methodology that has been discredited
by peer-reviewed scholarship published
since the 1981–1982 rulemaking.61 In a
comment, two Professors of Economics
argued that ‘‘the results of any study
that measures the cost of prevailing
wages based on [the wage differential
method] should be interpreted with
extreme caution and is not suitable as a
basis of public policy decisions.’’
Commenters noted that more advanced
statistical methods than those used by
GAO have since established that in the
construction industry, the substitution
of lower-wage and lower-skilled
workers for higher-paid and higherskilled workers does not necessarily
reduce project costs because the lower
productivity of lower-skilled workers
can offset incrementally higher wages
Act, Public Law 101–625, Sec. 811(j)(6), 104 Stat.
4329 (1990); Energy Independence and Security Act
of 2007, Public Law No, 110–140, Sec. 491(d), 121
Stat. 1651 (2007); American Recovery and
Reinvestment Act, Public Law 111–5, Sec. 1606,
123 Stat. 303 (2009); Consolidated Appropriations
Act of 2021, Public Law 116–260, Sec. 9006(b), 134
Stat. 1182 (2021).
61 See Kevin Duncan & Russell Ormiston, ‘‘What
Does the Research Tell Us About Prevailing Wage
Laws,’’ 44 Lab. Stud. J. 139, 141–42 (2018). The
Beacon Hill Report was not peer-reviewed. Id. at
141. The 2022 Beacon Hill Report uses the same
methodology as the 2008 Beacon Hill Report.
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paid to more-skilled workers.62 That is
why, they asserted, the preponderance
of peer-reviewed studies conclude that
prevailing wage laws as a whole have
little or no effect on overall project
costs.63 Given the evidence for
prevailing wage laws as a whole, the
commenters expressed skepticism that
the return to the 30-percent rule would
have an effect on project costs.
The Department agrees with those
commenters that found the 1979 GAO
Report and the Department’s 1981–1982
analysis unpersuasive. The Department
does not believe that these analyses are
reliable or accurate.64 For example, the
Department’s 1981–1982 analysis did
not consider labor market forces that
could prevent contractors from lowering
wage rates in the short run. The analysis
also did not attempt to address
productivity losses or other costs of
setting a lower minimum wage, such as
higher turnover and a reduced ability to
recruit high-skilled workers. For these
reasons, the Department does not
believe that the analysis in the 1982
final rule implies that the current
proposed reversion to the 30-percent
rule would have a significant impact on
contract costs. Moreover, even if the
Department were to rely on this analysis
as an accurate measure of impact, such
purported cost savings (adjusted to 2019
dollars) would only amount to
approximately two-tenths of a percent of
total estimated covered contract costs.
The two CBO reports from 1983 and
1985 cited in a comment by CEI are not
persuasive for the same reason. The
1983 CBO study projected that the
elimination of the 30-percent rule
would save an average of $112 million
per year from 1984 to 1988. Id. at 36.
That report, however, was based on the
Department’s own analysis in the 1981–
1982 rulemaking, id. at xii, which was
62 See William Blankenau & Steven Cassou,
‘‘Industry Differences in the Elasticity of
Substitution and Rate of Biased Technological
Change between Skilled and Unskilled Labor,’’ 43
Applied Econ. 3129–42 (2011); Edward Balistreri,
Christine McDaniel, & Eina V. Wong, ‘‘An
Estimation of U.S. Industry-Level Capital-Labor
Substitution Elasticities: Support for CobbDouglas,’’ 14 N. Am. J. of Econ. & Fin 343–56
(2003).
63 See Duncan & Ormiston, supra note 61, at 142–
48 (collecting peer-reviewed studies).
64 The Department has not attempted to assess the
relative accuracy of the $120 million estimate over
the decades, which would be challenging given the
dynamic nature of the construction industry and
the relatively small impact of even $120 million in
savings. The Department at the time acknowledged
that its estimate had been heavily criticized by
commenters and was only a ‘‘best guess’’—in part
because it could not foresee how close a correlation
there would be between the wage rates that are
actually paid on covered contracts and the wage
determinations that set the Davis-Bacon minimum
wages. 47 FR 23648.
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flawed as previously noted. The 1985
CBO report did not contain an
independent analysis and simply cited
to the 1983 report. See 1985 CBO
Report, at 16 n.2. Thus, the reports
provide no additional helpful evidence
and instead suffer from the same
analytical problems as the Department’s
own 1981–1982 study and other simple
wage-differential analyses.65
After considering the available data,
and assuming for the purposes of this
discussion that costs are in fact a
permissible consideration in defining
the term ‘‘prevailing wage,’’ the
Department is not persuaded that
returning to the 30 percent threshold
will cause a meaningful increase in
Federal construction costs. Based on the
Department’s demonstration in the
economic analysis of what the
prevailing wage would be after applying
the 30-percent threshold to a sample of
recently published prevailing wage
rates, the Department found no clear
evidence of a systematic increase in the
prevailing wage sufficient to affect
prices across the economy. The
illustrative analysis in section V.D.
shows returning to the 30-percent rule
will significantly reduce the reliance on
the weighted average method to produce
prevailing wage rates. Applying the 30percent threshold, some prevailing wage
determinations may increase and others
may decrease, but the magnitude of
these changes will, overall, be
negligible. Even where wage
determinations may increase, the
Department is persuaded by recent peerreviewed research, which generally has
not found a significant effect from wage
increases related to prevailing wage
requirements on the total construction
costs of public works projects.
For similar reasons, the Department is
not persuaded that the reversion to the
30-percent threshold would have any
impact on national inflation rates.
Several commenters, including CEI and
certain members of Congress, stated that
the Department’s proposal is ill-timed
because of the current levels of
65 The 1983 CBO study acknowledged these
issues. It noted that the 1979 GAO study had been
questioned because of inadequate sample sizes, the
choice of projects covering small volumes of
construction, and inappropriate assumptions. See
1983 CBO Report, at 48. It also noted that
‘‘questions have been raised regarding the general
approach of translating wage increases directly into
cost increases.’’ Such an approach, the report notes,
‘‘may be incorrect . . . to the extent that workers
at different wage levels may not be equally
productive.’’ Id. at 48–49. The 2018 CBO projection
that NAHB cites does not explain its methodology,
but it estimates savings from eliminating the entire
Davis-Bacon Act as amounting to only 0.8
percentage points in project costs associated with
a reduction in wages and benefits. See supra note
57, https://www.cbo.gov/budget-options/54786.
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economy-wide inflation and the risks of
a wage-price spiral. Returning to the 30percent rule, CEI claimed, ‘‘would likely
contribute to the pressures’’ that could
create such a spiral. Although CEI
referenced the 1983 CBO Report to
support its argument that the 30-percent
threshold would increase construction
costs, CEI did not note the conclusion
in that study that the DBA as a whole
‘‘seems to have no measurable effect on
the overall rate of inflation.’’ 1983 CBO
Report, at xii, 30–31.
One individual commenter asserted
that the Department should be required
to consider not only whether the 30percent rule can alone cause inflation,
but also whether the proposal, in
combination with other regulatory and
spending measures, would have an
effect on inflation and what that effect
would be. The commenter stated that
the infusion of Federal infrastructure
spending from the Infrastructure
Investment and Jobs Act (IIJA), Public
Law 117–58, will likely lead to
substantial compensation premiums for
construction workers. The commenter
stated that such wage increases would
occur ‘‘because a sudden increase in
federal infrastructure spending does not
necessarily lead to a commensurate
increase in construction sector
employment.’’
The Department disagrees that this
rule will substantially impact inflation.
As noted, the Department’s illustrative
analysis in section V.D. suggests that the
reimplementation of the 30-percent
threshold will result in some prevailing
wage determinations increasing and
others decreasing, but the magnitude of
these changes will, overall, be
negligible. In addition, even if this rule
leads to an increase in some required
prevailing wage rates, it will not have an
equal impact on actual wages paid to
workers on DBRA-covered contracts,
because some workers may already be
earning above the new prevailing wage
rate.
If wages for potentially affected
workers were to increase, the
Department does not believe that it
would lead to inflation. Recent research
shows that wage increases, particularly
at the lower end of the distribution, do
not cause significant economy-wide
price increases.66 For example, a 2015
66 See, e.g., J.P. Morgan, ‘‘Why Higher Wages
Don’t Always Lead to Inflation’’ (Feb. 7, 2018),
available at: https://www.jpmorgan.com/
commercial-banking/insights/higher-wagesinflation; Daniel MacDonald & Eric Nilsson, ‘‘The
Effects of Increasing the Minimum Wage on Prices:
Analyzing the Incidence of Policy Design and
Context,’’ Upjohn Institute working paper; 16–260
(June 2016), available at https://research.
upjohn.org/up_workingpapers/260/; Nguyen Viet
Cuong, ‘‘Do Minimum Wage Increases Cause
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Federal Reserve Board study found little
evidence that changes in labor costs
have had a material effect on price
inflation in recent years.67 Even in the
recent period of increased inflation,
there was little evidence that the
inflation was caused by increases in
wages. A study of producer price
inflation and hourly earnings from
December 2020 to November 2021
found that inflation and wage growth
were uncorrelated across industries.68
Additionally, as two Professors of
Economics commented, ‘‘since
prevailing wages are not associated with
increased construction costs, there is no
reason to assume that the policy causes
inflation in the macroeconomy.’’
More importantly, DBRA-covered
contracts make up a small share of
overall economic output. Because
federally-funded construction only
makes up approximately 13 percent of
total construction output and the
number of potentially affected workers
(1.2 million) is less than 1 percent of the
total workforce, the Department does
not believe that any wage increase
associated with this rule would
significantly increase prices or have any
appreciable effect on the
macroeconomy.69
In sum, the factual conclusions about
‘‘inflationary effects’’ underlying the
1982 elimination of the 30-percent rule
are no longer supportable because they
have been discounted over the past 40
years by more sophisticated analytical
tools. Furthermore, the available
evidence does not suggest that concerns
about the 30-percent threshold
Inflation? Evidence from Vietnam,’’ ASEAN
Economic Bulletin Vol. 28, No. 3 (2011), pp. 337–
59, available at: https://www.jstor.org/stable/
41445397; Magnus Jonsson & Stefan Palmqvist, ‘‘Do
Higher Wages Cause Inflation?,’’ Sveriges Riksbank
Working Paper Series 159 (Apr. 2004), available at:
https://archive.riksbank.se/Upload/WorkingPapers/
WP_159.pdf; Kenneth M. Emery & Chih-Ping Chang,
‘‘Do Wages Help Predict Inflation?,’’ Federal
Reserve Bank of Dallas, Economic Review First
Quarter 1996 (1996), available at: https://
www.dallasfed.org/∼/media/documents/research/
er/1996/er9601a.pdf.
67 Ekaterina V. Peneva & Jeremy B. Rudd, ‘‘The
Passthrough of Labor Costs to Price Inflation,’’
Federal Reserve Board (2015), available at: https://
www.federalreserve.gov/econres/feds/thepassthrough-of-labor-costs-to-price-inflation.htm.
68 Josh Bivens, ‘‘U.S. Workers Have Already Been
Disempowered in the Name of Fighting Inflation,’’
Figure A, Economic Policy Institute (Jan. 2022),
available at: https://www.epi.org/blog/u-s-workershave-already-been-disempowered-in-the-name-offighting-inflation-policymakers-should-not-make-iteven-worse-by-raising-interest-rates-tooaggressively/.
69 Federally funded construction as a share of
total construction output can be calculated from the
data in Table 3 ($216,700,000,000 ÷
$1,667,000,000,000 = 0.13). The estimate of 1.2
million potentially affected workers is calculated in
section V.B.2.
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increasing project costs or national
inflation rates are justified.
The Department also considered the
comments that express concern about
whether the 30-percent threshold may
affect certain sectors or areas, and the
residential construction industry in
particular, differently than the national
economy as a whole. As they are for
other types of construction,
respectively, prevailing wage rates for
DBRA-covered residential construction
are based on WHD wage surveys of
residential construction projects.
Residential construction can be
distinguished from other construction
types in several important ways: it tends
to be less capital- and skill- intensive
and thus generally has fewer barriers to
entry for firms as well as for workers,
projects tend to be of smaller and
shorter duration, workers tend to move
more often between firms, and firms
tend to provide less training.70 Wages
also tend to be lower in residential
construction than in nonresidential
construction types, and unionization
rates have historically been lower.
Because of lower unionization rates in
the residential construction industry,
where the methodology for determining
prevailing rates is based on the mode
(whether majority or 30-percent
threshold), the rates that prevail are
more likely to come from non-union
wage rates than from higher, collectively
bargained rates. As a result, in
comparison to other construction types,
it is less likely—not more likely—that
the 30-percent threshold will result in
increases in prevailing wage rates on
residential construction projects.
However, in the more limited
circumstances in which residential
construction rates may change from
averages to rates based on CBAs, the
increases in wage rates could be larger
given the generally lower wage floors in
the industry.71
Moreover, even if implementation of
the proposal were to lead in some areas
to increased wages, and even assuming
those increased wages resulted in
increased project costs for federally
financed residential construction, the
70 See Russell Ormiston et al., ‘‘Rebuilding
Residential Construction,’’ in Creating Good Jobs:
An Industry-Based Strategy 75, 78–79 (Paul
Osterman ed., 2020).
71 Although the transfer analysis presented in
Section V.D.1 is simply illustrative and may not be
representative of the impact of this rule, the results
of this analysis reflect that only 5 percent of the
residential fringe benefit rates analyzed were
affected by the reversion to the 30-percent
threshold, compared to 14 percent of building
fringe rates, 19 percent of heavy fringe rates and 23
percent of highway fringe rates. In those limited
circumstances where residential fringe rates were
affected, however, they tended to increase more
significantly given their largely nonunion baseline.
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effects on overall housing prices or rents
would not be significant. DBRA-covered
construction makes up only a very small
percentage of the total new construction
in the residential construction market—
only 1 percent as of July 2022.72 And,
annual new residential construction
itself tends to be less than 1 percent of
all available residential units.73 Among
the residential construction covered by
the DBRA, many projects would be
unaffected by the proposed reversion to
the 30-percent threshold. The
Department’s illustrative analysis
suggests that the proposal would only
affect the methodology for
approximately one-third of new wage
determinations, and of those, some
would result in decreases in the
required wage rate, not an increase. See
section V.D.1.ii.74 The most reasonable
conclusion is that any limited potential
increase in some construction costs for
such a small percentage of the
residential market would not affect
housing prices or rents generally.75
The Department also considered the
concerns commenters raised about the
construction of publicly funded
affordable housing in particular. In a
comment, two Professors of Economics
said that three studies have found that
the application of prevailing wage laws
in general may be correlated with
increased project costs for affordable
housing projects.76 But, for two reasons,
these studies are of limited value for
forecasting the effects of reversion to the
30-percent rule. First, as noted, the
Department’s illustrative analysis of the
effects of the 30-percent threshold,
which included residential construction
72 According to the Census Bureau, the Seasonally
Adjusted Annual Value of Private Residential
Construction Put in Place, as of July 2022, was
$920.4 billion; public residential construction was
$9.3 billion. https://www.census.gov/construction/
c30/c30index.html.
73 See U.S. Census Bureau, National and State
Housing Unit Estimates: 2010 to 2019, https://
www.census.gov/data/tables/time-series/demo/
popest/2010s-total-housing-units.html,
74 There are additional reasons why increasing
labor costs do not have a one-to-one correlation
with housing and rent prices. In recent decades,
housing prices have significantly outpaced real
construction costs. See Joseph Gyourko & Raven
Molloy, ‘‘Regulation and Housing Supply,’’ (Nat’l
Bureau of Econ. Rsch., Working Paper No. 20536,
2014), https://www.nber.org/system/files/working_
papers/w20536/w20536.pdf. Gyourko and Molloy
conclude that, as a general matter, labor and
material costs do not appear to act as a major
constraint on residential development, in
comparison to land-use policy constraints.
75 In addition, the reversion to the 30-percent
threshold will not result in any wage increases in
the short-term. Any effect on wage increase will
only occur after wage new residential constructiontype surveys are initiated and completed, and then
wage determinations based on those surveys are
incorporated into new construction contracts.
76 See also Duncan & Ormiston, supra n. 61, at
142–48 (discussing peer-reviewed studies).
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survey data, does not show a systematic
increase in prevailing wage rates.
Second, the peer-reviewed studies
showing potential increased project
costs on affordable housing projects do
not compare different prevailing wage
methodologies, but instead compare
whether projects are either covered or
not covered at all by prevailing wage
requirements. Where studies compare
the existence of prevailing wage
requirements at all (as opposed to a
simple change in wage determination
methodologies), other factors can
explain project cost increases.77
The Department also considered the
comments regarding the potential effects
of economic conditions that may result
from increased infrastructure spending.
While it is true that increases in
construction spending can lead to
increases in construction wage rates in
the short run,78 this potential does not
suggest the Department’s proposal is
unwarranted. Under the 30-percent
threshold, as under the current majority
rule or any other measure of prevailing
wages, wage determinations will and
should generally reflect increases in
wage rates that result from separate
policy decisions by Federal, State, or
Local governments, or other macroeconomic phenomena. The commenters
did not suggest, and the Department did
not identify, any specific mechanism
through which the 30-percent threshold
would interact with construction
spending increases in a way that would
materially affect the results of the
Department’s illustrative analyses or
suggest outcomes other than those
supported by the peer-reviewed
literature. Finally, the prevailing wage
methodology in this rule is not a shortterm policy; it is intended to apply
during timeframes when public
infrastructure spending is lower, as well
as those when it is higher, and during
all phases of the construction industry
business cycle.
Finally, the Department disagrees
with NAHB that the proposal should be
withdrawn because, among other
reasons, the proposal does not address
certain challenges in the residential
building industry, including ‘‘an
increasingly transient and aging
workforce, increased building costs
77 For example, cost differences may be
attributable in part to reductions in independentcontractor misclassification, failure to pay overtime,
and other basic wage violations that are
disincentivized because of the prevailing-wage
requirement to submit certified payroll. Id. at 146.
78 One commenter suggested that increased
infrastructure spending could lead to an increase in
demand for construction workers, and that the
supply of skilled workers might not be
commensurate in the short term, which could lead
to an increase in wage rates.
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resulting from supply shortages, and the
economic impact of COVID–19, among
other things.’’ NAHB explains, in
addition, that the residential
construction industry has been
‘‘suffering from a skilled labor shortage
for many years.’’ The Department agrees
with NAHB that these topics are
important for policymakers to consider.
NAHB does not explain why the
methodology for determining the
prevailing wage under the DBRA is
relevant to addressing these challenges,
or why a methodology other than the
Department’s proposed reversion to the
three-step process would be more
beneficial. However, to the extent that
the 30-percent threshold could increase
wage rates in some areas, as NAHB also
asserts, such an outcome would be
beneficial to the industry by attracting
more workers to the construction labor
market and allowing required prevailing
wages to more often support the
maintenance of apprenticeship and
training costs that will contribute to the
expansion of the skilled workforce.
In addition to all of these factual
arguments about whether costs or
inflation may increase, however, several
unions and contractor associations
argued that the Department should not
be permitted as a legal matter to
consider contract costs or other similar
effects of any wage increases when it
determines the proper prevailing wage
methodology. The United Brotherhood
of Carpenters and Joiners of America
(UBC) and NABTU argued that the
Department’s apparent goal in 1981–
1982 of reducing construction costs was
not consistent with the purpose of the
Act. NABTU stated that such a reliance
on cost considerations was arbitrary and
capricious under the Supreme Court’s
decision in Motor Vehicle
Manufacturers Ass’n of the United
States v. State Farm Mutual Automobile
Insurance Co., 463 U.S. 29, 43 (1983)
(State Farm), because it relied on a
factor (cost) that Congress had not
intended to be considered. To the
contrary, commenters noted, statements
in the legislative history suggest that
Congress’s ‘‘chief concern’’ was ‘‘to
maintain the wages of our workers and
to increase them wherever possible.’’ 74
Cong. Rec. 6513 (1931) (remarks of Rep.
Mead); see also United States v.
Binghamton Constr. Co., 347 U.S. 171,
176–77 (1954) (noting that the
legislative history demonstrates that the
DBA was ‘‘not enacted for the benefit of
contractors, but rather to protect their
employees from substandard earnings’’).
The Department agrees with these
commenters that there is a legitimate
question as to whether it would be
appropriate to use a methodology that is
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less consistent with the definition of
‘‘prevailing wage’’ in order to reduce
contract costs. Such a determination
would not seem to be consistent with
Congressional intent. As Solicitor
Donahue testified in the 1962 hearings
on the Act, ‘‘Congress has not injected
a cost factor into the Davis-Bacon Act as
one of the standards to be used in
determining which wage rates will
apply.’’ 79 The ‘‘basic purpose of the
Davis-Bacon Act is to protect the wages
of construction workers even if the
effect is to increase costs to the [F]ederal
[G]overnment.’’ Bldg. & Constr. Trades
Dep’t, 543 F. Supp. at 1290. Congress
considered cost concerns and enacted
and expanded the DBA notwithstanding
them. Id. at 1290–91; 1963 House
Subcommittee Report, at 2–3;
Reorganization Plan No. 14 of 1950, 15
FR 3176, 5 U.S.C. app. 1.80
Thus, even if concerns about an
inflationary effect on government
contract costs or speculative effects on
the national macro economy were used
to justify eliminating the 30-percent rule
in 1982, the Department does not
believe such reasoning now provides a
persuasive factual basis or legal
requirement to maintain the current
majority rule. While the Department
agrees with the commenters that are
skeptical about the permissibility of
considering costs or cost effects at all in
deciding the appropriate definition of
‘‘prevailing,’’ the Department
considered these cost-related arguments
nonetheless and does not find them
convincing, given the weakness of the
wage-differential analyses on which
they are based. However, even if the
reversion to the 30-percent rule were to
add 0.3 percent to total Federal
construction contract costs (as CEI
estimates and the Department disputes),
and have idiosyncratic cost effects in
certain localities or construction types,
the Department would still conclude
that this is the better course in order to
more often ensure that the prevailing
wage rates incorporated into covered
contracts are rates that are actually paid
to workers in an area and that are
therefore, on balance, more protective of
local construction wage rates.81
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79 Administration
of the Davis-Bacon Act:
Hearings before the Spec. Subcomm. Of Lab. Of the
H. Comm. On Educ. & Lab., 87th Cong. 153 (1962).
80 In his message accompanying Reorganization
Plan No. 14, President Truman noted that ‘‘[s]ince
the principal objective of the plan is more effective
enforcement of labor standards, it is not probable
that it will result in savings. But it will provide
more uniform and more adequate protection for
workers through the expenditures made for the
enforcement of the existing legislation.’’ 15 FR
3176; 5 U.S.C. app. 1.
81 The Department also considered NAHRO’s
narrower suggestion that HUD programs should be
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The Department also considered
whether the 30-percent threshold gives
‘‘undue weight’’ to collectively
bargained rates. In the 1982 final rule,
the Department noted criticism of the
30-percent rule on that basis, and later—
though without specifically discussing
the issue—the Department stated
generally that it agreed with the
comments criticizing the rule. Now,
certain commenters opposing the
Department’s proposal to return to the
30-percent rule have made similar
arguments. ABC pointed to the
phenomenon of ‘‘wage dispersion,’’
which affects non-union contractors
more than it does union contractors.
According to ABC, non-union
contractors more often base
compensation on skills or productivity
rather than job category, unlike union
contractors. Thus, they argue, union
contractors are more likely than nonunion contractors to pay their workers
the same rate.82 AFP–I4AW commented
that nothing in the NPRM contradicts
the conclusion in 1982 that the 30percent rule gives undue weight to
collectively bargained rates.
On the other hand, commenters
supporting a return to the 30-percent
rule criticized the reasoning in 1982 that
the 30-percent rule provided ‘‘undue
weight’’ to collectively bargained rates.
These commenters argued that this
reasoning was a symptom of anti-union
bias and had no basis in the statute. The
Iron Workers quoted the 1962
congressional testimony of Solicitor of
Labor Charles Donahue regarding the
interface between the rule and union
rates. As Solicitor Donahue pointed out,
the 30-percent rule did not uniformly
lead to the identification of union rates
as prevailing, but, in any case, the
question of whether union or non-union
contractors are disadvantaged by the
Department’s prevailing wage
determinations is not something that the
Department should be properly taking
into consideration in making its wage
determinations.83 In a related comment,
two Professors of Economics noted that
the potential for union rates being
identified as the prevailing rate does not
excepted from the final rule because of concerns
about potential cost impacts on affordable housing
development. As discussed, the Department
disagrees with the assertion that the reversion to the
30-percent threshold will necessarily raise costs to
affordable housing projects in a significant or
systematic manner so as to suggest the threshold
should not be applied.
82 See also 1979 GAO Report, at 52 (describing
the difference between CBA pay scales and nonunion contractor pay practices).
83 Administration of the Davis Bacon Act:
Hearings before the Spec. Subcomm. of Lab. of the
H. Comm. on Educ. & Lab., 87th Cong. 819–20
(1962) (statement and submission of Charles
Donahue, Solicitor of Labor).
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necessarily mean that project costs will
increase. The comment cited several
peer-reviewed studies that found no
statistically significant cost difference
between projects built with prevailing
rates based on union rates and projects
that were not.84
The Department is no longer
persuaded that the 30-percent threshold
gives undue weight to collectively
bargained rates or that whatever weight
it gives to collectively bargained rates is
a convincing basis to maintain the status
quo. The underlying concern in 1982
was, as ABC explained, that
identification of a modal prevailing
wage could give more weight to union
rates that more often tend to be the same
across companies. If this occurs,
however, it is a function of the statutory
term ‘‘prevailing,’’ which, as both the
Department and OLC have concluded,
refers to a predominant modal wage
rate. If a modal methodology with a
modal threshold is used, then the modal
threshold—regardless of the number
used—may on balance be more likely to
be satisfied by collectively bargained
rates than by non-collectively bargained
rates. Said differently, the same weight
is given to collectively bargained rates
whether the Department chooses a 50percent or 30-percent threshold; thus
any ‘‘undue weight’’ to collectively
bargained rates should not be a basis for
distinguishing between these two
thresholds. The Department,
accordingly, now understands the
concerns about undue weight to
collectively bargained rates to be
concerns about the potential outcome
(of more wage determinations based on
collectively bargained rates) instead of
concerns about any actual weight given
to collectively bargained rates by the
choice of the modal threshold. To
choose a threshold because the outcome
would be more beneficial to non-union
contractors—as the Department seems to
have suggested it was doing in 1982—
does not have any basis in the statute.
Donovan, 543 F. Supp. at 1291 n.16
(noting that the Secretary’s concern
about weight to collectively bargained
rates ‘‘bear[s] no relationship to the
purposes of the statute’’).
The Department also notes that there
appears to be confusion among some
84 See Lamek Onsarigo et al., ‘‘The Effect of
Prevailing Wages on Building Costs, Bid
Competition, and Bidder Behaviour: Evidence from
Ohio School Construction,’’ 38 Constr. Mgmt. &
Econ. 917 (2020); Kevin Duncan & Jeffrey
Waddoups, ‘‘Unintended Consequences of Nevada’s
Ninety-Percent Prevailing Wage Rule,’’ 45 Lab.
Stud. J. 166 (2020); Jaewhan Kim et al., ‘‘The Effect
of Prevailing Wage Regulations on Contractor Bid
Participation and Behavior: A Comparison of Palo
Alto, California with Four Nearby Prevailing Wage
Municipalities,’’ 51 Indus. Rels. 874 (2012).
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commenters about what it means when
the prevailing wage in a wage
determination is set based on a
collectively bargained wage rate. A
comment on the Department’s proposal
from the group of U.S. Senators
characterized the 1982 rule as having
changed the definition of prevailing
wage ‘‘to allow open-shop contractors to
bid on DBRA covered contracts on an
equal footing with their unionized
counterparts.’’ This description seems to
conflate the basis of a wage
determination with its effect on
competition. Whether wage
determinations are based on collectively
bargained rates or on non-collectively
bargained rates, both non-union and
union contractors are on similar footing
in that they have similar notice of the
Department’s wage determinations and
are required to pay at least the same
specified minimum rates. See 74 Cong.
Rec. 6510 (1931) (Statement of Rep.
Bacon) (‘‘If an outside contractor gets
the contract . . . it means that he will
have to pay the prevailing wages, just
like the local contractor.’’).85 To the
extent that a non-union contractor has
to pay higher rates on a contract than it
would have paid without the prevailing
wage requirement, it is not unfairly
harmed because all other bidders are
required to pay at least the same
prevailing rate.86
Regardless, the Department’s
regulatory impact analysis does not
suggest that a return to the 30-percent
rule would give undue weight to
85 As the AGC noted in a comment, the same is
not necessarily true when the prevailing wage rate
is set below a collectively bargained wage rate, as
contractors bound by CBAs may not be able to pay
their workers less than the collectively bargained
rate on a covered project, while a non-union
contractor could. For this reason, another
commenter that is a member of a larger contractor
association asserted the belief that its association
was taking a position against the proposal because
non-union contractors ‘‘do not appear to want to
compete on a level playing field by paying rates
consistent with the determination. Rather, their
position indicates they prefer to be able to undercut
the wage/benefit determination by paying rates
below these to gain an advantage over competitors.’’
Thus, to the extent that eliminating the 30-percent
rule in 1982 led to a decrease in the use of
collectively bargained rates to set the prevailing
wage, the effect was not to place non-union
contractors on ‘‘equal footing’’ as union contractors,
but to give non-union contractors an advantage.
86 As the Department explains in section V.F.1.,
significant benefits flow from ensuring that as many
contractors as possible can bid on a contract. One
study on the impact of bid competition on final
outcomes of State department of transportation
construction projects, demonstrated that each
additional bidder reduces final project cost
overruns by 2.2 percent and increases the
likelihood of achieving a high-quality bid by 4.9
times. See Delaney, J. (2018). ‘‘The Effect of
Competition on Bid Quality and Final Results on
State DOT Projects.’’ https://www.proquest.com/
openview/33655a0e4c7b8a6d25d30775d350b8ad/
1?pq-origsite=gscholar&cbl=18750.
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collectively bargained rates. Among a
sample of rates considered in an
illustrative analysis, one-third of all
rates (or about half of rates currently
established based on weighted averages)
would shift to a different method.
Among these rates that would be set
based on a new method, the majority
would be based on non-collectively
bargained rates. In the illustrative
example, the Department estimates that
the use of single (modal-based)
prevailing wage rates that are not the
product of CBAs would increase from
12 percent to 36 percent of all wage
rates—an overall increase of 24
percentage points. See Table 6, section
V.D.1.ii. The use of modal wage rates
that are based on CBAs would increase
from 25 percent to 34 percent—an
overall increase of 9 percentage points.
Id.87
Having considered the comments both
for and against the Department’s
proposed reversion to the three-step
process for determining the prevailing
wage, the final rule adopts the amended
definition of prevailing wage in § 1.2 of
the regulations as proposed.
(3) Former § 1.2(a)(2)
In a non-substantive change, the
Department proposed to move the
language currently at § 1.2(a)(2) that
explains the interaction between the
definition of prevailing wage and the
sources of information in § 1.3. The
Department proposed to move that
language (altered to update the crossreference to the definition of prevailing
wage) to the introductory section of
§ 1.3. The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed.
(4) Variable Rates That Are Functionally
Equivalent
The Department also proposed to
amend the regulations on compiling
wage rate information at § 1.3 to allow
for variable rates that are functionally
equivalent to be counted together for the
purpose of determining whether a wage
87 As discussed in the regulatory impact analysis,
the Department found that fringe benefits currently
do not prevail in slightly over half of the
classification-county observations it reviewed—
resulting in no required fringe benefit rate for that
classification. See Table 6, section V.D.1.ii. This
would be largely unchanged under the proposed
reversion to the three-step process, with nearly half
of classification rates still not requiring the payment
of fringe benefits. Only about 13 percent of fringe
rates would shift from no fringes or an average rate
to a modal prevailing fringe rate. Overall, under the
estimate, the percentage of fringe benefit rates based
on CBAs would increase from 25 percent to 34
percent. The percentage of fringe benefit rates not
based on collective bargaining rates would increase
from 3 percent to 7 percent.
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rate prevails under the proposed
definition of ‘‘prevailing wage’’ in § 1.2.
The Department generally followed this
proposed approach until after the 2006
decision of the ARB in Mistick Constr.,
ARB No. 04–051, 2006 WL 861357.
Historically, when reviewing wage
survey data, the Department has
considered wage rates that may not be
exactly the same to be functionally
equivalent—and therefore counted as
the same—as long as there was an
underlying logic that explained the
difference between them. For example,
some workers may perform work under
the same labor classification for the
same contractor or under the same CBA
on projects in the same geographical
area being surveyed and get paid
different wages based on the time of day
that they performed work—e.g., a ‘‘night
premium.’’ In that circumstance, the
Department would count the normal
and night-premium wage rates as the
‘‘same wage’’ rate for purposes of
calculating whether that wage rate
prevailed under the majority rule that is
discussed in § 1.2. Similarly, where
workers in the same labor classification
were paid different ‘‘zone rates’’ for
work on projects in different zones
covered by the same CBA, the
Department considered the difference
between those rates to be compensating
workers for the burden of traveling or
staying away from home instead of
reflecting fundamentally different
underlying wage rates for the work
actually completed. Variable zone rates
would therefore be considered the
‘‘same wage’’ for the purpose of
determining the prevailing wage rate.
In another example, the Department
took into consideration ‘‘escalator
clauses’’ in CBAs that may have
increased wage rates across the board at
some point during the survey period.
Manual of Operations (1986), at 58–59.
Wages for workers working under the
same CBA could be reported differently
on a survey solely because of the week
their employer used in responding to
the wage survey rather than an actual
difference in prevailing wages. The
Department has historically treated such
variable rates the same for the purposes
of determining the prevailing wages
paid to laborers or mechanics in the
survey area. Id. The Department has also
considered wage rates to be the same
where workers made the same
combination of basic hourly rates and
fringe rates, even if the basic hourly
rates (and also the fringe rates) differed
slightly.
In these circumstances, where the
Department has treated certain variable
rates as the same, it has generally
chosen one of those rates to use as the
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prevailing rate. In the case of rates that
are variable because of an escalatorclause issue, it uses the most current
rate under the CBA. Similarly, where
the Department identified combinations
of hourly and fringe rates as the ‘‘same,’’
the Department previously identified
one specific hourly rate and one specific
fringe rate that prevailed, following the
guidelines in 29 CFR 5.24, 5.25, and
5.30.
In 2006, the ARB strictly interpreted
the regulatory language of § 1.2(a) in a
way that limited some of these
practices. See Mistick Constr., ARB No.
04–051, 2006 WL 861357, at *5–7. The
decision affirmed the Administrator’s
continued use of the escalator-clause
practice; but the ARB also found that
the combination of basic hourly and
fringe rates did not amount to a single
‘‘wage,’’ and thus the payment of the
same combination of hourly and fringe
rates could not justify a finding that the
‘‘same wage,’’ as used in § 1.2(a), had
been paid. Id. The ARB also viewed the
flexibility shown to CBAs as
inconsistent with the ‘‘purpose’’ of the
1982 final rule, which the Administrator
had explained was in part to avoid
giving ‘‘undue weight’’ to collectively
bargained rates. Id. The ARB held that,
with the exception of escalator clauses,
the Administrator could not consider
variable rates under a CBA to be the
‘‘same wage’’ under § 1.2(a) as the
regulation was written. Id. If no ‘‘same
wage’’ prevailed under the majority rule
for a given classification, the
Administrator would have to use the
fallback weighted average to determine
the prevailing wage. Id. at * 7.
The ARB’s conclusion in Mistick—
particularly its determination that even
wage data reflecting the same aggregate
compensation but slight variations in
the basic hourly rate and fringe benefit
rates did not reflect the ‘‘same wage’’ as
that term was used under the current
regulations—could be construed as a
determination that wage rates need to be
identical ‘‘to the penny’’ in order to be
regarded as the ‘‘same wage,’’ and that
nearly any variation in wage rates, no
matter how small and regardless of the
reason for the variation, might need to
be regarded as reflecting different,
unique wage rates.
The ARB’s decision in Mistick limited
the Administrator’s methodology for
determining a prevailing rate, thus
contributing to the increased use of
weighted average rates. As noted in the
discussion of the definition of
‘‘prevailing wage’’ in § 1.2, however,
both the Department and OLC have
agreed that averages should generally
only be used as a last resort for
determining prevailing wages. See
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section III.B.1.ii.A. As the OLC opinion
noted, the use of an average is difficult
to justify, ‘‘particularly in cases where it
coincides with none of the actual wage
rates being paid.’’ 5 Op. O.L.C. at 177.88
In discussing those cases, OLC quoted
from the 1963 House Subcommittee
Report summarizing extensive
congressional oversight hearings of the
Act. Id. The report had concluded that
‘‘[u]se of an average rate would be
artificial in that it would not reflect the
actual wages being paid in a local
community,’’ and ‘‘such a method
would be disruptive of local wage
standards if it were utilized with any
great frequency.’’ Id.89 To the extent that
an inflexible approach to determining if
wage data reflects the ‘‘same wage’’
promotes the use of average rates even
when wage rate variations are based on
CBAs or other written policies reflecting
that the rates, while not identical, are
functionally equivalent, such an
approach would be inconsistent with
these authorities and the statutory
purpose they reflect.
As reflected in Mistick, the existing
regulation does not clearly authorize the
use of functionally equivalent wages to
determine the local prevailing wage. See
ARB No. 04–051, 2006 WL 861357, at
*5–7. Accordingly, the Department
proposed in the NPRM to amend § 1.3
to include a new paragraph at § 1.3(e)
that would permit the Administrator to
count wage rates together—for the
purpose of determining the prevailing
wage—if the rates are functionally
equivalent and the variation can be
explained by a CBA or the written
policy of a contractor.
The Department received a number of
comments from unions and contractor
associations that supported the
proposed new language in § 1.3(e).
These commenters noted that there are
various ways that CBAs and
management decisions can create slight
compensation variations that may
reflect special circumstances and not
simply different wages paid for the same
underlying work. NABTU explained
that the same principle explains why
the Department does not count an
overtime premium as a separate wage
rate from the worker’s base hourly rate
for the purpose of calculating the
prevailing wage.
The commenters in favor of the
Department’s proposal asserted that the
reversion to the pre-Mistick practice of
counting functionally equivalent rates
as the same is consistent with the DBA’s
legislative history and the Department’s
88 See
89 See
note 1, supra.
1963 House Subcommittee Report, supra,
at 7–8.
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longstanding preference for prevailing
wages that reflect actual wages paid to
workers instead of artificial averages.
According to these commenters, the
Mistick decision led to an increase in
the unnecessary use of average rates for
wage determinations, and it failed to
adequately capture and reflect local area
practice. See Fry Bros. Corp., WAB No.
76–06, 1977 WL 24823, at * 6.90 One
commenter, MCAA, also asserted that
the decision in the Mistick case was
based on a ‘‘non-statutory aim, if not
animus, of limiting the impact of CBA
rates in the process.’’
Conversely, ABC and several of its
members stated that the Department’s
proposal conflicts with the
Department’s intended definition of
‘‘prevailing wage’’ and contradicts the
ARB’s Mistick decision. Numerous other
contractors and individual commenters,
as part of an organized initiative, stated
that the ‘‘functionally equivalent’’
proposal, in combination with the
return to the three-step process and the
elimination of the bar on crossconsideration of metropolitan and rural
wage data, was likely to ‘‘further distort
the accuracy’’ of WHD wage
determinations, a process that the
commenters stated was ‘‘already deeply
flawed.’’ These commenters urged the
Department to abandon these proposed
changes to the rule, including the
proposed language in § 1.3(e).
The Independent Electrical
Contractors (IEC) and AFP–I4AW stated
their opposition to the proposal because
it would authorize the finding that rates
are functionally equivalent on the basis
of CBAs. AFP–I4AW stated that the
modal analysis in the definition of
prevailing wage in § 1.2 already favors
the more uniform rates characteristic of
CBAs, and that the functional
equivalence proposal’s direction to the
agency to look to these agreements for
the analysis ‘‘will only increase the
likelihood of finding union rates to be
the prevailing rates, leading to the
unjustified inflation of labor costs.’’ IEC
stated that, while they appreciate the
Department’s intention of obtaining
additional data points for the purpose of
determining a predominant wage rate, it
90 In Fry Brothers, the Wage Appeals Board
(WAB) described the importance of using CBAs to
help determine classifications based on job content
where collectively bargained rates prevail. 1977 WL
24823, at *6. The WAB was the Department’s
administrative appellate entity from 1964 until
1996, when it was eliminated and the ARB was
created and provided jurisdiction over appeals from
decisions of the Administrator and the
Department’s ALJs under a number of statutes,
including the Davis-Bacon and Related Acts. 61 FR
19978 (May 3, 1996). WAB decisions from 1964 to
1996 are available on the Department’s website at
https://www.dol.gov/agencies/oalj/public/dba_sca/
references/caselists/wablist.
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is not sufficiently clear what principle
will guide the Department’s finding that
varied rates are nonetheless functionally
equivalent.
The Department has reviewed the
many comments received regarding the
proposed language at § 1.3(e) and agrees
with the commenters that advocated in
favor of the proposal. The Department’s
intent in the proposal is to ensure that
prevailing wage rates reflect wage rates
paid for the same underlying work, and
do not instead give undue weight to
artificial differences that can be
explained because workers are being
compensated for something other than
the underlying work. This is consistent
with the text and purpose of the DavisBacon Act and has the salutary effect of
reducing the unnecessary reliance on
average wage rates that are less
protective of local construction wages.
The Department disagrees with the
comments, sent in response to an
organized initiative, that the proposal
conflicts with the Department’s
intended definition of ‘‘prevailing
wage.’’ The three-step process and the
functional-equivalence rule are
consistent because they both seek to
reduce the reliance on averages and
increase the use of wage rates that are
actually paid to workers in the area. In
doing so, they both seek to protect local
prevailing wage rates and the craft
classifications of local area practice,
which is the core purpose of the DBRA.
Moreover, the Department disagrees that
there is any conflict between the two
regulatory sections. The proposed
language at § 1.3(e) explicitly crossreferences the definition in § 1.2 and
explains how it should apply to the realworld circumstances that WHD
encounters when analyzing survey data.
The new language in § 1.3(e) is an
amendment to, and becomes an element
of, the definition itself. The Department
also does not agree that the new
language contradicts the Mistick
decision; rather, the new language
changes the rule that would be
interpreted by the ARB in the future.
The Mistick decision was an
interpretation of the text of the
Department’s 1983 regulations that
required a determination of whether
wage rates were the ‘‘same wage’’ and
its fundamental holding was that the
Department had not abided by the
regulatory language as it was then
written. There would be no basis for the
ARB to come to the same conclusion
under the proposed new language at
§ 1.3(e), which expressly authorizes the
Administrator to count variable wage
rates together as the ‘‘same wage’’ in
appropriate circumstances.
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While no commenter made the
argument explicitly, the Department
also considered whether the comments
regarding the proposed departure from
the post-Mistick status quo should be
understood as assertions that
contractors have reliance interests in the
Department’s recent practice. To the
extent that any assertion of reliance
interest was made, however, the
Department concludes that it is not
sufficient to override the value of the
functionally equivalent analysis. The
functionally equivalent analysis, like
the return to the 30-percent threshold, is
a change that will likely lead to
increased use of modal prevailing wages
and decreased use of averages on wage
determinations. As with the 30-percent
threshold, this change should
reasonably be expected to lead in some
circumstances to increases in prevailing
wage rates and in other circumstances to
decreases. Similar to the 30-percent rule
and to other amendments to the wage
determination process in part 1 of the
regulations, the effects of this rule
change will apply only to future wage
determinations and the future contracts
that incorporate them, with limited
exception of certain ongoing contracts
covered in § 1.6(d) of the final rule.
Accordingly, contractors will generally
be able to adjust their bids or price
negotiations on future contracts to
account for any effects of the regulatory
change on prevailing wages in a
particular area.
Many of the comments in opposition
to the proposal, for example from IEC
and AFP–I4AW, explained their
opposition to be in part because of a
perception that the use of CBAs to
identify functionally equivalent rates
would lead to more prevailing wage
rates based on CBAs. At least some of
these commenters appeared to
misunderstand the proposal as only
allowing for the use of CBAs to make an
underlying determination. IEC, for
example, stated that if the intent is to
broaden the set of wage rates that can be
used to determine that a certain wage
rate is prevailing, then there is no
reason the Department could not also
find non-CBA wages ‘‘functionally
equivalent’’ so long as they have the
same acceptable variation proposed for
CBA wages deemed functionally
equivalent. The Department agrees. In
the NPRM, the Department intended the
functional equivalence analysis to be
applicable to both collectively bargained
and non-collectively bargained rates as
appropriate. That is why the proposed
text of § 1.3(e) expressly allowed for the
determination of equivalence to be
made based on a ‘‘written policy’’
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maintained by a contractor or
contractors—in addition to a CBA.
The Department also disagrees with
the other criticisms related to the use of
collectively bargained rates. The
Department disagrees with the write-in
campaign comments stating that any
potential for this proposal to increase
the use of collectively bargained rates
would mean that wage determinations
would be less accurate. The
commenters’ conception of ‘‘accuracy’’
is not well explained in the context of
the ‘‘functionally equivalent’’ analysis,
but the Department assumes it is similar
to the way the term was used in the
criticisms of the 30-percent rule—in
other words, how closely the
‘‘prevailing wage’’ hews to the average
rate, what the market rate would be in
the absence of the law, or whether the
percentage of prevailing wage rates
based on CBAs matches the union
density in an area. As the Department
has explained, these comparisons may
demonstrate the differences between
possible conceptions of the term
‘‘prevailing wage,’’ but the Department
disagrees that potential differences
between these numbers necessarily
represent differences in accuracy.91
The Department similarly disagrees
with AFP–I4AW’s argument that the
proposal should be rejected because it
could lead to an increase in the
likelihood of finding collectively
bargained rates to be the prevailing rates
and therefore an ‘‘unjustified inflation
of labor costs.’’ The Department has
addressed variations of this argument
above with respect to the definition of
prevailing wage. The cost effects
associated with shifting from the use of
an average rate to a modal prevailing
rate are complicated for a variety of
reasons—in particular because there can
be significant productivity gains
associated with an increase in required
wage rates on projects. Given these
countervailing effects, and the fact that
Congress did not specify the potential
cost to the government as a factor in
determining prevailing wage rates, the
91 ABC made a related argument that the
proposed functional equivalence analysis would
not improve accuracy because it is just a ‘‘tweak’’
of the data that the Department received from its
wage survey, which ABC believes should be
replaced by use of BLS data or augmented through
representative sampling. As explained above with
regard to the definition of prevailing wage, the
Department disagrees with ABC that its suggested
alternatives to the wage survey program are either
preferable or required. Regardless, the functional
equivalence analysis can be beneficial to the
determination of prevailing wages because the
Department can avoid mistakenly assigning value in
a wage determination to apparent differences in
wage rates that a further examination would reveal
to be superficial and not reflecting different pay
received for the same work.
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Department is not persuaded that the
potential cost effects AFP–I4AW
identifies are sufficient reason to reject
the proposal.
Several commenters, both supporting
and opposing the proposed language,
asked for additional guidance regarding
types of wage differentials that might
appropriately be considered
functionally equivalent. The
Department believes that the term
‘‘functionally equivalent’’ as described
here provides sufficient guidance—the
difference between two wage rates must
be explained by something other than
simply different pay for the same work
for the wage rates to be functionally
equivalent. Furthermore, as the
Foundation for Fair Contracting (FFC)
and the Northern California District
Council of Laborers (NCDCL) stated, the
Department’s specification that the
functional-equivalence determination
must be supported with reference to
CBAs or the written policies represents
a ‘‘necessary precaution’’ to
appropriately limit the scope of the rule.
The Department therefore has not added
any additional language in § 1.3(e)
delineating specific categories of wage
differentials that may or may not fit the
analysis.
While no amendment to the
regulatory text is necessary, certain
examples that commenters provided
may be helpful to further illustrate the
concept of functional equivalence. The
Department does not mean for these
examples to be an exhaustive list, but a
discussion may be helpful in
responding to commenters who asked
for further clarification. For example,
the NPRM mentioned the potential for
different wages based on the time of day
that hours are worked to be considered
equivalent, but several commenters
suggested a broader phrasing—to
include differentials based on
‘‘undesirable’’ hours or shifts. This
could include, for example, hours
worked on certain undesirable days of
the week or certain times of year. The
Department agrees that where wage
differentials are attributable to the
timing of the work, they do not
represent different wage rates for the
same classification—and can be
reasonably understood to be
functionally equivalent.
Similarly, the UA and several other
commenters requested that the
Department identify hazard pay for
working in hazardous conditions as a
wage differential that would be
considered functionally equivalent as
the base rate. In another example,
SMART and SMACNA described
working forepersons who spend most of
their time working in a specific
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‘‘mechanic’’ classification. While their
base rate is that of a journeyperson in
that classification, they also get paid a
premium to compensate them for the
foreperson duties they perform as well.
NABTU and several other commenters
described premiums for call-back work
as another example of a differential
wage rate that should not be treated as
a separate wage rate from the worker’s
underlying base hourly rate. All these
examples are circumstances where two
workers may be paid different amounts
for work in the same classification but
where the Department generally would
not interpret those different amounts as
representing different wage rates for the
same underlying work. These are
appropriate examples of variable rates
that could be found to be functionally
equivalent as long as the wage
differentials are explained by CBAs or
written policies.
SMART and SMACNA requested
clarification regarding whether rates can
be functionally equivalent if one rate is
paid pursuant to a CBA and the other
rate is not. This might apply, for
example, if a CBA provided for a base
hourly rate of $20 per hour for a
classification and a night premium rate
of $25 per hour for the same work, and
one worker consistently earned a night
premium rate of $25 per hour under the
CBA while another worker not working
at night earned $20 per hour for a
different contractor and was not covered
by the CBA. Under those circumstances,
the Department could reasonably count
both workers as earning the $20 per
hour base rate for the purposes of
determining the prevailing wage for the
classification. The Department does not
believe such a clarification is necessary
in the text of § 1.3(e) because the
language of § 1.3(e) already allows for
such a determination.
AGC asked whether the wage rates of
various groups of workers on a specific
California wage determination would be
considered functionally equivalent. In
the example presented, a wage
determination lists a number of different
subclassifications for power equipment
operators, and all of the
subclassifications have base hourly rates
within $5 of each other. AGC asked
whether this differential of
approximately 10 percent is an
appropriate ‘‘slight variation’’ such that
all of these wage rates should be
considered functionally equivalent and
counted as the same rate for purposes of
determining a prevailing wage rate. The
focus on the words ‘‘slight variation’’ in
the NPRM is misplaced, because a slight
variation between or among wage rates
is not alone sufficient to render rates
functionally equivalent. Rather, there
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57549
must be some explanation in a CBA or
written policy that explains why the
variation exists and supports a
conclusion that the variation does not
represent simply different pay for the
same underlying work. Thus, although
some of the individual wage rates AGC
describes might reasonably be
considered to be slight variations in
terms of the magnitude of the difference
between them, the types of variable
wage rates they represent generally do
not fit within the concept of
functionally equivalent. Wage
differentials between types of power
equipment operators in the example are
associated with sufficiently different
underlying work—for example, as the
comment notes, the different groups
include ‘‘Cranes, Piledriving &
Hoisting,’’ ‘‘Tunnel Work,’’ and ‘‘All
Other Work.’’ This kind of wage
differential is a distinct concept from
functionally equivalent pay rates
received for work within the same labor
classification.
As previously discussed, Congress did
not intend to create a single minimum
wage rate with the DBA. Rather,
generally speaking, the Act requires
prevailing wage rates for different types
of construction work to be calculated
separately. The statute explicitly
addresses this concept in two ways—
requiring the Secretary to determine the
prevailing wage for ‘‘corresponding
classes’’ of workers, and for workers
employed on projects of a similar
‘‘character’’ in the area. 40 U.S.C.
3142(b). Thus, when the Department
gathers wage information to determine
the prevailing wages in an area, it
attempts to identify the appropriate
classifications (corresponding class) and
construction types (projects of a similar
character) of work. Through this
process, the Department can develop
wage determinations that allow for
different prevailing wages to account for
the different skills that workers use or
where there are otherwise material
differences in the actual work that
workers are doing. The Department does
not intend for the functional
equivalence concept to apply to these
types of situations where wage
differentials are attributable to
fundamentally different underlying
work that requires different skills, or to
differences in construction type.92
92 In explaining the limits of this concept of
functional equivalence, the Department does not
intend to remove the necessary discretion that the
Department separately exercises in determining
classifications and sub-classifications of work in a
particular area. The Department has long
recognized that the appropriate level and division
of craft specificity can be different in different
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AGC also questioned how the
Department would decide which rate to
identify on a wage determination among
a set of multiple rates found in a survey
to be functionally equivalent. AGC
stated that the identification of the
middle rate (or any rate that is less than
the CBA rate in a wage determination
that would otherwise use the CBA rates
and classifications) could put
contractors that are signatories to those
CBAs at a competitive disadvantage in
bidding, since the signatory contractors
would be contractually obligated to pay
the higher CBA rate while nonsignatory
contractors would be free to pay the
lower rate.
The Department agrees with AGC that
WHD may need to be sensitive to the
effects of identifying functionally
equivalent wage rates, in particular
where collectively bargained rates
prevail. Where there are functionally
equivalent wage rates, and only a single
rate is published, that published wage
rate may often be the base hourly rate
(and not the higher rate including the
relevant wage premium). This could
lead to disadvantages for bidders bound
by CBAs on projects that may require
substantial work at the premium rate,
such as substantial work that would be
at a hazard pay rate or at night
premiums. Thus, where collectively
bargained rates prevail, an analysis of
local area practice and the wage data
received may suggest that WHD should
include certain wage premiums (such as
a project size premium or zone rates) as
separate lines on a wage determination
instead of counting them all as the same
functionally equivalent underlying base
rate.93
AGC also expressed concern that the
concept of functionally equivalent wage
rates might create incentives for
contractors and unions to negotiate rates
that preserve their competitiveness. As
areas, and that the decisions that the Department
must make to identify the appropriate
classifications can be fact specific. See Fry Bros.
Corp., 1977 WL 24823, at *6–7. An area practice
survey in tandem with the wage survey can often
be helpful in this process.
93 This type of flexibility is consistent with the
agency’s current and historical practice. For
example, the Department has periodically identified
zone rates on wage determinations. In the Alaska
Statewide wage determination for building and
heavy construction types, the Department recently
published separate wage lines for Laborers North of
the 63rd Parallel & East of Longitude 138 Degrees
and for those South of the 63rd Parallel & West of
Longitude 138 Degrees. As commenters in favor of
the ‘‘functional equivalence’’ proposal noted, CBAs
can be helpful in identifying how relevant
differences in the work actually performed or the
projects of a similar ‘‘character’’ are divided
between classifications of workers in areas where
collectively bargained rates prevail. See Fry Bros.
Corp., 1977 WL 24823, at *4, *6; Manual of
Operations at 23.
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noted in the NPRM, some variations
within the same CBA may clearly
amount to different rates, and one
example is when a CBA authorizes the
use of ‘‘market recovery rates’’ that are
lower than the standard rate to win a
bid. It may not be appropriate to
combine market recovery rates together
with the CBA’s standard rate as
‘‘functionally equivalent’’ in certain
circumstances, because frequent use of
such a rate could suggest (though does
not necessarily compel) a conclusion
that the CBA’s regular rate would not be
prevailing in the area.
A few of the commenters in favor of
the proposal suggested helpful changes
to the proposed language of § 1.3(e).
NABTU highlighted that the Department
used the term ‘‘employee’’ in proposed
§ 1.3(e) to explain the principle of
treating variable rates for ‘‘employees
within the same classification’’ as
functionally equivalent. NABTU noted
that DBRA applies to workers even in
the absence of an employment
relationship, see 40 U.S.C. 3142(c)(1),
and suggested revising to refer instead
to ‘‘laborers and mechanics.’’ The
Department agrees that the use of the
term ‘‘employee’’ in the proposed
language was imprecise considering the
scope of the Act, and the language of
§ 1.3(e) in the final rule is therefore
revised to refer to ‘‘workers’’ instead of
‘‘employees,’’ to be consistent with the
language used elsewhere in § 1.3 and
the rule as a whole.
NABTU, the Laborers’ International
Union of North America (LIUNA), and
the Iron Workers commented that the
Department appeared to tether the
‘‘functional equivalence’’ analysis only
to single CBAs or to written policies
maintained by contractors. As the
commenters noted, there are
circumstances in which it may be
appropriate to analyze multiple CBAs in
order to identify whether rates in a
survey are functionally equivalent. They
suggested that the Department amend
the text of proposed § 1.3(e) to allow a
functional equivalence determination to
be based on ‘‘one or more collective
bargaining agreements’’ or ‘‘written
policies’’ of a contractor or contractors
instead of just ‘‘a collective bargaining
agreement’’ or a ‘‘written policy.’’ The
Department agrees that this change in
the language is warranted because there
are circumstances in which a
comparison of multiple CBAs or written
policies may be helpful to
understanding the relationship between
wage rates. For example, if different
locals of the same union have parallel
collective bargaining units with the
same base rate and hazard pay rate, and
the WHD survey captures rates from
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workers working at the base rate under
one of the CBAs and from workers
working in the same classification but at
the hazard pay rate under the other
CBA, it would be reasonable to consider
the rates to be functionally equivalent
for the purpose of determining the
prevailing wage. Accordingly, the final
rule adopts this change.
A few other commenters that were
largely supportive of the proposal made
suggestions that the final rule does not
adopt. The Iron Workers recommended
that the Department further codify that
combined fringe and benefit wage rates
must be treated as functionally
equivalent wherever two workers have
the same total overall compensation.
The Iron Workers provided alternative
regulatory text that would reference the
statutory definition for the term
‘‘wages’’ in 40 U.S.C. 3141. That
definition includes both the basic
hourly rate of pay and fringe benefit
rate. As the Iron Workers noted, the
NPRM explained that slightly differing
base hourly rates can be considered
functionally equivalent where workers
have the same combined hourly and
fringe rate. In other words, where the
combination of hourly and fringe rates
are the same, it is appropriate for the
Department to count the base rate as the
‘‘same wage’’ for the purpose of
determining the prevailing wage. In
light of this clarification, the
Department does not believe it is
necessary to add the additional text to
§ 1.3(e) that the Iron Workers suggested.
Finally, LIUNA and NABTU, while
supporting the Department’s proposal,
urged that the language of proposed
§ 1.3(e) be changed from allowing the
Department to treat functionally
equivalent rates the same, to requiring
it. These commenters noted that in the
proposed language, the Administrator
‘‘may’’ treat variable wage rates as the
same wage in appropriate
circumstances, and they suggested that
the language be revised to use the term
‘‘shall’’ instead. The Department
declines to adopt this suggestion.
During the survey process, respondents
can assist the Department by identifying
when wage differentials are due to
elements of a CBA or written policy that
are unrelated to the underlying work.
However, as the Department has
explained in this rulemaking, the wage
survey and wage determination process
can be resource-intensive and timeconsuming for WHD, and the need for
timely completion of surveys and wage
determinations has been the subject of
criticism levied against the current
process.
Thus, while the identification of wage
differentials that may be functionally
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equivalent can be an important tool for
WHD in increasing the use of
predominant modal wage rates as
prevailing in wage determinations,
LIUNA and NABTU’s proposal would
not be reasonable or administratively
feasible, because it would require WHD
to review individual CBA wage rates as
well as request that contractors provide
written policies about every wage rate
submitted during a survey—even where
the successful identification of wage
rates that are functionally equivalent
might have limited or no effect on the
outcome of the wage determination.
The final rule therefore adopts the
language at § 1.3(e) as proposed, with
the limited changes identified above.
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(B) Area
The Department also proposed
changes to the definition of the term
‘‘area’’ in § 1.2. The regulations use the
term ‘‘area’’ to describe the relevant
geographic units that the Department
may use to determine the prevailing
wage rates that laborers and mechanics
must, at a minimum, receive on covered
projects. See 29 CFR 1.2, 1.3. The
definition of area therefore has
consequences for how the Department
gathers wage rate information and how
the Department calculates prevailing
wages.
The core definition of ‘‘area’’ in § 1.2
states that the term ‘‘means the city,
town, village, county or other civil
subdivision of the State in which the
work is to be performed.’’ This
definition largely reproduces the
specification in the Davis-Bacon Act
statute, prior to its 2002 re-codification,
that the prevailing wage should be
based on projects of a similar character
in the ‘‘city, town, village, or other civil
subdivision of the State in which the
work is to be performed.’’ See 40 U.S.C.
276a(a) (2002).
The geography-based definition of
‘‘area’’ in § 1.2 applies to federally
assisted projects covered by the DavisBacon Related Acts as well as projects
covered by the DBA itself. Some of the
Related Acts have used different
terminology to identify the appropriate
‘‘area’’ for a wage determination,
including the terms ‘‘locality’’ and
‘‘immediate locality.’’ 94 However, the
Department has long concluded that
these terms are best interpreted and
applied consistent with the
methodology for determining the area
94 See, e.g., National Housing Act, 12 U.S.C.
1715c(a) (locality); Housing and Community
Development Act of 1974, 42 U.S.C. secs. 1440(g),
5310(a) (locality); Federal Water Pollution Control
Act, 33 U.S.C. 1372 (immediate locality); FederalAid Highway Acts, 23 U.S.C. sec 113(a) (immediate
locality).
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under the original DBA. See Virginia
Segment C–7, METRO, WAB No. 71–4,
1971 WL 17609, at *3–4 (Dec. 7, 1971).
While the definition of ‘‘area’’
provides for the use of various possible
geographic units, the Department has,
for several decades now, identified the
county as the default unit for this
purpose. See 29 CFR 1.7(a). This has a
corollary for contracting agencies. In
order to determine what wages apply to
a given construction project, the
contracting agency will generally need
to identify the county (or counties) in
which the project will be constructed
and obtain the general wage
determination for the correct type of
construction for that county (or
counties) from the System for Award
Management (SAM).
The Department’s choice of a
geographic ‘‘area’’ to use for a wage
determination has consequences for
how the prevailing wage will be
determined. The regulations, as
amended in this rulemaking, explain
that the Department will carry out a
voluntary wage survey to seek wage data
for a type of construction in an ‘‘area.’’
They will then apply the three-step
process to that data to determine what
wage rate in an ‘‘area’’ prevails for a
specific labor classification. See
III.B.1.ii.A and III.B.1.iii.
Because the Department uses the
county as the default area for a wage
determination, it will normally gather
wage survey data for each county and
carry out the three-step process for each
classification of worker and
construction type in that county. If there
is sufficient current wage data for a
classification of workers in a county,
this process will result in the prevailing
wage that will appear on a wage
determination. The regulations at
§ 1.7(b) and (c) describe the
Department’s procedures for making the
determination if there is not sufficient
wage data in a county for a given
classification of workers.
In the NPRM, the Department
proposed to maintain the core definition
of ‘‘area’’ in § 1.2 as currently written,
with its list of possible geographic units
that the Administrator may use. As
discussed in section III.B.1.vii regarding
§ 1.7 and geographic aggregation
practices, the Department similarly
proposed to maintain the use of the
county as the default area for most wage
determinations. The Department also,
however, proposed two limited
additions to the definition of ‘‘area’’ in
§ 1.2 to address projects that span
multiple counties and to address
highway projects specifically.
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(1) Multi-County Project Wage
Determinations
Under WHD’s current methodology, if
a project spans more than one county,
the contracting officer is instructed to
attach wage determinations for each
county to the contract for the project
and contractors may be required to pay
differing wage rates to the same
employees when their work crosses
county lines. This policy was reinforced
in 1971 when the Wage Appeals Board
(WAB) found that, under the terms of
the then-applicable regulations, there
was no basis to provide a single
prevailing wage rate for a project
occurring in Virginia, the District of
Columbia, and Maryland. See Virginia
Segment C–7, METRO, WAB No. 71–4,
1971 WL 17609.
Critics of this policy have pointed out
that this can be inconsistent with how
workers are paid on projects outside of
the Davis-Bacon context. In any given
non-DBRA project that might be
completed in multiple counties, workers
are very often hired and paid a single
wage rate for all of their work on the
project, and—unless there are different
city or county minimum wage laws, or
zone pay under a CBA—workers’ pay
rates often would not change as they
move between tasks in different
counties. The 2011 report by the GAO,
for example, quoted a statement from a
contractor association representative
that the requirement of different wage
rates for the same workers on the same
multi-county project is ‘‘illogical.’’ See
2011 GAO Report, at 24.95
To address the concerns of these
critics, the Department proposed adding
language in the definition of ‘‘area’’ in
§ 1.2 to expressly authorize WHD to
issue project wage determinations with
a single rate for each classification,
using data from all of the relevant
counties in which a project will occur.
Under the proposal, the definition of
‘‘area’’ would provide that where a
project requires work in multiple
counties, the ‘‘area’’ may include all the
counties in which the work will be
performed. The NPRM also included
related language at § 1.5(b)(i) that
authorized contracting agencies to
request a project wage determination
where the project involves work in more
than one county and will employ
workers who may work in more than
one county. The Department solicited
comments on whether this procedure
should be mandatory for multijurisdictional projects or available at the
request of the contracting agency or an
interested party, if WHD determines that
95 See
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such a project wage determination
would be appropriate.
Several commenters, including three
contractor associations, a union, the
Minnesota Department of
Transportation (MnDOT), and the
Council of State Community
Development Agencies (COSCDA),
generally supported the Department’s
proposal as written. COSCDA noted that
the proposal could be helpful for
broadband projects and AGC noted that
it would be helpful for highway
projects. According to AGC, the current
practice can be particularly burdensome
where the different county wage
determinations that are applicable to the
same project have differing craft
classifications and job duties. AGC
stated that the Department’s proposal to
allow a single wage determination to
apply to an entire project is a proposal
that ‘‘provides logical relief’’ and is
‘‘true modernization.’’ A Professor of
Economics who commented on the
proposal stated that combining
contiguous counties together on
‘‘horizontal projects’’ such as heavy and
highway projects is a ‘‘conceptually
appropriate way of designing a local
labor market’’ because all of the
counties in which the project occurs are
counties from which the workers are
likely to be drawn.
One commenter, Montana Lines Inc.,
supported making these single-rate
project wage determinations mandatory
for multi-county projects. Montana
Lines Inc. stated that in Montana,
construction workers are available
across the state and travel to all parts of
the state and, therefore, the prevailing
wage for the whole state should be the
same.
Conversely, NFIB strongly opposed
the proposal. NFIB asserted that the
statutory language referencing ‘‘civil
subdivision of a state’’ in 40 U.S.C.
3142(b) requires the establishment of
prevailing wages on a ‘‘subdivision by
subdivision’’ basis and thus requires a
separate prevailing wage for each
subdivision in which work under the
contract occurs. NFIB thus
recommended regulatory language that
would instead codify the current
practice that, in multi-county projects,
‘‘each such civil subdivision in which
work will be performed is a separate
area.’’
Two commenters, LIUNA and
Indiana-Illinois-Iowa Foundation for
Fair Contracting (III–FFC) supported the
Department’s proposal, but strongly
advocated that it be discretionary as
opposed to mandatory and that the
Department ensure that it is used only
where appropriate. They advocated that
the Department should only adopt the
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proposal if it is limited to circumstances
where the resulting wage
determinations reflect local labor
markets and do not undermine the
highest rates paid in any included
county under the governing general
wage determination. LIUNA stated that
the Department can maintain deference
to established labor markets by
analyzing available wage data, the
jurisdictional coverage of CBAs,
contractor bidding practices, geography,
and/or administratively established
areas under State law. The two
commenters explained that these
precautions are necessary to ensure that
the procedure is consistent with the
Davis-Bacon Act’s purpose of preserving
a wage floor in each local labor market.
The Florida Transportation Builder’s
Association, Inc. (FTBA) stated it
supported the proposed change along
with the proposal for using State
highway districts as ‘‘areas’’ for highway
projects. FTBA requested clarification
regarding the methodology the
Department would use in setting single
rates for each job classification on
project wage determinations for work
that spans multiple counties. They
proposed that the Department set rates
based on the wage determination rates
for the county where the majority of the
work would occur on a covered project.
The Department considered these
comments regarding the proposal to
authorize multi-county ‘‘areas.’’ The
proposal does not provide, as FTBA
suggested, for the opportunity to
identify the county in which most of the
construction will occur and then use the
wage rates in that county for all other
counties in which the project would
take place. Rather, the proposal
intersects with the definition of
‘‘prevailing wage’’ in § 1.2 and the
Department’s guidelines for obtaining
and compiling wage rate information in
§ 1.3. Those regulations, as amended in
this rulemaking, explain that the
Department will carry out the three-step
process to determine whether any wage
rate prevails in a given ‘‘area.’’ See
section III.B.1.iii. Thus, if a multicounty area is used, then the wage data
from all counties where the project will
take place would be combined together
before the Department determines
whether there is a modal wage rate that
prevails for each classification and
construction type.
The Department disagrees with
NFIB’s argument that this procedure is
not permissible. Using a project wage
determination with a single ‘‘area’’ for
multi-county projects is not inconsistent
with the text of the DBA. The DBA and
Related Act statutes themselves do not
address multi-jurisdictional projects,
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and ‘‘Congress anticipated that the
general authorization to the Secretary to
set the prevailing wage would
encompass the power to find a way to
do so in the interstitial areas not
specifically provided for in the statute.’’
Donovan, 712 F.2d at 618. As other
commenters noted, providing
contractors with the ability to pay a
single wage rate to workers within the
same classification on a multi-county
project is responsive to concerns that
have been raised about administrative
burdens of the program.
In addition, as a general matter, the
creation of multi-county areas for
projects covering multiple counties is
consistent with the purpose of the DBA,
which is to protect against the
depression of local wage rates caused by
competition from low-bid contractors
from outside of the locality. Allowing
the use of data from all counties in
which the project is being carried out
means incorporating wage data from
workers who will generally have been
working in the vicinity of some portion
of the project and thus cannot
reasonably be characterized as imported
labor from outside of the project
locality.
The Department, however, is sensitive
to the concerns raised by LIUNA and IIIFFC. In many circumstances, multicounty projects will satisfy these
commenters’ concerns that the counties
involved are effectively within the same
labor market. But it is certainly possible
that a multi-county project could take
place in counties that are particularly
dissimilar and represent entirely
different labor markets, such as may be
the case if the project were to span a
long string of counties across an entire
state. In such circumstances, while a
multi-county project wage
determination could still be requested,
it may not be appropriate to combine
the county data by using a multi-county
area. Instead, it could be more
appropriate to use general wage
determinations with separate county
wage rates for counties that are in
wholly different labor markets, or to
create a project wage determination for
certain counties that are part of the same
labor market and use available general
wage determinations for any other
counties that are not.
Accordingly, the Department is
disinclined to make multi-county areas
mandatory for any multi-county project
wage determination or to make them
available as a matter of course at the
request of interested parties other than
the contracting agency. Instead, the final
rule adopts the language as proposed,
which allows the Department to use
multi-county areas for multi-county
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project wage determinations but does
not require their use. The Department
agrees with LIUNA that it will be
important for the Department to ensure
that the multi-county areas do not
undermine the two important purposes
of the statute of identifying actual
prevailing wage rates where they exist
and guarding against the depression of
local wage standards. See 5 Op. O.L.C.
at 176. Thus, as LIUNA noted, a multicounty area may be inappropriate for a
classification of workers on a project
wage determination if it would result in
the use of an average rate where existing
individual county wage determinations
would otherwise identify prevailing
wage rates under the Department’s
preferred modal methodology.
Similarly, a single multi-county area for
certain classifications of workers on a
project wage determination might be
inconsistent with the purpose of the
statute if the procedure results in
average wage rates that are substantially
lower than the prevailing wage rate
would be in one of the included
counties under the default general wage
determination.
(2) State Highway Districts
The Department’s other proposed
change to the definition of ‘‘area’’ in
§ 1.2 was to allow the use of State
highway districts or similar
transportation subdivisions as the
relevant wage determination area for
highway projects, where appropriate.
Although there is significant variation
between states, most states maintain
civil subdivisions responsible for
certain aspects of transportation
planning, financing, and maintenance.96
These districts tend to be organized
within State departments of
transportation or otherwise through
State and County governments.
In the NPRM, the Department
explained that using State highway
districts as a geographic unit for wage
determinations would be consistent
with the Davis-Bacon Act’s specification
that wage determinations should be tied
to a ‘‘civil subdivision of a State.’’ State
highway districts were considered to be
‘‘subdivisions of a State’’ at the time the
term was used in the original DavisBacon Act. See Wight v. Police Jury of
Par. of Avoyelles, La., 264 F. 705, 709
(5th Cir. 1919) (describing the creation
of highway districts as ‘‘governmental
subdivisions of the [S]tate’’). The
Department further explained that State
96 See generally Am. Assoc. of State Highway and
Transp. Offs., ‘‘Transportation Governance and
Financing: A 50-State Review of State Legislatures
and Departments of Transportation’’ (2016),
available at: https://www.financing
transportation.org/pdf/50_state_review_nov16.pdf.
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highway or transportation districts often
plan, develop, and oversee federally
financed highway projects. Accordingly,
the provision of a single wage
determination for each district would
simplify the procedure for incorporating
Federal financing into these projects.
Several commenters that supported
the proposal for multi-county project
wage determinations, such as MnDOT
and FTBA, also supported the proposal
to authorize WHD to adopt State
highway districts as areas for highway
projects. The New Jersey Heavy &
Highway Construction Laborers District
Council (NJHHCL) called the proposal a
‘‘common-sense revision’’ that will
simplify how projects are structured and
planned, allowing more resources to be
devoted to the projects themselves
instead of their administration. The
American Road & Transportation
Builders Association (ARTBA)
supported the proposal because
highway construction projects often
span more than one county, and the use
of a single area would ensure workers
on the project are paid at the same rate
regardless of the county in which they
are working. As noted, AGC strongly
supported the use of multi-county wage
project wage determinations for
highway projects. Although AGC did
not specifically mention the use of state
Highway districts as ‘‘areas,’’ the two
proposals would work in similar ways
and have similar effects. NFIB
recommended that the Department
adopt the proposal, revised slightly to
apply to highway districts and ‘‘other
similar State agency geographical units’’
instead of the language the Department
proposed referring to highway districts
and ‘‘other similar State subdivisions.’’
LIUNA expressed a similar position
regarding the State highway district
proposal as it did for multi-county
project wage determinations. They
advocated that the Department should
only adopt the proposal if the use is
limited to circumstances where the
resulting wage determinations reflect
local labor markets and do not
undermine the highest rates paid in any
individual county under a general wage
determination. III–FFC stated that they
were ‘‘neutral’’ on the Department’s
proposal. They stated that the existence
of State highway districts may be an
appropriate consideration when
establishing a project wage
determination on a highway project but
that this consideration should be
secondary to ‘‘local labor market
considerations.’’
The group of U.S. Senators submitted
a comment strongly opposing the
proposal. They argued that the
Department lacks statutory authority to
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interpret the term ‘‘civil subdivision of
the State’’ in the DBA statute as
including State highway districts. The
comment asserted that the separate
reference in the statutory text at 42
U.S.C. 3142(b) to the District of
Columbia should limit the meaning of
‘‘other subdivision of the State’’ to
subdivisions that the District of
Columbia does not have. The comment
also asserted that the Department’s
proposal runs counter to decades of
agency practice, faulted it for failing to
cite any legislative history to support its
interpretation, and found the
Department’s citation to the 1919 Wight
decision to be unconvincing. The
Senators stated that not all State
highway districts are the same, because
not all States grant taxing and bonding
authority or formal subdivision status to
their highway districts. They also
suggested that stakeholders had ‘‘come
to rely upon’’ the current and prior
regulations, which did not expressly
provide for the use of State highway
districts.
The Department generally agrees with
the commenters that supported the
highway districts proposal. The use of
State highway districts or similar
subdivisions as the areas for highway
project wage determinations has the
potential to reduce burdens and
streamline highway projects that may
cross county lines. These projects
otherwise will require the use of
multiple wage determinations for the
same classification of workers and may
often require the same individual
workers to be paid different rates for
doing the same work on different parts
of the project.
The Department disagrees with the
Senators that asserted the proposal is
not permitted by the statute. The plain
text of the Davis-Bacon statute supports
the Department’s interpretation.
Congress has used the terms political
subdivision and civil subdivision
interchangeably, including with regard
to the DBA’s ‘‘civil subdivision
requirement.’’ See 1963 Subcommittee
Report, at 5 (‘‘There may be isolated
areas where no rate can be found for the
particular kind of project in the political
subdivision of the State in which the
project is located.’’); see also Political
Subdivision, Black’s Law Dictionary
(11th ed. 2019) (defining political
subdivision as a ‘‘division of a state that
exists primarily to discharge some
function of a local government.’’). As
the Wight decision explained, during
the time period leading up to the
passage of the DBA, the funding and
maintenance of roads was a function of
subdivisions of State government, and
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‘‘many States’’ created subdivisions to
exercise those functions. 264 F. at 709.
The Senators did not provide any
authority to support their statement that
at the time of the DBA’s passage ‘‘there
was a widely accepted distinction
between state highway districts and
civil subdivisions’’ and that ‘‘Congress
has always differentiated between the
two.’’ If anything, the history of Federal
highway funding statutes supports the
opposite conclusion. In the Federal-Aid
Road Act of 1916, Congress directly
linked highway funding to ‘‘civil
subdivisions’’ that were required to
maintain the funded roads or else forfeit
future Federal funding. Public Law 64–
156, Sec. 7, 39 Stat. 355, 358 (1916). The
current version of the Federal highway
aid statute reinforces this
understanding, as it ties funding to State
highway districts or ‘‘other’’ political or
administrative subdivisions of a State.
23 U.S.C. 116.97
The Department also disagrees that
the meaning of the term ‘‘subdivision’’
in the DBA is constrained by the
subsequent statutory reference to the
District of Columbia. See 40 U.S.C.
3142(b). The Act provides for the
determination of rates for the various
potential ‘‘civil subdivisions of a State
in which the work is to be performed,’’
followed by ‘‘or in the District of
Columbia if the work is to be performed
there.’’ The Department interprets this
language as suggesting only that the
District of Columbia may be the
appropriate ‘‘area’’ to use for projects
occurring there, and that for such
projects it should not be necessary to
further subdivide the District of
Columbia into smaller areas.
The Department disagrees with the
U.S. Senators’ suggestion that the final
rule should not adopt the revised
definition of ‘‘area’’ because
stakeholders have come to rely on the
prior definition. Any such reliance
interests would not weigh strongly
against adopting the multi-county and
State highway district area proposals,
because these area subdefinitions would
only factor into the development of
wage determinations that are finalized
after this rule becomes effective. Any
resulting new wage determinations
would themselves generally have effect
97 Similarly, in 1927 Congress enacted the
Longshore and Harbor Workers Compensation Act
(LHWCA), where it limited the workers
compensation liability under the Act for ‘‘political
subdivisions’’ of a State. See Public Law 69–803,
Sec. 3, 44 Stat. 1424, 1426 (1927). As used in the
LHWCA, ‘‘political subdivision’’ includes Stateauthorized transportation districts such as the
Golden Gate Bridge, Highway & Transportation
District. See Wheaton v. Golden Gate Bridge,
Highway & Transp. Dist., 559 F.3d 979, 984–85 (9th
Cir. 2009).
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once they have been incorporated into
future contracts, allowing contractors to
take any new rates into consideration as
they develop their bids or negotiate
contract pricing.98
The legislative history of the DBA,
while it does not expressly address
highway districts, is helpful because the
text of the statute should be interpreted
in a manner consistent with its purpose.
Given that the purpose of the Act is to
protect locally prevailing wage rates, the
term ‘‘civil subdivision’’ necessarily
must have a geographical component.
Cf. Jones v. Conway Cnty, 143 F.3d 417,
418–19 (8th Cir. 1998) (noting that the
enumerated examples of ‘‘political
subdivisions,’’ such as counties,
municipal corporations, and school
districts, can help to interpret that the
term is meant to be limited to
subdivisions that involve a ‘‘physical
division of the state’’).99 The
Department agrees with NFIB’s
comment that a slight revision to the
proposed language would be
appropriate to communicate this
understanding. The final rule therefore
provides that, for highway projects, the
‘‘area’’ for wage determinations may be
State department of transportation
highway districts or other similar State
‘‘geographic’’ subdivisions.
The Department also agrees with
LIUNA and III–FFC that while the use
of State highway districts may at times
be consistent with the purpose of the
DBRA, they will not necessarily always
98 As explained in § 1.6(c), whenever a new wage
determination is issued (either after the completion
of a new wage survey or through the new periodic
adjustment mechanism), that revision as a general
matter does not and will not apply to contracts
which have already been awarded, with three
exceptions. These exceptions are explained in
§ 1.6(c)(2)(iii), and they include where a contract or
order is changed to include substantial covered
work that was not within the original scope of
work, where an option is exercised, and also certain
ongoing contracts that are not for specific
construction, for which new wage determinations
must be incorporated on an annual basis under
§ 1.6(c)(2)(iii)(B) of the final rule. The final rule
instructs contracting agencies to apply the terms of
§ 1.6(c)(2)(iii) to all existing contracts, without
regard to the date of contract award, if practicable
and consistent with applicable law. The
Department does not anticipate that the application
of the amended wage determination methodologies
in these situations will result in unfair harm to
reliance interests in a manner sufficient to outweigh
the benefits of the final rule implementation as
planned. See also section III.C. (‘‘Applicability
Date’’) below.
99 For the same reason, there is no particular
reason to interpret the term as requiring some
element of exercise of particular State powers such
as taxing and bonding authority. These factors may
be helpful where the use of the term ‘‘political
subdivision’’ implicates questions regarding the
rights or duties of the governmental entity in charge
of such a subdivision, but those characteristics are
not particularly relevant to the economic and
geographical context in which the term is used in
the DBA.
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be so. For this reason, the proposed
language does not make it mandatory for
the Department to use State highway
districts as ‘‘areas’’ for highway projects,
and instead gives the Department
discretion to use them where they are
appropriate. Relevant here, the FederalAid Highway Act of 1956 (FAHA), one
of the Related Acts, uses the term
‘‘immediate locality’’ instead of ‘‘civil
subdivision’’ for identifying the
appropriate geographic area of a wage
determination. 23 U.S.C. 113. The
FAHA requires the application of
prevailing wage rates in the immediate
locality to be ‘‘in accordance with’’ the
DBA, id., and, as noted above, WHD has
long applied these alternative
definitions of area in the Related Acts in
a manner consistent with the ‘‘civil
subdivision’’ language in the original
Act. The FAHA ‘‘locality’’ language,
however, is helpful guidance for
determining whether certain State
highway districts, while within the
broadest meaning of ‘‘civil subdivision
of a State,’’ may be too large to be used
as the default areas for general wage
determinations.
Similarly, it would not be consistent
with the purpose of the DBRA to use
State highway districts as ‘‘areas’’ in a
State where doing so would result in a
significant increase in the use of average
rates instead of modal prevailing wage
rates on wage determinations. The
Department therefore will need to take
similar precautions with regard to the
use of State highway districts as with
multi-county project wage
determinations.
Having considered the comments
regarding the State highway district
proposal, the final rule adopts the
proposal with the addition of the word
‘‘geographic’’ to better describe the type
of State agency transportation
subdivisions that may be used.
(C) Type of Construction (or
Construction Type)
The Department proposed to define
‘‘type of construction’’ or ‘‘construction
type’’ to mean the general category of
construction as established by the
Administrator for the publication of
general wage determinations. The
proposed language also provided
examples of types of construction,
including building, residential, heavy,
and highway, consistent with the four
construction types the Department
currently uses in general wage
determinations, but did not exclude the
possibility of other types. The terms
‘‘type of construction’’ or ‘‘construction
type’’ are already used elsewhere in part
1 to refer to these general categories of
construction, as well as in wage
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determinations themselves. As used in
this part, the terms ‘‘type of
construction’’ and ‘‘construction type’’
are synonymous and interchangeable.
The Department believes that including
this definition will provide additional
clarity for these references, particularly
for members of the regulated
community who might be less familiar
with the terms.
The Department received no
comments specifically addressing this
proposal. However, the Department
received several comments relating to
the definitions provided in AAM 130
(Mar. 17, 1978) for the residential and
building construction categories. AAM
130 provides a description of the four
types of construction with an
illustrative listing of the kinds of
projects that are generally included
within each type for DBRA purposes.
Under AAM 130, apartment buildings of
no more than four stories in height are
classified as residential and apartment
buildings of five or more stories are
classified as building construction.
MBA, AWHA, and NAHB urged the
Department to adopt in the final rule an
expanded definition of residential
construction that would include all
multifamily structures regardless of
their story level. On the other hand,
SMART and SMACNA argued AAM
130’s categorization of apartment
buildings based on the story level has
resulted in the misclassification of
‘‘mixed-use’’ buildings as residential
and called for the reexamination of the
classifications.
The Department believes the
definition of what falls under each type
of construction is best addressed
through subregulatory guidance and
intends to continue with that approach.
The final rule therefore adopts the
proposal without any changes.
(D) Other Definitions
The Department proposed additional
conforming edits to 29 CFR 1.2 in light
of proposed changes to 29 CFR 5.2. As
part of these conforming edits, the
Department proposed to revise the
definition of ‘‘agency’’ (and add a subdefinition of ‘‘Federal agency’’) to
mirror the definition proposed and
discussed in the preamble regarding
§ 5.2. The Department also proposed to
add new defined terms to § 1.2 that were
proposed in parts 3 and 5, including
‘‘employed,’’ ‘‘type of construction (or
construction type),’’ and ‘‘United States
or the District of Columbia.’’ As
discussed in the preamble regarding
§ 5.2, the Department did not receive
any comments on the proposed changes
to the definition of ‘‘agency’’ or the
addition of the definition of ‘‘United
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States or the District of Columbia,’’ and
therefore the final rule adopts these
changes as proposed. The proposed
addition of the terms ‘‘employed’’ and
‘‘type of construction (or construction
type),’’ and comments associated with
them, are discussed in the preamble
sections III.B.1.ii.C (§ 1.2) and
III.B.3.xxii (§ 5.2).
(E) Paragraph Designations
The Department also proposed to
amend §§ 1.2, 3.2, and 5.2 to remove
paragraph designations of defined terms
and instead to list defined terms in
alphabetical order. The Department
proposed to make conforming edits
throughout parts 1, 3, and 5 in any
provisions that currently reference
lettered paragraph definitions.
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed.
iii. Section 1.3 Obtaining and
Compiling Wage Rate Information
(A) 29 CFR 1.3(b)
The Department proposed to switch
the order of § 1.3(b)(4) and (5) for
clarity. This non-substantive change
would simply group together the
paragraphs in § 1.3(b) that apply to wage
determinations generally and follow
those paragraphs with one that applies
only to Federal-aid highway projects
under 23 U.S.C. 113.
The Department received no
comments on this specific proposal. The
final rule therefore adopts this change as
proposed.
However, the Department received
one comment in response to its
proposed revision to § 1.3(b). Although
the Department only proposed revisions
to § 1.3(b)(4) and (5), the Iron Workers
noted that § 1.3(b) provides guidelines
concerning the types of information that
WHD may consider when making
prevailing wage determinations and
suggested that the Department also
amend § 1.3(b)(2) to further safeguard
against the fragmentation of job
classifications. Specifically, this
commenter suggested the Department
codify Fry Brothers in § 1.3(b)(2).
The Department appreciates the
recommendation and notes that
classification decisions are made in
accordance with relevant legal
precedent and subregulatory guidance,
including the decision in Fry Brothers
and subregulatory guidance such as
AAM 213 (Mar. 22, 2013). Because the
Department did not propose changes to
§ 1.3(b)(2), it declines to adopt the Iron
Workers’ recommendation.
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(B) 29 CFR 1.3(d)
The Department noted in the NPRM
that it was considering whether to revise
§ 1.3(d), which addresses when survey
data from Federal or federally assisted
projects subject to Davis-Bacon
prevailing wage requirements
(hereinafter ‘‘Federal project data’’) may
be used in determining prevailing wages
for building and residential construction
wage determinations. The Department
did not propose any specific revisions to
§ 1.3(d) in the NPRM, but rather sought
comment on whether § 1.3(d)—
particularly its limitation on the use of
Federal project data in determining
wage rates for building and residential
construction projects—should be
revised.
As the Department observed in the
NPRM, for approximately 50 years
(beginning shortly after the DBA was
enacted in 1931 and continuing until
the 1981–1982 rulemaking), the
Department used Federal project data in
determining prevailing wage rates for all
categories of construction, including
building and residential construction.
The final rule promulgated in May 1982
codified this practice with respect to
heavy and highway construction,
providing in new § 1.3(d) that ‘‘[d]ata
from Federal or federally assisted
projects will be used in compiling wage
rate data for heavy and highway wage
determinations.’’100 The Department
explained that ‘‘it would not be
practical to determine prevailing wages
for ‘heavy’ and ‘highway’ construction
projects if Davis-Bacon covered projects
are excluded in making wage surveys
because such a large portion of those
types of construction receive Federal
financing.’’101
With respect to building and
residential construction, however, the
1982 final rule concluded that such
construction often occurred without
Federal financial assistance subject to
Davis-Bacon prevailing wage
requirements, and that to invariably
include Federal project data in
calculating prevailing wage rates
applicable to building and residential
construction projects therefore would
‘‘skew[] the results upward,’’ contrary to
congressional intent.102 The final rule
therefore provided in § 1.3(d) that ‘‘in
compiling wage rate data for building
and residential wage determinations,
the Administrator will not use data from
Federal or federally assisted projects
subject to Davis-Bacon prevailing wage
requirements unless it is determined
that there is insufficient wage data to
100 47
FR 23652.
at 23645.
102 See Donovan, 712 F.2d at 620.
101 Id.
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determine the prevailing wages in the
absence of such data.’’ 29 CFR 1.3(d). In
subsequent litigation, the D.C. Circuit
upheld § 1.3(d)’s limitation on the use of
Federal project data as consistent with
the DBA’s purpose and legislative
history—if not necessarily its plain
text—and therefore a valid exercise of
the Administrator’s broad discretion to
administer the Act.103
As a result of § 1.3(d)’s limitation on
the use of Federal project data in
calculating prevailing wage rates
applicable to building and residential
construction, WHD first attempts to
calculate a prevailing wage based on
non-Federal project survey data at the
county level—i.e., survey data that
includes data from private projects or
projects funded by State and local
governments without assistance under
the DBRA, but that excludes data from
Federal or federally assisted projects
subject to Davis-Bacon prevailing wage
requirements. See 29 CFR 1.3(d), 1.7(a);
Manual of Operations at 38; Coal. for
Chesapeake Hous. Dev., ARB No. 12–
010, 2013 WL 5872049, at *4 (Sept. 25,
2013) (Chesapeake Housing). If there is
insufficient non-Federal project survey
data for a particular classification in that
county, then WHD considers survey
data from Federal projects in the county
if such data is available.
Under the current regulations, WHD
expands the geographic scope of the
data that it considers when it is making
a county wage determination when data
is insufficient at the county level. This
procedure is described below in the
discussion of the ‘‘scope of
consideration’’ regulation at § 1.7. For
wage determinations for building and
residential construction projects, WHD
currently integrates Federal project data
into this procedure at each level of
geographic aggregation in the same
manner it is integrated at the county
level: If the combined Federal and nonFederal survey data received from a
particular county is insufficient to
establish a prevailing wage rate for a
classification in a county, then WHD
attempts to calculate a prevailing wage
rate for that county based on nonFederal wage data from a group of
surrounding counties. See 29 CFR
1.7(a), (b). If non-Federal project survey
data from the surrounding-counties
group is insufficient, then WHD
includes Federal project data from all
the counties in that group. If both nonFederal project and Federal project data
for a surrounding-counties group is still
insufficient to determine a prevailing
wage rate, then WHD may expand to a
‘‘super group’’ of counties or even to the
statewide level. See Chesapeake
Housing, ARB No. 12–010, 2013 WL
5872049, at *6; PWRB, Davis-Bacon
Surveys, at 6.104 At each stage of data
expansion for building and residential
wage determinations, WHD first
attempts to determine prevailing wages
based on non-Federal project data;
however, if there is insufficient nonFederal data, WHD will consider
Federal project data.
As reflected in the plain language of
§ 1.3(d) as well as WHD’s
implementation of that regulatory
provision, the current formulation of
§ 1.3(d) does not prohibit the use of
Federal project data in establishing
prevailing wage rates for building and
residential construction projects subject
to Davis-Bacon requirements; rather, it
limits the use of such data to
circumstances in which ‘‘there is
insufficient wage data to determine the
prevailing wages in the absence of such
data.’’ 29 CFR 1.3(d). As the Department
explained in the NPRM, WHD often
uses Federal project data in calculating
prevailing wage rates applicable to
residential construction due to
insufficient non-Federal data. By
contrast, because WHD’s surveys of
building construction typically have a
higher participation rate than residential
surveys, WHD uses Federal project data
less frequently in calculating prevailing
wage rates applicable to building
construction projects covered by the
DBRA. For example, the 2011 GAO
Report analyzed 4 DBA surveys and
found that over two-thirds of the
residential rates for 16 key job
classifications (such as carpenter and
common laborer) included Federal
project data because there was
insufficient non-Federal project data,
while only about one-quarter of the
building wage rates for key
classifications included Federal project
data. 2011 GAO Report, at 26.105
Notwithstanding the use of Federal
project data in calculating prevailing
wage rates for building and residential
construction, the Department noted in
the NPRM that some interested parties
may believe that § 1.3(d) imposes an
absolute barrier to the use of Federal
project data in determining prevailing
wage rates. As a result, survey
participants may not submit Federal
project data in connection with WHD’s
surveys of building and residential
construction, thereby reducing the
amount of data that WHD receives in
response to its building and residential
surveys. The Department therefore
strongly encouraged robust participation
104 See
103 Id.
at 621–22.
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in Davis-Bacon prevailing wage surveys,
including building and residential
surveys, and it urged interested parties
to submit Federal project data in
connection with building and
residential surveys with the
understanding that such data will be
used in calculating prevailing wage
rates if insufficient non-Federal project
data is received. The Department
specifically observed that in the absence
of such Federal project data, for
example, a prevailing wage rate may be
calculated at the surrounding-counties
group or even statewide level when it
would have been calculated based on a
smaller geographic area if more Federal
project data had been submitted.
Although increased submission of
such Federal project data thus could be
expected to contribute to more robust
wage determinations even without any
change to § 1.3(d), the Department
recognized in the NPRM that revisions
to § 1.3(d) might nonetheless be
warranted. The Department therefore
solicited comments regarding whether
to revise § 1.3(d) in a way that would
permit WHD to use Federal project data
more frequently when it calculates
building and residential prevailing
wages. For example, particularly given
the challenges that WHD has faced in
achieving high levels of participation in
residential wage surveys—and given the
number of residential projects that are
subject to Davis-Bacon labor standards
under Related Acts administered by
HUD—the Department noted in the
NPRM that it might be appropriate to
expand the amount of Federal project
data that is available to use in setting
prevailing wage rates for residential
construction.
The Department also observed that
there might be other specific
circumstances that particularly warrant
greater use of Federal project data and
that, more generally, if the existing
limitation on the use of Federal project
data were removed from § 1.3(d), WHD
could in all circumstances establish
Davis-Bacon prevailing wage rates for
building and residential construction
based on all usable wage data in the
relevant county or other geographic
area, without regard to whether
particular wage data was ‘‘Federal’’ and
whether there was ‘‘insufficient’’ nonFederal project data. The Department
also noted in the alternative that § 1.3(d)
could be revised in order to provide a
definition of ‘‘insufficient wage data,’’
thereby providing increased clarity
regarding when Federal project data
may and may not be used in
establishing prevailing wage rates for
building or residential construction. The
Department specifically invited
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comments on these and any other issues
regarding the use of Federal project data
in developing building and residential
wage determinations.
Numerous commenters expressed
support for a regulatory change that
would result in increased use of Federal
project data to establish prevailing wage
rates for building and residential
construction. LIUNA, the International
Union of Operating Engineers (IUOE),
UBC, CEA, SMACNA, NABTU, and III–
FFC expressed support for returning to
the Department’s approach prior to the
1981–1982 rulemaking, when the
Department used Federal project data in
all instances in determining prevailing
wage rates for building and residential
construction. MCAA similarly
supported allowing and perhaps even
routinely using Federal project data in
building and residential wage
determinations. LIUNA, NABTU, and
UBC, in particular, criticized the
limitation on the use of Federal project
data that was imposed by the 1981–1982
rulemaking and contended that the
limitation has resulted in the exclusion
of a significant amount of data on
worker compensation in Davis-Bacon
wage surveys. LIUNA and other
commenters recognized that § 1.3(d)
permits use of Federal project data in
determining prevailing wage rates for
building and residential construction
when private project data is insufficient,
but contended that the WHD
Administrator’s reliance on various
sufficiency standards over the years to
determine when Federal project data
may be used has often caused large
swaths of local wage data to be excluded
based solely on a disproportionately de
minimis amount of private data. LIUNA,
NABTU, and III–FFC posited that using
Federal project data in all circumstances
would increase the amount of usable
data and thereby increase the likelihood
that wage rates could be calculated
based on a substantial amount of wage
data and/or at the county level.
The IUOE and III–FFC similarly
commented that allowing greater use of
Federal project data would promote
clarity and efficiency and resolve some
of the challenges associated with
insufficient data. Relatedly, LIUNA and
III–FFC observed that the current
exclusion of Federal project data
discourages the submission of such data
in the first place, particularly since
some interested parties believe that
§ 1.3(d) imposes an absolute barrier to
the consideration of Federal project
data, and that removing the limitation
set forth in § 1.3(d) therefore would
promote greater survey participation.
The UBC, the IUOE, and MCAA further
commented that revising § 1.3(d) to
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provide for broader use of Federal
project data would be consistent with
the purpose of the DBA. The IUOE and
III–FFC also commented that building
projects that are likely to be subject to
DBRA requirements include detention
facilities, institutional buildings,
museums, post offices, and schools, and
that it is essential that data from such
projects are included in Davis-Bacon
wage surveys as such data reflects the
wages paid by skilled and experienced
contractors on these types of projects.
Finally, NABTU encouraged the
Department, should it decide to retain
the current restriction on the use of
Federal project data in residential and
building construction wage
determinations, to expressly state in
§ 1.3(d) that when the Department
receives insufficient data for an
individual county, it will first look to
Federal and federally assisted projects
before expanding its search to nearby
counties. In proposing this regulatory
revision, NABTU recognized that this
has been a longstanding policy of WHD,
but that it is not codified in the
regulations and therefore, NABTU
asserted, is not always uniformly
applied in Davis-Bacon wage surveys.
SMART and SMACNA included a
lengthy discussion of § 1.3(d) and noted
that they support unrestricted use of
Federal project data in building surveys
but that, to be responsive to the NPRM’s
requests for specific information, they
were also identifying ‘‘specific
circumstances that particularly warrant
greater use of Federal project data’’ and
discussed the possibility of including a
definition of ‘‘insufficient wage data’’ in
§ 1.3(d). They noted that the Federal
government plays a significant role in
building and residential construction in
local labor markets and that ‘‘[s]ince the
goal of the DBA is to prevent use of the
federal government’s purchasing power
to depress labor standards, it makes
little sense to ignore the federal
government’s impact on local markets in
determining prevailing rates.’’ SMART
and SMACNA further commented that if
the Department ‘‘decides not to rescind
§ 1.3(d),’’ the Department should, at
minimum, define the term ‘‘insufficient
wage data’’ in the regulation so that it
takes into account the total value of
Davis-Bacon projects in a county
relative to the total value of the private
projects in the county.’’ SMART and
SMACNA also noted that ‘‘a dearth of
private data in two-thirds of residential
surveys and in building surveys in
isolated, sparsely-populated rural
counties necessitates the use of federal
and federally funded data in these
surveys.’’
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In contrast to these comments in favor
of revising § 1.3(d), numerous
commenters opposed any change to
§ 1.3(d). Citing the DBA’s legislative
history, IEC contended that the DBA
was intended to reflect prevailing rates
established by private industry, and that
to revise § 1.3(d) to allow for broader
use of Federal project data in
establishing prevailing wage rates for
building and residential construction
would violate the DBA’s purpose and
established case law. MBA (in
comments submitted jointly with 10
other organizations) and NAHRO
posited that the use of Federal project
data in establishing prevailing wage
rates for building and residential
construction in all instances would
skew prevailing wages upward and
result in rates that would not reflect
actual prevailing wages for residential
and/or building construction. The
NAHB, in addition to joining the
comment submitted by the MBA,
recommended that the Department
maintain its policy of not factoring
Davis-Bacon wages from covered
projects in its initial calculation of
prevailing wages. AGC similarly
commented that they were not aware of
any significant deficiencies in the
sources of private data for building and
residential construction that would
necessitate a change in the current
practice or regulation. Finally, the Small
Business Administration (SBA) Office of
Advocacy expressed opposition to
greater use of Federal project data,
though they (like certain other
commenters) misinterpreted the NPRM
as expressly proposing a regulatory
change, when in fact the Department
simply solicited comments in the NPRM
as to whether a regulatory change was
warranted.
After considering the comments
supporting and opposing a regulatory
change, the Department has decided not
to revise § 1.3(d) and to continue to
consider submitted Federal project data
in all instances when calculating
prevailing wage rates for heavy and
highway construction and, in
calculating prevailing wage rates for
building and residential construction, to
consider Federal project data whenever
‘‘it is determined that there is
insufficient wage data to determine the
prevailing wages in the absence of such
data.’’ 29 CFR 1.3(d). As the current
regulatory text reflects, § 1.3(d) does not
erect an absolute barrier to considering
Federal project data when determining
prevailing wage rates for building and
residential construction, but rather
provides that Federal project data will
be used whenever the Department has
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determined that there is insufficient
private data to determine such
prevailing rates. The Department
therefore will continue to solicit and
receive Federal project data in all DavisBacon wage surveys of building and
residential construction, and, consistent
with § 1.3(d) and existing practice, will
use such data in determining prevailing
wage rates for those categories of
construction whenever insufficient
private data has been received.
Moreover, in light of certain comments
confirming that some stakeholders
apparently believe that § 1.3(d) imposes
an absolute barrier to the consideration
of Federal project data, the Department
will ensure that guidance materials and
communications specific to Davis-Bacon
wage surveys properly emphasize that
the Department seeks the submission of
Federal project data in all instances and
that it will use such data to determine
prevailing wage rates whenever
appropriate under § 1.3(d).
In deciding not to revise § 1.3(d) to
permit the use of Federal project data in
all instances, the Department considers
it significant that current § 1.3(d) does
not prohibit in all circumstances the use
of Federal project data in calculating
prevailing wage rates for building and
residential construction, but rather
requires the use of such data whenever
there is insufficient private data. In
interpreting § 1.3(d), the Department’s
ARB has held repeatedly that the
determination of whether or not there is
‘‘insufficient’’ private project data for
purposes of § 1.3(d) depends on the
circumstances, and that Federal project
data should not be disregarded simply
because the quantum of private data
received minimally satisfied WHD’s
subregulatory sufficiency threshold for
determining a prevailing wage rate
(currently wage data for six workers
employed on three projects). See Road
Sprinkler Fitters Local Union No. 669,
ARB No. 10–123, 2012 WL 2588591, at
*7 (June 20, 2012) (‘‘[I]it seems illogical
to conclude that data from merely three
workers in a metropolitan county for a
common job is ‘sufficient data’ to
eliminate the need to . . . include data
from federal jobs, as permitted by the
DBA and its implementing
regulations.’’); Plumbers Local Union
No. 27, ARB No. 97–106, 1998 WL
440909, at *5 (July 30, 1998) (under
§ 1.3(d), WHD could not establish a
prevailing wage for the plumber
classification by solely considering data
reflecting the wages paid to six
plumbers on private projects when the
record indicated that WHD had received
wage data for hundreds of plumbers on
federally funded projects). The
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Department agrees with this
interpretation and believes that this
precedent supports retaining § 1.3(d) as
presently drafted rather than revising
the provision to mandate the use of
Federal project data in determining all
prevailing wage rates.
The Department likewise has
concluded that it is unnecessary to
adopt the specific proposals, short of a
complete rescission of the limitation on
the use of Federal project data in
determining prevailing wage rates for
building and residential conduction,
that commenters identified. In response
to NABTU’s alternative
recommendation that § 1.3(d) be revised
to codify WHD’s longstanding policy of
looking to Federal project data before
expanding its search to nearby counties
when the Department receives
insufficient data for an individual
county, the Department believes that
codifying the order of operations in
determining prevailing wage rates for
building and residential construction at
this level of detail is not necessary. The
existing text of § 1.3(d), which directs
the use of Federal project data whenever
there is insufficient private data, already
provides for the consideration of
Federal project data at the county level
whenever there is insufficient countylevel private data. Moreover, established
WHD policies and procedures expressly
provide that if there is insufficient nonFederal project survey data for a
particular classification in a county,
then WHD will consider available
survey data from Federal projects in the
county and will likewise integrate
Federal project data at each level of
geographic aggregation to the same
extent and in the same manner it is
integrated at the county level. Manual of
Operations at 38; Chesapeake Housing,
ARB No. 12–010, 2013 WL 5872049, at
*4. The Department appreciates the
importance of adhering to this order of
operations in all circumstances,
however, and it will therefore continue
to emphasize, through subregulatory
guidance such as the Manual of
Operations and internal and external
communications, that, for building and
residential construction wage surveys,
Federal project data must always be
considered when there is insufficient
private data at the county level, and that
a similar process of considering Federal
project data must be followed each time
the geographic area is expanded in
accordance with the governing
regulations and WHD’s policies and
procedures.
The Department also declines to
adopt SMART and SMACNA’s
alternative proposal that the Department
define the term ‘‘insufficient wage data’’
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in the regulation so that it takes into
account the total value of Davis-Bacon
projects in a county relative to the total
value of the private projects in the
county. WHD has long determined
prevailing wages based on the wage data
for workers on ‘‘projects of a character
similar’’ that WHD receives through its
wage survey program 40 U.S.C. 3142(b).
As a general matter, projects of
significantly greater value will employ
more workers than smaller projects, and
the size or value of a particular project
for which wage data is submitted thus
can be expected to influence the
calculation of prevailing wages. To
determine sufficiency based on general
data regarding aggregate project values
in a county without regard to the
specific wage data received in a
particular Davis-Bacon wage survey
would represent a significant and
complex shift away from WHD’s current
method of determining prevailing wage
rates. The Department therefore believes
that the sufficiency or insufficiency of
private project data should continue to
be determined based on WHD’s
‘‘compiling of wage data,’’ § 1.3(d),
rather than on distinct, extra-survey
information regarding relative project
values. The current regulatory text,
particularly as interpreted by the ARB,
thus provides sufficient and appropriate
direction to the Department in
determining when Federal project data
may be used to determine prevailing
wage rates on building and residential
construction. See Road Sprinkler Fitters,
ARB No. 10–123, 2012 WL 2588591, at
*7; Plumbers Local Union No. 27, ARB
No. 97–106, 1998 WL 440909, at *5.
(C) 29 CFR 1.3(f)—Frequently
Conformed Rates
The Department is also proposing
changes relating to the publication of
rates for labor classifications for which
conformance requests are regularly
submitted when such classifications are
missing from wage determinations. The
Department’s proposed changes to this
paragraph are discussed below in
section III.B.1.xii (‘‘Frequently
conformed rates’’), together with
proposed changes to § 5.5(a)(1).
(D) 29 CFR 1.3(g)–(j)—Adoption of
State/Local Prevailing Wage Rates
In the NPRM, the Department
proposed to add new paragraphs (g), (h),
(i), and (j) to § 1.3 to permit the
Administrator, under specified
circumstances, to determine DavisBacon wage rates by adopting prevailing
wage rates set by State and local
governments. The Department
explained that this proposal was
intended to reduce reliance on outdated
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Davis-Bacon wage rates while enabling
the WHD to avoid performing costly and
duplicative prevailing wage surveys
when a State or locality has already
performed similar work.
About half of the States, as well as
many localities, have their own
prevailing wage laws (sometimes called
‘‘little’’ Davis-Bacon laws).106
Additionally, a few states have
processes for determining prevailing
wages in public construction even in the
absence of such State laws.107
Accordingly, the Administrator has long
taken prevailing wage rates set by States
and localities into account when making
wage determinations. Under the current
regulations, one type of information that
the Administrator may ‘‘consider[ ]’’ in
determining wage rates is ‘‘[w]age rates
determined for public construction by
State and local officials pursuant to
State and local prevailing wage
legislation.’’ 29 CFR 1.3(b)(3).
Additionally, for wage determinations
on federally funded highway
construction projects, the Administrator
is required by the FAHA statute to
‘‘consult’’ with ‘‘the highway
department of the State’’ in which the
work is to be performed, and to ‘‘giv[e]
due regard to the information thus
obtained.’’ 23 U.S.C. 113(b); see 29 CFR
1.3(b)(4).
In reliance on these provisions, WHD
has sometimes adopted and published
certain states’ highway wage
determinations in lieu of conducting
wage surveys in certain areas.
According to a 2019 report by the OIG,
WHD used highway wage
determinations from 15 states between
fiscal years 2013 and 2017. See 2019
OIG Report, at 10.
This same OIG report expressed
concern about the high number of outof-date Davis-Bacon wage rates,
particularly non-union rates, noting, for
example, that some published wage
rates were as many as 40 years old. Id.
at 5. The OIG report further noted that
at the time, 26 states and the District of
Columbia had their own prevailing
wage laws, and it recommended that
WHD ‘‘should determine whether it
would be statutorily permissible and
programmatically appropriate to adopt
[S]tate or local wage rates other than
those for highway construction.’’ Id. at
10–11. WHD indicated to OIG that in
the absence of a regulatory revision, it
viewed adoption of State rates for non106 A list of such states, and the thresholds for
coverage, can be found here: ‘‘Dollar Threshold
Amount for Contract Coverage,’’ U.S. Dep’t of Lab.,
Wage and Hour Div., https://www.dol.gov/agencies/
whd/state/prevailing-wages.
107 These states include Iowa, North Dakota, and
South Dakota.
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highway construction as in tension with
the definition of prevailing wage in
§ 1.2(a) and the ARB’s Mistick decision.
Id. at 10.
In the NPRM, the Department
explained that it shared OIG’s concerns
regarding out-of-date rates, and that a
regulatory revision would best ensure
that WHD can incorporate State and
local wage determinations when doing
so would further the purposes of the
Davis-Bacon labor standards. As noted
above, the current regulations permit
WHD to ‘‘consider’’ State or local
prevailing wage rates among a variety of
sources of information used to make
wage determinations and require WHD
to give ‘‘due regard’’ to information
obtained from State highway
departments for highway wage
determinations. See 29 CFR 1.3(b)(3)–
(4). However, they also provide that any
information WHD considers when
making wage determinations must ‘‘be
evaluated in the light of [the prevailing
wage definition set forth in] § 1.2(a).’’ 29
CFR 1.3(c). While some States and
localities’ definitions of prevailing wage
mirror the Department’s regulatory
definition, many others’ do not.
Likewise, because the current
regulations at §§ 1.2(a) and 1.3(c), as
well as the ARB’s decision in Mistick,
suggest that any information (such as
State or local wage rates) that WHD
obtains and ‘‘consider[s]’’ under § 1.3(b)
must be filtered through the definition
of ‘‘prevailing wage’’ in § 1.2, the
Department proposed a regulatory
change to clarify that WHD may adopt
State or local prevailing wage
determinations under certain
circumstances even where the State or
locality’s definition of prevailing wage
differs from the Department’s.
Under the Department’s proposal,
WHD would only be permitted to adopt
State or local prevailing wage rates if the
Administrator, after reviewing the rate
and the processes used to derive the
rate, concludes that they meet certain
listed criteria. The criteria the
Department proposed, which were
included in proposed new § 1.3(h), were
as follows:
First, the Department proposed that
the State or local government must set
prevailing wage rates, and collect
relevant data, using a survey or other
process that generally is open to full
participation by all interested parties.
This proposed requirement was
intended to ensure that WHD will not
adopt a prevailing wage rate where the
process to set the rate unduly favors
certain entities, such as union or nonunion contractors. Rather, the State or
local process must reflect a good-faith
effort to derive a wage that prevails for
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similar workers on similar projects
within the relevant geographic area
within the meaning of the Davis-Bacon
Act statutory provisions. The phrase
‘‘survey or other process’’ in the
proposed regulatory text was intended
to permit the Administrator to
incorporate wage determinations from
States or localities that do not
necessarily engage in surveys but
instead use a different process for
gathering information and setting
prevailing wage rates, provided that this
process meets the required criteria.
Second, the Department proposed
requiring that a State or local wage rate
must reflect both a basic hourly rate of
pay as well as any locally prevailing
bona fide fringe benefits, and that each
of these can be calculated separately.
Thus, the Department explained that
WHD must be able to confirm during its
review process that both figures are
prevailing for the relevant
classification(s) and list each figure
separately on its wage determinations.
This reflects the statutory requirement
that a prevailing wage rate under the
Davis-Bacon Act must include fringe
benefits, 40 U.S.C. 3141(2)(B); 29 CFR
5.20, and that ‘‘the Secretary is obligated
to make a separate finding of the rate of
contribution or cost of fringe benefits.’’
29 CFR 5.25(a). This requirement also
would ensure that WHD could
determine the basic or regular rate of
pay to determine compliance with the
CWHSSA and the Fair Labor Standards
Act (FLSA).
Third, the Department proposed that
the State or local government must
classify laborers and mechanics in a
manner that is recognized within the
field of construction.108 The proposed
rule explained that this standard is
intended to ensure that the
classification system does not result in
lower wages than are appropriate by, for
example, assigning duties associated
with skilled classifications to a
classification for a general laborer.
Finally, the Department proposed that
the State or local government’s criteria
for setting prevailing wage rates must be
108 In the NPRM, the Department explained that
it recognizes that differences in industry practices
mean that the precise types of work done and tools
used by workers in particular classifications may
not be uniform across states and localities. For
example, in some areas, a significant portion of
work involving the installation of heating,
ventilation, and air conditioning (HVAC) duct work
may be done by an HVAC Technician, whereas in
other areas such work may be more typically
performed by a Sheet Metal Worker. Unlike in the
case of the SCA, WHD does not maintain a directory
of occupations for the Davis-Bacon Act. However,
under this proposed rule, in order for WHD to adopt
a State or locality’s wage rate, the State or locality’s
classification system must be in a manner
recognized within the field of construction.
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substantially similar to those the
Administrator uses in making wage
determinations under 29 CFR part 1.
The proposed regulation provided a
non-exclusive list of factors to guide this
determination, including, but not
limited to, the State or local
government’s definition of prevailing
wage; the types of fringe benefits it
accepts; the information it solicits from
interested parties; its classification of
construction projects, laborers, and
mechanics; and its method for
determining the appropriate geographic
area(s). Thus, the more similar a State or
local government’s methods are to those
used by WHD, the greater likelihood
that its corresponding wage rate(s) will
be adopted. While the proposed
regulation listed the above factors as
guidelines, it ultimately directed that
the Administrator’s determination in
this regard will be based on the totality
of the circumstances. The reservation of
such discretion in the Administrator
was intended to preserve the
Administrator’s ability to make an
overall determination regarding whether
adoption of a State or local wage rate is
consistent with both the language and
purpose of the DBA, and thereby is
consistent with the statutory directive
for the Secretary (in this case, via
delegation to the Administrator), to
determine the prevailing wage. See 40
U.S.C. 3142(b).
The Department proposed in § 1.3(g)
to permit the Administrator to adopt
State or local wage rates with or without
modification. The Department
explained that this was intended to
encompass situations where the
Administrator reviews a State or local
wage determination and determines that
although the State or local wage
determination might not satisfy the
above criteria as initially submitted, it
would satisfy those criteria with certain
modifications. For example, the
Administrator may obtain from the State
or local government the State or
locality’s wage determinations and the
wage data underlying those
determinations, and, provided the data
was collected in accordance with the
criteria set forth earlier (such as that the
survey was fully open to all
participants), may determine, after
review and analysis, that it would be
appropriate to use the underlying data
to adjust or modify certain
classifications or construction types, or
to adjust the wage rate for certain
classifications. Consistent with the
Secretary’s authority to make wage
determinations, the regulation permits
the Administrator to modify a State or
local wage rate as appropriate while still
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generally relying on it as the primary
source for a wage determination. For
instance, before using State or local
government wage data to calculate
prevailing wage rates under the DBA,
the Administrator could regroup
counties, apply the definition of
‘‘prevailing wage’’ set forth in § 1.2,
disregard data for workers who do not
qualify as laborers or mechanics under
the DBA, and/or segregate data based on
the type of construction involved. The
Department explained that the
Administrator would cooperate with the
State or locality to make the appropriate
modifications to any wage rates.
In proposed § 1.3(i), the Department
proposed requiring the Administrator to
obtain the wage rates and any relevant
supporting documentation and data
from the State or local entity before
adopting a State or local government
prevailing wage rate.
Finally, § 1.3(j) of the proposed rule
explained that nothing in proposed
§ 1.3(g), (h), or (i) precludes the
Administrator from considering State or
local prevailing wage rates in a more
holistic fashion, consistent with
§ 1.3(b)(3), or from giving due regard to
information obtained from State
highway departments, consistent with
§ 1.3(b)(4), as part of the Administrator’s
process of making prevailing wage
determinations under 29 CFR part 1. For
example, under the proposed rule, as
under the current regulations, if a State
or locality were to provide the
Department with the underlying data
that it uses to determine wage rates,
even if the Administrator determines
not to adopt the wage rates themselves,
the Administrator may consider or use
the data as part of the process to
determine the prevailing wage within
the meaning of 29 CFR 1.2, provided
that the data is timely received and
otherwise appropriate. The purpose of
proposed § 1.3(j) was to clarify that the
Administrator may, under certain
circumstances, adopt State or local wage
rates, and use them in wage
determinations, even if the process and
rules for State or local wage
determinations differs from the
Administrator’s.
A diverse array of commenters—
including labor unions, worker
advocacy organizations, contractors,
contractor associations, State
government officials, and various
members of Congress—expressed
support for the Department’s proposals
to expand WHD’s authority to adopt
State or local prevailing wage rates. The
most common reason offered for such
support was that the adoption of State
or local rates could help ensure that
Davis-Bacon rates remain up to date. For
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example, FFC and NCDCL stated in
their comments that wage
determinations by the State of California
are updated with ‘‘significantly greater
frequency’’ than WHD’s. These
commenters and others, such as
NABTU, asserted that incorporation of
more current State and local wage rates
would help attract workers to the
construction industry, which they
viewed as an important policy priority
in light of the increased number of
construction projects financed by IIJA.
Other commenters expressed support
for an expanded incorporation of State
and local prevailing wage rates for
efficiency reasons. For example,
COSCDA said that the proposals may
‘‘avoid delays in identifying certain
federal prevailing wages,’’109 while
Pennsylvania government officials
commented that ‘‘the proposal would
streamline the wage determination
process . . . and align DBRA wages
with State and local rates for projects
covered by both sets of laws.’’ CEA,
NECA, and SMACNA identified this
proposal as among those from the
Department’s proposed rule that would
greatly improve the overall efficiency of
the Act. IUOE, MCAA, and UBC
asserted that the proposals would allow
WHD to conserve its resources for
improved administration and
enforcement of the DBA, with MCAA
characterizing the proposals as ‘‘sound
good-government policy.’’ MBA
remarked that ‘‘[t]he added flexibility
afforded to the Administrator in the
proposed rule is a positive step in
getting a deeper understanding of the
relevant wages,’’ and urged the
Department to ‘‘go a step further’’ by
‘‘[e]xpanding the use of the data, not
just when WHD does not have sufficient
data to determine a wage, but in all
circumstances . . . [to] provide a
comparative wage and help gain a
greater understanding whenever there
are material discrepancies or when the
overall respondent rate is low for a wage
determined through the Davis-Bacon
survey.’’
Several commenters expressed more
qualified support for the Department’s
proposals regarding the incorporation of
State and local prevailing wage rates.
For example, the UA acknowledged that
it ‘‘makes sense to use state and local
rates . . . as a fall-back option for
combatting stale rates,’’ but
109 While opposing the Department’s proposals
for other reasons, FTBA acknowledged that ‘‘[the]
adoption of prevailing rates set by state or local
officials has some appeal given the time intensive
survey process which has resulted in delays in
surveys and consequently delays in the issuance of
new wage determinations based on updated wages
and benefits data.’’
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‘‘encourage[d] [the Department] to
continue to prioritize its own wage
surveys as the first and best option.’’
Similarly, Contractor Compliance &
Monitoring, Inc. (CC&M) ‘‘agree[d] with
using state or local prevailing wage rate
for wage rates, but only where there is
otherwise insufficient information from
BLS.’’ AGC stated that ‘‘[a]dopting state
and local wage rates could improve the
accuracy and timeliness of rates if done
properly,’’ but opined that ‘‘[t]he
viability and practicality of this
proposal depends almost entirely on
how much confidence one has in state
procedures for collecting wage rate data
and calculating prevailing wages.’’
NABTU cautioned that ‘‘[the
Department] must . . . conduct
meaningful independent review of local
rates to avoid engaging in an
impermissible delegation of
authority,’’ 110 and ‘‘[a]bove all . . .
retain the final decision-making
authority over rates.’’
While some commenters specifically
approved of the limiting criteria
specified in proposed § 1.3(h), see, e.g.,
Fair Contracting Foundation of
Minnesota and MCAA, others asked the
Department to codify additional
limitations on WHD’s discretion to
adopt State or local prevailing wage
rates. For example, several labor unions
and worker advocacy organizations,
including III–FFC, LCCHR, and UBC,
requested the final rule to prohibit the
use of State or local rates lower than an
alternative Federal rate.111 In support of
this proposal, III–FFC asserted that
‘‘[a]dopting rates that are lower than
those derived from the Department’s
own methodology would run counter to
the purpose of the Davis-Bacon Act to
establish rates ‘for the benefit of
construction workers.’ Binghamton
Constr. Co., 347 U.S. at 178.’’ Other
commenters expressed concern about
the risks of low State or local prevailing
wage rates but stopped short of
requesting the Department to
categorically reject the adoption of
lower State or local rates. For example,
IUOE requested the Department to ‘‘add
a clause to the final rule that the
110 III–FFC similarly cautioned that ‘‘DOL . . .
must include an independent review process that
ensures these [State and local] wage determination
programs are methodologically sound and
consistent with the requirements of Davis-Bacon
labor standards,’’ but expressed its view that the
NPRM ‘‘contain[s] a solid framework with relevant
criteria to help DOL review state and local
processes for setting prevailing wage rates.’’
111 LIUNA supported this proposed restriction,
and additionally requested the Department to
prohibit ‘‘replac[ing] a federal wage determination
based on a collective bargaining agreement subject
to annual updating with one that cannot be so
escalated.’’
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Administrator shall closely scrutinize a
state’s submissions if the state cannot
demonstrate a 5-year history of
successfully administering such a
prevailing wage program,’’ explaining
that such scrutiny would ‘‘allow the
Administrator to not accept such wages
if they significantly lower the wages
already listed on the WD.’’
Other commenters suggested
methodological modifications. NABTU
and the UA requested the Department to
limit its adoption of State or local rates
to communities where WHD has not
completed a wage survey in the area for
the applicable type of construction in
more than 3 years.112 NAHB urged the
Department not to adopt wage rates
from State and local governments that
use a methodology that permits the
cross-consideration of rural and
metropolitan wage rates, asserting that
wages resulting from such a
methodology are not appropriately
representative of a given area. And ABC
requested that the Department modify
proposed § 1.3(h)(1) to require that the
State or local government ‘‘use
appropriate statistical methods, such as
sampling, weighting, or imputation, to
obtain statistically representative
results,’’ or, in the alternative, ‘‘clarify
that statistically representative
sampling, where all respondents have a
proportionate likelihood of inclusion in
the sample, qualifies as ‘full
participation by all interested parties’
within the meaning of the regulation.’’
The Department identified at least
five comments which opposed an
expanded use of State or local
prevailing wage rates, submitted by
AWHA, FTBA, IEC, NAHB, and the
group of U.S. Senators, respectively.
Unlike some of the commenters that
voiced concern about the potential
adoption of lower State or local wage
rates, FTBA, IEC, and the group of U.S.
Senators were chiefly concerned that
the proposal could result in the
adoption of State or local wage rates that
are inappropriately high. For example,
the group of U.S. Senators cited research
asserting that New York’s prevailing
wage law has inflated state and local
construction costs by 13 to 25 percent,
depending on the region. The group of
U.S. Senators elaborated that ‘‘[m]any
state prevailing wage laws, such as New
112 NABTU specifically requested the Department
to ‘‘limit its adoption of local rates to communities
where the SU rates are more than three years old
and where such local rates are established through
a data collection process that: (1) prioritizes the
modal wage rate and utilizes weighed averages,
means or medians as a last resort; (2) is carried out
no less frequently than every three years; (3) is open
to participation by, at least, those interested parties
listed in 29 CFR 1.3(a); and (4) accepts the types
of fringe benefits that DOL accepts.’’
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York’s, base their definition of
prevailing rate of wage directly on
compensation levels set in [a] CBA,
rather than voluntary surveys, allowing
contract administrative costs and union
work rules to further inflate wages, at
great detriment to the taxpayer.’’
AWHA and FTBA expressed a
different concern that expanding the use
of State and local prevailing wage rates
might inappropriately reduce WHD’s
need or desire to regularly perform
Federal wage surveys.113 AWHA
asserted that State and local
governments ‘‘face similar, if not more
pronounced, capacity and outreach
challenges in conducting
methodologically rigorous wage and
hour surveys,’’ and further objected that
the Department’s proposal to use local
prevailing wage rates even in cases
where the definitions and methods are
different than the Federal standard was
‘‘at odds with the given rationale to
return to the three-step process.’’
Highlighting the requirement in
proposed § 1.3(h)(4) that State or local
rates must be derived from
‘‘substantially similar’’ criteria to those
the Administrator uses in making wage
determinations under part 1, IEC
asserted that ‘‘the ability to merely
adopt—rather than consider—state and
local wage determinations converts key
provisions of the regulations governing
wage determinations into mere
suggestions.’’ And, as previously
discussed, NAHB relayed concerns
about incorporation of State or local
rates to the extent that those rates are
derived from methodologies that permit
cross-consideration of rural and
metropolitan areas.
Having considered the feedback in
response to the proposed expansion of
the use of State and local prevailing
wage rates, the Department agrees with
the 2019 OIG report and the
overwhelming majority of the
commenters that addressed these
proposals that expanding WHD’s ability
to incorporate State and local wage rates
would be a significant improvement to
the current regulations. Specifically, the
Department believes that the provisions
in proposed § 1.3(g)–(j) will give the
Department an important tool to keep
DBRA prevailing wage rates accurate
and up to date, with appropriate
safeguards to guard against the adoption
of excessively high or low State or local
rates. Accordingly, the final rule adopts
new paragraphs (g), (h), (i), and (j) in
§ 1.3 as proposed in the NPRM.
113 FTBA additionally asserted that the proposal
might reduce WHD’s need to consult with the
highway department of the State in which a project
in the Federal-aid highway system is to be
performed.
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The Department declines to adopt
additional limitations on its discretion
to adopt State or local prevailing wage
rates beyond those specified in the
proposed rule. The final rule provides
the Administrator with the ultimate
responsibility to make an affirmative
determination to adopt a State or local
wage rate. This contemplates that WHD
will engage in a careful and
individualized review of State and local
prevailing wages, and the criteria
specified in proposed § 1.3(h)
accomplish that objective while also
providing appropriate safeguards. For
example, the Department disagrees with
NABTU and the UA’s suggestion to
prohibit the adoption of State or local
prevailing wage rates where an
applicable Federal rate exists that was
determined from the prior 3 years.
Although the Department agrees that in
general, it will be less likely to adopt a
State or local rate if the applicable wage
determination is derived from more
recent data, the Department believes
that individual decisions whether or not
to adopt particular rates are best left to
the Administrator to determine on a
case-by-case basis.
Similarly, the Department declines to
adopt a categorical prohibition on the
adoption of State or local prevailing
wage rates that are lower than those
provided in the most recent Federal
wage determination. First, the
Department expects that this outcome
will be exceedingly rare, because one of
the primary purposes of the new
adoption provision is to fill in gaps in
areas where WHD is unable to conduct
regular surveys due to resource
constraints. Thus, in most or all cases in
which a State or local wage
determination is adopted, WHD will not
have a recent wage rate to use for
comparison. Moreover, the purpose of a
wage determination is to accurately
reflect wages that prevail in the locality.
As such, if the Administrator
determines that a State or local rate is
the most appropriate or accurate rate to
use, it would not be appropriate to reject
the State or local rate simply because it
happens to be lower than the analogous
rate in the most recent (and potentially
outdated) WHD survey. In any event, as
noted above, the Department anticipates
that the regulatory criteria for adoption
will prevent the adoption of rates that
would deviate significantly from those
that would apply if the Department
were to conduct a wage survey itself.
The Department declines ABC’s
request to restrict the pool of State and
local prevailing wages eligible for
incorporation to those that ‘‘use
appropriate statistical methods, such as
sampling, weighting, or imputation, to
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obtain statistically representative
results.’’ This restriction does not apply
to WHD’s own wage determination
process, and the Department declines to
impose it on State and local wage
determinations. In response to ABC’s
concern that the language in proposed
§ 1.3(h)(1) referring to ‘‘full participation
by all interested parties’’ could be read
to only permit a process in which
participants self-select into a survey, as
noted above, the phrase ‘‘survey or other
process’’ is specifically intended to
permit the Administrator, where
otherwise appropriate, to adopt not only
wage rates that are set using surveys, but
also rates set using a different process.
The Department reaffirms that the intent
of § 1.3(h)(1) is to ensure that WHD will
not adopt a State or local rate where the
process that the State or locality uses to
determine the rate unduly favors certain
entities.
The Department declines NAHB’s
request to require that State and local
governments bar the cross-consideration
of rural and metropolitan wage data. As
explained in greater detail in section
III.B.1.vii.A, the Department is
eliminating this prohibition in
connection with its own wage
determination process, and likewise
does not believe that imposing such a
ban in new § 1.3(h) to limit the pool of
State and local rates eligible for
adoption would be necessary or helpful.
As explained in section III.B.1.vii, the
removal of the prohibition on crossconsideration of rural and metropolitan
data in the context of WHD’s own DavisBacon surveys provides for such crossconsideration in limited and
appropriate circumstances, as described
in that section, and will not lead to the
widespread mixing of metropolitan and
rural data in determining prevailing
wages. Similarly, the extent to which
State or local prevailing wage rates
reflect the combining of metropolitan
and rural data in limited circumstances
of the type contemplated in § 1.7(b), as
opposed to a significantly broader
combining of metropolitan and rural
data, would be a factor that the
Administrator could consider in
determining whether it would be
appropriate to adopt or not adopt the
State or local rates, or, alternatively, to
obtain the underlying State or local data
and reconfigure the data based on
county groupings that are similar or
identical to those used by the
Administrator in analogous contexts.
The Department also notes that
consistent with § 1.3(d), the
Administrator will also review the
extent to which a State or local building
or residential prevailing rate is derived
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using Federal project data, but that a
State or locality’s use of such data to a
greater or lesser extent than WHD uses
such data in its own wage
determinations will not categorically
preclude adoption of the State or
locality’s rates. The Department also
declines CC&M’s suggestion to adopt
State or local rates only when there is
insufficient data from BLS. For the
reasons explained at length above, the
Department does not believe that the
use of BLS data to set DBRA wage rates
is generally appropriate. The
Department notes that to the extent that
a State or locality’s system for making
wage determinations raises similar
concerns, such concerns would weigh
significantly against the Department’s
adoption of such rates.
The Department appreciates
commenter concerns about the adoption
of inappropriately high State or local
prevailing wage rates but believes that
the criteria specified in new § 1.3(h) will
serve as a safeguard against such
outcomes. Moreover, WHD’s expanded
authority to adopt State and local rates
under new § 1.3(g) is wholly
discretionary, and may be done ‘‘with or
without modification’’ of an underlying
rate. While the Department
acknowledges that the adoption of State
or local rates will in many cases result
in increases to the applicable DavisBacon prevailing wage rates due to the
replacement of outdated and artificially
low rates with more current State or
local rates, such increases are entirely
appropriate and result in rates that
better reflect wages that actually prevail
in the relevant locality. As a general
matter, states and localities that conduct
wage surveys more frequently than
WHD may have stronger relationships
with local stakeholders, enabling those
bodies to determine prevailing wage
rates with greater participation.114 A
wide swath of commenters—including
contractors, contractor associations, and
contracting agencies—agreed that with
that reasoning, and asserted that the
proposals would benefit the
construction industry as a whole.
The Department disagrees that
expanding WHD’s ability to adopt State
or local prevailing wage rates will
hamper its ability or willingness to
conduct Federal wage surveys. To the
contrary, empowering WHD to adopt
State and local rates in appropriate
cases will give WHD the flexibility to
better allocate its limited resources to
114 The Department explained this in the NPRM,
see 87 FR 15699–700, and several comments,
including from III–FFC and the LCCHR and other
civil rights and worker advocacy organizations,
made similar arguments in support of the
Department’s proposals.
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the classifications and localities most in
need of attention.115 As other
commenters noted, an expanded use of
State and local prevailing wages may
achieve efficiencies that improve WHD’s
overall administration and enforcement
of the DBRA.
The Department also disagrees that
increased flexibility to adopt State and
local rates is inconsistent with the final
rule’s restoration of the ‘‘three-step
process’’ when WHD conducts its own
wage surveys. Both regulatory revisions
seek to further the same goal: the
adoption of prevailing wage
determinations that better reflect wages
that are currently prevailing in a
locality. Moreover, the final rule
requires WHD to consider the extent to
which a state’s methodology is similar
to, or deviates from, WHD’s when
determining whether to adopt a State or
local rate, and whether to do so with or
without modification. As the
Department emphasized in the NPRM,
the new provisions require the
Administrator to make an affirmative
determination that the criteria
enumerated in § 1.3(h) have been met in
order to adopt a State or local wage rate,
and to do so only after careful review of
both the rate and the process used to
derive the rate. The criteria are intended
to allow WHD to adopt State and local
prevailing wage rates where appropriate
while also ensuring that adoption of
such rates is consistent with the
statutory requirements of the DavisBacon Act and does not create arbitrary
distinctions between jurisdictions
where WHD makes wage determinations
by using its own surveys and
jurisdictions where WHD makes wage
determinations by adopting State or
local rates.116 Thus, under the final rule,
the Department may not simply accept
State or local data with little or no
review. Such actions would be
inconsistent with the Secretary’s
statutory responsibility to
‘‘determine[ ]’’ the wages that are
prevailing. 40 U.S.C. 3142(b). Adoption
of State or local rates after appropriate
review, however, is consistent with the
authority Congress granted to the
Department in the Davis-Bacon Act. The
115 Fair Contracting Foundation of Minnesota
opined that the Department’s proposals would
‘‘free[ ] up precious agency resources to focus on
states that lack the requisite public infrastructure to
conduct their own surveys.’’
116 For example, in response to AWHA’s
expressed concern about the adoption of ‘‘wage
rates that have substantively different methods than
those mandated at the federal level,’’ the
Department notes that § 1.3(h) requires that a State
or local government’s criteria for setting prevailing
wage rates must be ‘‘substantially similar’’ to that
used by the Administrator in order for the State or
local wage rate to be adopted.
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DBA ‘‘does not prescribe a method for
determining prevailing wages.’’
Chesapeake Housing, ARB No. 12–010,
2013 WL 5872049, at *4. Rather, the
statute ‘‘delegates to the Secretary, in
the broadest terms imaginable, the
authority to determine which wages are
prevailing.’’ Donovan, 712 F.2d at 616.
The D.C. Circuit has explained that the
DBA’s legislative history reflects that
Congress ‘‘envisioned that the Secretary
could establish the method to be used’’
to determine DBA prevailing wage rates.
Id. (citing 74 Cong. Rec. 6516 (1931)
(remarks of Rep. Kopp) (‘‘A method for
determining the prevailing wage rate
might have been incorporated in the
bill, but the Secretary of Labor can
establish the method and make it known
to the bidders.’’)).
Reliance on prevailing wage rates
calculated by State or local authorities
for similar purposes is a permissible
exercise of this broad statutory
discretion. In areas where states or
localities are already gathering reliable
information about prevailing wages in
construction, it may be inefficient for
the Department to use its limited
resources to perform the same tasks. As
a result, the Department is finalizing its
proposal to use State and local wage
determinations under specified
circumstances where, based on a review
and analysis of the processes used in
those wage determinations, the
Administrator determines that such use
would be appropriate and consistent
with the DBA. Such resource-driven
decisions by Federal agencies are
permissible. See, e.g., Hisp. Affs. Project
v. Acosta, 901 F.3d 378, 392 (D.C. Cir.
2018) (upholding Department’s decision
not to collect its own data but instead
to rely on a ‘‘necessarily . . . imprecise’’
estimate given that data collection
under the circumstances would have
been ‘‘very difficult and resourceintensive’’); Dist. Hosp. Partners, L.P. v.
Burwell, 786 F.3d 46, 61–62 (D.C. Cir.
2015) (concluding that an agency’s use
of an ‘‘imperfect[ ]’’ data set was
permissible under the Administrative
Procedure Act).117
117 The Federal Highway Administration’s
(FHWA) independent statutory obligation for the
Department to consider and give ‘‘due regard’’ to
information obtained from State highway agencies
for highway wage determinations does not prohibit
WHD from adopting State or local determinations,
either for highway construction or for other types
of construction, where appropriate. Rather, this
language imposes a minimum requirement for the
Secretary to consult with states and consider their
wage determinations for highway construction. See
Virginia, ex rel., Comm’r, Virginia Dep’t of
Highways and Transp. v. Marshall, 599 F.2d 588,
594 (4th Cir. 1979) (‘‘Section 113(b) requires that
the Secretary ‘consult’ and give ‘due regard’ to the
information thus obtained.’’).
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For the above reasons, the final rule
adopts these revisions as proposed.
iv. Section 1.4 Report of Agency
Construction Programs
Section 1.4 currently provides that, to
the extent practicable, agencies that use
wage determinations under the DBRA
shall submit an annual report to the
Department outlining proposed
construction programs for the coming
year. The reports described in § 1.4
assist WHD in its multiyear planning
efforts by providing information that
may guide WHD’s decisions regarding
when to survey wages for particular
types of construction in a particular
locality. These reports are an effective
way for the Department to know where
Federal and federally assisted
construction will be taking place, and
therefore where updated wage
determinations will be of most use.
Notwithstanding the importance of
these reports to the program, contracting
agencies have not regularly provided
them to the Department. As a result,
after consideration, the Department
proposed to remove the language in the
regulation that currently allows agencies
to submit reports only ‘‘to the extent
practicable.’’ Instead, proposed § 1.4
would require Federal agencies to
submit the construction reports.
The Department also proposed to
adopt certain elements of two prior
AAMs addressing these reports. In 1985,
WHD updated its guidance regarding
the agency construction reports,
including by directing that Federal
agencies submit the annual report by
April 10 each year and providing a
recommended format for such agencies
to submit the report. See AAM 144 (Dec.
27, 1985). In 2017, WHD requested that
Federal agencies include in the reports
proposed construction programs for an
additional 2 fiscal years beyond the
upcoming year. See AAM 224 (Jan. 17,
2017). The proposed changes to § 1.4
would codify these guidelines in the
regulations.
The Department also proposed new
language requiring Federal agencies to
include notification of any expected
options to extend the terms of current
construction contracts. The Department
proposed this change because—like a
new contract—the exercise of an option
requires the incorporation of the most
current wage determination. See AAM
157 (Dec. 9, 1992); see also 48 CFR
22.404–12(a). Receiving information
concerning expected options to extend
the terms of current construction
contracts therefore will help the
Department assess where updated wage
determinations are needed for Federal
and federally assisted construction,
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which will in turn contribute to the
effectiveness of the Davis-Bacon wage
survey program. The Department also
proposed that Federal agencies include
the estimated cost of construction in
their reports, as this information also
will help the Department prioritize
areas where updated wage
determinations will have the broadest
effects.
In addition, the Department proposed
to require that Federal agencies include
in the annual report a notification of any
significant changes to previously
reported construction programs. In turn,
the Department proposed eliminating
the current directive that agencies notify
the Administrator mid-year of any
significant changes in their proposed
construction programs. Such
notification would instead be provided
in Federal agencies’ annual reports.
Finally, the Department proposed
deleting the reference to the Interagency
Reports Management Program because
the requirements of that program were
terminated by the General Services
Administration (GSA) in 2005. See 70
FR 3132 (Jan. 19, 2005).
The Department explained that these
proposed changes would not result in
significant burdens on contracting
agencies, as the proposed provisions
request only information already on
hand. Furthermore, any burden
resulting from the new proposal should
be offset by the proposed elimination of
the current directive that agencies notify
the Administrator of any significant
changes in a separate mid-year report.
The Department also sought comment
on any alternative methods through
which the Department may obtain the
information and eliminate the need to
require the agency reports.
A number of contractors, unions, and
industry associations that submitted
comments expressed general support for
the Department’s proposed change to
require that reports include construction
program information for an additional 2
fiscal years beyond the upcoming year
and include notification of options to
extend terms of current construction
contracts or any significant changes to
construction programs. See, e.g.,
Minnesota State Building and
Construction Trades Council; SMACNA;
and Smith-Boughan, Inc. NECA
supported the changes as necessary for
ensuring that the Department is
informed of where Federal and federally
assisted construction will take place.
The UA supported the proposed
change and further suggested that the
reports be posted online to improve
transparency or that the Department
‘‘provide a streamlined mechanism for
interested parties to request the
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reports.’’ While appreciating the UA’s
interest in transparency, the Department
does not believe codification of such a
procedure is necessary, particularly
given the amount of information
regarding agency construction programs
that is already in the public domain and
available through resources such as
USAspending.gov and agency operating
plans.
The Department of the Army’s Labor
Advisor supported the proposal to
change agency construction reports’ due
date to April 10, stating that the April
date is ‘‘considerably more practicable
than October 1,’’ as contracting agency
activity ‘‘is especially busy at the start
of each fiscal year.’’ This commenter,
however, noted that the proposed
language is confusing because it
characterizes the requirement as one
that is ‘‘[a]t the beginning of each fiscal
year,’’ even though fiscal years for the
Federal government run from October 1
through September 30. The Department
agrees that the proposed language may
lead to confusion and has changed the
description to require the reports ‘‘[o]n
an annual basis.’’
The Department received a few
comments expressing concerns about
additional burdens from the proposal to
remove the language in the regulation
that currently allows agencies to submit
reports only ‘‘to the extent practicable.’’
NAHRO expressed concern that if
agencies are required to submit reports,
additional burdens will be placed on
public housing authorities and other
housing and community development
organizations that provide information
to HUD. The National Community
Development Association was also
concerned that the Department’s
proposal would result in HUD needing
to impose additional information
collection requirements on grantees and
recommended that agencies only be
required to report on projects ‘‘of such
a scale as to be relevant to the stated
goal of assisting [the Department] decide
where updated wage determinations are
needed or would be of most use.’’ The
Department of the Army’s Labor
Advisor recommended the Department
add clarifying language that
construction reports be ‘‘based on
information already on hand.’’ In
response to comments received, and
specifically in order to address the
stated concerns about imposing
potentially burdensome information
collection requirements on recipients of
Federal financial assistance, the
Department has added language at the
end of the opening sentence in § 1.4 of
the regulatory text to clarify that a
Federal agency’s report should be based
on information in the Federal agency’s
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possession at the time it furnishes its
report. This language is intended to
clarify that a Federal agency is not
required to impose additional
information collection requirements on
grantees in order to fulfill the Federal
agency’s duty to submit construction
program reports to the Department.118
Having considered the comments both
supporting and opposing the proposed
changes to the agency construction
reporting requirements, the Department
continues to believe it is appropriate to
remove the language allowing the
reporting to occur only ‘‘to the extent
practicable.’’ Accordingly, the final rule
adopts the proposed revisions to § 1.4,
with the limited changes specified
above.
v. Section 1.5 Publication of General
Wage Determinations and Procedure for
Requesting Project Wage Determinations
The Department proposed a number
of revisions to § 1.5 to clarify the
applicability of general wage
determinations and project wage
determinations. Except as noted below,
these revisions are consistent with
longstanding Department practice and
subregulatory guidance.
First, the Department proposed to retitle § 1.5, currently titled ‘‘Procedure
for requesting wage determinations,’’ as
‘‘Publication of general wage
determinations and procedure for
requesting project wage
determinations.’’ The proposed revision
better reflects the content of the section
as well as the distinction between
general wage determinations, which the
Department publishes for broad use, and
project wage determinations, which are
requested by contracting agencies on a
project-specific basis. The Department
also proposed to add titles to each
paragraph in § 1.5 to improve
readability.
Additionally, the Department
proposed to add language to § 1.5(a) to
explain that a general wage
determination contains, among other
information, a list of wage rates
determined to be prevailing for various
classifications of laborers and
mechanics for specified type(s) of
construction in a given area. Likewise,
the Department proposed to add
language to § 1.5(b) to explain
circumstances under which an agency
118 While this rule change does not require
Federal agencies to impose additional information
collection requirements on grantees or other
recipients of federal assistance, this language does
not prevent them from doing so to the extent that
additional or modified information requests may be
helpful. The details of such information collection
requests, however, are outside of the scope of this
rulemaking.
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may request a project wage
determination, namely, where (1) the
project involves work in more than one
county and will employ workers who
may work in more than one county; (2)
there is no general wage determination
in effect for the relevant area and type
of construction for an upcoming project;
or (3) all or virtually all of the work on
a contract will be performed by one or
more classifications that are not listed in
the general wage determination that
would otherwise apply, and contract
award or bid opening has not yet taken
place. The first of these three
circumstances conforms to the proposed
revision to the definition of ‘‘area’’ in
§ 1.2 that would permit the issuance of
project wage determinations for
multicounty projects where appropriate.
The latter two circumstances reflect the
Department’s existing practice. See
PWRB, Davis-Bacon Wage
Determinations, at 4–5.
The Department also proposed to add
language to § 1.5(b) clarifying that
requests for project wage determinations
may be sent by means other than the
mail, such as email or online
submission, as directed by the
Administrator. Additionally, consistent
with the Department’s current practice,
the Department proposed to add
language to § 1.5(b) requiring that when
requesting a project wage determination
for a project that involves multiple types
of construction, the requesting agency
must attach information indicating the
expected cost breakdown by type of
construction. See PWRB, Davis-Bacon
Wage Determinations, at 5. The
Department also proposed to clarify that
in addition to submitting the
information specified in the regulation,
a party requesting a project wage
determination must submit all other
information requested in the Standard
Form (SF) 308. The Department
proposed to discuss the time required
for processing requests for project wage
determinations in § 1.5(b)(5).
Finally, the Department proposed to
clarify the term ‘‘agency’’ in § 1.5. In
proposed § 1.5(b)(2) (renumbered,
currently § 1.5(b)(1)), which describes
the process for requesting a project wage
determination, the Department
proposed to delete the word ‘‘Federal’’
that precedes ‘‘agency.’’ This proposed
deletion, and the resulting incorporation
of the definition of ‘‘agency’’ from § 1.2,
clarifies that, as already implied
elsewhere in § 1.5, non-Federal agencies
may request project wage
determinations. See, e.g., § 1.5(b)(3)
(proposed § 1.5(b)(4)) (explaining that a
State highway department under the
Federal-Aid Highway Acts may be a
requesting agency).
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The Department received no
substantive comments on these
proposals other than comments
regarding the availability of project
wage determinations for multicounty
projects; these comments were
discussed above in the review of
comments on the definition of ‘‘area’’ in
§ 1.2. The final rule adopts these
changes as proposed, with one nonsubstantive change. The proposed
language in § 1.5(b)(5), to address
processing times for requests for project
wage determinations, inadvertently
duplicated language already found in
§ 1.5(c). Therefore, the final rule
removes existing § 1.5(c) to avoid
duplication.
vi. Section 1.6 Use and Effectiveness
of Wage Determinations
(A) Organizational, Technical and
Clarifying Revisions
(1) Terminology and Organization
The Department proposed to
reorganize, rephrase, and/or renumber
several regulatory provisions and text in
§ 1.6. These proposed revisions
included adding headings to paragraphs
for clarity; changing the order of some
of the paragraphs so that discussions of
general wage determinations precede
discussions of project wage
determinations, reflecting the fact that
general wage determinations are (and
have been for many years) the norm,
whereas project wage determinations
are the exception; adding the word
‘‘project’’ before ‘‘wage determinations’’
in locations where the text refers to
project wage determinations but could
otherwise be read as referring to both
general and project wage
determinations; using the term
‘‘revised’’ wage determination to refer
both to cases where a wage
determination is modified, such as due
to updated CBA rates, and cases where
a wage determination is reissued
entirely (referred to in the current
regulatory text as a ‘‘supersedeas’’ wage
determination), such as after a new
wage survey; consolidating certain
paragraphs that discuss revisions to
wage determinations to eliminate
redundancy and improve clarity;
revising the regulation so that it
references the publication of a general
wage determination (consistent with the
Department’s current practice of
publishing wage determinations online),
rather than publication of notice of the
wage determination (which the
Department previously did in the
Federal Register); and using the term
‘‘issued’’ to refer, collectively, to the
publication of a general wage
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determination or WHD’s provision of a
project wage determination.
The Department did not receive any
comments on these proposed changes to
terminology and the organization of the
section. The final rule therefore adopts
these changes as proposed.
(2) Use of Inactive Wage Determinations
The Department also proposed minor
revisions regarding wage determinations
that are no longer current, referred to in
current regulatory text as ‘‘archived’’
wage determinations. First, the
Department proposed to revise the
regulatory text to instead refer to such
wage determinations as ‘‘inactive’’ to
conform to the terminology currently
used on SAM. Second, the Department
proposed to clarify that there is only one
appropriate use for inactive wage
determinations, namely, when the
contracting agency initially failed to
incorporate the correct wage
determination into the contract and
subsequently must incorporate the
correct wage determination after
contract award or the start of
construction (a procedure that is
discussed in § 1.6(f)). In that
circumstance, even if the wage
determination that should have been
incorporated at the time of the contract
award has since become inactive, it is
still the correct wage determination to
incorporate into the contract. Third, the
Department also proposed that agencies
should notify WHD prior to engaging in
incorporation of an inactive wage
determination, and that agencies may
not incorporate the inactive wage
determination if WHD instructs
otherwise. While the existing regulation
requires the Department to ‘‘approv[e]’’
the use of an inactive wage
determination, the proposed change
would permit the contracting agency to
use an inactive wage determination
under these limited circumstances as
long as it has notified the Administrator
and has not been instructed otherwise.
The proposed change was intended to
ensure that contracting agencies
incorporate omitted wage
determinations promptly rather than
waiting for approval.
The Department did not receive any
comments on the proposed revisions
relating to inactive wage
determinations. Accordingly, the final
rule adopts these changes as proposed.
(3) Incorporation of Multiple Wage
Determinations Into a Contract
The Department also proposed
revisions to § 1.6(b) to clarify when
contracting agencies must incorporate
multiple wage determinations into a
contract. The proposed language stated
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that when a construction contract
includes work in more than one ‘‘area’’
(as the term is defined in § 1.2), and no
multi-county project wage
determination has been obtained (as
contemplated by the proposed revisions
to § 1.2), the applicable wage
determination for each area must be
incorporated into the contract so that all
workers on the project are paid the
wages that prevail in their respective
areas, consistent with the DBA. The
Department also proposed language
stating that when a construction
contract includes work in more than one
‘‘type of construction’’ (as the
Department has proposed to define the
term in § 1.2), the contracting agency
must incorporate the applicable wage
determination for each type of
construction where the total work in
that type of construction is substantial.
This corresponds with the Department’s
longstanding guidance published in
AAM 130 (Mar. 17, 1978) and AAM 131
(July 14, 1978).119 The Department also
proposed to continue interpreting the
meaning of ‘‘substantial’’ in
subregulatory guidance.120 The
Department requested comments on the
above proposals, including potential
ways to improve the standards for when
and how to incorporate multiple wage
determinations into a contract.
The Department did not receive any
comments on the proposed language
relating to the incorporation of multiple
general wage determinations when the
construction contract includes work in
more than one area, other than those
comments regarding the use of multicounty areas that are addressed above in
the discussion of the definition of area
in § 1.2, and therefore the final rule
adopts that language as proposed.
119 AAM 130 states that where a project ‘‘includes
construction items that in themselves would be
otherwise classified, a multiple classification may
be justified if such construction items are a
substantial part of the project . . . . [But] a separate
classification would not apply if such construction
items are merely incidental to the total project to
which they are closely related in function,’’ and
construction is incidental to the overall project.
AAM 130, at 2 n.1. AAM 131 similarly states that
multiple schedules are issued if ‘‘the construction
items are substantial in relation to project cost[s].’’
However, it further explains that ‘‘[o]nly one
schedule is issued if construction items are
‘incidental’ in function to the overall character of
a project . . . and if there is not a substantial
amount of construction in the second category.’’
AAM 131, at 2 (emphasis omitted).
120 Most recently, on Dec. 14, 2020, the
Administrator issued AAM 236 (Dec. 14, 2020),
which states that ‘‘[w]hen a project has construction
items in a different category of construction,
contracting agencies should generally apply
multiple wage determinations when the cost of the
construction exceeds either $2.5 million or 20% of
the total project costs,’’ but that WHD will consider
‘‘exceptional situations’’ on a case-by-case basis.
AAM 236, at 1–2.
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In contrast, the Department received
comments related to the proposed
language on the incorporation of
multiple wage determinations when a
construction contract includes work in
more than one type of construction.
CC&M expressed support for the
Department’s position reflected in AAM
236 (Dec. 14, 2020) that work in another
category of construction is generally
considered substantial when it exceeds
either $2.5 million or 20 percent of total
project costs. See supra note 118. While
not explicitly taking a position on the
proposed language or the existing
subregulatory guidance, the UA
recommended that the Department
provide either regulatory or
subregulatory guidance clarifying when
it is appropriate for work to be classified
as heavy or building in multiple wage
determination situations.
MBA and National Council of State
Housing Agencies (NCSHA) expressed
opposition to the proposed language’s
application to multifamily housing
projects, recommending that the
regulations instead specify that only a
single residential wage determination
should apply to such projects. These
commenters asserted that HUD policy
has long been that only a single
residential wage determination need be
applied to residential projects and that
application of multiple wage
determinations would be unnecessarily
complex because it would require
contractors to track when workers are
performing work in different categories
of construction and pay different rates
accordingly. MBA further asserted that
the use of a single residential rate in
these scenarios would also be consistent
with the Department’s own guidance
and that work in other categories of
construction on residential projects is
actually of a character similar to
residential work because wage rates for
such work are more similar to
residential wage rates, and are therefore
more likely to be included in residential
wage determinations. In the alternative,
MBA argued that if multiple wage
determinations are applied to
multifamily housing projects, the
threshold for substantiality should be
increased to $15 million, because
current HUD standards consider Federal
Housing Administration-insured loans
to be large loans when the loan exceeds
$75 million ($15 million is 20 percent
of $75 million). MBA also suggested $5
million as a potential threshold. Finally,
MBA requested that the Department
provide more details as to the process
that will be used to re-evaluate annually
whether an update to the substantiality
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threshold is warranted, as provided for
in AAM 236.
The final rule adopts the language
relating to the application of multiple
categories of wage determinations as
proposed. As an initial matter, the
Department has decided to continue to
interpret the meaning of ‘‘substantial’’
in its subregulatory guidance in
accordance with its longstanding
practice. With respect to the monetary
threshold in particular, WHD
anticipates issuing an AAM or other
guidance containing additional
information regarding both the
methodology and frequency of updates
to the threshold.
The Department appreciates the UA’s
suggestion that the distinctions between
building and heavy construction should
be more precisely delineated and MBA’s
suggestion that the Department should
more precisely describe the methods
used to update the dollar threshold, and
will consider these suggestions when
developing further guidance on this
issue and when updating the threshold
in the future. The Department also notes
that stakeholders are always welcome to
provide input as to data and methods
that should be used in interpreting the
meaning of ‘‘substantial’’ and updating
the dollar threshold.
While the Department appreciates
MBA’s and NCSHA’s goal of
encouraging the development of
multifamily housing projects, the
Department declines the suggestion to
exempt such projects from the
requirement to incorporate wage
determinations from multiple categories
when a project has a substantial amount
of work in another category of
construction. Although HUD previously
suggested that a single residential wage
determination could be used in such
circumstances, it has since issued
guidance clarifying that multiple wage
determinations should be incorporated
into construction contracts for
multifamily housing when there is a
substantial amount of work in another
category of construction, consistent with
longstanding Department policy and
this rulemaking. See U.S. Dep’t of Hous.
& Urb. Dev., Labor Relations Letter on
Applicability of Department of Labor
Guidance Concerning ‘Projects of a
Similar Character’ (Jan. 15, 2021).121
Moreover, the Department’s existing
guidance does not support an exception;
rather, AAM 130 and 131 apply the
substantiality standard to residential
projects to the same extent as other
types of projects. While MBA contends
in its comment that language in AAM
121 https://www.hud.gov/sites/dfiles/OCHCO/
documents/LR_21-01.pdf.
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130 stating that residential construction
includes ‘‘all incidental items, such as
site work, parking areas, utilities, streets
and sidewalks’’ indicates that a single
residential wage determination may be
applied to any such work related to a
residential project, AAM 130 similarly
describes ‘‘incidental grading, utilities,
and paving’’ in building construction
projects and states that highway
construction excludes projects
‘‘incidental to residential or building
construction.’’ These references to
‘‘incidental’’ work in AAM 130 (and
similar references in AAM 131 and the
Manual of Operations) reflect the policy
explained in those documents that a
single wage determination for a project
involving more than one type of
construction is only appropriate when
construction items in the non-primary
category are ‘‘ ‘incidental’ in function,’’
‘‘and . . . there is not a substantial
amount of construction in the second
category.’’ AAM 131, at 2; see also AAM
130, at 2 n.1; Manual of Operations, at
29. Thus, although, as AAM 130 and the
Manual of Operations suggest, site work
and the construction of parking areas,
utilities, streets, and sidewalks are often
incidental in function to residential
construction, these construction items
may or may not be substantial in
relation to a particular project’s overall
cost. Nothing in those guidance
documents suggests that residential
projects are to be treated any differently
from other types of projects in this
regard or that substantial work in other
categories should be assigned a
residential wage determination.122
The Department also does not agree
with MBA’s contention that the data on
the rates paid to workers who perform
work in another category of
construction, where work in that other
category of construction is substantial,
are likely to be included in the
applicable residential wage
determination. To the contrary, when
wage data submitted to the Department
in connection with a Davis-Bacon wage
survey reflects that a project in one
category includes substantial
construction in another category, the
Department excludes the wage data for
the work in the second category from
122 Similarly, the absence of a specific example of
a residential project in the examples of projects
with multiple wage determinations in AAM 130
and AAM 131 in no way indicates that residential
construction projects cannot have a substantial
amount of work in another category of construction.
The examples listed in AAM 130 and 131 were not
intended to be an exclusive list of all possible
situations in which a project might require the
application of multiple wage determinations. AAM
131 plainly states that beyond the listed examples,
‘‘the same principles are applied to other
categories.’’
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the dataset that will be used to establish
prevailing wage rates for the primary
category of construction, including in
surveys for residential construction.
Moreover, MBA has not provided any
data to support its assertion that
workers who perform the types of work
in other categories of construction
commonly found on residential projects
are typically paid residential wage rates
rather than the wage rates generally
applicable to those categories of
construction. Similarly, MBA has not
provided any data suggesting that the
local wages in other categories of
construction are somehow more
shielded from the potential impact on
wages of a substantial amount of work
in that category of construction on
residential projects than on other types
of projects.
Finally, the Department disagrees that
any added complexity from the
application of multiple wage
determinations to multifamily housing
projects justifies an exception. DavisBacon contractors across all types of
projects are required to track the hours
worked and to pay the corresponding
prevailing wage rates due. These rates
necessarily vary depending on the work
performed, because workers work in
different classifications and sometimes
in different construction categories. The
‘‘substantiality’’ threshold for work in a
second category of construction seeks to
balance the benefits of applying the
appropriate wage determinations—
including the preservation of locally
prevailing wages—against any
associated administrative burden, by
requiring that additional wage
determinations be incorporated only
where the work in the non-primary
category is of a sufficient magnitude.
There is no indication that this balance
should be any different for multifamily
housing projects.
For these reasons, the final rule
adopts the language relating to the
application of multiple categories of
wage determinations as proposed and
declines to create an exception for
multifamily housing contractors.
(4) Clarification of Responsibilities of
Contracting Agencies, Contractors, and
Subcontractors
The Department also proposed to add
language to § 1.6(b) clarifying and
reinforcing the responsibilities of
contracting agencies, contractors, and
subcontractors with regard to wage
determinations. Specifically, the
Department proposed to clarify in
§ 1.6(b)(1) that contracting agencies are
responsible for making the initial
determination of the appropriate wage
determination(s) for a project. In
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§ 1.6(b)(2), the Department proposed to
clarify that contractors and
subcontractors have an affirmative
obligation to ensure that wages are paid
to laborers and mechanics in
compliance with the DBRA labor
standards.
The Department did not receive any
comments on these proposed revisions,
and therefore the final rule adopts these
changes as proposed.
(5) Consideration of Area Practice
The Department also proposed to
revise language in § 1.6(b) that currently
states that the Administrator ‘‘shall give
foremost consideration to area practice’’
in resolving questions about ‘‘wage rate
schedules.’’ In the Department’s
experience, this language has created
unnecessary confusion because
stakeholders have at times interpreted it
as precluding the Administrator from
considering factors other than area
practice when resolving questions about
wage determinations. Specifically, the
Department has long recognized that
when ‘‘it is clear from the nature of the
project itself in a construction sense that
it is to be categorized’’ as either
building, residential, heavy, or highway
construction, ‘‘it is not necessary to
resort to an area practice survey’’ to
determine the proper category of
construction. AAM 130, at 2; see also
AAM 131, at 1 (‘‘[A]rea practice
regarding wages paid will be taken into
consideration together with other
factors,’’ when ‘‘the nature of the project
in a construction sense is not clear.’’);
Chastleton Apartments, WAB No. 84–
09, 1984 WL 161751, at *4 (Dec. 11,
1984) (because the ‘‘character of the
structure in a construction sense
dictates its characterization for DavisBacon wage purposes,’’ where there was
a substantial amount of rehabilitation
work being done on a project similar to
a commercial building in a construction
sense, it was ‘‘not necessary to
determine whether there [was] an
industry practice to recognize’’ the work
as residential construction). The
proposed rule explained that the
regulatory directive to give ‘‘foremost
consideration to area practice’’ in
determining which wage determination
to apply to a project arguably is in
tension with the Department’s
longstanding position and has resulted
in stakeholders contending on occasion
that WHD or a contracting agency must
in every instance conduct an exhaustive
review of local area practice as to how
work is classified, even if the nature of
the project in a construction sense is
clear. The proposed language would
resolve this perceived inconsistency and
would streamline determinations
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regarding construction types by making
clear that while the Administrator
should continue considering area
practice, the Administrator may
consider other relevant factors,
particularly the nature of the project in
a construction sense. This proposed
regulatory revision also would better
align the Department’s regulations with
the FAR, which does not call for
‘‘foremost consideration’’ to be given to
area practice in all circumstances, but
rather provides, consistent with AAMs
130 and 131, that ‘‘[w]hen the nature of
a project is not clear, it is necessary to
look at additional factors, with primary
consideration given to locally
established area practices.’’ 48 CFR
22.404–2(c)(5).
The Department received one
comment on this proposal. VDOT
recommended that the Department
retain the language in the existing
regulation, expressing concern that if
area practice is not the primary factor to
be considered when determining what
wage determinations are to be applied to
a project, the Department could
determine that a project is one type of
construction even if area practice is to
pay wage rates from another category of
construction. VDOT opined that this
would be contrary to the purpose of the
DBA, which is to establish prevailing
wage rates based on actual wage rates
that contractors pay for a type of
construction project.
While the Department recognizes
VDOT’s concerns, it does not believe
they warrant deviating from the
proposed rule. The Davis-Bacon labor
standards require that covered workers
receive at least the locally prevailing
wages that are paid on projects of a
similar character. As explained above,
where the character of a project in a
construction sense is clear, it is not
necessary or appropriate to survey area
practice to determine what category of
construction applies; the applicable
category is based on the nature of
construction even if area practice is to
pay wage rates associated with a
different category. See 2900 Van Ness
Street, WAB No. 76–11, 1977 WL 24827,
at *2 (Jan. 27, 1977) (‘‘The test of
whether a project is of a character
similar to another project refers to the
nature of the project itself in a
construction sense, not to whether
union or non-union wages are paid or
whether union or non-union workers
are employed.’’); Lower Potomac
Pollution Control Plant, WAB No. 77–
20, 1977 WL 24840, at *1 (Sept. 30,
1977) (‘‘When it is clear from the nature
of the project itself in a construction
sense that it is to be categorized as
either building, heavy or highway
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construction . . . [t]he area practice
with respect to wages could not convert
what is clearly one category of
construction into another category.’’). A
highway cannot be a building, for
example, regardless of how similar the
wages paid on highway projects in a
locality may be to the wages paid on
building projects. The Department
believes that the revision to the ‘‘area
practice’’ language better reflects that
principle by eliminating any
implication that area practice could
somehow outweigh the clear character
of a project.
In contrast, the revision reflects that
when it is unclear how a project should
be categorized, while the Department
considers area practice as to wage rates
to assist in determining that project’s
category, area practice is not the only
relevant information. As indicated in
AAM 131, ‘‘area practice regarding
wages paid will be taken into
consideration together with other
factors’’ when there is a genuine
question as to the correct category of
construction for a project (emphasis
added). See also Tex. Heavy-Highway
Branch, WAB No. 77–23, 1977 WL
24841, at *4 (Dec. 30, 1977) (‘‘Wages,
however, are only one indication. It is
also necessary to look at other
characteristics of the project, including
the construction techniques, the
material and equipment being used on
the project, the type of skills called for
on the project work and other similar
factors which would indicate the proper
category of construction.’’). The
proposed language is consistent with
these principles and simply clarifies
that area practice information is relevant
to determining the type of construction
project involved only when there is a
genuine question as to the applicable
category of construction, and that other
relevant information is not excluded
from consideration when making such a
determination. The final rule therefore
adopts the language as proposed.
(6) Section 1.6(e) and (g)
In § 1.6(e), the Department proposed
to clarify that if, prior to contract award
(or, as appropriate, prior to the start of
construction), the Administrator
provides written notice that the bidding
documents or solicitation included the
wrong wage determination or schedule,
or that an included wage determination
was withdrawn by the Department as a
result of an ARB decision, the wage
determination may not be used for the
contract, regardless of whether bid
opening (or initial endorsement or the
signing of a housing assistance
payments contract) has occurred.
Current regulatory text states that under
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such circumstances, notice of such
errors is ‘‘effective immediately’’ but
does not explain the consequences of
such effect. The proposed language is
consistent with the Department’s
current practice and guidance. See
Manual of Operations, at 35.
The Department did not receive any
comments on these proposed revisions,
and therefore the final rule adopts the
changes as proposed, except that in a
technical correction, the Department has
moved certain language from § 1.6(e)(2)
into § 1.6(e), as the language was
intended to encompass the entire
paragraph.
In § 1.6(g), the Department proposed a
number of additional clarifying
revisions. It proposed to clarify that
under the Related Acts, if Federal
funding or assistance is not approved
prior to contract award (or the beginning
of construction where there is no
contract award), the applicable wage
determination must be incorporated
retroactive to the date of the contract
award or the beginning of construction.
The Department also proposed to delete
language indicating that a wage
determination must be ‘‘requested,’’ as
such language appears to contemplate a
project wage determination, which in
most situations will not be necessary as
a general wage determination will
apply. The Department also proposed to
revise § 1.6(g) to clarify that it is the
head of the applicable Federal agency
who must request any waiver of the
requirement that a wage determination
provided under such circumstances be
retroactive to the date of the contract
award or the beginning of construction.
The current version of § 1.6(g) uses the
term ‘‘agency’’ and is therefore
ambiguous as to whether it refers to the
Federal agency providing the funding or
assistance or the state or local agency
receiving it. The proposed clarification
that this term refers to Federal agencies
was intended to reflect both the
Department’s current practice and its
belief that it is most appropriate for the
relevant Federal agency, rather than a
State or local agency, to bear these
responsibilities, including assessing, as
part of the waiver request, whether nonretroactivity would be necessary and
proper in the public interest based on
all relevant considerations.
The Department did not receive any
comments on these proposed revisions,
and therefore the final rule adopts these
changes as proposed.
(B) Requirement To Incorporate Most
Recent Wage Determinations Into
Certain Ongoing Contracts
The Department’s longstanding
position has been to require that
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contracts and bid solicitations contain
the most recently issued revision to the
applicable wage determination(s) to the
extent that such a requirement does not
cause undue disruption to the
contracting process. See 47 FR 23644,
23646 (May 28, 1982); U.S. Army, ARB
No. 96–133, 1997 WL 399373, at *6
(July 17, 1997) (‘‘The only legitimate
reason for not including the most
recently issued wage determination in a
contract is based upon disruption of the
procurement process.’’). Under the
current regulations, a wage
determination is generally applicable for
the duration of a contract once
incorporated. See 29 CFR 1.6(c)(2)(ii),
1.6(c)(3)(vi). For clarity, the NPRM
proposed to add language to § 1.6(a) to
state this affirmative principle.
The Department also proposed to add
a new paragraph, § 1.6(c)(2)(iii), to
clarify two circumstances where the
principle that an incorporated wage
determination remains applicable for
the life of a contract does not apply.
First, the Department proposed to
explain that the most recent version of
any applicable wage determination(s)
must be incorporated when a contract or
order is changed to include additional,
substantial construction, alteration, and/
or repair work not within the scope of
work of the original contract or order or
to require the contractor to perform
work for an additional time period not
originally obligated, including where an
agency exercises an option provision to
unilaterally extend the term of a
contract. The proposed change was
consistent with the Department’s
guidance, case law, and historical
practice, under which such
modifications are considered new
contracts. See U.S. Army, 1997 WL
399373, at *6 (noting that the
Department has consistently ‘‘required
that new DBA wage determinations be
incorporated . . . when contracts are
modified beyond the obligations of the
original contract’’); Iowa Dep’t of
Transp., WAB No. 94–11, 1994 WL
764106, at *5 (Oct. 7, 1994) (‘‘A contract
that has been ‘substantially’ modified
must be treated as a ‘new’ contract in
which the most recently issued wage
determination is applied.’’); AAM 157
(explaining that exercising an option
‘‘requires a contractor to perform work
for a period of time for which it would
not have been obligated . . . under the
terms of the original contract,’’ and as
such, ‘‘once the option . . . is exercised,
the additional period of performance
becomes a new contract’’). The
Department proposed that under these
circumstances, the most recent version
of any wage determination(s) must be
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incorporated as of the date of the change
or, where applicable, the date the
agency exercises its option to extend the
contract’s term. These circumstances do
not include situations where the
contractor is simply given additional
time to complete its original
commitment or where the additional
construction, alteration, and/or repair
work in the modification is merely
incidental.
Additionally, the Department
proposed a revision to address modern
contracting methods that frequently
involve a contractor agreeing to perform
construction as the need arises over an
extended time period, with the quantity
and timing of the construction not
known when the contract is awarded.123
Examples of such contracts would
include, but are not limited to: a
multiyear indefinite-delivery-indefinitequantity (IDIQ) contract to perform
repairs to a Federal facility when
needed; a long-term contract to operate
and maintain part or all of a facility,
including repairs and renovations as
needed; 124 or a schedule contract or
BPA whereby a contractor enters into an
agreement with a Federal agency to
provide certain products or services
(either of which may involve work
subject to Davis-Bacon coverage, such as
installation) or construction at agreedupon prices to various agencies or other
government entities, who can order
from the schedule at any time during
the contract. The extent of the required
construction, the time, and even the
place where the work will be performed
may be unclear at the time such
contracts are awarded.
Particularly when such contracts are
lengthy, using an outdated wage
determination from the time of the
underlying contract award instead of the
most current wage determination is a
departure from the intent of the DavisBacon labor standards because it does
not sufficiently ensure that workers are
paid prevailing wages. Additionally, in
the Department’s experience, agencies
are sometimes inconsistent as to how
they incorporate wage determination
revisions into these types of contracts.
Some agencies do so every time
additional Davis-Bacon work is
obligated, others do so annually, others
only incorporate applicable wage
determinations at the time the original,
123 Depending on the circumstances, these types
of contracts may be principally for services and
therefore are subject to the SCA, but contain
substantial segregable work that is covered by the
DBA. See 29 CFR 4.116(c)(2).
124 The Department of Defense, for example,
enters into such arrangements pursuant to the
Military Housing Privatization Initiative, 10 U.S.C.
2871 et seq.
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underlying contract is awarded, and
sometimes no wage determination is
incorporated at all. This inconsistency
can prevent the payment of prevailing
wages to workers and can disrupt the
contracting process.
Accordingly, the Department
proposed to require, for these types of
contracts, that contracting agencies
incorporate the most up-to-date
applicable wage determination(s)
annually on each anniversary date of a
contract award or, where there is no
contract, on each anniversary date of the
start of construction, or another similar
anniversary date where the agency has
sought and received prior approval from
the Department for the alternative date.
This proposal was consistent with the
rules governing wage determinations
under the SCA, which require that the
contracting agency obtain a wage
determination prior to the ‘‘[a]nnual
anniversary date of a multiyear contract
subject to annual fiscal appropriations
of the Congress.’’ See 29 CFR
4.4(a)(1)(v). The Department further
proposed that when any construction
work under such a contract is obligated,
the most up-to-date wage
determination(s) incorporated into the
underlying contract be included in each
task order, purchase order, or any other
method used to direct performance.
Once the applicable wage determination
revision is included in such an order,
that revision would generally apply to
the order until the construction items
called for by that order are completed.
With this proposal, the Department
intended that a wage determination
correctly incorporated into such an
order would not need to be updated
even if the duration of the order extends
past the next anniversary date of the
master contract (when the wage
determination in the master contract is
updated), unless the order itself
involves the exercise of an option or is
changed to include additional,
substantial construction, alteration, and/
or repair work not within the original
scope of work, in accordance with
proposed § 1.6(c)(2)(iii)(A). The NPRM
explained that consistent with this
discussion, if an option is exercised for
one of these types of contracts, the most
recent version of any wage
determination(s) would still need to be
incorporated as of the date the agency
exercises its option to extend the
contract’s term (subject to the
exceptions set forth in proposed
§ 1.6(c)(2)(ii)), even if that date did not
coincide with the anniversary date of
the contract.
By proposing these revisions, the
Department sought to ensure that
workers are being paid prevailing wages
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within the meaning of the Act; provide
certainty and predictability to agencies
and contractors as to when, and how
frequently, wage rates in these types of
contracts can be expected to change;
and bring consistency to agencies’
application of the Davis-Bacon labor
standards. The Department also
proposed to include language noting
that contracting and ordering agencies
remain responsible for ensuring that the
applicable updated wage
determination(s) are included in task
orders, purchase orders, or other similar
contract instruments issued under the
master contract.
After consideration of the comments
received, for the reasons detailed below,
the final rule adopts these revisions as
proposed with minor revisions and
clarifications. The Department received
several comments generally supporting
the proposed changes. The Minnesota
State Building and Construction Trades
Council stated that these changes would
improve the efficiency of enforcement
and help make sure that prevailing
wages paid to workers remain current.
III–FFC stated that the proposed
changes reflected existing guidance,
case law, and historical practice, were
consistent with the SCA requirements,
and would better ensure workers are
paid current prevailing wage rates on
Davis-Bacon projects, consistent with
the statutory purpose. The UA indicated
that it strongly supported regulatory
language that would ensure that wage
determinations in such contracts remain
up-to-date, but suggested a slight change
to the proposed language to clarify that
the requirement applies to both the
unilateral exercise of options and the
mutual exercise of options. The
Department appreciates the UA raising
this issue, as the intent was not to
exclude mutually exercised options
from the obligation to update wage
determinations, but rather to make clear
that the obligation applies even when
the contracting agency exercises a
unilateral option. The proposed
language has therefore been adjusted to
clarify that the requirement applies
whenever an option is exercised
generally.
A few commenters opposed the
proposed change or alternatively
suggested revisions. FTBA stated that
contracting agencies and contractors
generally cannot know at the bidding
stage whether a contract is going to be
extended or amended or what the
prevailing wage rates will be when and
if the contract is amended, further
noting that many contracts are now
being extended due to global supply
issues beyond either the contracting
agency or the contractor’s control. FTBA
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stated that if the proposed change is
retained, the Department should add a
price adjustment clause to require that
contractors are reimbursed for
additional costs resulting from the
incorporation of updated wage
determinations into their contracts or
funding agreements. CC&M suggested
that the price adjustment should be a
150 percent increase change order.
MnDOT argued that the proposed
changes would place an additional
administrative burden on contracting
agencies, requiring change orders,
changes to contract terms, and increases
or decreases in contract funding, and
would probably impact contractors’
bids. MnDOT suggested that rather than
requiring an annual update of wage
determinations for multiyear IDIQ
contracts, the Department instead
require contracting agencies to annually
increase the applicable prevailing wage
rates for each classification by a
percentage (e.g., 2 percent of base and
fringe rates) to allow contractors and
contracting agencies to predict the
potential increases at the time of
bidding.
As an initial matter, the Department
does not believe that these changes will
affect contracts that are simply extended
due to supply chain issues or other
circumstances that interfere with the
timely completion of a contract. Such
circumstances expressly fall within the
events described in the rule that do not
require the incorporation of a new wage
determination, namely, situations where
the contractor is simply given additional
time to complete the construction that
the contractor committed to perform at
the time of the initial award.
Regarding the comments on how the
proposed changes will affect pricing and
cost, the Department recognizes that
contracting agencies and contractors
may not know at the bidding stage or
even at initial contract award whether
that contract will be extended or
amended, or, in the case of IDIQ and
other similar contracts, how much work
will ultimately be requested by the
agency and performed by the contractor.
However, the Department believes that
issues related to budgeting, pricing, and
costs associated with these types of
contracts can be addressed between the
contractor and the agency as part of the
contracting process. For example, where
a contract is amended to require the
contractor to perform additional
construction work or to perform work
for an additional time period not
originally obligated, agencies and
contractors can come to an agreement
about what additional compensation the
contractor will receive for this
additional work and will be able to take
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the updated wage determination into
account during such negotiations.
Where a contract includes option
clauses or involves construction of an
unknown amount and at unknown
times over an extended period, this will
be clear when the contract is solicited
and at the time of contract award,
allowing for the inclusion of contractual
provisions for any increases to the
compensation due to the contractor to
reflect updated wage determinations.
See, e.g., 48 CFR 52.222–32 (price
adjustment clause applicable to FARbased DBA-covered contracts, providing
that the contracting officer will ‘‘adjust
the contract price or contract unit price
labor rates to reflect’’ the contractor’s
‘‘actual increase . . . in wages and
fringe benefits to the extent that the
increase is made to comply with . . .
[i]ncorporation of the Department of
Labor’s Construction Wage Rate
Requirements wage determination
applicable at the exercise of an option
to extend the term of the contract’’).125
The Department similarly appreciates
MnDOT’s concern about the logistics of
inserting wage determinations in
multiyear IDIQ contracts annually.
However, the Department declines to
adopt MnDOT’s alternative approach of
an across-the-board percentage increase.
While the Department has provided in
this rule for the periodic adjustment of
out-of-date non-collectively bargained
wage rates during the interval between
wage surveys, the Department does not
believe that creating a separate
mechanism for wage rate increases of
the type proposed by MnDOT would be
necessary or appropriate given that the
Department will have already published
revised wage determinations that are
available to be incorporated into such
contracts. Additionally, the
Department’s position is that
contracting agencies can include
language in agency procurement
policies, bid documents, and contract
specifications that would give both
contractors and contracting agencies
notice, and an expectation from the time
of bid solicitation planning, about the
anticipated timing of updated wage
determinations in multiyear IDIQ
contracts and the likely potential for
DBRA prevailing wage increases, even
125 While the Department does not have
information as to the universe of existing contracts
to which this revision will apply, many such
contracts may well have mechanisms requiring the
contracting agency to compensate the contractor for
increases in labor costs over time generally. See,
e.g., id. Where outdated wage determination rates
have been applied, it is similarly difficult to
quantify the cost differential between updated
prevailing wage wages and wage rate increases that
contractors have already made due to labor market
factors.
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though the precise amount of those
increases will not be known at the
outset. Finally, contracting agencies
have long administered a similar
requirement for SCA contracts, see 29
CFR 4.4(c)(5), and the Department
believes that it will be similarly feasible
to do so for DBRA-covered construction
contracts.
Naval Facilities Engineering
Command Southwest (NAVFAC SW)
did not comment on the proposed
changes to § 1.6(c)(2)(iii) but proposed
an additional related change to
§ 1.6(c)(2)(ii). Specifically, NAVFAC SW
suggested that the provision applicable
to sealed 126 bidding procedures,
§ 1.6(c)(2)(ii)(D) —which permits
contracting agencies to decline to
incorporate modifications published
fewer than 10 calendar days before the
opening of bids when there is not
sufficient time available before bid
opening to notify bidders of the
modification—should be expanded to
include negotiated contracts, which do
not involve sealed bidding. While
negotiated contracts are currently
required to include the most recent
applicable wage determination
modifications up to the date of contract
award, NAVFAC SW proposed
permitting agencies to not include a
wage determination modification issued
fewer than 10 days prior to award date,
where the agency finds that there is not
a reasonable time still available before
contract award to notify all offerors that
have not been eliminated from the
competition and provide them a
reasonable opportunity to amend their
proposals. NAVFAC SW argued that
incorporating wage determination
modifications shortly before the award
date is administratively difficult, takes
additional time and resources, and may
delay award of the contract, and that
these costs outweigh the benefits of
what may be only minimal changes to
wage rates in the updated wage
determination. An individual
commenter also made a similar request.
The Department appreciates that the
incorporation of an updated wage
determination within a few days of
contract award may be challenging.
However, as the Department did not
propose a change to the provisions
relating to the required timeline for the
pre-award incorporation of applicable
wage determinations into contracts, the
Department believes that such a change
would be beyond the scope of this
rulemaking. The Department will,
126 The current regulation refers to ‘‘competitive’’
bidding procedures in this provision; in a nonsubstantive change, this rule changes the term to
‘‘sealed.’’
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however, consider these comments in
future rulemakings, and welcomes the
opportunity to discuss the points raised
by NAVFAC SW with other
stakeholders.
MBA proposed a different change to
§ 1.6(c)(2)(ii). This provision currently
located at § 1.6(c)(3)(ii), states that for
projects assisted under the National
Housing Act, a revised wage
determination must be applied to the
project if it is issued prior to the
beginning of construction or the date the
mortgage is initially endorsed,
whichever occurs first. MBA suggested
that this provision should be changed to
instead only require the incorporation of
a revised wage determination when it is
published before the date that the
developer submits an application for a
firm commitment, or the start of
construction, whichever comes first.
MBA stated that such updates can
trigger a need to revisit previously
completed procedural steps, both for the
developer and for HUD, resulting in
potential disruption for the affected
multifamily housing project. MBA
stated that this proposed change would
reduce the risk that the need to
incorporate a revised wage
determination would inhibit the
successful completion of multifamily
housing projects, though it also
acknowledged that changes in the
applicable wage determination would
still be disruptive prior to the
submission of an application. NAHB
and NCHSA also critiqued what they
described as disruptive cost changes
due to revised wage determinations that
are assigned late in the application
process.
The Department finds that a change to
the provisions in § 1.6(c)(2)(ii) for the
initial incorporation of wage
determinations into contracts would be
beyond the scope of this rulemaking and
does not believe such a change would
be appropriate. It is well established
that a prevailing wage should be a
current wage. As a result, the
regulations specifying the circumstances
under which the most current wage
determination need not be applied
generally reflect the principle that only
disruption of the contracting process
justifies a failure to include the most
recent prevailing wages as of, typically,
the date of contract award or bid
opening. See, e.g., Modernization of the
John F. Kennedy Fed. Bldg, WAB No.
94–09, 1994 WL 574115 (Aug. 19, 1994);
Iowa Dep’t of Transp., WAB No. 94–11,
1994 WL 764106. As such, in both the
current and proposed regulations, the
Department has sought to strike a
balance between requiring the payment
of current, prevailing wages to the
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57571
extent feasible while also minimizing
disruption in the contracting process.
To that end, the regulations’ use of the
initial endorsement date for certain
housing contracts already reflects an
earlier lock-in date for the application of
wage determination modifications than
the date of contract award or the bid
opening date, which are the lock-in
dates that apply to most other types of
contracts. Pushing this date back even
further to the time when the housing
developer first applies for Related Act
funding would undermine worker
protections by using even more
outdated wage rates for DBRA-covered
laborers and mechanics on these
projects. In addition, it would not be
administratively practical to use so early
a date. Initial endorsement occurs when
all parties have agreed upon the design
and costs. Prior to initial endorsement,
and certainly at so early a point as the
developer’s application for a firm
commitment to funding, the project
design and costs may undergo
significant alterations, resulting in
changes to the classifications and
potentially even to the categories of
wage determinations that may be
applicable.
It would be impractical to lock in the
modification of a wage determination at
a time when the applicable wage
determination itself may yet be subject
to change. It would also be
inappropriate to lock in a particular
wage determination before it is even
clear whether the project will entail
substantial construction in multiple
categories of construction, and hence
require the application of multiple wage
determinations.
The Department also made additional
minor revisions to the proposed
regulatory text. After further
consideration, the Department has
decided to revise the scope of the
potential exceptions to this process that
contracting agencies may request. As
proposed, the regulatory language
would only permit agencies to request
the Department’s approval for an
alternative anniversary date for the
updating of wage determinations.
However, the requirement that wage
determinations be updated annually for
certain contracts applies to a wide
variety of contracting mechanisms, and
input from Federal contracting agencies
suggests that it would be helpful to
allow the updating process to be
tailored in appropriate circumstances to
the specific contracting mechanisms.
Accordingly, the Department has
revised this language to permit agencies
to request the Department’s prior
written approval for alternative
updating processes, where such an
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exception is necessary and proper in the
public interest or to prevent injustice
and undue hardship. After further
consideration, the Department also
clarified the language stating that the
contracting and ordering agencies must
include the updated wage determination
revision into any task orders, purchase
orders, or other similar contract
instruments issued under these master
contracts. To prevent any confusion, the
revised language now clearly states that
the contracting agency is responsible for
ensuring that the master contract directs
the ordering agency to include the
applicable updated wage determination
in such task orders, purchase orders, or
other similar contract instrument while
the ordering agency must accordingly
incorporate the applicable update wage
determinations into such orders.
In addition, the Department added
language further clarifying whether
wage determination revisions, once
properly incorporated into a task order,
purchase order, or similar contract
instrument from the master contract,
must be further updated. Once a wage
determination revision has been
properly incorporated into such an
order, it will generally remain
applicable for the duration of the order
without requiring further updates, in
accordance with the proposed language
stating that the annually updated wage
determination revision will apply to any
construction work that begins or is
obligated under such a contract during
the 12 months following that
anniversary date until such construction
work is completed, even if the
completion of that work extends beyond
the 12-month period. The revised
language notes this general principle, as
well as two exceptions. The first
exception notes that if such an order is
changed to include additional,
substantial construction, alteration, and/
or repair work not within the scope of
work, the wage determination must be
updated as set forth in paragraph
(c)(2)(iii)(A). The second exception
states that if the task order, purchase
order, or similar contract instrument
itself includes the exercise of options,
the updated applicable wage
determination revision, as incorporated
into the master contract, must be
included when an option is exercised
on such an order.
The Department also provided
additional clarification regarding master
contracts that both call for construction,
alteration, and/or repair work over a
period of time that is not tied to the
completion of any particular project and
also include the exercise of options. As
explained in the NPRM and discussed
above in this section, contracts calling
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for construction, alteration, and/or
repair work over a period of time that
is not tied to the completion of any
particular project may also include the
exercise of options, and if so, the wage
determination must be updated when
the option is exercised. The Department
revised the regulatory text to also
include this requirement, while also
clarifying that where this type of
contract has extended base or option
periods, wage determinations must still
be incorporated on an annual basis in
years where an option is not exercised.
Accordingly, for the foregoing
reasons, the final rule adopts the
changes to § 1.6(c)(2) as proposed with
the two minor clarifications discussed.
(C) 29 CFR 1.6(c)(1)—Periodic
Adjustments
The Department proposed to add a
provision to 29 CFR 1.6(c)(1) to
expressly provide a mechanism to
regularly update certain noncollectively bargained prevailing wage
rates. The Department proposed that
such rates (both base hourly wages and
fringe benefits) would be updated
between surveys so that they do not
become out-of-date and fall behind wage
rates in the area.
(1) Background
Based on the data that it receives
through its prevailing wage survey
program, WHD generally publishes two
types of prevailing wage rates in the
Davis-Bacon wage determinations that it
issues: (1) modal rates, which under the
current regulations must be paid to a
majority of workers in a particular
classification, and (2) weighted average
rates, which under the current
regulations are published whenever the
wage data received by WHD reflects that
no single wage rate was paid to a
majority of workers in the classification.
See 29 CFR 1.2(a)(1).
Under the current regulations, modal
wage rates often reflect collectively
bargained wage rates. When a CBA rate
prevails on a general wage
determination, WHD updates that
prevailing wage rate based on periodic
wage and fringe benefit increases in the
CBA. Manual of Operations at 74–75;
see also Mistick Constr., ARB No. 04–
051, 2006 WL 861357, at *7 n.4.127
However, when the prevailing wage is
set through the weighted average
method based on non-collectively
bargained rates or a mix of collectively
bargained rates and non-collectively
127 WHD similarly updates weighted average rates
based entirely on collectively bargained rates
(currently designated as ‘‘UAVG’’ rates) using
periodic wage and fringe benefit increases in the
CBAs.
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bargained rates, or when a noncollectively bargained rate prevails,
such wage rates (currently designated as
‘‘SU’’ rates) on general wage
determinations are not updated between
surveys and therefore can become outof-date. The Department’s proposal
would expand WHD’s current practice
of updating collectively bargained
prevailing wage rates between surveys
to include updating non-collectively
bargained prevailing wage rates.
In the NPRM, the Department
emphasized that WHD’s goal is to
conduct surveys in each area every 3
years in order to avoid prevailing wage
rates becoming out-of-date. WHD also
noted that because of the resourceintensive nature of the wage survey
process and the vast number of survey
areas, many years can pass between
surveys conducted in any particular
area. The 2011 GAO Report found that,
as of 2010, while 36 percent of
‘‘nonunion-prevailing rates’’ 128 were 3
years old or less, almost 46 percent of
these rates were 10 or more years old.
2011 GAO Report, at 18.129 As a result
of lengthy intervals between DavisBacon surveys, the real value of the
effectively frozen rates erodes as
compensation in the construction
industry and the cost-of-living rise. The
resulting decline in the real value of
prevailing wage rates may adversely
affect construction workers whom the
DBA was intended to protect. See
Coutu, 450 U.S. at 771 (‘‘The Court’s
previous opinions have recognized that
‘[o]n its face, the Act is a minimum
wage law designed for the benefit of
construction workers.’ ’’ (citations
omitted)).
Program stakeholders have previously
raised this issue with the GAO.
According to several union and
contractor officials interviewed in
connection with the GAO’s 2011 report,
the age of the Davis-Bacon ‘‘nonunionprevailing rates’’ means they often do
not reflect actual prevailing wages in a
particular area. 2011 GAO Report, at
18.130 As a result, the stakeholders said
it is ‘‘more difficult for both union and
nonunion contractors to successfully
bid on federal projects because they
cannot recruit workers with artificially
low wages but risk losing contracts if
their bids reflect more realistic wages.’’
128 ‘‘Nonunion-prevailing rates,’’ as used in the
GAO report, is a misnomer, as it refers to weighted
average rates that, as noted, are published whenever
the same wage rate is not paid to a majority of
workers in the classification, including when much
or even most of the data reflects union wages, just
not that the same union wage was paid to a majority
of workers in the classification.
129 See note 10, supra.
130 See note 10, supra.
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Id. Regularly updating these rates would
alleviate this situation and better protect
workers’ wage rates. The Department
anticipates that updated rates would
also better reflect construction industry
compensation in communities where
federally funded construction is
occurring.
The Department explained in the
NPRM that the proposal to update noncollectively bargained rates is consistent
with, and builds upon, the current
regulatory text at 29 CFR 1.6(c)(1),
which provides that wage
determinations ‘‘may be modified from
time to time to keep them current.’’ This
regulatory provision provides legal
authority for updating wage rates, and
has been used as a basis for updating
collectively bargained prevailing wage
rates based on CBA submissions
between surveys. See Manual of
Operations at 74–75. The Department
proposed to extend the practice of
updating prevailing wage rates to
include non-collectively bargained rates
based on ECI data. The Department
stated its belief that ‘‘chang[ed]
circumstances’’—including an increase
in the use of weighted average rates—
and the lack of an express mechanism
to update non-collectively bargained
rates between surveys under the existing
regulations support this proposed
‘‘extension of current regulation[s]’’ to
better effectuate the DBRA’s purpose.
State Farm, 463 U.S. at 42; see also In
re Permian Basin Area Rate Cases, 390
U.S. 747, 780 (1968) (explaining the
Court was ‘‘unwilling to prohibit
administrative action imperative for the
achievement of an agency’s ultimate
purposes’’ absent ‘‘compelling evidence
that such was Congress’ intention’’).
The proposal also is consistent with
the Department’s broad authority under
the Act to ‘‘establish the method to be
used’’ to determine DBA prevailing
wage rates. Donovan, 712 F.2d at 616.
The Department stated its belief that the
new periodic adjustment proposal will
‘‘on balance result in a closer
approximation of the prevailing wage’’
for these rates and therefore is an
appropriate extension of the current
regulation. Id. at 630 (citing Am.
Trucking Ass’ns v. Atchison, T. & S.F.
Ry., 387 U.S. 397, 416 (1967)).
The Department emphasized that this
proposed new provision is particularly
appropriate because it seeks to curb a
practice the DBA and Related Acts were
enacted to prevent: payment of
‘‘substandard’’ wages (here, out-of-date
non-collectively bargained prevailing
wage rates) on covered construction
projects that are less than current wages
paid for similar work in the locality.
Regularly increasing non-collectively
bargained prevailing wage rates that are
more than 3 years old would be
consistent with the DBA’s purpose of
protecting local wage standards by
updating significantly out-of-date noncollectively bargained prevailing wage
rates that have fallen behind currently
prevailing local rates. The Department
emphasized that updating such out-ofdate construction wages would better
align with the DBRA’s main objective.
The Department further explained
that periodically updating existing noncollectively bargained prevailing wage
rates is intended to keep such rates
more current in the interim period
between surveys. The Department
asserted that it is reasonable to assume
that non-collectively bargained rates,
like other rates that the Secretary has
determined to prevail, generally
increase over time like other
construction compensation measures.
See, e.g., Table A (showing recent
annual rates of union and non-union
construction wage increases in the
United States); Table B (showing ECI
changes from 2001 to 2020).
TABLE A—CURRENT POPULATION SURVEY (CPS) WAGE GROWTH BY UNION STATUS—CONSTRUCTION
Median weekly earnings
Year
2015
2016
2017
2018
2019
2020
2021
Members of
unions
Non-union
Percentage of differential
Members of
unions
(%)
Non-Union
(%)
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
$1,099
1,168
1,163
1,220
1,257
1,254
1,344
$743
780
797
819
868
920
922
6
0
5
3
0
7
5
2
3
6
6
0
Average ....................................................................................................
........................
........................
3
4
Source: Current Population Survey, Table 43: Median weekly earnings of full-time wage and salary workers by union affiliation, occupation,
and industry, BLS, https://www.bls.gov/cps/cpsaat43.htm (last modified Jan. 20, 2022).
Note: Limited to workers in the construction industry.
TABLE B—ECI, 2001–2020, TOTAL COMPENSATION OF PRIVATE WORKERS IN CONSTRUCTION, AND EXTRACTION,
FARMING, FISHING, AND FORESTRY OCCUPATIONS
[Average 12-month percent changes (rounded to the nearest tenth)]
Average annual
total compensation,
12-month % change
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Year
2001
2002
2003
2004
2005
2006
2007
2008
2009
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
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3.5
3.9
4.5
3.1
3.5
3.5
3.6
1.7
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TABLE B—ECI, 2001–2020, TOTAL COMPENSATION OF PRIVATE WORKERS IN CONSTRUCTION, AND EXTRACTION,
FARMING, FISHING, AND FORESTRY OCCUPATIONS—Continued
[Average 12-month percent changes (rounded to the nearest tenth)]
Average annual
total compensation,
12-month % change
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
.......................................................................................................................................................................................
1.9
1.6
1.4
1.8
2.0
2.0
2.4
2.7
2.2
2.8
2.4
3.0
Source: ECI Historical Listing Volume III, Table 5: ECI for total compensation, for private industry workers, by occupational group and industry,
BLS, https://www.bls.gov/web/eci/eci-current-nominal-dollar.pdf (updated Mar. 2022).
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(2) Periodic Adjustment Proposal
In the NPRM, the Department noted
that the proposal sought to update noncollectively bargained prevailing wage
rates that are 3 or more years old by
adjusting them regularly based on total
compensation data to keep pace with
current construction wages and fringe
benefits. Specifically, the Department
proposed to add language to § 1.6(c)(1)
to expressly permit adjustments to noncollectively bargained prevailing rates
on general wage determinations based
on BLS ECI data or its successor data.
The Department’s proposal provided
that non-collectively bargained rates
may be adjusted based on ECI data no
more frequently than once every 3 years,
and no sooner than 3 years after the date
of the rate’s publication, continuing
until the next survey results in a new
general wage determination. This
proposed interval would be consistent
with WHD’s goal to increase the
percentage of Davis-Bacon wage rates
that are 3 years old or less. Under the
proposal, non-collectively bargained
prevailing wage rates (wages and fringe
benefits) would be adjusted from the
date the rate was originally published
and brought up to their present value.
Going forward, any non-collectively
bargained prevailing wage rates
published after this rule becomes
effective may be updated if they are not
re-surveyed within 3 years after
publication. The Department anticipates
implementing this new regulatory
provision by issuing modifications to
general wage determinations.
The Department stated its belief that
ECI data is appropriate for these rate
adjustments because the ECI tracks both
wages and fringe benefits and may be
used as a proxy for changes in
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construction compensation over time.
Therefore, the Department proposed to
use a compensation growth rate based
on the change in the ECI total
compensation index for construction,
extraction, farming, fishing, and forestry
occupations to adjust non-collectively
bargained prevailing wage rates (both
base hourly and fringe benefit rates)
published in 2001 or after.131
In addition, because updating noncollectively bargained prevailing wage
rates would be resource-intensive, the
Department did not anticipate making
all initial adjustments to such rates that
are 3 or more years old simultaneously,
but rather considered it more likely that
such adjustments would be made over
a period of time (though as quickly as
is reasonably possible). Similarly, the
Department stated that particularly due
to the effort involved, the process of
adjusting non-collectively bargained
rates that are 3 or more years old was
unlikely to begin until approximately 6–
12 months after a final rule
implementing the proposal became
effective.
The Department sought comments on
the proposal and invited comments on
alternative data sources to adjust noncollectively bargained prevailing wage
rates. The Department considered
proposing to use the Consumer Price
Index (CPI) but noted that the CPI is less
131 Because this particular index is unavailable
prior to 2001, the Department proposed to use the
compensation growth rate based on the change in
the ECI total compensation index for the goodsproducing industries (which includes the
construction industry) to bring the relatively small
percentage of non-collectively bargained prevailing
wage rates published before 2001 up to their 2000
value. The Department would then adjust the rates
up to the present value using the ECI total
compensation index for construction, extraction,
farming, fishing, and forestry occupations.
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appropriate to use to update noncollectively bargained prevailing wage
rates because the CPI measures
movement of consumer prices as
experienced by day-to-day living
expenses, unlike the ECI, which
measures changes in the costs of labor
in particular. The CPI does not track
changes in wages or benefits, nor does
it reflect the costs of construction
workers nationwide. The Department
nonetheless invited comments on use of
the CPI to adjust non-collectively
bargained rates.
The Department received many
comments about the proposal. Most of
the commenters expressed general
support for the proposal, and many of
them supported the proposal in its
entirety. Other commenters
recommended modifications to the
Department’s proposal, and several
commenters opposed the proposal
entirely. In general, there was an
overarching consensus about the need to
regularly update out-of-date noncollectively bargained prevailing wage
rates. For example, NABTU and WA
BCTC gave examples of outdated noncollectively bargained wage rates,
including some that reflected amounts
less than the local minimum wage. AGC
noted that periodic adjustments can
improve the accuracy of ‘‘woefully outof-date open shop rates.’’ FTBA stated
that updating non-collectively bargained
rates would help eliminate the widening
compensation gap between collectively
bargained prevailing wage rates that are
updated at least annually, and noncollectively bargained rates that are
frozen in time, sometimes for a decade
or longer.
The Economic Policy Institute (EPI)
noted that this proposal is critical to
ensure that DBRA prevailing wage rates
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contribute to stabilizing rather than
eroding workers’ wages, which EPI
stated have been lower in inflationadjusted terms than they were in 1970
despite decades of economic growth and
a higher national income. LIUNA stated
that weighted averages are susceptible
to annual wage erosion as inflation eats
away at worker earnings. The IUOE
made a similar point, noting that the
lengthy stagnation and lack of escalation
of non-collectively bargained prevailing
wage rates dilute the value of such rates.
IUOE pointed to the 2019 OIG Report’s
identification of decades-old rates that
were applicable to particular DBRA
projects, highlighted the OIG’s
recommendation that WHD use a wage
escalator (like the CPI) to bring noncollectively bargained rates current, and
applauded the Department for
proposing to do so.
A number of supporting commenters
concurred that periodic updates would
appropriately implement the
Department’s broad authority to curb a
practice the DBA and Related Acts were
enacted to prevent: payment of
‘‘substandard’’ wages (here, out-of-date
non-collectively bargained rates). Such
commenters noted that while it is
preferable for Davis-Bacon prevailing
wage rates to reflect actual wages paid
to workers in their communities and not
weighted averages, where the
Department’s wage determination is
based on weighted averages it is critical
that the Department not allow those
rates to become stagnant. See Brick and
Allied Craftworkers Local4 INKY,
Building and Construction Trades
Council of Northern Nevada (BAC
NNV), III–FFC, and WA BCTC. DMCA
commented that prevailing rates in
North and South Dakota are often very
old and not reflective of actual wages
being paid—a problem that the updates
should help fix by providing rates more
reflective of the marketplace. Similarly,
the North Dakota State Building and
Construction Trade Union supported
this ‘‘critical’’ proposal so rates do not
become stagnant and gave examples of
North Dakota non-collectively bargained
rates that are over 22 years old. The
joint SMART and SMACNA comment
identified some non-collectively
bargained rates that were roughly
equivalent to collectively bargained
rates that prevailed for similar
classifications at the time these rates
were published. SMART and SMACNA
then observed that whereas the noncollectively bargained rates became stale
during the long intervals between DavisBacon surveys, the collectively
bargained rates increased during that
time, resulting in a growing disparity
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between the two types of prevailing
wage rates.
Various commenters provided
additional justification for the proposal,
including benefits for the regulated
community. COSCDA asserted that
workers, contractors, and program
administrators would all benefit from
the proposal. LIUNA similarly noted
that the proposal should reduce
uncertainty for contracting agencies and
contractors who rely upon published
wage determinations for bidding and
awarding contracts under DBRA. UBC
likewise supported the proposal’s
anticipated relief for workers and
improved competitiveness for
contractor-bidders who had already
been granting increases in wages and
benefits. MCAA remarked that among
member mechanical contractor firms
that do not currently compete for
prevailing wage work, low and out-ofdate wage determinations were part of
the reason they did not bid on these
projects.
Supporters and opponents agreed
about the need to address the
construction labor shortage, particularly
in light of the IIJA, which is expected to
further increase demand for
construction workers. See, e.g., BAC
NNV, NABTU, ABC. Supporters
asserted that updating non-collectively
bargained rates under the proposal
would reflect labor market changes and
improve contractors’ ability to attract,
develop, and retain skilled workers. See,
e.g., III–FFC. Brick and Allied
Craftworkers Local #15 MO-KS-NE
commented that it is critical that survey
rates are not allowed to become stagnant
because stagnant rates both undermine
the purpose of the DBA to protect local
area wages and discourage new workers
from considering a career in the trades.
Several other union commenters
likewise emphasized the importance of
keeping non-collectively bargained
prevailing wage rates up-to-date because
outdated and artificially low wages
could discourage workers from entering
the construction workforce. These
organizations commented that this
circumstance is particularly problematic
in an industry in which workers’
average age, 61, is approaching
retirement age.
Various union, labor-management,
and contractor group commenters such
as LIUNA, III–FFC, and IEC supported
using BLS ECI to update noncollectively bargained rates. LIUNA
noted the ECI’s suitability because it
captures both wage and benefit data.
AGC observed that the ECI has a large
sample size, is calculated using
‘‘scientifically sound principles,’’ and is
publicly released quarterly.
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In response to the Department’s
NPRM request for comments about
using data sources other than the ECI,
such as the CPI, MCAA opposed using
the CPI and III–FFC preferred ECI to the
CPI for urban consumers because the
ECI reflects labor market trends and
includes fringe benefits. LIUNA also
preferred the ECI instead of a consumerbased index. The MBA, et al., on the
other hand, opposed the Department’s
proposal to adopt the ECI, stating that
the ECI’s participation rate over the past
10 years had dropped. They also noted
that it is unclear whether the ECI’s
Construction industry category covers
residential construction and whether
the index includes both CBA and nonCBA wages.
Several commenters that supported
the proposal also recommended
additional regulatory provisions.
NABTU and LIUNA recommended that
the ECI should be used only to increase,
not decrease, non-collectively bargained
rates, and III–FFC and UBC suggested
changing the proposed regulation to
require more frequent periodic
updates—at least every 3 years, instead
of no sooner than every 3 years. These
two commenters explained that more
frequent adjustments would help ensure
that DBA rates do not stagnate.
Other commenters recommended
using ECI data to update noncollectively bargained rates only as a
method of last resort, noting that the ECI
does not capture actual wages paid to
workers in their home communities. See
NABTU, NCDCL, and UA. These
commenters instead recommended
replacing out-of-date non-collectively
bargained prevailing wage rates with
existing state and local prevailing wage
rates derived through methods that
closely resemble the Department’s
method. The UA also emphasized that
the Department’s proposal is no
substitute for greater efforts to conduct
surveys within 3 years and encouraged
the Department to continue to prioritize
its own wage surveys as the first and
best option. The UA recognized the
Department’s improvements in the
survey process—citing the 2019 OIG
report’s finding that the Department’s
‘‘time to complete a wage survey
decreased from an average of five-toseven years in 2002 to 2.6 years in
2015’’—but also welcomed the fallback
option of using ECI data to update rates
when necessary since surveys are time
consuming and the Department’s
resources are limited.
A number of commenters—both that
supported and opposed the proposal—
expressed concerns about using ECI
data. NABTU, AGC, FTBA, and ABC
took exception to using nationwide data
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such as the ECI data the Department
anticipated using. FTBA preferred that
the Department use county-specific data
that is the ‘‘legal lynchpin for the setting
of prevailing wages under the [DBA].’’
FTBA and AGC expressed concern that
the ECI includes certain payments that
are statutorily excluded from DavisBacon fringe benefits, such as disability
insurance, unemployment insurance,
employer taxes, workers compensation,
overtime, and non-production bonuses.
The group of U.S. Senators criticized the
ECI for merely accounting for the net
increase or decrease in the cost of labor,
but for not ‘‘as the DBRA commands,
account[ing] for prevailing wages paid
to ‘corresponding classes of laborers and
mechanics.’ ’’ The MBA, et al. cautioned
that ‘‘indexing a wage rate that is
potentially forty years old is
problematic as the validity of that wage
is unknown.’’
Several commenters, some of whom
did not expressly oppose the proposal,
asserted that it was inconsistent or
arbitrary of the Department to update
certain non-collectively bargained
prevailing wage rates with ECI data from
BLS while not also using BLS data to
determine the underlying prevailing
wages. For example, while NAHB did
not endorse using BLS data to set
prevailing wages, NAHB stated that it
would be inconsistent to use BLS data
for periodic updates but not to calculate
the underlying prevailing wage rates
using BLS data. NAHB also criticized
the Department’s Davis-Bacon wage
methodology as being greatly flawed
and argued that the proposed periodic
updates would only allow WHD’s
flawed survey methodology to persist.
AFP–I4AW opposed the proposal,
which they asserted would mix two
different methodologies for determining
prevailing wages and use an unrelated
BLS escalator to unjustifiably inflate
what they claimed to be unreliable and
inaccurate rates.
Among the commenters opposing the
proposal in its entirety, AFP–I4AW,
ABC, the group of U.S. Senators, a group
of members of the U.S. House of
Representatives Committee on Labor &
Employment, and a few individuals
objected to the proposal in the context
of an overall criticism of WHD’s survey
method, which they recommended
replacing with BLS data to determine
prevailing wages. ABC, for example,
suggested using BLS data to determine
prevailing wages because it asserted
BLS data is more timely and accurate.
ABC stated that BLS surveys are
conducted scientifically, have high
response rates from large sample sizes,
and therefore are superior to WHD’s
wage survey process. By comparison,
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ABC contended the Department’s
proposal to adjust certain noncollectively bargained prevailing wage
rates on a rolling basis no more
frequently than every 3 years would be
less effective and less accurate than
using BLS data to determine prevailing
wages in the first place. ABC also
argued, along with the group of U.S.
Senators and the group of members of
the U.S. House of Representatives
Committee on Labor & Employment,
that this periodic adjustment proposal
would only serve to perpetuate the
status quo with inaccurate wage
determinations remaining after the
updates. See section III.B.1.ii.A.(1) for a
discussion of why the Department has
declined to replace WHD’s Davis-Bacon
wage survey program with data from the
BLS.
Commenters raised other general
concerns about the proposal. While
NAHB agreed that a mechanism is
needed to update ‘‘grossly outdated
wage rates,’’ they thought the proposal
implied less incentive for WHD to
conduct wage surveys more often
moving forward. The Construction
Industry Roundtable (CIRT) said that the
proposal could work but would ‘‘require
constant updates across dozens if not
hundreds of individual salary scales’’ to
keep up with the proposed cycles.
After considering the comments
received on the proposed new periodic
updates to certain non-collectively
bargained prevailing rates, the
Department adopts without
modification the proposed new
language in § 1.6(c)(1). By expressly
authorizing the Department to
periodically adjust non-collectively
bargained prevailing wage rates between
surveys under specified circumstances
in order to maintain the currency of
those rates, this section plays an
important role in WHD’s efforts to
improve the Davis-Bacon prevailing
wage program. As the Department
emphasized in the NPRM, this new
provision advances the DBA’s purpose
of maintaining local wage standards and
protecting construction workers—in this
case by safeguarding against a decline in
the real value of prevailing wage rates
over time. This periodic adjustment rule
implements a concrete and incremental
mechanism to address the criticism,
noted by various commenters, that as
non-collectively bargained prevailing
rates become out-of-date, they
decreasingly reflect the prevailing rates
currently paid. The periodic adjustment
of non-collectively bargained wage rates
is particularly important given that the
change to the definition of ‘‘prevailing
wage’’ in the 1981–1982 rulemaking has
resulted in the increasing overuse of
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weighted average wage rates, most of
which are the very type of rates that are
not adjusted under the Department’s
current procedures. This change
warrants extending the express
regulatory authority under which WHD
updates collectively bargained
prevailing wage rates between surveys
based on CBA submissions to noncollectively bargained rates updated
based on ECI data. The Department
anticipates that periodic adjustments
will occur less often over time, as it
conducts surveys more frequently and
adopts more state or local prevailing
wage rates.
While the Department has considered
the suggested changes to its proposal,
the Department declines to adopt the
suggestions. Specifically, the
Department declines to adopt the
recommendation to limit periodic
updates to increases only. The ECI
historically has increased over time, and
it appears unlikely that the
compensation growth index would
result in a decrease over a 3-year
interval. Moreover, the purpose of this
provision is to periodically adjust
otherwise out-of-date non-collectively
bargained prevailing wage rates. In the
unlikely event that a downward
adjustment of an otherwise stagnant rate
were warranted based on a 3-year period
of ECI data on which the Department
would be relying, making such an
adjustment would be appropriate and
consistent with wage rate changes
resulting from an entirely new
prevailing wage survey, which can
result in both increases and decreases in
published prevailing wage rates.
The Department also declines to
require that the periodic updates occur
more frequently than every 3 years and
maintains that this provision of the final
rule will not reduce WHD’s incentive to
conduct Davis-Bacon wage surveys.
This provision to periodically update
out-of-date non-collectively bargained
prevailing wage rates that are 3 or more
years old enables the Department to
adjust such rates between surveys based
on total compensation data, allowing
prevailing wage rates to better keep pace
with construction wage and benefit
growth and remain more in line with
local prevailing rates. The proposed 3year minimum interval is consistent
with WHD’s goal to increase—primarily
through the wage survey program—the
percentage of Davis-Bacon wage rates
that are 3 years old or less and therefore
would not need to be periodically
updated. The periodic adjustments will
be effectuated in conjunction with
WHD’s other efforts to increase the
frequency with which the results of new
wage surveys are published, including
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surveys conducted under State or local
law and adopted by the Department
under the circumstances specified in
section III.B.1.iii.D. The Department,
therefore, has calibrated the frequency
of periodic updates so that they better
align with these other changes to the
Davis-Bacon wage survey program. In
addition, more frequent updating might
disincentivize stakeholders from
participating in the Davis-Bacon survey
process.
The Department agrees with LIUNA
that ECI data should only be used for
the narrow purpose specified in this
proposed rule. The new periodic
adjustment rule will ‘‘on balance result
in a closer approximation of the
prevailing wage,’’ Donovan, 712 F.2d at
630, for these out-of-date noncollectively bargained rates and,
therefore, is an appropriate extension of
the authority reflected in current
§ 1.6(c)(1) to modify wage
determinations ‘‘from time to time to
keep them current.’’ The periodic
adjustments will update certain existing
non-collectively bargained prevailing
rates, supplementing, but not replacing,
the Department’s survey-based wage
determination process which the
Department is committed to continuing
and striving to improve as discussed in
this section below and in section
III.B.1.ii.A.
The Department notes that various
commenters, such as ABC, the group of
U.S. Senators, and the group of
members of the U.S. House of
Representatives Committee on
Education & Labor, opposed the
proposal and urged the Department to
use BLS data instead of WHD’s wage
survey program to determine prevailing
wages. The Department declines to
adopt the suggestion of such
commenters that WHD should have
chosen to, or is required to, use BLS
data for its wage survey process in its
entirety, instead of using ECI data for
the limited purpose of periodic
adjustments. For the reasons discussed
below and in section III.B.1.ii.A.1, the
Department’s decision to use the rule’s
periodic adjustment mechanism to
incrementally improve the quality of
certain underlying prevailing wage rates
is reasonable and within its broad
statutory discretion, and it does not
require that WHD adopt BLS data as the
sole method of determining prevailing
wage rates to begin with.
The DBA authorizes the
Administrator to choose the method for
determining prevailing wage rates. As a
threshold matter, the DBA does not
prescribe a method that the
Administrator must or should use for
determining prevailing wages, but rather
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‘‘delegates to the Secretary, in the
broadest terms imaginable, the authority
to determine which wages are
prevailing.’’ 712 F.2d at 616. The
Secretary, thus, has broad discretion to
determine the prevailing wage. Even
though there may be multiple methods
of determining prevailing wages under
the DBA, WHD may choose which
method to use to do so.
The Department disagrees with the
premise underlying the claims of the
group of U.S. Senators, ABC, and the
MBA, et al. that it is inappropriate to
adjust an underlying wage rate that is
allegedly flawed, as the Department’s
wage survey methodology operates
comfortably within the authority
granted by the DBA and constitutes a
reasonable method of determining
prevailing wage rates for laborers and
mechanics on covered construction
projects.
WHD has used and may continue to
use various regulatory and
subregulatory tools intended to refine
and improve its prevailing wage survey
process. Such tools include this rule’s
periodic adjustments of certain noncollectively bargained rates with ECI
data. WHD’s survey method for
determining prevailing wages is not
static. The agency consistently strives to
improve its Davis-Bacon wage survey
program and has made improvements
over the years. For example, as of March
2019, WHD had successfully reduced
the amount of time it takes to complete
a wage survey by more than 50 percent
since 2002 and was continuing to
implement process improvements to
reduce the time it takes to complete a
survey. See 2019 OIG Report, at 34 app.
B.
Other efforts to improve WHD’s DBRA
wage survey program include this rule’s
use of a modal prevailing wage rate
when 30 percent or more of the wages
are the same, and the provision
regarding variable rates that are
functionally equivalent, both of which
seek to more closely reflect the
prevailing (i.e., predominant) wages
paid to workers in an area and to
decrease the prevalence of weighted
average rates. Another recent endeavor
is the June 2022 and March 2023
solicitations of comments about the
proposed revision of the wage survey
form (WD–10 form), which WHD uses to
solicit information that is used to
determine locally prevailing wages. See
87 FR 36152–53; 88 FR 17629 (Mar. 23,
2023) (Notice of availability; request for
comments). Outside this rulemaking,
the Department’s proposed changes to
the WD–10 form would improve the
overall efficiency of the DBA survey
process and aim to streamline the
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57577
collection of data required for the
survey and make the collection less
burdensome for respondents. 87 FR
36153. The Department also proposed to
add a new WD–10A collection
instrument to be used pre-survey to
identify potential respondents that
performed construction work within the
survey period in the survey area. Id.; see
also 88 FR 17629–30.
The Department acknowledges that
the ECI data it has selected includes
wages and fringe benefit information for
construction-related occupations
nationwide, and that ECI benefits
include some employer costs that are
not bona fide fringe benefits under the
DBA. Nevertheless, these ECI data
characteristics, while not identical, are
consistent with the DBA’s statutory
requirements. As discussed in this
section and section III.B.1.ii.A, the
Department has developed its
underlying methodology for
determining prevailing wages to be
consistent with the Act’s directive to
determine prevailing wages for
‘‘corresponding classes’’ of workers on
‘‘projects of a character similar’’ within
‘‘civil subdivision[s] of the State’’ in
which the work is to be performed. 40
U.S.C. 3142(b). This rule supplements
WHD’s methodology. The ECI will be
used to adjust prevailing wage rates
only after WHD has determined the
underlying rates for specific
classifications of workers on projects of
a similar character within the relevant
locality. Moreover, the ECI simply
reflects the rate of change in employer
labor costs over time. Given the
Department’s statutory and regulatory
authority, the Department’s use of the
ECI is reasonable even though the ECI
may not mirror in every respect changes
to certain labor costs on a classificationby-classification, project-by-project, and
location-by-location basis.
The Department disagrees with the
commenters who suggested that the
index used for periodic updates must
have the same level of detail that the
Department uses to make its wage
determinations in the first place. The
ECI data that the Department has
selected, while not perfect, is a
reasonable option for the task. ECI
contains data for construction-related
occupations and includes both wages
and fringe benefits. While the data is not
delineated by county and the mix of
fringe benefits is different than that
required to be considered by the DBRA,
the ECI’s general data characteristics are
sufficient for the purpose of keeping
certain non-collectively bargained rates
better aligned with compensation
changes over time, and better than any
other index that the Department has
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considered or commenters have
suggested for periodic adjustments
under the DBRA.
The Department’s broad discretion
about how to determine prevailing
wages comfortably encompasses this
mechanism to periodically update
certain out-of-date survey-based
prevailing wages pending completion of
the next wage survey. Further, the
DBA’s legislative history supports this
manner of trying to keep certain
prevailing wage rates more current.
Congress recognized that ‘‘[a] method
for determining the prevailing wage rate
might have been incorporated in the
bill, but the Secretary of Labor can
establish the method and make it known
to the bidders.’’ 74 Cong. Rec. 6516
(Feb. 28, 1931) (remarks of Rep. Kopp).
The Department also disagrees that
using ECI or its successor data to
periodically update certain noncollectively bargained wages while
continuing to use the Department’s
longstanding survey process is arbitrary.
The periodic adjustments are tethered to
existing prevailing wage rates and seek
to better approximate current prevailing
rates. As stated in the NPRM, ECI data
is appropriate for these proposed rate
adjustments because the ECI tracks both
wages and benefits and may be used to
approximate the changes in
construction compensation over time.
The Department notes in response to
comments that the ECI data to be used
includes private industry union and
non-union workers, residential and nonresidential construction, and is not
seasonally adjusted. ECI data is a
reasonable proxy for construction
compensation growth to first bring noncollectively bargained rates that are
more than 3 years old up to their
present value, and then to update these
rates no more often than every 3 years
going forward. For these and the other
reasons explained in this section, the
final rule adopts this proposal without
modification.
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(D) 29 CFR 1.6(f)
Section 1.6(f) addresses post-award
determinations that a wage
determination has been wrongly omitted
from a contract. The Department’s
proposed changes to this paragraph are
discussed below in section III.B.3.xx
(‘‘Post-award determinations and
operation-of-law’’), together with
proposed changes to §§ 5.5 and 5.6.
vii. Section 1.7 Scope of Consideration
The Department’s regulations in § 1.7
address two related concepts. The first
is the level of geographic aggregation of
wage data that should be the default
‘‘area’’ for making a wage determination.
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The second is how the Department
should expand that level of geographic
aggregation when it does not have
sufficient wage survey data to make a
wage determination at the default level.
In the NPRM, the Department proposed
changes to this paragraph to more
clearly describe WHD’s process for
expanding the geographic scope of
survey data and to modify the
regulations by eliminating the current
bar on combining wage data from
‘‘metropolitan’’ and ‘‘rural’’ counties
when the geographic scope is expanded.
In the 1981–1982 rulemaking, the
Department codified its practice of
using the county as the default area for
making a wage determination. 47 FR
23644, 23647 (May 28, 1982). Thus,
while the definition of the term ‘‘area’’
in § 1.2 allows the Administrator to use
other civil subdivisions of a State for
this purpose, § 1.7(a) specifies that the
area for a wage determination will
‘‘normally be the county.’’ 29 CFR
1.7(a).
The use of the county as the default
‘‘area’’ means that in making a wage
determination the WHD first considers
the wage survey data that WHD has
received from projects of a similar
character in a given county. The
Department typically collects the
county-level data by construction type
(e.g., building, residential, highway,
heavy) to account for the statutory
requirement to determine prevailing
wages on projects of a similar
‘‘character.’’ 40 U.S.C. 3142(b); see also
AAM 130 (Mar. 17, 1978) (discussing
construction types). If there is sufficient
county-level data for a classification of
covered workers (e.g., laborers or
painters) working on those projects,
WHD then makes a determination of the
prevailing wage rate for that
classification on that construction type
in that county. See 40 U.S.C. 3142(b)
(requiring prevailing wages to be
determined for ‘‘corresponding classes’’
of laborers or mechanics); 29 CFR 1.7(a).
In determining whether there is
sufficient current wage data, WHD can
use data on wages paid on current
projects or, where necessary, projects
under construction up to one year
before the beginning of the survey. 29
CFR 1.7(a).
The second concept addressed in § 1.7
is the procedure that WHD follows
when it does not receive sufficient
current wage data at the county level to
determine a prevailing wage rate for a
given classification of workers in a
given construction type. This process is
described in detail in the 2013
Chesapeake Housing ARB decision.
ARB No. 12–010, 2013 WL 5872049. In
short, if there is insufficient data to
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determine a prevailing wage rate for a
classification of workers in a given
county, WHD will determine that
county’s wage-rate for that classification
by progressively expanding the
geographic scope of data (still for the
same classification of workers) that it
uses to make the determination. First,
WHD expands to include a group of
surrounding counties at a ‘‘group’’ level.
See 29 CFR 1.7(b) (discussing
consideration of wage data in
‘‘surrounding counties’’); Chesapeake
Housing, ARB No. 12–010, 2013 WL
5872049, at *2–3. If there is still not
sufficient data at the group level, WHD
considers a larger grouping of counties
in the State, which has been called a
‘‘super group,’’ and thereafter may use
data at a statewide level. Chesapeake
Housing, ARB No. 12–010, 2013 WL
5872049, at *3; see 29 CFR 1.7(c).132
In the 1981–1982 rulemaking, the
Department imposed a limitation on this
process. The Department included, in
§ 1.7(b), a strict bar on combining data
from ‘‘metropolitan’’ and ‘‘rural’’
counties when there is insufficient wage
data in a given county. See 47 FR 23647.
That proviso stated that projects in
‘‘metropolitan’’ counties may not be
used as a source of data for a wage
determination in a ‘‘rural’’ county, and
vice versa. 29 CFR 1.7(b). The regulation
did not define the terms metropolitan
and rural.
To be consistent with the prohibition
on cross-consideration in § 1.7(b), WHD
developed a practice of using
designations from the Office of
Management and Budget (OMB) to
identify whether a county is
‘‘metropolitan’’ or ‘‘rural.’’ The OMB
designations WHD has used for this
purpose are called the core based
statistical area (CBSA) standards. See 86
FR 37770 (July 16, 2021). As part of the
CBSA designations, OMB identifies two
types of statistical areas: metropolitan
statistical areas (MSAs) and
micropolitan statistical areas. The OMB
standards do not specifically identify
counties as ‘‘rural.’’ However, because
OMB identifies counties that have
metropolitan characteristics as part of
MSAs, the practice of the WHD
Administrator has been to designate
counties as ‘‘metropolitan’’ if they are
within an OMB-designated MSA and
132 For residential and building construction
types, this expansion of the scope of data
considered also involves the use of data from
Federal and federally assisted projects subject to
Davis-Bacon labor standards at each countygrouping level when data from non-Federal projects
is not sufficient. See 29 CFR 1.3(d). Data from
Federal and federally assisted projects subject to
Davis-Bacon labor standards is used in all instances
to determine prevailing wage rates for heavy and
highway construction. Id.
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‘‘rural’’ if they are not. See Mistick
Constr., ARB No. 04–051, 2006 WL
861357, at *8. If OMB designates a
county as a micropolitan statistical area,
WHD will identify the county as rural,
even if it is contiguous with a nearby
MSA. The ARB has determined that
such proxy designations are reasonable.
See id.133
The ban on combining metropolitan
and rural county data that was
implemented in the 1981–1982
rulemaking did not apply explicitly to
the consideration of data above the
surrounding-counties level. See 29 CFR
1.7(c). After that rulemaking, however,
the Department implemented
procedures that did not mix
metropolitan and rural county data at
any level in the expansion of geographic
scope, including even at the statewide
level.
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(A) ‘‘Metropolitan’’ and ‘‘Rural’’ Wage
Data in Surrounding Counties
In the NPRM, the Department
proposed to eliminate the language in
§ 1.7(b) barring the cross-consideration
of metropolitan and rural wage data at
the surrounding-counties level. In
explaining this proposal, the
Department noted prior feedback that
the blanket bar had not adequately
considered the heterogeneity of
commuting patterns and local labor
markets between and among counties
that may be designated overall as
‘‘rural’’ or ‘‘metropolitan.’’ In its 2011
report, for example, the GAO noted
criticism of the DBA program for using
‘‘arbitrary geographic divisions,’’ given
that the relevant regional labor markets,
which are reflective of area wage rates,
‘‘frequently cross county and state
lines.’’ 2011 GAO Report, at 24.134
The NPRM explained that the
Department understood the point in the
GAO report to be that actual local labor
markets are not constrained by or
defined by county lines, and that the
point applies even to those lines
between counties identified (by OMB or
otherwise) as ‘‘metropolitan’’ or ‘‘rural.’’
The Department noted that this is
particularly the case for the construction
industry, in which workers tend to have
longer commutes than other
professionals, resulting in
geographically larger labor markets. See,
133 The OMB standards are different from the
Census Bureau’s classification of urban and rural
areas. The OMB standards use counties or countyequivalents as the basic building blocks of their
MSA designations. The Census Bureau’s urbanrural classification uses smaller ‘‘census blocks’’ as
the ‘‘analysis unit (or geographic building block)’’
of its classification process. See Urban Area Criteria
for the 2020 Census-Final Criteria, 87 FR 16706,
16709 (Mar. 24, 2022).
134 See note 8, supra.
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e.g., Keren Sun et al., ‘‘Hierarchy
Divisions of the Ability to Endure
Commute Costs: An Analysis based on
a Set of Data about Construction
Workers,’’ J. of Econ. & Dev. Stud., Dec.
2020, at 4.135 Even within the
construction industry, workers in
certain trades have greater or lesser
tolerance for longer commutes. Keren
Sun, ‘‘Analysis of the Factors Affecting
the Commute Distance/Time of
Construction Workers,’’ Int’l J. of Arts &
Humanities, June 2020, at 43.136
By excluding a metropolitan county’s
wage rates from consideration in a
determination for a bordering rural
county, the strict ban implemented in
the 1981–1982 rulemaking disregarded
the potential for projects in neighboring
counties to compete for the same supply
of construction workers and be in the
same local construction labor market. In
many cases, the workers working on a
metropolitan county’s projects may
themselves live across the county line in
a neighboring rural county and
commute to the metropolitan projects.
In such cases, under the current bar, the
Department cannot use the wage rates of
these workers to determine the
prevailing wage rate for projects in the
rural county in which they live, even
where there is otherwise no data from
that rural county to rely on. Instead,
WHD would import wage rates from
other ‘‘rural’’-designated counties,
potentially somewhere far across the
State. As the Department noted in the
NPRM, this practice can result in DavisBacon wage rates that are lower than the
wage rates that actually prevail in a
cross-county metropolitan-rural labor
market.
For these reasons, the Department
stated in the NPRM that it believed that
limitations based on binary rural and
metropolitan designations at the county
level can result in geographic groupings
that at times do not fully account for the
realities of relevant construction labor
markets. To address this concern, the
Department considered the possibility
of using smaller basic units than the
county as the initial area for a wage
determination and expanding to labor
market areas that do not directly track
county lines. This could include cities
or their equivalents, or even census
blocks, which as noted above, are the
basic units for the Census Bureau’s
urban-rural classifications. The
Department, however, concluded that
continuing the longstanding practice of
using counties as the civil subdivision
basis unit is more administratively
135 https://jedsnet.com/journals/jeds/Vol_8_No_4_
December_2020/1.pdf.
136 https://ijah.cgrd.org/images/Vol6No1/3.pdf.
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feasible.137 As a result, the NPRM
instead proposed to eliminate the
metropolitan-rural bar in § 1.7(b) and to
allow the agency to use metropolitan
data in appropriate circumstances to
help set rural county prevailing wage
rates where the survey has not resulted
in sufficient current wage data from the
rural county. Eliminating the bar will
also allow the Department to use data
from adjacent rural counties to help set
a metropolitan county’s rates in
circumstances where the survey has not
resulted in sufficient current wage data
from the metropolitan county.
The Department explained that
eliminating the strict bar could have
other benefits in addition to allowing
WHD to account for actual construction
labor market patterns. It could allow
WHD to publish more rates at the
surrounding-counties group level rather
than having to rely on data from larger
geographic areas, because it could
increase the number of counties that
may be available to supply data at that
initial group level. Eliminating the bar
could also allow WHD to publish more
rates for more classifications overall by
authorizing the use of both metropolitan
and rural county data together when the
Department must rely on statewide data.
Combining rural and metropolitan data
at the State level would be a final option
for geographic expansion when
otherwise the data could be insufficient
to identify any prevailing wage at all.
The Department stated that the purposes
of the Act may be better served by using
such combined statewide data to allow
prevailing wages to be determined more
often.
The Department also explained that
eliminating the strict rural-metropolitan
bar would result in a program that
would be more consistent with the
Department’s original practice between
1935 and the 1981–1982 rulemaking as
well as the text and legislative history
of the DBA. Congressional hearings
shortly after the passage of the initial
1931 Act suggest that Congress
understood the DBA as allowing the
Secretary to refer to metropolitan rates
where rural rates were not available,
including by looking to the nearest city
when there was insufficient
construction in a village or ‘‘little town’’
to determine a prevailing wage. See 75
Cong. Rec. at 12366, 12377 (1932)
(remarks of Rep. Connery). Likewise, the
Department’s original 1935 regulations
directed the Department to ‘‘the nearest
large city’’ when there had been no
137 The Department also considered this option in
the 1981–1982 rulemaking, but similarly concluded
that the proposal to use the county as the basic unit
of a wage determination was the ‘‘most
administratively feasible.’’ See 47 FR 23647.
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similar construction in the locality in
recent years. See Labor Department
Regulation No. 503 section 7(2)
(1935).138
In the NPRM, in addition to
eliminating the metropolitan-rural
proviso language in § 1.7(b), the
Department also discussed other
potential changes to the methods for
describing the surrounding-counties
groupings procedure. Because the term
‘‘surrounding counties’’ was not defined
in the 1981–1982 rulemaking, it has
from time to time led to confusion about
whether a county can be considered
‘‘surrounding’’ if it does not share a
border with the county for which more
data is needed. As noted, WHD’s current
method of creating surroundingcounties groupings is to use OMBdesigned MSAs to create predetermined county groupings. This
method does not require that all
counties in the grouping share a border
with (in other words, be a direct
neighbor to) the county in need. Rather,
at the surrounding-counties grouping,
WHD will include counties in a group
as long as they are all a part of the same
contiguous area of either metropolitan
or rural counties, even though each
county included may not be directly
adjacent to every other county in the
group.139
For example, in the Chesapeake
Housing case, one group of
‘‘surrounding counties’’ that WHD had
compiled included the areas of
Portsmouth, Virginia Beach, Norfolk,
and Suffolk. ARB No. 12–010, 2013 WL
5872049, at *1 n.1. That was
appropriate because those jurisdictions
all were part of the same contiguous
OMB-designated MSA, and each
jurisdiction thus shared a border with at
least one other in the group—even if
they did not all share a border with
every other jurisdiction in the group.
See id. at *5–6. Thus, by using the
group, WHD combined data from
Virginia Beach and Suffolk at the
surrounding-counties level, even though
Virginia Beach and Suffolk do not
themselves share a border. The ARB
138 See also 29 CFR 1.8(b) (1982) (if no similar
construction is in area, ‘‘wage rates paid on the
nearest similar construction may be considered’’);
21 FR 5801, 5802 (1956) (same).
139 In addition, in certain limited circumstances,
WHD has allowed the aggregation of counties at the
‘‘surrounding counties’’ level that are not part of a
contiguous grouping of all-metropolitan or all-rural
counties. This has been considered appropriate
where, for example, two rural counties border an
MSA on different sides and do not themselves share
a border with each other or with any other rural
counties. Under WHD’s current practice, those two
rural counties could be considered to be a county
group at the ‘‘surrounding counties’’ level even
though they neither share a border nor are part of
a contiguous group of counties.
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concluded that this grouping strategy—
of relying on OMB MSA designations—
was consistent with the term
‘‘surrounding counties.’’ See Mistick
Constr., ARB No. 04–051, 2006 WL
861357, at *7–8.
In the NPRM, the first option for the
surrounding-counties group level that
the Department discussed was to
maintain the current group description
without further amendment. The
Department noted that the term
‘‘surrounding counties’’ itself is not so
ambiguous and devoid of meaning that
it requires additional definition. The
Department stated that the term has
been reasonably read to require that
such a grouping be of a contiguous
grouping of counties as the Department
currently requires in its use of OMB
MSAs (as described above), with limited
exceptions. Thus, while the elimination
of the metropolitan-rural proviso would
allow a nearby rural county to be
included in a surrounding-counties
grouping with metropolitan counties
that it borders, it would not allow WHD
to append a faraway rural county to a
surrounding-counties grouping made up
entirely of metropolitan counties with
which the rural county shares no border
at all. Conversely, the term
‘‘surrounding counties’’ does not allow
the Department to consider a faraway
metropolitan county to be part of a
surrounding-counties grouping of rural
counties with which the metropolitan
county shares no border at all.
The second and third options the
Department outlined in the NPRM were
to add more precise definitions to the
term ‘‘surrounding.’’ The second option
was to limit ‘‘surrounding counties’’ to
solely those counties that share a border
with the county for which additional
wage data is sought. The Department
noted that this proposal would generally
ensure that the surrounding-counties
grouping would not expand beyond the
commuting range of the construction
workers who would work on projects in
the county at issue. However, the
Department explained, the narrowness
of such a limitation would also be a
drawback, as it could lead to fewer wage
rates being set at the surroundingcounties group level. It also would have
a significant drawback in that it would
not allow for the use of pre-determined
county groupings that would be the
same for a number of counties, because
each county may have a different set of
counties with which it alone shares a
border. This could result in a substantial
burden on WHD in developing far more
county-grouping rates than it currently
develops.
The third option was to include
language that would define
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‘‘surrounding counties’’ as a grouping of
counties that are all a part of the same
‘‘contiguous local construction labor
market’’ or some comparable definition.
The Department noted that, in practice,
this methodology could result in similar
(but not identical) groupings as the
current methodology, as the Department
could decide to use OMB designations
to assist in determining what counties
are part of the contiguous local labor
market. Without the strict metropolitanrural proviso, however, this option
would allow the Department to use
additional evidence on a case-by-case
basis to determine whether the OMB
designations—which do not track
construction markets specifically—are
too narrow for a given construction
market.
(1) Comments Regarding Metropolitan
and Rural Wage Data
A number of union and contractor
association commenters generally
agreed with the Department’s proposed
changes to § 1.7(b). Commenters such as
FTBA, MCAA, and NABTU supported
eliminating the strict prohibition on
combining data from rural and
metropolitan areas, because eliminating
the prohibition would allow the
Department’s wage determinations to
better reflect the complexities of the
construction industry. As NCDCL noted,
rural areas are frequently economically
interconnected to nearby metropolitan
areas. For this reason, commenters
explained, the proposal is common
sense because it does not limit the
Department to the use of ‘‘arbitrary
geographic designations.’’
Several commenters supporting the
proposal emphasized that it is important
that the Department have the flexibility
to create groupings instead of being
bound by a rigid rule. SMART and
SMACNA, for example, stated that the
task of figuring out how to properly
expand geographic scope is a
complicated one ‘‘for which regional
and demographic differences necessitate
solutions that reflect the realities of
local markets.’’ They agreed that
‘‘county lines do not dictate local labor
markets’’ and that there is great
diversity on a state-by-state basis in how
county lines are drawn. SMART and
SMACNA stated that under the bar on
cross-consideration, the Department has
effectively treated all rural counties as a
‘‘monolith’’ instead of as diverse entities
with differing levels of integration with
metropolitan counties and a wide range
of populations and economic activity.140
140 See, e.g., Haya El Nasser, ‘‘More Than Half of
U.S. Population in 4.6 Percent of Counties,’’
Census.gov: Big and Small America (Oct. 24, 2017),
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They noted that ‘‘there is no single,
universally preferred definition of
rural’’ and no ‘‘single rural definition
that can serve all policy purposes.’’ That
variability makes ‘‘rigid rules banning
the use of metropolitan data in rural
counties unreasonable.’’ 141 LIUNA
criticized the Department’s current
‘‘absolutist’’ approach that ‘‘prevents the
Administrator from properly
considering labor markets in instances
where discretion is required.’’
A number of the commenters,
including LIUNA and NABTU, agreed
with the Department’s reasoning in the
NPRM that the strict bar has had a
depressive effect in particular on the
prevailing wage rates for rural counties
that border—and have a level of labormarket integration with—metropolitan
areas. The commenters noted that the
Department’s rural county groupings
have combined data from metropolitanadjacent rural counties with other rural
counties that may be geographically
remote and have no connection to any
metropolitan area. UBC, likewise,
explained that this practice is
counterintuitive given that wage rates
are higher in metropolitan-adjacent
counties than in remote rural counties
because projects in the metropolitanadjacent counties have to compete for
the same workers as projects in the
neighboring metropolitan areas. The UA
asserted that eliminating the strict bar in
§ 1.7(b) should increase the accuracy of
wage determinations for these types of
metropolitan-adjacent counties by better
reflecting actual labor markets and
commuting patterns.
Several union commenters, including
IUOE, West Central Illinois Building
and Construction Trades Council, and
others, agreed with the Department that
the current binary approach to
categorizing counties does not account
for ‘‘realities of the construction
industry, in which workers tend to
commute longer distances than other
professionals.’’ These commenters
explained that this fact is in part related
to the ‘‘cyclical nature of construction
employment.’’ When one project ends,
they explained, workers are forced to
follow the next project that will provide
gainful employment, even if it means
traveling to surrounding communities.
https://www.census.gov/library/stories/2017/10/bigand-small-counties.html.
141 SMART and SMACNA cited an Issue Brief
prepared for the Rural Policy Research Institute
Health Panel that compared OMB and Census
bureau statistical area designations and noted that
30 million ‘‘Census Bureau-defined rural people
live in OMB-defined metropolitan areas, and 20
million urban people live in nonmetropolitan
areas.’’ Andrew F. Coburn, et al., ‘‘Choosing Rural
Definitions: Implications for Health Policy,’’ Rural
Pol’y Rsch. Inst. 3 (Mar. 2007).
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A number of commenters, including
industry associations such as ABC,
NAHB, and IEC, opposed the
Department’s proposal to eliminate the
strict bar. These commenters asserted
that adoption of higher average wages
reflected in metropolitan county data
will likely result in inflated wages in
nearby rural counties that do not reflect
local area prevailing wage rates.
Numerous individual commenters, as
part of an organized campaign, stated
that the elimination of the bar, in
combination with other aspects of the
Department’s proposed rule, was likely
to ‘‘further distort the accuracy’’ of
WHD wage determinations. ABC issued
a survey to its members and stated that
only 14.4 percent of respondents agreed
that ‘‘aggregating metropolitan and rural
wage data’’ would ‘‘increase the
accuracy’’ of wage determinations. IEC
and the group of U.S. Senators stated
that construction unions tend to be
more heavily concentrated in
metropolitan areas than in rural areas,
so the proposal would lead to higher
union rates being applied to rural areas
that may not have a high union density.
Several commenters opposing the
proposal, including ABC and the group
of U.S. Senators, said that the
importation of metropolitan wages that
may be higher than wages actually paid
in a rural county would be inconsistent
with the purpose and congressional
intent underlying the DBRA.
Commenters opposing the proposal
also stated that increased prevailing
wage rates in rural counties would have
negative effects. NAHB stated that
increased wage rates would decrease
production of affordable housing. IEC
stated that ‘‘by equating rates between
metropolitan and rural areas, the rule
would disincentivize workers from
taking on higher-paying jobs in
metropolitan areas, which have
numerous additional out-of-pocket
expenses for such workers, including
but not limited to commuting, parking,
subsistence, and other related costs.’’
IEC further stated this would create a
shortage of workers being willing to
incur these expenses for work in
metropolitan areas, thus driving up
costs of metropolitan projects even
further to attract workers. IEC also
stated that using a metropolitan
county’s wage rate for a rural county
would inflate rural wage rates above
what the local economy can support and
would ‘‘undermine existing methods of
incentivizing rural construction, such as
subsistence pay to offset food and
lodging.’’ The comment from the
Senators argued that the proposal would
‘‘upset the local wage structure’’ and
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57581
result in small local contractors being
‘‘excluded from bidding on Federal
projects.’’
Commenters opposing the
Department’s proposal also criticized
the Department’s reasoning in the
NPRM for proposing the change. NAHB
argued that the Department’s
explanation—that construction workers
travel long distances for work and that
nearby counties with different
designations may be competing for the
same supply of workers—is one that
‘‘contradicts’’ the system of MSAs set up
by OMB. NAHB noted that OMB already
analyzes commuting data in order to
capture local labor markets when it
designates MSAs, and that these areas
are treated as ‘‘authoritative’’ and used
by a variety of government agencies for
important programs. They argue that
these labor market definitions should
not be ignored or contradicted without
substantial evidence.
NAHB also stated that the two
academic studies on constructionworker commuting time that the
Department referenced were not
persuasive because they were based on
evidence from one city in California, did
not show that construction commutes
were substantially longer than the next
longest commutes, and that any
lengthier commute times could be
explained by the need for workers to
travel to different construction sites
rather than to a single central office, and
therefore do not necessarily mean
commute times extend outside of
metropolitan areas. NAHB also noted
one of the two papers stated that
construction workers travel long
distances to projects in search of higher
wages, and this, NAHB stated, did not
support the idea that workers in
metropolitan counties would travel to
nearby rural counties for work.
The comment from the group of U.S.
Senators criticized the proposal as
allowing for rural wage determinations
to be governed by ‘‘locality-distinct
metropolitan wages’’ from metropolitan
areas that may be ‘‘lacking both
commonality and contiguousness with
the rural locality.’’ The comment also
argued that the process of geographic
expansion at all—even the current
process allowing the use of MSAs at the
group level—inflates prevailing wages
compared to the ‘‘actual prevailing wage
BLS calculated.’’ ABC argued that
‘‘combining data from rural and
metropolitan counties cannot improve
accuracy so long as the underlying wage
data comes from a self-selected,
statistically unrepresentative sample.’’
Various commenters supporting and
opposing the proposal disagreed about
the extent to which the Department’s
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historical practice supports the
proposal. On one hand, the comment
from the group of U.S. Senators argued
that the Department mischaracterized in
the NPRM that the bar on combining
data has existed only since the 1982
rulemaking. They noted that, as early as
1977, the Secretary’s Operations Manual
for the Issuance of the Wage
Determinations Under the DBRA
instructed that ‘‘[g]enerally, a
metropolitan county should not be used
to obtain data for a rural county (or visa
[sic] versa).’’ Donovan, 712 F.2d at
618.142 They cited the Carter
Administration regulations that were
suspended before enactment in 1981 as
seeking to ‘‘formalize such a
prohibition,’’ and they cited a WAB
decision from 1977 for the proposition
that the WAB had warned against
importing rates from non-contiguous
counties.
On the other hand, a number of
commenters supporting the proposal
agreed with the Department that
eliminating the strict bar was consistent
with the legislative history of the DBA
and the Department’s historical practice
from the enactment of the Act until the
1981–1982 rulemaking. NABTU stated
that the legislative history ‘‘supports the
proposition that [the Department]
should first consider neighboring
communities’’ when there is not
sufficient wage data in a nonmetropolitan area. The Iron Workers
noted in particular the exchange in the
1932 hearings regarding amending the
DBA where Congressman William
Connery, the manager of the bill, used
the example of the construction of the
Hoover Dam (then referred to as the
Boulder Dam) near the Arizona-Nevada
line. See 75 Cong. Rec. at 12366, 12377
(1932) (remarks of Rep. Connery). Rep.
Connery had explained how at the time
there may have been a need to go 500
miles to find a city large enough to
provide a sufficient amount of wage
data to determine what prevailing wage
rates should be for the project. As the
Iron Workers explained, Rep. Connery’s
statement supports the conclusion that
Congress intended to give the Secretary
discretion to determine the necessary
scope of geographic aggregation where
there was insufficient wage data—to
aggregate from a geographic scope that
is ‘‘large enough to include wage data
from a sufficient number of similar
projects.’’ SMART and SMACNA noted
that the Department then, until the
1981–1982 rulemaking, consistently
142 In their comment, the U.S. Senators left out
the word ‘‘generally’’ from their recitation of the
language from the Manual. See Donovan, 712 F.2d
at 618.
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relied on data from more populous areas
in deriving prevailing rates for thinlypopulated areas in appropriate
circumstances.143
Commenters supporting and opposing
the proposal also disagreed about
whether the D.C. Circuit’s decision in
Donovan supports the proposal. The
Donovan decision considered the
reasons that the Department had
provided in its 1981–1982 rulemaking
for enacting the strict bar on crossconsideration and ultimately upheld the
Department’s rule as a permissible
exercise of its discretion. 712 F.2d at
618. The comment by the group of U.S.
Senators argued that the Department’s
reasons for enacting the bar in the 1981–
1982 rulemaking had been
‘‘compelling,’’ and that the D.C. Circuit
had validated those reasons by stating
that they ‘‘make sense.’’ The Senators
asserted that the Department’s reasoning
now is similar to the reasoning of the
unions and others who opposed the
1981–1982 rulemaking, and that these
arguments were ‘‘dismissed’’ by the D.C.
Circuit. ABC stated that the
Department’s justifications now are
inadequate in light of the Donovan
decision.
The Iron Workers, on the other hand,
emphasized that the D.C. Circuit’s
decision about the metropolitan-rural
bar in Donovan was based on a
deferential standard of review. The
import of the decision, according to the
Iron Workers, is that the Department is
not bound by prior practice and can
adopt new rules regarding geographic
aggregation as long as they are
consistent with the purposes of the DBA
and not arbitrary. The Iron Workers and
SMART and SMACNA also noted that
the development of the program after
the 1981–1982 rulemaking (and the
Donovan decision) supports revisiting
the strict bar. The 2011 GAO Report
analyzed a group of surveys and found
that in those surveys, the Department
received increasingly insufficient
current wage data at the county and
surrounding-counties levels, which
caused the Department to rely more
heavily on super-group and statewide
data to calculate prevailing wage rates.
See supra note 10, at 21. This
circumstance, the commenters argued,
showed that the Department was too
143 For the Oahe Reservoir constructed in rural
South Dakota in 1954, the Solicitor of Labor
explained that ‘‘[t]he labor force for the project
obviously had to be drawn from the entire state and
beyond,’’ since there were ‘‘no projects of a
character similar in the civil subdivisions
involved.’’ Charles Donahue, ‘‘The Davis-Bacon Act
and the Walsh-Healey Public Contracts Act: A
Comparison of Coverage and Minimum Wage
Provisions,’’ 29 Law & Contemp. Probs. 488, 510
(1964).
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often relying on far-away county data
when the better alternative would be
adding neighboring counties to the
surrounding-counties group level and
thus relying on data from within local
construction labor markets.
(2) Department’s Decision Regarding
Metropolitan and Rural Wage Data
The Department generally agrees with
the commenters supporting the
proposal. Given the wide variation in
counties and construction labor
markets, the current bar on crossconsideration of the binary categories of
‘‘metropolitan’’ and ‘‘rural’’ county data
unnecessarily limits the Department’s
geographic aggregation methodology.
Accordingly, the Department has
decided to revert to the prior approach,
pre-dating the 1981–1982 rulemaking,
under which the regulations do not
strictly bar the Administrator from using
data from metropolitan counties to help
set prevailing wage rates in other
counties in appropriate circumstances.
In doing so, the Department will be able
to better distinguish between
metropolitan-adjacent counties that are
part of a larger metropolitan
construction market and those rural
counties that are not economically
integrated with any nearby metropolitan
areas, will be able to set more wage
determinations at smaller levels of
geographic aggregation, and will be able
to include more classifications in wage
determinations overall.
Some of the criticism of the
Department’s proposal may reflect
underlying misunderstandings. The
geographic aggregation provisions of
§ 1.7 apply only when there is not
sufficient current wage data in a county
to determine a prevailing wage for a
particular classification for that county.
This can happen for a variety of reasons.
As one commenter, a Professor of
Economics from the University of Utah,
stated, there may be insufficient wage
data in some counties because they are
simply ‘‘too small to provide adequate
numbers of survey responses,’’ which is
not uncommon given that there are
counties in the United States with
populations as low as 64 people. As this
commenter noted, this challenge can
also be common regardless of county
size for specialized subclassifications on
complex heavy construction projects
(such as dams) because these types of
projects ‘‘are often non-repeating, vast
and unique in their design so that
obtaining sufficient comparable wage
data in one county is challenging.’’ Only
where there is not sufficient current
wage data for a particular classification
in a particular county will WHD expand
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its geographic scope of consideration to
consider data from other counties.144
The corollary of this structure is that
the geographic aggregation provisions
do not apply when there is already
sufficient wage data for a classification
at the county level in a WHD survey. It
may be helpful to consider the example
of a core metropolitan county, County
A, and an outlier county, County B, that
shares a border with County A. If the
Department’s wage survey produces
sufficient current wage data for a certain
classification in County A and
separately produces sufficient current
wage data for that classification in
County B, then the Department’s
proposal would not result in any
combination of data for the two
counties. The proposal would only
potentially apply if the wage survey did
not produce sufficient current wage data
for a classification in County A or
County B. In that circumstance, the
Department would need to consider
how to set the prevailing wage rate for
that classification and would look to
wage data from outside of that county
for that purpose.
The Department disagrees with ABC
that the proposal to eliminate the strict
bar on cross-consideration is a
‘‘dramatic change’’ from the 1981–1982
rulemaking. While eliminating the strict
bar, the final rule does not require
fundamental changes to the general
underlying procedure for geographic
aggregation described above. Under the
final rule, as under current practice, the
geographic aggregation provisions of
§ 1.7 apply only when there is not
sufficient current wage data in a county
to determine a prevailing wage rate for
a particular classification for that
county. See 29 CFR 1.7(b). In these
circumstances, as under the current
practice, the Department would first
aggregate data from ‘‘surrounding
counties’’ to set the prevailing wage for
the county with insufficient data. Id.
Further geographic aggregation would
occur only if sufficient data is still not
available at the ‘‘surrounding counties’’
group level. In that circumstance, the
Department could aggregate data from
other ‘‘comparable counties or groups of
counties.’’ Id. § 1.7(c). Finally, and only
if there is no sufficient current wage
data for the classification at this
intermediate level, the Department
could aggregate statewide data for the
classification to set the prevailing wage
rate in that county.
144 In addition, as the Department noted in the
NPRM, if more interested parties participate in the
wage survey, then there will be fewer counties
without sufficient wage data for which the § 1.7
expansion process becomes relevant.
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In addition, the elimination of the
strict bar does not require WHD to
abandon the use of OMB designations as
helpful references in the aggregation
process. As noted above, the
Department’s current use of OMB
designations to identify appropriate
counties for geographic aggregation has
been found to be consistent with the
term ‘‘surrounding counties’’ and a
reasonable method of addressing
circumstances where there is
insufficient wage data for a
classification in a given county. The
final rule will allow the Department to
continue this practice, although the rule
will not require it. It will also allow the
Department to consider additional
information on a case-by-case basis to
avoid artificially or unreasonably
depressing prevailing wage rates in
counties that are adjacent to
metropolitan areas but not designated as
part of the MSA by OMB and to enable
the calculation of more prevailing wages
at the surrounding-counties group level
rather than based on data from larger,
more disparate super group or even
statewide areas.
The Department disagrees with NAHB
that cross-consideration of data from
outside of the same MSA ‘‘contradicts’’
these OMB designations. As an initial
matter, OMB itself notes that ‘‘[c]ounties
included in metropolitan and
micropolitan statistical areas may
contain both urban and rural territory
and population.’’ 86 FR 37772. It also
disclaims that its standards ‘‘produce an
urban-rural classification.’’ Id. at 37776.
OMB requires counties to achieve a
relatively high level of economic
integration in order to be included in
the same MSA. An outlying county will
only be included in an MSA if 25
percent or more of the workers living in
the county work in the central county or
counties of the MSA or 25 percent or
more of the employment in the county
is accounted for by workers who reside
in the central or county or counties. Id.
Given that construction workers may
generally commute longer distances
than other workers, it is reasonable that
counties that are economically
integrated—but to a somewhat lesser
extent than are MSAs—may still be a
part of the same local construction labor
market.
One example that would be
permissible under the final rule would
be for the Department to take a new
approach with counties that OMB
designates as micropolitan statistical
areas. As OMB notes, metropolitan and
micropolitan statistical areas are
‘‘conceptually similar to each other, but
a micropolitan area features a smaller
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nucleus.’’ 86 FR 37771.145 The
Department, however, has generally
considered counties designated as
micropolitan to be ‘‘rural’’ and thus not
appropriately included in a
metropolitan ‘‘surrounding county’’
grouping even where the micropolitan
county shares a border with an MSA.
Under the final rule, the Department
could analyze micropolitan counties on
a case-by-case basis to determine how to
include them in surrounding-counties
groupings.
Where a micropolitan county is not
adjacent to any MSA, and is surrounded
by rural counties with no urban
population, the Department could
continue (as it generally does under the
existing strict bar) to include such a
county within a surrounding-counties
grouping of other adjacent and
contiguous ‘‘rural’’ counties. In such
circumstances, there would be no
combining of metropolitan and ‘‘rural’’
data at the county or surroundingcounties group level for that county.
However, where a micropolitan county
is adjacent to one or more metropolitan
counties, the Department might
reasonably consider it to be a part of the
same surrounding-counties grouping as
those nearby counties within the MSA
for the purpose of geographic
aggregation. OMB’s ‘‘combined
statistical areas’’ concept could be
useful in such a circumstance. OMB
creates combined statistical areas by
appending micropolitan counties to
adjacent MSAs where there is a
sufficient ‘‘employment interchange’’
between the two areas. 86 FR 37777–78.
Although the final rule does not require
as much, it would permit the
Department to use data from
metropolitan counties to set prevailing
wages for micropolitan counties (for
which there is not sufficient current
wage data for a classification at the
micropolitan county level) that are
within the same combined statistical
area.
Given the wide variety of counties
and local construction labor markets,
the Department does not believe it is
appropriate to set overly simplistic rules
that apply rigidly throughout the
country. Rather, depending on resource
availability, the Department should be
permitted to analyze data and other
evidence on a state-by-state basis to
determine appropriate county
groupings. For example, Rice County in
Minnesota is a micropolitan county that
is adjacent to the Minneapolis-St. Paul
145 An MSA is ‘‘based on Urban Areas of 50,000
or more population,’’ and a micropolitan statistical
area is ‘‘based on Urban Areas of at least 10,000
population but less than 50,000 population.’’ 86 FR
37776.
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MSA. In the most recent DBA wage
determination process, the Department
considered Rice County to be rural and
therefore did not use any wage data
from Minneapolis-St. Paul to assist in
wage determinations. Because it
satisfies the threshold for employment
integration, however, OMB considers
Rice County to be part of the
Minneapolis-St. Paul Combined
Statistical Area.146 Likewise, Rice is also
within the same union jurisdiction for
various construction crafts as the
metropolitan counties in the adjacent
MSA. In a future survey, if there are
classifications in Rice County for which
there is not sufficient current wage data,
it would be reasonable under these
circumstances for the Department to
expand to a surrounding-counties
grouping that includes the other
counties within the same MinneapolisSt. Paul Combined Statistical Area.
The Department has considered and
disagrees with NAHB’s criticism of the
two academic papers that the
Department used to illustrate that
construction labor markets can be
geographically larger than the average
occupation’s labor market. NAHB stated
that the papers were not persuasive, but
it did not cite to any studies or other
data that contradicted them. NAHB first
stated these papers were unconvincing
because the average commute time they
cited for construction workers—while
the highest of all occupational groups—
was only 1.6 minutes higher than the
next highest occupational group. By
comparing the commute times to the
next highest number, however, NAHB
ignored that the average commute times
for construction workers in the study
are significantly longer than many other
common occupations. For example, they
are 31 percent higher than sales
workers, 44.5 percent higher than
education workers, and nearly 52
percent higher than food service
workers. See Sun et al. (Dec. 2020)
supra note 135, at 1, 4.
NAHB also stated that any lengthier
commute times for construction workers
could be explained by the need for
workers to travel to different
construction sites rather than to a single
central office, and therefore do not
necessarily mean commute times extend
outside of metropolitan areas. The
Department agrees that lengthy
construction worker commutes may in
part be a result of commuting to project
146 See U.S. Census Bureau, ‘‘Minnesota: 2020
Core Based Statistical Areas and Counties,’’ https://
www2.census.gov/programs-surveys/metro-micro/
reference-maps/2020/state-maps/27_Minnesota_
2020.pdf.
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sites instead of a central office.147
However, the Department is not
persuaded that such a distinction is
relevant to whether these longer
commutes cross metropolitan-rural
county borders and reflect a larger
construction labor market. The two
academic papers, moreover, note a high
percentage of particularly long
commutes in the study area: 40 percent
of the workers in the study commuted
more than 50 miles from home to the
project site, and 12 percent of workers
commuted more than 80 miles. See Sun
et al. (June 2020), supra note 136, at 40.
It is reasonable to assume that
commutes of this length can often
extend across metropolitan-rural county
borders.148
Finally, NAHB also noted that
construction workers travel long
distances to projects in search of higher
wages, and this, they stated, did not
support the idea that workers in
metropolitan counties would travel to
nearby rural counties for work. The
Department agrees that as a general
matter, construction contractors may
need to pay a premium to motivate
workers to commute longer distances.
This does not, however, undermine the
Department’s reasoning. To the
contrary, it suggests that if a rural
county is within commuting distance of
a metropolitan area and the rural county
does not itself have sufficient
construction workers in a particular
classification, workers from the
metropolitan area may need to be paid
a premium to be willing to commute to
the job. This is the concept underlying
the ‘‘zone pay’’ premiums in CBAs,
147 As another paper noted, it is reasonable to
assume that commute times are higher for
construction workers because commute times will
generally be longer for workers (like construction
workers) who have ‘‘greater uncertainty about
future job location.’’ Randall Crane and Daniel G.
Chatman, ‘‘As Jobs Sprawl, Whither the
Commute?,’’ ACCESS Mag., Fall 2003, at 14, 17.
148 NAHB also criticized the two papers because
they were based only on data from one city in
California. The Department, however, does not find
that criticism to be persuasive. The average
commute times discussed in the papers were not
local numbers, but were numbers derived from the
nationwide U.S. Census data in the 2014 American
Community Survey. See Sun et al. (Dec. 2020)
supra note 135 (citing Dan Kopf, ‘‘Which
Professions Have the Longest Commutes?,’’
Priceonomics (Feb. 23, 2016), https://
priceonomics.com/which-professions-have-thelongest-commutes/). While the commute mileage
numbers were from a single California city, the
Department’s proposal is to increase the
Administrator’s flexibility to treat different
construction labor markets differently. Thus, the
potential that data from other cities in the country
could show different commuting patterns for
construction workers does not undermine the
rationale for the proposal.
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which are discussed above in section
III.B.1.ii.(A)(4).149
The Department has also considered
the comments from opponents of the
proposal that the elimination of the
strict bar will likely result in ‘‘inflated’’
wages in the rural counties in which
metropolitan data is newly used. In
support of this argument, the comment
from the group of U.S. Senators
referenced statements in the 1979 GAO
Report and by then-Comptroller General
Staats that criticized the importation of
rates from one county to another. Also
supporting this argument, NAHB cited
testimony from an NAHB member
asserting that it had constructed two
projects—one in the Philadelphia
metropolitan area and the other
‘‘outside of the Philadelphia area’’ that
was ‘‘described as a more complex
project’’—and that the labor costs and
cost-per-unit had been higher on the
metropolitan project. NAHB, in
addition, pointed to litigation over
certain DBA rates in Nevada, where
geographic aggregation led to the
adoption of Las Vegas metropolitan
rates in a smaller metropolitan area in
Northern Nevada that included Reno.
The Department does not find the
reference to the 1979 GAO Report to be
persuasive. The GAO Report was
criticizing the importation of rates from
other counties ‘‘even though an
adequate basis generally existed for
issuing prevailing rates based on the
labor force and construction data in the
locality.’’ 1979 GAO Report, at 50. Later,
the GAO referenced a project where it
stated that the Department had not even
attempted to survey a rural county and
instead adopted a wage rate from a
metropolitan county that did not even
share a border with the rural county. Id.
at 174.150 This is not what the
Department proposed in the NPRM.
Rather, the proposal would not change
the fundamental threshold for
149 A comment from The Pacific Companies, an
affordable housing developer and owner of
affordable housing, provided another example of
this phenomenon. The comment noted that it
prefers to use modular construction to reduce the
need for labor and offset labor costs in rural areas
‘‘where labor is more scarce and costs can be
higher.’’
150 Similarly, the U.S. Senators cited to the WAB
decision in Texas Paving & Utilities Rates, WAB
No. 77–19, 1977 WL 24839 (Dec. 30, 1977), to
support the argument that importing wage rates
could violate the plain language of the DBRA by
‘‘establishing new wage rates rather than reflecting
local wages.’’ In the Texas Paving decision,
however, the Administrator had not surveyed the
area at issue and set rates notwithstanding the lack
of a survey. This would not be an issue under the
proposed scope-of-consideration rule, as the
Department’s current methodology requires the use
of surveys, and geographic aggregation only occurs
if a survey has resulted in insufficient current wage
data in the county at issue.
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geographic expansion in the regulation
at § 1.7(b), which only expands the
scope when the Department has
surveyed a county and the survey has
not resulted in sufficient current wage
data to make a wage determination.
The Senators also cite language in the
GAO Report stating that ‘‘the use of
wage rates from another area is not in
accord with the act’s intent[.]’’ 1979
GAO Report, at 50. The Department
interprets this statement as referencing
the practices that the GAO was
criticizing—of using rates from another
area without even attempting to survey
the county at issue—and not a broader
statement that the use of wage rates
from another area is never permitted.
However, to the extent that the GAO
Report intended a broader rejection of
the practice of geographic aggregation,
that position was subsequently
undermined by the D.C. Circuit in the
Donovan decision upholding the
geographic aggregation provisions in
§ 1.7. In Donovan, the D.C. Circuit
concluded from the legislative history of
the DBA that the practice of using data
from outside the area where necessary
was permissible and consistent with the
statute. As the court explained ‘‘if a
prevailing wage could not be set in a
given county by looking only to projects
in that county, it was essential to the
attainment of the general purpose of
Congress—the predetermination of
locally prevailing wages—that another
mechanism be found.’’ 712 F.2d at 618.
The Department also does not agree
that the proposal will lead to an
impermissible adoption of inaccurate
and ‘‘inflated’’ wage rates. The
Department agrees that different areas
can have different wage structures; that
is the basic concept underlying the Act.
However, as the D.C. Circuit noted, the
Department is tasked with finding a way
to make wage determinations even
where there is not sufficient current
wage data from a given county to make
the determination. Donovan, 712 F.2d at
618. In such circumstances, the
Department must consider a number of
factors in determining how to proceed,
including consistency with local area
practice, as well as administrative
feasibility, publishing as many wage
determinations as possible, and
reducing the need for conformances. As
the Department noted in the NPRM,
there is no perfect solution for
identifying county groupings in the
geographic aggregation procedure.
However, on balance, the Department
has concluded that the better approach
is not to constrain the agency with strict
limits based on an overly simplistic
binary categorization of counties.
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The Department agrees that there is a
possibility that increased flexibility may
lead to higher prevailing wage rates in
certain counties that are adjacent to
metropolitan areas. The Department
agrees with the commenters that
supported the proposal that the current
geographic aggregation methodology can
have a depressive effect on the
prevailing wage rates for rural counties
that border—and have a level of labormarket integration with—metropolitan
areas.
Conversely, however, increased
flexibility in geographic aggregation
may in other circumstances lead to
lower prevailing wage rates. Under the
current ban, where a survey does not
result in sufficient current wage data for
a classification in a metropolitan
county, the Department may need to use
a super group of metropolitan counties
from different parts of the state to make
a wage determination for that
classification. This can result in relying
on data from far away metropolitan
areas that may have less in common
with the metropolitan county than
neighboring micropolitan counties (that
are currently treated as ‘‘rural’’).
Without the ban, the Department could
instead look to the adjacent rural county
that is within commuting distance from
the metropolitan county for which there
is not sufficient current wage data for
the classification at issue. The result in
that instance could be a lower rate in
the wage determination, but one that
might better reflect the prevailing wage
in the specific local construction labor
market.151
A similar effect can be anticipated for
rural areas that are adjacent to small
metropolitan areas. Under the current
approach, if there were insufficient data
in a rural metropolitan-adjacent county,
the Department would look to other
‘‘rural’’ areas elsewhere in the state
where wage rates might be driven by
rates in micropolitan counties with
markedly higher rates. For example, in
a recent survey of Utah, WHD
determined that the combined
prevailing wage and fringe benefit rate
in a smaller metropolitan county, Weber
County, for a Laborer: Mason Tender/
Cement Concrete was $14.93. In
151 The same is true for prevailing wage rates
based on CBAs. IEC speculated that the end of the
absolute bar could lead to metropolitan area CBA
rates being applied to neighboring rural counties.
However, it is equally as likely that small
metropolitan MSAs that have insufficient data and
would be subject to a CBA-based rate at a
metropolitan ‘‘super group’’ level under the existing
regulations, will, under the final rule, have the
potential to instead reach sufficiency at the
surrounding-counties group level with a
combination of metropolitan and rural county data
that may not be CBA-based.
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neighboring Rich County, a rural
county, there was no sufficient current
wage data, and WHD calculated the
prevailing wage for the same
classification by looking to other rural
counties statewide, resulting in a
determination of $19.33. If instead WHD
had been able to combine the
metropolitan data from neighboring
Weber County with the rural Rich
County, the prevailing wage in Rich
County would be lower than it has been
calculated under the existing strict bar
on cross-consideration of
‘‘metropolitan’’ and ‘‘rural’’ data.
This same phenomenon can occur
even when the metropolitan area is not
a particularly small one. For example, in
a recent survey of Tennessee, WHD
determined that the prevailing wage for
an Electrician in a number of counties
within the MSA of Nashville-DavidsonMurfreesboro was $22.53. In
neighboring Lawrence County, a
micropolitan county that is part of the
larger combined statistical area, but still
considered to be a ‘‘rural’’ county under
the current rules, there was not
sufficient wage data to make a wage
determination for the Electrician
classification. WHD thus calculated the
prevailing wage for Electricians in
Lawrence County by looking to other
‘‘rural’’ counties at a super-group level,
resulting in a determination of $26.25.
If instead WHD had been able to
combine the ‘‘metropolitan’’ data from
the neighboring MSA with micropolitan
Lawrence County, the prevailing wage
in Lawrence would have been lower.
Overall, while it is reasonable to
expect that ending the strict bar on
cross-consideration may in some
counties lead to increases in the
published prevailing wage rates, the
Department does not agree that such
increases would be unwarranted or
inaccurate, or that they would have
significant negative effects that
outweigh their benefits. In addressing
these questions, the Department has
considered the arguments that were
made during the 1981–1982 rulemaking
and subsequent litigation, as well as the
comments received on the current
proposal. Many of these arguments are
similar, and many mirror the arguments
that the same commenters made
regarding the proposed reversion to the
30-percent rule, such as NAHB’s
statement that increased wage rates
would decrease production of affordable
housing, and IEC’s statement that using
a metropolitan county’s wage rate for a
rural county would inflate rural wage
rates ‘‘above what the local economy
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can support.’’ 152 The Department does
not find these arguments to be
persuasive for the same reason that they
are not persuasive with regard to the 30percent rule. See section III.B.1.ii.
The comments identifying potential
negative effects on rural contractors also
do not provide persuasive reasons to
reject the proposal. The Department
does not agree with the comment from
the Senators that eliminating the strict
bar would result in small local
contractors being ‘‘excluded from
bidding on Federal projects.’’ In support
of this argument, the Senators cited the
1979 GAO Report in which the GAO
speculated that for certain contracts in
rural counties, the lack of local
contractors could be attributed to these
contractors declining to bid on contracts
with higher ‘‘metropolitan’’ prevailing
wage rates because they did not want to
‘‘disrupt their wage structures.’’ 1979
GAO Report, at 73–74. In addition, the
Department’s 1981–1982 NPRM noted a
comment from the National Utility
Contractors Association that ‘‘in the
past’’ the ‘‘importation’’ of metropolitan
rates into rural areas had ‘‘disrupted
labor relations in rural areas, because
employees who received high wages on
a Davis-Bacon project were unwilling to
return to their usual pay scales after the
project was completed.’’ 47 FR 23647.
The Department is not persuaded by
the concerns about ‘‘labor disruption’’
for several reasons. As an initial matter,
the comment assumes a significant
discrepancy between the wage that
construction workers are paid in a rural
county and the prevailing wage that the
Department would set through the
geographic aggregation process. Among
the counties that the Department has
identified as potentially affected by this
rule change are metropolitan-adjacent
counties—within commuting distance
of the metropolitan core—in which the
Department does not have sufficient
current wage data from the county to
make a determination. In many or most
such circumstances, it will be
reasonable to assume that the wage rate
from a neighboring county is not
significantly different and therefore that
there is no reason to assume labor
disruption from setting the same
prevailing wage rate. Moreover, where
non-metropolitan counties are next to
metropolitan areas, the workers in these
counties generally already live within
152 Similarly, the comment from the group of U.S.
Senators stated that wages would be inflated if they
were compared to ‘‘actual prevailing wage[s] BLS
calculated,’’ and ABC argued that the proposal
regarding metropolitan and rural data cannot
improve accuracy so long as the Department
continues to use its current voluntary survey
process.
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commuting range of earning the
metropolitan rates that could potentially
be designated as prevailing. Thus, it
does not follow that the potential for
additional projects—all within the same
commuting range—to be governed by
these rates would result in a disruption
of labor relations.153
It also does not follow that the
requirement to pay certain higher base
rates would, as the IEC asserts,
‘‘undermine existing methods of
incentivizing rural construction, such as
subsistence pay to offset food and
lodging.’’ Prevailing wage rates do not
operate as a maximum rate that can be
paid; if contractors provide additional
pay to cover food and lodging so as to
ensure that metropolitan-based workers
are willing to commute to a rural job,
then they are permitted to provide such
additional incentives above and beyond
the prevailing wage rate.
Finally, even if using wage rates from
a metropolitan county to set the
prevailing wage rate in an adjacent rural
area were to result in a higher prevailing
wage rate than under the current policy,
such a result would not ‘‘exclude’’ any
bidders. As noted above in response to
the Senators’ comments on the 30percent rule proposal, a higher required
prevailing wage rate does not exclude
bidders because all bidders are equally
required to pay the same wage rate. See
section III.B.1.ii.A. The potential that
some contractors might choose not to
bid on covered contracts is also not a
persuasive reason to abandon the
proposal. In any type of county, not just
rural counties, it may be possible that
contractors that derive competitive
advantage only by paying the lowest
wages might be disincentivized from
bidding on contracts covered by
prevailing wage requirements. Studies
have shown, however, that this
potential may be generally offset by the
incentive that prevailing wage
requirements provide for higher-skilled
contractors to bid where they might not
otherwise. See section V.F.1.154 This
conclusion is also supported by
commenters on the current proposal.
Many comments from contractor
153 The Department notes that IEC, while
generally disagreeing with the Department’s
proposal, agreed that the labor disruption argument
is not at issue where the cross-consideration of rates
is occurring within the same commuting area.
154 In 1979, when the GAO sought the
Department’s comment on its preliminary findings,
the Department criticized GAO’s conclusion that
the Department was implementing the Act in a way
that harmed local contractors in rural counties. See
1979 GAO Report, at 224–225 (appending letter
from the Department). The Department stated that
the GAO has based its conclusions on a statistically
insignificant sample of projects and on mistaken
understandings about the specific projects.
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associations supporting the current
proposal stated that appropriate
enforcement of prevailing wage
requirements provides more contractors
with the ability to pay their workers
fairly and bid on contracts on the basis
of skill and quality instead of on which
contractor will pay the lowest wage
rates. Accordingly, the Department is
not convinced that the elimination of
the strict bar will have net negative
effects on local rural contractors or rural
construction workers generally.
Although commenters did not
expressly assert as much, the
Department also considered whether the
concerns about ‘‘disruption’’ of rural
wage structures (and other comments
regarding the scope-of-consideration
regulation at § 1.7) amounted to
assertions of reliance interests in the
current regulations that would weigh
against adopting the changes in the final
rule. Contractors have not asserted, and
the Department does not believe, that
the rural wage rates or practices that the
commenters have mentioned have been
set in reliance on the Davis-Bacon wage
determination methodology. However,
to the extent they have been, and
required prevailing wage rates may rise
as a result of the rulemaking, the
barriers for such contractors to increase
wage rates when working on DBRAcovered projects are not unreasonably
high, given that any new wage rates will
apply only to new contracts—with
limited exceptions reflected in
§ 1.6(c)(2)(iii) and discussed in section
III.C. (‘‘Applicability Date’’) below—and
contractors can adjust their bids or
future negotiations on contract pricing
as necessary to accommodate them. In
instances where required wage rates
may fall instead of rise, and specifically
where they may fall from a CBA rate,
the potential for disruption may be
greater. In those circumstances, it is
possible that contractors who have
agreed to be bound by a CBA may have
done so in part relying on the existence
of CBA-based prevailing rates for work
on Federal contracts. Notwithstanding
this possibility, the Department has
determined that it is preferable to
eliminate the absolute bar on crossconsideration to allow the
determination of wage rates to more
often occur based on smaller geographic
groupings.
The Department has also considered
that the concern about labor disruption
was discussed by the D.C. Circuit when
it upheld the strict bar in 1983. See
Donovan, 712 F.2d at 618–19. The
Donovan decision noted the
Department’s apparent reliance on the
labor-disruption argument in the 1981–
1982 rulemaking, and the court then
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broadly stated that the Department’s
reasoning ‘‘makes sense.’’ Id. at 619. The
underlying holding in Donovan,
however, was that situations ‘‘where
there is insufficient data from a given
civil subdivision to determine a
prevailing wage,’’ represent ‘‘interstitial
areas’’ of the statute, regarding which
Congress had granted the Department
broad authority to ‘‘implement[ ] the Act
in the way necessary to achieve its
purposes.’’ Id. at 618.
Under these circumstances, a prior
holding that a rule was reasonable does
not prohibit the Department from
coming to a different conclusion at a
later date. See Home Care Ass’n of Am.
v. Weil, 799 F.3d 1084, 1092 (D.C. Cir.
2015) (holding that the Supreme Court’s
decision that prior rule was
‘‘reasonable’’ did not preclude different
approach in new rule, where the matter
was interstitial in nature and within the
agency’s discretion). Likewise, two
opposing arguments can both ‘‘make
sense.’’ Where they do, the Department
has to determine what it believes to be
the best course, taking into
consideration its expertise and any new
factual circumstances that have arisen
after the earlier decision. As various
commenters have correctly observed,
the strict bar in the 1981–1982
rulemaking has led to an increasing
reliance on data from super group and
statewide levels to calculate prevailing
wage rates. See 2011 GAO Report, at 21.
Considering this trend, the Department
has concluded that the better option is
to allow a more case-by-case analysis of
local construction labor markets—and
thus increase the number of wage
determinations that can be made with
smaller geographical aggregations of
data.
The Department disagrees with the
Senators’ comment that the proposal is
not permissible or reasonable because
the D.C. Circuit in Donovan
‘‘dismissed’’ the arguments that the
Department is now making regarding
the need to have flexibility in
geographic aggregation because of
heterogeneity in commuting patterns. In
the 1981–1982 rulemaking, unions had
argued that ‘‘importing’’ rates from
nearby metropolitan areas is justified
because workers from metropolitan
areas often perform the work in rural
areas due to shortages of skilled labor in
rural areas. 47 FR 23647. The
Department had responded, stating that
if those commenters were correct that
‘‘large numbers’’ of workers from
metropolitan areas typically work at
higher metropolitan wage rates on
projects in rural areas, then ‘‘those
higher wages would be found and
receive proper weight in surveys of
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wages paid in such areas.’’ Id. The D.C.
Circuit’s did not ‘‘dismiss’’ the
reasonableness of the unions’ argument
or suggest that Department would have
been prohibited from agreeing with the
unions. To the contrary, the court
acknowledged that ‘‘it might be true’’ in
some cases that looking to far away rural
counties ‘‘would not reveal the higher
wages that should be paid in the project
county.’’ 712 F.2d at 619. The court
held, however that the unions had not
provided a sufficient factual basis to
‘‘overturn the Secretary’s informed
exercise of authority.’’ Id.
In the years since the Donovan
decision, the practical experience of
making wage determinations based on
the strict bar has highlighted a flaw in
the Department’s prior reasoning. The
Department’s hypothetical during the
1981–1982 rulemaking, and the court’s
analysis of it, did not grapple with
factual circumstances in which the
geographical aggregation rule in fact
applies. In practice, the question of
cross-consideration of metropolitan and
rural county data only arises when a
wage survey finds that there is not
sufficient current wage data in a county
to determine a prevailing wage rate for
a particular classification. Only then
does the Department consider looking to
‘‘surrounding counties’’ for comparable
data. The fact that there may not have
been sufficient similar projects in a
county during the most recent survey
period, as measured by the wage survey,
however, does not reflect on what the
wage rates are or would be on such
projects when they do occur. In such a
circumstance, the relevant question is
not whether ‘‘large numbers’’ of workers
from the metropolitan county have been
working in the adjacent county during
the survey period at metropolitan rates
sufficient to set the prevailing wage.
Rather, the question is whether the
metropolitan-adjacent rural county is
sufficiently part of a local construction
labor market that it is reasonable to set
the prevailing wage rate closer to the
rates in the nearby metropolitan
counties that are also part of that labor
market than to a lower (or higher) rate
of a farther-away rural county. As noted,
wage rates in a metropolitan-adjacent
rural county may be similar to a nearby
metropolitan county not only because
metropolitan-county workers may
routinely travel to the adjacent county
to work, but also because workers who
live in the rural county can command a
similar wage rate to the adjacent
metropolitan area because the rural
county is sufficiently economically
intertwined with it.
At the time this question reached the
D.C. Circuit in Donovan, it was
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sufficiently abstract that the court
reasonably deferred to the Department’s
expertise. However, the imposition of
the strict bar has given rise to many
examples where the Department has
overlooked indicia of economic
integration solely because a county is
not a part of an OMB-designated MSA.
As discussed above, one example is
where a micropolitan county is part of
a combined statistical area with a
neighboring MSA—thus sharing a
certain level of measurable economic
integration—or where there is evidence
that a particular contractor community
operates regularly in a geographic area
that transcends an MSA’s boundaries.
Under such circumstances, there is
sufficient reason to use data from the
neighboring MSA to set wage rates
where there otherwise is not sufficient
current wage data in the county. The
D.C. Circuit’s decision in Donovan does
not suggest otherwise.
The Department has also considered
IEC’s argument that the proposal would
incentivize workers to work on rural
projects instead of taking jobs in
metropolitan areas, leading to an
increase in the costs of metropolitan
projects to attract workers. The
Department agrees with the principle
underlying IEC’s comment—that if two
projects are in counties that are within
commuting distance, then they will
likely be competing for the labor of
many of the same construction workers.
This principle explains why the
Department believes it can be
appropriate to consider a metropolitan
county’s wage rates when there is not
sufficient data in a neighboring rural
county instead of relying on a farther
away rural county or counties that may
have much more limited connections to
any metropolitan labor market.
The Department, however, does not
believe that adopting a metropolitan
county’s prevailing wage rates for an
adjacent rural county will have the
broad effect IEC anticipates so as to
warrant maintaining the strict bar. The
first problem with IEC’s argument is that
it begins with the assumption that the
‘‘true’’ prevailing rate in the rural
county is significantly different than the
rate in the neighboring metropolitan
county, even though the two counties
may be within commuting distance of
one another and therefore within the
same local construction labor market.
As a related matter, IEC also necessarily
must be assuming that most
construction workers in the two-county
market live in the rural county and
would therefore be willing to accept a
lower rate in order to avoid commuting.
While this may be true in some labor
markets, it will not be true in others. If
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most skilled construction workers reside
in populous metropolitan counties, it
may already be necessary for projects in
nearby rural counties to pay wages
commensurate with metropolitan rates
(or even a premium above metropolitan
rates) to attract sufficient workers from
the metropolitan core, as is exemplified
by the structure of many CBA ‘‘zone
rates,’’ discussed in section
III.B.1.ii.(A).(4). Finally, IEC’s
hypothetical assumes a finite number of
workers, which ignores the potential
that additional significant construction
projects (and any related increase in
wage rates) may attract new workers to
a labor market. In sum, there is
significant variation in construction
labor markets, and this variation
suggests that the Department should
have the flexibility to create county
groupings through which it can attempt
to account for these differences.
The D.C. Circuit’s decision in
Donovan is helpful for addressing the
question that the Senators raised
regarding whether the proposal to relax
the strict bar is consistent with the
legislative history of the Act and with
the Department’s historical practice
prior to the 1981–1982 rulemaking. In
Donovan, the district court had struck
down the strict bar, as the D.C. Circuit
explained, ‘‘almost exclusively on what
it saw as a longstanding and consistent
administrative practice contrary to the
proposed regulations.’’ 712 F.2d at 619
(citing the two district court decisions
below). The D.C. Circuit noted that the
Department’s administrative practice
had not been ‘‘quite as consistent’’ as
the district court had stated. Id. (citing
the 1977 Manual of Operations and the
Carter Administration rule).
Nonetheless, the D.C. Circuit opinion
did not turn on this question. Rather, it
stated that ‘‘[m]ore fundamentally’’ it
was reversing the district court and
upholding the strict bar because ‘‘prior
administrative practice carries much
less weight when reviewing an action
taken in the area of discretion,’’ such as
the interstitial question of how to make
wage determinations in counties that do
not have sufficient current wage data.
Id.
In any case, the current proposal to
relax the strict bar is consistent with the
Department’s prior practice before the
1981–1982 rulemaking. In that
rulemaking, the Department
acknowledged that the strict bar was a
departure from the prior status quo,
stating that the Department had
determined ‘‘that its past practice of
allowing the use of wage data from
metropolitan areas in situations where
sufficient data does not exist within the
area of a rural project is inappropriate.’’
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47 FR 23647. As both the D.C. Circuit
and the Senators noted, although there
was no strict bar on cross-consideration
from 1935 until the 1981–1982
rulemaking, the Department’s
procedures were not necessarily
uniform over that time period. In the
late 1970s, while no strict bar existed in
the regulations, the Department’s
Manual of Operations document
provided that ‘‘generally’’ it would not
mix such data. See 712 F.2d at 619
(citing the 1977 Manual of Operations).
This description, however, would be a
fair description of the expected effects
of the Department’s current proposal.
There are two reasons why, as a
practical matter, the Department will
‘‘generally’’ not combine metropolitan
and rural data under the current
proposal. First, aside from the
exceptions of multi-county projects and
highway projects described above, no
cross-consideration will occur for any
county (rural or metropolitan) for which
a survey results in sufficient current
wage data to make a wage
determination. Second, even when there
is no sufficient current wage data in a
rural county, the Department will
generally not need to combine the
available rural wage data with
metropolitan data as part of the
surrounding-counties grouping. For
rural counties surrounded by other rural
counties, the Department will usually
look only to these neighboring rural
counties as part of the surroundingcounties grouping. The only crossconsideration at the surroundingcounties grouping will generally be
where a ‘‘rural county’’ shares a border
with a metropolitan county and
reasonably can be considered to be part
of the local construction labor market.
While the Department’s proposal may
not be exactly the same as prior
administrative practice, Donovan
instructs that the Department is not
bound to apply geographic aggregation
only in the same way as it has before as
long as the Department has a reasonable
basis for a new proposal that is
consistent with the purposes of the Act.
The Department believes that it is more
consistent with the purpose of the Act
to maintain sufficient flexibility in the
wage determination process so as to
adequately consider the heterogeneity of
‘‘rural counties’’ and avoid
unnecessarily depressing (or increasing)
prevailing wage rates in metropolitanadjacent counties by referring to faraway
rural counties before considering
whether neighboring metropolitan
county rates might reasonably be
considered to prevail under the
circumstances. It is also more consistent
with the Act to seek to make prevailing
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wage determinations at smaller levels of
geographic aggregation in order to better
track local area practices.
(3) Defining ‘‘Surrounding Counties’’
A number of commenters responded
to the Department’s request for
comment regarding whether there was a
need for additional definition within the
regulatory text of the first level of
geographic aggregation, which is
currently referred to in the regulations
as ‘‘surrounding counties.’’ 29 CFR
1.7(b). Of the three options that the
Department presented in the NPRM,
commenters favored either Option 1 (to
leave the description the same) or
Option 3 (to include in the regulatory
text a definition of ‘‘surrounding
counties’’ as a ‘‘contiguous local
construction labor market’’).155
The III–FFC supported defining
‘‘surrounding counties’’ as contiguous
construction labor markets because it
would give the Department the
flexibility to use OMB designations, but
also allow the use of additional
evidence on a case-by-case basis to
determine if OMB designations are too
narrow for a given construction market.
III–FFC also supported this option
because, unlike the second option the
Department had proposed, it would
allow the Department to make
predetermined county groupings or
make determinations on a case-by-case
basis. The NCDCL noted that the
California State prevailing wage rules
contain a similar definition, instructing
the consideration of rates ‘‘in the nearest
labor market area.’’ Cal. Lab. Code
section 1773.9(b)(1). NCDCL
commented that a county grouping
methodology based on the nearest labor
market area is the best way to effectuate
the purpose of the DBRA by ‘‘ensur[ing]
that prevailing wage rates actually
reflect the wages paid to workers in the
labor market they work in.’’ The FTBA
155 No commenters favored the second option,
which would have relied only on counties sharing
a border with the county in need. As noted, that
option would have made predetermined groupings
virtually impossible—even groupings based solely
on OMB’s statistical area designations as under
current procedures. The Department is not adopting
the second option for that reason. In the NPRM, the
Department also stated that it was considering one
more option of more explicitly tailoring the ban on
combining metropolitan and rural data so that it
applies only at the ‘‘surrounding counties’’ level,
but not at the statewide level or an intermediate
level. The Department received no comments
regarding this option. While limiting the ban to
‘‘surrounding counties’’ but allowing crossconsideration at higher levels would be more
beneficial than the current regulations, it would not
allow the Department the flexibility of identifying
metropolitan-adjacent rural counties that can
reasonably be added to metropolitan surroundingcounties groupings. Accordingly, the final rule does
not adopt that option.
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supported this definition as the best for
reflecting the most relevant wage and
benefits data ‘‘in areas in which the
labor pool is not limited to a single
county.’’
Commenters opposed to the
Department’s proposal stated that none
of the Department’s proposed options
adequately explained what other
approaches it would be using (instead of
relying on OMB ‘‘metropolitan’’
designations) to expand geographic
aggregation when necessary. AGC stated
generally that ‘‘metro and rural data
should not be mixed’’; it clarified,
however, that it may be appropriate to
combine county data when counties
‘‘are economically related and part of
the same sphere of influence.’’ AGC also
asserted that the Department should
‘‘retain flexibility in this matter instead
of prescriptiveness’’ because ‘‘[e]very
state, county, city and especially
construction market is unique.’’ With
regard to the Department’s specific
proposals, AGC requested that the
Department set specific definitions and
limitations to how it would identify a
‘‘contiguous local construction labor
market’’ and recommended the
Department instead use ‘‘defined market
approaches.’’
The Department has elected to retain
the reference to ‘‘surrounding counties’’
without further definition in the
regulatory text, given that the term
already has accrued meaning through
litigation in the ARB. See Chesapeake
Housing, ARB No. 12–010, 2013 WL
5872049. As noted, a surroundingcounties grouping generally should be a
contiguous group of counties that
approximate a local labor market, either
through the adoption of OMB
designations or on the basis of some
other appropriate evidence of economic
relationship between the included
counties. The Department agrees with
AGC that construction markets can be
unique, and it makes sense to retain
flexibility and avoid prescriptiveness.156
Accordingly, while the Department has
identified certain potentially
appropriate types of surroundingcounties groupings (for example,
following the lines of OMB ‘‘combined
statistical areas’’), there may be other
methodologies to identify whether
counties are reasonably within the same
156 AGC did not explain what it meant by its
suggestion to use ‘‘defined market’’ approaches. The
Department interprets AGC comment as opposing
the second option posed in the NPRM (of using
only neighboring counties to the county with
insufficient data), because such a policy would not
allow the use of predetermined county groups that
are the same for all of the counties in the group.
The Department agrees that the second option
would have been administratively infeasible and
has not adopted it for that reason.
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local construction labor market and thus
can be appropriately grouped together
as ‘‘surrounding counties.’’ For
example, as the Department noted in the
NPRM, the Department could rely on
county groupings in use by State
governments for state prevailing wage
laws, as long as they are contiguous
county groupings that reasonably can be
characterized as ‘‘surrounding
counties.’’ Notwithstanding this
flexibility, it will generally not be
appropriate to include noncontiguous
counties within a surrounding-counties
grouping; all of the counties within a
first-level grouping should border at
least one other county in the grouping.
Having considered the comments
received regarding the proposal to
eliminate the strict bar and to retain the
surrounding-counties grouping, the
Department has decided to adopt the
language of § 1.7(a) and (b) as proposed
in the NPRM.
(B) Other Proposed Changes to § 1.7
The Department proposed several
other changes to § 1.7. These included
non-substantive changes to the wording
of each paragraph in § 1.7 to clarify that
the threshold for expansion in each one
is insufficient ‘‘current wage data.’’ The
Department also sought comment on
whether the existing definition of
‘‘current wage data’’ should be retained
or amended to narrow or expand its
scope. The existing regulation now
defines ‘‘current wage data’’ in § 1.7(a)
as ‘‘data on wages paid on current
projects or, where necessary, projects
under construction no more than 1 year
prior to the beginning of the survey or
the request for a wage determination, as
appropriate.’’ The Department did not
receive any comments regarding the
definition or these non-substantive
changes, and the final rule has
accordingly adopted the nonsubstantive changes as proposed and
does not modify the definition of
‘‘current wage data.’’
The Department also proposed
amendments to § 1.7(c) to better
describe the process for expanding from
the surrounding-counties level to
consider data from an intermediary
level (such as the current super-group
level) before relying on statewide data.
In the proposed regulatory text, the
Department described this second level
of county groupings as ‘‘comparable
counties or groups of counties in the
State.’’ The Department stated that this
proposed ‘‘comparable counties’’
language in § 1.7(c) would allow the
Department to continue to use the
procedure described in Chesapeake
Housing of combining various
surrounding-counties groups (such as
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57589
MSAs) or various non-contiguous
groups of rural counties to create super
groups. The proposal also included
reference in § 1.7(c) to the use of
statewide data, but only ‘‘if necessary.’’
The Department received only a few
substantive comments regarding the
proposal for clarifying the use of
intermediate and statewide county
groupings in § 1.7(c). The labor
organization REBOUND requested
additional information about how
intermediate groupings would be
selected and expressed concern that the
analysis for determining comparable
counties could involve statistical
analyses that could be the subject of
political manipulation. NAHB
expressed concern about eliminating the
bar on cross-consideration of rural and
urban data at the super group and
statewide level. They stated that the
proposal did not provide sufficient
clarity about whether at each level it
would adopt a single rate that combines
both metropolitan and rural data. The
comment from the group of U.S.
Senators disagreed with the
Department’s reasoning that the
purposes of the Act are better served by
using combined statewide data to
determine the prevailing wage, when
the alternative could be to fail to
publish a wage rate at all. Conversely,
NCSHA supported the proposal, stating
that it is important in particular in rural
areas to ensure that as much data as
possible can be considered so that there
are more classifications published on
wage determinations.
The Department intended the
proposed changes to § 1.7(c) to be
clarifying as opposed to substantive.
The current regulation does not
specifically mention the intermediate
super-group county grouping. Rather, as
the ARB stated in the Chesapeake
Housing case, the existing regulations
‘‘implicitly’’ permit their use. ARB No.
12–010, 2013 WL 5872049, at *1. In the
Chesapeake Housing case, the ARB
explained that WHD’s practice was to
create ‘‘super groups’’ by using the same
OMB designations that are currently
used at the surrounding-counties level
to create super groups of either rural or
metropolitan counties. Id. at *3. If there
were still not sufficient data, WHD
would expand further to a statewide
level, still divided along metropolitan
and rural lines, combining data for all
rural counties or all metropolitan
counties in the state. Id. While the ARB
found that the existing regulations
permitted the use of super groups, the
Department believes it is preferable to
have regulatory language that expressly
notifies parties of the practice and
provides basic guidance regarding how
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these intermediate groupings will be
identified.
The Department, however, does not
agree with REBOUND that further
specificity is needed regarding the
composition of intermediate groupings.
The Department intends the word
‘‘comparable’’ in proposed § 1.7(c) to
apply both to ‘‘counties’’ and ‘‘groups of
counties.’’ Thus, in order for counties or
groups of counties to be grouped
together in an intermediate grouping for
the purposes of § 1.7(c), WHD will need
to identify county characteristics that
are similar between the groupedtogether counties and justify grouping
them together as a fallback if there is not
sufficient current wage data at the
surrounding-counties group level. As
with the surrounding-counties grouping,
it would be consistent with this
language to continue to identify
intermediate groupings using OMB
designations. Further specificity in the
regulatory text is unwarranted because
of the wide variety in size and
composition of the states in which wage
determinations are conducted. For some
smaller states, as in the Virginia survey
at issue in Chesapeake Housing, the
intermediate groupings may effectively
be statewide groupings of counties that
share an OMB designation.157 For
others, there may be a sufficient number
of counties and variation among them to
justify the creation of intermediate
groupings of counties that do not
encompass all of a certain OMBdesignated (or otherwise specified)
category of counties in a state.
The Department anticipates that the
intermediate county groupings
discussed in § 1.7(c) will generally be
composed of combinations of
comparable surrounding-counties
groupings. Thus, if there are several
surrounding-counties groupings in a
state that are each based on an MSAanchored combined statistical area, then
it may be appropriate to create
intermediate groupings by grouping
together all of the counties that are
included within those combined
statistical areas. Likewise, intermediate
groupings may be formed out of groups
of counties that are included in multiple
surrounding-counties groups that are
made up solely of ‘‘rural’’ counties that
157 In Chesapeake Housing, WHD had used a
‘‘super group’’ intermediate grouping that consisted
of all metropolitan counties and independent cities
in eastern Virginia including those from the DC
MSA, the Richmond MSA, and the Norfolk-Virginia
Beach MSA. ARB No. 12–010, 2013 WL 5872049,
at *3. The ARB noted that this grouping was in fact
the same as it would have been had the Department
used ‘‘statewide’’ data segregated along
metropolitan and rural county lines, because the
‘‘super group’’ included all of the MSAs in the state.
Id. at *5–6.
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are not included in any combined MSA.
Depending on the size of the State,
number of counties, and complexity of
local construction labor markets, it may
also be appropriate to create multiple
levels of intermediate groupings that
initially combine only the most similar
surrounding-counties groupings, before
making larger intermediate-grouping
combinations.
With regard to the final grouping—
statewide data—NAHB requested
clarification regarding whether
‘‘metropolitan’’ and ‘‘rural’’ counties
will be grouped together statewide
before (or instead of) considering a
single rate that combines all counties.
The proposal did not require a
particular procedure. Given the
flexibility discussed for the intermediate
county groupings, the Department does
not believe that there is need to specify
that statewide data must be considered
along binary ‘‘rural’’ and ‘‘metropolitan’’
lines before it is ultimately combined as
a last fallback before older data can be
used. This is because the highest level
of intermediate grouping the
Department can design will effectively
be statewide grouping of comparable
counties. The Department would only
use fully combined statewide data
(combining all counties in a state,
without regard for any designation) if
current wage data at the intermediate
grouping level is not sufficient to make
a wage determination.158 The
Department agrees with NCSHA that the
proposal (and, specifically, the
possibility of using fully combined
statewide data) provides a valuable
benefit of making it possible for the
Department to publish more
classifications on rural wage
determinations in particular.
Having considered the comments
regarding the intermediate and
statewide county groupings procedure
in § 1.7(c), the Department adopts the
language of § 1.7(c) as proposed.
viii. Section 1.8 Reconsideration by
the Administrator
In the NPRM, the Department
proposed to revise §§ 1.8 and 5.13 to
explicitly provide procedures for
reconsideration by the Administrator of
decisions, rulings, or interpretations
made by an authorized representative of
the Administrator. Parts 1 and 5 both
define the term ‘‘Administrator’’ to
mean the WHD Administrator or an
authorized representative of the
Administrator. See 29 CFR 1.2(c), 5.2(b).
Accordingly, when parties seek rulings,
158 In addition, the language of § 1.7(c) in the final
rule permits, but does not require, the use of
statewide data.
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interpretations, or decisions from the
Administrator regarding the DavisBacon labor standards, it is often the
practice of the Department to have such
decisions made in the first instance by
an authorized representative. After an
authorized representative issues a
decision, the party may request
reconsideration by the Administrator.
The decision typically provides a time
frame in which a party may request
reconsideration by the Administrator,
often within 30 days.
To provide greater clarity and
uniformity, the Department proposed to
codify this practice and clarify how and
when a reconsideration may be sought.
First, the Department proposed to
amend § 1.8, which concerns
reconsideration of wage determinations
and related decisions under part 1. The
Department proposed to provide that if
a decision for which reconsideration is
sought was made by an authorized
representative of the Administrator, the
interested party seeking reconsideration
may send such a request to the WHD
Administrator. The Department
proposed that requests for
reconsideration must be submitted
within 30 days from the date the
decision is issued, and that this time
period may be extended for good cause
at the Administrator’s discretion upon a
request by the interested party. Second,
the Department proposed to amend
§ 5.13, which concerns rulings and
interpretations under parts 1, 3, and 5,
to similarly provide for the
Administrator’s reconsideration of
rulings and interpretations issued by an
authorized representative. The
Department proposed to apply the same
procedures for such reconsideration
requests in § 5.13 as apply to
reconsideration requests under § 1.8.
The Department also proposed to divide
§§ 1.8 and 5.13 into paragraphs for
clarity and readability, and to add email
addresses for parties to submit requests
for reconsideration and requests for
rulings or interpretations.
The Department received two
comments regarding this proposal, one
from REBOUND, a non-profit
organization; and another from a former
director of REBOUND. These comments
did not oppose the proposed changes,
but suggested that the regulations also
explicitly provide for a level of review
prior to review by the Administrator,
and that such review be conducted by
an individual who was not connected in
any way with the original decision. The
comments indicated that intermediate
review often occurs under current
practice, but rarely results in reversal of
the original decision because the
individuals who perform such review
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are often either the same individuals
who rendered the original decision or
their managers. The comments agreed
that if done properly, intermediate
review can resolve cases more promptly
without the need to appeal to the
Administrator, but suggested that
without a requirement that such review
be independent, it will not accomplish
this goal because reviewers will be
reluctant to overturn decisions that they
made in the first instance.
After considering the comments
above, the Department retains the
language as proposed. The final rule
permits an intermediate level of review
without requiring it, and, as the
commenters noted, in many instances
an intermediate level of review is
provided. The language similarly allows
for reconsideration requests to be
considered by agency personnel who
were or were not involved in the
original decision, as the circumstances
warrant. The Department believes that it
is important for the regulations to
preserve such administrative flexibility
when handling reconsideration requests
so that the Department can properly
allocate its resources. Agency staff are
able to consider and help respond to
reconsideration requests with
objectivity regardless of whether they
played any role in the underlying
decision, and resource constraints make
it infeasible to adopt a blanket rule that
intermediate review cannot be handled
by anyone who participated in the
original decision. Moreover, as the
commenters note, intermediate
decisions are appealable to the
Administrator. The Department
therefore declines to codify specific
procedures or requirements for
intermediate-level reconsideration and
adopts the change as proposed.
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ix. Section 1.10
Severability
The Department proposed to add a
new § 1.10, titled ‘‘Severability.’’ The
proposed severability provision
explained that each provision is capable
of operating independently from one
another, and that if any provision of part
1 is held to be invalid or unenforceable
by its terms, or as applied to any person
or circumstance, or stayed pending
further agency action, the Department
intended that the remaining provisions
remain in effect.
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed. An expanded discussion of
severability is below in section III.B.5.
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x. References to Website for Accessing
Wage Determinations
The Department proposed to revise
§§ 1.2, 1.5, and 1.6 to reflect, in more
general terms, that wage determinations
are maintained online, without a
reference to a specific website.
The current regulations reference
Wage Determinations OnLine (WDOL),
previously available at https://
www.wdol.gov, which was established
following the enactment of the EGovernment Act of 2002, Public Law
107–347, 116 Stat. 2899 (2002).
WDOL.gov served as the source for
Federal contracting agencies to use
when obtaining wage determinations.
See 70 FR 50887 (Aug. 26, 2005).
WDOL.gov was decommissioned on
June 14, 2019, and SAM, specifically
https://sam.gov/content/wagedeterminations, became the
authoritative and single location for
obtaining DBA general wage
determinations.159 The transition of
wage determinations onto SAM was part
of the Integrated Award Environment
(IAE), a government-wide initiative
administered by GSA to manage and
integrate multiple online systems used
for awarding and administering Federal
financial assistance and contracts.160 To
avoid outdated website domain
references in the regulations should the
domain name change in the future, the
Department proposed to use the more
general term ‘‘Department of Laborapproved website,’’ which would refer
to any official government website the
Department approves for posting wage
determinations.
The Department received a question
from Montana Lines Inc. asking how the
location of the Department-approved
website would be communicated to
contractors. The Department currently
publicizes the online location of wage
determinations, SAM, in various
resource materials (fact sheets,
frequently asked questions, and WHD’s
PWRB) and in multiple prominent
locations on the Department’s website.
Promptly following publication of this
final rule, WHD will update the PWRB
and other resources to refer to the SAM
website. Should there be a change in
domain, the Department would
announce such change and make
changes to appropriate materials and
websites. The Department believes that
159 ‘‘WDOL.gov Decommissioning Approved by
IAE Governance: System Set to Transition to
beta.SAM.gov on June 14, 2019,’’ GSA Interact (May
21, 2019), https://interact.gsa.gov/blog/wdolgovdecommissioning-approved-iae-governance-systemset-transition-betasamgov-june-14-2019.
160 About This Site, System for Award
Management, https://sam.gov/content/about/thissite.
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such an approach is preferable to
codifying the website location in
regulatory text that can become
outdated if the location changes.
HarringtonMitova LLC requested that
the Department make all DBRA relevant
information, presumably including
wage determinations, accessible from a
single website. The Department notes
that while this specific proposal is
beyond the scope of this rulemaking,
WHD’s website contains extensive, wellorganized materials regarding the
DBRA, including information regarding
Davis-Bacon wage surveys and
compliance principles, and that general
wage determinations are available
through a single, government-wide
website (specifically SAM, the official
website of the U.S. Government for the
Federal award process) for the ease and
convenience of the contracting
community. NFIB commented that the
website for viewing wage
determinations should be ‘‘at no cost
and without any condition of access
such as registration, a unique identifier,
or submission of any information.’’
NFIB also suggested that such language
be added to § 1.5(a). SAM, the current
website, is an improved and streamlined
government-wide website administered
by GSA that integrates multiple online
systems used for awarding and
administering Federal financial
assistance and contracts. Access to
search or obtain wage determinations on
this website is free and does not require
registration or the submission of any
information other than the details of the
wage determination being requested
(project location and/or construction
type). The Department intends to
maintain these features in the future and
does not believe it is necessary to codify
them in the regulations.
The UA commented that the proposal
does not substantively alter the practice
for publication of wage determinations
and suggested that the Department
require the applicable wage
determination(s) for a specific project,
as well as any conformances that were
granted for the project, to be published
online. Although the Department
appreciates this suggestion, it is beyond
the scope of the current rulemaking,
which did not address whether to
require the online publication of the
specific wage determinations and
conformances applicable to each
particular DBRA-covered project. The
Department also notes that interested
parties such as contracting agencies and
contractors should be able to identify
the wage determination that applies to
a given project, as such wage
determinations are included in the
contract documents, and that 29 CFR
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5.5(a)(1)(i) already requires contractors
and subcontractors to post wage
determinations, including conformed
classifications and wage rates, in a
prominent and accessible place at the
site of the work where it can be easily
seen by the workers.
The final rule therefore adopts this
change as proposed.
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xi. Appendices A and B to Part 1
The Department proposed to remove
Appendices A and B to 29 CFR part 1
and make conforming technical edits to
sections that reference those provisions.
Appendix A lists statutes related to the
Davis-Bacon Act that require the
payment of wages at rates
predetermined by the Secretary of
Labor, and Appendix B lists local offices
of the WHD. As the Department
explained in the NPRM, these
appendices are no longer current and
updated information contained in both
appendices can be found on WHD’s
website at https://www.dol.gov/
agencies/whd/. Specifically, a listing of
statutes requiring the payment of wages
at rates predetermined by the Secretary
of Labor under the Davis-Bacon Act can
be found at https://www.dol.gov/
agencies/whd/government-contracts,
and a listing of WHD local offices can
be found at https://www.dol.gov/
agencies/whd/contact/local-offices.
The Department received one
comment in response to this proposal.
The UA supported the Department’s
approach, stating that outdated
information presents problems, such as
suggesting a narrower scope of DavisBacon coverage (Appendix A), or
directing potential complainants to
incorrect resources (Appendix B). The
Department agrees and adopts this
change as proposed.
xii. Frequently Conformed Rates
The Department proposed to revise
§§ 1.3 and 5.5 to provide that, where
WHD has received insufficient data
through its wage survey process to
publish a prevailing wage for a
classification for which conformance
requests are regularly submitted, WHD
nonetheless may list the classification
and wage and fringe benefit rates for the
classification on the wage
determination, provided that the three
basic criteria for conformance of a
classification and wage and fringe
benefit rate have been satisfied: (1) the
work performed by the classification is
not performed by a classification in the
wage determination; (2) the
classification is used in the area by the
construction industry; and (3) the wage
rate for the classification bears a
reasonable relationship to the wage rates
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contained in the wage determination.
The Department specifically proposed
that the wage and fringe benefit rates for
these classifications be determined in
accordance with the ‘‘reasonable
relationship’’ criterion that is currently
used in conforming missing
classifications pursuant to current 29
CFR 5.5(a)(1)(ii)(A). The Department
welcomed comments regarding all
aspects of this proposal.
WHD determines DBA prevailing
wage rates based on wage survey data
that contractors and other interested
parties voluntarily provide. See 29 CFR
1.1–1.7. When WHD receives robust
participation in its wage surveys, it is
able to publish wage determinations
that list prevailing wage rates for
numerous construction classifications.
However, in some instances survey
participation may be limited,
particularly in surveys for residential
construction or in rural areas, thereby
preventing WHD from receiving
sufficient wage data to publish
prevailing wage rates for various
classifications generally necessary for a
particular type of construction.
When a wage determination lacks a
wage rate for a classification of work
that is necessary for performance of
DBRA-covered construction, the missing
classification and an appropriate wage
rate must be added to the wage
determination on a contract-specific
basis through the conformance process.
Conformance is the process by which a
classification and wage and fringe
benefit rate are added to an existing
wage determination applicable to a
specific DBRA-covered contract. See 29
CFR 5.5(a)(1)(ii)(A). When, for example,
a wage determination lists only certain
skilled classifications such as carpenter,
plumber, and electrician (because they
are the skilled classifications for which
WHD received sufficient wage data
through its survey process), the
conformance process is used at the
request of a contracting agency to
provide a contractor that has been
awarded a contract with minimum wage
rates for other necessary classifications
(such as, in this example, painters and
bricklayers).
‘‘By design, the Davis-Bacon
conformance process is an expedited
proceeding created to ‘fill in the gaps’ ’’
in an existing wage determination, with
the ‘‘narrow goal’’ of establishing an
appropriate wage rate for a classification
needed for performance of the contract.
Am. Bldg. Automation, Inc., ARB No.
00–067, 2001 WL 328123, at *3 (Mar.
30, 2001). As a general matter, WHD is
given ‘‘broad discretion’’ in setting a
conformed wage rate, and the
Administrator’s decisions ‘‘will be
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reversed only if inconsistent with the
regulations, or if they are unreasonable
in some sense[.]’’ Millwright Loc. 1755,
ARB No. 98–015, 2000 WL 670307, at *6
(May 11, 2000) (internal quotations and
citations omitted). See, e.g., Constr.
Terrebonne Par. Juvenile Justice
Complex, ARB No. 17–0056, 2020 WL
5902440, at *2–4 (Sept. 4, 2020)
(reaffirming the Administrator’s ‘‘broad
discretion’’ in determining appropriate
conformed wage rates); Courtland
Constr. Corp., ARB No. 17–074, 2019
WL 5089598, at *2 (Sept. 30, 2019)
(same).
The regulations require the following
criteria be met for a proposed
classification and wage rate to be
conformed to a wage determination: (1)
the work to be performed by the
requested classification is not performed
by a classification in the wage
determination; (2) the classification is
used in the area by the construction
industry; and (3) the proposed wage
rate, including any bona fide fringe
benefits, bears a reasonable relationship
to the wage rates in the wage
determination. See 29 CFR
5.5(a)(1)(ii)(A).
Pursuant to the first conformance
criterion, WHD may approve a
conformance request only where the
work of the proposed classification is
not performed by any classification on
the wage determination. WHD need not
‘‘determine that a classification in the
wage determination actually is the
prevailing classification for the tasks in
question, only that there is evidence to
establish that the classification actually
performs the disputed tasks in the
locality.’’ Am. Bldg. Automation, 2001
WL 328123, at *4. Even if workers
perform only a subset of the duties of a
classification, they are still performing
work that is covered by the
classification, and conformance of a
new classification thus would be
inappropriate. See, e.g., Fry Bros. Corp.,
WAB No. 76–06, 1977 WL 24823, at *6
(June 14, 1977). In instances where the
first and second conformance criteria
are satisfied and it has been determined
that the requested classification should
be added to the contract wage
determination, WHD will address
whether the third criterion has also been
satisfied, i.e., whether ‘‘[t]he proposed
wage rate, including any bona fide
fringe benefits, bears a reasonable
relationship to the wage rates’’ in the
wage determination.
WHD typically receives thousands of
conformance requests each year. In
some instances, including instances
where contractors are unaware that the
work falls within the scope of work
performed by an established
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classification on the wage
determination, WHD receives
conformance requests where
conformance plainly is not appropriate
because the wage determination already
contains a classification that performs
the work of the proposed classification.
In other instances, however,
conformance is necessary because the
applicable wage determination does not
contain all of the classifications that are
necessary to complete the project. The
need for conformances due to the
absence of necessary classifications on
wage determinations reduces certainty
for prospective contractors in the
bidding process, who may be unsure of
what wage rate must be paid to laborers
and mechanics performing work on the
project, and taxes WHD’s resources.
Such uncertainty may cause contractors
to underbid on construction projects
and subsequently pay less than the
required prevailing wage rates to
workers.
To address this issue, the Department
proposed to revise 29 CFR 1.3 and
5.5(a)(1) to expressly authorize WHD to
list classifications and corresponding
wage and fringe benefit rates on wage
determinations even when WHD has
received insufficient data through its
wage survey process. Under this
proposal, for key classifications or other
classifications for which conformance
requests are regularly submitted,161 the
Administrator would be authorized to
list the classification on the wage
determination along with wage and
fringe benefit rates that bear a
‘‘reasonable relationship’’ to the
prevailing wage and fringe benefit rates
contained in the wage determination,
using essentially the same criteria under
which such classifications and rates are
currently conformed by WHD pursuant
161 As explained in WHD’s PWRB, WHD has
identified several ‘‘key classifications’’ normally
necessary for one of the four types of construction
(building, highway, heavy, and residential) for
which WHD publishes general wage
determinations. See supra note 19, Davis-Bacon
Surveys at 6. The PWRB contains a table that lists
the key classifications for each type of construction.
The table, which may be updated periodically as
warranted, currently identifies the key
classifications for building construction as heat and
frost insulators, bricklayers, boilermakers,
carpenters, cement masons, electricians, iron
workers, laborers (common), painters, pipefitters,
plumbers, power equipment operators (operating
engineers), roofers, sheet metal workers, tile setters,
and truck drivers; the key classifications for
residential construction as bricklayers, carpenters,
cement masons, electricians, iron workers, laborers
(common), painters, plumbers, power equipment
operators (operating engineers), roofers, sheet metal
workers, and truck drivers; and the key
classifications for heavy and highway construction
as carpenters, cement masons, electricians, iron
workers, laborers (common), painters, power
equipment operators (operating engineers), and
truck drivers. Id.
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to current § 5.5(a)(1)(ii)(A)(3). In other
words, for a classification for which
conformance requests are regularly
submitted, and for which WHD received
insufficient data through its wage
survey process, WHD would be
expressly authorized to essentially ‘‘preapprove’’ certain conformed
classifications and wage rates, thereby
providing contracting agencies,
contractors, and workers with advance
notice of the minimum wage and fringe
benefits required to be paid for those
classifications of work. WHD would list
such classifications and wage and fringe
benefit rates on wage determinations
where: (1) the work performed by the
classification is not performed by a
classification in the wage determination
for which a prevailing wage rate has
been determined; (2) the classification is
used in the area by the construction
industry; and (3) the wage rate for the
classification bears a reasonable
relationship to the prevailing wage rates
contained in the wage determination.
The Administrator would establish
wage rates for such classifications in
accordance with proposed
§ 5.5(a)(1)(iii)(A)(3). Contractors would
be required to pay workers performing
work within such classifications at no
less than the rates listed on the wage
determination. Such classifications and
rates on a wage determination would be
designated with a distinct term,
abbreviation, or description to denote
that they essentially reflect preapproved conformed rates rather than
prevailing wage and fringe benefit rates
that have been determined through the
Davis-Bacon wage survey process.
These rates would apply to the
applicable classification without the
need to submit a conformance request in
accordance with current
§ 5.5(a)(1)(ii)(A)–(C). However, if a
contracting agency, contractor, union, or
other interested party has questions or
concerns about how particular work
should be classified—and, specifically,
whether the work at issue is performed
by a particular classification included
on a wage determination (including
classifications listed pursuant to this
proposal) as a matter of local area
practice or otherwise, the contracting
agency should submit a conformance
request in accordance with § 5.5(a)(1) or
seek guidance from WHD pursuant to 29
CFR 5.13. Moreover, under the proposal,
contracting agencies would still be
required to submit conformance
requests for any needed classifications
not listed on the wage determination,
which would be approved, modified, or
disapproved as warranted after award of
the contract, as required by the
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57593
regulatory provisions applicable to
conformance requests.
The Department also proposed to add
language to § 5.5(a)(1) to state that the
conformance process may not be used to
split or subdivide classifications listed
in the wage determination, and that
conformance is appropriate only where
the work which a laborer or mechanic
performs under the contract is not
within the scope of any classification
listed on the wage determination,
regardless of job title. This language
reflects the principle that conformance
is not appropriate when the work of the
proposed classification is already
performed by a classification on the
wage determination. See 29 CFR
5.5(a)(1)(ii)(A)(1). Even if workers
perform only some of the duties of a
classification, they are still performing
work that is covered by the
classification, and conformance of a
new classification thus would be
inappropriate. See, e.g., Fry Bros. Corp.,
WAB No. 76–06, 1977 WL 24823, at *6
(contractor could not divide carpentry
work between carpenters and carpenter
tenders in order to pay a lower wage
rate for a portion of the work; under the
DBA, it is not permissible to divide the
work of a classification into several
parts according to the contractor’s
assessment of each worker’s skill and to
pay for such division of the work at less
than the specified rate for the
classification). The proposed regulatory
language is also in line with the
principle that WHD must base its
conformance decisions on the work to
be performed by the proposed
classification, not on the contractor’s
own classification or perception of the
workers’ skill. See 29 CFR 5.5(a)(1)(i)
(‘‘Such laborers and mechanics shall be
paid the appropriate wage rate and
fringe benefits . . . for the classification
of work actually performed, without
regard to skill . . . .’’); see also, e.g.,
Tele-Sentry Sec., Inc., WAB No. 87–43,
1987 WL 247062, at *7 (Sept. 11, 1987)
(workers who performed duties falling
within the electrician classification
must be paid the electrician rate
regardless of the employer’s
classification of workers as laborers).
The Department encouraged comments
on this proposal.
The Department also proposed to
make non-substantive revisions to
current § 5.5(a)(1)(ii)(B) and (C) to more
clearly describe the conformance
request process, including by providing
that contracting officers should submit
the required conformance request
information to WHD via email using a
specified WHD email address.
The Department also proposed
changes relating to the publication of
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rates for frequently conformed
classifications. The Department’s
proposed changes to this paragraph are
discussed in section III.B.1.xii
(‘‘Frequently conformed rates’’),
together with proposed changes to § 1.3.
The Department also proposed to add
language to the contract clauses at
§ 5.5(a)(1)(vi), (a)(6), and (b)(4) requiring
the payment of interest on any
underpayment of wages or monetary
relief required by the contract. This
language is consistent with and would
be subject to the proposed discussion of
interest in 29 CFR 5.10 (Restitution,
criminal action), which requires that
calculations of interest be carried out at
the rate specified by the Internal
Revenue Code for underpayment of
taxes and compounded daily.
(A) Discussion of Comments
A number of contractors, unions,
industry trade associations, and elected
officials expressed support for the
proposed change. See, e.g., Braswell
DM; International Brotherhood of
Electrical Workers (IBEW); NABTU;
SMACNA; several members of the U.S.
House of Representatives from Illinois.
Many unions, associations, and
individual commenters stated that
proactively adding ‘‘missing
classifications to wage determinations
using existing standards under the
conformance process, will guard against
abuses, and enhance predictability in
bidding.’’ International Union of
Bricklayers and Allied Craftworkers; see
also West Central Illinois Building and
Construction Trades Council. Many of
these same commenters also stated that
the Department’s proposal is in line
with Congressional intent to preserve
key craft classifications, quoting the
admonition in Fry Brothers that there
would be little left of the Davis-Bacon
Act if contractors were permitted to
‘‘classify or reclassify, grade or subgrade
traditional craft work’’ as they wished.
WAB No. 76–06, 1977 WL 24823, at *6.
Many commenters also voiced concern
that unscrupulous contractors
frequently subdivide classifications
listed on wage determinations under the
current system in order to fabricate low
wage subclassifications. See, e.g.,
Affiliated Construction Trades
Foundation. In expressing support for
the Department’s proposal, these
commenters stated that proactively
adding missing classifications to wage
determinations when survey data is
insufficient will help guard against such
abuse.
III–FFC highlighted that ‘‘[p]reapproving frequently conformed rates
will significantly improve a process that
otherwise causes unnecessary delay and
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is an inefficient use of WHD resources.’’
They also stated that the Department’s
proposal ‘‘will significantly improve the
conformance process to the benefit of all
parties involved with Davis-Bacon
covered projects.’’ The Department
agrees.
Several commentors agreed with the
proposed changes but also offered
suggestions for improvement. The
Related Urban Development Group
suggested that classifications for which
conformance requests are regularly
submitted ‘‘should more closely reflect
industry standards,’’ and said, for
example, that glazing/windows, when
delivered to a worksite, should be
installed by carpenters and not glazers.
The Department notes that all relevant
factors, including local area practice, are
considered when resolving questions
regarding the type of work performed by
a classification. The Department
reiterates that if a contracting agency,
contractor, union, or other interested
party has questions or concerns about
how particular work should be
classified—and, specifically, whether
the work at issue is performed by a
particular classification included on a
wage determination (including
classifications listed pursuant to this
regulatory revision) as a matter of local
area practice or otherwise—the
contracting agency should submit a
conformance request in accordance with
§ 5.5(a)(1) or seek guidance from WHD
pursuant to 29 CFR 5.13.
AWHA encouraged the Department to
identify in wage determinations which
classifications and wage rates were preapproved. The Department stated in the
NPRM that such classifications and
rates on a wage determination would be
designated with a distinct term,
abbreviation, or description to denote
that they essentially reflect preapproved conformed rates rather than
prevailing wage and fringe benefit rates
that have been determined through the
Davis-Bacon wage survey process.
AWHA also urged the Department to
‘‘set a clear timeline for responding to
the contracting entity’’ in cases where
there is no pre-approved conformance
and the Department still must respond
to a conformance request The
Department notes that current 29 CFR
5.5(a)(1)(ii)(C) (which is being
recodified at 29 CFR 5.5(a)(1)(iii)(C))
already states that the Administrator, or
an authorized representative, will issue
a determination within 30 days of
receipt or will notify the contracting
officer within the 30-day period if
additional time is necessary.
While generally supportive of the
Department’s proposal, the International
Union of Elevator Constructors (IUEC)
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misinterpreted the Department’s
proposal to apply only to classifications
that are considered a ‘‘key
classification,’’ i.e., one that is
‘‘normally necessary for one of the four
types of construction.’’ Based on this
misinterpretation, IUEC requested the
Department acknowledge elevator
mechanic as a ‘‘key classification’’ for at
least building construction. As noted in
its proposal, adding pre-approved
classifications to wage determinations is
not limited to ‘‘key classifications.’’
Rather, the Department’s proposal also
encompassed other classifications for
which conformance requests are
regularly submitted.
AGC agreed that the proposal to
include frequently conformed rates in
wage determinations constituted a
‘‘logical preemptive action by the
Department to provide contractors more
information upfront in the contract
bidding and award process.’’ AGC,
however, encouraged the Department to
revise its wage survey process to
increase the ‘‘collection of accurate
utilizable wage data’’ through increased
survey participation.
Several commentors generally
supported the revisions to §§ 1.3(f) and
5.5(a)(1)(ii) and requested stakeholder
involvement prior to implementation.
LIUNA, for example, requested that preapproved conformed rates not be
designated unless stakeholders have an
opportunity in advance to provide input
to WHD. COSCDA similarly encouraged
WHD to involve stakeholders and
suggested a pilot or trial development
on a smaller scale to help address any
issues ahead of a wider launch. Other
commenters requested additional
clarification on the precise methodology
that would be employed for preapproving certain conformed
classifications and wage rates. The
FTBA asked whether the Department
would set rates based on previously
conformed rates and ‘‘whether or how
conformed rates would be updated on
wage determinations.’’ SMART and
SMACNA suggested adopting
safeguards to ensure that the preapproval process does not result in the
‘‘deskilling’’ of highly skilled trades.
SMART and SMACNA proposed to
include a prohibition (similar to
proposed § 5.5(a)(1)(B)) against using
the pre-approval process to split or
subdivide classifications in § 1.3(f).
SMART and SMACNA, while noting
that AAM 213 was an improvement in
WHD’s administration of conformances,
cautioned that WHD’s use of an ‘‘overly
broad ‘skilled crafts’ category
advantages some trades and
disadvantages others depending upon
the relative skill levels of individual
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trades.’’ Concerned that AAM 213 does
not accurately address the disparity in
skill sets among skilled crafts, SMART
and SMACNA recommended the
regulatory text be revised to explicitly
require WHD to determine which
classification already listed in the wage
determination is ‘‘most comparable in
terms of skill’’ to the class of employee
being conformed.
As stated in the NPRM, the
Department will ensure that (1) the
work performed by the classification is
not performed by a classification in the
wage determination for which a
prevailing wage rate has been
determined; (2) the classification is used
in the area by the construction industry;
and (3) the wage rate for the
classification bears a reasonable
relationship to the prevailing wage rates
contained in the wage determination.
The Administrator would establish
wage rates for such classifications in
accordance with proposed
§ 5.5(a)(1)(iii)(A)(3).
The Department believes that the
conformance process, including the
reasonable relationship process already
discussed in detail in AAM 213 and in
other publicly available resource
materials, is responsive to the concerns
commenters raised. AAM 213 states that
‘‘to determine a ‘reasonable
relationship,’ the requested additional
classification is compared to the
classifications on the applicable wage
determination within the same
category.’’ AAM 213 illustrates that a
‘‘proposed skilled craft classification is
compared to skilled classifications in
the wage determination; a proposed
laborer classification is compared to
existing laborer classifications; a
proposed power equipment operator
classification is compared to existing
power equipment operator
classifications; and a proposed truck
driver classification is compared to
existing truck driver classifications.’’
AAM 213 further clarifies that when
considering a conformance request for a
skilled classification, WHD generally
considers the entirety of the rates for the
skilled classifications on the applicable
wage determination and looks to where
the proposed wage rate falls within the
rates listed on the wage determination.
AAM 213 notes that whether the wage
rates in the applicable category (skilled
craft, laborer, power equipment
operator, truck driver, etc.) in the wage
determination are predominantly union
prevailing wage rates or predominantly
weighted average wage rates should be
considered when proposing rates for an
additional classification. For example, if
a wage determination contains
predominantly union prevailing wage
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rates for skilled classifications, it
typically would be appropriate to look
to the union sector skilled
classifications in the wage
determination and the rates for those
classifications when proposing a wage
rate for the additional classification.
Conversely, if a wage determination
contains predominantly weighted
average wage rates for skilled
classifications, it typically would be
appropriate to look to the weighted
average/non-union sector skilled
classifications in the wage
determination and the rates for those
classifications when proposing a wage
rate for the additional classification. The
Department believes that the process for
determining reasonable relationship is
sufficiently explained in existing
materials and does not need to be
expanded in the regulation, particularly
since the ARB has repeatedly affirmed
WHD’s application of AAM 213. See
System Tech, Inc., ARB No. 2020–0029,
at *4 (ARB May 25, 2021); Constr.
Terrebonne Par. Juvenile Justice
Complex, ARB No. 2017–0056, 2020 WL
5902440, at *2; Courtland Construction
Corp., ARB No. 17–074, 2019 WL
5089598, at *2; Velocity Steel, Inc., ARB
No. 16–060 (ARB May 29, 2018).
Additional clarification, if needed, will
be through subregulatory guidance.
Similarly, although the Department
does not plan to implement this
regulatory change on a pilot or trial
basis, or to provide for stakeholder
review of pre-approved conformed wage
rates before they are issued, the
Department will be available to respond
to questions and concerns regarding
particular rates, and interested parties
may also challenge particular
classifications pursuant to 29 CFR 1.8
and/or seek a formal response to
questions or concerns regarding
conformed wage rates pursuant to 29
CFR 5.13. In response to SMART and
SMACNA’s specific concerns about the
potential subdivision of classifications,
the Department notes that classification
decisions will be made in accordance
with relevant legal precedent and
subregulatory guidance, including the
decision in Fry Brothers and other
precedent regarding classification and
subregulatory guidance such as AAM
213. The Department thus declines
SMART and SMACNA’s proposal to
revise the regulatory text to explicitly
require WHD to determine which
classification already listed in the wage
determination is ‘‘most comparable in
terms of skill’’ to the class of employee
being conformed; rather, determinations
of the appropriate wage rate will be
made in accordance with currently
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established principles, including those
reflected in the existing conformance
regulations, as revised by this rule, and
AAM 213 and similar guidance.
The IEC opposed the proposal,
contending that ‘‘this change eliminates
contractors’ rights to dispute a proposed
classification and wage rate, currently
found at 29 CFR 5.5(a)(1)(ii)(C).’’
Although the dispute mechanism cited
by the IEC will not apply to preapproved classifications and wage rates,
the Department notes that, as reflected
above, interested parties have the right
to dispute these classifications and wage
rates prior to contract award pursuant to
29 CFR 1.8.
CC&M did not state whether they
supported or opposed adding
conformed rates to wage determinations,
but they provided suggestions on how to
improve the conformance process and
related matters. In particular, this
commenter proposed that contractors
seeking a conformance be required to
submit scopes of work and backup
documentation relating to wage and
fringe benefits proposed; that
contractors should be allowed to apply
a wage classification and rate from one
wage determination to another type of
work without submitting a conformance
when multiple wage determinations are
applicable to a project; and that
contractors should be allowed to adopt
conformed wage rates from the same
county that are contained in a different
determination, presumably including
from wage determinations that are not
included in the DBRA-covered contract.
The Department is not adopting such
suggestions, which could be viewed as
beyond the scope of this rulemaking, as
they would require regulatory changes
that were not proposed, and which are
contrary to established procedures and
requirements applicable to conformed
classifications and wage rates, including
the settled principle that a contractor
‘‘may not rely on a wage determination
granted to another party regardless of
the similarity of the work in question’’
and also may not prospectively rely on
WHD’s prior approval of conformed
classifications and rates for application
to a different contract performed at the
same location. E&M Sales, Inc., WAB
No. 91–17, 1991 WL 523855, at *2–3
(Oct. 4, 1991); see also Inland Waters
Pollution Control, Inc., WAB No. 94–12,
1994 WL 596585, at *5 (Sept. 30, 1994).
As for CC&M’s separate proposal that
‘‘once a conformance is granted, it could
be included in the next update for the
prevailing wage determination in that
particular jurisdictional area,’’ the
Department notes that the conformancerelated regulatory change it is adopting
concerns only classifications for which
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conformance requests are frequently
occurring, not all conformance requests.
In certain instances, where conformance
requests pertaining to a classification
are sufficiently recurring, WHD may in
fact publish a pre-approved conformed
wage rate on the next modification of a
particular wage determination.
In opposition to the Department’s
proposal, ABC stated that the
Department can better meet its
objectives in §§ 1.3 and 5.5(a)(1) by
calculating missing prevailing wage
rates using BLS data and using
statistical modeling. The Department
has explained in section III.B.1.ii.A.1
why the Department declines to use BLS
data to determine prevailing wages. For
the same reasons, using BLS data to
determine a reasonable relationship to
rates on the wage determination is
inappropriate.
The Department does not believe
additional language or further changes
are necessary and the final rule adopts
§ 5.5(a)(1)(ii) and new § 1.3(f) as
proposed.
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2. 29 CFR Part 3
‘‘Anti-kickback’’ and payroll
submission regulations under section 2
of the Act of June 13, 1934, as amended,
40 U.S.C. 3145, commonly known as the
Copeland Act, are set forth in 29 CFR
part 3. This part details the obligations
of contractors and subcontractors
relative to the weekly submission of
statements regarding the wages paid on
work covered by the Davis-Bacon labor
standards; sets forth the circumstances
and procedures governing the making of
payroll deductions from the wages of
those employed on such work; and
delineates the methods of payment
permissible on such work.
i. Corresponding Edits to Part 3
The Department proposed multiple
revisions to various sections in part 3 to
update language and ensure that terms
are used in a manner consistent with the
terminology used in 29 CFR parts 1 and
5, update websites and contact
information, and make other similar,
non-substantive changes. The
Department also proposed conforming
edits to part 3 to reflect proposed
changes to part 5, such as revising § 3.2
to clarify existing definitions or to add
new defined terms also found in parts
1 and 5. The Department similarly
proposed to change certain
requirements associated with the
submission of certified payrolls to
conform to changes made to the
recordkeeping requirements in
§ 5.5(a)(3).
To the extent that those proposed
changes were substantive, the changes,
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and any comments associated with
them, are discussed below in §§ 5.2 and
5.5. The Department did not receive any
comments regarding the incorporation
of conforming changes to part 3.
Accordingly, the Department adopts
these changes as proposed, along with
additional conforming changes to reflect
revisions to corresponding language in
part 5 in the final rule.
The Department requested comment
on whether it should further consolidate
and/or harmonize the definitions in
§§ 1.2, 3.2, and 5.2 in a final rule, such
as by placing all definitions in a single
regulatory section applicable to all three
parts. The Department received one
comment in support of such a change.
UBC noted that many of the same words
and phrases are defined similarly across
the different parts and supported
consolidating the sections. UBC further
noted in their comment that
harmonizing the definitions will
‘‘benefit understanding and application
of the rule by the regulated community
and will thus decrease implementation
costs.’’ The Department appreciates
UBC’s input on this issue but declines
to make this change at this time. While
the Department received many
comments specifically in response to
proposed revisions to defined terms, no
other commenters expressed support for
consolidating all definitions in a single
regulatory section. Particularly in the
absence of any indication from other
commenters that consolidating all
definitions in a single section would be
preferable to setting forth the relevant
definitions at the beginning of each of
the key parts of the DBRA’s
implementing regulations, the
Department believes that the regulated
community will find it helpful to have
the relevant definitions set forth at the
beginning of parts 1, 3, and 5.
Accordingly, the Department will
maintain definitions in §§ 1.2, 3.2, and
5.2.
The Department also proposed to
remove § 3.5(e) regarding deductions for
the purchase of United States Defense
Stamps and Bonds, as the Defense
Stamps and Bonds are no longer
available for purchase. Similarly, the
Department proposed to simplify the
language regarding deductions for
charitable donations at § 3.5(g) by
eliminating references to specific
charitable organizations and instead
permitting voluntary deductions to
charitable organizations as defined by
26 U.S.C. 501(c)(3). The Department
received no comments on these
proposals. The final rule therefore
adopts these changes as proposed.
Finally, the Department proposed to
add language to § 3.11 explaining that
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the requirements set forth in part 3 are
considered to be effective as a matter of
law, whether or not these requirements
are physically incorporated into a
covered contract, and cross-referencing
the proposed new language discussing
incorporation by operation of law at
§ 5.5(e). These proposed changes, and
the comments related to them, are
discussed further in the sections on
operation-of-law.
3. 29 CFR Part 5
The regulations at 29 CFR part 5
establish rules providing for the
payment of minimum wages, including
fringe benefits, to covered workers
engaged in construction activity covered
by the Davis-Bacon and Related Acts, as
well as establishing rules for the
enforcement of these prevailing wage
obligations. The regulations at this part
also set forth contract clauses to be
included in all covered contracts that
specify contractors’ prevailing wage and
other obligations on such contracts.
i. Section 5.1 Purpose and Scope
The Department proposed minor
technical revisions to § 5.1 to update
statutory references and delete the
listing of laws requiring Davis-Bacon
labor standards provisions, given that
any such list inevitably becomes out-ofdate due to statutory revisions and the
enactment of new Related Acts. In lieu
of this listing in the regulation, the
Department proposed to add new
paragraph (a)(1) to refer to the current
WHD website (https://www.dol.gov/
agencies/whd/government-contracts) or
its successor website on which a listing
of laws requiring Davis-Bacon labor
standards provisions is currently found
and regularly updated.
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed.
ii. Section 5.2
Definitions
(C) Agency, Agency Head, Contracting
Officer, Secretary, and Davis-Bacon
Labor Standards
The Department proposed to revise
the definitions of ‘‘agency head’’ and
‘‘contracting officer’’ and to add a
definition of ‘‘agency’’ to reflect more
clearly that State and local agencies
enter into contracts for projects that are
subject to the Davis-Bacon labor
standards and that they allocate Federal
assistance they have received under a
Davis-Bacon Related Act to subrecipients. These proposed definition
changes also were intended to reflect
that, for some funding programs, the
responsible Federal agency has
delegated administrative and
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enforcement authority to states or local
agencies. When the existing regulations
referred to the obligations or authority
of agencies, agency heads, and
contracting officers, they were referring
to Federal agencies and Federal
contracting officers. However, as noted
above, State or local agencies and their
agency heads and contracting officers
exercise similar authority in the
administration and enforcement of
Davis-Bacon labor standards. Because
the existing definitions defined ‘‘agency
head’’ and ‘‘contracting officer’’ as
particular ‘‘Federal’’ officials or persons
authorized to act on their behalf, which
did not clearly reflect the role of State
and local agencies in effectuating DavisBacon requirements, including by
entering into contracts for projects
subject to the Davis-Bacon labor
standards and inserting the Davis-Bacon
contract clauses in such contracts, the
Department proposed to revise these
definitions to reflect the role of State
and local agencies. The proposed
revisions also enabled the regulations to
specify the obligations and authority
held by both State or local and Federal
agencies, as opposed to obligations that
are specific to one or the other.
The Department received no
comments on this proposal. The final
rule therefore adopts these changes as
proposed.
The Department also proposed to
define the term ‘‘Federal agency’’ as a
sub-definition of ‘‘agency’’ to
distinguish those situations where the
regulations refer specifically to an
obligation or authority that is limited
solely to a Federal agency that enters
into contracts for projects subject to the
Davis-Bacon labor standards or allocates
Federal assistance under a Davis-Bacon
Related Act.
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed.
The Department also proposed to add
the District of Columbia to the
definition of ‘‘Federal agency.’’ The
DBA states in part that it applies to
every contract in excess of $2,000, to
which the Federal Government ‘‘or the
District of Columbia’’ is a party. See 40
U.S.C. 3142(a). As described above,
Reorganization Plan No. 14 of 1950
authorizes the Department to prescribe
regulations to ensure that the Act is
implemented in a consistent manner by
all agencies subject to the Act. See 15
FR 3176, 5 U.S.C. app. 1. Accordingly,
the proposed change to the definition of
‘‘Federal agency’’ in § 5.2 clarified that
the District of Columbia is subject to the
DBA and the regulations implemented
by the Department pursuant to
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Reorganization Plan No. 14 of 1950.162
The proposed change was also
consistent with the definition of
‘‘Federal agency’’ in part 3 of this title,
which specifically includes the District
of Columbia. See 29 CFR 3.2(g). The
proposed change simply reflected the
DBA’s applicability to the District of
Columbia and was not intended to
reflect a broader or more general
characterization of the District of
Columbia as a Federal Government
entity.
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed.
The Department also proposed a
change to the definition of ‘‘Secretary’’
to delete a reference to the Deputy
Under Secretary for Employment
Standards. As noted, the Employment
Standards Administration was
eliminated in a reorganization in 2009,
and its authorities and responsibilities
were devolved into its constituent
components, including WHD.
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed.
Lastly, the Department proposed a
minor technical edit to the definition of
‘‘Davis-Bacon labor standards’’ that
reflected proposed changes to § 5.1,
discussed above. The Department also
made a clarifying, non-substantive
change to the term ‘‘labor standards’’ by
calling that term ‘‘Davis-Bacon labor
standards.’’
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed.
(B) Building or Work
(1) Energy Infrastructure and Related
Activities
The Department proposed to
modernize the definition of the terms
‘‘building or work’’ by including solar
panels, wind turbines, broadband
installation, and installation of electric
car chargers to the non-exclusive list of
construction activities encompassed by
the definition. These proposed
additions to the definition were
clarifications intended to reflect the
significance of energy infrastructure and
related projects to modern-day
162 The 1973 Home Rule Act, Public Law 93–198,
transferred from the President to the District of
Columbia the authority to organize and reorganize
specific governmental functions of the District of
Columbia, but does not contain any language
removing the District of Columbia from the
Department’s authority to prescribe DBA
regulations pursuant to Reorganization Plan No. 14
of 1950.
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57597
construction activities subject to the
Davis-Bacon and Related Acts, as well
as to illustrate the types of energyinfrastructure and related activities that
are encompassed by the definition of
‘‘building or work.’’
The Department received multiple
comments on these proposed additions,
several of which favored the proposed
language. III–FFC strongly supported
the proposal, stating that the inclusion
of energy infrastructure projects on the
non-exclusive list of examples of
buildings or works ensures that DavisBacon definitions more accurately
reflect the modern construction industry
and will help ensure that workers on
such projects will receive Davis-Bacon
prevailing wages when applicable.
SMART noted that the proposed
additions will make it clear to the
regulated community that such projects
are considered buildings or work,
thereby preventing potential litigation.
LIUNA stated that this clarification will
be helpful as Federal funding for such
construction, generally performed by
construction workers, has been
increasing in recent years. Three LIUNA
local chapters also commented that the
proposed language was a useful
clarification of coverage, as did the
Alaska District Council of Laborers. The
NCDCL also noted that the proposed
clarifications were consistent with longstanding policy and that such projects
were clearly construction work.
In contrast, other commenters
opposed the proposed additions. ABC
stated that the proposed language
expanded coverage to green energy
projects, creating a large administrative
burden for developers and small
contractors that would in turn inhibit
the construction of such projects. In
support of their claim, they cited to a
2010 GAO report and a 2010 U.S.
Department of Energy (DOE) OIG report,
stating that both reports indicated that
the expansion of Davis-Bacon coverage
to green energy and weatherization
projects due to American Reinvestment
and Recovery Act of 2009 (ARRA)
funding delayed construction of such
projects and increased costs.163 An ABC
163 The GAO report stated that four Federal
funding agencies and several State and local
funding recipients indicated that because their
programs had not previously received any Related
Act funding prior to receiving funding to ARRA,
they had to establish internal infrastructure and
procedures to allow them to handle the large
increase in funding and manage the accompanying
Davis-Bacon requirements. GAO report ‘‘Project
Selection and Starts Are Influenced by Certain
Federal Requirements and Other Factors.’’ Feb.
2010. The DOE OIG report indicated that the need
to determine prevailing wages for weatherization
work and develop guidance for funding sub-
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member write-in campaign similarly
mentioned the proposed language as
one of several changes that they asserted
would increase the inflationary effects
of prevailing wage requirements and
increase the regulatory burden on
contractors, as did two individual
commenters. CIRT stated that the
inclusion of green energy projects
within the scope of Davis-Bacon
coverage would be beyond the scope of
the statute. A comment by the group of
members of the U.S. House Committee
on Education & Labor also stated that
including green energy projects within
the definition of building or work would
increase the number of small businesses
subject to the Davis-Bacon
requirements, subjecting such small
businesses to additional costs and
uncertainty.
After considering these comments, the
final rule adopts the revisions as
proposed. As noted in the proposed
rule, the inclusion of these energy
infrastructure projects in the nonexclusive list of examples of a building
or work simply provides clarification
that such projects are among the types
of buildings or works that may be
covered by the DBRA, and therefore that
Federal or federally assisted
construction of these projects will be
subject to Davis-Bacon prevailing wage
requirements when all other
requirements are met, including that the
work is pursuant to a Federal contract
under the DBA or federally funded
under a Related Act, that the project is
for construction, prosecution,
completion, and/or repair, and that the
work is performed by laborers and
mechanics and, if required under the
relevant statute, is done at the site of the
work.
Opposing comments appear to be
based on the assumption that such
projects were not previously considered
to be buildings or works that could be
subject to Davis-Bacon coverage, and
that the inclusion of these projects as
examples of a building or work would
expand this definition to previously
uncovered energy projects. However,
this is an inaccurate presumption, as
such projects already clearly fit within
the existing definition of a building or
work, which includes ‘‘without
limitation, buildings, structures, and
improvements of all types.’’ The GAO
and DOE OIG reports cited by ABC
clearly show that energy infrastructure
projects are already understood to be
within the existing definition of
building or work. For example, ARRA
did not change the definition of
recipients on Davis-Bacon requirements delayed
states’ use of ARRA weatherization funding.
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building or work; rather, it was a
Related Act that provided that projects
funded under its provisions, including
various improvements to energy
infrastructure, are covered by the DavisBacon labor standards. See ARRA sec.
406, 1606. Likewise, a number of other
Related Acts cover government-funded
energy projects,164 and the existing
regulation’s inclusion of projects such
as dams, plants, power lines, and heavy
generators makes clear that ‘‘building or
work’’ has long included the
construction of energy infrastructure
projects. Because those energy
infrastructure projects already were
buildings or works under the existing
definition, the additional Related Act
funding triggered Davis-Bacon
prevailing wage requirements for these
energy infrastructure projects. Had such
projects not already fit within the
definition of building or work, however,
Davis-Bacon prevailing wage
requirements would not have applied.
Therefore, pursuant to its authority
under Reorganization Plan No. 14 of
1950 ‘‘to prescribe appropriate
standards, regulations, and procedures’’
for the DBRA and to eliminate any
potential confusion as to whether
energy infrastructure projects should be
considered buildings or works, and to
provide some examples of those types of
projects in the non-exhaustive list, the
final rule retains the proposed language.
(2) Coverage of a Portion of a Building
or Work
The Department proposed to add
language to the definitions of ‘‘building
or work’’ and ‘‘public building or public
work’’ to clarify that these definitions
can be met even when the construction
activity involves only a portion of an
overall building, structure, or
improvement. The definition of
‘‘building or work’’ already states that
the terms ‘‘building’’ and ‘‘work’’
‘‘generally include construction activity
as distinguished from manufacturing,
furnishing of materials, or servicing and
maintenance work,’’ and includes
‘‘without limitation, buildings,
structures, and improvements of all
types.’’ 29 CFR 5.2(i). In addition, the
regulation already provides several
examples of construction activity
included within the term ‘‘building or
work’’ that do not constitute an entire
building, structure, or improvement,
such as ‘‘dredging, shoring, . . .
scaffolding, drilling, blasting,
excavating, clearing, and landscaping.’’
Id. Moreover, the current regulations
164 See https://www.dol.gov/agencies/whd/
government-contracts (List of Current Davis-Bacon
and Related Acts).
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define the term ‘‘construction,
prosecution, completion, or repair’’ to
mean ‘‘all types of work done on a
particular building or work at the site
thereof . . . including, without
limitation . . . [a]ltering, remodeling,
installation . . . ; [p]ainting and
decorating.’’ Id. § 5.2(j).
However, to further make plain that
‘‘building or work’’ includes not only
construction activity involving an entire
building, structure, or improvement, but
also construction activity involving a
portion of a building, structure, or
improvement, or the installation of
equipment or components into a
building, structure, or improvement, the
Department proposed to add a sentence
to this definition stating that ‘‘[t]he term
building or work also includes a portion
of a building or work, or the installation
(where appropriate) of equipment or
components into a building or work.’’
The Department also proposed to
include additional language in the
definition of ‘‘public building or public
work’’ to clarify that a ‘‘public building’’
or ‘‘public work’’ includes the
construction, prosecution, completion,
or repair of a portion of a building or
work that is carried on directly by
authority of or with funds of a Federal
agency to serve the interest of the
general public, even where construction
of the entire building or work does not
fit within this definition.
The Department explained that these
proposed revisions are consistent with
the Davis-Bacon Act. The concepts of
alteration or repair presuppose that only
a portion of a building, structure, or
improvement will be affected. By
specifically including the alteration or
repair of public buildings or works
within its scope of coverage, the DavisBacon Act itself necessitates that
construction activity involving merely a
portion of a building or work may be
subject to coverage.
The Department also noted that these
proposed revisions are consistent with
the Department’s longstanding policy
that a ‘‘public building’’ or ‘‘public
work’’ includes construction activity
involving a portion of a building or
work, or the installation of equipment or
components into a building or work
when the other requirements for DavisBacon coverage are satisfied. See, e.g.,
AAM 52 (July 9, 1963) (holding that the
upgrade of communications systems at
a military base, including the
installation of improved cabling,
constituted the construction, alteration
or repair of a public work); Letter from
Sylvester L. Green, Dir., Div. of Cont.
Standards Operations, to Robert Olsen,
Bureau of Reclamation (Mar. 18, 1985)
(finding that the removal and
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replacement of stator cores in a
hydroelectric generator was covered
under the Davis-Bacon Act as the
alteration or repair of a public work);
Letter from Samuel D. Walker, Acting
Adm’r, to Edward Murphy (Aug. 29,
1990) (stating that ‘‘[t]he Department
has ruled on numerous occasions that
repair or alteration of boilers,
generators, furnaces, etc. constitutes
repair or alteration of a ‘public work’ ’’);
Letter from Nancy Leppink, Deputy
Adm’r, to Armin J. Moeller (Dec. 12,
2012) (finding that the installation of
equipment such as generators or
turbines into a hydroelectric plant is
considered to be the improvement or
alteration of a public work).
The Department further explained
that the proposed revisions are
consistent with the Department’s
longstanding position that a ‘‘public
building’’ or ‘‘public work’’ may include
structures, buildings, or improvements
that will not be owned by the Federal
government when construction is
completed, so long as the construction
is carried on directly by authority of or
with funds of a Federal agency to serve
the interest of the general public.
Accordingly, the Department has long
held that the Davis-Bacon labor
standards provisions may apply to
construction undertaken when the
government is merely going to have the
use of the building or work, such as in
lease-construction contracts, depending
upon the facts and circumstances
surrounding the contract. See
Reconsideration of Applicability of the
Davis-Bacon Act to the Veteran
Admin.’s Lease of Med. Facilities, 18
Op. O.L.C. 109, 119 n.10 (May 23, 1994)
(‘‘1994 OLC Memorandum’’) (‘‘[T]he
determination whether a leaseconstruction contract calls for
construction of a public building or
public work likely will depend on the
details of the particular arrangement.’’);
FOH 15b07. In AAM 176 (June 22,
1994), WHD provided guidance to the
contracting community regarding the
DBA’s application to lease-construction
contracts, and specifically advised that
the following non-exclusive list of
factors from the 1994 OLC
Memorandum should be considered in
determining the scope of DBA coverage:
(1) the length of the lease; (2) the extent
of Government involvement in the
construction project (such as whether
the building is being built to
Government requirements and whether
the Government has the right to inspect
the progress of the work); (3) the extent
to which the construction will be used
for private rather than public purposes;
(4) the extent to which the costs of
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construction will be fully paid for by the
lease payments; and (5) whether the
contract is written as a lease solely to
evade the requirements of the DBA.
In sum, as noted above, the term
‘‘building or work’’ has long been
interpreted to include construction
activity involving only a portion of a
building, structure, or improvement. As
also noted above, a public building or
public work is not limited to buildings
or works that will be owned by the
Federal Government, but may include
buildings or works that serve the general
public interest, including spaces to be
leased or used by the Federal
Government. Accordingly, it necessarily
follows that a contract for the
construction, alteration, or repair of a
portion of a building, structure, or
improvement may be a DBA-covered
contract for construction of a ‘‘public
building’’ or ‘‘public work’’ where the
other requirements for coverage are met,
even if the Federal Government is not
going to own, lease, use, or otherwise be
involved with the construction of the
remaining portions of the building or
work. For example, as WHD has
repeatedly explained in connection with
one contracting agency’s leaseconstruction contracts, where the
Federal Government enters into a lease
for a portion of an otherwise private
building—and, as a condition of the
lease, requires and pays for specific
tenant improvements requiring
alterations and repairs to that portion to
prepare the space for government
occupancy in accordance with
government specifications—DavisBacon labor standards may apply to the
tenant improvements or other specific
construction activity called for by such
a contract. In such circumstances, the
factors discussed in AAM 176 must be
considered to determine if coverage is
appropriate, but the factors would be
applied specifically with reference to
the leased portion of the building and
the construction required by the lease.
Finally, the Department noted that
these proposed revisions would further
the remedial purpose of the DBA by
ensuring that the Act’s protections
apply to contracts for construction
activity for which the government is
responsible. Walsh v. Schlecht, 429 U.S.
401, 411 (1977) (reiterating that the DBA
‘‘was not enacted to benefit contractors,
but rather to protect their employees
from substandard earnings by fixing a
floor under wages on Government
projects’’) (citation and internal
quotation marks omitted); 1994 OLC
Memorandum, 18 Op. O.L.C. at 121
(‘‘[W]here the government is financially
responsible for construction costs, the
purposes of the Davis-Bacon Act may be
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implicated.’’). If the Davis-Bacon Act
were only applied in situations where
the Federal Government is involved in
the construction of the entire (or even
the majority of the) building or work,
coverage of contracts would be
dependent on the size of the building or
work, even if two otherwise equivalent
contracts involved the same square
footage and the government was paying
for the same amount of construction.
Such an application of coverage would
undermine the statute’s remedial
purpose by permitting publicly funded
construction contracts for millions of
dollars of construction activity to evade
coverage merely based on the size of the
overall structure or building.
Accordingly, and as noted above, the
Department proposed revisions to the
definitions of ‘‘building or work’’ and
‘‘public building or public work’’ that
served to clarify rather than change
existing coverage requirements.
However, the Department recognized
that in the absence of such clarity under
the existing regulations, contracting
agencies have differed in their
implementation of Davis-Bacon labor
standards where construction activity
involves only a portion of a building,
structure, or improvement, particularly
in the context of lease-construction
contracts. Thus, as a practical matter,
the proposed revisions would result in
broader application of Davis-Bacon
labor standards. The Department
therefore invited comment on the
benefits and costs of these proposed
revisions to private business owners,
workers, and the Federal Government,
particularly in the context of leasing.
After consideration of the comments
received, for the reasons detailed below,
the Department is adopting these
proposed revisions in this final rule,
with one additional clarification.
Several commenters expressed their
general support for the proposed
changes, indicating that they agreed that
the proposed changes would provide
additional clarification of Davis-Bacon
coverage. More specifically, IUOE stated
that this was an important change that
helps bring Davis-Bacon coverage into
the 21st century, allowing Davis-Bacon
labor standards to continue to apply to
public buildings and public works
despite the increase in non-traditional
funding and contracting methods such
as public-private partnerships, complex
bond finance schemes, leasing
agreements, and other sorts of private
involvement in public buildings and
works. III–FFC and the UA both noted
that the proposed changes would result
in Davis-Bacon coverage being more
consistently applied to contracts for
construction activity for which the
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government is responsible. UBC also
commented favorably on the proposed
changes, noting that they clarify that
Davis-Bacon coverage can exist even
when the building or work will not be
owned by the Federal Government,
while also suggesting revising the
proposed language in the definition of
‘‘public building or public work’’ to
include ‘‘the construction, prosecution,
completion, installation of equipment
(where appropriate) of components, or
repair. . . .’’ [proposed addition in
italics], to harmonize the proposed
definition of ‘‘public building or public
work’’ with the proposed language for
‘‘building or work.’’ 165
SMART agreed with the Department
that Davis-Bacon coverage should not be
determined by the size of the building
or work, or portion of the building or
work, and stated that the proposed
changes would ensure that the entire
regulated community would have
consistent information as to DavisBacon applicability when bidding for
government contracts and meeting
prevailing wage obligations. SMART
also found the legal authority cited in
support of the proposed change
persuasive, noting that not only did the
authority involve the application of
Davis-Bacon coverage to portions of a
building or work or the installation of
equipment, but also that none of the
cases considered the fact that the
construction only involved a portion of
a building or work to be in any way
worthy of comment when applying
coverage. SMART further agreed that
the concept of alteration or repair,
included in the DBA itself, pre-supposes
that coverage is applicable to a portion
of a building or work, pointing out that
this position is ‘‘fully consistent with
decades of interpretations of dozens of
work functions and construction
activities.’’ SMART further
recommended that the Department
amend the proposed definition of
building or work to state that ‘‘[t]he term
building or work also includes a portion
of a building or work, or the installation
(where appropriate) of equipment or
components into a building or work at
a primary construction site or a
secondary construction site’’ [proposed
165 In suggesting this additional regulatory
language, UBC indicated that this language was
already contained in the Department’s proposed
definition of ‘‘building or work.’’ However, the
Department’s proposed definition of ‘‘building or
work’’—specifically, the language ‘‘installation
(where appropriate) of equipment or
components’’—is slightly different than the
language proposed by UBC. The Department
interprets UBC’s comment as intending to propose
that the Department include ‘‘installation (where
appropriate) of equipment or components’’ in the
definition of ‘‘public building or public work.’’
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addition in italics]. SMART stated that
this proposed addition would clarify
that the installation of equipment or
components into a building or work
being constructed at another site should
be included in determining whether a
‘‘significant portion’’ of the building or
work is being constructed at that other
site, such that it should be considered
a secondary site of work. SMART also
requested that the Department add
language stating that the proposed
definition of ‘‘portion’’ in ‘‘building or
work,’’ with no size parameter or
limitation, has the same meaning in the
definition of the ‘‘site of the work,’’ such
that the construction of a ‘‘portion,’’
regardless of size, is covered work
whether it takes place on the primary or
secondary site.
The Department agrees with the above
comments that the changes proposed by
the Department codify long-standing
principles of Davis-Bacon coverage, will
result in a more consistent application
of Davis-Bacon coverage, and will
support the remedial purpose of the
DBA. The Department analyzes the
additional regulatory changes proposed
by these commenters at the end of this
section.
Some commenters disagreed with the
Department’s proposal based on
assertions that the proposed change
conflicts with the decision of the U.S.
Court of Appeals for the District of
Columbia Circuit (D.C. Circuit) in
District of Columbia v. Dep’t of Labor,
819 F.3d 444 (D.C. Cir. 2016)
(CityCenterDC). In particular, ABC
stated that the court in CityCenterDC
‘‘found that lease agreements similar to
agreements described in the NPRM did
not qualify as ’contracts for
construction’ even though construction
was contemplated on portions of
buildings pursuant to the lease(s)’’ and
that imposing Davis-Bacon ‘‘coverage in
the absence of federal funding was
unlawful.’’ AGC similarly asserted that
CityCenterDC held that the ‘‘DBA
cannot reasonably be read to cover
construction contracts to which the
[Federal government] is not a party,’’
and claimed that the proposed changes
would unlawfully eliminate the
coverage requirement that the Federal
Government must be a party to a
contract for construction. NAHB
expressed the view that the portion of
the existing definition of ‘‘public
building or public work,’’ which
provides that a public building or work
must be ‘‘carried on directly by
authority of or with funds of a Federal
agency to serve the interest of the
general public’’ (emphasis added), was
inconsistent with CityCenterDC, on the
grounds that CityCenterDC made clear
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that DBA coverage applies to publiclyfunded construction projects and/or
those which are owned or operated by
the government, and not to projects that
merely serve the ‘‘public interest.’’
The Department does not find the
comments relating to CityCenterDC
persuasive. In that case, private
developers leased land from the District
of Columbia and entered into
development agreements under which
the land would be used as the site of a
new mixed-use development, to include
shops, restaurants, a hotel, other private
retail business, and private residential
units. CityCenterDC, 819 F.3d at 447.
The developers paid the District of
Columbia for the lease of the land, so
that money flowed from the developers
to the government rather than from the
government to the developers. Id. The
District of Columbia (1) did not provide
any funding for the construction of the
project, through a lease or any other
contractual arrangement, as the
developers were leasing from and
paying money to the government, (2)
would not own or operate any portion
of the project upon its completion, and
(3) did not propose to occupy any
portion of the space or offer any services
there. Id. On these unusual facts, the
D.C. Circuit held that the District did
not enter into a contract for construction
of the project. Id. at 450–51 (explaining
that the District entered into contracts
that ‘‘refer[red] to the eventual
construction that the Developers would
pay for’’ (emphasis added)); id. at 453
(‘‘DC did not expend funds for the
construction of CityCenterDC. Quite the
opposite. The Developers make
substantial rental payment to DC’’). In
reaching this conclusion, the court
observed that a finding of Davis-Bacon
coverage would constitute a ‘‘sudden[]
exten[sion]’’ of the Act. Id. at 450. The
court therefore explicitly distinguished
the CityCenterDC situation from various
other cases where, over the course of
decades, the DBA had been held
applicable to leases, because those other
cases involved situations where, ‘‘unlike
[CityCenterDC], the Government was the
lessee not the lessor, and the leases
required construction for which the
Government would pay de facto through
its rental payments.’’ 166 Id. at 450 n.3.
166 In distinguishing these cases, the court did not
express disagreement with the Department’s
longstanding interpretation that a contract is for
construction if ‘‘more than an incidental amount of
construction-type activity is involved in the
performance of a government contract.’’ Mil. Hous.,
Fort Drum, WAB No. 85–16, 1985 WL 167239, at
*4 (Aug. 23, 1985) (determining that contracts to
lease housing units for military families that were
to be built on private land to the specifications of
the Department of the Army were contracts for
construction for purposes of the DBA). See, e.g.,
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Separately from its conclusion that the
District did not enter into a contract for
construction, the D.C. Circuit
determined that CityCenterDC was not a
covered project for the independent
reason that CityCenterDC was not a
public building or work, stating that a
project must at least have either public
funding or government ownership or
operation to be considered a public
building or public work, and that
CityCenterDC had neither. Id. at 451–54.
The proposed changes to the
definition of a public building or work,
adopted in this final rule, do not
eliminate the requirement that the
Federal Government enter into a
contract for construction for the DBA to
be applicable. As reflected not only in
the CityCenterDC decision but also in
the statute itself, coverage under the
DBA applies to ‘‘every contract in
excess of $2,000, to which the Federal
Government or the District of Columbia
is a party, for construction, alteration, or
repair, including painting and
decorating, of public buildings and
public works.’’ 40 U.S.C. 3142(a). The
requirement that the Federal
Government enter into a contract for
construction and the requirement that
such a contract for construction must be
for a public building or public work are
two distinct requirements, both of
which must be satisfied for the DBA to
apply to a contract. The changes to the
definitions of ‘‘building or work’’ and
‘‘public building or public work’’
described here simply provide that the
construction of a portion of a building
or work may still be considered a public
building or work, even where the entire
building or work is not owned, leased
by, or to be used by a Federal agency.
These revisions do not eliminate or
affect the separate requirement under
the DBA that the Federal government
enter into a ‘‘contract . . . for
construction.’’
Phx. Field Off., Bureau of Land Mgmt., ARB No. 01–
010, 2001 WL 767573, at *8–9 (June 29, 2001)
(concluding that the DBA applied to a lease by the
Bureau of Land Management of a building and
storage facility to be built for the Bureau’s use);
Crown Point, Ind. Outpatient Clinic, WAB No. 86–
33, 1987 WL 247049, at *2–3 (June 26, 1987)
(holding that Davis-Bacon coverage applied to the
Veteran Administration’s lease of an outpatient
clinic to be constructed under the terms of the
lease), enforced sub nom., Bldg. & Constr. Trades
Dep’t, AFL–CIO v. Turnage, 705 F. Supp. 5, 6
(D.D.C. 1988). See also, e.g., Choctawhatchee Elec.
Coop., Inc., ARB Case No. 2017–0032, 2019 WL
3293926, at *6 (June 14, 2019) (CHELCO)
(distinguishing CityCenterDC based on its
‘‘controversial facts’’ and affirming WHD
Administrator’s determination that an electric
utility privatization contract was a ‘‘contract for
construction’’ under the DBA where the
privatization contract called for significant
construction that was at least heavily funded by the
Federal government).
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Moreover, contrary to commenters’
contentions, CityCenterDC did not hold
that lease-construction contracts like
those discussed in the NPRM are not
contracts for construction. As
mentioned, the D.C. Circuit explicitly
distinguished the CityCenterDC
development from contracts in which
the Federal Government or District of
Columbia pays a third party to lease
land and requires construction,
alteration, or repair as a condition of the
lease. CityCenterDC, 819 F.3d at 450 &
n.3; AAM 222 (Jan. 11, 2017), at 7.
Specifically, in CityCenterDC, the
District of Columbia was leasing land to
a private developer that was paying the
government to use the land to build a
new mixed-use development entirely for
private use. There was no agreement
that the District of Columbia would
own, operate, lease, or even use any
portion of the development once
completed, and therefore there was no
agreement requiring construction of a
government-owned, operated or leased
portion. In contrast, in the NPRM’s
lease-construction agreement example,
the Federal Government leases a portion
of a building from a private developer
or owner—and, as a condition of the
lease, requires and pays for specific
tenant improvements requiring
alterations and repairs to the leased
portion to ensure that the space meets
the requirements for government
occupancy or use.
The Department similarly does not
agree that the proposed revisions extend
Davis-Bacon coverage to any project
involving a portion of a building or
work that is in the general public
interest. The revised definitions still
require the construction, prosecution,
completion, or repair of that portion of
the building or work to be carried on
directly by authority of or with funds of
a Federal agency and that the
construction of the portion of the
building or work serve the interest of
the general public.
Nor does the Department agree that
maintaining the requirement that
construction projects must serve the
public interest contradicts the holding
in CityCenterDC. The D.C. Circuit held
that, at minimum, a public building or
work must have either public funding or
government ownership or operation,
consistent with the existing definition
and the proposed changes. See
CityCenterDC, 819 F.3d at 452 n.5, 453
n.6 (suggesting that 29 CFR 5.2(k)
requires public funding for construction
but not government ownership or
operation but explicitly noting that the
court was not resolving the question of
whether either one of the two
characteristics was alone sufficient for a
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project to be a public work). By stating
that the construction of the building or
work must serve the general public
interest, the definition recognizes that
while government ownership or
operation is one indication that the
building or work serves the public
interest sufficiently to be considered a
public building or work, a project that
receives Federal funding without
government ownership or operation
may still fulfill a significant need or goal
of the relevant Federal agency and serve
the general public interest. See AAM
222, at 8; see also United States ex rel.
Noland Co. v. Irwin, 316 U.S. 23, 28
(1942) (holding that a privately-owned
library building at Howard University
was a public work for purposes of the
Miller Act, relying on the definition of
‘‘public works’’ in the National
Industrial Recovery Act, Public Law 73–
90, 48 Stat. 201 (June 16, 1933)—from
which the Department’s regulatory
definition is derived—because the
project received Federal funding and
because the ‘‘education of youth in the
liberal arts and sciences’’ fulfills a
public interest).
Some commenters also expressed
concerns with the proposed changes on
grounds that were unrelated to the
CityCenterDC decision. NAHB noted
that the proposed language does not
include a threshold for the amount of or
degree of work that must be performed
to trigger Davis-Bacon requirements for
buildings where the construction of a
portion of the building is ‘‘carried on by
authority of . . . a Federal agency to
serve the interest of the general public.’’
NAHB recommended that such a
limitation, similar to the ‘‘significant
portion’’ language in the existing and
proposed ‘‘site of the work’’ definition,
be incorporated into the proposed
‘‘building or work’’ definition, or
alternatively that the Department should
adopt a monetary threshold. NAHB
noted that although the proposed
changes might be intended to clarify
coverage, confusion among contracting
agencies may still arise if agencies are
inconsistent in their interpretation of
the added language regarding DavisBacon coverage of portions of a building
or work, or misunderstand the other
elements of the definition, and that
subregulatory interagency guidance
therefore may also be needed to address
such potential confusion. Commenters
participating in a write-in campaign also
expressed concern about the
applicability of Davis-Bacon
requirements to improvements to
private buildings or works, with
governmental leasing as one of multiple
listed items that the commenters
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contended would increase regulatory
burdens and costs for contractors on
projects that have not typically been
subject to Davis-Bacon coverage. Such
commenters, however, did not express
any specific concerns regarding the
definitions of ‘‘building or work’’ or
‘‘public building or public work.’’
The Department also does not agree
with NAHB’s assertion that the
inclusion of an additional size or dollar
threshold in the definition of ‘‘public
building or public work’’ is necessary,
because the DBA already imposes a
dollar threshold for coverage. The
revised definition does not alter this
threshold, but instead merely clarifies
that where the construction of a portion
of a building or work is carried on
directly by authority of or with funds of
a Federal agency to serve the interest of
the general public, that portion of a
building or work is a public building or
public work to which DBA coverage
applies if the Act’s $2,000 dollar
threshold is satisfied. The revised
definition does not automatically extend
DBA coverage in this scenario to
construction not called for in the
contract, i.e., of the entire building or
work. Nor does it alter the long-standing
requirements and analysis needed to
determine whether an entire building or
work is a public building or public
work. In other words, where the
government has entered into a contract
in excess of $2,000 for the construction,
alteration, or repair of a public building
or public work, the contract will be
subject to DBA requirements regardless
of whether the contract applies only to
a portion of a building or work or to an
entire building or work. To apply an
additional threshold beyond the
statutory $2,000 threshold to contracts
for construction of a portion of a
building or work would result in the
arbitrary exclusion of otherwise-covered
contracts from Davis-Bacon coverage.
The Department does not agree with
SMART’s suggestion to add language to
the regulation stating that the proposed
definition of ‘‘portion’’ in ‘‘building or
work’’, without any size parameter or
other threshold, has the same meaning
as the word ‘‘portion’’ in the term
‘‘significant portion’’ in the existing
definition of ‘‘site of the work.’’ The
term ‘‘portion’’ is not defined, and the
Department simply intends that it be
given its ordinary meaning, that is, a
part of a whole. However, the final rule
specifically defines the term ‘‘significant
portion’’ for purposes of the definition
of a ‘‘secondary construction site.’’ The
final rule explains that ‘‘significant
portion’’ is limited to instances where
an entire portion or module of a
building or work, such as a completed
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room or structure, is constructed offsite
with minimal construction work
remaining. This term is necessarily
more limiting than ‘‘portion,’’ and is
used in a specific context, and therefore
Department does not believe it would be
helpful to insert any language that could
be read to suggest that the two terms are
equivalent.
The Department also declines to
adopt SMART’s suggestion to amend the
proposed definition of building or work
to state that ‘‘[t]he term building or work
also includes a portion of a building or
work, or the installation (where
appropriate) of equipment or
components into a building or work at
a primary construction site or a
secondary construction site’’ [proposed
addition in italics]. Although the
Department agrees, as explained above,
that the installation of components and
equipment into a building or work or
portion thereof is construction work, the
Department does not believe that it
would be appropriate to incorporate
references to ‘‘site of the work’’
elements into the definition of ‘‘building
or work.’’ This is because the ‘‘building
or work’’ requirement applies even
under statutes whose application is not
limited to the site of the work and so
applies to all work performed by
laborers and mechanics in the
development of a project, as discussed
further below.
Finally, the Department agrees with
UBC’s suggestion to revise the proposed
definition of ‘‘public building or public
work’’ to include the installation (where
appropriate) of equipment or
components in order to harmonize the
revised definition of ‘‘public building or
public work’’ with the revised definition
of ‘‘building or work.’’ As the examples
discussed in the NPRM and earlier in
this section clearly indicate, installation
of equipment or components has long
been considered to be covered
construction activity, and the
Department agrees that including
corresponding language in both
definitions may clarify that such
installation may similarly be considered
a public building or work when the
other requirements are met. In such
circumstances, the installation may be
considered a public building or work
even where the equipment or
components are being installed in a
larger structure that may not be a public
building or work. For example, where
the installation of equipment such as
wind turbines or electric car chargers is
carried on directly by authority of or
with funds of a Federal agency to serve
the interest of the general public, such
installation would be considered a
public building or work even where
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such installation takes place at a private
facility. Similarly, when a Federal
agency enters into a long-term lease of
office space in an otherwise privately
owned and occupied building, and the
lease provides for the installation of
equipment, at government expense and
in accordance with government
specifications, in the portion of the
building that the Federal Government is
leasing and occupying in order to
provide public services, the installation
of such equipment would be the
construction of a public building or
public work subject to Davis-Bacon
labor standards.
Accordingly, for the reasons
discussed, the Department is adopting
the proposed definitions of ‘‘building or
work’’ and ‘‘public building or public
work’’ in this final rule, with one
clarification to the definition of ‘‘public
building or public work,’’ as explained.
(C) Construction, Prosecution,
Completion, or Repair
The final rule also adds a new subdefinition to the term ‘‘construction,
prosecution, completion, or repair’’ in
§ 5.2, to better clarify when demolition
and similar activities are covered by the
Davis-Bacon labor standards.
As explained in the proposed rule, in
general, the Davis-Bacon labor standards
apply to contracts ‘‘for construction,
alteration or repair . . . of public
buildings and public works.’’ 40 U.S.C.
3142(a). Early in the DBA’s history, the
Attorney General examined whether
demolition fits within these terms and
concluded that ‘‘[t]he statute is
restricted by its terms to ‘construction,
alteration, and/or repair,’’’ and that this
language ‘‘does not include the
demolition of existing structures’’ alone.
38 Op. Atty. Gen. 229 (1935). However,
the Attorney General expressly
distinguished, and declined to decide
the question of whether the Davis-Bacon
labor standards apply to ‘‘a razing or
clearing operation provided for in a
building contract, to be performed by
the contractor as an incident of the
building project.’’ Id.
Consistent with the Attorney
General’s opinion, the Department has
long maintained that standalone
demolition work is generally not
covered by the Davis-Bacon labor
standards. See AAM 190 (Aug. 29,
1998); WHD Opinion Letter SCA–78
(Nov. 27, 1991); WHD Opinion Letter
DBRA–40 (Jan. 24, 1986); WHD Opinion
Letter DBRA–48 (Apr. 13, 1973); AAM
54 (July 29, 1963); FOH 15d03(a).
However, the Department has
understood the Davis-Bacon labor
standards to cover demolition and
removal under certain circumstances.
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First, demolition and removal
activities are covered by Davis-Bacon
labor standards when such activities in
and of themselves constitute
construction, alteration, or repair of a
public building or work. For example,
the Department has explained that
removal of asbestos or paint from a
facility that will not be demolished—
even if subsequent reinsulating or
repainting is not considered—is covered
by Davis-Bacon because the asbestos or
paint removal is an ‘‘alteration’’ of the
facility. See AAM 153 (Aug. 6, 1990).
Likewise, the Department has explained
that Davis-Bacon labor standards can
apply to certain hazardous waste
removal contracts, because
‘‘[s]ubstantial excavation of
contaminated soils followed by
restoration of the environment’’ is
‘‘construction work’’ under the DBA and
because the term ‘‘landscaping’’ as used
in the DBA regulations includes
‘‘elaborate landscaping activities such as
substantial earth moving and the
rearrangement or reclamation of the
terrain that, standing alone, are properly
characterized as the construction,
restoration, or repair of a public work.’’
AAM 155 (Mar. 25, 1991); see also AAM
190 (noting that ‘‘hazardous waste
removal contracts that involve
substantial earth moving to remove
contaminated soil and recontour the
surface’’ can be considered DBAcovered construction activities).
Second, the Department has
consistently maintained that if future
construction that will be subject to the
Davis-Bacon labor standards is
contemplated at the location where the
demolition occurs—either because the
demolition is part of a contract for such
construction or because such
construction is contemplated as part of
a future contract, then the demolition of
the previously existing structure is
considered part of the construction of
the subsequent building or work and
therefore within the scope of the DavisBacon labor standards. See AAM 190.
This position is also articulated in the
Department’s SCA regulations at 29 CFR
4.116(b). Likewise, the Department has
explained that certain activities under
hazardous waste removal and
remediation contracts, including ‘‘the
dismantling or demolition of buildings,
ground improvements and other real
property structures and . . . the
removal of such structures or portions of
them’’ are covered by Davis-Bacon labor
standards ‘‘if this work will result in the
construction, alteration, or repair of a
public building or public work at that
location.’’ AAM 187, attach., at 1–2
(Nov. 18, 1996).
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As noted in the proposed rule, while
the Department has addressed these
distinctions to a degree in the SCA
regulations and in subregulatory
guidance, the Department believes that
clear standards for the coverage of
demolition and removal and related
activities in the DBA regulations will
assist agencies, contractors, workers,
and other stakeholders in identifying
whether contracts for demolition are
covered by the DBA. This, in turn, will
ensure that Davis-Bacon contract
clauses and wage determinations are
incorporated into contracts where
warranted, thereby providing
contractors with the correct wage
determinations prior to bidding and
requiring the payment of Davis-Bacon
prevailing wages where appropriate.167
Accordingly, the Department
proposed to add a new paragraph (2)(v)
to the definition of ‘‘construction,
prosecution, completion, or repair’’ to
assist agencies, contractors, workers,
and other stakeholders in identifying
when demolition and related activities
fall within the scope of the DBRA.
Specifically, the Department proposed
to clarify that demolition work is
covered under Davis-Bacon in any of
three circumstances: (1) Where the
demolition and/or removal activities
themselves constitute construction,
alteration, and/or repair of an existing
public building or work; (2) where
subsequent construction covered in
whole or in part by Davis-Bacon labor
standards is planned or contemplated at
the site of the demolition or removal,
either as part of the same contract or as
part of a future contract; or (3) where
otherwise required by statute.168
While a determination of whether
demolition is performed in
contemplation of a future construction
project is a fact-specific question, the
proposed rule also included a nonexclusive list of factors that can inform
this determination, including the
existence of engineering or architectural
plans or surveys; the allocation of, or an
application for, Federal funds; contract
negotiations or bid solicitations; the
stated intent of the relevant government
officials; the disposition of the site after
167 The Department notes that under Federal
contracts and subcontracts, demolition contracts
that do not fall within the DBA’s scope are instead
service contracts covered by the SCA, and the
Department uses DBA prevailing wage rates as a
basis for the SCA wage determination. See AAM
190. However, federally funded demolition work
carried out by State or local governments that does
not meet the criteria for coverage under a DavisBacon Related Act would generally not be subject
to Federal prevailing wage protections.
168 This third option accounts for Related Acts
when broader language may provide greater
coverage of demolition work.
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demolition (e.g., whether it is to be
sealed and abandoned or left in a state
that is prepared for future construction);
and other factors. Based on these
guidelines, Davis-Bacon coverage may
apply, for example, to the removal and
disposal of contaminated soil in
preparation for construction of a
building, or the demolition of a parking
lot to prepare the site for a future public
park. In contrast, Davis-Bacon likely
would not apply to the demolition of an
abandoned, dilapidated, or condemned
building to eliminate it as a public
hazard, to reduce likelihood of squatters
or trespassers, or to make the land more
desirable for sale to private parties for
purely private construction.
The Department received several
comments supporting the proposed
revisions regarding demolition. LIUNA,
for example, noted that providing clear
guidance on when demolition is
covered by the DBRA will ensure
workers on covered projects receive the
protections of the DBRA. LIUNA noted
its ongoing concern that contracting
agencies incorrectly classify demolition
activities as not covered by the DBRA
because of insufficient or conflicting
guidance from the contracting agency
and the Department. Other commenters,
including the III–FFC, the IUOE, and
Public Employees Local 71, Alaska,
echoed these concerns and supported
the proposed language as a means of
clarifying the circumstances under
which demolition work is covered,
ensuring workers receive the protections
of the Davis-Bacon labor standards
when appropriate.
Conversely, the National Demolition
Association (NDA) opposed the
proposed revision and expressed
concern that it would ‘‘expand the
scope of demolition activities that could
be subject to the Davis-Bacon Act
requirements.’’ NDA also stated that the
proposed change would add complexity
to the implementation of the DBRA and
pose an undue burden on small
contractors. Other commenters,
including ABC member campaign
comments, also voiced opposition and
termed the proposed revisions an
‘‘expansion’’ of coverage.
In the final rule, the Department
adopts the language regarding
demolition as proposed. As explained in
the proposed rule, the revised language
is not an expansion of Davis-Bacon
coverage, but rather a codification and
clarification of current Department
policy that is already reflected in
current DBRA subregulatory guidance
and in SCA regulations. Thus, the
revisions will not expand coverage or
increase burdens or complexity. To the
contrary, they will simplify and
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streamline compliance efforts by
explicitly setting these principles out in
the DBRA regulations themselves so that
contractors and contracting agencies can
look to those regulations to determine
whether or not the Davis-Bacon labor
standards apply to particular demolition
activities. This will improve the
accuracy and consistency of coverage
determinations prior to the submission
of bids or the commencement of work,
thus mitigating the need for
investigations and costly corrective
actions after work has started on a
project. The change will also help
ensure that all contractors have a better
understanding of the circumstances
under which demolition work is
covered when bidding on federally
funded or assisted construction projects.
(D) Contract, Contractor, Prime
Contractor, and Subcontractor
The Department proposed nonsubstantive revisions to the definition of
‘‘contract’’ and also proposed new
definitions in § 5.2 for the terms
‘‘contractor,’’ ‘‘subcontractor’’ and
‘‘prime contractor.’’ The definitions
would apply to 29 CFR part 5, including
the DBRA contract clauses in § 5.5(a)
and (b) of this part.
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(1) Definition of ‘‘Contract’’
While neither the DBA nor CWHSSA
contains a definition of the word
‘‘contract,’’ the language of the DavisBacon and Related Acts makes clear that
Congress intended the prevailing wage
and overtime requirements to apply
broadly, to both prime contracts
executed directly with Federal agencies
as well as any subcontracts through
which the prime contractors carry out
the work on the prime contract. See 40
U.S.C. 3142(c); 40 U.S.C. 3702(b), (d).
Thus, the Department’s existing
regulations define the term ‘‘contract’’
as including ‘‘any prime contract . . .
and any subcontract of any tier
thereunder.’’ 29 CFR 5.2(h). The current
definition of ‘‘contract’’ also states that
it applies to prime contracts which are
subject wholly or in part to the labor
standards of any of the acts listed in
§ 5.1. This definition reinforces that it is
intended to apply equally to direct
Federal contracts covered by the DBA
and also to contracts between Federal,
State, or local government entities
administering Federal assistance and
the direct recipients or beneficiaries of
that assistance, where such assistance is
covered by one of the Related Acts—as
well as the construction contracts and
subcontracts of any tier financed by or
facilitated by such a contract for
assistance. See id.
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In the NPRM, the Department stated
that it was considering the creation of
an expanded definition for the term
‘‘contract’’ in § 5.2, similar to the way
that the term is defined in other
Department regulations applying to
Federal contracting statutes and
Executive orders. In the regulations
implementing Executive Order 13658
(Establishing a Minimum Wage for
Contractors), for example, the
Department defined contract as ‘‘an
agreement between two or more parties
creating obligations that are enforceable
or otherwise recognizable at law’’ and
listed many types of specific
instruments that fall within that
definition. 29 CFR 10.2. The
Department’s SCA regulations, while
containing a definition of ‘‘contract’’
that is similar to the current DavisBacon regulatory definition at 29 CFR
5.2(h), separately specify that ‘‘the
nomenclature, type, or particular form
of contract used . . . is not
determinative of coverage’’ at 29 CFR
4.111(a).
In the NPRM, the Department noted
that the term ‘‘contract’’ in the DavisBacon and Related Acts has been
interpreted in a similarly broad manner,
with the common law of contract as the
touchstone. For example, in its 1994
memorandum, the OLC cited the basic
common-law understanding of the term
to explain that, for the purposes of the
DBA, ‘‘[t]here can be no question that a
lease is a contract, obliging each party
to take certain actions.’’ 1994 OLC
Memorandum, 18 Op. O.L.C. at 113 n.3
(citing 1 Arthur Linton Corbin, Corbin
on Contracts §§ 1.2–1.3 (rev. ed. 1993));
see also Bldg. & Const. Trades Dep’t,
AFL–CIO v. Turnage, 705 F. Supp. 5, 6
(D.D.C. 1988) (‘‘The Court finds that it
is reasonable to conclude, as the WAB
has done, that the nature of the contract
is not controlling so long as
construction work is part of it.’’). The
Davis-Bacon and Related Acts thus have
been routinely applied to various types
of agreements that meet the commonlaw definition of a ‘‘contract’’—such as,
for example, leases, utility privatization
agreements, individual job orders or
task letters issued under basic ordering
agreements, and loans or agreements in
which the only consideration from the
agency is a loan guarantee—as long as
the other elements of DBRA coverage
are satisfied.
In the NPRM, the Department also
stated that it intends the use of the term
‘‘contract’’ in the DBRA regulations to
apply also to any agreement in which
the parties intend for a contract to be
formed, even if (as a matter of the
common law) the contract may later be
considered to be void ab initio or
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otherwise fail to satisfy the elements of
the traditional definition of a contract.
Such usage, the Department explained,
follows from the statutory requirement
that the relevant labor standards clauses
must be included not just in ‘‘contracts’’
but also in the advertised specifications
that may (or may not) become a covered
contract. See 40 U.S.C. 3142(a).
In light of this discussion, the
Department sought comments on
whether it is necessary to include in the
regulatory text itself a similarly detailed
recitation of the types of agreements that
may be considered to be contracts. The
Department also proposed, in a nonsubstantive change, to move a sentence
addressing whether governmental
entities are ‘‘contractors’’ from the
current definition of ‘‘contract’’ to the
new definition of ‘‘contractor.’’
Several commenters, including CEA,
SMACNA, and the National Alliance for
Fair Contracting (NAFC), expressed
general support for the proposed
definition of ‘‘contract’’ in the NPRM.
No comments were submitted
expressing a position regarding whether
the proposed definition of contract
should include the detailed list of
agreements or legal instruments that
could be considered to be ‘‘contracts’’
under the definition. As the Department
noted in the NPRM, inclusion of a
detailed list of types of contracts should
not be necessary, given that such a list
would follow directly from the use of
the term ‘‘contract’’ in the statute.169
Thus, the final rule adopts the
definition of ‘‘contract’’ as proposed,
with one conforming edit to ensure that
the definition and the contract clauses
that apply the defined term reflect the
principle that employers meeting the
definition of ‘‘material supplier’’ are not
covered.170 See section III.B.3.ii.(G).(1).c
(‘‘Material supplier exception’’). While
the Department has not included a list
in the regulatory text of all of the
various types of agreements that may be
considered to be ‘‘contracts’’ under the
definition, it continues to interpret the
DBRA as applying broadly to any
contract that fits within the common
law definition, as well as to contractsimplied-in-law where the parties
intended to enter into such a contract,
as long as the contract satisfies the other
169 The Restatement (First) of Contracts,
published in 1932, defined a ‘‘contract’’ as ‘‘a
promise or a set of promises for the breach of which
the law gives a remedy, or the performance of
which the law in some way recognizes as a duty.’’
Restatement (First) of Contracts section 1 (Am. L.
Inst. 1932).
170 This conforming edit mirrors the language that
the Department proposed, and adopts in the final
rule, to similarly limit the definition of
‘‘contractor.’’
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statutory and regulatory elements of
coverage.
(2) Definition of ‘‘Contractor’’
The Department proposed to include
a new definition of the term
‘‘contractor’’ in § 5.2. The word
‘‘contractor’’ is not defined in the DBA
or CWHSSA, and the existing DBRA
regulations use the term ‘‘contractor’’
but do not define it. Paralleling the
definition of ‘‘contract,’’ the Department
proposed a definition of ‘‘contractor’’ to
clarify that, where used in the
regulations, it applies to both prime
contractors and subcontractors. In
addition, the proposed definition sought
to clarify that sureties may also—under
appropriate circumstances—be
considered ‘‘contractors’’ under the
regulations. As noted in the NPRM, this
is consistent with the Department’s
longstanding interpretation. See Liberty
Mut. Ins., ARB No. 00–018, 2003 WL
21499861, at *6 (June 30, 2003) (finding
that the term ‘‘contractor’’ included
sureties completing a contract pursuant
to a performance bond). As the ARB
explained in the Liberty Mutual case,
the term ‘‘contractor’’ in the DBA
should be interpreted broadly in light of
Congress’s ‘‘overarching . . . concern’’
in the 1935 amendments to the Act that
the new withholding authority included
in those amendments would ensure
workers received the pay they were due.
Id. (citing S. Rep. No. 74–1155, at 3
(1935)).
The proposed definition of
‘‘contractor’’ contained additional
clarifications. It contained language
reflecting the long-held interpretation
that bona fide ‘‘material suppliers’’ are
generally not considered to be
contractors under the DBRA, subject to
certain exceptions. As noted above, the
Department also moved two sentences
from the existing definition of
‘‘contract’’ to the new definition of
‘‘contractor.’’ This language clarifies
that State and local governments
generally are not regarded as contractors
or subcontractors under the Related
Acts in situations where construction is
performed by their own employees. The
exception is the subset of Related Act
statutes that more broadly require
payment of Davis-Bacon prevailing
wages to all laborers and mechanics
employed in the project’s development
regardless of their employment by a
contractor or subcontractor.171 The
Department proposed to supplement the
language regarding State and local
171 As discussed in section III.B.3.ii.G.2.e, the
Department is including a new defined term,
‘‘development statute,’’ in the final rule, which
refers to the Related Acts that have this broader
scope of coverage.
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governments to explain (as the
Department has similarly clarified in the
SCA regulations) that the U.S.
Government, its agencies, and
instrumentalities are also not
contractors or subcontractors for the
purposes of the Davis-Bacon and
Related Acts. Cf. 29 CFR 4.1a(f).172
Several commenters, including CEA,
SMACNA, and NAFC, expressed general
support for the proposed definition of
‘‘contractor’’ in the NPRM. The
Department did not receive any
comments opposing the inclusion of
sureties within the definition of
‘‘contractor’’ or opposing any of the
other specific elements of the
definition.173 AGC did not oppose the
proposed definition of contractor, but
they sought clarification on the status of
‘‘business owners’’ in the definition of
‘‘contractor,’’ ‘‘prime contractor,’’ and
‘‘subcontractor.’’ Citing to FOH 15f06,
AGC asserted that individuals who meet
the definition of a ‘‘business owner’’ in
the FLSA regulation at 29 CFR 541.101
are ‘‘exempt from DBA coverage’’ and
should therefore not be included in the
definition of contractor.
AGC’s comment appears to conflate
two concepts: ‘‘contractors’’ and
‘‘laborers or mechanics.’’ If a person or
business is a ‘‘contractor,’’ they have
responsibilities under the DBRA
contract clauses and regulations to
ensure that any workers they employ (or
whose labor they contract for by
subcontract) are paid the required
prevailing wage. If a person is a ‘‘laborer
or mechanic,’’ then they must be paid a
prevailing wage by the contractor or
subcontractor for whom they work. FOH
15f06 addresses whether an individual
is a ‘‘laborer or mechanic,’’ not whether
they are a ‘‘contractor.’’
Under the current DBRA regulations,
the FLSA exemption from the minimum
wage and overtime requirements for a
‘‘business owner’’ is relevant to whether
an individual is a ‘‘laborer or mechanic’’
under the DBRA who therefore must
receive the prevailing wage. The DBRA
regulations define ‘‘laborer or
mechanic’’ in part with a reference to
the part 541 FLSA regulations that
172 The Department has also considered work by
Tribal governments using their own employees to
be excluded from DBRA coverage in a similar
manner and for the same reasons as work by the
Federal agencies and instrumentalities and by State
or local recipients of Federal assistance. Under the
final rule, the Department will continue to interpret
DBRA coverage in this manner.
173 Several commenters opposed the Department’s
definition of ‘‘material supplier’’ (which is
incorporated into the definitions of contractor and
subcontractor) as too narrow and therefore
expanding the types of companies treated as DBRAcovered ‘‘contractors’’ or ‘‘subcontractors.’’ The
Department has addressed these comments in the
discussion of the definition of material supplier.
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provide tests for the administrative,
professional, and executive exemptions
from the minimum wage and overtime
requirements under the FLSA. 29 CFR
5.2(m); 29 CFR 541.0. The ‘‘business
owner’’ regulation at § 541.101 is a
method of identifying employees who
may be exempt under the FLSA
exemption for executive employees.
Unlike the definition of ‘‘laborer or
mechanic,’’ the DBRA definition of
‘‘contractor’’ does not involve the
consideration of whether an individual
or entity is a business owner under 29
CFR 541.101. The Department defines
the term ‘‘contractor’’ as a person that
‘‘enters into or is awarded a contract’’
covered by the DBRA. If a person enters
into a covered prime contract or
subcontract, that person is a
‘‘contractor’’ to whom the DBRA
requirements for contractors apply—
requiring that they ensure that any
laborers or mechanics they employ (or
contract for) on the project are paid a
prevailing wage.
Accordingly, the Department has not
amended the definition of ‘‘contractor’’
to discuss the FLSA ‘‘business owner’’
exemption, and the final rule adopts the
definition of ‘‘contractor’’ as proposed.
(3) Definition of ‘‘Prime Contractor’’
The Department also proposed to add
a definition for the term ‘‘prime
contractor’’ as it is used in part 5 of the
regulations. Consistent with the ARB’s
decision in Liberty Mutual, ARB No. 00–
018, 2003 WL 21499861, at *6, the
Department proposed a broad definition
of prime contractor that would prioritize
the appropriate allocation of
responsibility for contract compliance
and enhance the effectiveness of the
withholding remedy. The proposed
definition would clarify that the label an
entity gives itself is not controlling;
rather, an entity is considered to be a
‘‘prime contractor’’ based on its
contractual relationship with the
Government, its control over the entity
holding the prime contract, or the duties
it has been delegated.
The proposed definition began by
identifying as a prime contractor any
person or entity that enters into a
covered contract with an agency. This
would include, under appropriate
circumstances, entities that may not be
understood in lay terms to be
‘‘construction contractors.’’ For
example, where a non-profit
organization, owner/developer,
borrower or recipient, project manager,
or single-purpose entity contracts with a
State or local government agency for
covered financing or assistance with the
construction of housing—and the other
required elements of the relevant
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Related Act statute are satisfied—that
owner/developer or recipient entity is
considered to be the ‘‘prime contractor’’
under the regulations. This is so even if
the entity does not consider itself to be
a ‘‘construction contractor’’ and itself
does not employ laborers and
mechanics and instead subcontracts
with a general contractor to complete
the construction. See, e.g., Phoenix Dev.
Co., WAB No. 90–09, 1991 WL 494725,
at *1 (Mar. 29, 1991) (‘‘It is well settled
that prime contractors (‘ownersdevelopers’ under the HUD contract at
hand) are responsible for the DavisBacon compliance of their
subcontractors.’’); Werzalit of Am., Inc.,
WAB No. 85–19, 1986 WL 193106, at *3
(Apr. 7, 1986) (rejecting petitioner’s
argument that it was a loan ‘‘recipient’’
standing in the shoes of a State or local
government and not a prime
‘‘contractor’’).
The proposed definition of ‘‘prime
contractor’’ also included the
controlling shareholder or member of
any entity holding a prime contract, the
joint venturers or partners in any joint
venture or partnership holding a prime
contract, any contractor (e.g., a general
contractor) that has been delegated all or
substantially all of the responsibilities
for overseeing and/or performing the
construction anticipated by the prime
contract, and any other person or entity
that has been delegated all or
substantially all of the responsibility for
overseeing Davis-Bacon labor standards
compliance on a prime contract. Under
this definition, more than one entity on
a contract—for example, both the
owner/developer and the general
contractor—could be considered to be
‘‘prime contractors’’ on the same
contract. Accordingly, the proposal also
explained that any of these related legal
entities would be considered to be the
‘‘same prime contractor’’ for the
purposes of cross-withholding.
Although the Department had not
previously included a definition of
prime contractor in the implementing
regulations, the proposed definition was
consistent with the Department’s prior
enforcement of the DBRA. In
appropriate circumstances, for example,
the Department has considered a general
contractor to be a ‘‘prime contractor’’
that is therefore responsible for the
violations of its subcontractors under
the regulations—even where that
general contractor does not directly hold
the contract with the Government (or is
not the direct recipient of Federal
assistance), but instead has been hired
by the private developer that holds the
overall construction contract. See
Palisades Urb. Renewal Enters. LLP.,
ALJ No. 2006–DBA–00001, slip op. at 16
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(Aug. 3, 2007), aff’d, ARB No. 07–124,
2009 WL 2371237 (July 30, 2009);
Milnor Constr. Corp., WAB No. 91–21,
1991 WL 494763, at *1, *3 (Sept. 12,
1991); cf. Vulcan Arbor Hill Corp. v.
Reich, 81 F.3d 1110, 1116 (D.C. Cir.
1996) (referencing agreement by
developer that ‘‘its prime’’ contractor
would comply with Davis-Bacon
standards). Likewise, where a joint
venture holds the contract with the
government, the Department has
characterized the actions of the parties
to that joint venture as the actions of
‘‘prime contractors.’’ See Big Six, Inc.,
WAB No. 75–03, 1975 WL 22569, at *2,
*4 (July 21, 1975).
The proposed definition of prime
contractor was also similar to the broad
definition of the term ‘‘contractor’’ in
the FAR part 9 regulations that govern
suspension and debarment across a
broad swath of Federal procurement
contracts. In that context, where the
Federal Government seeks to protect its
interest in effectively and efficiently
completing procurement contracts, the
FAR Council has adopted an expansive
definition of contractor that includes
affiliates or principals that functionally
control the prime contract with the
government. See 48 CFR 9.403. Under
the FAR part 9 definition, ‘‘Contractor’’
means any individual or entity that
‘‘[d]irectly or indirectly (e.g., through an
affiliate)’’ is awarded a Government
contract or ‘‘[c]onducts business . . .
with the Government as an agent or
representative of another contractor.’’
Id.174 The Department has a similar
interest here in protecting against the
use of the corporate form to avoid
responsibility for the Davis-Bacon labor
standards.
The Department sought comment on
the proposed definition of ‘‘prime
contractor,’’ in particular, as it would
affect the withholding contract clauses
at § 5.5(a)(2) and (b)(3), the prime
contractor responsibility provisions at
§ 5.5(a)(6) and (b)(4), and the proposed
provisions in § 5.9 regarding the
authority and responsibility of
contracting agencies for satisfying
requests for cross-withholding.
174 The definition section in 48 CFR 9.403
specifies that it applies only ‘‘as used in this
subpart’’—referring to subpart 9.4 of the FAR. It
thus applies only to the general suspension and
debarment provisions of the FAR and does not
apply to the regulations within the FAR that
implement the Davis-Bacon labor standards, which
are located in FAR part 22 and the contract clauses
in FAR part 52. The DBRA-specific provisions of
the FAR are based on the Department’s regulations
in parts 1, 3, and 5 of subtitle 29 of the CFR, which
are the subject of this rulemaking. The Department
does not anticipate that this rulemaking will affect
FAR subpart 9.4.
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Several commenters, including
LIUNA, UBC, and UA, expressed
support for the proposed definition of
‘‘prime contractor.’’ These commenters
supported the proposed definition of
‘‘prime contractor’’ because they believe
the definition—in tandem with the
modifications to the withholding
contract clause—will help address
violations on DBRA contracts by
expanding the Department’s ability to
recover back wages. Commenters
emphasized that there has been
documentation of widespread labor
violations in the construction industry
in recent decades, and that this problem
has been exacerbated by various
enforcement shortcomings.175 As the
UBC noted, the lack of meaningful
enforcement in the industry has in turn
led to ‘‘a breakdown of industry selfpolicing.’’ Commenters also stated that
there has been an increase in recent
175 WA BCTC and LIUNA, for example, pointed
to the Department’s recent data showing that the
construction industry is consistently one of the top
two low-wage, high violation industries. See
https://www.dol.gov/agencies/whd/data/charts/lowwage-high-violation-industries. The comment from
the Leadership Conference on Civil & Human Rights
and other civil rights and worker advocacy
organizations pointed to various studies showing
that a significant number of construction employers
misclassified workers as independent contractors or
otherwise working ‘‘off-the-books.’’ See, e.g., Mark
Erlich, ‘‘Misclassification in Construction: The
Original Gig Economy,’’ 74 Indus. & Lab. Rel. Rev.
1202 (2021); Nat’l Emp. L. Project, ‘‘Independent
Contractor Misclassification Imposes Huge Costs on
Workers and Federal and State Treasuries ’’ (Oct.
2020), https://www.nelp.org/publication/
independent-contractor-misclassification-imposeshuge-costs-workers-federal-state-treasuries-updateoctober-2020; Nathaniel Goodell & Frank Manzo IV,
‘‘The Costs of Wage Theft and Payroll Fraud in the
Construction Industries of Wisconsin, Minnesota,
and Illinois: Impacts on Workers and Taxpayers ’’
(Jan. 2021), https://midwestepi.files.wordpress.com/
2020/10/mepi-ilepi-costs-of-payroll-fraud-in-wi-mnil-final.pdf; Mandy Locke, et. al., ‘‘Taxpayers and
Workers Gouged by Labor-Law Dodge,’’ Miami
Herald (Sept. 4, 2014), https://www.miamiherald.
com/latest-news/article1988206.html; Russell
Ormiston et al., supra note 70, at 75–113
(summarizing widespread labor violations in the
residential construction industry). A comment from
two Professors of Economics noted that the research
documenting worker misclassification and wage
theft in the U.S. construction industry is
‘‘extensive.’’ They noted one estimate using
government data found between 12.4 percent and
20.5 percent of the U.S. construction workforce is
misclassified, while other studies imply the
proportion exceeds 30 percent in some locations.
See Russell Ormiston et. al., ‘‘An Empirical
Methodology to Estimate the Incidence and Costs of
Payroll Fraud in the Construction Industry’’ (2020)
at 37, https://iceres.org/wp-content/uploads/2020/
06/ICERES-Methodology-for-Wage-and-TaxFraud.pdf; Workers Defense Project, ‘‘Building a
Better Texas: Construction Conditions in the Lone
Star State’’ (2013) at 2, https://workersdefense.org/
wpcontent/uploads/2020/10/research/
Build%20a%20Better%20Texas.pdf; Clayton Sinai
et al., ‘‘The Underground Economy and Wage
Theft,’’ Catholic Labor Network (2021) at 7,https://
catholiclabor.org/wpcontent/uploads/2021/04/
Underground-Economy-and-Wage-Theft-Report4.14.pdf.
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decades in the use of ‘‘contracting
vehicles,’’ such as single-purpose
limited liability companies (LLCs).
NCDCL and FFC stated that they had
witnessed the use of these vehicles by
contractors to avoid liability for wage
violations. According to the UA, it is
‘‘vital’’ that the Department clarify
liability for back wages for those
contractors that ‘‘jump from one project
to the next under various names.’’
As the comment from the LCCHR and
other civil rights and worker advocacy
organizations stated, the expanded
definition of ‘‘prime contractor’’ will
ensure that any person or entity that is
entirely or mostly responsible for
overseeing the contract will be
accountable for following the law.
Referencing the proposal, COSCDA
stated that they concurred generally
with the Department’s efforts to recover
back wages. III–FFC stated that the
prime contractor definition, as
incorporated into the proposed crosswithholding provision, would help to
protect workers against wage theft and
will help to achieve the fundamental
purpose of the Davis-Bacon Act.
Other commenters opposed the
proposed definition. The Illinois Road &
Transportation Builders Association
(IRTBA), the Ohio Contractors
Association (OCA), the Southern Illinois
Builders Association (SIBA), and the
American Pipeline Contractors
Association (APCA) submitted
comments arguing that the proposed
definition would place an undue burden
on contractors, increase their risk, and
discourage them from bidding on work
covered by the DBRA, thus making it
harder for the government to find
qualified contractors. These
commenters, along with the FTBA, also
argued that the new definition would
not improve enforcement of the DavisBacon Act, and that the Department had
not presented any evidence that the
current standards for imposing liability
are either ineffective or unworkable.
The FTBA asserted that the
Department’s sole justification was to
create a ‘‘broader pot of funds if needed
for withholding purposes.’’
Other commenters did not directly
oppose the definition of ‘‘prime
contractor,’’ but they expressed
concerns or requested additional
clarification. NAHB expressed concern
that the proposed definition of ‘‘prime
contractor’’ (among other proposals)
would introduce uncertainty as to
liability for homebuilders, particularly
multifamily builders that are highly
dependent on subcontractors. In their
comment, NAHB suggested that the
definitions of ‘‘prime contractor’’ and
‘‘subcontractor’’ seem to remove the
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‘‘defining line’’ between general
contractor and subcontractor liability.
NAHB stated that the Department
should clarify that the apportionment of
liability between multiple entities
should be governed by the ‘‘joint
employer’’ standard under the FLSA.
Likewise, AGC, in a manner similar to
its comment regarding the definition of
‘‘contractor,’’ did not specifically
oppose the proposed definition of
‘‘prime contractor,’’ but requested
clarification that a ‘‘business owner’’
under the FLSA regulations is not
included in the definition. Several other
commenters opposed the Department’s
cross-withholding provisions but did
not expressly oppose the definition of
‘‘prime contractor.’’
The Department agrees with the
commenters that supported the
proposed definition of ‘‘prime
contractor’’ because it will promote
compliance with the DBRA by
specifying which entities are properly
defined as prime contractors. As these
commenters explained, recent studies
have shown that there is widespread
noncompliance with basic wage and
hour laws in the construction industry
as a whole, and in the residential
construction industry in particular.176
Under these circumstances, and given
the very large number of DBRA-covered
contracts for which the Department is in
charge of enforcement, it is important
that the regulations and contract clauses
appropriately incentivize
compliance.177 By codifying a definition
of ‘‘prime contractor,’’ the Department
clarifies which entities may be held
liable for noncompliance of
subcontractors. Doing so puts these
entities on notice that they will be held
liable for violations of subcontractors on
the contract under the liability and
flow-down provisions of the contract
clauses at § 5.5(a)(6) and (b)(4), which
create an incentive for the prime
contractors to ensure that subcontractors
on the project will be in compliance
with the DBRA before work commences.
The Department disagrees with
commenters that opposed the proposed
definition on the basis that the
Department lacked sufficient evidence
or analysis showing that the new
definition is necessary. As noted above,
the widespread compliance problems in
the construction industry are well
documented, see supra note 175, and, as
explained in the NPRM, the Department
has noted that the use of single-purpose
176 See
supra note 175.
177 The Department also addresses these
arguments in its discussion of the crosswithholding provision in the DBRA contract clause,
in section III.B.3.xxiii.
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57607
LLC entities and similar joint ventures
and teaming agreements has been
increasing in recent decades. See, e.g.,
John W. Chierichella & Anne Bluth
Perry, ‘‘Teaming Agreements and
Advanced Subcontracting Issues,’’
TAASI GLASS–CLE A, at *1–6 (Fed.
Publ’ns LLC, 2007); A. Paul Ingrao,
‘‘Joint Ventures: Their Use in Federal
Government Contracting,’’ 20 Pub. Cont.
L.J. 399 (1991). This confluence of
trends in construction contracting has
created significant enforcement
challenges for the Department, at times
requiring exhaustive investigations and
litigation to pierce the corporate veil.178
One of the key reforms that experts
analyzing these types of problems in the
construction industry have
recommended is a clarification of
liability among upper-level entities that
have control over the workplace.179
The Department also does not agree
that the proposed definition would
cause undue burdens or introduce
uncertainty for contracting entities. The
regulations in § 5.5(a)(6) and (b)(4) have
long held prime contractors responsible
for compliance by their subcontractors,
and the Department has long interpreted
the Act as allowing for piercing the
corporate veil in appropriate
circumstances. Codifying the proposed
definition of prime contractor does not
change the obligations of a prime
contractor on a DBRA project; rather, it
provides clarity on which entity or
entities are properly identified as the
prime contractor. The definition uses
well understood terms, including
‘‘controlling shareholders or members’’
and ‘‘joint venturers or partners.’’ It also
states that contractors have been
delegated ‘‘all or substantially all of the
responsibilities for overseeing any
construction’’ will be considered prime
contractors. This language provides
clarity so that entities can recognize
ahead of time whether they may bear
potential liability for violations on a
DBRA-covered contract and can protect
themselves by using care in the choice
of subcontractors and using
indemnification agreements and similar
instruments that will adequately
address any increased risk.
The Department disagrees with NAHB
that the liability of prime contractors
should be limited to any liability as
‘‘joint employers’’ under the FLSA.
Such a limitation on liability would be
inconsistent with the longstanding
interpretation of the DBRA of holding
178 See, e.g., Letter from Cheryl M. Stanton, Adm’r
to Hal J. Perloff (Sept. 17, 2020) (piercing the veil
in DBRA matter involving a Military Housing
Privatization Initiative project).
179 See, e.g., Ormiston et al. (2020), supra note 70
at 100–101.
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prime contractors responsible for any
back wages that are owed to the
employees of subcontractors regardless
of whether there is any employment
relationship or even any knowledge of
the violations that have taken place. See
29 CFR 5.5(a)(6); M.A. Bongiovanni,
Inc., WAB No. 91–08, 1991 WL 494751,
at *1 (Apr. 19, 1991). This longstanding
interpretation follows from the
Congressional intent in the DBRA that
the Act ensure that laborers and
mechanics that are employed on the site
of the work are paid the required
prevailing wage. Bongiovanni, 1991 WL
494751, at *1.
The Department also does not agree
with AGC that a person who may be a
‘‘business owner’’ under the FLSA
regulations cannot be a ‘‘prime
contractor’’ under the DBRA definition.
As noted above with regard to the
definition of ‘‘contractor,’’ AGC’s
comment appears to conflate two
concepts: first, whether an individual or
business is a ‘‘prime contractor’’ and
therefore must ensure that covered
workers on the project are paid the
required prevailing wage; and second,
whether an individual is a ‘‘laborer or
mechanic’’ to whom a prevailing wage
must be paid. The provision of the FOH
referenced by the AGC in its comment
(FOH 15f06) addresses the latter
question, not the former.
While the Department declines to
limit the definition of prime contractor
with reference to the FLSA regulations,
the Department has decided that the
definition should be amended to limit
ambiguity in one respect. In the
proposal, the definition included ‘‘any
other person or entity that has been
delegated all or substantially all of the
responsibility for overseeing DavisBacon labor standards compliance on a
prime contract.’’ This language could
have extended the definition to cover
individual employees of a contractor
regardless of their ownership interests,
which was beyond the scope that the
Department intended for the definition.
This language has been removed from
the definition in the final rule.
Other than the modification noted
above, the final rule adopts the
definition of prime contractor in § 5.2 as
proposed.
(4) Definition of ‘‘Subcontractor’’
In addition to new definitions of
‘‘contractor’’ and ‘‘prime contractor,’’
the Department also proposed a new
definition of the term ‘‘subcontractor.’’
The definition, as proposed,
affirmatively stated that a
‘‘subcontractor’’ is ‘‘any contractor that
agrees to perform or be responsible for
the performance of any part of a contract
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that is subject wholly or in part to the
labor standards provisions of any of the
laws referenced in § 5.1.’’ Like the
current definition of ‘‘contract,’’ the
proposed definition of ‘‘subcontractor’’
also reflects that the Act covers
subcontracts of any tier—and thus the
proposed definition of ‘‘subcontractor’’
stated that the term includes
subcontractors of any tier. See 40 U.S.C.
3412; Castro v. Fid. & Deposit Co. of
Md., 39 F. Supp. 3d 1, 6–7 (D.D.C.
2014). The proposed definition of
‘‘subcontractor’’ necessarily excluded
material suppliers (except for narrow
exceptions), because such material
suppliers are excluded from the
definition of ‘‘contractor,’’ as proposed,
and that definition applies to both
prime contractors and subcontractors.
Finally, the proposed definition of
‘‘subcontractor’’ stated that the term did
not include laborers or mechanics for
whom a prevailing wage must be paid.
Several commenters expressed
general support for the Department’s
definition of ‘‘subcontractor.’’ The
Department did not receive any
comments expressly opposed to the
definition. NAHB and AGC, however,
expressed similar concerns about the
definition as their concerns about the
definitions of ‘‘contractor’’ and ‘‘prime
contractor.’’ NAHB suggested that the
definition removed defining lines
around traditional concepts of
subcontractor liability. AGC sought to
clarify that ‘‘business owners’’ are
‘‘exempt’’ from being considered
covered subcontractors.
In light of the comments from NAHB
and AGC, the Department has
reconsidered one aspect of the
definition of subcontractor. The
proposed definition excluded from
inclusion as ‘‘subcontractors’’ those
‘‘ordinary laborers or mechanics to
whom a prevailing wage must be paid
regardless of any contractual
relationship which may be alleged to
exist between the contractor or
subcontractor and the laborers and
mechanics.’’ This language was
borrowed from the 1935 amendment to
the DBA, which requires the payment of
a prevailing wage ‘‘regardless of any
contractual relationship which may be
alleged to exist between the contractor
or subcontractor and the laborers and
mechanics.’’ 40 U.S.C. 3142(c)(1). This
language has been interpreted to ensure
that the requirement to pay a prevailing
wage extends beyond the traditional
common-law employment relationship.
See section III.B.3.xxii (discussing the
definition of ‘‘Employed’’).
Upon further consideration, the
Department’s recitation of this statutory
language in the proposed definition of
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‘‘subcontractor’’ could have been
misconstrued as having the opposite of
the intended effect. By including that
language in the 1935 amendment to the
DBA, Congress intended to emphasize
that an individual could be a laborer or
mechanic—and therefore be due a
prevailing wage—regardless of whether
they might be called a subcontractor or
independent contractor. See Bldg. &
Const. Trades Dep’t, AFL–CIO v. Reich,
40 F.3d 1275, 1288 (D.C. Cir. 1994)
(analyzing House and Senate reports for
the 1935 DBA amendments). In other
words, an individual can both be
referred to as a ‘‘subcontractor’’ who
contracts for a portion of the work on
the prime contract and also be a laborer
who must be paid a prevailing wage by
the prime contractor or upper-tier
subcontractor that has brought them
onto the project.
The conclusion that an individual can
have dual roles as ‘‘subcontractor’’ and
‘‘laborer or mechanic’’ is consistent with
the Department’s guidance on this issue.
See DBRA–185 (July 28, 1993); DBRA–
178 (July 31, 1992). In those letters, the
Department responded to a request
concerning the payment of prevailing
wages to ‘‘independent contractors who
are owners or working foremen.’’ After
analyzing the statutory text of the DBA,
the Department concluded that
‘‘individuals [or partners] who
subcontract to perform a portion of a
Davis-Bacon contract and who
simultaneously meet the regulatory
definition of a laborer or mechanic must
be compensated at the prevailing wage
rate by the prime contractor for any
work so performed.’’ Id.180
180 The Department’s guidance regarding
‘‘working subcontractors’’ has not been a model of
clarity. In the 1950’s, the Department concluded
that the statutory language of the 1935 amendments
clearly indicated that individuals could be both
owner-operators and also ‘‘laborers or mechanics’’
owed a prevailing wage—a position with which the
Attorney General agreed. See Federal Aid Highway
Program-Prevailing Wage Determination, 41 U.S.
Op. Atty. Gen. 488, 489–503 (1960). Subsequently,
after issuing several letters with similar positions,
the Department then issued an AAM regarding
‘‘working subcontractors’’ in 1976, see AAM 123
(May 19, 1976), only to immediately revoke it, see
AAM 125 (Aug. 30, 1976). The Department
promised subsequent guidance, but in the
meantime reminded contracting agencies of the
statutory language that the DBRA requirements
must be met ‘‘regardless of any contractual
relationship[.]’’ AAM 125. The Department did not
issue a new AAM, but instead issued the 1981–1982
rulemaking, and then the subsequent ruling letters
that clarified that individuals can be both
‘‘subcontractors’’ and ‘‘laborers or mechanics.’’
DBRA–185 (July 28, 1993); DBRA–178 (July 31,
1992). See also Griffin v. Sec’y of Lab., ARB Nos.
00–032, 00–033, 2003 WL 21269140, at *4, *7 (May
30, 2003) (noting that the Department ‘‘considers
even bona fide owner-operators performing DBAcovered work on a DBA-covered project to be due
the prevailing rate.’’), aff’d sub nom Phoenix-Griffin
Grp. II, Ltd. v. Chao, 376 F. Supp. 2d 234, 242
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AGC’s comment regarding the
‘‘business owners’’ exemption in
§ 541.101 of the FLSA regulations
throws this hypothetical circumstance
into sharper relief. The Department’s
DBRA regulations explain that
individuals ‘‘employed in a bona fide
executive, administrative, or
professional capacity as defined in part
541 of this title are not deemed to be
laborers or mechanics.’’ 29 CFR 5.2(h).
The FLSA ‘‘business owner’’ regulation
at § 541.101 is one method under part
541 of identifying an employee that fits
within the FLSA’s exemption from
minimum wage and overtime pay
requirements for ‘‘executive
employees.’’ Id. § 541.101(a). That FLSA
regulation language provides that an
‘‘employee’’ falls under the executive
exemption if the employee ‘‘owns at
least a bona fide 20-percent equity
interest in the enterprise in which the
employee is employed, regardless of
whether the business is a corporate or
other type of organization, and who is
actively engaged in its management.’’ Id.
The subsequent section of the FLSA
regulations, § 541.102, defines
‘‘management’’ as ‘‘[g]enerally’’
including a variety of different duties,
largely (though not solely) related to
hiring and supervising employees.
The DBA statute itself provides
important context for responding to
AGC’s question regarding ‘‘business
owners.’’ As the Department highlighted
in the NPRM, the DBA contains express
language conveying Congress’s concern
that the payment of prevailing wages to
workers on covered projects should not
be evaded by characterizing workers as
owner operators or subcontractors. See
BCTD v. Reich, 40 F.3d at 1288; DBRA–
185; DBRA–178. The statute requires the
payment of prevailing wage ‘‘regardless
of any contractual relationship which
may be alleged to exist between the
contractor or subcontractor and the
laborers and mechanics.’’ 40 U.S.C.
3142(c)(1). This language was intended
to ‘‘eliminat[e] an evasive device
whereby individual laborers formed
partnerships under which the member
partners received less than the
prevailing wage.’’ BCTD, 40 F.3d at
1280 (citing the 1935 House and Senate
reports).
(D.R.I. 2005). The Department, however, has also
stated that ‘‘as a matter of administrative policy’’
the requirements of the DBRA and CWHSSA are not
applied to the wages of truck owner-operators who
are bona fide independent contractors, even though
they are laborers or mechanics within the meaning
of the Acts. DBRA–54 (Nov. 1, 1977). The
Department has explained in FOH 15e17 that this
policy does not apply to owners of other equipment
such as bulldozers, and that, as part of the policy,
any employees hired by truck owner-operators are
subject to the DBRA in the usual manner.
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Accordingly, to find that an
individual is not a ‘‘laborer or
mechanic’’ and is not due the prevailing
wage, it is not sufficient to simply assert
that an individual has an ownership
interest in a business. Rather, to be
excepted from coverage under the
DBRA, an individual must be employed
in a ‘‘bona fide’’ executive capacity
under the FLSA part 541 regulations. 29
CFR 5.2(h). In carrying out this analysis,
the Department is mindful of the
Congressional intent regarding the use
of corporate entities and partnerships
underpinning the 1935 amendments to
the DBA.181
In any case, as with the definitions of
‘‘contractor’’ and ‘‘prime contractor,’’
AGC has conflated the question of
whether an individual may be exempt
from being paid the prevailing wage as
a ‘‘laborer or mechanic’’ with the
question of whether an individual may
be a ‘‘subcontractor.’’ The FLSA
definition of ‘‘business owner’’ is
relevant to the ‘‘laborer or mechanic’’
definition under the DBRA, but is
wholly distinct from whether an
individual or entity is a ‘‘subcontractor’’
with associated duties under the DBRA,
its regulations, and its contract
clauses.182
Accordingly, the final rule adopts the
proposed definition of ‘‘subcontractor,’’
amended as discussed above to
eliminate the reference to the statutory
language from 40 U.S.C. 3142(c)(1).
181 The FOH provision that AGC cites emphasizes
the narrowness of the exemption. It states that
regardless of ownership interest, an individual
‘‘who is required to work long hours, makes no
management decisions, supervises no one and has
no authority over personnel does not qualify for the
executive exemption.’’ FOH 15f06.
182 Although not for the reason AGC asserted, it
may be unlikely that an individual may be both a
‘‘subcontractor’’ under the DBRA and a ‘‘business
owner’’ under the FLSA regulations. This is because
the definition of ‘‘business owner’’ in the FLSA
regulations includes any ‘‘employee’’ who owns a
bona fide interest of at least 20 percent in ‘‘the
enterprise in which the employee is employed,
regardless of whether the business is a corporate or
other type of organization[.]’’ 29 CFR 541.101.
Under this language, an individual must actually be
an employee of an enterprise or organization for
which the individual has an ownership interest for
the exemption to apply. This is so because of the
terms of the regulation and because the FLSA’s
minimum wage and overtime pay requirements (the
requirements from which part 541 provides
exemptions) apply only to employees and not to
bona fide independent contractors. The ‘‘business
owner’’ exemption thus does not apply to an
individual who is in business only as a bona fide
sole proprietor or is not otherwise an employee of
the enterprise or organization in which the
individual has the ownership interest. Thus, to the
extent such a sole proprietor (as opposed to an LLC
or corporation) may subcontract for a portion of the
prime contract, the individual would not meet the
requirements for exemption as a ‘‘business owner’’
under § 541.101.
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(E) Apprentice and Helper
The Department proposed to amend
the current regulatory definition in
§ 5.2(n) of ‘‘apprentice, trainee, and
helper’’ to remove references to trainees.
A trainee is currently defined as a
person registered and receiving on-thejob training in a construction
occupation under a program approved
and certified in advance by the
Employment and Training
Administration (ETA) as meeting its
standards for on-the-job training
programs, but ETA no longer reviews or
approves on-the-job training programs,
so this definition is unnecessary. See
section III.B.3.iii.(C) (‘‘29 CFR 5.5(a)(4)
Apprentices’’). The Department also
proposed to modify the definition of
‘‘apprentice and helper’’ to reflect the
current name of the office designated by
the Secretary of Labor, within the
Department, to register apprenticeship
programs.
The Department received three
comments in response to this proposal.
CEA and SMACNA both agreed that
ETA no longer reviews or approves onthe-job training programs and supported
the Department’s proposal to remove
references to trainees. The Illinois
Asphalt Pavement Association (IAPA)
opposed the Department’s proposal and
stated that ‘‘eliminating trainees from
the Davis[-]Bacon Act may have
unintended consequences.’’ IAPA noted
that the Illinois Department of
Transportation has a ‘‘Highway
Construction Careers Training Program’’
with the U.S. Department of
Transportation’s (USDOT) Federal
Highway Administration (FHWA), in
which individuals receive intensive
training in highway construction-related
skills.183 IAPA cautioned that these
student trainees may not be able to work
on Davis-Bacon projects if the trainee
language is removed.
The Department notes that the
proposed regulatory definition in § 5.2
retains the text currently found in
§ 5.2(n)(3), which states that the
regulatory provisions do not apply to
trainees employed on projects subject to
23 U.S.C. 113 who are enrolled in
programs which have been certified by
the Secretary of Transportation in
accordance with 23 U.S.C. 113(c). The
Department believes that retention of
this language makes clear that student
183 See Ill. Dep’t of Transp., ‘‘Highway
Construction Careers Training Program,’’ https://
idot.illinois.gov/Assets/uploads/files/About-IDOT/
Pamphlets-&-Brochures/
PA%20HCCTP%20story%201%20kg.pdf (including
‘‘job site readiness, carpentry, concrete flatwork,
blueprint reading orientation, introduction to tools,
forklift operation and Occupational Safety and
Health Administration 10 certification’’).
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trainees who are enrolled in such
programs may continue to work on
Davis-Bacon projects as a recognized
category of workers at wage rates
determined by the Secretary of
Transportation in accordance with 23
U.S.C. 113(c). Accordingly, the
Department adopts the change to § 5.2
as proposed.
(F) Laborer or Mechanic
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(1) Gender-Neutral Terminology
The Department proposed to amend
the regulatory definition of ‘‘laborer or
mechanic’’ to remove the reference to
trainees and to replace the term
‘‘foremen’’ with the gender-neutral term
‘‘working supervisors.’’ 184 The
Department received several comments
on this proposal.
The General Contractors Association
of New York (GCA), while appreciative
of efforts to introduce gender-neutral
terminology, recommended using the
term ‘‘foreperson’’ instead of ‘‘working
supervisor’’ as the latter term may be
confused with managerial positions.
ARTBA also recommended the term
‘‘foreperson’’ instead, as the term
‘‘working supervisor’’ is ‘‘nebulous and
could apply to multiple people on a
construction site.’’ Several commenters
objected to the term ‘‘working
supervisor,’’ noting that the term
‘‘working supervisor’’ does not
appropriately describe the years of
training and skill attainment necessary
to achieve the stature of
‘‘journeyperson.’’ See, e.g., SMART and
SMACNA. This commenter also noted
that the word ‘‘supervisor’’ has a
specific meaning under the National
Labor Relations Act (NLRA) and
cautioned against importing the word
into Davis-Bacon regulations.
Having considered the comments, the
final rule adopts the proposed revision
with modification. Rather than
replacing the term ‘‘foremen’’ with
‘‘working supervisor,’’ the Department
adopts the gender-neutral term
‘‘foreperson.’’
(2) Survey Crews
The Department did not propose any
additional substantive changes to this
definition, but because it frequently
receives questions pertaining to the
application of the definition of ‘‘laborer
or mechanic’’—and thus the application
of the Davis-Bacon labor standards—to
members of survey crews, the
Department provided information in the
preamble of the NPRM to clarify when
survey crew members are laborers or
184 The proposal addressing trainees is discussed
in greater detail below in section III.B.3.iii.(C) (‘‘29
CFR 5.5(a)(4) Apprentices.’’).
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mechanics under the existing definition
of that term. The Department adopts
that guidance in the preamble to this
final rule, with an additional
clarification in response to comments
received.
Specifically, the NPRM stated that the
Department has historically recognized
that members of survey crews who
perform primarily physical and/or
manual work on a DBA or Related Acts
covered project on the site of the work
immediately prior to or during
construction in direct support of
construction crews may be laborers or
mechanics subject to the Davis-Bacon
labor standards.185 Whether or not a
specific survey crew member is covered
by these standards is a question of fact,
which takes into account the actual
duties performed and whether these
duties are ‘‘manual or physical in
nature,’’ including the ‘‘use of tools or
. . . work of a trade.’’ When considering
whether a survey crew member
performs primarily physical and/or
manual duties, it is appropriate to
consider the relative importance of the
worker’s different duties, including (but
not solely) the time spent performing
these duties. Thus, survey crew
members who spend most of their time
on a covered project taking or assisting
in taking measurements would likely be
deemed laborers or mechanics
(provided that they are not exempt as
professional, executive, or
administrative employees under part
541). If their work meets other required
criteria (i.e., it is performed on the site
of the work, where required, and
immediately prior to or during
construction in direct support of
construction crews), it would be
covered by the Davis-Bacon labor
standards.
The Department sought comment on
issues relevant to the application of the
current definition to survey crew
members, especially the range of duties
performed by, and training required of,
survey crew members who perform
work on construction projects and
whether the range of duties or required
training varies for different roles within
a survey crew based on the licensure
status of the crew members, or for
different types of construction projects.
The Department received a number of
comments in response to the clarifying
information provided in the NPRM
despite proposing no changes to the
definition of ‘‘laborer or mechanic’’ that
would impact the application of this
term to members of survey crews. Many
commenters misunderstood the
information provided to mean that the
185 87
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Department was proposing to
categorically deem members of survey
crews to be ‘‘laborers or mechanics’’
subject to the Davis-Bacon labor
standards and wrote to support or
oppose such a change. The Department
did not make such a proposal and
reiterates that whether a specific survey
crew member is covered by the DavisBacon labor standards is a question of
fact based largely on the actual duties
performed. Similarly, some commenters
opined that the work performed by
survey crew members is ‘‘manual or
physical in nature,’’ and thus within the
definition of ‘‘laborer or mechanic,’’ or
that such work is ‘‘mental’’ or
‘‘intellectual’’ in nature, and thus not
within the definition, without
addressing the range of duties
performed by, and training required of,
survey crew members who perform
work on construction projects. However,
the Department has long recognized that
work performed by survey crew
members ‘‘immediately prior to or
during construction in direct support of
construction crews’’ involves a range of
duties, which are evaluated to
determine whether a specific survey
crew member or category of survey crew
members are ‘‘laborers or mechanics.’’
AAM 16 (July 25, 1960); AAM 39 (Aug.
6, 1962); AAM 212 (Mar. 22, 2013).186
The duties of survey crew members
described by commenters varied widely.
As a preliminary matter, several
commenters distinguished between the
surveying work that typically occurs in
direct support of construction crews and
other work that survey crews may
perform. The California Land Surveyors
Association (CLSA) noted that
‘‘construction and construction-related
land surveying work is a very small
fraction of any land surveyor[’]s work.’’
It further noted that ‘‘[c]onstruction land
surveying field work is comprised of an
ability to read engineering and
architecture plans and convey this
information to construction contractor’s
tradesman so they may self-perform
their land surveying work,’’ explaining
that ‘‘[c]ontractors have the full
capacity, due to technology, to perform
186 Commenters that characterize the
Department’s position as ‘‘flipflopping’’ on the
issue of survey crew coverage fail to recognize the
fact-specific nature of this coverage question. For
example, AGC contended that the Department
extended coverage to survey crew members in AAM
212 and ‘‘confirmed that surveying work is not
covered’’ when it rescinded AAM 212. While AAM
212 was rescinded to allow the Department to seek
a broader appreciation of the coverage issue and
due to its incomplete implementation, see AAM
235 (Dec. 14, 2020), its rescission did not change
the applicable standard, which is the definition of
‘‘laborer or mechanic’’ as currently set forth in 29
CFR 5.2(m), or the Department’s position that
coverage depends on the range of duties performed.
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any prospective land surveying work
limited to manual or physical duties
related to construction.’’ This was
echoed by III–FFC, which explained
that ‘‘survey work on a construction
project is distinct from professional land
surveying activities such as marking
land boundaries or preparing a
description for title or real property
rights,’’ and by ARTBA, which
described the need to ‘‘distinguish
between the survey work performed by
design professionals and the essential
surveying tasks that take place as part of
construction activities.’’ GCA similarly
‘‘distinguish[ed] between the survey
work performed by licensed
professionals who often work for design
or consulting firms, and the survey work
performed by construction crews that
are essential to any construction
project,’’ opining that the latter should
‘‘continue to be covered by prevailing
wage requirements.’’ An individual
commenter noted that as the technology
has become more readily available,
‘‘construction companies have been able
to purchase equipment and train
individuals in their rudimentary
measurements functions.’’ Another
noted that many construction
companies now have surveyors on staff.
The Department recognizes that
survey work performed ‘‘immediately
prior to or during construction in direct
support of construction crews’’ may
differ from survey work performed in
other contexts and may vary in
complexity. The Department has kept
this in mind while reviewing the duties
described by commenters, focusing on
the duties performed by survey crew
members on Davis-Bacon covered
contracts. For instance, several
commenters described work performed
off the site of the work, including
preliminary office work, such as
preparing design information for use in
the field; uploading design information
to the total station, GPS device, or data
collector; research; and postliminary
office work, such as downloading and
reviewing information from that day’s
field work. IAPA; Illinois Professional
Land Surveyors Association (IPLSA);
IRTBA; OCA. Because such duties
would not generally be performed on
the site of the work, and thus would not
be subject to the Davis-Bacon labor
standards, the Department did not
consider such duties to be an integral
part of the work performed for the
purposes of determining whether survey
crew members are ‘‘laborers or
mechanics’’ for the purposes of 29 CFR
5.2(m). Conversely, IAPA pointed out
that the Department did not include in
the clarifying information in the NPRM
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its previous determination from AAM
212 that only survey crew members
employed by contractors or
subcontractors on a project may be
covered laborers or mechanics. The
Department agrees that only survey
crew members employed by contractors
or subcontractors on a project may be
covered laborers or mechanics.
A number of commenters described
the survey work performed on
construction sites immediately prior to
or during construction in direct support
of construction crews. For instance,
several commenters explained that this
includes reestablishing land boundary
monuments and control points, doing
construction layout, and placing
wooden stakes (known as lath and hubs)
that mark the contours of the
construction project. IAPA, IPLSA,
IRTBA, Michigan Department of
Transportation (MDOT), OCA, SIBA. ‘‘A
general description of survey work on
horizontal construction (e.g., a highway,
road, or runway project) begins with
laying out the control points provided
on the engineer’s plans. Next, a survey
crew or worker locates, marks, and
installs lath and hub with a hammer
and/or sledgehammer at certain points
across the jobsite (e.g., every 25, 50, or
100 feet) for the initial excavation. A
worker may initially use a GPS unit to
measure for a ‘rough grade.’ Then, after
initial excavation, the worker may use a
robotic instrument for more accurate
positioning and elevation and continue
to mark various layers of subgrade,
including utilization of robotics and
GPS positioning for machine control
(e.g., excavation, paving, drilling, and
pile driving). Throughout the day the
worker is physically driving lath and
hubs into the earth or carrying, setting
up and using equipment around the
construction site. From start to finish on
a construction project, survey crew
members work in direct support of
construction crews.’’ III–FFC. Of these
duties, GCA explained that construction
crews can perform duties ‘‘essential to
any construction project,’’ including
‘‘layout for neat lines, rough excavation,
footings, piers, piles, caissons anchor
bolts, base plates, walls, major
imbedded items, slurry walls, and other
procedures that require layout of all
lines and grades for vertical and
horizonal control.’’
Some commenters emphasized
aspects of the work requiring the
exercise of professional judgment, such
as the need to ‘‘observe the progress of
the project, read and interpret design
data and methods on the construction
plans, calculate and determine if the
current site conditions meet the intent
of the design, and recalculate and/or
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57611
design a solution in the field that
satisfies the plans.’’ Michigan Society of
Professional Surveyors (MSPS); see also
MDOT. These commenters also
emphasized the need to complete forms,
perform calculations and technical and
mentals tasks, and the need to use
complex electronic devices. MDOT;
MSPS.
Other commenters emphasized
physical and manual aspects of
surveying work, including the use of
tools. III–FFC explained: ‘‘To perform
their job, survey crew members use data
collectors, GPS units, robotic
instruments (i.e., robotic total stations),
total stations, transits, drones, scanners,
and ground penetrating radar. This
equipment is used for construction
purposes such as: survey control;
building control including grid line
layout, electrical, plumbing,
communications, foundations, and
heating, ventilation, and air
conditioning (HVAC) systems; clearing;
slope staking; rough grade; final/finish
grade; drainage and utility layout; curb,
sidewalk and other hardscape surface
improvements; subdrains; structures;
walks; channels’ culverts; and stakes or
measurements for other related items
. . . . Workers on a survey crew also
use a variety of tools commonly
associated with construction work,
including sledgehammers to drive lath
and hubs into the ground, hammers,
nails, shovel, folding rule, scribe, tool
belt, spray paint and ribbon . . . .
While some methods have changed with
technical advances, the physical nature
of survey work has not.’’ Similarly,
IUOE explained that ‘‘members of
Surveyor Crews are on their feet most of
the workday, often walking several
miles a shift up and down slope. Crew
members are often expected to carry 30–
40 lbs. worth of equipment with them
to perform their task including but not
limited to: GPS receivers [and] staff,
lathe rub and hack bag, sledgehammer,
and shovel. Additionally, Survey Crew
members are expected to carry manual
tools on utility belts including a 16 oz
hammer, gloves, goggles, hand tape and
knives. Surveyors are often tasked with
navigating rough terrain and working
with a GPS to sink stakes, lathes, and
hubs with a sledgehammer into the
ground for equipment operators to use
as a guide for excavating or grading.’’
Additionally, they noted that surveyors
‘‘are often tasked with chiseling into
concrete with steel hammers to mark
where other trades are to locate walls
and put-up machinery.’’ A professional
land surveyor and small business owner
opined that ‘‘[c]onstruction survey
personnel’s duties are considerably
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more physically demanding and
dangerous than those of power
equipment operators who have always
been considered labor. While providing
construction surveying services does
involve significant mental calculations
in the interpretation of engineering
plans, setting 100 to 1000 stakes per day
on an active construction site is nothing
but laborious.’’
Commenters were also divided as to
the impact that technological
developments have had on survey crew
members duties. IAPA, Professional
Land Surveyors of Ohio, and several
individual commenters stated that the
use of sophisticated technology and
field computers has reduced the amount
of physical labor required and increased
the intellectual requirements. One
individual commenter noted that ‘‘such
manual labor is now uncommon for our
crews, who by the virtue of technology
spend nearly all their time in
intellectual labor with extremely
complex, delicate and very expensive
equipment.’’ CLSA explained that
‘‘technology has allowed contractors to
perform their construction work with
less involvement of a land surveyor.
Machine guidance—GPS mounted to
construction equipment for the
purposes of determining precise
grading—has eliminated the mass
grading work and underground utilities
staking work previously performed by
land surveyors. Contractors rely on a
land surveyor’s expertise in the limited
capacities of establishment of threedimension project control, development
of digital design models, specialized
training and certifications of the
contractors’ work, such as building pad
elevation and foundation form
certifications.’’
The wide range of duties described, as
well as the differences between the
scope of work performed by survey
crews employed by surveying or design
firms versus survey crews employed by
construction companies, highlights the
need to evaluate the specific duties
performed by the survey crew members
on a project. The Department reiterates
its view set forth in the NPRM that
whether a specific survey crew member
is covered by these standards is a
question of fact, which takes into
account the actual duties performed and
whether these duties are ‘‘manual or
physical in nature,’’ including the ‘‘use
of tools or . . . work of a trade.’’
Consideration of tool use is particularly
important given the technological
developments in surveying. The
Department notes that while the
computerized equipment used in
surveying today is more sophisticated
than the hand tools of the past, certain
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uses of this new technology have made
it easier for those with less training and
academic background to perform
surveying tasks required on
construction jobsites. See ARTBA,
CLSA, GCA. In light of these
developments, the Department
continues to believe that survey crew
members who spend most of their time
on a covered project taking or assisting
in taking measurements would likely be
deemed laborers or mechanics
(provided that they are not exempt as
professional, executive, or
administrative employees under part
541, as discussed). If their work meets
other required criteria—i.e., it is
performed on the site of the work
(where required) and immediately prior
to or during construction in direct
support of construction crews—it would
be likely covered by the Davis-Bacon
labor standards. Similarly, the
Department considers duties such as
walking and carrying equipment and
setting stakes to be physical or manual
for the purposes of determining whether
a survey crew member is a ‘‘laborer or
mechanic.’’
A number of commenters, particularly
those associated with professional
surveying organizations, expressed
strong disagreement with the
Department’s view that survey crew
members who spend most of their time
on a covered project taking or assisting
in taking measurements would likely be
deemed laborers or mechanics. See, e.g.,
CLSA, IPLSA, National Society of
Professional Surveyors (NSPS). In
support of their position, they cite AAM
39 (which they refer to as the ‘‘Goldberg
Standard’’), characterizing it as ruling
that members of survey crews were
exempt from Davis-Bacon, and that such
workers are covered only to the extent
to which they ‘‘perform manual work,
such as clearing brush and sharpening
stakes.’’ NSPS. They further asserted
that ‘‘[s]taking by survey crews on a job
site is 1% the physical and manual task
of putting a stake in the group and 99%
collecting and analyzing data and
making judgments for determining
where to set a stake.’’ NSPS. IPLSA
contends that the NPRM was ‘‘the first
time that the Department has ever
referenced taking measurements as a
physical or manual task.’’ IPLSA.
These characterizations of the
Department’s proposal are somewhat
overstated. Two years prior to issuing
AAM 39, the Department issued AAM
16, in which it concluded that survey
crew members who acted as
‘‘chainmen,’’ ‘‘rodmen,’’ and
‘‘instrument men’’ were laborers or
mechanics for the purposes of applying
the Davis-Bacon labor standards (in
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contrast, the party chief was considered
a bona fide supervisor excluded from
the definition of ‘‘laborer or mechanic’’).
In reaching its decision, the Department
evaluated the duties performed by these
survey crew members. In addition to
clearing brush and sharpening stakes,
the determination noted that ‘‘chainmen
and rodmen’’ also set stakes, handled
the rod and tape, and performed other
comparable duties. In evaluating the
‘‘instrument men’’ role, the Department
considered that it involved, among other
physical tasks, ‘‘occasionally
perform[ing] the physical work of
rodmen or chainmen,’’ ‘‘carry[ing] and
plac[ing] the instruments . . . [and]
operat[ing] them,’’ ‘‘mak[ing] the
sighting and tak[ing] and record[ing] the
readings,’’ as well as being required ‘‘to
exercise discretion, judgment, and skill
involving problems encountered in the
field.’’ Notably, these physical tasks
include several examples of using
surveying tools.
While AAM 39 appears to take a
narrower view of the duties performed
by laborers and mechanics, reliance on
this AAM is misplaced. As
demonstrated by the numerous
comments received, the duties
performed by survey crew members are
far different from those described in
AAM 39 (even the earlier AAM 16
described a wider array of duties).
Moreover, as several commenters
indicated, the more sophisticated
equipment available today actually
makes them easier for survey crew
members with less training and
academic background to use. Finally, it
is not clear that the narrow reading of
‘‘laborer or mechanic’’ in AAM 39 is
consistent with the common meaning of
those terms when the Davis-Bacon Act
was enacted. While it distinguished the
term ‘‘laborer’’ as ‘‘one who performs
manual laborer or labors at a toilsome
occupation requiring physical strength’’
from the term ‘‘mechanic,’’ a ‘‘skilled
worker with tools, who has learned a
trade,’’ it failed to articulate why the
latter would not apply to a wider range
of survey crew members who use tools
or even to address other types of
physical work performed by survey
crew members, such as walking and
carrying equipment.187
187 The statutory term ‘‘laborer or mechanic’’
incorporates the meanings of the terms ‘‘laborer’’
and ‘‘mechanic’’ as these were commonly
understood in 1931. See SMART and cases cited
therein. Thus, any interpretation of ‘‘laborer or
mechanic’’ that focuses solely on the meaning of
‘‘laborer’’ is inconsistent with the statute. For this
reason, the Department finds unpersuasive the
point raised by several commenters, e.g., IRTBA,
NSPS, that, because the BLS separately defines the
terms ‘‘surveyor’’ and ‘‘laborer,’’ members of survey
crews cannot be laborers or mechanics. In response
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Several commenters asserted that
surveyors, or survey crew members
more generally, should be treated as
‘‘learned professionals’’ under 29 CFR
part 541, and therefore excluded from
the definition of ‘‘laborer or mechanic,’’
29 CFR 5.2(m) (‘‘Persons employed in a
bona fide executive, administrative, or
professional capacity as defined in part
541 of this title are not deemed to be
laborers or mechanics.’’), because
surveying is recognized as a
‘‘professional service’’ akin to
architecture or engineering under the
Brooks Act, 40 U.S.C. 1101 et seq.
American Council of Engineering
Companies; IAPA; IRTBA; NSPS; OCA;
SIBA. Commenters also highlighted the
training and licensure requirements for
surveyors and expressed the view that
survey crew members ‘‘are either
professional land surveyors or overseen
by professional land supervisors’’ and
should therefore not be considered
‘‘laborers or mechanics.’’ IAPA; IPLSA;
IRTBA; OCA; SIBA. Specifically, NSPS
noted that all 50 states license
individuals to engage in the professional
practice of surveying, and an individual
commenter stated that most states
require a 4-year college degree. CLSA
explained that while ‘‘[e]very state
recognizes a bachelor’s degree in land
surveying as a qualification to becoming
a licensed land surveyor,’’ 12 states
require a 4-year degree in land
surveying or an associated field and 38
require at least some formal education
as a minimum qualification to becoming
a licensed land surveyor. It further
noted that a surveyor working in the
field has training in engineering and
that a construction surveyor has ‘‘a high
level of technical training anchored in
math, related professions, construction
management, and electronic data
management.’’ IAPA, IPLSA, IRTBA,
OCA, and SIBA explained that
Professional Land Surveyors licensed in
Illinois must have a baccalaureate
degree in land surveying or a related
science field with 24 credits of land
surveying course from an accredited
college, pass two licensing exams, and
to such narrow interpretations, including the
Department’s interpretation in AAM 39, SMART
opined that the Department should modify the
definition of ‘‘laborer or mechanic’’ to inter alia
give effect to each of its component terms. The
Department notes that it did not propose any
substantive changes to the definition of ‘‘laborer or
mechanic.’’ Moreover, it believes that the current
definition adequately reflects the separate
characteristics of ‘‘laborers’’ and ‘‘mechanics.’’ The
Department also notes that to the extent SMART
referred to the Department’s position about flaggers
being laborers or mechanics, as reflected in AAM
141 (Aug. 16, 1985) since 1985, the revisions in this
rule regarding flaggers do not address their status
as laborers or mechanics, but rather clarify coverage
of flaggers in connection with the site of the work.
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serve as a surveyor in training for 4
years, and then continue to take
continuing education to remain
licensed. Similarly, MSPS stated that
survey crew members working on
construction projects operate as ‘‘highly
knowledgeable, specially trained,
technicians and paraprofessionals’’
whose education and certificates of
achievement ‘‘provide advanced
knowledge in the surveying profession
necessary for taking or assisting in
taking measurements and exceed the
classification of ‘laborers or
mechanics.’ ’’ An individual commenter
noted that survey crews often employ
individuals with associate’s or
bachelor’s degrees, while another
referred to such survey technicians as
‘‘future professionals.’’
III–FFC noted that licensure status is
not determinative as ‘‘[o]ther trades
have licensing requirements . . .
including plumbers, electricians,
roofing contractors, water well
contractors, and water pump
installation contractors’’ and contended
that ‘‘[e]ven if work under a particular
classification must be performed by, or
under supervision of, a licensed
individual, this requirement does not
exclude workers from coverage,
including survey crew members.’’
To the extent that licensed
professional surveyors meet the
definition of ‘‘learned professionals’’ in
29 CFR part 541, they are not ‘‘laborers
or mechanics’’ subject to the DavisBacon labor standards. 29 CFR 5.2(m)
(‘‘Persons employed in a bona fide
executive, administrative, or
professional capacity as defined in part
541 of this title are not deemed to be
laborers or mechanics.’’); AAM 16. To
qualify as a ‘‘learned professional,’’ for
the purposes of part 541 and § 5.2(m),
one’s primary duty ‘‘must be the
performance of work requiring
advanced knowledge in a field of
science or learning customarily acquired
by a prolonged course of specialized
intellectual instruction.’’ 29 CFR
541.301(a). Work requiring ‘‘advanced
knowledge’’ means work which is
‘‘predominantly intellectual in
character, and which includes work
requiring the consistent exercise of
discretion and judgment, as
distinguished from performance of
routine, manual, mechanical or physical
work.’’ 29 CFR 541.301(b). Thus, an
employee who performs work requiring
advanced knowledge ‘‘generally uses
the advanced knowledge to analyze,
interpret or make deductions from
varying facts or circumstances.’’ Id. A
‘‘field of science or learning’’ includes
‘‘occupations that have a recognized
professional status as distinguished
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from the mechanical arts or skilled
trades where in some instances the
knowledge is of a fairly advanced type,
but is not in a field of science or
learning.’’ 29 CFR 541.301(c).
Specialized academic training must be a
standard prerequisite for entrance into
the profession (though this does not
exclude the occasional professional who
has ‘‘substantially the same knowledge
level and perform[s] substantially the
same work as the degreed employees,
but who obtained the advanced
knowledge through a combination of
work experience and intellectual
instruction’’). 29 CFR 541.301(d).
However, practitioners of occupations
that customarily may be performed with
only the general knowledge acquired by
an academic degree in any field, with
knowledge acquired through
apprenticeship or training, will
generally not be deemed ‘‘learned
professionals.’’ Id.
While state requirements vary, based
on the information received from
commenters, the Department believes
licensed surveyors may in some cases be
‘‘learned professionals’’ and thus
excluded from the definition of
‘‘laborers or mechanics.’’ However, this
conclusion may vary, particularly where
state licensing requirements do not
customarily require a prolonged course
of specialized intellectual instruction.
See Goebel v. Colorado, No. 93–K–1227,
1999 WL 35141269, at *7 (D. Co. 1999)
(concluding at summary judgment that,
under state licensing requirements
involving a combination of surveying
courses and land surveying experience,
but no college degree, that surveying did
‘‘not require the ‘advanced type of
knowledge’ gained through ‘a prolonged
course of specialized intellectual
instruction and study’’’ necessary to fall
into the category of ‘‘learned
professionals’’).
However, other members of survey
crews, even if working under the
supervision of a licensed surveyor,
cannot be excluded from the definition
of ‘‘laborer or mechanic’’ on this basis.
Unlicensed survey crew members have
not completed specialized academic
training or demonstrated ‘‘substantially
the same knowledge level’’ to state
licensing authorities to secure a
professional license. See 29 CFR
541.301(d). Because they must work
under the supervision of a licensed
surveyor, rather than independently, on
any work requiring a license, they are
generally not ‘‘perform[ing]
substantially the same work’’ as
licensed surveyors. See id. Unlicensed
paraprofessionals are generally not
considered ‘‘learned professionals.’’ See
29 CFR 541.301(e)(7) (paralegals are not
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learned professionals) and (e)(2)
(practical nurses and other similar heath
care employees, even if licensed, are not
learned professionals because
‘‘possession of a specialized advanced
academic degree is not a standard
prerequisite for entry into such
occupations’’). Nor does the inclusion of
surveying as a professional service
under the Brooks Act suggest that
unlicensed survey crew members
should be deemed ‘‘learned
professionals’’ excluded from the
protections of the Davis-Bacon labor
standards. As discussed above, whether
unlicensed survey crew members are
deemed ‘‘laborers or mechanics’’ will
depend, not on the application of the
part 541 ‘‘learned professional’’
exclusion in § 5.2(m), but on whether
the specific range of duties they perform
are ‘‘manual or physical in nature
(including . . . [the] use [of] tools or
. . . the work of a trade), as
distinguished from mental or
managerial.’’ See 29 CFR 5.2(m).188
After considering the comments
received, the Department adopts as
guidance the clarifying language set
forth in the NPRM with one
modification: The Department has
historically recognized that members of
survey crews who perform primarily
physical and/or manual work while
employed by contractors or
subcontractors on a DBA or Related Acts
covered project on the site of the work
immediately prior to or during
construction in direct support of
construction crews may be laborers or
mechanics subject to the Davis-Bacon
labor standards. Whether or not a
specific survey crew member is covered
by these standards is a question of fact,
which takes into account the actual
duties performed and whether these
duties are ‘‘manual or physical in
nature’’ including the ‘‘use of tools or
. . . work of a trade.’’ When considering
whether a survey crew member
performs primarily physical and/or
manual duties, it is appropriate to
consider the relative importance of the
worker’s different duties, including (but
not solely) the time spent performing
these duties. Thus, survey crew
members who spend most of their time
on a covered project taking or assisting
in taking measurements would likely be
188 MnDOT would have the Department simplify
its analysis under 29 CFR 5.2(m), by considering
survey crew members ‘‘ ‘laborers or mechanics’
subject to prevailing wage rates when performing
work under the contract unless they are licensed
surveyors.’’ Given the range of duties performed by
survey crew members on Davis-Bacon covered
contracts, the Department does not believe it could
implement such an approach without modifying
§ 5.2(m), which it did not propose doing in the
NPRM.
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deemed laborers or mechanics
(provided that they do not meet the tests
for exemption as professional,
executive, or administrative employees
under part 541). If their work meets
other required criteria (i.e., it is
performed on the site of the work,
where required, and immediately prior
to or during construction in direct
support of construction crews), it would
be covered by the Davis-Bacon labor
standards.
(G) Site of the Work and Related
Provisions
In the proposed rule, the Department
proposed the following revisions related
to the DBRA’s ‘‘site of the work’’
requirement: (1) revising the definition
of ‘‘site of the work’’ to further
encompass certain construction of
significant portions of a building or
work at secondary worksites, (2)
clarifying the application of the ‘‘site of
the work’’ principle to flaggers, (3)
revising the regulations to better
delineate and clarify the ‘‘material
supplier’’ exemption, and (4) revising
the regulations to set clear standards for
DBA coverage of truck drivers.
As discussed further below, having
reviewed and considered the comments
received, the Department is making
certain revisions to these proposals in
the final rule. Specifically, the final rule
limits coverage of secondary worksites
to locations where specific portions of a
building or work are constructed and
were either established specifically for
contract performance or are dedicated
exclusively or nearly so to the contract
or project; further clarifies the material
supplier exemption; and clarifies
coverage of truck drivers employed by
contractors or subcontractors by
codifying the Department’s current de
minimis standard rather than using an
analogous standard from the FLSA.
(1) Statutory and Regulatory
Background
a. Site of the Work
The DBA and Related Acts generally
apply to ‘‘mechanics and laborers
employed directly on the site of the
work’’ by ‘‘contractor[s]’’ and
‘‘subcontractor[s]’’ on contracts for
‘‘construction, alteration, or repair,
including painting and decorating, of
[covered] public buildings and public
works.’’ 40 U.S.C. 3142(a), (c)(1). The
Department’s current regulations define
‘‘site of the work’’ as encompassing
three types of locations: (1) ‘‘the
physical place or places where the
building or work called for in the
contract will remain,’’ (2) ‘‘any other
site where a significant portion of the
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building or work is constructed,
provided that such site is established
specifically for the performance of the
contract or project,’’ and (3) ‘‘job
headquarters, tool yards, batch plants,
borrow pits, etc.’’ that are both
‘‘dedicated exclusively, or nearly so, to
performance of the contract or project’’
and ‘‘adjacent or virtually adjacent to
the site of the work’’ itself. 29 CFR
5.2(l)(1), (2). The ‘‘site of the work’’
requirement does not apply to Related
Acts that extend Davis-Bacon coverage
to all laborers and mechanics employed
in the ‘‘development’’ of a project; such
statutes include the United States
Housing Act of 1937; the Housing Act
of 1949; and the Native American
Housing Assistance and SelfDetermination Act of 1996. See id.
§ 5.2(j)(1); 42 U.S.C. 1437j(a); 25 U.S.C.
4114(b)(1), 4225(b)(1)(B); 42 U.S.C.
12836(a). As the Department has
previously noted, ‘‘the language and/or
clear legislative history’’ of these
statutes ‘‘reflected clear congressional
intent that a different coverage standard
be applied.’’ 65 FR 80267, 80275 (Dec.
20, 2000) (2000 final rule); see Griffin v.
Sec’y of Lab., ARB Nos. 00–032, 00–033,
2003 WL 21269140, at *13 n.5 (May 30,
2003) (noting that the United States
Housing Act of 1937 ‘‘provides that all
construction activity funded or assisted
under its auspices is subject to DBA
requirements if that work is performed
‘in the development’ of a covered
project’’ and therefore ‘‘has no ‘site of
the work’ restriction’’); L.T.G. Constr.
Co., WAB No. 93–15, 1994 WL 764105,
at *4 (Dec. 30, 1994) (noting that ‘‘the
Housing Act [of 1937] contains no ‘site
of work’ limitation similar to that found
in the Davis-Bacon Act’’).
b. Offsite Transportation
The ‘‘site of the work’’ requirement is
also referenced in the current
regulation’s definition of ‘‘construction,
prosecution, completion, or repair,’’
which provides that ‘‘the transportation
of materials or supplies to or from the
site of the work’’ is not covered by the
DBRA, except for such transportation
under the statutes to which the ‘‘site of
the work’’ requirement does not apply,
as described above in paragraph (a). 29
CFR 5.2(j)(2). However, the regulation
explains that transportation to or from
the site of the work is covered where a
covered laborer or mechanic employed
by a contractor or subcontractor
transports materials between an
‘‘adjacent or virtually adjacent’’
dedicated support site that is part of the
site of the work pursuant to 29 CFR
5.2(l)(2), or transports portions of the
building or work between a site where
a significant portion of the building or
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work is constructed and that is
established specifically for contract or
job performance, which is part of the
site of the work pursuant to 29 CFR
5.2(l)(1), and the physical place or
places where the building or work will
remain.189 29 CFR 5.2(j)(1)(iv)–(l)(2).
c. Material Supplier Exception
While not explicitly set out in the
statute, the DBA has long been
understood to exclude from coverage
employees of bona fide ‘‘material
suppliers’’ or ‘‘materialmen.’’ See AAM
45 (Nov. 9, 1962) (enclosing WHD
Opinion Letter DB–30 (Oct. 15, 1962));
AAM 36 (Mar. 16, 1962) (enclosing
WHD Opinion Letter DB–22 (Mar. 12,
1962)); H.B. Zachry Co. v. United States,
344 F.2d 352, 359 (Ct. Cl. 1965); FOH
15e16. This principle has generally been
understood to derive from the limitation
of the DBA’s statutory coverage to
‘‘contractor[s]’’ and ‘‘subcontractor[s].’’
See AAM 36, WHD Opinion Letter DB–
22, at 2 (discussing ‘‘the application of
the term subcontractor, as distinguished
from materialman or submaterialman’’);
cf. MacEvoy v. United States, 322 U.S.
102, 108–09 (1944) (distinguishing a
‘‘subcontractor’’ from ‘‘ordinary laborers
and materialmen’’ under the Miller Act);
FOH 15e16 (‘‘[B]ona fide material
suppliers are not considered contractors
under DBRA.’’). Typically, these are
companies whose sole responsibility
under the contract or project is to
furnish materials, such as sand, gravel,
and ready-mixed concrete, rather than
to perform construction work.
Like the ‘‘site of the work’’ restriction,
the material supplier exception does not
apply to work under statutes that extend
Davis-Bacon coverage to all laborers and
mechanics employed in the
‘‘development’’ of a project, regardless
of whether they are employed by
‘‘contractors’’ or ‘‘subcontractors.’’ See
29 CFR 5.2(j)(1) (defining ‘‘construction,
prosecution, completion, or repair’’ as
including ‘‘[a]ll types of work done on
a particular building or work at the site
thereof . . . by laborers and mechanics
employed by a construction contractor
or construction subcontractor (or, under
the United States Housing Act of 1937;
the Housing Act of 1949; and the Native
American Housing Assistance and SelfDetermination Act of 1996, all work
done in the construction or
development of the project)’’); 29 CFR
5.2(i) (‘‘The manufacture or furnishing
of materials, articles, supplies or
equipment . . . is not a building or
work within the meaning of the
189 For more detail on this topic, see the section
titled ‘‘Coverage of Construction Work at Secondary
Construction Sites.’’
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regulations in this part unless
conducted in connection with and at the
site of such a building or work as is
described in the foregoing sentence, or
under the United States Housing Act of
1937 and the Housing Act of 1949 in the
construction or development of the
project.’’).
d. Relevant Regulatory History and Case
Law
The regulatory provisions regarding
the site of the work were revised in 1992
and 2000 in two distinct fashions.
First, in response to a series of
appellate court decisions in the 1990s,
the provisions were revised to narrow
the geographic scope of the site of the
work and to preclude coverage of offsite
transportation in most circumstances.
Specifically, the language in § 5.2(l) that
deems dedicated sites such as batch
plants and borrow pits part of the site
of the work only if they are ‘‘adjacent or
virtually adjacent’’ to the construction
site was adopted in 2000 in response to
Ball, Ball & Brosamer, Inc. v. Reich, 24
F. 3d 1447 (D.C. Cir. 1994) and L.P.
Cavett Company v. U.S. Department of
Labor, 101 F.3d 1111 (6th Cir. 1996),
which concluded that batch plants
located only a few miles from the
construction site (2 miles in Ball, 3
miles in L.P. Cavett) were not part of the
‘‘site of the work.’’ See 65 FR 80269–
71.190 The ‘‘adjacent or virtually
adjacent’’ requirement in the current
regulatory text is one that the courts in
Ball and L.P. Cavett suggested, and
which the ARB later concluded, to be
consistent with the statutory ‘‘site of the
work’’ requirement. See L.P. Cavett, 101
F.3d at 1115; Ball, Ball & Brosamer, 24
F.3d at 1452; Bechtel Constructors
Corp., ARB No. 97–149, 1998 WL
168939, at *4 (Mar. 25, 1998). Similarly,
the provision in § 5.2(j)(2) that excludes,
with narrow exceptions, ‘‘the
transportation of materials or supplies
to or from the site of the work’’ from
coverage stems from a 1992 interim final
rule, see 57 FR 19204 (May 4, 1992)
(1992 IFR), and was adopted in response
to Building & Construction Trades
Dep’t, AFL–CIO v. U.S. Dep’t of Labor
Wage Appeals Bd. (Midway), in which
190 Prior to 2000, the Department had interpreted
‘‘site of the work’’ more broadly to include, in
addition to the site where the work or building
would remain, ‘‘adjacent or nearby property used
by the contractor or subcontractor in such
construction which can reasonably be said to be
included in the ‘site.’ ’’ 29 CFR 5.2(l) (1990); see 65
FR 80269; AAM 86 (Feb. 11, 1970). This
interpretation encompassed the offsite batch plants
in Ball and L.P. Cavett that the courts in those cases
concluded were too far from the primary worksite.
Accordingly, the Department revised the regulation
in the 2000 final rule to adopt the ‘‘adjacent or
virtually adjacent’’ standard.
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57615
the D.C. Circuit held that drivers of a
prime contractor’s subsidiary who
picked up supplies and transported
them to the job site were not covered by
the DBA for their time spent going to
and from the site because ‘‘the Act
applies only to employees working
directly on the physical site of the
public building or public work under
construction.’’ 932 F.2d 985, 990 (D.C.
Cir. 1991).191
Second, as discussed in more detail
below in the discussion of ‘‘Coverage of
construction work at secondary
construction sites,’’ in response to
developments in construction that had
enabled companies in some cases to
construct entire portions of public
buildings or works offsite, the
Department broadened the ‘‘site of the
work’’ in the 2000 final rule by adding
the provision in § 5.2(l)(1) that
encompasses offsite locations ‘‘where a
significant portion of the building or
work is constructed, provided that such
site is established specifically for the
performance of the contract or project.’’
65 FR 80278.
(2) Regulatory Revisions
In the NPRM, the Department
proposed the following regulatory
changes related to the ‘‘site of the work’’
requirement: (1) revising the definition
of ‘‘site of the work’’ to further
encompass certain construction of
significant portions of a building or
work at secondary worksites, (2)
clarifying the application of the ‘‘site of
the work’’ principle to flaggers, (3)
revising the regulations to better
delineate and clarify the ‘‘material
supplier’’ exemption, and (4) revising
the regulations to set clear standards for
DBA coverage of truck drivers. The
following discussion explains, with
regard to each issue, the proposal, the
comments received, and the
Department’s decisions in the final rule.
a. Coverage of Construction Work at
Secondary Construction Sites
The current regulatory definition of
‘‘site of the work’’ includes a site away
from the location where the building or
work will remain where a ‘‘significant
portion’’ of a building or work is
constructed at the site, provided that the
site is established specifically for the
performance of the contract or project.
§ 5.2(l)(1). In the 2000 final rule in
which this language was added, the
Department explained that it was
intended to respond to technological
191 Prior to 1992, the Department had interpreted
the DBA as covering the transportation of materials
and supplies to or from the site of the work by
workers employed by a contractor or subcontractor.
See 29 CFR 5.2(j) (1990).
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developments that had enabled
companies in some cases to construct
entire portions of public buildings or
works offsite, leaving only assembly or
placement of the building or work
remaining. See 65 FR 80273 (describing
‘‘the innovative construction techniques
developed and currently in use, which
allow significant portions of public
buildings and public works to be
constructed at locations other than the
final resting place of the building or
work’’). The Department cited examples,
including a dam project where ‘‘two
massive floating structures, each about
the length of a football field’’ were
constructed upriver and then floated
downriver and submerged; the
construction and assembly of military
housing units in Portland for final
placement in Alaska; and the
construction of modular units to be
assembled into a mobile service tower
for Titan missiles. See id. (citing ATCO
Constr., Inc., WAB No. 86–1, 1986 WL
193113 (Aug. 22, 1986), and Titan IV
Mobile Serv. Tower, WAB No. 89–14,
1991 WL 494710 (May 10, 1991)).
The Department stressed that this new
provision was a narrow one, intended to
apply only to the ‘‘rare’’ situations
where ‘‘such a large amount of
construction is taking place that it is fair
and reasonable to view such location as
a site where the public building or work
is being constructed.’’ 65 FR 80274,
80276. It further stated that the limit of
such coverage to facilities that are
established specifically for the
performance of a particular contract or
project was necessary to exclude
‘‘[o]rdinary commercial fabrication
plants, such as plants that manufacture
prefabricated housing components,’’
which have long been understood to be
outside the DBA. Id. at 80274. The
Department explained that ‘‘[i]t [was]
the Department’s intention in [that]
rulemaking to require in the future that
workers who construct significant
portions of a federal or federally assisted
project at a location other than where
the project will finally remain, will
receive prevailing wages as Congress
intended when it enacted the DavisBacon and related Acts.’’ Id. Consistent
with this amendment, the Department
also revised § 5.2(j) to cover
transportation of portion(s) of the
building or work between such a site
and the location where the building or
work would ultimately remain,
explaining that ‘‘under these
circumstances[,] the site of the work is
literally moving between the two work
sites,’’ 65 FR 57269, 57273 (Sept. 21,
2000), and as such, ‘‘workers who are
engaged in transporting a significant
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portion of the building or work between
covered sites . . . are ‘employed
directly upon the site of the work.’ ’’ 65
FR 80276.
In the NPRM, the Department
proposed to expand this aspect of the
definition of ‘‘site of the work’’ to
include ‘‘any . . . site(s) where a
significant portion of the building or
work is constructed, provided that such
construction is for specific use in that
building or work and does not simply
reflect the manufacture or construction
of a product made available to the
general public.’’ The NPRM explained
that since 2000, technological
developments have continued to
facilitate offsite construction that
replaces onsite construction to an even
greater degree and that the Department
expects such trends to continue in the
future, including in Federal and
federally assisted construction. 87 FR
15731 (citing Dodge Data and Analytics,
‘‘Prefabrication and Modular
Construction 2020’’ (2020), at 4, and
GSA, Sched. 56—‘‘Building and
Building Materials, Industrial Service
and Supplies, Pre-Engineered/
Prefabricated Buildings Customer
Ordering Guide’’ (GSA Sched. 56), at 5–
7).192 The Department further stated that
‘‘when ‘significant portions’ of a
building or work that historically would
have been built where the building or
work will ultimately remain are instead
constructed elsewhere, the exclusion
from the DBA of laborers and mechanics
engaged in such construction is
inconsistent with the DBA.’’ Id. at
15732. Therefore, the Department
proposed to eliminate the current
regulation’s requirement that an offsite
facility at which such ‘‘significant
portions’’ are constructed must also be
‘‘established specifically for the
performance of a particular contract or
project’’ in order to be considered part
of the ‘‘site of the work.’’ The
Department explained that the goal of
excluding ‘‘[o]rdinary commercial
fabrication plants’’ and similar material
supply facilities and factories could be
better accomplished by elaborating on
the definition of ‘‘significant portion,’’
which the Department proposed to
define as ‘‘one or more entire portion(s)
or module(s) of the building or work, as
opposed to smaller prefabricated
components, with minimal construction
work remaining other than the
installation and/or assembly.’’
The Department received numerous
comments regarding the proposal
concerning secondary construction
sites.
Most labor unions and groups
representing union-affiliated employers
supported the proposal, agreeing that
the extension of coverage was consistent
with the intent of the DBA and would
prevent businesses from paying nonprevailing rates for work that
historically had been performed by
DBA-covered workers at the primary
worksite. Examples of such comments
included those from NABTU, LIUNA,
SMART, The Association of Union
Contractors (TAUC), UA, and MCAA.193
Some commenters, such as NABTU,
IBEW, LIUNA, and UA, urged the
Department to expand coverage even
further, contending that the NPRM’s
limitation of coverage to locations
where ‘‘entire portions or modules’’ of
a public work are constructed, ‘‘as
opposed to smaller prefabricated
components,’’ was unwarranted, and
that the proposed definition of
‘‘significant portion’’ should be changed
to mean ‘‘one or more portion(s),
module(s) and/or individualized
fabricated component(s) that are integral
to the building or public work,’’ to
include even smaller custom
components like custom pipe bends.
NABTU and several other commenters
that incorporated NABTU’s comments
by reference further argued that
Midway, L.P. Cavett, and Ball were
wrongly decided and encouraged the
Department to abandon the distinction
between work performed at ‘‘primary’’
or ‘‘secondary’’ sites, suggesting the
term ‘‘work’’ in the phrase ‘‘site of the
work’’ does not refer to the public work
or building being constructed, but to
any work that is specific to, and
customized for, a DBA project. The UA
made similar arguments. SMART urged
the Department to consider the impact
of building information modelling
(BIM), a software modeling process that
enables ‘‘virtual construction of a
building’s superstructure and
mechanical, electrical, and plumbing
systems before the off-site or on-site
construction of the physical buildings,
portions, modules, or components
begins,’’ and to integrate a reference to
BIM and similar technologies into the
definitions of ‘‘secondary construction
site(s).’’ Some commenters supporting
the proposal provided examples of the
use of offsite construction in Federal or
federally funded projects; LIUNA, for
example, cited the FHWA’s seeking to
develop innovations in offsite bridge
192 See https://
proddrupalcontent.construction.com/s3fs-public/
SMR1219_Prefab_2020_small-compressed.pdf;
https://www.gsa.gov/cdnstatic/SCHEDULE_56_-_
ORDERING_GUIDE.pdf.
193 MCAA, a group of union-affiliated contractors,
noted in its comment that while its support of the
proposal reflected the view of most of its member
employers, some of its members dissented from that
view.
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construction, modular construction in
airport expansion projects, prefabricated
chemical storage buildings at DOE’s
national laboratories, and the use of
prefabricated structures in Army Corps
of Engineers navigation projects.
A few commenters recommended
clarifications to the proposed definition
of ‘‘significant portion.’’ For example,
the NECA and the New York State
Metropolitan Transportation Authority
(MTA) requested that the Department
ensure the definition of ‘‘significant
portions’’ not include smaller
prefabricated components such as
electrical racks, temporary power
distribution centers, prefabricated tiled
wall units, elevators and escalators, and
bus and train wash units. NECA further
stated that the Department should
‘‘consider when determining ’significant
portion’ that the prefabrication materials
are specific and/or unique to the project
itself and are not readily available to the
general public or commercial market.’’
The MTA also recommended that the
Department clarify that, where required,
the prevailing wage for offsite work
should reflect the area where the offsite
work is performed, as opposed to the
area of the primary work site, and that
no prevailing wage requirements apply
to offsite fabrication that takes place in
a foreign country. American Clean
Power (ACP), while opposing the
expansion in general, asserting that it
was inconsistent with congressional
intent, suggested in the alternative that
‘‘significant portion’’ be changed to
eliminate any reference to size or
modularity and instead to tie coverage
or the lack thereof to a secondary site’s
‘‘permanence, independence, and
distance’’ from the primary worksite.
Except for groups representing unionaffiliated employers, commenters
representing employers generally
opposed the proposed expansion of
coverage of offsite work. Many of these
commenters, including ABC and its
member campaign comments, MBI,
AGC, NAHB, OCA, and IRTBA, argued
that the Department’s proposal
impermissibly exceeded the statutory
restriction of coverage to ‘‘site of the
work’’ as the term has been interpreted
in Midway, Ball, and L.P. Cavett. Several
commenters focused specifically on the
proposal’s potential impact on modular
construction, arguing that proposed
expansion would increase the cost of
modular construction projects and
imperil the modular industry and its
workers. These commenters, including,
for example, SG Echo, Parkline, Inc.,
Clark Pacific, Modular Solutions, Ltd.,
and IEC, described the modular industry
as highly competitive and relatively
low-margin, and argued that prevailing
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wage rates would cause modular
companies to become less competitive
in the marketplace, leading to increased
costs to taxpayers on public buildings
and works. Some commenters pointed
to what they asserted are advantages of
modular construction in arguing against
the proposed expansion. For example,
MBI, California Housing Consortium
(CHC), and others argued that in
addition to being more predictable and
efficient, construction in a factorycontrolled environment is safer for
workers and more environmentally
friendly than traditional construction,
and that those priorities would be
adversely affected if the industry were
impacted by the proposed coverage
expansion. Enterprise Electrical, LLC
asserted that offsite operations provide
an entry point for less experienced
workers to be introduced to a trade that
will enable them to graduate to onsite
locations where they can earn higher
wages.
Several of these commenters,
including Conscious Communities, the
CHC, Cloud Apartments, Optimum
Modular Solutions, Southeast Modular,
The Pacific Companies, and
Manufactured Housing Institute,
commented that the ‘‘site of the work’’
expansion would negatively impact the
affordable housing sector, noting that
the efficiencies and cost savings of
modular construction can increase the
availability of affordable housing. They
argued that by effectively removing the
cost advantages of modular
construction, the proposal will deter
modular housing firms from working on
DBRA-covered projects. One such
commenter, The Pacific Companies,
stated that if the proposed changes are
implemented, it would cease using
Federal funding that triggers DavisBacon coverage for the construction of
affordable housing, and would shift its
business to producing market-based
housing or commercial developments.
Some commenters opposing the
proposal cited a lack of clarity with
regard to coverage scope and impact.
For example, MBI and ACP argued that
the Department’s proposed definition of
‘‘significant portion’’ was unclear and
would cause tremendous uncertainty,
and that employers would have to guess
whether or not certain work is covered
and could face significant liability if
their interpretation is later determined
to be incorrect. ACP specifically
expressed concern that the new
definition of ‘‘significant portion’’
would be a deviation from the current
one on which stakeholders are relying to
seek Federal funding under the IIJA.
The SBA Office of Advocacy argued that
the extent of the economic impact of the
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57617
proposed expansion, including the
number of small businesses that will be
newly DBA-covered under the proposal,
was unclear and that the Department
should undertake further analysis of
these issues.
Some commenters also raised
concerns regarding whether it would be
feasible or appropriate to apply DavisBacon rates for onsite construction to an
offsite environment. For example,
Quartz Properties and Phoenix Modular
Elevator argued that the tasks and skills
of offsite factory workers differ
substantially from those of onsite
workers, and Blazer Industries
contended that paying factory workers
different rates for government contract
or federally funded work that is
otherwise identical to non-covered work
would be administratively difficult,
since such workers typically work on
multiple projects in a given day, and
could hurt employee morale if some
workers earn more than others doing the
same kind of work. FTBA similarly
argued that construction activity will be
difficult to segregate from commercial,
non-DBA work, including work
manufacturing materials covered by the
Walsh-Healey Public Contracts Act, and
that this will lead to confusion and
inadvertent violations of law. ACP,
GCA, and ARTBA noted that offsite
work often occurs at locations far away
from the public work’s intended
location and contended the
Department’s proposal could impose
liability on parties who have no control
over the manufacturing process. Two
union-affiliated commenters, UBC and
Signatory Wall and Ceiling Contractors
Alliance, while not expressly opposing
the proposal, raised concerns that it
could interfere with existing collectivebargaining agreements that cover
workers at offsite factories, and
proposed that the site of the work not
include facilities where in the normal
course of business products are
manufactured or fabricated for nonFederal or non-federally assisted
projects.
After consideration of the comments
received, the Department is modifying
its proposal to narrow the scope of
coverage at secondary construction
sites. Specifically, the final rule
provides that for a secondary
construction site to be considered part
of the site of the work, in addition to
being a location where a significant
portion of a building or work is
constructed for specific use in the
designated building or work, the site
must be either established specifically
for the performance of the covered
contract or project or dedicated
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exclusively, or nearly so, to the covered
contract or project.
While the Department remains
concerned that the trend toward offsite
construction of portions of buildings or
works that are otherwise covered by the
DBA and its Related Acts may result in
fewer workers earning Davis-Bacon
wages, in derogation of Congress’s
intent in enacting these statutes, the
Department believes that commenters
have raised valid concerns regarding the
specific proposal in the NPRM.
Specifically, the Department agrees that
further analysis of the potential
economic impact of such a proposal is
warranted, particularly given the
concerns raised about potential adverse
effects on CBAs and affordable
housing.194 Additionally, while the
Department maintains that the
interpretation of the term ‘‘site of the
work’’ advanced in the proposed rule
would be a permissible construction of
the language of the Davis-Bacon Act, the
Department is cognizant that a
reviewing court could reach a contrary
conclusion based on existing circuit
court precedent and the Department
does not wish to create unnecessary
legal uncertainty surrounding this issue
at this time without further analysis or
information about potential impacts.
Finally, the Department recognizes that
it could be challenging and resourceintensive for companies operating what
are essentially factory environments
creating products potentially for
multiple clients and projects to pay
workers different rates depending on the
particular project for which they are
creating products at any given point in
a day.
Instead, the Department is revising
this component of the regulation to
reflect a more incremental expansion of
coverage of secondary construction sites
where significant portions of public
works are constructed for specific use in
a particular building or work.
Specifically, whereas the current
regulation includes such sites only if
194 Although the Department noted above that it
anticipates that this rule’s revisions to the
definition of prevailing wage will at most result in
a limited potential increase in construction costs for
a small percentage of the market and will not
significantly affect overall housing prices or rents,
the Department is cognizant that the definition of
‘‘site of the work’’ impacts the scope of covered
employers and workers, rather than the amount of
the prevailing wage for those already covered. The
Department agrees that it is advisable to more
closely examine the potential effects of a regulatory
revision that could expand coverage to a category
of employers that have generally not previously
been covered by the Davis-Bacon labor standards.
The Department also believes that such closer
examination will inform the extent to which DavisBacon classifications can easily be applied to an
offsite environment in a broader fashion.
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they are established specifically for a
DBRA-covered project or contract, the
revised regulation also includes any
sites that are dedicated exclusively or
nearly so to the performance of a single
DBRA-covered project or contract—i.e.,
sites that for a specific period of time
are dedicated entirely, or nearly
entirely, to the construction of one or
more ‘‘significant portions’’ of a
particular public building or work. The
final rule further explains that a
‘‘specific period of time’’ in this context
means a period of weeks, months, or
more, and does not include
circumstances where a site at which
multiple projects are in progress is
shifted exclusively or nearly so to a
single project for a few hours or days in
order to meet a deadline.
The Department believes that this
more limited approach will address the
most significant concerns voiced by
commenters. Specifically, as noted
above, many commenters contended
that tracking time and wage rates at
facilities engaged in work on multiple
projects at once would be infeasible and
that the potential administrative costs
would especially deter small businesses,
which work on multiple projects at a
time, from working on Federal or
federally funded projects. MBI, for
example, asserted that ‘‘the
administrative costs of tracking multiple
rates of pay and fringe benefits based on
the type of project’’ would be
‘‘prohibitive.’’ One small business
owner stated that ‘‘[w]e always have
multiple projects being constructed in
our facility at any given time with man
power bouncing back and forth between
projects as needed.’’ Another voiced
concerns about the potentially
‘‘astronomical’’ ‘‘administrative costs of
tracking multiple rates of pay based on
the type of project.’’ Another noted that
‘‘[i]n the plant our staff are multi-tasking
all day long,’’ that ‘‘small manufacturers
everywhere . . . have cross trained
employees that do multiple functions
during the day on multiple projects,’’
and that ‘‘documentation of which
project they worked on and which
project is federal would be a huge
undertaking that may cause our small
minority firm to take a second look at
doing any federal work.’’ Along similar
lines, UBC and Signatory Wall and
Ceiling Contractors Alliance predicted
difficulties with implementing the
proposed rule at facilities at which
workers are employed on both DBRAcovered and non-DBRA-covered
projects. These issues will no longer be
significant under the final rule, which
will only cover secondary sites
established specifically for a particular
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project or that are dedicated exclusively,
or nearly so, to a single DBRA-covered
project. Thus, sites at which work is
being performed on more than one
project at a time—whether DBRAcovered or not—will not be considered
secondary construction sites (except for
circumstances where work on a second
project is merely token work, in which
case the site would be deemed ‘‘nearly’’
exclusively dedicated to the main
project and therefore covered).
Additionally, with a narrower scope
of coverage, the Department expects that
the impact of the final rule will be in
line with the more limited impact of the
2000 final rule that provided for
coverage of offsite locations where
‘‘significant portions’’ of public works
were constructed only if those locations
were established specifically for
contract performance. In that rule, the
Department stated that it anticipated
that the number of instances in which
the expansion would be implicated
would be ‘‘rare’’ and that ‘‘the
prevailing wage implications would not
be substantial.’’ 65 FR 80277. While this
final rule expands coverage beyond the
2000 rule to include dedicated
secondary construction sites even if
they were not established for contract
performance, the Department believes
that the impact will be of a similarly
limited order of magnitude and not of
the type that will cause significant
disruption, particularly given the
numerous comments stating that
modular construction facilities typically
work on multiple projects at a time and
would therefore be beyond the scope of
this provision. Similarly, the
Department believes that narrowing the
scope of the rule’s change largely
addresses concerns noted above
regarding stakeholders’ reliance on the
current definition in seeking Federal
funding, and that any remaining such
interests are outweighed by the benefits
of ensuring that construction workers on
DBRA projects are paid Davis-Bacon
wages for time spent on the site of the
work.
The Department believes that the
more limited scope of the final rule also
addresses concerns about the potential
ambiguity of the term ‘‘significant
portion.’’ While the Department
recognizes that there will be borderline
cases, the Department anticipates, as it
did in the 2000 final rule, that the
distinction between a significant portion
or module and a prefabricated
component will be clear in the vast
majority of cases. See 65 FR 80275
(stating that ‘‘where projects are
constructed in this manner, application
of this provision should normally be
obvious’’). The Department similarly
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agrees with its assessment in the 2000
final rule that ‘‘a precise definition
would be unwise because the size and
nature of the project will dictate what
constitutes a ‘significant portion.’’’ Id.
However, the final rule adds some
additional clarifying language, and now
states that a ‘‘significant portion’’
‘‘means one or more entire portion(s) or
module(s) of the building or work, such
as a completed room or structure, with
minimal construction work remaining
other than the installation and/or final
assembly of the portions or modules at
the place where the building or work
will remain.’’ Given the final rule’s
more limited scope, the Department
anticipates that contractors and
subcontractors can refer close questions
to the Administrator and will be able to
do so at an early stage in the contracting
process. To the extent that questions
arise frequently, the Department will
consider elaborating on the definition of
‘‘significant portion’’ in subregulatory
guidance.195 The Department will also
continue to solicit and review
information regarding offsite
construction and other developing
trends in construction with Davis-Bacon
implications.
The final rule further states explicitly
that ‘‘[a] ‘significant portion’ does not
include materials or prefabricated
component parts such as prefabricated
housing components.’’ The Department
reiterates that the manufacture of such
items has long been understood to be
outside the scope of the DBA since the
law’s inception, and the final rule does
not alter this well-established principle.
See Midway, 932 F.2d at 991 n.12 (citing
1932 House debate on the DBA as
evidence that its drafters understood
that offsite prefabrication sites would
generally not be considered part of the
site of the work). Such prefabrication,
however, is distinguishable from ‘‘preengineering’’ or ‘‘modular’’
construction, in which significant,
often-self-contained portions of a
building or work are constructed and
then simply assembled onsite ‘‘similar
to a child’s building block kit.’’ GSA
Sched. 56 at 5.
Under the latter circumstances, as the
Department noted in 2000, ‘‘such a large
amount of construction is taking place
[at an offsite location] that it is fair and
reasonable to view such location as a
site where the public building or work
is being constructed.’’ 65 FR 80274; see
also id. at 80272 (stating that ‘‘the
195 The Department notes that commenters raised
similar concerns in the 2000 rulemaking regarding
the ambiguity of the term ‘‘significant portions,’’
and that those concerns have not, to the
Department’s knowledge, resulted in significant
compliance issues in the 2 decades since.
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Department views such [secondary
construction] locations as the actual
physical site of the public building or
work being constructed’’). The
Department reached this conclusion in
2000 with respect to offsite locations
established specifically for contract
performance, and the Department
concludes that it is equally consistent
with the DBA, and with Midway, Ball,
and L.P. Cavett, to apply this principle
to locations dedicated exclusively or
nearly so to contract performance.
While the Department agrees that these
appellate decisions generally place the
primary focus of the ‘‘site of the work’’
inquiry on the physical proximity of a
location to the intended location of the
building or work, throughout the DBA’s
long history the Department has
recognized that under certain
circumstances, the term can also
encompass other locations with a
sufficient nexus to a particular project
based on the nature of the work
performed there. See AAM 7 (July 18,
1958) (concluding that DBRA applied to
sheet metal workers who alternated
between the installation site and an offsite shop); Titan IV Mobile Serv. Tower,
1991 WL 494710, at *7 (Rothman, J.,
writing separately) (opining that the
removal of construction work from the
final location ‘‘does not by the fact of
removal alone lose . . . Davis-Bacon
Act coverage’’).
The final rule is consistent with the
overarching principle, reflected in both
the site of the work principle and the
material supplier exemption, that DavisBacon coverage does not apply to
activities that are independent of the
particular contract or project. See
United Constr. Co., Inc., WAB No. 82–
10, 1983 WL 144675, at *3 (Jan. 14,
1983) (examining, as part of an inquiry
into whether support activities are on
the ‘‘site of the work,’’ ‘‘whether the
activities are sufficiently independent of
the primary project to determine that
the function of the support activities
may be viewed as similar to that of
materialman’’). As noted above, the
Department continues to maintain that
as a legal matter, it would be
permissible for the Department to
interpret the term ‘‘site of the work’’ to
include any location where custommade ‘‘significant portions’’ of a public
building or work are constructed.
However, the final rule’s restriction of
coverage of such facilities to those that
are either established for, or dedicated
exclusively or nearly exclusively to, a
particular project reflects a reasonable
balance that the Department believes is
supportable as a matter of law and
policy in light of the countervailing
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57619
concerns raised by commenters. In
particular, when an offsite location
becomes dedicated exclusively, or
nearly so, to actual construction of
either the entirety or significant portions
(as defined in the rule) of a single public
building or public work, the character of
the offsite location is such that it is ‘‘fair
and reasonable’’ to view it as a
construction site (and not simply a
factory) and as a ‘‘site of the work’’ for
purposes of the project to which it is
exclusively (or nearly so) dedicated.
While some commenters voiced
concerns that it will be challenging to
apply Davis-Bacon classifications in an
offsite environment, the Department
notes that if the classification of a
worker based on the set of the worker’s
job duties is not straightforward,
contractors, agencies, and other
interested parties can bring questions to
WHD and, if necessary, can submit
conformance requests. The Department
believes that the consultation and
conformance processes, together with
the final rule’s new procedures for
publishing supplemental wage rates
under certain circumstances, will
adequately address these concerns. The
Department fully intends to work with
contractors, contracting agencies, and
other interested parties to resolve those
questions as early in the contracting
process as possible. Additionally, to the
extent that some of these concerns are
grounded in the fact that workers at
secondary sites may work in different
capacities at different times, this
situation is not unique to offsite
facilities. To the contrary, the
Department’s regulations and
longstanding interpretation recognize
that workers may perform work in more
than one classification, and that
employers may pay them at the rate for
each classification based on the time
worked therein, provided that the
employer accurately tracks such time.
See 29 CFR 5.5(a)(1)(i); Pythagoras Gen.
Contracting Corp., ARB Nos. 08–107,
09–007, 2011 WL 1247207, at *7 (Mar.
1, 2011), aff’d sub nom. Pythagoras Gen.
Contracting Corp. v. U.S. Dep’t of Lab.,
926 F. Supp. 2d 490 (S.D.N.Y. 2013).
For the reasons discussed above
regarding the narrowing of the proposed
rule, the Department declines
commenters’ suggestions to expand
coverage of offsite construction even
further to include smaller custom-made
components, or to reject the holdings in
Midway, Ball, and L.P. Cavett. The
principles announced by the courts in
those decisions are now wellestablished, including in the
Department’s own case law. Moreover,
an even broader expansion of coverage
than proposed in the NPRM would raise
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the concerns regarding costs and impact
discussed above, but to an even greater
degree. The Department also believes
that it is reasonable to distinguish
between exclusively-dedicated support
sites like batch plants, borrow pits, and
prefabrication sites—which under case
law and the Department’s regulations
are part of the site of the work only if
adjacent or nearly adjacent to a primary
or secondary worksite—and exclusivelydedicated sites at which significant
portions are constructed, which under
the final rule are covered regardless of
proximity to the primary worksite.
Under the latter circumstances, the
magnitude of construction activity
taking place at the secondary location,
and the near-completeness of the
modules or portions, weigh much more
heavily in favor of a conclusion that the
secondary location is a ‘‘site of the
work’’ and distinguish such
circumstances from those in Midway,
Ball, and L.P. Cavett.
Finally, in response to MTA’s
questions, the Department agrees that
the appropriate geographic area for the
application of prevailing wages to
secondary construction sites is the
location of the secondary construction
site, not the location of the primary
worksite. The purpose of the DavisBacon labor standards is to ensure that
laborers and mechanics are paid wages
that prevail where they work; thus, it
would not be appropriate to apply wage
rates from a different area when there is
sufficient wage data in the area in which
they work. A contract involving both a
primary and secondary construction site
should include wage determinations for
both areas. Regarding whether work
performed outside the United States is
covered, the language of the specific
statute providing for application of the
Davis-Bacon labor standards controls.
For example, the DBA applies only
within the geographical limits of the 50
states and the District of Columbia, as
well as in the Commonwealth of the
Northern Mariana Islands. Conversely,
some Related Acts apply to construction
in U.S. territories such as Guam, Puerto
Rico, and the U.S. Virgin Islands.
b. Clarification of Application of ‘‘Site
of the Work’’ Principle to Flaggers
The Department proposed to clarify
that workers engaged in traffic control
and related activities adjacent or
virtually adjacent to the primary
construction site are working on the site
of the work. Often, particularly for
heavy and highway projects, it is
necessary to direct pedestrian or
vehicular traffic around or away from
the primary construction site. Certain
workers of contractors or
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subcontractors, typically called
‘‘flaggers’’ or ‘‘traffic directors,’’ may
therefore engage in activities such as
setting up barriers and traffic cones,
using a flag and/or stop sign to control
and direct traffic, and related activities
such as helping heavy equipment move
in and out of construction zones.
Although some flaggers work within the
confines of the primary construction
site, others work outside of that area and
do not enter the construction zone itself.
The Department has previously
explained that flaggers are laborers or
mechanics within the meaning of the
DBA. See AAM 141 (Aug. 16, 1985);
FOH 15e10(a); Superior Paving
Materials, Inc., ARB No. 99–065, 1999
WL 708177 (June 12, 2002). The
Department proposed to clarify, in the
definition of ‘‘nearby dedicated support
sites,’’ that such workers, even if they
are not working precisely on the site
where the building or work would
remain, are working on the site of the
work if they work at a location adjacent
or virtually adjacent to the primary
construction site, such as a few blocks
away or a short distance down a
highway. Although the Department
believes that any adjacent or virtually
adjacent locations at which such work
is performed are included within the
current regulatory ‘‘site of the work’’
definition, given that questions have
arisen regarding this coverage issue, the
Department proposed to make this
principle explicit.
As the Department has previously
noted, such work by flaggers and traffic
operators is integrally related to other
construction work at the worksite and
construction at the site would not be
possible otherwise. See AAM 141; FOH
15e10(a). Additionally, as noted above
in section III.B.3.ii.(G).(1).(d) and as the
ARB has previously explained, the
principle of adjacency or virtual
adjacency in this context is consistent
with the statutory ‘‘site of the work’’
limitation on DBA-covered work as
interpreted by courts. See Bechtel
Constructors Corp., ARB No. 97–149,
1998 WL 168939, at *5 (explaining that
‘‘it is not uncommon or atypical for
construction work related to a project to
be performed outside the boundaries
defined by the structure that remains
upon completion of the work,’’ such as
where a crane in an urban environment
is positioned adjacent to the future
building site). This proposed change
therefore is consistent with the DBA and
would eliminate any ambiguity
regarding these workers’ coverage.
The Department received a number of
comments about the coverage of flaggers
under the proposed revision of the
definition of site of work. Some of the
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commenters supported the proposal in
its entirety, others opposed the proposal
(including through comments submitted
as part of an organized ABC member
campaign), and a few commenters
sought clarification on the proposal.
Supporting commenters agreed with
the proposal’s intent to codify the
Department’s interpretation of
adjacency to the site of the work and
ensure that flaggers receive Davis-Bacon
protections. For example, LIUNA stated
this clarification reflects existing
practice and therefore will ensure that
laborers employed as flaggers receive
the benefits and protections of the
DBRA. LIUNA emphasized that this
clarification is not only consistent with
the original purpose of the DBA, but it
also furthers the Secretary’s 1985
coverage decision reflected in AAM 141.
Both LIUNA and the NCDCL stated
the work of flaggers is integrally related
to the other construction work at the
worksite, with NCDCL emphasizing that
this is especially true on heavy and
highway projects. LIUNA noted that
construction at the site would not be
possible without such integrally related
flaggers’ work and pointed to LIUNA
apprenticeship program curricula that
demonstrate the integral nature of traffic
control to construction work. Such
apprenticeship training encompasses
safety on construction sites related to
protection of flaggers themselves, as
well as of other workers and the driving
and pedestrian public near the site. A
number of commenters including
LIUNA noted that a flagger may need to
perform work outside the precise
confines of the work site in order for
them to effectively perform their duties,
which are integrally related to the other
work at the construction site.
LIUNA and NJHHCL noted that the
dangerous nature of flagger work
underscores the importance of
clarifying, and thus ensuring, DavisBacon coverage for flaggers. Flagger
work includes keeping laborers and
mechanics working on or near the
worksite safe, as well as keeping the
public safe and out of the work site.
LIUNA cited FHWA and State
department of transportation best
practices and flagging instruction
materials that noted that flagger stations
must be located in places where the
traveling public has sufficient distance
to stop at an intended stopping point
before entering the work space. They
also noted that flagger stations should
be preceded by advance warning signs
and be at points of maximum visibility,
such as on the shoulder of a highway
and opposite active work areas. Another
commenter echoed the importance of
flagger work performed adjacent or
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nearly adjacent to the construction site
because flaggers are keeping those in
and around the jobsite safe.
NJHHCL expressed approval of the
Department’s recognition that ‘‘workers
handling the traffic control near the
primary construction site are essential
personnel to these projects.’’ LIUNA
similarly emphasized that over 60
percent of all fatal injuries at road
construction sites are a result of vehicles
striking workers who are on foot.
Commenters such as ABC and ARTBA
opposed the proposal, characterizing it
as an expansion of DBA coverage to
flaggers whom they contend are not on
the site of the work. In its comment,
ABC argued that the proposed revision’s
‘‘expansion of coverage to include . . .
flaggers who do not perform work at the
site of construction’’ violates the plain
language of the DBA. ABC member
campaign comments similarly claimed
that the proposed rule would expand
DBA regulations to work such as
flaggers. These commenters also
asserted that the Department’s flagger
and other proposals would increase the
regulatory burden and costs on new
industries and types of construction
projects typically not subject to DBA
regulations.
Likewise, ARTBA claimed the
Department’s flagger proposal extended
DBA coverage to ‘‘off-site’’ flaggers.
ARTBA opposed the proposal, claiming
that it failed to recognize that flaggers
working onsite directing personnel and
equipment have special training. In
contrast, according to ARTBA, ‘‘off-site’’
flaggers do not have special training and
their primary responsibility is
pedestrian management and directing
people away from the worksite and they
‘‘are not physically present on the
worksite.’’ ARTBA argued that onsite
flaggers are properly covered by the
DBA while offsite flaggers should not be
covered by the DBA because of their
duties, location, and lack of specialized
training.
Various individual commenters also
claimed that the proposal was an
‘‘expansion of DBA regulations to . . .
flaggers’’ who do not perform work on
the construction sites,196 and voiced
concerns that it would increase the
regulatory burden and costs for
industries and types of construction
projects that these commenters claimed
were not typically subject to DBA
regulations.
The Department reiterates that the
rule does not change the meaning of
196 The Department understands that the ABC
member campaign comments, which were
ambiguous, opposed the flagger proposal on this
basis, as did ABC.
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adjacent or nearly adjacent dedicated
support sites or expand coverage to
previously non-covered workers, but
rather codifies the Department’s
interpretation that the site of the work
encompasses flagger activities
performed adjacent or virtually adjacent
to the construction site. Codifying this
policy is intended to assist contractors
and other stakeholders with accurately
assessing when flaggers are working on
the site of the work and, therefore,
covered by the DBA.
The Department thus disagrees with
commenters who claimed the rule
expands DBA coverage and would
increase administrative burdens and
costs on the regulated community. As
explained in the NPRM, workers
performing flagger activities adjacent or
nearly adjacent to worksites are working
on the site of the work under the DBA.
Such work ensures that construction
work in and around the active worksite
proceeds in a safe and efficient manner,
in part by protecting the laborers and
mechanics doing the work, the flaggers
themselves, and the public around the
worksite. The Department notes that a
worker’s title is not determinative of
whether the person performing flagger
activities is on the site of the work,
especially since, as LIUNA pointed out,
there are numerous titles for people
performing activities associated with
directing vehicular or pedestrian traffic
both on and around or away from the
primary construction site.
Furthermore, the Department
disagrees with ARTBA that only flaggers
working ‘‘on-site directing personnel
and equipment’’ and who have received
specialized training should be covered
by the DBA. Such a position is contrary
to the Department’s recognition that
flaggers are laborers, see, e.g., AAM 141,
whose work, like the work of crane
operators on building projects or of
laborers setting up cones or cleaning up
around heavy or highway projects, is
‘‘performed outside the boundaries
defined by the structure that remains
upon completion of the work.’’ Bechtel,
ARB No. 97–149, 1998 WL 168939, at
*5. These laborers work adjacent or
virtually adjacent to the site of the work
and are covered by the DBA.
Additionally, ARTBA’s emphasis on
specialized training about directing
personnel around work vehicles and
operations that ‘‘on-site’’ flaggers
receive is not relevant to whether a
worker is performing flagger activities
adjacent or virtually adjacent to the
worksite.
AGC did not disagree with the
proposal but emphasized that the
Department should maintain the
distinction between flaggers and
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employees of traffic service companies
that rent equipment to the prime
contractor and perform only incidental
functions at the site in connection with
delivery of equipment. AGC noted that
the Department’s current guidance in
FOH 15e10 and 15e16 draws this
distinction, with 15e16 further
providing that traffic service company
workers are not covered by the DBA
unless they spend a substantial amount
of time (20 percent or more) in a
workweek on the site.
The Department acknowledges the
distinction between flaggers and
workers of traffic service companies. As
described in section c (‘‘Clarification of
‘material supplier’ distinction’’), the
final rule codifies the distinction
between contractors and subcontractors
and material suppliers. Under the final
rule, if a traffic service company’s only
contractual responsibility is to deliver
equipment and to perform activities
incidental to such delivery, such as
loading and unloading, then assuming it
meets the other enumerated criteria, it is
considered a material supplier and its
workers therefore are not subject to the
Davis-Bacon labor standards unless the
work is performed under a statute that
applies to all work performed by
laborers and mechanics in the
development of a project. On the other
hand, if the company’s workers are
engaged in construction work on the site
that is not incidental to delivery, such
as acting as flaggers, the company
would be considered a subcontractor,
and therefore, as discussed below, see
infra section d (‘‘Coverage of time for
truck drivers’’), its workers would be
covered for any time spent in nondelivery-related construction work, as
well as any onsite time essential or
incidental to delivery that is not de
minimis.
Finally, the SBA commented that the
proposed rule may result in more small
businesses covered by the DBRA. The
SBA recommended that the Department
quantify the number of small businesses
potentially affected by this and other
proposals in the NPRM. The number of
potentially affected small businesses is
estimated in section VI (‘‘Final
Regulatory Flexibility (FRFA)
Analysis’’).
For the foregoing reasons, the final
rule adopts the language regarding
flaggers as proposed.
c. Clarification of ‘‘Material Supplier’’
Distinction
The Department also proposed to
clarify the distinction between
subcontractors and ‘‘material suppliers’’
and to make explicit that employees of
material suppliers are not covered by
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the DBA and most of the Related Acts.
Although this distinction has existed
since the DBA’s inception, the precise
line between ‘‘material supplier’’ and
‘‘subcontractor’’ is not always clear and
is sometimes the subject of dispute.
While the Davis-Bacon regulations
have not previously included
definitions of ‘‘contractor’’ or
‘‘subcontractor,’’ this rule, as discussed,
adds such definitions into § 5.2. The
Department proposed to incorporate the
material supplier exception into the
proposed new definition of
‘‘contractor,’’ which was incorporated
into the proposed definition of
‘‘subcontractor.’’ Specifically, the
Department proposed to exclude
material suppliers from the regulatory
definition of ‘‘contractor,’’ with the
exception of entities performing work
under ‘‘development statutes’’—certain
Related Acts that apply the Davis-Bacon
labor standards to all laborers and
mechanics employed in a project’s
development and thus are not limited to
‘‘contractors’’ or ‘‘subcontractors.’’
The Department proposed three
criteria for the material supplier
exception to apply to an employer. First,
that the employer’s only obligations for
work on the contract or project are the
delivery of materials, articles, supplies,
or equipment, which may include
pickup in addition to, but not exclusive
of, delivery. Second, that the employer
also supplies materials to the general
public. Third, that the employer’s
facility manufacturing the materials,
articles, supplies, or equipment is
neither established specifically for the
contract or project nor located at the site
of the work. The proposed language
further clarified that if an employer, in
addition to being engaged in material
supply and pickup, also engages in
other construction, prosecution,
completion, or repair work at the site of
the work, it is not a material supplier
but a subcontractor. The Department
explained that these criteria were
intended to reflect case law and the
Department’s guidance. See 87 FR
15732 (citing H.B. Zachry, 344 F.2d at
359, AAM 5 (Dec. 26, 1957), AAM 31
(Dec. 11, 1961), AAM 36, AAM 45, and
AAM 53 (July 22, 1963)); PWRB, DBA/
DBRA Compliance Principles, at 7–8;
FOH 15e16(c)).
The Department received comments
both supporting and opposing this
proposed change. Supportive comments
generally agreed with the Department
that a codification of the definition of
material supplier would be helpful. III–
FFC, for example, characterized the
Department’s clarification as
‘‘commonsense,’’ and SMART stated
that the revisions would ‘‘ensure that
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workers who perform construction
activities on a primary or secondary site
are not deprived of coverage simply
because one of their employer’s
functions is delivery.’’
In contrast, many of the comments in
opposition contended that the
Department was proposing to
significantly expand coverage to
material suppliers. IRTBA, for example,
argued that the proposed rule would
‘‘essentially determin[e] that material
suppliers are covered by the Act unless’’
they meet certain criteria. Several
comments, including the Illinois
Association of Aggregate Producers
(IAAP), Virginia Asphalt Association,
ABC, and a joint comment from NAPA,
NRMPCA, and NSSGA, voiced concern
that the proposed rule would cover
workers at temporary material supply
facilities that are established and
located on the site of the work and that
recycle materials onsite to produce
materials that can then be used onsite,
asserting that such locations are not
currently covered. The SBA Office of
Advocacy commented that small
businesses at its roundtable expressed
similar concerns. Other comments also
appeared to presume that the proposal
regarding material suppliers represented
a significant expansion. See, e.g., the
group of U.S. Senators. These
commenters generally asserted that the
proposed changes would significantly
increase costs and would make it more
difficult for small companies to compete
on DBA projects.
Some commenters’ objections were
more limited or specific. For example,
FTBA and AGC requested that any
regulatory clarification more closely
align with the Department’s existing
guidance, including the 20-percent
threshold and the de minimis rule. IEC
specifically opposed the proposed rule’s
requirement that to be a material
supplier, an employer must supply
products to ‘‘the general public,’’
contending that the term was ambiguous
and that a supplier’s ability to service
only a few clients should not transform
it into a subcontractor.
After considering the comments
received, the final rule adopts a
regulatory definition of material
supplier with certain modifications
from the proposed rule. As an initial
matter, the comments reinforced the
Department’s belief that it is necessary
to codify and clarify the definition of
‘‘material supplier’’ in the Davis-Bacon
regulations. Many of the comments
received appeared to be premised on an
overbroad understanding of the existing
material supplier exemption, and
therefore perceived the proposed
revisions as making significant
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substantive changes when they were
largely intended to clarify and reflect
existing coverage principles. As such,
explicitly delineating the differences
between subcontractors and material
suppliers in the regulation will ensure
that workers who are employed by
contractors or subcontractors and work
on the site of the work receive DavisBacon wages as appropriate.
Most notably, several comments
contended that the proposed definitions
would newly cover mobile or temporary
materials manufacturing facilities
located on the site of the work. These
comments reflect a misconception that
manufacturing or recycling of materials
on the site of the work is outside the
scope of the DBRA. To the contrary, the
regulations have long covered such
activities because the definition of
‘‘construction, prosecution, completion,
or repair’’ explicitly includes
‘‘[m]anufacturing or furnishing of
materials, articles, supplies or
equipment on the site of the building or
work.’’ 29 CFR 5.2(j)(1)(iii) (emphasis
added); see also § 5.2(i) (stating that
‘‘[t]he manufacture or furnishing of
materials, articles, supplies or
equipment . . . is not a building or
work within the meaning of the
regulations in this part unless
conducted in connection with and at the
site of such a building or work’’)
(emphasis added). The Department’s
case law is consistent with this
principle. See, e.g., Forrest M. Sanders,
ARB No. 05–107, 2007 WL 4248530, at
*4 (Nov. 30, 2007) (‘‘[C]ontractors who
furnish materials do engage in
construction, and thus must pay DBA
wages, when their activities occur on
the site of the building or work.’’). Thus,
while the commenters are correct that
under the proposed rule, such facilities
will be covered, this does not reflect a
change from the existing framework.
The Department believes it is important
to clarify that companies supplying
materials under such circumstances are
subcontractors, not material suppliers.
In recognition of commenters’
concerns, however, the Department is
making certain revisions to the
proposed criteria for material suppliers.
First, the Department is clarifying that
to qualify as a material supplier, an
employer’s obligations for work on a
contract must be limited to the supply
of materials, articles, supplies, or
equipment, which may include pickup
in addition to, but not exclusive of,
delivery,197 and which may also include
197 As noted in the NPRM, an employer that
contracts only for pickup of materials from the site
of the work is not a material supplier but a
subcontractor, and that this would be consistent
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activities incidental to such delivery
and/or pickup, such as delivery, drop
off, and waiting time.198 This is
intended to clarify that activities that
are incidental to material supply, such
as loading, unloading, and pickup,
would not constitute construction
activity that would render the material
supply exemption inapplicable.
Second, the Department is eliminating
the criterion that the employer must
supply materials to the ‘‘general public’’
in order to be a material supplier. The
Department agrees with the IEC that this
term lends itself to ambiguity. In place
of this criterion, the final rule clarifies
that for the material supplier exception
to apply, the employer’s facility or
facilities being used for material supply
of the contract either must have been
established before opening of bids or, if
it was established after bid opening,
may not be dedicated exclusively, or
nearly so, to the performance of a
covered contract. The Department’s
existing regulations, guidance, and case
law show that either of these two
options is indicative of a sufficient
degree of independence from the
contract for the facility to be deemed an
operation of a material supplier. See
United Constr. Co., Inc., 1983 WL
144675, at *3; 29 CFR 5.2(l) (describing
material supplier facilities that were
established before opening of bids, even
where such operations for a period of
time may be dedicated exclusively, or
nearly so, to the performance of a
contract); FOH 15e16(d) (same); FOH
15e16(b) (explaining that even if a
facility is set up for the purpose of
fulfilling a contract and therefore was
not established before bid opening, it
‘‘may undergo a change in its character
to such an extent that it becomes the
operation of a supplier,’’ such as ‘‘if it
makes a sufficient quantity of sales from
its producing facility to the general
public’’).
Finally, to harmonize the definition
with other regulatory provisions, the
final rule states that a material
supplier’s facility manufacturing the
materials, articles, supplies, or
with the plain meaning of the term ‘‘material
supplier’’ and with the Department’s case law. See
Kiewit-Shea, ALJ Case No. 84–DBA–34, 1985 WL
167240, at *2 (Sept. 6, 1985), (concluding that
companies whose contractual duties ‘‘called for
hauling away material and not for its supply’’ were
subcontractors, not material suppliers’’), aff’d, Md.
Equip., Inc., WAB No. 85–24, 1986 WL 193110
(June 13, 1986).
198 The Department notes that unloading of
materials is considered incidental to delivery even
if the materials are unloaded directly into a
contractor’s mixing facilities at the work site. See
FOH 15e16(a). Employers and contracting agencies
are encouraged to submit any questions regarding
whether onsite construction work qualifies as
incidental to delivery to the Administrator.
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equipment may not be located on the
primary or secondary construction site,
rather than, as the proposed rule stated,
on the site of the work, a term that also
encompasses adjacent or virtually
adjacent dedicated support sites. The
current regulation states that the site of
the work does not include a material
supplier’s facilities that are not on the
primary or secondary worksite, even if
the operations for a period of time may
be dedicated exclusively or nearly so to
the performance of a contract. § 5.2(l).
This implies two additional principles:
first, that a material supplier may have
a facility on an adjacent or virtually
adjacent support site without losing its
status as a material supplier provided
that the other conditions of
independence from the project are met,
and second, that on the other hand,
when an employer operates a
manufacturing or supply facility on the
primary or secondary worksite itself, it
is considered a subcontractor rather
than a material supplier. Put differently,
the existence of such a facility on the
primary or secondary worksite itself
demonstrates that it is not sufficiently
independent of the project or contract to
be deemed a material supply facility
whose workers are outside the DBRA’s
scope.
The Department emphasizes that
contrary to commenters’ concerns, the
only aspect of the ‘‘material supplier’’
definition in the final rule that arguably
reflects a change from current practice
is that the definition in the final rule
strictly limits applicability of the
exemption to companies whose only
contractual responsibilities are material
supply or activities incidental to
material supply. It therefore excludes
from the exemption companies that also
perform any other onsite construction,
alteration, or repair; such companies are
instead deemed contractors or
subcontractors even if they also engage
in material supply. This principle is
consistent with numerous statements in
the Department’s current guidance. See
PWRB, DBA/DBRA Compliance
Principles, at 7 (material suppliers are
companies ‘‘whose only contractual
obligations for on-site work are to
deliver materials and/or pick up
materials’’) (emphasis added); id. at 7–
8 (‘‘[I]f a material supplier,
manufacturer, or carrier undertakes to
perform a part of a construction contract
as a subcontractor, its laborers and
mechanics employed at the site of the
work would be subject to Davis-Bacon
labor standards in the same manner as
those employed by any other contractor
or subcontractor.’’); FOH 15e16(c)
(same). However, in tension with this
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57623
principle, the current guidance also
provides that a company may be
considered a material supplier even if
its workers engage in some amount of
non-delivery construction work onsite,
such as a precast concrete item supplier
that also repairs and cleans such items
at the worksite or an equipment rental
dealer that also repairs its leased
equipment onsite. See FOH 15e16(c).
The guidance provides that in such
cases, the supplier’s workers are
covered by the Davis-Bacon labor
standards for all onsite time engaged in
such non-delivery construction work,
and that if they spend at least 20 percent
of their workweek engaged in such
work, then all of their onsite time
during the workweek is covered. See id.;
PWRB, DBA/DBRA Compliance
Principles at 7–8.
While the Department recognizes that
many stakeholders are familiar with the
20-percent threshold, it believes that
eliminating the 20-percent threshold for
purposes of the material supplier/
subcontractor distinction is appropriate
for a number of reasons. First, the
Department believes that by creating a
bright-line rule that ties this
determination to a company’s
obligations under a contract, rather than
the amount of time its workers spend
onsite engaged in particular activities in
a given workweek, this change will
reduce uncertainty about coverage and
assist both bidders and agencies in
predicting labor costs before bidding.
Second, as noted in the proposed rule,
the Department has observed that under
its current guidance, there is
considerable confusion regarding the
20-percent threshold and its
application. Some employers, for
example, believe that 20 percent is the
de minimis threshold for coverage of
onsite delivery work by truck drivers
employed by contractors or
subcontractors; however, the 20-percent
threshold in the Department’s current
guidance actually applies to material
suppliers. Similarly, others incorrectly
read the existing guidance as only
requiring compensation for onsite nondelivery construction time if such time
exceeds 20 percent of a workweek;
however, the existing guidance actually
requires compensation for all such time
regardless of the amount, and
additionally requires that if such time
exceeds 20 percent of a workweek, all
of a worker’s onsite time is covered.
Such confusion can deprive workers of
Davis-Bacon wages to which they are
entitled. In contrast, the clarity in the
final rule will facilitate compliance and
is more consistent with both the
language and purpose of the Davis-
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Bacon labor standards, as it ensures that
all laborers and mechanics performing
any non-delivery construction work on
the site of the work will receive
prevailing wages for such work. The
Department therefore concludes that the
need for clarity and predictability
outweighs any reliance interests
implicated by the final rule’s change
from the subregulatory 20-percent
threshold, particularly given that in
many cases, such reliance appears to be
premised on contractors’ incorrect
application of the threshold.
Accordingly, the Department declines
to retain the 20-percent threshold.
Rather, under the final rule, an entity is
a material supplier if: (a) its only
obligations for work on the contract or
project are the delivery of materials,
articles, supplies, or equipment, which
may include pickup of the same in
addition to, but not exclusive of,
delivery, and which may also include
activities incidental to such delivery
and pickup; and (b) its facility or
facilities that manufactures the
materials, articles, supplies, or
equipment used for the contract or
project (1) is not located on, or does not
itself constitute, the project or contract’s
primary or secondary construction site,
and (2) either was established before
opening of bids on the contract or
project, or is not dedicated exclusively,
or nearly so, to the performance of the
contract or project. All other entities
engaged in work on the site of the work
are contractors or subcontractors.
The Department also notes that the
material supplier exemption operates in
tandem with the ‘‘site of the work’’
requirement, except for ‘‘development
statutes’’ to which neither limitation
applies. Thus, under the final rule, a
worker employed by an employer
meeting the criteria for the material
supplier exemption is not employed by
a contractor or subcontractor, and
therefore is not entitled to prevailing
wages and fringe benefits under the
Davis-Bacon labor standards at all even
for time spent on the site of the work.
In contrast, workers employed by
contractors or subcontractors are
entitled to Davis-Bacon wages, but only
for time spent on the site of the work.
Thus, for example, if a company
establishes a facility near, but not on,
the site of the work for the exclusive or
nearly-exclusive purpose of furnishing
materials to a particular project, even
though the company is considered a
subcontractor rather than a material
supplier, its workers are only subject to
the Davis-Bacon labor standards for time
they spend on the site of the work as
defined in this final rule.
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Finally, in addition to the changes
described above, the Department is
making a conforming edit to ensure that
the regulation as written reflects the
principle that employers meeting the
material supplier exemption are not
covered, with the exception of
employers performing work under
development statutes to which the
exemption does not apply. Specifically,
the Department is amending the
definition of ‘‘contract’’ in § 5.2 by
adding language stating explicitly that
with the exception of work performed
under a development statute, the terms
contract and subcontract do not include
agreements with employers that meet
the definition of a material supplier
under § 5.2.
d. Coverage of Time for Truck Drivers
The Department also proposed to
revise the regulations to clarify coverage
of truck drivers under the DBRA. As
explained in the proposed rule, the
Department’s current guidance differs
depending on whether truck drivers are
employed by material suppliers or
contractors or subcontractors. As noted
above, employees of material suppliers
are only covered for onsite time engaged
in non-delivery construction work, or
for all of their time onsite if such
construction work constitutes 20
percent or more of their workweek. FOH
15e16. In contrast, truck drivers
employed by contractors or
subcontractors are covered under a
broader range of circumstances,
including: (1) performing work on the
site of the work that is not related to
offsite hauling, including hauling
materials or supplies from one location
on the site of the work to another
location on the site of the work, see 65
FR 80275; FOH 15e22(a)(1) (stating that
drivers are covered ‘‘for time spent
working on the site of the work’’); (2)
hauling materials or supplies from a
dedicated facility that is ‘‘adjacent or
virtually adjacent to the site of the
work,’’ 65 FR 80275–76; see also 29 CFR
5.2(j)(1)(iv)(A); FOH 15e22(a)(3); (3)
transporting ‘‘significant portion(s)’’ of
the building or work between a
secondary worksite established for
contract performance and the primary
worksite, 65 FR 80276; see also 29 CFR
5.2(j)(1)(iv)(B); FOH 15e22(a)(4); and,
finally, (4) time spent on the site of the
work that is related to hauling materials
to or from the site, such as loading or
unloading materials, provided that such
time is more than de minimis—a
standard that as currently applied
excludes drivers ‘‘who come onto the
site of the work for only a few minutes
at a time merely to drop off construction
materials.’’ 65 FR 80276; see also FOH
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15e22(a)(2); PWRB, DBA/DBRA
Compliance Principles, at 6–7.
As noted in the NPRM, there is
significant uncertainty regarding this
topic, including, for example: the
distinction between drivers for material
supply companies versus drivers for
construction contractors or
subcontractors; what constitutes de
minimis; and whether the 20-percent
threshold for construction work
performed onsite by material supply
drivers is also applicable to delivery
time spent on site by drivers employed
by a contractor or subcontractor.
Moreover, the Department’s
Administrative Law Judges (ALJs) have
come to different conclusions on similar
facts. Compare Rogers Group, ALJ No.
2012–DBA–00005 (May 28, 2013)
(concluding that a subcontractor was
not required to pay its drivers prevailing
wages for sometimes-substantial
amounts of onsite time, as much as 7
hours 30 minutes in a day, making
deliveries of gravel, sand, and asphalt
from offsite), with E.T. Simonds Constr.
Co., ALJ No. 2021–DBA–00001, 2022
WL 1997485 (May 25, 2021), aff’d, ARB
No. 21–054, 2022 WL 1997485 (May 13,
2022) (concluding that drivers
employed by a subcontractor who
hauled materials from the site of the
work and spent at least 15 minutes per
hour—25 percent of the workday—on
site were covered for their onsite time).
Taking this into account, the
Department proposed to clarify coverage
of truck drivers. First, as discussed
above, the Department proposed to
codify a definition of ‘‘material
supplier’’ in a manner that would
reduce ambiguity regarding the
subcontractor/material supplier
distinction by restricting the material
supplier exemption to employers whose
sole contractual responsibility is
material supply and, in so doing,
eliminate the subregulatory 20-percent
threshold pertaining to material
suppliers’ drivers who engage in onsite
construction work. Second, the
Department proposed to amend its
regulations concerning the coverage of
transportation by truck drivers who are
included within the DBA’s scope
generally (i.e., truck drivers employed
by contractors and subcontractors, as
well as any truck drivers employed in
project construction or development
under development statutes) by
amending the definition of
‘‘construction, prosecution, completion,
or repair’’ in § 5.2 to include
‘‘transportation’’ under five specific
circumstances: (1) transportation that
takes place entirely within a location
meeting the definition of site of the
work (for example, hauling materials
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from one side of a construction site to
the other side of the same site); (2)
transportation of portion(s) of the
building or work between a ‘‘secondary
construction site’’ and a ‘‘primary
construction site’’; (3) transportation
between a ‘‘nearby dedicated support
site’’ and either a primary or secondary
construction site; (4) a driver or driver’s
assistant’s ‘‘onsite activities essential or
incidental to offsite transportation’’
where the driver or driver’s assistant’s
time spent on the site of the work is not
so insubstantial or insignificant that it
cannot as a practical administrative
matter be precisely recorded; and (5)
any transportation and related activities,
whether on or off the site of the work,
by laborers and mechanics under a
development statute. The Department
explained that proposals (1), (2), (3), and
(5) set forth principles reflected in the
current regulations, but in a clearer and
more transparent fashion, whereas
proposal (4) sought to resolve the
ambiguities discussed above regarding
the coverage of onsite time related to
offsite transportation.
The Department received comments
expressing support for these proposals
and the ‘‘site of the work’’ proposals in
general, including from III–FFC,
REBOUND, and an individual
commenter. III–FFC specifically
emphasized that most of the proposed
revisions regarding truck drivers reflect
principles that are in the current
regulations, interpreted in case law, and
explained in WHD regulatory guidance,
but that clarity would nonetheless be
helpful given stakeholder uncertainty. It
cited onsite loading and unloading of
equipment, which is a several-step,
time-consuming process, as one fact
pattern that can prompt coverage
disputes, and indicated that it was
hopeful that regulatory revisions would
reduce such disputes and increase
compliance.
The Department also received several
comments opposing these proposals.
Some appeared to argue that any
coverage of material delivery truck
drivers for onsite time is inconsistent
with the D.C. Circuit’s decision in
Midway. OCA, IRTBA, SIBA, and IAPA
also argued that case law under the
NLRA supports the exclusion of
delivery drivers from coverage even if
they spend time on the site of the work.
Some commenters similarly contended
that the proposed rule’s mere
specification of ‘‘transportation’’ as a
type of ‘‘construction, prosecution,
completion, or repair’’ was itself outside
the Department’s statutory authority,
whereas others suggested that while the
DBRA covers wholly onsite
transportation, such as hauling
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materials from one location on the site
of the work to another, it does not cover
any time spent onsite that is associated
with delivery from offsite.
Other commenters specifically took
issue with the proposal to cover truck
drivers employed by contractors or
subcontractors for any onsite deliveryrelated time that is ‘‘practically
ascertainable,’’ arguing that it would
effectively eliminate the current de
minimis principle and impose
burdensome recordkeeping
requirements. IAAP argued that the
Department’s proposed standard could
compromise safety by creating pressure
on truck drivers to perform any onsite
activities as quickly as possible. AGC
argued that the Department should
instead codify its current guidance,
including the de minimis and 20
percent principles. AGC also argued that
the Department should expand
application of the de minimis principles
to include all covered workers and
activities, not only truck drivers. And
FTBA suggested that the proposal
would in some cases impose burdens
without benefits since many truck
drivers are owner-operators to whom
the Department, as a matter of
administrative policy, has not applied
the DBRA. See supra n. 180.199
As an initial matter, the Department
maintains that it is important to clarify
the application of the DBRA to truck
drivers, and to do so in the regulatory
text. As noted above and in the
discussion regarding the material
supplier exemption, there remains
considerable confusion about these
principles, including conflation of the
de minimis standard with the current
20-percent threshold related to material
suppliers. Additionally, for the reasons
discussed above in section
III.B.3.ii.(G).(2).(b), the Department is
retaining, with some clarification, its
proposal to codify a definition of
material supplier that is restricted to
employers whose sole contractual
responsibility is material supply. As
such, any employer whose truck drivers
engage in other construction activities
will be considered contractors or
subcontractors who are subject to the
regulations’ new provisions concerning
transportation. This renders moot the
subregulatory 20-percent threshold
pertaining to onsite time for material
suppliers’ drivers who also engage in
onsite construction work.
199 AGC also suggested that the final rule codify
the Department’s policy in FOH 15e17 regarding
truck driver owner-operators. Because the
Department did not make any proposals along these
lines in the NPRM, it declines to do so in the final
rule.
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57625
The Department disagrees that
Midway, Ball, or L.P. Cavett preclude
coverage of onsite time for delivery
drivers employed by contractors or
subcontractors. None of those cases
speak to this precise issue; rather, these
cases concerned the geographic scope of
the ‘‘site of the work’’ and the coverage
for time driving on locations outside the
site of the work. As noted in the NPRM,
Midway expressly declined to decide
whether the DBA covers work that a
driver performs onsite if the amount of
such work is more than de minimis—
because no party had raised it. Midway,
932 F.2d at 989 n.5 (‘‘No one has argued
in this appeal that the truckdrivers were
covered because they were on the
construction site for this brief period of
the workday.’’). If anything, Midway is
best read to show that the DBA does
cover non-‘‘determinative of the [DBA’s]
coverage.’’ 932 F.2d at 991.200
Accordingly, the Department has
consistently maintained since Midway
that truck drivers, and their assistants,
employed by contractors or
subcontractors, are covered for onsite
work associated with offsite delivery,
provided that such onsite time exceeds
a certain threshold. See 65 FR 80276; 57
FR 19205–06; FOH 15e22(a)(2); PWRB,
DBA/DBRA Compliance Principles, at
6–7; ET Simonds, ALJ No. 2021–DBA–
00001, 2022 WL 1997485, at *3–4.
The Department similarly disagrees
that cases construing the NLRA
preclude such coverage. Section 8(e) of
the NLRA prohibits certain ‘‘contract[s]
or agreement[s]’’ between employers
and unions but does not prohibit ‘‘an
agreement . . . relating to . . . work to
be done at the site of the . . . work’’).
29 U.S.C. 158(e). Some commenters
contended that judicial and National
Labor Relations Board decisions
construing this language support a
conclusion that truck drivers
transporting materials to or from
construction sites are not considered to
be performing work on the site of
construction, even if they spend time
onsite, and that the DBA should be
construed similarly. These cases,
200 To the extent that some language in Midway
could be read to support the notion that even onsite
time of delivery drivers employed by contractors
and subcontractors is not covered, see, e.g., Midway,
932 F.2d at 992 (‘‘Material delivery truck drivers
who come onto the site of the work merely to drop
off construction materials are not covered by the
Act.’’), such language is dicta given the D.C.
Circuit’s express statement that it was not deciding
whether the DBA covers a more than de minimis
amount of work that a driver performs onsite, id.
at 989 n.5. See Cooper Indus., Inc. v. Aviall Servs.,
Inc., 543 U.S. 157, 170 (2004) (‘‘Questions which
merely lurk in the record, neither brought to the
attention of the court nor ruled upon, are not to be
considered as having been so decided as to
constitute precedents.’’).
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however, hold only that a rule similar
to the DBA’s de minimis principle
applies under section 8(e) of the NLRA,
which excludes ‘‘small’’ amounts of
onsite work that are ‘‘necessarily’’
performed in delivering materials and
merely ‘‘incidental’’ to a driver’s
primarily offsite work. See In re Techno
Constr. Corp., 333 NLRB 75, 82 (2001)
(‘‘[T]hese incidental tasks do not bring
the Respondent within the building and
construction industry as contemplated
by [the NLRA].’’); Teamsters Loc. 957,
298 N.L.R.B. 395, 399 (1990) (ALJ Op.)
(‘‘[E]mployees involved in such work
have only ‘incidental contact with the
site.’ . . . With rare exception, the
haulage of [material] by the [drivers] in
the instant case involves such
‘incidental contact’ with job sites.’’),
aff’d, Gen. Truck Drivers, Chauffeurs,
Warehousemen & Helpers of Am., Loc.
No. 957 v. NLRB, 934 F.2d 732, 737 (6th
Cir. 1991) (quoting ALJ with approval);
Joint Council of Teamsters No. 42, 248
NLRB 808, 816 (1980) (‘‘[T]he Board has
repeatedly held that the proviso does
not apply to jobsite deliveries (or, by
logical inference, pickups) which are
only a small part of basically offsite
transportation activity.’’); Drivers,
Salesmen, Warehousemen, Milk
Processors, Cannery, Dairy Emp. &
Helpers Loc. Union No. 695 v. NLRB,
361 F.2d 547, 552 (D.C. Cir. 1966)
(Section 8(e) does not cover work a
delivery driver ‘‘necessarily’’ performs
onsite). Thus, these cases stand only for
the idea that section 8(e) of the NLRA
apparently does not cover de minimis
onsite work, the same principle that the
Department has applied under the
DBRA.201 None of these cases held that
the NLRA excludes work that a driver
performs onsite that is more than de
minimis.202
The Department also rejects the
notion that it is improper to include
‘‘transportation’’ as a covered activity
under the specific circumstances listed
in the regulation. It has never been in
201 In Local No. 957, the Sixth Circuit emphasized
that the drivers performed only 10 percent of their
work onsite—the same amount as in Midway. Loc.
No. 957, 934 F.2d at 737; see also Midway, 932 F.2d
at 989 n.5.
202 The Department also notes that even if section
8(e) of the NLRA were construed to have a narrower
scope, the DBA’s ‘‘site of the work’’ language would
nonetheless be consistent with the Department’s
interpretation here. Section 8(e) concerns an
‘‘agreement’’ for work done onsite, a term the DBA
does not use. 29 U.S.C. 158(e). Even if an
‘‘agreement’’ which is primarily for offsite delivery
work, which necessarily entails some incidental
onsite work, does not necessarily ‘‘relat[e] to’’
onsite work under the NLRA, id., any onsite work
performed is still done at the ‘‘site of the work’’
under the DBA. Accord Smith v. Berryhill, 139 S.
Ct. 1765, 1776 (2019) (‘‘[they] are different statutes,
and courts must remain sensitive to their
differences’’).
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serious dispute that the transportation
of materials, equipment, and the like is
within the scope of the types of
activities covered by the DBRA. Rather,
in cases where workers performing
these activities have been determined
not to be covered, the basis for such
determinations has been either because
they were deemed employees of bona
fide material suppliers or because they
were not working on the site of the
work. The current regulations expressly
recognize that transportation and the
furnishing of materials are covered
construction activities, either if they
take place on the site of the work or if
they are performed as part of work
under a development statute. See
§ 5.2(j)(1)(iii), (iv), 5.2(j)(2). The
proposed rule did not reflect any
expansion of coverage in this regard.
However, after considering the
comments received, the Department is
not adopting the NPRM’s proposal to
require compensation for onsite time
related to offsite delivery as long as it is
not ‘‘so insubstantial or insignificant
that it cannot as a practical
administrative matter be precisely
recorded.’’ While the Department
maintains that such a standard would be
consistent with the DBA’s ‘‘site of the
work’’ principle, see 65 FR 80275–76
(explaining that the Department does
not understand Midway as precluding
coverage of any time that drivers spend
on the site of the work, ‘‘no matter how
brief’’), the Department also recognizes
that it could impose unnecessary
burdens on contractors for
comparatively marginal benefits.
Instead, the final rule codifies the
Department’s current guidance by
requiring contractors and subcontractors
to pay Davis-Bacon wages to delivery
drivers for onsite time related to offsite
delivery if such time is not de minimis.
The Department believes it is important
to codify this principle, as commenters
agreed that depending on the
circumstances, including what is being
delivered, traffic, and other factors, such
drivers can spend significant portions of
their day on the site of the work.
Consistent with its pronouncements
since Midway, the Department believes
that such time is compensable under the
DBRA.
However, whereas the proposed rule
sought to borrow language from the
Department’s regulatory definition of de
minimis under the FLSA, see 29 CFR
785.47, the final rule is not defining de
minimis in the regulation for several
reasons. First, the Department did not
propose a definition for the term in the
NPRM. Second, the Department’s
historical practice has been to evaluate
de minimis under the DBRA on a case-
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by-case basis, and a recent decision by
the ARB suggests that such an approach
is reasonable. See ET Simonds, ARB No.
2021–0054, 2022 WL 1997485, at *8
(concluding that ‘‘the analysis of
whether a material transportation driver
is covered is contextual in nature and
should include a discussion of the
totality of the circumstances’’). To the
extent warranted, the Department will
consider whether to further elaborate on
the definition of de minimis in
subregulatory guidance. However, the
Department notes two general principles
here.
First, the de minimis standard under
the DBRA is independent of the de
minimis standard under the FLSA. As
noted in the NPRM, the FLSA de
minimis rule ‘‘applies only where there
are uncertain and indefinite periods of
time involved of a few seconds or
minutes duration, and where the failure
to count such time is due to
considerations justified by industrial
realities.’’ 29 CFR 785.47. Moreover,
under the FLSA, ‘‘an employer may not
arbitrarily fail to count as hours worked
any part, however small, of the
employee’s fixed or regular working
time or practically ascertainable period
of time he is regularly required to spend
on duties assigned to him.’’ Id. This
strict standard is suitable for the FLSA,
a statute that requires payment of a
minimum wage for every hour worked.
The DBRA’s de minimis principle, on
the other hand, informs the different
inquiry of whether a worker is
‘‘employed directly on the site of the
work.’’ Thus, the Department has
generally held that it excludes periods
of ‘‘a few minutes’’ onsite just to drop
off materials, even though such time
generally is considered hours worked
under the FLSA.
Second, the Department intends that
under circumstances where workers
spend a significant portion of their day
or week onsite, short periods of time
that in isolation might be considered de
minimis may be aggregated. For
example, in its recent decision in ET
Simonds, the ARB concluded that it was
reasonable for the Administrator to
aggregate such periods throughout a
workday where the record showed that
workers spent a total of 15 minutes per
hour on the website. Thus, the
Department’s position is that the total
amount of time a driver spends on the
site of the work during a typical day or
workweek—not just the amount of time
that each delivery takes—is relevant to
a determination of whether the onsite
time is de minimis.
The Department declines AGC’s
suggestion to expand the de minimis
principle beyond the context of truck
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drivers. First, such a change would be
beyond the scope of the proposed rule.
Second, the Department developed the
de minimis principle for truck drivers
given that such workers frequently
alternate between time spent on and off
the worksite. The Department does not
believe it is necessary to extend the
principle to other types of workers.
Additionally, while FTBA expressed
concern that truck drivers that are
owner-operators might have to be added
to certified payrolls even though DOL
policy does not require that they be
compensated at DBRA rates, this is not
a consequence of the final rule; as
discussed above, even under the
guidance in place prior to this rule,
truck drivers employed by contractors
or subcontractors have been subject to
the DBRA for time spent on the site of
the work that is not de minimis.
e. Non-Substantive Changes for
Conformance and Clarity
The Department proposed to amend
§ 5.2 to use the term ‘‘secondary
construction sites’’ to describe the
covered locations at which ‘‘significant
portions’’ of public buildings and works
are covered provided all of the
conditions discussed above are met and
to use the term ‘‘primary construction
sites’’ to describe the place where the
building or work will remain. Although,
as discussed above in ‘‘Coverage of
Construction Work at Secondary
Construction Sites,’’ the Department
received numerous comments on the
substance of these proposals, the
Department did not receive comments
on this conforming change, and the final
rule retains these descriptive terms.
The Department additionally
proposed to use the term ‘‘nearby
dedicated support site’’ to describe
locations such as flagger sites and batch
plants that are part of the site of the
work because they are dedicated
exclusively, or nearly so, to the project,
and are adjacent or nearly adjacent to a
primary or secondary construction site.
AGC voiced concern that the term
‘‘nearby’’ was confusing and could be
read to indicate a broader geographic
scope of coverage than the ‘‘adjacent or
nearly adjacent’’ standard permits. As
such, the final rule instead adopts the
term ‘‘adjacent or nearly adjacent
dedicated support site.’’
The Department also proposed to
define the term ‘‘development statute’’
to mean a statute that requires payment
of prevailing wages under the DavisBacon labor standards to all laborers
and mechanics employed in the
development of a project, and to make
conforming changes to § 5.5 to
incorporate this new term. The
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Department noted that the current
regulations reference three specific
statutes—the United States Housing Act
of 1937; the Housing Act of 1949; and
the Native American Housing
Assistance and Self-Determination Act
of 1996—that fit this description, but do
not consistently reference all three, and
that replacing those references with the
defined term ‘‘development statute’’
would improve regulatory clarity and
ensure that the regulations would not
become obsolete if existing statutes
meeting this description are revised or
if new statutes meeting this description
are added.
Regarding this proposal, AGC
commented that the Sixth Circuit in L.P.
Cavett concluded that coverage
principles such as site of the work
applicable to the Davis-Bacon Act apply
to the Related Acts even if the Related
Acts may contain different wording. See
101 F.3d at 1116. It stated that if the
Department nonetheless wishes to apply
a different coverage standard to Related
Acts, it should engage in separate
rulemaking. However, while the
Department has previously voiced
agreement with the general conclusion
in L.P. Cavett regarding coverage
principles under the vast majority of the
Related Acts, it has explained that the
three housing statutes noted above are
distinguishable because their ‘‘language
and/or clear legislative history’’
‘‘reflected clear congressional intent that
a different coverage standard be
applied.’’ 65 FR 80275. The current
regulations reflect this conclusion, as its
references to both the site of the work
and the material supplier exemption
specifically exempt these statutes
(though, as noted above, the regulations
do not do so consistently in every
instance). See §§ 5.2(i), (j)(1), (j)(1)(iii),
(j)(2); 5.5(a)(1)(i), (a)(2), (a)(3)(i). Thus,
the proposed rule’s use of the defined
term ‘‘development statute’’ does not
make any substantive change from the
current regulations with respect to these
three statutes. However, to ensure that
the revision is faithful to the
Department’s previous statements
agreeing that identical coverage
principles apply to all of the Related
Acts except the above three, the final
rule specifically names the three
housing statutes in the definition of
‘‘development statute,’’ and requires
that for any other statute to be deemed
a development statute, the
Administrator must make an affirmative
determination that the statute’s language
and/or legislative history reflected clear
congressional intent to apply a coverage
standard different from the Davis-Bacon
Act itself.
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In addition to the above changes, the
Department proposed a number of
revisions to the regulatory definitions
related to the ‘‘site of the work’’ and
‘‘material supplier’’ principle to
conform to the above substantive
revisions and for general clarity. The
Department proposed to delete from the
definition of ‘‘building or work’’ the
language explaining that, in general,
‘‘[t]he manufacture or furnishing of
materials, articles, supplies or
equipment . . . is not a building or
work,’’ and proposed instead to clarify
in the definition of the term
‘‘construction (or prosecution,
completion, or repair)’’ that
‘‘construction, prosecution, completion,
or repair’’ only includes ‘‘manufacturing
or furnishing of materials, articles,
supplies or equipment’’ under certain
limited circumstances, namely, either
on the site of the work or under
development statutes. Along the lines of
its comments noted above, FTBA
expressed concern that this change
could expand coverage to include
material suppliers. While no substantive
change was intended, in recognition of
this concern, the Department is
clarifying the definition of
‘‘construction, prosecution, completion,
or repair’’ to read that such activities are
only covered if done by laborers or
mechanics who are employed by a
contractor or subcontractor (i.e., not a
material supplier) on the site of the
work, or who are working in the
construction or development of a project
under a development statute.
Additionally, the Department
proposed to remove the citation to
Midway from the definition of the term
‘‘construction (or prosecution,
completion, or repair).’’ Finally, the
Department proposed several linguistic
changes to defined terms in § 5.2 to
improve clarity and readability. Apart
from the numerous substantive
comments regarding these terms
discussed at length above, the
Department did not receive comments
on these proposed conforming and
clarifying changes and the final rule
therefore adopts them as proposed.
(H) Paragraph Designations
The Department also proposed to
amend § 5.2 to remove paragraph
designations of defined terms and
instead to list defined terms in
alphabetical order. The Department
proposed to make conforming edits
throughout parts 1, 3, and 5 in any
provisions that currently reference
lettered paragraphs of § 5.2.
The Department received no
comments on this proposal. The final
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rule therefore adopts this change as
proposed.
section III.B.1.xii (‘‘Frequently
conformed rates’’).
iii. Section 5.5 Contract Provisions and
Related Matters
The Department proposed to remove
the table at the end of § 5.5 related to the
display of OMB control numbers. The
Department maintains an inventory of
OMB control numbers on https://
www.reginfo.gov under ‘‘Information
Collection Review,’’ and this table is no
longer necessary to fulfill the
requirements of the Paperwork
Reduction Act. This website is updated
regularly and interested persons are
encouraged to consult this website for
the most up-to-date information.
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed.
The final rule includes a number of
technical changes and other minor
revisions to § 5.5, including to the
proposed regulatory text of the DBRA
and CWHSSA contract clauses, that
were not in the proposed rule. The final
rule adds a parenthetical to § 5.5(a) that
clarifies that the requirement in the FAR
is to incorporate contract clauses by
reference, as distinguished from the
non-FAR-covered contracts into which
the contract clauses must be inserted
‘‘in full.’’
The final rule also updates the § 5.5(b)
contract clauses by adding a reference to
the new anti-retaliation provision at
§ 5.5(b)(5) and using gender neutral
terminology (‘‘watchpersons’’). The term
‘‘watchpersons’’ has been substituted for
‘‘watchmen’’ in this and various other
regulations. This change in terminology
is not a substantive change.
Additional minor changes to § 5.5
include that § 5.5(b)(2) has been
updated to reflect the Department’s
Civil Penalties Inflation Adjustment Act
Annual Adjustment for 2023, which was
published in the January 13, 2023
Federal Register. This adjustment is
required by the Federal Civil Penalties
Inflation Adjustment Act Improvements
Act of 2015. Section 5.5(c) has also been
revised so that the CWHSSA-required
records are referred to in terms that
conform with the new terminology for
different types of records in § 5.5(a)(3).
That section refers to basic records
(including regular payroll) and certified
payroll. See also § 3.3. Finally,
‘‘CWHSSA’’ has been added to the
heading in § 5.5(b) to identify the
acronym for the Contract Work Hours
and Safety Standards Act.
(B) 29 CFR 5.5(a)(3)
(A) 29 CFR 5.5(a)(1)
The Department’s proposed changes
to this section are discussed above in
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The Department proposed a number
of revisions to § 5.5(a)(3) to enhance
Davis-Bacon compliance and
enforcement by clarifying and
supplementing existing recordkeeping
requirements. Conforming changes to
§ 5.5(c) are also discussed here.203
The Department received many
comments supporting the proposed
changes to § 5.5(a)(3) and the
corresponding changes to § 5.5(c). These
comments generally expressed the view
that the proposed changes would
enhance transparency and improve
enforcement of Davis-Bacon labor
standards requirements. Conversely, the
Department received comments from
the group of U.S. Senators and a few
contractor associations expressing the
view that the proposed changes were
unduly burdensome to contractors.
Specifics of these comments are
addressed in the discussion below.
(1) 29 CFR 5.5(a)(3)(i)
The Department proposed to amend
§ 5.5(a)(3)(i) to clarify this
recordkeeping regulation, consistent
with its longstanding interpretation and
enforcement, as requiring contractors to
maintain and preserve basic records and
information, as well as certified
payrolls. The Department explained that
required basic records include, but are
not limited to, regular payroll
(sometimes referred to as ‘‘in-house’’
payroll) and additional records relating
to fringe benefits and apprenticeship.
The Department similarly explained
that the term ‘‘regular payroll’’ refers to
any written or electronic records that
the contractor uses to document
workers’ days and hours worked, rate
and method of payment, compensation,
contact information, and other similar
information that provides the basis for
the contractor’s subsequent submission
of certified payroll.
The Department also proposed
changes to § 5.5(a)(3)(i) to clarify that
regular payrolls and other basic records
required by this section must be
preserved for a period of at least 3 years
after all the work on the prime contract
is completed. The proposed change was
intended to make it clear that even if a
project takes more than 3 years to
203 As an initial matter, the Department proposed
to replace all references to employment (e.g.,
employee, employed, employing, etc.) in § 5.5(a)(3)
and (c), as well as in § 5.6 and various other
sections, with references to ‘‘workers’’ or ‘‘laborers
and mechanics.’’ These proposed changes are
discussed in greater detail in section III.B.3.xxii
(‘‘Employment Relationship Not Required’’).
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complete, contractors and
subcontractors must keep payroll and
basic records for work on the project for
at least 3 years after all the work on the
prime contract has been completed. For
example, a subcontractor that performed
work during the second year of a 5-year
project would need to keep their payroll
and basic records for at least 3 years
after all work on the project had been
completed, even though that may be 6
years after the subcontractor completed
their own work on the project. This
revision expressly stated the
Department’s longstanding
interpretation and practice concerning
the period of time that contractors and
subcontractors must keep payroll and
basic records required by § 5.5(a)(3).
The Department also proposed a new
requirement that records required by
§ 5.5(a)(3) and (c) must include last
known worker telephone numbers and
email addresses, reflecting more modern
and efficient methods of communication
between workers and contractors,
subcontractors, contracting agencies,
and the Department’s authorized
representatives.
Another proposed revision in this
section, as well as in § 5.5(c), clarified
the Department’s longstanding
interpretation that these recordkeeping
provisions require contractors and
subcontractors to maintain records of
each worker’s correct classification or
classifications of work actually
performed and the hours worked in
each classification. See, e.g., Pythagoras
Gen. Contracting Corp., ARB Nos. 08–
107, 09–007, 2011 WL 1247207, at *7
(‘‘If workers perform labor in more than
one job classification, they are entitled
to compensation at the appropriate wage
rate for each classification according to
the time spent in that classification,
which time the employer’s payroll
records must accurately reflect.’’).
Current regulations permit contractors
and subcontractors to pay ‘‘[l]aborers or
mechanics performing work in more
than one classification . . . at the rate
specified for each classification for the
time actually worked therein,’’ but only
if ‘‘the employer’s payroll records
accurately set forth the time spent in
each classification in which work is
performed.’’ 29 CFR 5.5(a)(1)(i). The
proposed revisions similarly recognized
that laborers or mechanics may perform
work in more than one classification
and more expressly provided that, in
such cases, it is the obligation of
contractors and subcontractors to
accurately record information required
by this section for each separate
classification of work performed.
By proposing these revisions to the
language in § 5.5(a)(3)(i) and (c) to
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explicitly require records of the ‘‘correct
classification(s) of work actually
performed,’’ the Department intended to
clarify the requirements consistent with
its longstanding interpretation of the
current recordkeeping regulations that
contractors and subcontractors must
keep records of (and include on certified
payrolls) hours worked segregated by
each separate classification of work
performed. The Department noted that it
would continue to be the case that if a
contractor or subcontractor fails to
maintain such records of actual daily
and weekly hours worked and correct
classifications, then it must pay workers
the rates of the classification of work
performed with the highest prevailing
wage and fringe benefits due.
Current § 5.5 expressly states that
records that contractors and
subcontractors are required to maintain
must be accurate and complete. See also
40 U.S.C. 3145(b). The Department
proposed to put contractors and
subcontractors on further notice of their
statutory, regulatory, and contractual
obligations to keep accurate, correct,
and complete records by adding the
term ‘‘actually’’ in § 5.5(a)(3)(i) and (c)
to modify ‘‘hours worked’’ and ‘‘work
performed.’’ The current regulations
require maintenance of records
containing ‘‘correct classifications’’ and
‘‘actual wages paid,’’ and this proposed
revision did not make any substantive
change to the longstanding requirement
that contractors and subcontractors keep
accurate, correct, and complete records
of all the information required in these
sections.
Several commenters specifically
noted that the clarification that
contractors are required to maintain the
required records for at least 3 years after
work on the prime contract has been
completed will reduce wage
underpayment and enable more efficient
enforcement of Davis-Bacon labor
standards. See LIUNA, Electrical
Training Alliance (Alliance), NCDCL,
TAUC. LIUNA further noted that
requiring all contractors to maintain
required records for 3 years past the
completion of work on the prime
contract is particularly important in
enforcing compliance standards when
some or all of the workers may no
longer be onsite, while NCDCL
expressed the view that the proposed
requirement would reduce the
likelihood that records would be created
or even falsified after the work has been
performed. NECA similarly generally
supported the proposed changes, though
they also requested that the Department
establish a cutoff time period for
subcontractors to maintain the required
records, as some projects may continue
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for several years after a subcontractor
has performed any work on the project,
thereby making it potentially
burdensome for subcontractors to
maintain the required records for such
an extended period.
III–FFC and Alliance also specifically
expressed support for the clarification
that contractors must maintain accurate
records of workers’ classifications and
the number of hours worked in each
classification, indicating that
misclassification of workers is a serious
problem that would be reduced by the
proposed clarification. III–FFC also
commented favorably on the proposal to
require contractors to maintain a record
of workers’ last known telephone
numbers and email addresses, noting
that this information is particularly
important when the Department must
interview workers as part of the
enforcement process. Another
commenter suggested that the
Department should add to § 5.5(a)(3) a
requirement that contractors maintain
contact information for workers. The
Department notes that such a
requirement was part of its proposal and
that the current regulations require that
contractor records contain worker
addresses. UBC also noted that
contractors do not always maintain the
required records for workers who have
been classified, correctly or not, as
independent contractors, and requested
that language be added to the
regulations requiring contractors to
maintain time records for workers,
jobsite orientation information, contact
information for workers, names, contact
information of subcontractors, and
records of payments to independent
contractors and/or subcontractors.
The Department also received two
comments from contractor associations
opposing the proposed requirement that
contractors maintain a record of
workers’ last known telephone numbers
and email addresses. ABC expressed the
view that such a requirement would be
an invasion of privacy and would
increase the risk of identity theft and
that the regulations should at least
require that the phone numbers and
email addresses be redacted, a position
that appears to reflect the
misimpression that the proposed change
would require the worker phone
numbers and email addresses to be
included on the certified payrolls
submitted to contracting agencies. IEC
stated that ‘‘it is one thing to maintain
this contact information so that a
contractor can contact its employees,
and yet quite another to make this a
regulatory requirement.’’ IEC also noted
that workers may not want to provide
telephone numbers or email addresses
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57629
or even might not have them. IEC
further stated that the proposed
requirement conflicts with the Privacy
Act of 1974, as the information would
not be relevant or necessary to
accomplish the DBA’s statutory
purposes.
After consideration of the comments
on this topic, the Department is
adopting the changes to § 5.5(a)(3)(i) as
proposed. As the various comments in
support indicate, the proposed changes
will clarify the recordkeeping
requirements for contractors, discourage
misclassification of workers, and
increase the efficiency of the
Department’s enforcement. While the
Department appreciates ABC’s concerns
for workers’ privacy and the need to
protect workers from the risk of identity
theft, the change will not require
contractors to provide workers’
telephone numbers or emails on
certified payrolls or post them on a
publicly available database. The
contractor will merely have to maintain
records of the workers’ last known
telephone numbers and email addresses
in the contractor’s own internal records
in the workers’ personnel files or other
suitable location, and to make that
information available to the Department
or the contracting agency upon request.
Contractors will typically already have
contact information, including phone
numbers and email addresses, stored in
their records in whatever manner the
contractor has deemed appropriate in
light of privacy concerns. The proposed
requirement to maintain such a record
for those workers who perform work on
Davis-Bacon contracts for at least 3
years after work has concluded on the
project and allow authorized
representatives of the Department or the
contracting agency access to that
information on request, should not pose
a material increased risk of identity theft
for workers.
The Department acknowledges IEC’s
point that on occasion there may be
workers who do not have telephone
numbers or email addresses or who
would prefer not to provide them to the
contractor. However, workers also may
prefer not to provide their home
address, or may not have a permanent
home address, but contractors have
nevertheless been required to maintain
a record of workers’ last known home
address and have generally done so
without issue. Moreover, on the rare
occasions when the contractor is unable
to obtain a worker’s telephone number
or email address despite diligent efforts
to do so, and has noted that fact in their
records, the contractor will have
satisfied this requirement by, in effect,
documenting the worker’s ‘‘last known’’
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telephone number and email address.
As discussed below, having a record of
workers’ telephone numbers and email
addresses is extremely useful for
enforcement purposes. The Department
believes that these benefits outweigh
any slight additional administrative or
privacy burden that this requirement
may impose.
The Department does not agree with
IEC’s claim that this information is not
necessary or relevant to the DBA’s
statutory purposes. The Department, as
well as the contracting agencies, is
responsible for enforcing the DavisBacon prevailing wage requirements on
covered contracts. Enforcement of
prevailing wage requirements for a
Davis-Bacon project requires the
Department to obtain accurate and
detailed information as to workers’
classifications, hours of work, and
wages paid at all stages of a project.
Interviews are necessary to, among other
reasons, confirm that the information
provided on certified payrolls and basic
records is correct and to fill in any gaps
in a contractor’s records. However,
worksite interviews may not be possible
(or suitable) for a variety of reasons:
some workers may not be onsite at the
time an investigation is conducted;
some subcontractors may have already
completed their portion of the work;
certain work crews may not be
necessary at that stage of construction;
some contractors may attempt to
interfere with WHD’s investigation by,
for example, telling workers to leave the
worksite or lie to investigators; or some
workers may have voluntarily separated
from employment or been terminated.
Information that can be obtained from
such workers may be valuable or even
necessary to determine whether
contractors are in compliance with the
Davis-Bacon labor standards. The
requirement to maintain a record of
workers’ telephone numbers and email
addresses should make it considerably
easier and more efficient for the
Department—and contracting
agencies—to reach workers who are not
on the worksite at the time of the
Department’s investigation and will
therefore increase the effectiveness of
the Department’s enforcement efforts.
The Department also understands
NECA’s concern that the requirement to
maintain the required records for at
least 3 years after all the work on the
prime contract is completed may be
more burdensome for subcontractors
that may complete work on their
subcontract well before all work on the
prime contract has been completed.
However, allowing subcontractors to
maintain the required records for a
shorter period of time would be
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inconsistent with the Department’s
longstanding interpretation and practice
concerning the period of time that
contractors and subcontractors must
keep payroll and basic records required
by § 5.5(a)(3), and could impede
enforcement of the Davis-Bacon labor
standards. The obligation to ensure that
the Davis-Bacon labor standards have
been met and workers have received the
applicable prevailing wage rates does
not end when a subcontractor completes
their portion of work on the project, and
the Department may investigate
compliance with the Davis-Bacon labor
standards after a subcontractor is no
longer working onsite. The required
records are a key component in the
Department’s enforcement efforts. Such
records are particularly helpful when
workers are no longer working on the
project, as other commenters noted.
Accordingly, the Department does not
believe it is appropriate to only require
subcontractors to maintain records for a
more limited period of time. The
Department notes that nothing in the
regulations prohibits a prime contractor
from requesting, or requiring, its
subcontractors provide a copy of the
required records to the prime contractor,
so that the prime contractor can ensure
that these records are available for the
required timeframe, as the prime
contractor is responsible for ensuring
subcontractor compliance under
§ 5.5(a)(6). Such an approach does not
relieve subcontractors of their
obligations to maintain the required
records. If they also provide those
records to the prime contractor,
however, required records may be more
readily available when needed by the
Department or the contracting agency.
The Department also appreciates
UBC’s concerns that contractors may not
maintain adequate records for workers
when the contractor considers the
workers to be independent contractors
or subcontractors, making it more
difficult to determine whether such
workers were paid the applicable
prevailing wage rates for their hours
worked. Contractors are required to pay
applicable prevailing wage rates for
hours worked by laborers and
mechanics on the site of work,
regardless of any contractual
relationship which may be alleged to
exist between the contractor and those
workers. A worker’s classification as an
independent contractor, even where
such a classification is correct, does not
relieve a contractor of the obligation to
pay prevailing wages to that worker.
Therefore, the regulatory language as
proposed already requires that
contractors keep all of the required
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records described in § 5.5(a)(3) for such
workers, unless such workers meet the
requirements for the executive,
administrative, or professional
exemption as defined in 29 CFR 541.
These required records therefore already
include time records for all workers
(including workers’ attendance at jobsite
orientation, as this would be considered
hours worked), contact information for
all workers, and a record of payments
made to all workers, including
individuals classified as independent
contractors.
(2) 29 CFR 5.5(a)(3)(ii)
The Department proposed to revise
the language in § 5.5(a)(3)(ii) to
expressly apply to all entities that might
be responsible for maintaining the
payrolls a contractor is required to
submit weekly when a Federal agency is
not a party to the contract. Currently,
the specified records must be submitted
to the ‘‘applicant, sponsor, or owner’’ if
a Federal agency is not a party to the
contract. The proposed revision added
the language ‘‘or other entity, as the case
may be, that maintains such records’’ to
clarify that this requirement applies
regardless of the role or title of the
recipient of Federal assistance (through
grants, loans, loan guarantees or
insurance, or otherwise) under any of
the statutes referenced by § 5.1.
The Department also proposed to
revise § 5.5(a)(3)(ii) by replacing the
phrase ‘‘or audit of compliance with
prevailing wage requirements’’ with ‘‘or
other compliance action.’’ This
proposed revision clarified that
compliance actions may be
accomplished by various means, not
solely by an investigation or audit of
compliance. A similar change was
proposed in § 5.6. Compliance actions
include, without limitation, full
investigations, limited investigations,
office audits, self-audits, and
conciliations. The proposed revision
expressly set forth the Department’s
longstanding practice and interpretation
of this current regulatory language to
encompass all types of Davis-Bacon
compliance actions currently used by
the Department, as well as additional
compliance tools the Department may
use in the future. The proposed revision
did not impose any new or additional
requirements upon Federal agencies,
applicants, sponsors, owners, or other
entities, or on the Department,
contractors, or subcontractors.
The Department also proposed to add
language to § 5.5(a)(3)(ii)(A) to codify
the Department’s longstanding policy
that contracting agencies and prime
contractors can permit or require
contractors to submit their certified
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payrolls through an electronic system,
provided that the electronic submission
system requires a legally valid
electronic signature, as discussed below,
and the contracting agency or prime
contractor permits other methods of
payroll submission in situations where
the contractor is unable or limited in its
ability to use or access the electronic
system. See generally PWRB, DBA/
DBRA Compliance Principles, at 26. As
noted in the proposal, the Department
encourages all contracting agencies to
permit submission of certified payrolls
electronically, so long as all of the
required information and certification
requirements are met. Nevertheless,
contracting agencies determine which, if
any, electronic submissions systems
they will use, as certified payrolls are
submitted directly to the contracting
agencies. The Department explained
that electronic submission systems can
reduce the recordkeeping burden and
costs of record maintenance, and many
such systems include compliance
monitoring tools that may streamline
the review of such payrolls.204
However, under the proposed
revisions, agencies that require the use
of an electronic submission system
would be required to allow contractors
to submit certified payrolls by
alternative methods when contractors
are not able to use the agency’s
electronic submission system due to
limitations on the contractor’s ability to
access or use the system. For example,
if a contractor does not have internet
access or is unable to access or use the
electronic submission system due to a
disability, the contracting agency would
be required to allow such a contractor
to submit certified payrolls in a manner
that accommodates these circumstances.
The Department also proposed a new
paragraph, § 5.5(a)(3)(ii)(E), to reiterate
the Department’s longstanding policy
that, to be valid, the contractor’s
signature on the certified payroll must
either be an original handwritten
signature or a legally valid electronic
signature. Both of these methods are
sufficient for compliance with the
Copeland Act. See WHD Ruling Letter
(Nov. 12, 2004) (‘‘Current law
establishes that the proper use of
electronic signatures on certified
204 The Department explained that it does not
endorse or approve the use of any electronic
submission system or monitoring tool(s). Although
electronic monitoring tools can be a useful aid to
compliance, successful submission of certified
payrolls to an electronic submission system with
such tools does not guarantee that a contractor is
in compliance, particularly since not all violations
can be detected through electronic monitoring tools.
Contractors that use electronic submission systems
remain responsible for ensuring compliance with
Davis-Bacon labor standards provisions.
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payrolls . . . satisfies the requirements
of the Copeland Act and its
implementing regulations.’’).205 The
proposal specified that valid electronic
signatures include any electronic
process that indicates acceptance of the
certified payroll record and includes an
electronic method of verifying the
signer’s identity. Valid electronic
signatures do not include a scan or
photocopy of a written signature. The
Department recognized that electronic
submission of certified payroll expands
the ability of contractors and contracting
agencies to comply with the
requirements of the Davis-Bacon and
Copeland Acts. The proposal noted that
as a matter of longstanding policy, the
Department has considered an original
signature to be legally binding evidence
of the intention of a person with regard
to a document, record, or transaction. In
its proposal, the Department
acknowledged that modern technologies
and evolving business practices are
rendering the distinction between
original paper and electronic signatures
nearly obsolete.
Several commenters expressed
support for the proposed language
clarifying that agencies may permit or
require electronic submission of
certified payrolls, indicating that this
method would result in more
streamlined and efficient submission
and maintenance of certified payrolls.
See, e.g., COSCDA, MnDOT, UBC,
REBOUND. MnDOT also requested that
the Department provide a process by
which wage determination data could
be incorporated into an electronic
payroll system to more effectively
ensure compliance with prevailing wage
requirements. Although MnDOT’s
request is outside the scope of this
rulemaking, as the NPRM did not refer
to or otherwise address the possibility of
incorporating wage determination data
into electronic payroll systems, the
Department appreciates MnDOT’s
request and will consider as a separate,
subregulatory matter whether wage
determination data can be provided in
a format that would enable it to be
readily incorporated into electronic
payroll systems.
Although comments on the proposed
revisions were generally supportive,
several commenters suggested further
additions or revisions. Smith,
Summerset & Associates pointed out
that contractors rarely print out or
electronically save copies of certified
payrolls that they have entered into an
electronic submission system, generally
assuming that they will always be able
205 https://www.fhwa.dot.gov/construction/cqit/
111204dol.cfm.
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57631
to obtain their certified payrolls from
the system itself, but that certified
payrolls are often archived when a
project is complete and may therefore
not be readily accessible to the
contractor after that point. They
therefore suggested adding language to
the regulation to require any electronic
certified payroll software provider to
provide access to archived certified
payrolls to the contractor, the
contracting agency, and the Department
upon request for at least 3 years after the
work on the prime contract has been
completed. The Department agrees that
where a contracting agency encourages
or requires contractors to submit their
certified payroll through a particular
electronic submission system, it is
important that the contracting agency,
the Department, and the contractors are
easily able to access the certified
payrolls in that system for the entire
time period that such records must be
maintained. The Department has
therefore added language to
§ 5.5(a)(3)(ii)(A) of the final rule
clarifying that where a contracting
agency encourages or requires
contractors to submit their certified
payroll through a particular electronic
submission system, the contracting
agency must also ensure that the system
allows the contractor, the contracting
agency, and the Department to access
the certified payrolls upon request for at
least 3 years after the work on the prime
contract has been completed.
Smith, Summerset & Associates also
recommended that the Department add
language to the regulations specifically
authorizing contracting agencies to
provide copies of certified payrolls to
other labor or tax enforcement agencies,
noting that in their review of certified
payrolls, contracting agencies may
frequently find issues, such as
violations of state or local wage and
hour laws or misclassification of
employees as independent contractors,
that should be reported to the relevant
enforcement agency. They indicated
that including such language would
encourage contracting agencies to
provide certified payrolls to other
enforcement agencies while putting
contractors on notice that the agencies
might choose to do so. The Department
recognizes that contracting agencies
may frequently be in a position to
identify potential violations of laws
enforced by other agencies as the result
of their certified payroll reviews and
agrees that reporting such potential
violations to the appropriate
enforcement agencies can positively
impact enforcement in these other areas
and enhance workers’ welfare. As the
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certified payrolls are records submitted
to and maintained by the contracting
agencies, contracting agencies are free to
provide certified payrolls to other
enforcement agencies without the
Department’s authorization or
permission, where the contracting
agency has determined that such a
submission is appropriate and is in
accordance with all relevant legal
obligations. Therefore, the Department
does not believe that regulatory
language expressly directing such
submissions or providing a blanket
authorization for such submissions is
currently necessary. However, the
Department strongly encourages
contracting agencies to provide certified
payrolls and other related information
to other law enforcement agencies when
they determine they can and should
appropriately do so.
MnDOT stated that contractors should
be required to include addresses and
Social Security numbers on
electronically submitted certified
payrolls, as the electronic submissions
would be very secure, protecting
workers’ personally identifiable
information while still allowing workers
to be more easily identified and traced.
Two other commenters requested
adding a requirement to include an
identifying number or similar identifier
on certified payrolls that would not
need to be redacted when certified
payrolls are requested and obtained by
third parties, apparently unaware that
the current regulations already contain
a requirement (which this rulemaking
does not alter) that the contractor
include an individual identifying
number for each worker on the certified
payrolls. As the proposed language
maintains the current requirement that
contractors include an individually
identifying number for each worker, the
Department believes that this is
sufficient to allow workers to be
identified and tracked across multiple
certified payrolls. Although the
Department acknowledges that
electronic certified payroll submission
systems will generally use secure online
portals, the Department’s experience has
shown that the potential risk of
unauthorized disclosure of workers’
personally identifiable information
outweighs any additional benefit that
might be incurred by requiring the
addition of an address and full Social
Security number, instead of the current
requirement for an individual
identifying number, on certified
payrolls.
One commenter objected to the
proposed language explicitly permitting
contracting agencies to permit or require
the submission of certified payrolls
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through an electronic system, so long as
the electronic system requires a legally
valid signature, on the grounds that the
Department prohibits submission of
certified payrolls by email, even though
having to use an electronic submission
system is just as burdensome to small
contractors as submitting certified
payrolls by email. However, the
Department does not in fact prohibit
submission of certified payrolls by
email. Contracting agencies may permit
submission of certified payrolls by
email so long as the certified payrolls
submitted in such a manner have a
legally valid electronic signature, as
required for all forms of electronic
submission. Certified payrolls that do
not have an original or a legally valid
electronic signature, but rather are
unsigned or merely have a scan or copy
of a signature, do not meet the
requirements of the Copeland Act
regardless of the method of submission.
Many payroll software options provide
a method of adding a valid electronic
signature to payroll documents; even a
widely used Portable Document Format
(PDF) platform has a digital signature
option that can meet this requirement.
Accordingly, the Department declines to
adopt this suggestion because the
Department does not believe that the
requirement to append a legally valid
electronic signature to any certified
payrolls submitted electronically will be
burdensome to contractors, even where
such signatures must be added to
certified payrolls that are submitted by
email.
COSCDA and NCSHA also indicated
that the requirement to submit weekly
certified payrolls imposes significant
administrative costs on contractors,
particularly as many contractors have to
adjust their usual biweekly or
bimonthly payroll to meet the weekly
submission requirement. These
commenters requested that the
Department revise the regulations to
permit greater flexibility in the
frequency of certified payroll
submissions. While the Department
appreciates these commenters’ concerns
regarding the weekly payment of
prevailing wages and weekly
submission of certified payroll, both
requirements are statutory, not
regulatory. The DBA itself states that
contracts must include stipulations
requiring contractors and subcontractors
to pay applicable prevailing wages
‘‘unconditionally and at least once per
week.’’ 40 U.S.C. 3142(c)(1) (emphasis
added). The Copeland Act similarly
states that the Department’s
implementing regulations ‘‘shall include
a provision that each contractor and
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subcontractor each week must furnish a
statement on the wages paid to each
employee during the prior week.’’ 40
U.S.C. 3145(a) (emphasis added).
Therefore, the Department cannot
promulgate regulations allowing
contractors to pay required prevailing
wages or submit certified payrolls on
any basis less frequent than weekly.
Smith, Summerset & Associates noted
that the language at 29 CFR
5.5(a)(3)(ii)(A) stating that ‘‘[t]he prime
contractor is responsible for the
submission of copies of certified
payrolls by all subcontractors’’ is
unnecessarily confusing, as prime
contractors are responsible for ensuring
that subcontractors submit all required
certified payrolls, and recommended
that the words ‘‘copies of’’ be replaced
with ‘‘all’’ to eliminate this confusion.
They also noted a citation error in the
proposed regulatory text. The
Department agrees with these
suggestions and has made these nonsubstantive changes in the final rule.
After consideration of these
comments and for the reasons discussed
above, the Department is adopting the
changes to this paragraph as proposed,
except that the Department is also
adding language regarding access to
electronic certified payroll submission
systems and the minor non-substantive
edits described above. In addition, the
Department has added a new paragraph
(a)(3)(ii)(G) to § 5.5 that expressly states
that contractors and subcontractors
must preserve all certified payrolls
during the course of the work and for a
period of 3 years after all the work on
the prime contract is completed. This
length-of-record-retention requirement,
which is the same as for other required
records in § 5.5(a)(3), was implicit in the
proposed regulatory text and is explicit
in the existing regulatory text, but the
express inclusion in the regulation will
provide clarity for the regulated
community.
(3) 29 CFR 5.5(a)(3)(iii)–(iv)
The Department proposed to add
paragraph (a)(3)(iii) to § 5.5 to require all
contractors, subcontractors, and
recipients of Federal assistance to
maintain and preserve Davis-Bacon
contracts, subcontracts, and related
documents for 3 years after all the work
on the prime contract is completed. The
Department explained that these related
documents include, without limitation,
contractors’ and subcontractors’ bids
and proposals, as well as amendments,
modifications, and extensions to
contracts, subcontracts, or agreements.
The proposal explained that WHD
routinely requests these contract
documents in its DBRA investigations.
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In the Department’s experience,
contractors and subcontractors that
comply with the Davis-Bacon labor
standards requirements usually, as a
good business practice, maintain these
contracts and related documents. The
Department noted that adding an
express regulatory requirement that
contractors and subcontractors maintain
and provide these records to WHD
would bolster enforcement of the labor
standards provisions of the statutes
referenced by § 5.1. This requirement
would not relieve contractors or
subcontractors from complying with any
more stringent record retention
requirements (e.g., longer record
retention periods) imposed by
contracting agencies or other Federal,
State, or local law or regulation.
The Department also indicated that
this proposed revision could help
ensure uniform compliance with DavisBacon labor standards and prevent noncompliant contractors from
underbidding law-abiding contractors.
Like the current recordkeeping
requirements, non-compliance with this
new proposed requirement may result
in the suspension of any further
payment, advance, or guarantee of funds
and may also be grounds for debarment
action pursuant to 29 CFR 5.12.
The Department proposed to
renumber current § 5.5(a)(3)(iii) as
§ 5.5(a)(3)(iv). In addition, the
Department proposed to revise this renumbered paragraph to clarify the
records contractors and subcontractors
are required to make available to the
Federal agency (or applicant, sponsor,
owner, or other entity, as the case may
be) or the Department upon request.
Specifically, the proposed revisions to
§ 5.5(a)(3)(ii) and (iv), and the proposed
new § 5.5(a)(3)(iii), expanded and
clarified the records contractors and
subcontractors are required to make
available for inspection, copying, or
transcription by authorized
representatives specified in this section.
The Department also proposed an
additional requirement that contractors
and subcontractors must make available
any other documents deemed necessary
to determine compliance with the labor
standards provisions of any of the
statutes referenced by § 5.1.
Current § 5.5(a)(3)(iii) requires
contractors and subcontractors to make
available the records set forth in
§ 5.5(a)(3)(i) (Payrolls and basic
records). The proposed revisions to renumbered § 5.5(a)(3)(iv) would ensure
that contractors and subcontractors are
aware that they are required to make
available not only payrolls and basic
records, but also the payrolls actually
submitted to the contracting agency (or
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applicant, sponsor, owner, or other
entity, as the case may be) pursuant to
§ 5.5(a)(3)(ii), including the Statement of
Compliance, as well as any contracts
and related documents required by
proposed § 5.5(a)(3)(iii). The
Department explained that these records
help WHD determine whether
contractors are in compliance with the
labor standards provisions of the
statutes referenced by § 5.1, and what
the appropriate back wages and other
remedies, if any, should be. The
Department believed that these
clarifications would remove doubt or
uncertainty as to whether contractors
are required to make such records
available to the Federal agency (or
applicant, sponsor, owner, or other
entity, as the case may be) or the
Department upon request. The proposed
revisions made explicit the
Department’s longstanding practice and
did not impose any new or additional
requirements upon a Federal agency (or
applicant, sponsor, owner, or other
entity, as the case may be).
The proposal stated that the new or
additional recordkeeping requirements
in the proposed revisions to § 5.5(a)(3)
should not impose an undue burden on
contractors or subcontractors, as they
likely already maintain worker
telephone numbers and email addresses
and may already be required by
contracting agencies to keep contracts
and related documents. These proposed
revisions also enhance the Department’s
ability to provide education, outreach,
and compliance assistance to
contractors and subcontractors awarded
contracts subject to the Davis-Bacon
labor standards provisions.
Finally, the Department proposed to
add a sanction in re-numbered
§ 5.5(a)(3)(iv)(B) for contractors and
other persons that fail to submit the
required records in § 5.5(a)(3) or make
those records available to WHD within
the timeframe requested. Specifically,
the Department proposed that
contractors that fail to comply with
WHD record requests would be
precluded from introducing as evidence
in an administrative proceeding under
29 CFR part 6 any of the required
records that were not provided or made
available to WHD despite WHD’s
request for such records. The
Department proposed this sanction to
enhance enforcement of recordkeeping
requirements and encourage
cooperation with its investigations and
other compliance actions. The proposal
provided that WHD would take into
consideration a reasonable request from
the contractor or person for an extension
of the time for submission of records.
WHD would determine the
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57633
reasonableness of the request and may
consider, among other things, the
location of the records and the volume
of production.
In addition to the general support for
the proposed recordkeeping changes
mentioned above, III–FFC, LIUNA, and
TAUC specifically mentioned the
proposal to require the maintenance of
Davis-Bacon contracts, subcontracts,
and related documents for 3 years after
all the work on the prime contract is
completed, noting that it would help
ensure that contractors are acting
responsibly and would improve and
strengthen enforcement, particularly
when workers or contractors have
already completed their work on a
project. In contrast, FTBA, ABC, and the
group of U.S. Senators objected to those
proposed changes. FTBA also argued
that the proposed requirement that
contractors and subcontractors must
make available ‘‘any other documents
deemed necessary to determine
compliance with the labor standards
provisions of any of the statutes
referenced by § 5.1’’ was overly broad
and would require contractors to
comply with potentially burdensome,
varied, and unreasonable requests.
FTBA also stated that the Department
did not provide justification or state a
need for adding this requirement, and
that the Department should instead have
proposed specific additional records,
which would have provided an
opportunity to comment on each
specific additional record. ABC and the
group of U.S. Senators stated that the
proposed requirement that all
contractors, subcontractors, and
recipients of Federal assistance
maintain and preserve Davis-Bacon
contracts, subcontracts, and related
documents for 3 years after all the work
on the prime contract is completed is
unduly burdensome, further stating that
the Department did not provide
sufficient justification for the
requirement. ABC also objected to the
proposed language prohibiting
contractors that fail to comply with
record requests from later introducing
the specified records during
administrative proceedings as arbitrary,
coercive, and likely to violate
contractors’ due process rights,
particularly since contractors may have
many legitimate reasons for being
unable or unwilling to comply
immediately with the Department’s
record requests.
The Department agrees with
commenters’ statements that requiring
contractors, subcontractors, and funding
recipients to maintain Davis-Bacon
contracts, subcontracts, and related
documents will help ensure that
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contractors are aware of their
obligations and will strengthen
enforcement. While the Department
appreciates some commenters’ concerns
that maintaining copies of Davis-Bacon
contracts, subcontracts, and related
documents might be burdensome,
particularly to small or mid-sized
contractors, this requirement is not
likely to result in any significant
administrative burden or costs to
contractors that contractors are not
already incurring. Contractors would
only be required to maintain contracts
that they have been awarded or that
they in turn have awarded to others. As
the Department indicated in the NPRM,
contractors will already have many
sound business reasons for maintaining
these contracts. The contracts awarded
to the contractor (and subcontracts
awarded to subcontractors) typically set
forth the work that the contractor is
obligated to perform, the terms and
procedures of payment, and information
as to what would be considered a breach
of any of their contract obligations,
including the specific Davis-Bacon
obligations contained in their contract
clauses. The subcontracts similarly
typically state the subcontractor’s scope
of work, the financial terms under
which the work will be performed, and
what remedies exist if a subcontractor
fails to perform as contracted. With
these and many other sensible business
reasons for maintaining a record of
Davis-Bacon contracts and subcontracts,
it is not surprising that, in the
Department’s experience, most
contractors already maintain records of
these contracts and subcontracts. The
proposed regulatory language merely
requires such records to be maintained
for the same period of time as other
required records, and that such records
must similarly be provided to the
Department upon request, as there are
also several reasons why such records
are particularly useful for enforcement
purposes. Not only does the
Department’s experience indicate that
contractors who fail to maintain these
records are more likely to disregard
their obligations to workers and
subcontractors, as noted in the NPRM,
but these records are critical for
enforcement of the prevailing wage
requirements. The information provided
by these records assists the Department
to make accurate coverage
determinations, establish the extent of
the site(s) of work, determine whether
the contract included the required
clauses and all applicable wage
determinations (particularly where there
is a dispute between the contracting
agency and the contractor as to what
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was provided to the contractor), and
verify whether the prime contractor and
upper-tier contractors have met their
obligations to lower-tier subcontractors
and their workers. The advantages of
ensuring that contractors maintain a
record of the contracts that set out their
Davis-Bacon obligations for a reasonable
period of time and enabling the
Department to more easily enforce those
obligations clearly outweigh the minor
additional recordkeeping burden, if any,
that contractors may incur.
Similarly, the Department does not
agree that the proposed requirement that
contractors and subcontractors must
make available ‘‘any other documents
deemed necessary to determine
compliance with the labor standards
provisions of any of the statutes
referenced by § 5.1’’ is overly broad, or
that the Department instead should list
all possible types of records that may be
created during the course of a
construction project and may be
necessary to determine compliance.
Davis-Bacon labor standards apply to a
wide variety of projects, contractors,
and worker classifications, resulting in
a correspondingly wide variety of
relevant records, such that it would not
be possible to list every conceivable
type of record that may be needed to
verify hours worked, wages rates paid,
and fringe benefits provided.
Particularly where a contractor has not
maintained an accurate or complete
record of daily and weekly hours
worked and wages paid as required, the
Department may need to look at records
ranging from daily construction reports
or security sign-in sheets to drivers’ trip
tickets or petty cash logs to determine
whether laborers and mechanics
received the applicable prevailing wage
rates for all hours worked. It would
significantly hamper enforcement if the
Department could not require
contractors to provide existing—not
create new—relevant records that would
help determine compliance merely
because it is not possible to list every
conceivable form of relevant record.
Moreover, to the extent that such
records, or the failure to provide them,
results in a determination that a
contractor is not in compliance with the
Davis-Bacon labor standards, the
contractor will have the opportunity to
raise the issue of the reasonableness of
the Department’s request for such
records during the enforcement process,
including any administrative
proceedings, if the contractor wishes to
do so.
For similar reasons, the Department
does not believe that prohibiting
contractors that fail to comply with
record requests from later introducing
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the specified records during
administrative proceedings is arbitrary,
coercive, or likely to violate contractors’
due process rights. While contractors
may have valid reasons for being unable
or unwilling to comply immediately
with the Department’s request, it is
difficult to discern why contractors
would be unable to provide those
reasons to the Department in a request
for an extension of time to provide such
records, as provided for in the proposed
provision. In addition, if the contractor
believes that the requested records are
relevant evidence in administrative
proceedings relating to violations, the
records would presumably also be
relevant to the Department’s
investigation of those potential
violations. Moreover, if a contractor
believes that the Department’s request
for the records was arbitrary or
unreasonable despite the contractor’s
belief that the records should be
admitted as evidence during
administrative proceedings, the
contractor will have the opportunity to
raise that issue during the
administrative proceedings themselves.
For these reasons, the Department
adopts § 5.5(a)(3)(iii) and (a)(3)(iv) as
proposed.
(C) 29 CFR 5.5(a)(4) Apprentices
The Department proposed to
reorganize § 5.5(a)(4)(i) so that each of
the four apprentice-related topics it
addresses—rate of pay, fringe benefits,
apprenticeship ratios, and reciprocity—
are more clearly and distinctly
addressed. These proposed revisions are
not substantive. In addition, the
Department proposed to revise the
paragraph of § 5.5(a)(4)(i) regarding
reciprocity to better align with the
purpose of the DBA and the
Department’s ETA regulation at 29 CFR
29.13(b)(7) regarding the applicable
apprenticeship ratios and wage rates
when work is performed by apprentices
in a different State than the State in
which the apprenticeship program was
originally registered.
Section 5.5(a)(4)(i) provides that
apprentices may be paid less than the
prevailing rate for the work they
perform if they are employed pursuant
to, and individually registered in, a
bona fide apprenticeship program
registered with ETA’s Office of
Apprenticeship (OA) or with a State
Apprenticeship Agency (SAA)
recognized by the OA. In other words,
in order to employ apprentices on a
Davis-Bacon project at lower rates than
the prevailing wage rates applicable to
journeyworkers, contractors must
ensure that the apprentices are
participants in a federally registered
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apprenticeship program or a State
apprenticeship program registered by a
recognized SAA. Any worker listed on
a payroll at an apprentice wage rate who
is not employed pursuant to and
individually registered in such a bona
fide apprenticeship program must be
paid the full prevailing wage listed on
the applicable wage determination for
the classification of work performed.
Additionally, any apprentice performing
work on the site of the work in excess
of the ratio permitted under the
registered program must be paid not less
than the full wage rate listed on the
applicable wage determination for the
classification of work performed.
In its current form, § 5.5(a)(4)(i)
further provides that when a contractor
performs construction on a project in a
locality other than the one in which its
program is registered, the ratios and
wage rates (expressed in percentages of
the journeyworker’s hourly rate)
specified in the contractor’s or
subcontractor’s registered program will
be observed. Under this provision, the
ratios and wage rates specified in a
contractor’s or subcontractor’s registered
program are ‘‘portable,’’ such that they
apply not only when the contractor
performs work in the locality in which
the program was originally registered
(sometimes referred to as the
contractor’s ‘‘home State’’) but also
when a contractor performs work on a
project located in a different State
(sometimes referred to as the ‘‘host
State’’). In contrast, as part of a 1979
NPRM, the Department proposed
essentially the opposite approach, i.e.,
that apprentice ratios and wage rates
would not be portable and that, instead,
when a contractor performs
construction on a project in a locality
other than the one in which its program
was originally registered, ‘‘the ratios and
wage rates (expressed in percentages of
the journeyman’s hourly rate) specified
in plan(s) registered for that locality
shall be observed.’’ 206
In a final rule revising 29 CFR part 5,
issued in 1981, the Department noted
that several commenters had objected to
the 1979 NPRM’s proposal to apply the
apprentice ratios and wage rates in the
location where construction is
performed, rather than the ratios and
wage rates applicable in the location in
which the program is registered.207 The
Department explained that, in light of
these comments, ‘‘[u]pon
reconsideration, we decided that to
impose different plans on contractors,
many of which work in several locations
where there could be differing
206 44
207 46
FR 77085.
FR 4383.
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apprenticeship standards, would be
adding needless burdens to their
business activities.’’ 208
In 2008, ETA amended its
apprenticeship regulations in a manner
that is seemingly in tension with the
approach to Davis-Bacon apprenticeship
‘‘portability’’ reflected in the 1981 final
rule revising 29 CFR part 5. Specifically,
in December 2007, ETA issued an
NPRM to revise the agency’s regulations
governing labor standards for the
registration of apprenticeship
programs.209 One of the NPRM
proposals was to expand the provisions
of then-existing 29 CFR 29.13(b)(8),
which at that time provided that in
order to be recognized by ETA, an SAA
must grant reciprocal recognition to
apprenticeship programs and standards
registered in other States—except for
apprenticeship programs in the building
and construction trades.210 ETA
proposed to move the provision to 29
CFR 29.13(b)(7) and to remove the
exception for the building and
construction trades.211 In the preamble
to the final rule issued on October 29,
2008, ETA noted that several
commenters had expressed concern that
it was ‘‘unfair and economically
disruptive to allow trades from one
State to use the pay scale from their own
State to bid on work in other States,
particularly for apprentices employed
on projects subject to the Davis-Bacon
Act.’’212 The preamble explained that
ETA ‘‘agree[d] that the application of a
home State’s wage and hour and
apprentice ratios in a host State could
confer an unfair advantage to an out-ofstate contractor bidding on a Federal
public works project.’’ 213 Further, the
preamble noted that, for this reason,
ETA’s negotiations of memoranda of
understanding with States to arrange for
reciprocal approval of apprenticeship
programs in the building and
construction trades have consistently
required application of the host State’s
wage and hour and apprenticeship ratio
requirements. Accordingly, the final
rule added a sentence to 29 CFR
208 Id. The 1981 final rule revising 29 CFR part
5 was withdrawn, but the apprenticeship portability
provision in § 5.5 was ultimately proposed and
issued unchanged by a final rule issued in 1982.
See Final Rule, Labor Standards Provisions
Applicable to Contracts Covering Federally
Financed and Assisted Construction, 47 FR 23658,
23669 (May 28, 1982).
209 See NPRM, Apprenticeship Programs, Labor
Standards for Registration, Amendment of
Regulations Notice of Proposed Rulemaking, 72 FR
71019 (Dec. 13, 2007).
210 Id. at 71026.
211 Id. at 71029.
212 Final Rule, Apprenticeship Programs, Labor
Standards for Registration, Amendment of
Regulations, 73 FR 64402, 64419 (Oct. 29, 2008).
213 Id.
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57635
29.13(b)(7) to clarify that the program
sponsor seeking reciprocal approval
must comply with the host State’s
apprentice wage rate and ratio
standards.214
In order to better harmonize the
Davis-Bacon regulations and ETA’s
apprenticeship regulations, the
Department proposed in its NPRM to
revise 29 CFR 5.5(a)(4)(i) to reflect that
contractors employing apprentices to
work on a DBRA project in a locality
other than the one in which the
apprenticeship program was originally
registered must adhere to the apprentice
wage rate and ratio standards of the
project locality. As noted above, the
general rule in § 5.5(a)(4)(i) is that
contractors may pay less than the
prevailing wage rate for the work
performed by an apprentice employed
pursuant to, and individually registered
in, a bona fide apprenticeship program
registered with ETA or an OArecognized SAA. Under ETA’s
regulation at 29 CFR 29.13(b)(7), if a
contractor has an apprenticeship
program registered in one State but
wishes to employ apprentices to work
on a project in a different State with an
SAA, the contractor must seek and
obtain reciprocal approval from the
project State SAA and adhere to the
wage rate and ratio standards approved
by the project State SAA. Accordingly,
upon receiving reciprocal approval, the
apprentices in such a scenario would be
considered to be employed pursuant to
and individually registered in the
program in the project State, and the
terms of that reciprocal approval would
apply for purposes of the DBRA. The
Department’s proposed revision
requiring contractors to apply the ratio
and wage rate requirements from the
relevant apprenticeship program for the
locality where the laborers and
mechanics are working therefore better
aligns with ETA’s regulations on
recognition of SAAs and is meant to
eliminate potential confusion for DavisBacon contractors subject to both ETA
and WHD rules regarding apprentices.
The proposed revision also better
comports with the DBA’s statutory
purpose to eliminate the unfair
competitive advantage conferred on
contractors from outside of a geographic
area bidding on a Federal construction
contract based on lower wage rates (and,
in the case of apprentices, differing
ratios of apprentices paid a percentage
of the journeyworker rate for the work
performed) than those that prevail in the
location of the project.
The Department noted that multiple
apprenticeship programs may be
214 Id.
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registered in the same State, and that
such programs may cover different
localities of that State and require
different apprenticeship wage rates and
ratios within those separate localities. If
apprentices registered in a program
covering one State locality will be doing
apprentice work in a different locality of
the same State, and different apprentice
wage and ratio standards apply to the
two different localities, the proposed
rule would require compliance with the
apprentice wage and ratio standards
applicable to the locality where the
work will be performed. The
Department encouraged comments as to
whether adoption of a consistent rule,
applicable regardless of whether the
project work is performed in the same
State as the registered apprenticeship
program, best aligns with the statutory
purpose of the DBA and would be less
confusing to apply.
Lastly, the Department proposed to
remove the regulatory provisions
regarding trainees currently set out in
§§ 5.2(n)(2) and 5.5(a)(4)(ii), and to
remove the references to trainees and
training programs throughout parts 1
and 5. Current § 5.5(a)(4)(ii) permits
‘‘trainees’’ to work at less than the
predetermined rate for the work
performed, and § 5.2(n)(2) defines a
trainee as a person registered and
receiving on-the-job training in a
construction occupation under a
program approved and certified in
advance by ETA as meeting its
standards for on-the-job training
programs. Sections 5.2(n)(2) and
5.5(a)(4)(ii) were originally added to the
regulations over 50 years ago.215
However, ETA no longer reviews or
approves on-the-job training programs
and, relatedly, WHD has found that
§ 5.5(a)(4)(ii) is seldom if ever
applicable to DBRA contracts. The
Department therefore proposed to
remove the language currently in
§§ 5.2(n)(2) and 5.5(a)(4)(ii), and to
retitle § 5.5(a)(4) ‘‘Apprentices.’’ The
Department also proposed a minor
revision to § 5.5(a)(4)(ii) to align with
the gender-neutral term of
‘‘journeyworker’’ used by ETA in its
apprenticeship regulations. The
Department also proposed to rescind
and reserve §§ 5.16 and 5.17, as well as
delete references to such trainees and
training programs in §§ 1.7, 5.2, 5.5, 5.6,
and 5.15. The Department encouraged
comments on this proposal, including
215 See Final Rule, Labor Standards Applicable to
Contracts Covering Federally Financed and
Assisted Construction, 36 FR 19304 (Oct. 2, 1971)
(defining trainees as individuals working under a
training program certified by ETA’s predecessor
agency, the Manpower Administration’s Bureau of
Apprenticeship and Training).
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any relevant information about the use
of training programs in the construction
industry.
The Department received no
comments on its technical, nonsubstantive proposal to reorganize
§ 5.5(a)(4)(i) so that each of the four
apprentice-related topics it addresses
are more clearly and distinctly
addressed. The final rule therefore
adopts this change as proposed.
The Department received several
comments on its proposal regarding
reciprocity of ratios and wage rates
where a contractor performs
construction in a locality other than that
in which its apprenticeship program is
registered. The majority of the
comments expressed support for the
proposal. Several commenters, such as
CEA, NECA, and SMACNA, supported
the proposal, saying that requiring
contractors to apply the apprenticeship
ratio and wage rate standards of the
locality where the project is being
performed better aligns with ETA’s
apprenticeship regulations and
eliminates potential confusion. The UA
and NCDCL also stated that the proposal
would help prevent non-local
contractors from gaining an unfair
economic advantage over local
contractors and that it comports with
the purpose of the DBA.
MCAA commended the proposal as
constructive and sought clarification on
‘‘where the apprentice must . . . be
registered.’’ In response to the question
raised, the Department notes that
nothing in the existing regulation or
proposal purports to define where
apprentices should be registered.
Section 5.5(a)(4)(i) only provides that in
order for contractors to employ
apprentices on a Davis-Bacon project at
lower rates than the prevailing wage
rates applicable to journeyworkers, the
apprentices must be participants in a
federally registered apprenticeship
program, or a State apprenticeship
program registered by a recognized
SAA. The ETA regulation at 29 CFR
29.3 governs the ‘‘[e]ligibility and
procedure for registration of an
apprenticeship program’’ and § 29.3(c)
addresses individual registration.
CC&M, while supporting the proposal,
recommended an additional change to
the regulation to clarify that contractors
employing apprentices outside of the
locality in which the apprenticeship
program is registered should apply the
wage rate and ratio of the locality of the
project ‘‘or apply the wage rates and
ratio of the actual program in which the
apprentice is enrolled, whichever is
higher and more restrictive.’’ The
Department’s intent for the proposed
revision, in part, was to harmonize the
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Davis-Bacon regulations with ETA’s
apprenticeship regulations requiring
contractors to adhere to the host State’s
apprentice wage and ratio standards
when employing apprentices in a State
different from where the apprenticeship
program is registered. In its existing
form, § 5.5(a)(4)(i) is in tension with
ETA regulations because it explicitly
allows contractors to apply the
apprentice ratio and wage rates under
their registered program even where a
different apprentice ratio and/or wage
rate may apply pursuant to ETA’s
reciprocity rule. CC&M’s recommended
approach of applying the more
restrictive apprenticeship ratio and
wage rate would not sufficiently
alleviate this tension and could cause
further confusion for contractors subject
to both ETA and WHD rules regarding
apprentices. Therefore, the Department
declines to adopt CC&M’s
recommendation.
On the other hand, IEC asserted that
the proposed revision would impose an
undue burden on apprenticeship
programs by causing them ‘‘to register in
additional localities in order for
apprenticeship to journeyman ratios to
be reliable’’ and by imposing ‘‘localityspecific rules.’’ While IEC did not
elaborate on how the proposal would
cause apprenticeship programs to
register in additional localities, the
Department does not agree that it would
have that effect. Neither the proposal
nor the existing regulations address
where an apprenticeship program needs
to be registered. Rather, the rules
establish a framework for determining
the applicable apprentice ratio and wage
rate when a contractor seeks to employ
apprentices in a locality different from
that in which the program is registered.
The Department also disagrees with the
comment that the proposal would
impose an undue burden on
apprenticeship programs by imposing
locality specific rules. Rather, the
Department believes the proposal avoids
confusion and creates a consistent
framework for ETA registered
apprenticeship programs by requiring,
at a minimum, the application of local
wage rates and ratios consistent with
ETA’s apprenticeship regulations.
IEC further stated that the Department
provided no guidance for situations
where localities have no apprenticeship
program and asked what should be done
in those circumstances. In response, the
Department recognized the need for
clarification and made revisions to the
final rule accordingly. Specifically, the
Department revised § 5.5(a)(4)(i)(D) to
clarify that the apprenticeship ratio and
wage rates under the contractor’s
registered program would apply in the
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event there is no program in the project
locality establishing the applicable ratio
and rates.
Finally, the Department received a
few comments in response to its
proposal to remove the reference to the
regulatory provisions regarding trainees
set out in existing §§ 5.2(n)(2) and
5.5(a)(4)(ii). See section III.B.3.ii (‘‘29
CFR 5.2 Definitions’’). Two commenters,
CEA and SMACNA, supported the
proposal, recognizing that ETA no
longer reviews or approves on-the-job
training programs. On the other hand,
IAPA opposed the proposal and stated
that ‘‘eliminating trainees from the
Davis[-]Bacon Act may have unintended
consequences.’’ IAPA contended that
student trainees such as those receiving
training under the Illinois Department
of Transportation’s program with the
USDOT’s FHWA may not be able to
work on Davis-Bacon projects if the
trainee language is removed.
IAPA’s comment perhaps reflects a
misunderstanding of the proposal. The
existing regulation under § 5.5(a)(4)(ii)
stated that trainees must not be paid at
less than the predetermined rate for the
work performed unless they are
employed pursuant to and individually
registered in a program which has
received prior approval from the ETA.
Given that the ETA no longer reviews or
approves on-the-job training programs,
the allowance to pay trainees less than
the predetermined rate under the
existing § 5.5(a)(4)(ii) also no longer
applied. The proposal to remove the
regulatory provisions pertaining to
trainees would not prohibit trainees
from working on Davis-Bacon projects.
Rather, the proposal makes it clear that
the trainees should be paid the full
prevailing wage listed on the applicable
wage determination for the work
performed.
Moreover, as discussed in section
III.B.3.ii (‘‘29 CFR 5.2 Definitions’’), the
proposed regulatory definition in § 5.2
retains the text currently found in
§ 5.2(n)(3), which provides an exception
for trainees employed on projects
subject to 23 U.S.C. 113 who are
enrolled in programs which have been
certified by the Secretary of
Transportation in accordance with 23
U.S.C. 113(c). Trainees under 23 U.S.C.
113(c) are subject to wage rates and
conditions set by the USDOT pursuant
to 23 CFR 230.111, and thus, may be
paid less than the full prevailing wage
for the work performed.
The Department received no specific
comments on its proposal to rescind and
reserve §§ 5.16 and 5.17, as well as
delete references to such trainees and
training programs in §§ 1.7, 5.2, 5.5, 5.6,
and 5.15. The Department also received
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no comments regarding its proposal to
revise current § 5.5(a)(4)(ii) to align with
the gender-neutral term of
‘‘journeyworker’’ used by ETA in its
apprenticeship regulations.
For the foregoing reasons, the final
rule adopts the proposal to remove the
regulatory provisions regarding trainees
set out in existing §§ 5.2(n)(2) and
5.5(a)(4)(ii), and to remove the
references to trainees and training
programs throughout parts 1 and 5 as
proposed. The final rule also adopts the
changes proposed regarding reciprocity
under § 5.5(a)(4)(i)(D) with minor
clarifications as discussed in this
section.
(D) Flow-Down Requirements in
§ 5.5(a)(6) and (b)(4)
The Department proposed to add
clarifying language to the DBRA- and
CWHSSA-specific contract clause
provisions at § 5.5(a)(6) and (b)(4),
respectively. Currently, these contract
clauses contain explicit contractual
requirements for prime contractors and
upper-tier subcontractors to flow down
the required contract clauses into their
contracts with lower-tier subcontractors.
The clauses also explicitly state that
prime contractors are ‘‘responsible for
[the] compliance by any subcontractor
or lower tier subcontractor.’’ 29 CFR
5.5(a)(6) and (b)(4). The Department
proposed changes that would affect
these contract clauses in several ways.
(1) Flow-Down of Wage Determinations
The Department proposed adding
language to § 5.5(a)(6) to clarify that the
flow-down requirement also requires
the inclusion in such subcontracts of the
appropriate wage determination(s).
(2) Application of the Definition of
‘‘Prime Contractor’’
As noted in the discussion of § 5.2,
the Department is codifying a definition
of ‘‘prime contractor’’ in § 5.2 to include
controlling shareholders or members,
joint venturers or partners, and any
contractor (e.g., a general contractor)
that has been delegated all or
substantially all of the construction
anticipated by the prime contract. These
entities, having notice of the definitions,
these regulations, and the contract
clauses, would therefore also be
‘‘responsible’’ under § 5.5(a)(6) and
(b)(4) for the same violations as the legal
entity that signed the prime contract. As
the Department explained, the change is
intended to ensure that contractors do
not interpose single-purpose corporate
entities as the nominal ‘‘prime
contractor’’ to escape liability or
responsibility for the contractors’ Davis-
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Bacon labor standards compliance
duties.
(3) Responsibility for the Payment of
Unpaid Wages
The proposal included new language
underscoring that being ‘‘responsible for
. . . compliance’’ means the prime
contractor has the contractual obligation
to cover any unpaid wages or other
liability for contractor or subcontractor
violations of the contract clauses. This
is consistent with the Department’s
longstanding interpretation of this
provision. See M.A. Bongiovanni, Inc.,
WAB No. 91–08, 1991 WL 494751, at *1
(Apr. 19, 1991); see also All Phase Elec.
Co., WAB No. 85–18, 1986 WL 193105,
at *1–2 (June 18, 1986) (withholding
contract payments from the prime
contractor for subcontractor employees
even though the labor standards had not
been flowed down into the
subcontract).216 Because such liability
for prime contractors is contractual, it
represents strict liability and does not
require that the prime contractor knew
of or should have known of the
subcontractors’ violations. Bongiovanni,
1991 WL 494751, at *1. As the WAB
explained in Bongiovanni, this rule
‘‘serves two vital functions.’’ Id. First,
‘‘it requires the general contractor to
monitor the performance of the
subcontractor and thereby effectuates
the Congressional intent embodied in
the Davis-Bacon and Related Acts to an
extent unattainable by Department of
Labor compliance efforts.’’ Id. Second,
‘‘it requires the general contractor to
exercise a high level of care in the initial
selection of its business associates.’’ Id.
(4) Potential for Debarment for Disregard
of Responsibility
The Department proposed new
language to clarify that in certain
circumstances, underpayments of a
subcontractor’s workers may subject the
prime contractor to debarment for
violating the responsibility provision.
Under the existing regulations, there is
no reference in the § 5.5(a)(6) or (b)(4)
responsibility clauses to a potential for
debarment. However, the existing
§ 5.5(a)(7) currently explains that ‘‘[a]
breach of the contract clauses in 29 CFR
5.5’’—which thus includes the
responsibility clause at § 5.5(a)(6)—
‘‘may be grounds . . . for debarment[.]’’
29 CFR 5.5(a)(7). The new language
provides more explicit notice (in
§ 5.5(a)(6) and (b)(4) themselves) that a
prime contractor may be debarred where
216 The new language also clarifies that,
consistent with the language in § 5.10, such
responsibility also extends to any interest assessed
on back wages or other monetary relief.
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there are violations on the contract
(including violations perpetrated by a
subcontractor) and the prime contractor
has failed to take responsibility for
compliance.
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(5) Responsibility and Liability of
Upper-Tier Subcontractors
The Department also proposed
language in § 5.5(a)(6) and (b)(4) to
eliminate confusion regarding the
responsibility and liability of upper-tier
subcontractors. The existing language in
§ 5.5(a)(6) and (b)(4) creates express
contractual responsibility of upper-tier
subcontractors to flow down the
required contract clauses to bind their
lower-tier subcontractors. See § 5.5(a)(6)
(stating that the prime contractor ‘‘or
subcontractor’’ must insert the required
clauses in ‘‘any subcontracts’’);
§ 5.5(b)(4) (stating that the flow-down
clause must ‘‘requir[e] the
subcontractors to include these clauses
in any lower tier subcontracts’’). The
Department has long recognized that
with this responsibility comes the
potential for sanctions against upper-tier
subcontractors that fail to properly flow
down the contract clauses. See AAM 69
(DB–51), at 2 (July 29, 1966).217
The current contract clauses in
§ 5.5(a)(6) and (b)(4) do not expressly
identify further contractual
responsibility or liability of upper-tier
subcontractors for violations their
lower-tier subcontractors commit.
However, although the Department has
not had written guidance to this effect,
it has in many circumstances held
upper-tier subcontractors responsible
for the failure of their lower-tier
subcontractors to pay required
prevailing wages. See, e.g., Ray Wilson
Co., ARB No. 02–086, 2004 WL 384729,
at *6 (Feb. 27, 2004); see also Norsaire
Sys., Inc., WAB No. 94–06, 1995 WL
90009, at *1 (Feb. 28, 1995).
In Ray Wilson Co., for example, the
ARB upheld the debarment of an uppertier subcontractor because its lower-tier
subcontractor misclassified its workers.
As the ARB held, the upper-tier
subcontractor had an ‘‘obligation[ ] to be
aware of DBA requirements and to
ensure that its lower-tier subcontractor
. . . properly complied with the wage
payment and record keeping
requirements on the project.’’ 2004 WL
384729, at *10. The Department sought
debarment because the upper-tier
217 In
AAM 69, the Department noted that ‘‘the
failure of the prime contractor or a subcontractor to
incorporate the labor standards provisions in its
subcontracts may, under certain circumstances, be
a serious violation of the contract requirements
which would warrant the imposition of sanctions
under either the Davis-Bacon Act or our
Regulations.’’
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subcontractor discussed the
misclassification scheme with the
lower-tier subcontractor and thus
‘‘knowingly countenanced’’ the
violations. Id. at *8.
In the NPRM, the Department
proposed to clarify that upper-tier
subcontractors (in addition to prime
contractors) may be responsible for the
violations committed against the
employees of lower-tier subcontractors.
The Department’s proposal also clarified
that this responsibility requires uppertier subcontractors to pay back wages on
behalf of their lower-tier subcontractors
and subjects upper-tier subcontractors
to debarment in appropriate
circumstances (i.e., where the lower-tier
subcontractor’s violation reflects a
disregard of obligations by the uppertier subcontractor to workers of their
subcontractors). In the contract clauses
at § 5.5(a)(6) and (b)(4), the Department
proposed to include language adding
that ‘‘any subcontractor[ ] responsible’’
for the violations is also liable for back
wages and potentially subject to
debarment. This language is intended to
place liability not only on the lower-tier
subcontractor that is directly employing
the worker who did not receive required
wages, but also on the upper-tier
subcontractors that may have
disregarded their obligations to be
responsible for compliance.
A key principle in enacting regulatory
requirements is that liability should, to
the extent possible, be placed on the
entity that can best control whether a
violation occurs. See Bongiovanni, 1991
WL 494751, at *1.218 For this reason, the
Department proposed language
assigning liability to upper-tier
subcontractors that can choose the
lower-tier subcontractors they hire,
notify lower-tier subcontractors of the
prevailing wage requirements of the
contract, and take action if they have
any reason to believe there may be
compliance issues. By clarifying that
upper-tier subcontractors may be liable
under appropriate circumstances—but
are not strictly liable as are prime
218 Cf. Am. Soc’y of Mech. Eng’rs, Inc. v.
Hydrolevel Corp., 456 U.S. 556, 572–73 (1982) (‘‘[A]
rule that imposes liability on the standard-setting
organization—which is best situated to prevent
antitrust violations through the abuse of its
reputation—is most faithful to the congressional
intent that the private right of action deter antitrust
violations.’’). The same principle supports the
Department’s codification of the definition of
‘‘prime contractor.’’ Where the nominal prime
contractor is a single-purpose entity with few actual
workers, and it contracts with a general contractor
for all relevant aspects of construction and
monitoring of subcontractors, the most reasonable
enforcement structure would place liability on both
the nominal prime contractor and the general
contractor that actually has the staffing, experience,
and mandate to assure compliance on the job site.
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contractors—the Department believes
that it has struck an appropriate balance
that is consistent with historical
interpretation, the statutory language of
the DBA, and the feasibility and
efficiency of future enforcement.
The Department received many
comments from unions, contractor
associations, and worker advocacy
groups supporting the proposed changes
to § 5.5(a)(6) and (b)(4). These comments
stated generally that greater clarity and
stronger enforcement mechanisms are
necessary to increase compliance by
contractors and protect vulnerable
workers who may otherwise have no
recourse against unscrupulous practices
such as wage theft. Several contractor
associations, including SMACNA,
NECA, and CEA, supported the changes
as reasonable clarifications of existing
interpretations.
Several commenters in support of the
proposal stated that the new language
would help to ensure workers have a
recourse regardless of which entity is
their direct employer. The LCCHR letter,
for example, stated that ‘‘up-the-chain
liability’’ for DBRA violations is
particularly important in the
construction industry because largescale construction is an inherently
fissured operation, with multiple
specialized subcontractors retained to
complete discrete aspects of a project.
Under these circumstances,
strengthening and clarifying the
longstanding principles of contractors’
liability throughout the contracting
chain reinforces accountability in
taxpayer-funded construction and helps
ensure workers will receive the wages
they have earned, consistent with the
purpose of the DBRA.219
Several commenters, including UBC
and III–FFC, stated that appropriate
liability is important to promote selfpolicing by contractors. These
commenters stated that the clarification
of responsibility and potential
accountability will further incentivize
prime contractors and upper-tier
subcontractors to choose lower-tier
subcontractors wisely and encourage
them to police compliance. Several
commenters supporting the proposal,
including UA, III–FFC, MCAA, NECA,
and CEA, noted that enhanced
oversight, enforcement, and
vulnerability to penalties would close
219 A number of commenters supporting the
proposal cited to a publication summarizing the
evidence of widespread unlawful labor practices in
the residential construction industry in particular.
See Ormiston et al., supra note 70, at 75–113. The
authors of this meta-analysis noted that one of the
most effective methods of ensuring compliance in
such circumstances is the appropriate allocation of
liability on upper-tier subcontractors. Id. at 100.
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loopholes, deter bad actors, and ensure
that contractors do not shirk their
responsibilities through subcontracting
arrangements. This would also remove
competitive disadvantages for high-road
contractors bidding on covered projects.
Several dozen contractors and statelevel contractor associations that are
members of SMACNA wrote letters, as
part of a campaign, that expressed
general support of the revisions to
§ 5.5(a)(6) and (b)(4).
NECA and CEA, while supporting the
proposal, urged that the contract clauses
should include compliance language,
including timetables, directing the
prime contractor to expedite any new
wage changes and contract
modifications so they quickly and
appropriately reach the lower-tier
subcontractors and the workforce
entitled to them.
The Department also received a few
comments opposing the proposed
changes. The SBA Office of Advocacy
conveyed comments from small
businesses that it would be especially
difficult for subcontractors to keep track
of their lower-tiered subcontractors and
material suppliers because of the lack of
clarity and vague definitions in the
rulemaking. Three contractor
associations, the OCA, SIBA, and
IRTBA, commented that the current
Davis-Bacon enforcement mechanisms
are working and should not be changed.
IEC stated that the Department’s
proposed language was ‘‘overly harsh’’
and would greatly increase the
compliance costs of upper-tier
contractors that would have to expend
significant costs to audit subcontractors.
NAHB stated that subcontracting is
ubiquitous in the residential
construction industry, and in particular
for multifamily residential building.
NAHB likened the proposed language in
this section and elsewhere in this
rulemaking to a proposed expansion of
joint employer liability. NAHB stated
that construction sites are unique
examples of multiemployer worksites
and that many of the usual factors for
establishing a joint employer
relationship are not applicable in this
setting. But NAHB also urged that WHD
should clarify in the final rule that
‘‘joint employer’’ status will be
governed by case law under the FLSA.
IEC stated that the cases the
Department cited in support of its
proposal ‘‘do not support a blanket
liability provision.’’ IEC specifically
pointed to the ARB decision in Ray
Wilson Co., in which, according to IEC,
the vice-president of ‘‘a prime
[contractor], Aztec’’ had prepared the
subcontract with a lower-tier
subcontractor that had violated the
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DBA, and the subcontract did not
include DBA provisions.220 IEC stated
that in that instance it ‘‘may have been
appropriate’’ to hold Aztec responsible,
but that these ‘‘specific issues govern
the case’’ and should be used to
interpret the Board’s finding that Aztec
violated the requirement to ensure that
its lower-tier subcontractor properly
complied with the Act’s requirements.
ARB No. 02–086, 2004 WL 384729, at
*6. IEC also emphasized that the ARB in
Ray Wilson Co. and WAB in Norsaire
Systems, 1995 WL 90009, at *1, did not
cite any provision of the DBA or
regulations to support the Department’s
actions.
IEC recommended that the
Department follow the approach of
other regulations applicable to
government contractors by explicitly
allowing upper-tier contractors to rely
on the certifications of lower-tier
subcontractors with respect to certain
compliance obligations. IEC gave the
example of the SBA, which allows
upper-tier contractors to rely on the size
certifications of small business with no
duty to inquire unless there was a
reason to believe the certification was
inaccurate. Similarly, the ARTBA
recommended that the DBA rule should
include a ‘‘good faith’’ standard for
prime contractors that would relieve the
prime contractor of liability for a
subcontractor’s violation if the prime
contractor has established a compliance
program, the transgression was beyond
their reasonable scope of knowledge,
and they did not willfully participate in
the violation.
The Department has considered the
comments received on this proposal.
Both the comments for and against the
proposal emphasize that subcontracting
is a critical aspect of the construction
industry and that the allocation of
liability between upper-tiered and
lower-tiered subcontractors is an issue
of particular interest to contractors,
subcontractors, and workers. The
Department generally agrees with the
commenters that supported the proposal
that the failure to appropriately allocate
responsibility has consequences for the
construction workers for whom the Act
was enacted. See Binghamton Constr.
Co., 347 U.S. at 178. The LCCHR letter
emphasized that one of the letter’s
signatory organizations represents a
construction workforce in Texas and
pointed to the crucial role ‘‘up-the-chain
220 This description misstates the role of the
company Aztec in Ray Wilson Co. Aztec was an
upper-tier subcontractor, not the prime contractor.
A lower-tier subcontractor of Aztec misclassified its
workers as ‘‘partners’’ allegedly exempt from the
Act’s wage requirements. ARB No. 02–086, 2004
WL 384729, at *3, *5.
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57639
liability’’ plays in enabling these
workers to secure redress from prime
and general contractors for wage theft
committed by subcontractors. The
Department agrees with the LCCHR
letter that clarity in the allocation of
‘‘up-the-chain’’ responsibility is
consistent with the purpose of the Act
to protect prevailing wages for these and
other local construction workers.
The Department agrees with NECA
and CEA that the contract clause
language in § 5.5(a)(6) would be
strengthened through the inclusion of a
requirement that any DBRA-related
contract modifications must also be
flowed down. The Department therefore
has amended the § 5.5(a)(6) contract
clause language in the final rule to
cover, along with the enumerated
contract clauses and applicable wage
determination(s), such other clauses ‘‘or
contract modifications’’ as the Federal
agency may by appropriate instructions
require. The Department does not
believe it is necessary to impose a
specific timetable for such incorporation
in § 5.5(a)(6), as the Department or
relevant Federal agency can specify the
timetable in the modification with the
prime contractor, and the prime
contractor will already be liable for the
effect of any modification on the
prevailing wages of the employees of
lower-tier subcontractors during any
delay in the flowing down of the
required modification.
The Department has considered, but
declines to adopt, the suggestions from
IEC and ARTBA regarding certifications
and ‘‘good faith’’ defenses. As the
NPRM explained, the Department has
long interpreted the DBRA to place
strict liability on prime contractors to
account for all unpaid back wages. This
is because prime contractors are
entering into a contract with the
government agency that requires that all
workers on the project be paid the
prevailing wage in compliance with the
Act. As explained in the Restatement
(Second) of Contracts, ‘‘[c]ontract
liability is strict liability’’ and ‘‘[t]he
obligor is therefore liable in damages for
breach of contract even if he is without
fault[.]’’ Restatement, ch. 11, intro. note
(Am. Law Inst. 1981). Allocating
liability in this manner is appropriate
given the prime contractor’s ability to
choose which subcontractors to hire,
provide adequate notice and instruction
to subcontractors of their
responsibilities, and inquire into their
compliance or audit them as
appropriate. Creating a good faith
defense to basic back wage or other
contractual liability in this context is
not consistent with common law of
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contract or with the purpose of the
statute.
For the same reason, the Department
does not believe that NAHB’s
comparison to joint employer liability
under the FLSA is helpful. The DBA
and Related Acts, like other statutes and
executive orders governing Federal
contracting, are not general regulatory
statutes. Rather, they seek to impose
conditions solely on entities involved in
contracts for construction with a Federal
agency or construction contracts
receiving Federal assistance. The
relevant question is not whether the
common law would consider one entity
to be liable for the other under a
vicarious liability theory, or whether
other statutes like the FLSA might
impose liability depending on the
wording of those statutes. Rather, the
question the Department seeks to
address is how best to ensure that the
congressional purpose of the DBRA—
the protection of the prevailing wages of
workers on covered contracts—is
satisfied.
Notwithstanding the above, the
Department emphasized in the proposal
that it does not intend to place the same
strict liability on upper-tier
subcontractors for back wages
recoverable by the Department as it does
on prime contractors. The Department
also emphasized that it did not intend
for the proposed new language in
§ 5.5(a)(6) to impose a new strict
liability standard for debarment for
either prime contractors or upper-tier
subcontractors for violations involving
the workers of lower-tier contractors.
Some of the critical comments that the
Department received overlooked these
points in the NPRM. For example, OCA,
SIBA, and IRTBA characterized the
proposal as ‘‘[e]ssentially . . .
impos[ing] strict, vicarious liability on
contractors, to the point of debarment.’’
They opposed this, saying that it would
place an undue burden and risk on
contractors and would discourage
contractors from bidding on work
covered by the DBA.
OCA, SIBA, and IRTBA’s recitation of
the proposed changes blurs the
Department’s distinction between prime
contractors and upper-tier
subcontractors and also suggests
confusion regarding the applicable
debarment standard. The strict liability
for covering unpaid back wages only
applies to prime contractors, for the
reasons articulated above. The new
contract language in § 5.5(a)(6) will only
impose back wage liability on upper-tier
subcontractors to the extent they are
‘‘responsible’’ for the violations of their
lower-tier subcontractors. As the
Department stated in the NPRM, this
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language should not be read to place the
same strict liability responsibility on all
upper-tier subcontractors that the
existing language already places on
prime contractors. Rather, the new
language clarifies that, in appropriate
circumstances, such as in Ray Wilson
Co., upper-tier subcontractors may be
held responsible for paying back wages
jointly and severally with the prime
contractor and the lower-tier
subcontractor that directly failed to pay
the prevailing wages. This standard is
intended to provide the potential for
back wage liability for an upper-tier
subcontractor that, for example,
repeatedly or in a grossly negligent
manner fails to flow down the required
contract clause, or has knowledge of
violations by lower-tier subcontractors
and does not seek to remedy them, or
is otherwise purposefully inattentive to
Davis-Bacon labor standards obligations
of lower-tier subcontractors.
Regarding debarment, OCA, SIBA,
and IRTBA’s implication that there
could be a strict liability standard
requiring the Department to debar a
prime contractor or any upper-tier
subcontractor for the violations of a
lower-tier subcontractor is misplaced. In
proposing this additional notice of the
potential for debarment, the Department
stated that it did not intend to change
the core standard for when a prime
contractor or upper-tier subcontractor
may be debarred for the violations of a
lower-tier subcontractor. The potential
for debarment for a violation of the
responsibility requirement, unlike the
responsibility for back wages, is not
subject to a strict liability standard—
even for prime contractors. Rather, in
the cases in which prime contractors
have been debarred for the
underpayments of subcontractors’
workers, they were found to have some
level of intent that reflected a disregard
of their own obligations. See, e.g., H.P.
Connor & Co., WAB No. 88–12, 1991
WL 494691, at *2 (Feb. 26, 1991)
(affirming ALJ’s recommendation to
debar prime contractor for ‘‘run[ning]
afoul’’ of 29 CFR 5.5(a)(6) because of its
‘‘knowing or grossly negligent
participation in the underpayment’’ of
the workers of its subcontractors).221
221 See also Martell Constr. Co., ALJ No. 86–DBA–
32, 1986 WL 193129, at *9 (Aug. 7, 1986), aff’d,
WAB No. 86–26, 1987 WL 247045 (July 10, 1987).
In Martell, the prime contractor had failed to flow
down the required contract clauses and investigate
or question irregular payroll records submitted by
subcontractors. The ALJ explained that the
responsibility clause in § 5.5(a)(6) places a burden
on the prime contractor ‘‘to act on or investigate
irregular or suspicious situations as necessary to
assure that its subcontractors are in compliance
with the applicable sections of the regulations.’’
1986 WL 193129, at *9.
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The Department does not intend to
change this debarment standard.
The Department believes it has
appropriately relied on the precedent
reflected in Ray Wilson Co. and Norsaire
Systems to explain these liability
principles. The lesson of Ray Wilson
Co.—as IEC points out—is not that an
upper-tier subcontractor will be
debarred in any case in which a lowertier subcontractor violates the DBRA.
Rather, it is an example of a set of
factual circumstances in which
debarment of an upper-tier
subcontractor was appropriate because
it disregarded its obligations to
employees of its own lower-tier
subcontractor.
Although the Department declines to
adopt IEC’s suggestion that contractors
should be allowed to escape liability if
they rely on certifications of compliance
by lower-tier subcontractors, this
decision is not intended to limit the
ways in which prime contractors,
upper-tier subcontractors, and lower-tier
subcontractors may agree among
themselves to allocate liability. For
example, a small business prime
contractor or upper-tier subcontractor
may wish to limit its exposure to back
wage liability by requiring lower-tier
subcontractors to enter into
indemnification agreements with them
for any back wage liability for the
workers of lower-tier subcontractors.
The Department believes that these
types of agreements can address some of
the concerns conveyed by SBA’s Office
of Advocacy about the potential burdens
on small business subcontractors.
In general, however, the Department
believes that the proposed changes to
§ 5.5(a)(6) and (b)(4) are consistent with
the governing case law and represent a
balanced compromise by allocating
strict contractual liability only on the
prime contractor and not on upper-tier
subcontractors. The Department adopts
the changes as proposed, with the
limited addition of the language
requiring the flow down of DBRArelated contract modifications.
(E) 29 CFR 5.5(d)—Incorporation of
Contract Clauses and Wage
Determinations by Reference
New paragraph at § 5.5(d) clarifies
that, notwithstanding the continued
requirement at § 5.5(a) that agencies
incorporate contract clauses and wage
determinations ‘‘in full’’ into contracts
not awarded under the FAR, the clauses
and wage determinations are equally
effective if they are incorporated by
reference. This new paragraph is
discussed further below in section
III.B.3.xx (‘‘Post-award determinations
and operation-of-law’’), together with
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proposed changes to §§ 1.6(f), 3.11,
5.5(e), and 5.6.
(F) 29 CFR 5.5(e)—Operation of Law
In a new paragraph at § 5.5(e), the
Department proposed language making
effective by operation of law a contract
clause or wage determination that was
wrongly omitted from the contract. This
paragraph is discussed below in section
III.B.3.xx (‘‘Post-award determinations
and operation-of-law’’), together with
changes to §§ 1.6(f), 3.11, 5.5(d), and
5.6(a).
iv. Section 5.6
Enforcement
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(A) 29 CFR 5.6(a)(1)
The Department proposed to revise
§ 5.6(a)(1) by renumbering the existing
regulatory text § 5.6(a)(1)(i), and adding
an additional paragraph, § 5.6(a)(1)(ii),
to include a provision clarifying that
where a contract is awarded without the
incorporation of the required DavisBacon labor standards clauses required
by § 5.5, the Federal agency must
incorporate the clauses or require their
incorporation. This paragraph is
discussed further below in section
III.B.3.xx (‘‘Post-award determinations
and operation-of-law’’), together with
changes to §§ 1.6(f), 3.11, 5.5(d), and
5.5(e).
(B) 29 CFR 5.6(a)(2)
The Department proposed to amend
§ 5.6(a)(2) to reflect the Department’s
longstanding practice and interpretation
that certified payrolls submitted by the
contractor as required in § 5.5(a)(3)(ii)
may be requested—and Federal agencies
must produce such certified payrolls—
regardless of whether the Department
has initiated an investigation or other
compliance action. The term
‘‘compliance action’’ includes, without
limitation, full investigations, limited
investigations, office audits, self-audits,
and conciliations.222 The Department
further proposed revising this paragraph
to clarify that, in those instances in
which a Federal agency does not itself
maintain such certified payrolls, it is the
responsibility of the Federal agency to
ensure that those records are provided
to the Department upon request, either
by obtaining and providing the certified
payrolls to the Department, or by
requiring the entity maintaining those
certified payrolls to provide the records
directly to the Department.
The Department also proposed to
replace the phrase ‘‘payrolls and
statements of compliance’’ with
‘‘certified payrolls’’ to continue to more
clearly distinguish between certified
222 See 2020 GAO Report, note 14, supra, at 6
tbl.1, for descriptions of WHD compliance actions.
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payrolls and regular payroll and other
basic records and information that the
contractor is also required to maintain
under § 5.5(a)(3), as discussed above.
The proposed revisions were intended
to clarify that an investigation or other
compliance action is not a prerequisite
to the Department’s ability to obtain
from a Federal agency certified payrolls
submitted pursuant to § 5.5(a)(3)(ii). The
proposed revisions also were intended
to remove any doubt or uncertainty that
each Federal agency has an obligation to
produce or ensure the production of
such certified payrolls, including in
those circumstances in which it may not
be the entity maintaining the requested
certified payrolls. As the Department
noted in the NPRM, these proposed
revisions will make explicit the
Department’s longstanding practice and
interpretation of this provision, and do
not place any new or additional
requirements or recordkeeping burdens
on contracting agencies, as they are
already required to maintain these
certified payrolls and provide them to
the Department upon request.
The Department believes that these
revisions will enhance the Department’s
ability to provide compliance assistance
to various stakeholders, including
Federal agencies, contractors,
subcontractors, sponsors, applicants,
owners, or other entities awarded
contracts subject to the provisions of the
DBRA. Specifically, these revisions are
expected to facilitate the Department’s
review of certified payrolls on covered
contracts where the Department has not
initiated any specific compliance action.
Conducting such reviews promotes the
proper administration of the DBRA
because, in the Department’s
experience, such reviews often enable
the Department to identify compliance
issues and circumstances in which
additional outreach and education
would be beneficial.
The Department received no specific
comments on these proposed revisions.
III–FFC generally supported clarifying
and strengthening the recordkeeping
requirements as a means of ensuring
that contractors remain responsible and
that workers are paid the correct
prevailing wage, without specifically
discussing § 5.6(a)(2). The final rule
therefore adopts these changes as
proposed.
(C) 29 CFR 5.6(a)(3)–(5), 5.6(b)
The Department proposed revisions to
§ 5.6(a) and (b), similar to the proposed
changes to § 5.6(a)(2), to clarify that an
investigation is only one method of
assuring compliance with the labor
standards clauses required by § 5.5 and
the applicable statutes referenced in
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§ 5.1. The Department proposed to
supplement the term ‘‘investigation,’’
where appropriate, with the phrase ‘‘or
other compliance actions.’’ The
proposed revisions align with all the
types of compliance actions currently
used by the Department, as well as any
additional types that the Department
may use in the future. These proposed
revisions made explicit the
Department’s longstanding practice and
interpretation of these provisions and
did not impose any new or additional
requirements upon a Federal agency.
Proposed revisions to § 5.6(a)(3)
clarified the records and information
that contracting agencies should include
in their DBRA investigations. These
proposed changes conformed to
proposed changes in § 5.5(a)(3).
The Department also proposed
renumbering current § 5.6(a)(5) as a
stand-alone new § 5.6(c) and updating
that paragraph to reflect its practice of
redacting portions of confidential
statements of workers or other
informants that would tend to reveal
those informants’ identities. This
proposed change was made to
emphasize—without making substantive
changes—that this regulatory provision
mandating protection of information
that identifies or would tend to identity
confidential sources, applies to both the
Department’s and other agencies’
confidential statements and other
related documents. The proposed
revisions codify the Department’s
longstanding position that this
provision protects workers and other
informants who provide information or
documents to the Department or other
agencies from having their identities
disclosed.
The Department received few
comments about these proposals. Two
comments supported the proposed
revisions. III–FFC generally supported
clarifying and strengthening the
recordkeeping requirements. The UA
also supported the safeguards the
Department proposed to make it
possible for underpaid or misclassified
workers to report violations, starting
with the Department’s clear
commitment in § 5.6(c) to expressly
protect the identity of workers or other
informants who provide information in
connection with a complaint or
investigation.
In addition, the Department received
a comment from NFIB recommending
two limiting changes to § 5.6(b)(2) and
(c). First, NFIB requested that the
Department revise § 5.6(b)(2) by
inserting ‘‘consistent with applicable
law,’’ after ‘‘cooperate.’’ NFIB requested
this regulatory change based on its
concern that the existing regulatory
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requirement that private entities or
citizens cooperate with Department
investigations creates a legal duty that
potentially conflicts with the legal rights
of private entities or citizens to invoke
evidentiary privileges against document
production and the privilege against
self-incrimination, and a right to refrain
from answering questions absent service
of compulsory process.
Second, NFIB recommended that the
Department revise § 5.6(c) by inserting
‘‘unless otherwise directed by a final
and unappealable order of a federal
court’’ after ‘‘without the prior consent
of the informant’’ and by inserting ‘‘or
by the terms of such final and
unappealable order of the court’’ at the
end of the paragraph. NFIB asserted that
the Department’s privilege to withhold
the identity of confidential sources in
investigations or other compliance
actions is a qualified, not absolute,
privilege, and that the Department
should not ‘‘make[] a promise of
confidentiality to confidential sources
that, in certain circumstances, the
Department cannot keep.’’ In support of
this recommendation, NFIB cited a
seminal U.S. Supreme Court decision,
Roviaro v. United States, 353 U.S. 53,
60¥61 (1957), that addresses the
common law government informer’s
privilege standard that applies to the
FLSA, among other statutes.
After consideration, the Department
declines to adopt NFIB’s proposed
limiting changes. First, the Department
did not propose any substantive changes
to the language in § 5.6(b)(2) that NFIB
recommended qualifying. Second, the
Davis-Bacon regulations have required
cooperation since 29 CFR part 5 was
added in 1951. See 16 FR 4432.
Specifically, the paragraph then
numbered § 5.10(a) provided that ‘‘the
Federal agencies, contractors,
subcontractors, sponsors, applicants or
owners, shall cooperate with any
authorized representative of the
Department of Labor in the inspection of
records, interviews with workers, and in
all other aspects of the investigation.’’
Id. (emphasis added). This duty to
cooperate, which has been reflected in
the DBRA’s implementing regulations
for more than 70 years with only minor,
technical changes to the operative
language, has coexisted and will
continue to coexist with other legal
rights, such as the Fifth Amendment
right against self-incrimination, and
other privileges. The Department is not
aware of any instances (and NFIB points
to none) in which the regulatory
language of § 5.6(b)(2) and its
predecessor provisions have caused
confusion or been interpreted as
compelling contractors or other entities
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to, in NFIB’s words, ‘‘forfeit their legal
rights in case of an investigation as a
condition of working on federal
construction projects.’’ Particularly in
the absence of any such evidence, and
given that the Department did not
propose any substantive changes to
§ 5.6(b)(2), the Department declines to
adopt NFIB’s suggested regulatory
change.
Similarly, the Department declines to
add NFIB’s proposed qualification to the
confidentiality protections codified in
current § 5.6(a)(5) (renumbered as
§ 5.6(c)) in the case of ‘‘final and
unappealable order[s] of the court’’
overriding these protections because
that qualification is implicit and
therefore unnecessary. The Department
will continue to defend existing
regulatory informant’s privilege
provisions which are currently codified
in 29 CFR 5.6(a)(5) and 6.5 223 and
discussed further in the following
paragraphs. The Department would,
however, also abide by a higher court’s
final and unappealable order to the
contrary.
The Department has long taken the
position that protecting the identities of
confidential informants is essential for
enforcement. As explained in sections
II.A (‘‘Statutory and regulatory history’’)
and III.B.3.xix (‘‘Anti-Retaliation’’), the
Department has broad authority to enact
regulations like this one, which enhance
enforcement and administration of the
Act’s worker protections. Decades ago,
the Department exercised this authority
by, among other measures, extending
protections to confidential informants.
The first iteration of current § 5.6(a)(5)
was added in 1951 in the then new 29
CFR part 5. See 16 FR 4432
(‘‘Complaints of alleged violations shall
be given priority and statements, written
or oral, made by an employee shall be
treated as confidential and shall not be
disclosed to his employer without the
consent of the employee.’’). The current
regulations, 29 CFR 5.6(a)(5) and 6.5,
prohibit disclosing, without the
informer’s consent, the identities of
such people who have provided
information to the Department in
confidence. Specifically, §§ 5.6(c) and
6.5 direct that when an informant
223 In 1984, the Department added the following
sentence to § 6.5 (previously numbered § 6.33): ‘‘In
no event shall a statement taken in confidence by
the Department of Labor or other Federal agency be
ordered to be produced prior to the date of
testimony at trial of the person whose statement is
at issue unless the consent of such person has been
obtained.’’ 49 FR 10626, 10628 (Mar. 21, 1984)
(final rule). The companion regulations in 29 CFR
part 6, subparts A (general) and C (DBRA
enforcement proceedings), are authorized by
various sources, including the DBA and
Reorganization Plan No. 14 of 1950.
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provides statements or information in
confidence, in no event will the identity
of such an informant, or any portions of
their statements, or other information
provided that would tend to reveal their
identity, be ordered to be produced
before the date of that person’s
testimony. In the case of non-testifying
informants, such information may not
be disclosed at all, unless the person has
consented to such disclosure. These
DBRA regulatory informant’s
provisions, currently codified in
§§ 5.6(a)(5) and 6.5—unlike the common
law government informer’s privilege
discussed in Roviaro, which is derived
from judicial decisions, not
regulations—prohibit disclosure (absent
consent) of information that would tend
to identify non-testifying informants
and, for testifying informants, does not
permit such disclosure until the date of
the informant’s testimony at trial.
Absent these controlling regulations,
application of the common law
government informant’s privilege alone,
which, as NFIB asserts, is a qualified
privilege, would be appropriate. But
even if that common law government
informant’s privilege alone were
applicable, it would be unnecessary to
codify. WHD’s current and longstanding
practice is to let workers know that their
identities will be kept confidential to
the maximum extent possible under the
law.
v. Section 5.10 Restitution, Criminal
Action
To correspond with proposed new
language in the contract clauses, the
Department proposed to add references
to monetary relief and interest to the
description of restitution in § 5.10, as
well as an explanation of the method of
computation of interest applicable
generally to any circumstance in which
there has been an underpayment of
wages under a covered contract.
The Department also proposed new
anti-retaliation contract clauses at
§ 5.5(a)(11) and (b)(5), along with a new
related section of the regulations at
§ 5.18. Those clauses and section
provide for monetary relief that would
include, but not be limited to, back
wages. Reference to this relief in § 5.10
was proposed to correspond to those
proposed new clauses and section. For
further discussion of those proposals,
see section III.B.3.xix (‘‘AntiRetaliation’’).
The reference to interest in § 5.10 was
similarly intended to correspond to
proposed new language requiring the
payment of interest on any
underpayment of wages in the contract
clauses at § 5.5(a)(1)(vi), (a)(2) and (6),
and (b)(2) through (4), and on any other
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monetary relief for violations of the
proposed anti-retaliation clauses. The
current Davis-Bacon regulations and
contract clauses do not specifically
provide for the payment of interest on
back wages. The ARB and the
Department’s ALJs, however, have held
that interest calculated to the date of the
underpayment or loss is generally
appropriate where back wages are due
under other similar remedial worker
protection statutes enforced by the
Department. See, e.g., Lawn Restoration
Serv. Corp., ALJ No. 2002–SCA–00006,
slip op. at 74 (Dec. 2, 2003) (awarding
prejudgment interest under the SCA).224
Under the DBRA, as under the INA and
SCA and other similar statutes, an
assessment of interest on back wages
and other monetary relief will ensure
that the workers Congress intended to
protect from substandard wages will
receive the full compensation that they
were owed under the contract.
The proposed language established
that interest would be calculated from
the date of the underpayment or loss,
using the interest rate applicable to
underpayment of taxes under 26 U.S.C.
6621, and would be compounded daily.
Various Occupational Safety and Health
Administration (OSHA) whistleblower
regulations use the tax underpayment
rate and daily compounding because
that accounting best achieves the makewhole purpose of a back-pay award. See
Procedures for the Handling of
Retaliation Complaints Under Section
806 of the Sarbanes-Oxley Act of 2002,
as Amended, Final Rule, 80 FR 11865,
11872 (Mar. 5, 2015).
The Department received one
comment in opposition to its proposal.
ABC noted that contractors may be
unaware of any wage underpayments
until they are notified by the
Department at or near the end of a
construction project, and that—absent
knowledge and/or willful
underpayment—interest compounding
should not begin to be accrue until after
the Department notifies a contractor of
an unremedied liability.
However, the majority of commenters
on this topic supported the
Department’s proposal. The UA stated
that the chances of underpaid or
misclassified workers coming forward to
report violations—and in turn,
employers paying employees swiftly—
224 See also Greater Mo. Med. Pro-care Providers,
Inc., ARB No. 12–015, 2014 WL 469269, at *18 (Jan.
29, 2014) (approving of pre-judgment and postjudgment interest on back pay award for H–1B visa
cases under the Immigration and Nationality Act
(INA)), aff’d sub nom. Greater Mo. Med. Pro-care
Providers, Inc. v. Perez, No. 3:14–CV–05028, 2014
WL 5438293 (W.D. Mo. Oct. 24, 2014), rev‘d on
other grounds, 812 F.3d 1132 (8th Cir. 2015).
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are improved by requiring employers to
pay interest if they fail to pay required
wages. PAAG and PADLI also supported
the proposal to calculate interest from
the date of the underpayment or loss,
and to be compounded daily, which it
noted would ensure that the workers
whom Congress intended to protect
from substandard wages would receive
the full compensation that they were
owed. UBC stated that such language
will improve deterrence and
compliance. CC&M also supported the
Department’s proposal, noting that
misclassification of workers as
independent contractors amounts to
wage theft and that protocols for
workers to receive restitution are
needed in the regulations.
Although in some cases the
requirement to pay interest may act as
an additional deterrent, the reason why
the Department believes the
requirement is necessary is its function
in providing make-whole relief to
workers who have not timely received
the full prevailing wages that they were
due under the statute and the
regulations. The requirement to pay
interest is not intended as a penalty on
contractors or subcontractors that are
responsible for violations. Accordingly,
the requirement to provide interest
outweighs the expressed concern about
whether contractors and subcontractors
have acted knowingly or willfully. The
final rule adopts this change as
proposed.
vi. Section 5.11 Disputes Concerning
Payment of Wages
The Department proposed minor
revisions to § 5.11(b)(1) and (c)(1), to
clarify that where there is a dispute of
fact or law concerning payment of
prevailing wage rates, overtime pay, or
proper classification, the Administrator
may notify the affected contractors and
subcontractors, if any, of the
investigation findings by means other
than registered or certified mail, so long
as those other means would normally
assure delivery. Examples of such other
means include, but are not limited to,
email to the last known email address,
delivery to the last known address by
commercial courier and express
delivery services, or by personal service
to the last known address. The
Department explained that while
registered or certified mail may
generally be a reliable means of
delivery, other delivery methods may be
just as reliable or even more successful
at assuring delivery, as has been
demonstrated during the COVID–19
pandemic. The proposed revisions
would therefore allow the Department
to choose methods to ensure that the
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57643
necessary notifications are delivered to
the affected contractors and
subcontractors.
In addition, the Department proposed
similar changes to allow contractors and
subcontractors to provide their
response, if any, to the Administrator’s
notification of the investigative findings
by any means that would normally
assure delivery. The Department also
proposed replacing the term ‘‘letter’’
with the term ‘‘notification’’ in this
section, as the proposed changes would
allow the notification of investigation
findings to be delivered by letter or
other means, such as email. Similarly,
the Department proposed to replace the
term ‘‘postmarked’’ with ‘‘sent’’ to
reflect that various means may be used
to confirm delivery depending upon the
method of delivery, such as by the date
stamp on an email or the delivery
confirmation provided by a commercial
delivery service.
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed.
For additional discussion related to
§ 5.11, see section III.B.3.xxi
(‘‘Debarment’’).
vii. Section 5.12 Debarment
Proceedings
The Department proposed minor
revisions to § 5.12(b)(1) and (d)(2)(iv)
(renumbered as § 5.12(c)(2)(iv)(A)) to
clarify that the Administrator may
notify the affected contractors and
subcontractors, if any, of the
investigation findings by means other
than registered or certified mail, so long
as those other means would normally
assure delivery. As discussed above in
reference to identical changes proposed
to § 5.11, these revisions would allow
the Department to choose the most
appropriate method to confirm that the
necessary notifications reach their
recipients. The Department proposed
similar changes to allow the affected
contractors or subcontractors to use any
means that would normally assure
delivery when making their response, if
any, to the Administrator’s notification.
The Department also proposed a
slight change to § 5.12(b)(2), which
stated that the Administrator’s findings
would be final if no hearing were
requested within 30 days of the date the
Administrator’s notification is sent, as
opposed to the current language, which
states that the Administrator’s findings
shall be final if no hearing is requested
within 30 days of receipt of the
Administrator’s notification. This
proposed change would align the time
period available for requesting a hearing
in § 5.12(b)(2) with similar requirements
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in § 5.11 and other paragraphs in § 5.12,
which state that such requests must be
made within 30 days of the date of the
Administrator’s notification.
For additional discussion related to
§ 5.12, see section III.B.3.xxi
(‘‘Debarment’’).
The Department received no
comments on this proposal. The final
rule therefore adopts these changes as
proposed.
viii. Section 5.16 Training Plans
Approved or recognized by the
Department of Labor Prior to August 20,
1975
As noted (see III.B.3.ii.(E) ‘‘29 CFR
5.5(a)(4) Apprentices.’’), the Department
proposed to rescind and reserve § 5.16.
Originally published along with
§ 5.5(a)(4)(ii) in a 1975 final rule, § 5.16
is essentially a grandfather clause
permitting contractors, in connection
with certain training programs
established prior to August 20, 1975, to
continue using trainees on Federal and
federally assisted construction projects
without seeking additional approval
from the Department pursuant to
§ 5.5(a)(4)(ii). See 40 FR 30480. Since
§ 5.16 appears to be obsolete more than
four decades after its issuance, the
Department proposed to rescind and
reserve the section. The Department also
proposed several technical edits to
§ 5.5(a)(4)(ii) to remove references to
§ 5.16.
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed.
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ix. Section 5.17 Withdrawal of
Approval of a Training Program
As already discussed, the Department
proposed to remove references to
trainees and training programs
throughout parts 1 and 5 (see
III.B.3.ii.(E) ‘‘29 CFR 5.5(a)(4)
Apprentices.’’) as well as rescind and
reserve § 5.16 (see III.B.3.viii ‘‘Section
5.16 Training plans approved or
recognized by the Department of Labor
prior to August 20, 1975.’’).
Accordingly, the Department also
proposed to rescind and reserve § 5.17.
The Department received no
comments on the proposal to rescind
and reserve § 5.17. The final rule
therefore adopts this change as
proposed.
x. Section 5.20 Scope and Significance
of This Subpart
The Department proposed two
technical corrections to § 5.20. First, the
Department proposed to correct a
typographical error in the citation to the
Portal-to-Portal Act of 1947 to reflect
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that the relevant section of the Portal-toPortal Act is codified at 29 U.S.C. 259,
not 29 U.S.C. 359. Second, the last
sentence of § 5.20 currently states,
‘‘Questions on matters not fully covered
by this subpart may be referred to the
Secretary for interpretation as provided
in § 5.12.’’ However, the regulatory
provision titled ‘‘Rulings and
Interpretations,’’ which this section is
meant to reference, is currently located
at § 5.13. The Department therefore
proposed to replace the incorrect
reference to § 5.12 with the correct
reference to § 5.13.
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed, with minor technical edits to
improve readability, none of which are
intended to reflect a change in the
substance of this section.
xi. Section 5.23
Provisions
The Statutory
The Department proposed to make
technical, non-substantive changes to
§ 5.23. The existing text of § 5.23
primarily consists of a lengthy quotation
of a particular fringe benefit provision of
the 1964 amendments to the DBA. The
Department proposed to replace this
text with a summary of the statutory
provision at issue for two reasons. First,
due to a statutory amendment, the
quotation set forth in existing § 5.23 no
longer accurately reflects the statutory
language. Specifically, on August 21,
2002, Congress enacted legislation
which made several non-substantive
revisions to the relevant 1964 DBA
amendment provisions and recodified
those provisions from 40 U.S.C. 276a(b)
to 40 U.S.C. 3141.225 The Department
proposed to update § 5.23 to include a
citation to 40 U.S.C. 3141(2). Second,
the Office of the Federal Register
disfavors lengthy block quotations of
statutory text.226 In light of this drafting
convention, and because the existing
quotation in § 5.23 no longer accurately
reflects the statutory language, the
Department proposed to revise § 5.23 so
that it paraphrases the statutory
language set forth at 40 U.S.C. 3141(2).
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed.
225 See Revision of Title 40, U.S.C., ‘‘Public
Buildings, Property, and Works,’’ Public Law 107–
217, sec. 3141, 116 Stat. 1062, 1150 (Aug. 21, 2002).
226 See Off. of the FR, ‘‘Document Drafting
Handbook’’ section 3.6 (Aug. 2018 ed., rev. Mar. 24,
2021), https://www.archives.gov/files/Federalregister/write/handbook/ddh.pdf.
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xii. Section 5.25 Rate of Contribution
or Cost for Fringe Benefits
The Department proposed to add new
paragraph (c) to existing § 5.25 to codify
the principle of annualization used to
calculate the amount of Davis-Bacon
credit that a contractor may receive for
contributions to a fringe benefit plan
when the contractor’s workers perform
work on both DBRA-covered projects
(referred to as ‘‘DBRA-covered’’ work or
projects) and projects that are not
subject to DBRA requirements (referred
to as ‘‘private’’ work or projects) in a
particular year or other shorter time
period. While existing guidance
generally requires the use of
annualization to compute the hourly
equivalent of fringe benefits,
annualization is not currently addressed
in the regulations. The Department’s
proposal provided for annualization of
fringe benefits unless a contractor
obtained an exception with respect to a
particular fringe benefit plan and also
addressed how to properly annualize
fringe benefits. The proposal also set
forth an administrative process for
obtaining approval by the Administrator
for an exception from the annualization
requirement.
Consistent with the Secretary’s
authority to set the prevailing wage,
WHD has long concluded that a
contractor generally may not take DavisBacon credit for all its contributions to
a fringe benefit plan based solely upon
the workers’ hours on a DBRA-covered
project when the workers also work on
private projects for the contractor in that
same time period. See, e.g., Miree
Constr. Corp. v. Dole, 930 F.2d 1536,
1545–46 (11th Cir. 1991) (adopting the
Administrator’s contention that ‘‘[i]f an
employer chooses to provide a year-long
fringe benefit, rather than cash or some
other fringe benefit, the annualization
principle simply ensures that a
disproportionate amount of that benefit
is not paid for out of wages earned on
Davis-Bacon work’’); see also, e.g.,
Indep. Roofing Contractors v. Chao, 300
Fed. Appx. 518, 521 (9th Cir. 2008)
(noting the Department’s ‘‘long history
of applying annualization,’’ including
when an ‘‘employer provides a yearlong benefit’’ so as to ‘‘ensure ‘that a
disproportionate amount of that fringe
benefit is not paid out of wages earned
on . . . Davis-Bacon work’ ’’) (citation
omitted); In re Cody-Zeigler, ARB Nos.
01–014, 01–015, 2003 WL 23114278, at
*13 (Dec. 19, 2003); WHD Opinion
Letter DBRA–72 (June 5, 1978); WHD
Opinion Letter DBRA–134 (June 6,
1985); WHD Opinion Letter DBRA–68
(May 22, 1984); FOH 15f11(b).
Contributions made to a fringe benefit
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plan for DBRA-covered work generally
may not be used to fund the plan for
periods of private work. A contractor
therefore typically must convert its total
annual contributions to the fringe
benefit plan to an hourly cash
equivalent by dividing the cost of the
fringe benefit by the total number of
hours worked (DBRA-covered and
private work) to determine the amount
creditable towards meeting its
obligation to pay the prevailing wage
under the DBRA. See FOH 15f11(b)
(‘‘Normally, contributions made to a
fringe benefit plan for government work
generally may not be used to fund the
plan for periods of non-government
work.’’); see also FOH 15f12(b).
This principle, which is referred to as
‘‘annualization,’’ effectively prohibits
contractors from using fringe benefit
plan contributions attributable to work
on private projects to meet their
prevailing wage obligation for DBRAcovered work. See, e.g., Miree Constr.,
930 F.2d at 1545 (annualization ensures
receipt of the prevailing wage by
‘‘prevent[ing] employers from receiving
Davis-Bacon credit for fringe benefits
actually paid to employees during nonDavis-Bacon work’’). Annualization is
intended to prevent the use of DBRAcovered work as the disproportionate or
exclusive source of funding for benefits
that are continuous in nature and that
constitute compensation for all the
worker’s work, both DBRA-covered and
private.
For many years, WHD has required
contractors to annualize contributions
for most types of fringe benefit plans,
including health insurance plans,
apprenticeship training plans, vacation
plans, and sick leave plans. See, e.g.,
Rembrant, Inc., WAB No. 89–16, 1991
WL 494712, at *1 (Apr. 30, 1991)
(noting WHD Deputy Administrator’s
position that ‘‘fringe benefit
contributions creditable for Davis-Bacon
purposes may not be used to fund a
fringe benefit plan for periods of nongovernment work’’); PWRB, sec. 9, p. 21
(noting that the Administrator originally
applied annualization to health
insurance plans in the 1970s). WHD’s
rationale for requiring annualization is
that such contributions finance benefits
that are continuous in nature and reflect
compensation for all of the work
performed by a laborer or mechanic,
including work on both DBRA-covered
and private projects. One exception to
this general rule compelling the
annualization of fringe benefit plan
contributions has been that
annualization is not required for defined
contribution pension plans (DCPPs) that
provide for immediate participation and
essentially immediate vesting (e.g., 100
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percent vesting after a worker works 500
or fewer hours). See WHD Opinion
Letter DBRA–134 (June 6, 1985); see
also FOH 15f14(f)(1). However, WHD
does not currently have public guidance
explaining the extent to which other
plans may also warrant an exception
from the annualization principle.
To clarify when an exception to the
general annualization principle may be
appropriate, the Department proposed
language stating that contributions to a
fringe benefit plan may only qualify for
such an exception when three
requirements are satisfied: (1) the
benefit provided is not continuous in
nature; (2) the benefit does not provide
compensation for both public and
private work; and (3) the plan provides
for immediate participation and
essentially immediate vesting. In
accordance with the Department’s
longstanding guidance, under the
proposal, a plan would generally be
considered to have essentially
immediate vesting if the benefits vest
after a worker works 500 or fewer hours.
These proposed criteria were not
necessarily limited to DCPPs. However,
to ensure that the criteria were applied
correctly and that workers’ Davis-Bacon
wages were not disproportionately used
to fund benefits during periods of
private work, the Department proposed
that such an exception could only apply
when the plan in question had been
submitted to the Department for review
and approval. As proposed, such
requests could be submitted by plan
administrators, contractors, or their
representatives. However, to avoid any
disruption to the provision of worker
benefits, the Department also proposed
that any plan that is not subject to
annualization under the Department’s
existing guidance could continue to use
such an exception until the plan had
either requested and received a review
of its exception status under the
proposed process, or until 18 months
had passed from the effective date of
this rule, whichever came first.
The Department noted that by
requiring annualization, the proposal
furthered the policy goal of protecting
the fringe benefit component of workers’
Davis-Bacon prevailing wage
compensation from dilution by
preventing contractors from taking
credit for fringe benefits attributable to
work on private projects against their
fringe obligations on DBRA-covered
work. The proposed exception also
provided the flexibility for certain fringe
benefit plan contributions to be
excepted from the annualization
requirement if they met the proposed
criteria.
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The Department received a wide
variety of comments on the
Department’s proposal to codify the
annualization principle. All of the
commenters appeared to recognize that
the Department has long required most
fringe benefits to be annualized. They
also appeared to accept that
annualization of fringe benefits is at
least typically warranted and that
codification of the annualization
principle in regulations would be
appropriate. However, some
commenters that were generally
supportive of annualization advocated
that the Department modify the
proposal to more broadly require
annualization, whereas others
(including through comments submitted
as part of an organized ABC member
campaign) opposed the proposed
exception approval process, questioned
or opposed the criterion that
annualization apply to any fringe
benefit that is continuous in nature,
and/or proposed that contributions to
specific types of fringe benefit plans
such as DCPPs and supplemental
unemployment benefit (SUB) 227 plans
be excepted from annualization.
Many commenters, including III–FFC,
Alaska District Council of Laborers,
LIUNA Laborers’ Local 341, PAAG and
PADLI, NABTU, and an individual
commenter, expressed general support
for the Department’s proposal to codify
the Davis-Bacon annualization
principle. These commenters agreed
that annualization prevents the use of
DBRA work as the disproportionate or
exclusive source of funding for benefits
that are continuous in nature and that
constitute compensation for all the
worker’s work, both DBRA-covered and
private. Commenters such as PAAG and
PADLI also supported the Department’s
explanation of the method for
annualizing fringe benefit contributions,
commenting that codifying and
explaining annualization would assist
227 Under SUB plans, contractors typically make
payments to worker-specific supplemental
unemployment insurance accounts. The terms and
conditions of SUB plans vary, but contractors often
contribute an amount equal to the difference
between the fringe benefit amount listed on an
applicable Davis-Bacon wage determination and the
fringe benefit amount that the contractor would
have provided in the absence of DBRA
requirements. Participating contractors generally
are not required to make contributions to SUB plans
for hours worked on private projects, but plan
benefits may be available to workers when they
experience ‘‘involuntary work interruptions’’ on
both DBRA-covered and private projects. Under
some SUB plans, for example, work interruptions
such as layoffs, inclement weather, illness, or
equipment down time can all render a participant
eligible to receive benefits. Under other SUB plans,
a participant may be eligible to receive payouts if
the worker qualifies to receive state unemployment
benefits.
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contractors in complying with the
Davis-Bacon annualization and fringe
benefit requirements.
Although NABTU, the III–FFC, and
the IUOE expressed strong support for
the annualization principle, they
commented that the Department should
revise the proposed regulation to
strengthen the annualization
requirement. In particular, NABTU and
the III–FFC recommended adopting an
express presumption in favor of
annualization, claiming that without
such an express presumption and the
other revisions they proposed,
contractors would be free to front-load
benefit costs on DBRA projects instead
of spreading them out across DBRAcovered and private work, thereby
effectively paying for fringe benefits
used by workers during periods of
private work with Davis-Bacon
contributions. NABTU, the III–FFC, and
the IUOE also recommended that the
phrase ‘‘essentially immediate vesting’’
in the Department’s third proposed
criterion for an exception from
annualization be changed to ‘‘immediate
vesting.’’ In longstanding subregulatory
guidance, as well as in its proposed
rule, the Department has interpreted
‘‘essentially immediate vesting’’ to refer
to 100 percent vesting after a worker
works 500 or fewer hours. See, e.g., FOH
15f14(f)(1). An exception from
annualization therefore is available
when a worker becomes 100 percent
vested in their DCPP benefit after
working 500 or fewer hours, if all other
criteria 228 for the exception are
satisfied. Under these commenters’
recommended approach, by contrast,
the exception from annualization would
not be available unless a worker’s fringe
benefit vested beginning with their first
hour of work.229
NABTU, the III–FFC, and the IUOE,
along with an individual commenter,
further contended that an exception
from annualization should not be
available for plan types other than
DCPPs, and that the final rule should
expressly state that the narrow
exception to annualization only applies
to DCPPs. The III–FFC and the IUOE
explained that no type of fringe benefit
228 In this final rule the Department has made a
non-substantive change by referring to the
requirements for the annualization exception as
‘‘criteria’’ instead of ‘‘factors.’’ The NPRM
sometimes referred to these requirements as factors,
but criteria is a more appropriate term.
229 IEC appeared to interpret the Department’s
proposal as already contemplating the type of
‘‘immediate vesting’’ that NABTU, the III–FFC, and
the IUOE proposed, thereby prompting IEC to
comment, incorrectly, that the Department’s
proposal of ‘‘immediate participation and
immediate vesting’’ would ‘‘eliminate[ ] fringe 401k
plans from DBA creditability.’’
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plan besides DCPPs satisfies each of the
exception criteria that the Department
set forth in proposed § 5.25, since, for
example, health and welfare fringe
benefit plans are continuous in nature
and cover individuals when working on
DBRA-covered and private projects.
Similarly, NABTU urged the
Department to emphasize in the final
rule that the criterion that a fringe
benefit not be continuous in nature is a
stringent requirement that very few
benefit plans would satisfy. Specifically,
NABTU asserted that a year-round SUB
plan that is available to protect against
loss of both private work and DBRAcovered work should be considered
continuous in nature, as the plan is
available throughout the year to meet a
contingent event, such as the
involuntary loss of employment due to
seasonal or similar conditions prevalent
in the construction industry. NABTU
similarly stated that, unlike DCPPs, SUB
plans are made available during an
employee’s active career, not at
retirement, and therefore are
‘‘continuous in nature’’ for this reason
as well. By limiting the annualization
exception to certain DCPPs, NABTU
contended (as did the III–FFC and the
IUOE) that prevailing wage standards
will be preserved, as contractors will be
unable to use DBRA-covered work to
pay for fringe benefits used by
employees during periods of private
work.
Other commenters, including Fringe
Benefit Group, Inc. (FBG), CC&M, IEC,
the Law Office of Martha Hutzelman
(Hutzelman), and ABC, objected to the
treatment of particular types of fringe
benefits under the proposed rule and,
more generally, the administrative
exception process set forth in the
proposed rule. FBG expressed support
for the principles underlying proposed
§ 5.25(c) ‘‘on a macro level’’ but
recommended that, with respect to
DCPPs, the Department reconsider
requiring all fringe benefit plans seeking
an exception from the annualization
requirement to submit a written request
for approval to WHD. FBG explained
that, with respect to DCPPs, such a
requirement would place a significant
burden on contractors, plan
administrators, and WHD in connection
with plans that ‘‘on their face’’ qualify
for the exception. FBG added that this
additional administrative complexity
could discourage small businesses or
new entrants from pursuing work on
DBRA-covered projects without any
offsetting benefits given that ‘‘the vast
number of contractors adopt DCPPs that
are already consistent with the longheld annualization exception.’’ Other
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commenters, including ABC, expressed
similar concerns and opposition to the
proposed administrative exception
process.230 In light of these stated
concerns, and particularly given their
view that the Department has long
successfully applied the exception from
annualization to DCPPs that provide for
immediate participation and essentially
immediate vesting, FBG, along with
CC&M, proposed amending the proposal
to create a safe-harbor provision that
would automatically apply the
annualization exception to DCPPs that
meet the proposed requirements
without requiring them to apply for
approval.
Hutzelman similarly objected to the
creation of a new administration
exception process applicable to all types
of fringe benefit plans and instead
called for the Department to clearly
define and describe the criteria for
exception from the annualization
requirement in the final rule.
Specifically, Hutzelman recommended
that the Department not adopt its
administrative exception process or
that, in the alternative, the proposal be
revised to provide for an exception from
the annualization process for all DCPPs
and SUB plans that provide for
immediate participation and essentially
immediate vesting (as historically
defined by the Department) where the
benefit provided is not continuous in
nature.231 Hutzelman then proposed
that the term ‘‘continuous in nature’’ be
defined in the regulations as ‘‘a benefit
that requires minimum periodic
deposits or payments or that has a stated
annual cost associated with the benefit,’’
such that a benefit that is ‘‘continuous
in nature’’ ‘‘is not a benefit that is
continuously available, but rather is a
benefit that is continuously funded.’’
Hutzelman contended that ‘‘essentially
cash equivalent benefits’’ such as DCPPs
and SUB plans are not ‘‘continuous in
nature’’ under this proposed definition
and should be excepted from the
annualization requirement.232
REBOUND and an individual
230 IEC opposed the administrative exception
process for similar reasons, and III–FFC similarly
commented that a general ‘‘preclearance process’’
would be unnecessary, particularly if exceptions to
annualization are limited to certain DCPPs, and that
the proposed process also raised practical concerns
about staff and resources.
231 Hutzelman’s proposed formulation did not
include the long-established criterion that, in order
to be excepted from annualization, contributions to
a fringe benefit plan must not provide
compensation for both DBRA-covered and private
work.
232 ABC also address the ‘‘continuous in nature’’
criterion, contending that the criterion does not
appear in the FOH or other guidance materials and
therefore appeared to reflect ‘‘a significant, but
unacknowledged, policy change.’’
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commenter expressed support for the
annualization of fringe benefits and for
the specific exception criteria proposed
by the Department.’’ However, they
further commented that there has been
an increase in the number of companies
that offer contractors the ability to
purchase medical and other types of
insurance for their employees during
the hours that they are employed on
public works projects in order to
comply with prevailing wage
requirements, but that the contractors
do not have to participate in the plans
when they work on private projects. The
commenters opposed annualization of
such contributions, as long as the
policies provided immediate vesting
and coverage of each individual
employee, and further stated that these
policies allow contractors to meet the
requirements of prevailing wage laws
while still maintaining their regular
operations. These comments thus
appear similar to Hutzelman’s to the
extent they suggest that whether an
exception to the annualization
requirement is warranted should be
determined based on when the
contribution is made (i.e., whether
contributions are made solely in
connection with DBRA-covered work)
rather than when benefits are available.
In considering the comments
received, the Department notes at the
threshold that annualization is not a
new principle; rather, as reflected in the
directly applicable Federal court and
administrative precedent cited in this
section, DBRA contractors have been
required to annualize fringe benefit
contributions for decades. As various
commenters stated, including
annualization in the regulations will
help ensure that contractors are aware of
how to comply with fringe benefit
requirements and are informed about
how to properly credit plan
contributions against their fringe benefit
obligations.
The Department believes that
addressing annualization in the final
rule will increase compliance with
Davis-Bacon prevailing wage obligations
by codifying subregulatory guidance
and case law about the requirement to
annualize contributions to fringe benefit
plans. Codifying the annualization
principle in regulations rather than
continuing to address annualization at
the subregulatory level does not
increase costs or make compliance more
difficult for experienced contractors,
small contractors, or contractors that are
new to DBRA-covered projects. Rather,
codifying the annualization principle
will aid contractors in understanding
and fulfilling their obligations when
working on Davis-Bacon projects. By
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doing so, the regulations will help
contractors that may otherwise have
overlooked or misunderstood the
requirements of annualization to
correctly satisfy their fringe benefit
obligations under the DBRA and to
account for the annualization of fringe
benefits when formulating bids for
DBRA-covered projects.
While annualization is not a new
requirement, the addition of a regulatory
administrative process requiring
approval of all plans for the exception
to annualization would have been new.
The Department appreciates the
comments and recommendations
regarding this proposed administrative
process to approve plans for exception
from annualization.
Upon review and consideration of the
comments, in this final rule the
Department adopts § 5.25(c) as
proposed, with two substantive
exceptions and related revisions. First,
the formal administrative process for
requesting exceptions from the
annualization requirement will not
apply to contributions to DCPPs as long
as the DCPP meets each of the exception
criteria. This approach aligns with
various commenters’ objections to
applying the proposed administrative
exception process to DCPPs and the
related requests for a safe harbor for
DCPPs that satisfy the exception criteria.
The final rule, therefore, consistent with
existing subregulatory requirements,
generally only requires that
administrative approval of an exception
to the annualization requirement be
obtained in connection with
contributions to fringe benefit plans
other than DCPPs. In accordance with
this change from the proposed
provision, a sentence has been added to
§ 5.25(c)(2) excepting contributions to
DCPPs provided that each of the
requirements of new § 5.25(c)(3) is
satisfied, and that the DCPP provides for
immediate participation and essentially
immediate vesting (i.e., the benefit vests
within the first 500 hours worked). In
the final rule, proposed § 5.25(c)(3) was
replaced with a portion of proposed
§ 5.25(c)(2) that was revised as
explained in this section.
The Department made this change to
the proposed rule because it agrees with
commenters, including ABC and FBG,
that contributions to DCPPs have a long
history of being excepted from the
annualization requirement. The
Department believes that excepting
contributions to DCPPs that meet the
criteria for exception from the
annualization requirement in the final
rule addresses the concern of
commenters that the administrative
process could be burdensome on plan
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57647
administrators, contractors, and the
Department. Not applying the formal
administrative exception process to
DCPPs will likely dramatically reduce
the number of requests for an exception
from the annualization requirement.
The Department also agrees with
commenters that DCPPs will typically if
not invariably satisfy the enumerated
exception criteria. To the extent
questions arise regarding whether the
exception to annualization may apply to
contributions to a particular DCPP, an
exception request should be submitted
in accordance with § 5.25(c)(2).
In further response to the comments
about the proposal’s perceived
administrative burdens, the Department
reiterates that, as revised, § 5.25
provides that only contributions to nonDCPP fringe benefit plans that wish to
be excepted from the annualization
requirement need to be approved
through the administrative process.
Thus, as revised, § 5.25 mirrors existing
subregulatory practice, under which
contributions to DCPPs do not need to
be annualized if the applicable criteria
are satisfied, and fringe benefit
contributions to all other types of plans
must be annualized absent requesting
and receiving an exception from the
annualization requirement from WHD.
Thus, the administrative burden for
plan administrators, contractors, and the
Department is limited to non-DCPP
plans that want to be approved for the
exception to annualization and DCPPs
for which there is uncertainty as to
whether they meet all the requirements
of the exception. Based on its extensive
experience, the Department believes the
number of fringe benefit plans that fall
in this category will be manageable for
all affected parties. The final rule does
not impose an unduly burdensome
administrative requirement for the
remaining plans that choose to apply for
the exception because exception
requests will predominantly be based on
readily available documents such as
plan descriptions. Requiring approval
for the exception for non-DCPP fringe
benefit plans will help ensure workers
receive their required Davis-Bacon
fringe benefits.
The Department declines to adopt
suggestions that the exception from
annualization perhaps should be
eliminated altogether, or that it should
apply exclusively to DCPPs. While the
Department acknowledges these
commenters’ concerns that workers
receive all the fringe benefits they are
due under the DBRA, it also recognizes
the long-standing practice of allowing
DCPPs to forego annualization if they
meet the enumerated criteria. Moreover,
by allowing contributions to bona fide
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fringe benefit plans other than DCPPs to
be excepted from the annualization
requirement, the final rule codifies
existing practice and implements a
process that allows a broader range of
plans to potentially be excepted from
the annualization requirement to the
extent appropriate, but only if they too
meet the enumerated criteria for the
exception.
The Department believes that the test
for obtaining an exception from
annualization is sufficient to address
NABTU’s and III–FFC’s concerns about
DBRA benefit contributions—
particularly SUB plan benefits—
subsidizing benefits that are available
throughout the year on DBRA-covered
and private projects. If WHD has not
approved an exception from
annualization with respect to a specific
non-DCPP plan, such as a particular
SUB plan, then contributions to the plan
must be annualized. Moreover, with
respect to such plans, exceptions to
annualization will be approved only
when each of the criteria have been
satisfied. This framework reflects an
implicit presumption in favor of
annualization. Therefore, the
Department declines to add an express
presumption in favor of annualization.
The second change in the final rule
from the proposed rule is a more
fulsome recitation in § 5.25(c)(3) of the
criteria for an exception to the
annualization requirement. Some
commenters, including NABTU and III–
FFC, recommended the regulations
include a definition of ‘‘continuous in
nature’’ and eliminate the use of the
word ‘‘essentially’’ when discussing
immediate vesting, specifically
recommending elimination of the use of
the 500-hour criterion and opting for
immediate vesting. The Department
agrees that the regulations should
include an explanation of when a fringe
benefit is not ‘‘continuous in nature’’ to
provide further guidance to the
regulated community and other
interested parties. As a result,
§ 5.25(c)(3)(i) of the final rule includes
a new explanation of benefits that are
‘‘not continuous in nature’’ as benefits
that are not available to a participant
without penalty throughout the year or
other relevant time period to which the
cost of the benefit is attributable.
The Department declines to accept
Hutzelman’s proposed definition of
‘‘continuous in nature’’ as a benefit that
requires minimum periodic deposits or
payments or that has a stated annual
cost associated with the benefit. This
proposed definition would appear to
undermine the purpose of
annualization, which is to prevent
contractors from paying for benefits that
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cover hours worked on private projects
with compensation due for hours
worked on DBRA-covered projects.
Moreover, the continuous in nature
criterion focuses on the circumstances
under which the fringe benefit is
available, not the timing of the
contractor’s contributions toward the
benefit. Under a contrary approach that
focused on the timing of the contractor’s
contributions to the benefit, a contractor
could annualize contributions to a
fringe benefit plan that were made only
in connection with DBRA-covered work,
even though benefits were available to
the worker during periods of private
work. Such an approach would
contravene the basic premise of the
annualization requirement. See, e.g.,
Indep. Roofing Contractors, 300 Fed.
Appx. at 521 (noting the Department’s
‘‘long history of applying
annualization’’ so as to ‘‘ensure ‘that a
disproportionate amount of that fringe
benefit is not paid out of wages earned
on . . . Davis-Bacon work’’’) (citation
omitted). For this reason, to the extent
that REBOUND and an individual
commenter suggested that whether an
exception to the annualization
requirement is warranted should be
determined based on when the
contribution is made (i.e., whether
contributions are made solely in
connection with DBRA-covered work)
rather than when benefits are available,
such a suggestion reflects a
misunderstanding of the annualization
principle, as in such a scenario,
contributions during periods of DBRAcovered work would be used to
subsidize benefits provided during
periods of private work, thereby
presenting a classic case in which
annualization is required.
The Department also disagrees with
ABC’s contention that the ‘‘continuous
in nature’’ criterion appears to reflect ‘‘a
significant, but unacknowledged, policy
change’’ because it does not appear in
the FOH or other guidance materials.
This criterion simply expressly reflects
the bedrock principle that where
benefits are available on a continuing
basis, and are not, for example,
restricted to Davis-Bacon work,
annualization will be warranted. As
such, this criterion reflects the
Department’s longstanding position, as
reflected in Miree Construction and
Independent Roofing Contractors, that it
is proper to annualize benefits that are
continuous in nature and constitute
compensation for all of an employee’s
work. See Miree Constr., 930 F.2d at
1546 (‘‘If an employer chooses to
provide a year-long fringe benefit, rather
than cash or some other fringe benefit,
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the annualization principle simply
ensures that a disproportionate amount
of that benefit is not paid for out of
wages earned on Davis-Bacon work’’);
Indep. Roofing Contractors, 300 Fed.
Appx. at 521 (concluding that the ARB
had a reasonable basis for requiring
annualization of apprentice training
program benefits where ‘‘apprentice
training continued year-round but [the
contractor] contributed to the
[apprenticeship training fund] only for
DBA projects’’).
The Department did not receive
comments specifically on the second
criterion that requires a benefit plan to
not compensate both DBRA-covered and
private work. However, considering the
comments requesting clarification or
recommending changes to the other two
criteria, the Department has clarified in
§ 5.25(c)(3)(ii) of the final rule that the
second criterion means that a benefit
does not compensate both private and
DBRA-covered work if any benefits
provided during periods of private work
are wholly paid for by compensation for
private work. Benefits provided during
periods of private work that are paid for,
in whole or in part, by compensation
earned during hours worked on DBRAcovered work do not meet this criterion.
While the Department appreciates
some commenters’ request to require
immediate vesting, the Department
declines to adopt this recommendation.
The Department has used the 500-hour
criteria for ‘‘essentially immediate
vesting’’ for decades, and it is the
current standard for DCPPs that are
excepted from the annualization
requirement. Moreover, any request to
change vesting requirements (as
opposed to identifying a vesting
threshold that satisfies the
annualization principle) is beyond the
scope of this rule. The Department has,
however, revised the regulatory text to
reflect that, as a matter of historical
practice, the requirement of immediate
participation and essentially immediate
vesting has been a criterion generally
applied to DCPPs. To the extent that
benefit plans or contractors have
concerns regarding the application of
this criterion or wish to seek exception
approval whether or not they satisfy the
criterion, they may direct questions or
requests for specific exception to the
Department pursuant to § 5.25(c)(3). The
Department also notes that to the extent
that IEC interpreted the Department’s
proposal as requiring ‘‘immediate
vesting’’ in a manner that would
‘‘eliminate[ ] fringe 401k plans from
DBA creditability,’’ the commenter
misunderstood the nature of the
proposal, which, through its
requirement of ‘‘essentially immediate
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xiii. Section 5.26 ‘‘* * * Contribution
Irrevocably Made * * * to a Trustee or
to a Third Person’’
As an initial matter, as noted in the
proposed rule, this change was not
intended to be substantive. Neither the
existing language nor the proposed
language imposes any fiduciary
responsibilities; rather, both simply
state that the recipient of fringe benefits
contributions must adhere to whatever
fiduciary responsibilities already apply
by virtue of any ‘‘applicable law.’’ Thus,
whether a non-trustee third party is
considered a fiduciary and subject to
fiduciary responsibilities is determined
not by the Davis-Bacon regulations but
by other laws. The proposed rule would
not have effected any change in this
regard.
The Department nonetheless
recognizes that, as these commenters
noted, the current regulation only
includes trustees, not non-trustee ‘‘third
persons,’’ when referring to applicable
fiduciary responsibilities, whereas the
proposed rule included both. Given the
commenters’ concerns that this could be
construed as a substantive change, the
Department modifies the language in the
final rule to state instead that ‘‘a trustee
must adhere to any fiduciary
responsibilities applicable under law.’’
The Department notes, however, that
whether the recipient of fringe benefit
contributions is a trustee or a third
person, to the extent that the party is
deemed a fiduciary under applicable
law, if the party is found to have
materially violated its fiduciary
responsibilities with respect to the
fringe benefit contributions, it is likely
that such contributions will not be
creditable under the DBRA. The final
rule makes this change and otherwise
adopts the language as proposed.
The Department proposed several
non-substantive technical corrections to
§ 5.26 to improve clarity and readability.
The Department received no comments
on most of the proposed changes to
§ 5.26 and therefore adopts those
changes as proposed. The Department,
however, received two comments
contending that one of the proposed
changes would be substantive and
opposing the change. Specifically, FBG
and ABC asserted that the proposed
change from current language stating,
‘‘The trustee [of fringe benefits
contributions] must assume the usual
fiduciary responsibilities imposed upon
trustees by applicable law’’ to revised
language stating, ‘‘the trustee or third
person must adhere to any fiduciary
responsibilities applicable under law’’
appeared to impose, for the first time,
fiduciary responsibilities on non-trustee
third parties that administer fringe
benefits, and that the scope of such
fiduciary responsibilities was unclear.
xiv. Section 5.28 Unfunded Plans
Section 5.28 discusses ‘‘unfunded
plans,’’ i.e., plans in which the
contractor does not make irrevocable
contributions to a trustee or third person
pursuant to a fund, plan, or program,
but instead provides fringe benefits
pursuant to an enforceable commitment
to carry out a financially responsible
plan or program, and receives fringe
benefit credit for the rate of costs which
may be reasonably anticipated in
providing benefits under such a
commitment. In the NPRM, the
Department proposed a technical
correction to the citation to the DBA to
reflect the codification of the relevant
provision at 40 U.S.C. 3141(2)(B)(ii), as
well as a number of other nonsubstantive revisions. The Department
received no comments on these
proposals. The final rule therefore
adopts these changes as proposed.
Additionally, the Department
proposed adding a new paragraph (b)(5)
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vesting,’’ reflected that annualization of
contributions to DCPPs will be
permissible (assuming other criteria are
satisfied) where the pension benefit
vests within the first 500 hours worked,
which is a criterion that has not
interfered with the availability of an
exception from annualization for
DCPPs.
In addition to the two substantive
changes discussed in this section, the
final rule includes several clarifying
changes. In § 5.25(c), the Department
has added a one-sentence summary of
the annualization principle as well as
language to further clarify that
annualization requirements apply to
unfunded as well as funded plans. The
Department also has clarified that,
except as provided in § 5.25(c),
contractors must annualize all
contributions to fringe benefit plans, not
all fringe benefit contributions. As
proposed, this paragraph could have
been construed to incorrectly imply that
cash payments in lieu of fringe benefits
must be annualized. Similarly, the
beginning of § 5.25(c)(3) in the final rule
has been revised to clarify that the
annualization principle, and exceptions
to that principle, apply to contributions
to fringe benefit plans, not to the plans
themselves. This concept was clear in
the NPRM and was understood by the
regulated community and other
stakeholders that submitted comments
on this proposal. The Department has
made these changes in the final rule to
be more precise.
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to § 5.28, explicitly stating that
unfunded benefit plans or programs
must be approved by the Secretary in
order to qualify as bona fide fringe
benefits, and to replace the text in
current paragraph (c) with language
explaining the process contractors and
subcontractors must use to request such
approval. To accommodate these
changes, the Department proposed to
add a new paragraph (d) that contains
the text currently located in paragraph
(c) with non-substantive edits for clarity
and readability.
As the Department noted in the
proposed rule, other regulatory
sections—including the Davis-Bacon
contract clause itself in § 5.5—make
clear that if a contractor provides its
workers with fringe benefits through an
unfunded plan, the contractor may only
take credit for any costs reasonably
anticipated in providing such fringe
benefits if it has submitted a request in
writing to the Department and the
Secretary has determined that the
applicable standards of the DBA have
been met. See 29 CFR 5.5(a)(1)(iv),
5.29(e). However, § 5.28 does not
mention this approval requirement or
the process for requesting approval,
even though § 5.28 is the section that
most specifically discusses
requirements for unfunded plans.
Accordingly, to improve regulatory
clarity and consistency, the Department
proposed to revise § 5.28 to clarify that,
for payments under an unfunded plan
or program to be credited as fringe
benefits, contractors and subcontractors
must submit a written request for the
Secretary to consider in determining
whether the plan or program, and the
benefits proposed to be provided
thereunder, are ‘‘bona fide,’’ meet the
factors set forth in § 5.28(b)(1)–(4), and
are otherwise consistent with the Act.
The Department also proposed to add
language to explain that such requests
must be submitted by mail to WHD’s
Division of Government Contracts
Enforcement, via email to unfunded@
dol.gov or any successor address, or via
any other means directed by the
Administrator.
The Department received one
comment in support of the proposed
revisions to § 5.28. PAAG and PADLI
commented that while ‘‘unfunded plans
may provide workers with meaningful
benefits, prevailing wage violators often
. . . claim fringe benefit credits for
unfunded plans that do not meet the
standards currently outlined in 29 CFR
5.28.’’ As an example, PAAG and PADLI
cited a case in which a contractor
claimed credit for an unfunded paid
time off plan under which all but 3 of
the workers’ unused vacation days were
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forfeited every year and the workers
were not compensated for the forfeited
vacation time. PAAG and PADLI
explained that contracting agencies—
especially small, local agencies—often
lack the information and expertise to
determine whether or not an unfunded
plan is creditable under the DBRA and
therefore need to refer questionable
cases for investigation, whereas the
proposed language would ensure that
unfunded plans would be evaluated and
preapproved up front. PAAG and PADLI
therefore supported the proposed
revisions to § 5.28 explicitly requiring
preapproval of unfunded plans as a
means of ensuring that workers actually
receive the money they earn and
increasing regulatory clarity.
The Department also received
comments in opposition to these
revisions. CC&M commented that
requiring the Department’s approval of
unfunded plans, especially vacation and
holiday plans, is unduly burdensome to
contractors and would disadvantage
nonunion contractors by discounting
legitimate holiday and vacation benefits.
Similarly, IUOE commented that over
60 percent of construction workers
receive health care from self-funded
plans. They expressed concern that
contractors might not possess the
documentation necessary to substantiate
more ‘‘informal’’ self-funded benefits
such as vacation, holiday, and sick
leave. IUOE also expressed concern that
a preapproval process would be
unnecessarily burdensome on WHD and
that WHD’s authority to approve benefit
plans could conflict with the authority
of the Department’s Employee Benefits
Security Administration (EBSA) under
the Employment Retirement Income
Security Act (ERISA). The IUOE instead
recommended that the final rule
establish clear rules for determining the
hourly fringe benefit credit in lieu of
cash wages for unfunded plans,
recommending four specific additions to
the rule.233 III–FFC expressed concerns
and made recommendations similar to
those of IUOE. ABC suggested that the
Department address any inconsistency
in the regulations by eliminating the
advance approval requirement from
233 Specifically, IUOE suggested that (1) all ‘‘rate
of cost’’ plans must use a yearly period for their
fringe benefit credit calculations; (2) ‘‘rate of cost’’
health care plans must use the IRS COBRA rules for
determining the premium costs used for any fringe
benefit credit calculations; (3) all ‘‘rate of
contribution’’ plans must use the existing annual or
monthly time period for annualizing fringe credit
calculation; shorter periods are not allowed; and (4)
the regulations should state that annualization rule
should apply to all types of plans, including Health
Savings Accounts and Health Reimbursement
Accounts; except for Defined Contribution Pension
Plans.
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both §§ 5.28 and 5.29, stating that such
advance approvals should be voluntary
on the part of contractors. Finally, IAPA
expressed concern that under the
proposed revisions, underfunded
multiemployer pension plans may be
considered unfunded, and contractors
would be prohibited from paying cash
in lieu of fringe benefits or using other
fringe benefit plans that are regulated by
the Internal Revenue Service (IRS).
Many of the comments in opposition
appear to be premised on a
misconception that the revisions impose
new substantive requirements with
respect to unfunded plans. Nothing in
these revisions alters the four
substantive conditions for unfunded
plans set out in § 5.28(b)(1)–(4) or the
overall requirements that an unfunded
plan must be ‘‘bona fide’’ and able to
‘‘withstand a test . . . of actuarial
soundness.’’ For example, the existing
regulations already provide the
Secretary with discretion to require
sufficient funds be set aside to meet the
obligations of an unfunded plan, and
nothing in the existing or revised
regulations prohibits a contractor from
making contributions to bona fide fringe
benefit plans or from paying cash in lieu
of fringe benefits, as appropriate. Nor do
the revisions have any effect on whether
a multiemployer pension plan would be
considered ‘‘underfunded.’’ Consistent
with §§ 5.5(a)(1)(iv) and 5.29(e), the
Department has long required written
approval if a contractor seeks credit for
the reasonably anticipated costs of an
unfunded benefit plan towards its
Davis-Bacon prevailing wage
obligations, including with respect to
vacation and holiday plans. The
revisions to § 5.28 merely clarify this
preexisting requirement and detail the
process through which contractors may
request such approval from the
Department. Moreover, this existing
process is consistent with ERISA; while
EBSA is charged with evaluating a
plan’s compliance with ERISA, WHD is
responsible for determining whether an
employer has complied with the fringe
benefit requirements of the DBRA.
The Department disagrees that the
revised regulations will disadvantage
non-union contractors. To the extent
any contractor—union or non-union—
wishes to take credit towards its
prevailing wage obligations for the
reasonably anticipated costs of
unfunded benefit plans, the contractor
must ensure that such plan has been
approved by the Department. The
approval process benefits contractors by
helping them avoid potential violations
by correcting any issues noted during
the approval process. The approval
process also benefits workers by
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ensuring that they will receive the full
prevailing wage to which they are
entitled when working on Davis-Bacon
covered contracts. Only contractors who
wish to claim credit for the reasonably
anticipated costs of an unfunded plan
will incur the minimal burden of
submitting a request for approval.
While the Department appreciates the
suggestions by IUOE and III–FFC for
specific standards for unfunded plans,
the Department believes that the current
regulatory requirements provide greater
flexibility to contractors in fulfilling
their prevailing wage obligations on
Davis-Bacon covered contracts. Section
5.28 outlines the process and
requirements for obtaining approval
regarding an unfunded benefit plan; it
does not purport to describe the
methodology by which contractors may
calculate the appropriate credit for the
reasonably anticipated cost of such
plans. Adding the language that IUOE
and III–FFC proposed would
significantly alter the purpose and scope
of this section and would be beyond the
scope of the proposed rule.
Finally, the proposal provided that a
request for approval of an unfunded
plan must include sufficient
documentation for the Department to
evaluate whether the plan satisfies the
regulatory criteria. To provide flexibility
for contractors, the final rule, like the
proposed rule, does not specify the
documentation that must be submitted
with the request. Rather, new paragraph
(d) of this section (which, as noted
above, contains the language of former
paragraph (c) with non-substantive edits
for clarity and readability) explains that
the words ‘‘reasonably anticipated’’
contemplate a plan that can ‘‘withstand
a test’’ of ‘‘actuarial soundness.’’ While
WHD’s determination whether an
unfunded plan meets the statutory and
regulatory requirements will be based
on the totality of the circumstances, the
type of information WHD will require
from contractors or subcontractors in
order to make such a determination will
typically include identification of the
benefit(s) to be provided; an explanation
of the funding/contribution formula; an
explanation of the financial analysis
methodology used to estimate the costs
of the plan or program benefits and how
the contractor has budgeted for those
costs; a specification of how frequently
the contractor either sets aside funds in
accordance with the cost calculations to
meet claims as they arise, or otherwise
budgets, allocates, or tracks such funds
to ensure that they will be available to
meet claims; an explanation of whether
employer contribution amounts are
different for Davis-Bacon and nonprevailing wage work; identification of
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the administrator of the plan or program
and the source of the funds the
administrator uses to pay the benefits
provided by the plan or program;
specification of the ERISA status of the
plan or program; and an explanation of
how the plan or program is
communicated to laborers or mechanics.
The final rule accordingly adopts
these revisions as proposed.
xv. Section 5.29 Specific Fringe
Benefits
In the NPRM, the Department
proposed to revise § 5.29 to add a new
paragraph (g) that addresses the
circumstances under which a contractor
may take a fringe benefit credit for the
costs of an apprenticeship program.
While § 5.29(a) provides that the
defrayment of the costs of
apprenticeship programs is a recognized
fringe benefit that Congress considered
common in the construction industry,
the regulations do not presently address
when a contractor may take credit for
such contributions or how to properly
credit such contributions against a
contractor’s fringe benefit obligations.
In the NPRM, the Department
proposed that for a contractor or
subcontractor to take credit for the costs
of an apprenticeship program, the
program, in addition to meeting all
other requirements for fringe benefits,
must be registered with OA, or an SAA
recognized by the OA). Additionally,
the Department proposed to permit
contractors to take credit for the actual
costs of the apprenticeship program,
such as tuition, books, and materials,
but not for additional contributions that
are beyond the costs actually incurred
for the apprenticeship program. The
proposed rule also reiterated the
Department’s position that the
contractor may only claim credit
towards its prevailing wage obligations
for the workers employed in the
classification of laborer or mechanic
that is the subject of the apprenticeship
program. For example, if a contractor
has apprentices registered in a bona fide
apprenticeship program for carpenters,
the contractor could claim a credit for
the costs of the apprenticeship program
towards the prevailing wages due to the
carpenters on a Davis-Bacon project, but
could not apply that credit towards the
prevailing wages due to other
classifications, such as electricians or
laborers, on the project. Furthermore,
the proposed paragraph explained that,
when applying the annualization
principle pursuant to the proposed
revisions to § 5.25, the workers whose
total working hours are used to calculate
the hourly contribution amount are
limited to those workers in the same
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classification as the apprentice, and that
this hourly amount may only be applied
toward the wage obligations for such
workers. The Department explained that
the proposed changes were consistent
with its historical practice and
interpretation and relevant case law. See
WHD Opinion Letters DBRA–116 (May
17, 1978), DBRA–18 (Sept. 7, 1983),
DBRA–16 (July 28, 1987), DBRA–160
(Mar. 10, 1990); FOH 15f17; Miree
Constr. Corp., 930 F.2d at 1544–45;
Miree Constr. Corp. v. Dole, 730 F.
Supp. 385 (N.D. Ala. 1990); Miree
Constr. Corp., WAB No. 87–13, 1989 WL
407466 (Feb. 17, 1989). The Department
also proposed a minor technical
revision to paragraph (e) to include a
citation to § 5.28, which provides
additional guidance on unfunded plans.
The comments the Department
received regarding these proposals were
generally supportive. The Alliance
agreed that limiting creditable
contributions to registered
apprenticeship programs will help
ensure that apprentices receive quality
instruction and may help prevent
unscrupulous employers from paying a
lower wage while providing substandard apprenticeship programs.
SMACNA stated that the guidance will
assist contractors to properly compute
fringe benefit credit against their fringe
benefit obligation. CEA also expressed
support for these proposals. LIUNA,
while generally supportive, suggested
that § 5.29(g)(2) be revised so that
permissible contributions include, in
addition to actual costs incurred by an
apprenticeship program, contributions
negotiated as part of a collectively
bargained agreement. LIUNA expressed
concern that the proposed language
might not necessarily encompass such
programs.
After reviewing the comments
received, the Department has largely
retained the language as proposed but
has modified § 5.29(g)(2) to allow for
greater flexibility in determining
whether contributions to apprenticeship
plans are creditable. Specifically, the
final rule requires that a contractor’s
apprenticeship contributions must bear
a ‘‘reasonable relationship’’ to the cost
of apprenticeship benefits provided to
the contractor’s employees. This
standard more accurately reflects the
Department’s position noted and upheld
in Miree and subsequent decisions. See
Indep. Roofing Contractors, 300 F.
App’x at 521; Tom Mistick & Sons, Inc.
v. Reich, 54 F.3d 900, 903 (D.C. Cir.
1995); Miree Constr. Corp., 930 F.2d at
1543. The final rule further explains
that in the absence of evidence to the
contrary, the Department will presume
that amounts the employer is required
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57651
to contribute by a CBA or by a bona fide
apprenticeship plan (whether or not the
plan is collectively bargained) satisfy
this standard, but reaffirms that
voluntary contributions beyond that
which is reasonably related to
apprenticeship benefits are not
creditable.
While the Department declines to
adopt LIUNA’s suggestion to
categorically deem collectively
bargained contributions creditable,
under this presumption, required
contributions to apprenticeship plans
under CBAs will typically be creditable.
See Miree Constr. Corp., 930 F.2d at
1543–45 (noting that the Department
‘‘gives full credit for the amounts
required to be contributed under a
[collectively bargained] plan, based on
the assumption that there exists a
reasonable relationship between the
amount of contributions on the one
hand and the cost of providing training
and administering the plan on the other
hand,’’ and agreeing that such an
assumption is reasonable) (quoting
Letter of Administrator of Feb. 20,
1987).
xvi. Section 5.30 Types of Wage
Determinations
The Department proposed several
non-substantive revisions to § 5.30. In
particular, the Department proposed to
update the examples in § 5.30(c) to more
closely resemble the current format of
wage determinations issued under the
DBA. The current illustrations in
§ 5.30(c) list separate rates for various
categories of fringe benefits, including
‘‘Health and welfare,’’ ‘‘Pensions,’’
‘‘Vacations,’’ ‘‘Apprenticeship
program,’’ and ‘‘Others.’’ However,
current Davis-Bacon wage
determinations typically contain a
single combined fringe benefit rate per
classification, rather than separately
listing rates for different categories of
fringe benefits. To avoid confusion, the
Department proposed to update the
illustrations to reflect the way in which
fringe benefits are typically listed on
wage determinations. The Department
also proposed several non-substantive
revisions to § 5.30(a) and (b), including
revisions pertaining to the updated
illustrations in § 5.30(c).
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed.
xvii. Section 5.31 Meeting Wage
Determination Obligations
The Department proposed to update
the examples in § 5.30(c) to more closely
resemble the current format of wage
determinations under the DBRA. The
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Department therefore proposed to make
technical, non-substantive changes to
§ 5.31 to reflect the updated illustration
in § 5.30(c).
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed.
xviii. Section 5.33 Administrative
Expenses of a Contractor or
Subcontractor
The Department proposed to add a
new § 5.33 to codify existing WHD
policy under which a contractor or
subcontractor may not take Davis-Bacon
credit for its own administrative
expenses incurred in connection with
fringe benefit plans. 87 FR 15745 (citing
WHD Opinion Letter DBRA–72 (June 5,
1978); FOH 15f18). This policy is
consistent with Department case law
under the DBA, under which such costs
are viewed as ‘‘part of [an employer’s]
general overhead expenses of doing
business and should not serve to
decrease the direct benefit going to the
employee.’’ Collinson Constr. Co., WAB
No. 76–09, 1977 WL 24826, at *2 (also
noting that the DBA’s inclusion of
‘‘costs’’ in the provision currently
codified at 40 U.S.C. 3141(2)(B)(ii) refers
to ‘‘the costs of benefits under an
unfunded plan’’); see also Cody-Zeigler,
Inc., ARB Nos. 01–014, 01–015, 2003
WL 23114278, at *20 (applying
Collinson and concluding that a
contractor improperly claimed its
administrative costs for ‘‘bank fees,
payments to clerical workers for
preparing paperwork and dealing with
insurance companies’’ as a fringe
benefit). This policy is also consistent
with the Department’s regulations and
guidance under the SCA. See 29 CFR
4.172; FOH 14j00(a)(1).
The Department also sought public
comment regarding whether it should
clarify this principle further with
respect to administrative functions
performed by third parties. 87 FR 15745.
Under both the DBA and SCA, fringe
benefits include items like health
insurance, which necessarily involves
both the payment of medical benefits
and administration of those benefits
through activities such as evaluating
benefit claims, deciding whether they
should be paid, and approving referrals
to specialists. 40 U.S.C. 3141(2)(B); 41
U.S.C. 6703(2). Accordingly, reasonable
costs incurred by a third-party fiduciary
in its administration and delivery of
fringe benefits to employees are
creditable under the SCA. See WHD
Opinion Letter SCA–93 (Jan. 27, 1994)
(noting that an SCA contractor could
take credit for its contribution to a
pension plan on behalf of its employees,
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including the portion of its contribution
that was used by the pension plan for
‘‘administrative costs’’ ‘‘incurred’’ by
‘‘the plan itself’’); FOH 14j00(a)(2).
WHD applies a similar standard under
the DBA.
However, as explained in the NPRM,
WHD has received a number of inquiries
in recent years regarding the extent to
which contractors may take credit for
fees charged by third parties for
performing such administrative tasks as
tracking the amount of the contractor’s
fringe benefit contributions; making
sure those contributions cover the fringe
benefit credit claimed by the contractor;
tracking and paying invoices from thirdparty plan administrators; and sending
lists of new hires to the plan
administrators. Since a contractor’s own
administrative costs incurred in
connection with the provision of fringe
benefits are non-creditable business
expenses, see Collinson, 1977 WL
24826, at *2; cf. 29 CFR 4.172, WHD has
advised that if a third party is merely
performing these types of administrative
functions on the contractor’s behalf, the
contractor’s payments to the third party
are not creditable.
While not proposing specific
regulatory text, the Department sought
comment on whether and how to
address this issue in a final rule. The
Department sought comment on
whether it should incorporate the
above-described policies, or other
policies regarding third-party entities,
into its regulations. In addition, the
Department sought comment on
examples of the administrative duties
performed by third parties that do not
themselves pay benefits or administer
benefit claims. The Department also
sought comment on the extent to which
third-party entities both (1) perform
administrative functions associated with
providing fringe benefits to employees,
such as tracking a contractor’s fringe
benefit contributions, and (2) actually
administer and deliver benefits, such as
evaluating and paying out medical
claims, and on how the Department
should treat payments to any such
entities. The Department asked for
comments on whether, for instance, it
should consider the cost of the
administrative functions in the first
category to be non-creditable business
expenses, and the cost of actual benefits
administration and payment in the
second category to be creditable as
fringe benefit contributions. It also
asked whether the creditability of
payments to such an entity depends on
the third-party entity’s primary function
or whether the third-party entity is an
employee welfare plan within the
meaning of ERISA, 29 U.S.C. 1002(1).
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The Department received several
comments in response to proposed
§ 5.33 and its request for comments
regarding administrative functions
performed by third parties.
Commenters either generally agreed
with or did not specifically address the
Department’s proposal to codify the
longstanding principle that a contractor
or subcontractor may not take credit for
its own administrative expenses which
it incurs directly, like the cost of an
office employee who fills out medical
insurance claim forms for submission to
an insurance carrier.234 For example,
Duane Morris noted that the statement
that ‘‘a contractor may not take DBRA
credit for its own administrative
expenses incurred in connection with
the administration of a fringe benefit
plan’’ expresses a longstanding
principle, reflected in Collinson, WAB
No. 76–09, 1977 WL 24826, and CodyZeigler, ARB Nos. 01–014, 015, 2003 WL
23114278, that, in Duane Morris’s
words, ‘‘a contractor may not take fringe
credit for expenses it pays directly for
delivering DBRA-required fringe
benefits.’’ FBG similarly stated that the
language of FOH 15f18 regarding a
contractor’s own administrative
expenses, which the Department
proposed to codify in § 5.33, ‘‘directly
aligns’’ with its preferred approach to
the issue of administrative costs
generally.
However, a number of commenters
expressed concerns in response to the
Department’s request for comments
regarding the potential creditability of
administrative expenses paid by third
parties. While they generally agreed, as
noted above, that contractors should not
receive credit against DBRA fringe
benefits for their own direct costs, they
expressed concern that the Department
appeared to be considering classifying
as non-creditable any expenses incurred
by a third party other than those
associated with claims payment or
benefits administration. These
commenters, including ABC, Duane
Morris, and FBG, advocated that the
Department instead permit any
reasonable fees paid by a contractor to
a third party that are directly related to
the provision of fringe benefits to be
creditable, and suggested that the
standard for such an inquiry be that a
third-party expense should be creditable
as long as it would not have been
incurred ‘‘but for’’ the provision of the
fringe benefit. Duane Morris and FBG
argued that such a standard would be
234 East Coast Wall Systems stated they would
find it beneficial to use fringe benefit contributions
to pay for the cost of providing fringe benefits but
did not specifically explain this statement or how
it related to the proposed revisions.
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consistent with their own interpretation
of ERISA’s standard for the permissible
use of plan assets, with Duane Morris
contending that a separate DBRA
creditability standard would make the
distinction between creditable and
noncreditable expenses ambiguous and
would unnecessarily complicate
compliance.235 These commenters
argued that necessary expenses
associated with plan administration go
beyond mere claims administration, that
administrative functions and the
delivery of benefits are inherently
interrelated, and therefore that the costs
of both should be creditable toward
DBRA obligations.236
Some of these commenters also
argued that the Department’s proposal
would also unfairly advantage
contractors that make direct payments
to insurers as opposed to contractors
who either self-insure, participate in
multiemployer plans, or pay third
parties to administer their Davis-Bacon
fringe benefit obligations. Duane Morris,
for example, stated that the Department
had ‘‘conflate[d]’’ ‘‘employers and their
plans when the plans are funded in
trust’’ and inappropriately contemplated
‘‘regulat[ing] the internal operations of
235 Under ERISA, plan fiduciaries must act
prudently and solely in the interest of the plan’s
participants and beneficiaries and for the exclusive
purpose of providing benefits and defraying
reasonable expenses of administering the plan.
While ERISA section 406(a) prohibits the provision
of services between plans and service providers and
plan payments to service providers, ERISA section
408(b)(2) sets forth an exemption from section
406(a) which permits a plan fiduciary to contract
or make reasonable arrangements for services
necessary for the establishment or operation of the
plan if no more than reasonable compensation is
paid therefore, among other requirements. See 29
U.S.C. secs. 1106(a), 1108(b)(2); see also 29 CFR
2550.408b–2. However, the exemption under
section 408(b)(2) does not provide relief for
transactions described in section 406(b) of ERISA,
including fiduciary self-dealing, conflicts of
interest, and kickbacks in connection with
transactions involving plan assets.
236 Duane Morris also submitted a set of proposals
‘‘to improve the scheme for benefiting contractor
employees’’ subject to a fixed-cost contract, under
which, among other elements, a contractor
apparently would be required to request
competitive bids for fringe benefits at least every 3
years in order to satisfy a requirement, for purposes
of receiving fringe benefit credit, to evaluate
whether the value of the benefit ‘‘is market
competitive with comparable alternatives available
to the contractor.’’ Under these proposals,
contributions to a trust that ‘‘can be expected to
provide’’ ‘‘market competitive’’ benefits would be
presumptively creditable, ‘‘without regard to the
specific application of plan assets to the trust.’’
Although the Department has reviewed and
appreciates the proposals, it considers them to be
outside the scope of this rulemaking. To the extent
Duane Morris is proposing that, under certain
conditions, a contractor should be permitted to take
credit for payments to a third party to perform the
contractor’s own administrative tasks, the
Department disagrees, for the reasons discussed
below.
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the plan.’’ 237 Similarly, FBG said that
the distinction between creditable
expenses incurred by a third party for
administration of a plan versus
noncreditable expenses that substitute
for a contractor’s own administrative
costs is impracticable because third
parties usually bundle their services and
fees together. It also commented that
making certain third-party
administrative costs noncreditable
would make it more expensive for
contractors to use ‘‘third-party benefit
administrators,’’ thereby incentivizing
contractors to, for instance, ‘‘spend[ ]
less on administrative services’’ or
‘‘bring[ ] administration ‘in-house’ to be
performed by individuals who lack . . .
specialized knowledge[.]’’ ABC likewise
argued that contractors should be
permitted to take credit for any
reasonable fees paid to third parties,
whether related to the administration
and delivery of benefits or to the
administrative costs relating to the
provision of fringe benefits to
employees, as contractors ‘‘use qualified
third parties to assist with the
administration of benefits’’ because they
‘‘ensure that the highest quality benefits
are provided in an efficient manner to
covered employees.’’ Clark Pacific
commented that the rule would prohibit
taking credit for administrative costs
entirely and, as a result, reduce the
number of contractors willing to provide
fringe benefits.
III–FFC and IUOE recommended that
the Department continue to analyze
when contributions are creditable
against fringe benefits on a case-by-case
basis, particularly relating to fees
charged by plan administrators and
other plan service providers. IUOE
stated that it would be difficult to
determine whether a plan
administrative expense is ‘‘reasonable’’
because there are too many factors to be
considered, such as ‘‘the size of the
plan, the nature of the benefits provided
by the plan, the nature of the
administrative services provided to the
plan, the availability of the
administrative services in the
marketplace, the precise scope of the
237 Duane Morris claimed that multiemployer
plans maintained through CBAs often use plan
assets to hire third-party administrators to perform
tasks which the Department ‘‘propose[d] to make
non-creditable,’’ such as ‘‘reconcil[ing] covered
hours [and] employer contributions[.]’’ The
Department did not receive any comments from
unions indicating that its proposal would make
noncreditable the cost of tasks regularly performed
by plans maintained under CBAs between unions
and contractors. In WHD’s enforcement experience,
such plans do not perform administrative tasks on
behalf on the contractor such as keeping track of
whether a particular contractor’s contributions were
sufficient to cover its fringe benefit credit on its
various projects.
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administrative services provided, the
qualifications, expertise and reputation
of the service provider, differences in
regional costs, and so forth.’’ After
reviewing the comments received, the
Department has adopted § 5.33 with
several revisions to clarify the
Department’s intent and address
commenter concerns.
As an initial matter, the Department
did not propose to make all third-party
expenses, or even all expenses except
for the direct expense of evaluating and
paying out benefit claims,
noncreditable; nor did the Department
propose to incentivize any particular
method by which contractors provide
bona fide fringe benefits. As multiple
commenters noted, third-party
administrators may fulfill a vital role in
the provision of fringe benefits. As WHD
has expressly noted in guidance under
the analogous fringe benefit
requirements under the SCA,
contractors may take credit for thirdparty expenses which are directly
related to the administration and
delivery of fringe benefits to their
workers under a bona fide plan. See
FOH 14j00(a)(2). The Department agrees
that credit for such expenses is
appropriate whether the entity
performing such activities is an
insurance carrier, a third-party trust
fund, or a third-party administrator
under a contractor’s bona fide unfunded
plan.
To clarify this, the Department has
added paragraph (a) to § 5.33, which
explicitly states that a contractor may
take credit for costs incurred by a
contractor’s insurance carrier, thirdparty trust fund, or other third-party
administrator that are directly related to
the administration and delivery of bona
fide fringe benefits to the contractor’s
laborers and mechanics. Section 5.33(a)
includes illustrative examples of
creditable expenses directly related to
the administration and delivery of
benefits, stating that a contractor may
take credit for payments to an insurance
carrier or trust fund that are used to pay
for both benefits and the administration
and delivery of benefits, such as
evaluating benefit claims, deciding
whether they should be paid, approving
referrals to specialists, and other
reasonable costs of administering the
plan. Additional examples of such
creditable expenses include the
reasonable costs of administering the
plan, such as the cost of recordkeeping
related to benefit processing and
payment in the case of a healthcare
plan, or expenses associated with
managing plan investments in the case
of a 401(k) plan. Additionally, to clarify
that these expenses are also creditable
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in the case of an unfunded plan,
§ 5.33(a) states that a contractor may
take credit for the fees paid to a thirdparty administrator to perform similar
tasks directly related to the
administration and delivery of benefits,
including under an unfunded plan.
As noted above, commenters did not
oppose the Department’s proposal to
codify its policy that a contractor may
not take credit for its own
administrative costs where it incurs
them directly, and accordingly, in new
§ 5.33(b), the final rule adopts that
proposal. In addition, section 5.33(b) of
the final rule states that a contractor
may not take credit for its own
administrative expenses even when the
contractor pays a third party to perform
its administrative tasks rather than
incurring the expenses internally. The
final rule includes illustrative examples
of such noncreditable administrative
expenses, including the cost of filling
out medical insurance claim forms for
submission to an insurance carrier,
paying and tracking invoices from
insurance carriers or plan
administrators, updating the
contractor’s personnel records when
laborers or mechanics are hired or
separate from employment, sending lists
of new hires to insurance carriers or
plan administrators, or sending out tax
documents to the contractor’s laborers
or mechanics. The Department is
hopeful that these examples will be
helpful in identifying expenses that
would be considered employer expenses
not directly related to the
administration and delivery of bona fide
fringe benefits. The Department agrees
with the commenters who contended
that its regulations should not
incentivize any particular benefit
model, and as such, the final rule
clarifies that these types of costs are
non-creditable regardless of whether the
employer performs them itself or pays a
third party a fee to perform them.
Section 5.33(b) also clarifies that
recordkeeping costs associated with
ensuring the contractor’s compliance
with the Davis-Bacon fringe benefit
requirements, such as the cost
associated with tracking the amount of
its fringe benefit contributions or
making sure contributions cover the
fringe benefit credit claimed, are
considered a contractor’s own
administrative expenses and therefore
are not creditable whether the
contractor performs those tasks itself or
whether it pays a third party a fee to
perform those tasks.
Section 5.33(b) is in accordance with
the analogous SCA regulations, which
preclude SCA contractors from taking
credit for any costs that are ‘‘primarily
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for the benefit or convenience of the
contractor.’’ 29 CFR 4.171(e); see also 29
CFR 4.172. Under the FLSA—upon
which the SCA prohibition against
taking credit for contractor business
expenses is based, see 48 FR 49757—an
expense is primarily for the benefit of
the employer if, among other reasons, it
is ‘‘imposed on the employer by law.’’
See Br. of the Sec’y of Labor, 2010 WL
5622173, at *10–11, Ramos-Barrientos
v. Bland Farms, No. 10–13412–C (11th
Cir. 2011), ECF No. 47 (citing 29 CFR
531.3(d)(2), 531.32(c), 531.38). Given
that contractors may satisfy their DBRA
prevailing wage obligations by making
contributions to or incurring reasonably
anticipated costs in providing bona fide
fringe benefits under a plan or program,
see 29 CFR 5.5(a)(1)(i), and given that
contractors are required to keep records
of the hours worked by their laborers
and mechanics and any contributions
made or costs reasonably incurred
under a bona fide fringe benefit plan, id.
at (3)(i), it would be anomalous to
permit a contractor to take credit
towards its prevailing wage obligation
for the cost of, for instance, tracking the
hours worked by its laborers and
mechanics on DBRA-covered projects
costs, tracking the contractor’s fringe
benefit contributions on behalf of these
workers, and reconciling workers’ hours
worked with the contractor’s
contributions.
This rationale applies equally to a
contractor that uses its own employees
to perform such tasks as to a contractor
that pays a third party to perform such
tasks. If a contractor were permitted to
claim a credit for these expenses, it
could effectively outsource its own
administrative and compliance costs to
third parties and have the cost paid for
from the prevailing wages due to its
workers. Similarly, if it is not
permissible for a contractor to take
credit for the cost of an office employee
who submits claim forms to an
insurance carrier—which none of the
commenters specifically disputed—then
it should not be permissible for a
contractor to take credit for payments it
makes to a third party to perform similar
tasks on its behalf.
The Department declines the
recommendation from some
commenters to adopt a standard under
which third-party expenses are
considered directly related to the
administration and delivery of fringe
benefits, and therefore creditable, as
long as they would not have been
incurred but for the provision of the
fringe benefit. The Department
acknowledges those comments that
claimed that such a ‘‘but for’’ standard
would be consistent with what they
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assert are ERISA standards governing
the permissible use of plan assets.
Regardless of the accuracy of those
claims, the DBRA requires a different
analysis for whether a contractor may
take credit against the payment of
prevailing wages for such expenses.
Under the DBRA, the question is not
whether a plan’s assets may be used for
a particular expense, but whether a
contribution or cost may be considered
a part of a worker’s wage. A contractor’s
own administrative costs, even if related
in some fashion to the fringe benefits
provided to workers, are not part of its
workers’ wages since, as explained
above, such costs primarily benefit the
contractor. It is therefore not sufficient,
for purposes of DBRA credit, that an
administrative cost would not have been
incurred ‘‘but for’’ the fringe benefit
plan(s).
The Department has observed an
increase in the number of third-party
businesses that promise to reduce
contractors’ costs if contractors hire
them to perform the contractors’ own
administrative tasks and then claim a
fringe benefit credit for the costs of
those outsourced tasks. Existing
regulations have not been sufficient to
curtail this practice, and for the reasons
discussed above, the payments of fees to
third parties to perform such tasks is
inconsistent with the requirements of
the DBRA. Thus, the final rule adopts an
approach, consistent with the guidance
the Department has previously
provided, that distinguishes more
precisely between creditable and
noncreditable expenses based on
whether the expenses are properly
viewed as business expenses of the
contractor. The Department believes
that codifying this standard in the
regulations will help the contracting
community and third-party
administrators understand which types
of expenses are creditable and which
types are not.
By making creditability depend on the
type and purpose of the expense, rather
than on whether it is paid by the
contractor directly or through a third
party, the Department believes that the
final rule addresses commenters’
concerns that the proposed rule might
have discouraged the use of bona fide
third-party plan administrators or
provided an advantage to contractors
that make payments directly to insurers
and other benefit providers. The final
rule does not preclude contractors from
taking credit for reasonable costs
incurred or charged by these entities to
administer bona fide fringe benefit
plans. Rather, § 5.33(b) merely
precludes contractors from taking credit
for their own administrative costs
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associated with providing fringe benefit
plans and which are properly
considered business expenses of the
contractor, whether the contractor
incurs such costs directly or in the form
of payments to a third party.
While the Department appreciates
some commenters’ recommendation to
continue to analyze administrative
expenses on a case-by-case basis, given
that, as discussed above, the Department
has observed an increase in business
models under which contractors may be
taking credit for noncreditable expenses,
the Department believes that it is
necessarily to codify these basic
principles to help contractors and plan
administrators recognize and comply
with the requirements and their
obligations under the DBRA. The
Department recognizes that there will,
of course, be close cases, and will
continue to conduct fact-specific
analyses in individual cases when
questions of creditability arise. To that
end, the Department has added § 5.33(c)
to clarify that if contractors, plan
administrators, or others have questions
as to whether certain expenses are
creditable, such questions should be
submitted to the Department for review.
Finally, the Department disagrees
with FBG’s comment that third parties’
practice of bundling creditable and
noncreditable expenses together will
makes it difficult to comply with the
proposed rule. In its investigations
under the DBRA and SCA, WHD has
found that when third parties both
perform plan administration and help
contractors fulfill their own
administrative obligations, they
frequently impose separate charges for
the different types of services. Even in
instances where such services are so
intertwined that it is not possible to
determine whether payments to a third
party are for creditable plan
administration or noncreditable
administrative activities, WHD will
consider the facts to determine whether
the third party is primarily performing
creditable services. Finally, if questions
arise, § 5.33(c) will allow contractors to
receive input from the Department as to
the creditability of any questionable
expenses, whether bundled or not.
xix. Anti-Retaliation
The Department proposed to add antiretaliation provisions to enhance
enforcement of the DBRA and their
implementing regulations in 29 CFR
parts 1, 3, and 5. The proposed antiretaliation provisions were intended to
discourage contractors, responsible
officers, and any other persons from
engaging in—or causing others to engage
in—unscrupulous business practices
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that may chill worker participation in
WHD investigations or other compliance
actions and enable prevailing wage
violations to go undetected. The
proposed anti-retaliation provisions
were also intended to provide makewhole relief for any worker who has
been discriminated against in any
manner for taking, or being perceived to
have taken, certain actions concerning
the labor standards provisions of the
DBA, CWHSSA, and other Related Acts,
and the regulations in parts 1, 3, and 5.
In most WHD DBRA investigations or
other compliance actions, effective
enforcement requires worker
cooperation. Information from workers
about their actual hours worked, wages
paid, and work performed is often
essential to uncover violations such as
falsification of certified payrolls or wage
underpayments, including
underpayments due to craft
misclassification, by contractors or
subcontractors that fail to keep pay or
time records or have inaccurate or
incomplete records. Workers are often
reluctant to come forward with
information about potential violations of
the laws WHD enforces because they
fear losing their jobs or suffering other
adverse consequences. Workers are
similarly reluctant to raise these issues
with their supervisors. Such reluctance
to inquire or complain internally may
result in lost opportunities for early
correction of violations by contractors.
The current Davis-Bacon regulations
protect the identity of confidential
worker-informants in large part to
prevent retribution by the contractors
for whom they work. See 29 CFR
5.6(a)(5); see also 29 CFR 6.5. This
protection helps combat the ‘‘possibility
of reprisals’’ by ‘‘vindictive employers’’
against workers who speak out about
wage and hour violations, but does not
eliminate it. Cosmic Constr. Co., WAB
No. 79–19, 1980 WL 95656, at *5 (Sept.
2, 1980).
When contractors retaliate against
workers who cooperate or are suspected
of cooperating with WHD or who make
internal complaints or otherwise assert
rights under the DBRA, neither worker
confidentiality nor the DBRA remedial
measures of back wages or debarment
can make workers whole. The
Department’s proposed anti-retaliation
provisions aimed to remedy such
situations by providing make-whole
relief to workers who are retaliated
against, as well as by deterring or
correcting interference with DBRA
worker protections.
The Department’s authority to
promulgate the anti-retaliation
provisions stems from 40 U.S.C. 3145
and Reorganization Plan No. 14 of 1950.
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In transmitting the Reorganization Plan
to Congress, President Truman noted
that ‘‘the principal objective of the plan
is more effective enforcement of labor
standards,’’ and that the plan ‘‘will
provide more uniform and more
adequate protection for workers through
the expenditures made for the
enforcement of the existing legislation.’’
Special Message to the Congress
Transmitting Reorganization Plan No.
14 of 1950, reprinted in 5 U.S.C. app. 1
(Mar. 13, 1950) (1950 Special Message
to Congress).
It is well settled that the Department
has regulatory authority to debar
Related Act contractors even though
Related Acts do not expressly provide
for debarment. See Janik Paving &
Constr., Inc. v. Brock, 828 F.2d 84, 90,
91 (2d Cir. 1987) (upholding debarment
for CWHSSA violations even though
that statute ‘‘specifically provided civil
and criminal sanctions for violations of
overtime work requirements but failed
to mention debarment’’). In 1951, the
Department added a new part 5 to the
DBRA regulations, including the Related
Act debarment regulation. See 16 FR
4430. The Department explained that it
was doing so in compliance with the
directive of Reorganization Plan No. 14
of 1950 to ‘‘assure coordination of
administration and consistency of
enforcement of the labor standards
provisions’’ of the DBRA. Id. Just as
regulatory debarment is a permissible
exercise of the Department’s ‘‘implied
powers of administrative enforcement,’’
Janik Paving & Constr., 828 F.2d at 91,
so, too, are the proposed anti-retaliation
provisions and the revised Related Act
debarment provisions discussed in
section III.B.3.xxi (‘‘Debarment’’). The
Department stated its position that it
would be both efficient and consistent
with the remedial purpose of the DBRA
to investigate and adjudicate complaints
of retaliation as part of WHD’s
enforcement of the DBRA. These
measures will help achieve more
effective enforcement of the DavisBacon labor standards.
Currently, debarment is the primary
mechanism under the DBRA civil
enforcement scheme for remedying
retribution against workers who assert
their right to prevailing wages.
Debarment is also the main tool for
addressing less tangible discrimination
such as interfering with investigations
by intimidating or threatening workers.
Such unscrupulous behavior may be
both a disregard of obligations to
workers under the DBA and ‘‘aggravated
or willful’’ violations under the current
Related Act regulations that warrant
debarment. See 40 U.S.C. 3144(b)(1); 29
CFR 5.12(a)(1), (a)(2), (b)(1).
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Both the ARB and ALJs have debarred
contractors in part because of their
retaliatory conduct or interference with
WHD investigations. See, e.g.,
Pythagoras Gen. Contracting Corp., ARB
Nos. 08–107, 09–007, 2011 WL 1247207,
at *13 (affirming debarment of
contractor and its principal in a DBRA
case in part because of the ‘‘attempt [by
principal and other officials of the
contractor] at witness coercion or
intimidation’’ when they visited former
employees to talk about their upcoming
hearing testimony); R.J. Sanders, Inc.,
WAB No. 90–25, 1991 WL 494734, at
*1–2 (Jan. 31, 1991) (affirming ALJ’s
finding that employer’s retaliatory firing
of an employee who reported to a Navy
inspector being paid less than the
prevailing wage was ‘‘persuasive
evidence of a willful violation of the
[DBA]’’); Early & Sons, Inc., ALJ No. 85–
DBA–140, 1986 WL 193128, at *8 (Aug.
5, 1986) (willful and aggravated DBRA
violations evidenced in part where
worker who ‘‘insisted on [receiving the
mandated wage] . . . was told, in effect,
to be quiet or risk losing his job’’), rev’d
on other grounds, WAB No. 86–25, 1987
WL 247044, at *2 (Jan. 29, 1987); Enviro
& Demo Masters, Inc., ALJ No. 2011–
DBA–00002, Decision and Order, slip
op. at 9–10, 15, 59, 62–64 (Apr. 23,
2014) (Enviro D&O) (debarring
subcontractor, its owner, and a
supervisor because of ‘‘aggravated and
willful avoidance of paying the required
prevailing wages,’’ which included
firing an employee who refused to sign
a declaration repudiating his DBRA
rights, and instructing workers to lie
about their pay and underreport their
hours if questioned by investigators).
There are also criminal sanctions for
certain coercive conduct by DBRA
contractors. The Copeland AntiKickback Act makes it a crime to induce
DBRA-covered construction workers to
give up any part of compensation due
‘‘by force, intimidation, or threat of
procuring dismissal from employment,
or by any other manner whatsoever.’’ 18
U.S.C. 874; cf. 29 CFR 5.10(b)
(discussing criminal referrals for DBRA
violations). Such prevailing wage
kickback schemes are also willful or
aggravated violations of the civil
Copeland Act (a Related Act) that
warrant debarment. See 40 U.S.C. 3145;
see, e.g., Killeen Elec. Co., WAB No. 87–
49, 1991 WL 494685, at *5 (Mar. 21,
1991).
Interference with WHD investigations
or other compliance actions may also
warrant criminal prosecution. For
example, in addition to owing 37
workers $656,646 in back wages in the
DBRA civil administrative proceeding,
see Enviro D&O at 66, both the owner
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of Enviro & Demo Masters and his
father, the supervisor, were convicted of
Federal crimes including witness
tampering and conspiracy to commit
witness tampering. These company
officials instructed workers at the jobsite
to hide from and ‘‘lie to investigators
about their working hours and wages,’’
and they fired workers who spoke to
investigators or refused to sign false
documents. Naranjo v. United States,
No. 17–CV–9573, 2021 WL 1063442, at
*1–2 (S.D.N.Y. Feb. 26, 2021), report
and recommendation adopted by 2021
WL 1317232 (S.D.N.Y. Apr. 8, 2021); see
also Naranjo, Sr. v. United States, No.
16 Civ. 7386, 2019 WL 7568186, at *1
(S.D.N.Y. Dec. 16, 2019), report and
recommendation adopted by 2020 WL
174072, at *1 (S.D.N.Y. Jan. 13, 2020).
Contractors, subcontractors, and their
responsible officers may be debarred
and even criminally prosecuted for
retaliatory conduct. Laborers and
mechanics who have been
discriminated against for speaking up,
or for having been perceived as speaking
up, however, currently have no redress
under the Department’s regulations
implementing the DBA or Related Acts
to the extent that back wages do not
make them whole or that such
discriminatory conduct is not
prohibited under a separate antiretaliation provision such as the FLSA,
29 U.S.C. 215(a)(3).238 For example, the
Department currently may not order
reinstatement of workers fired for their
cooperation with investigators or as a
result of an internal complaint to their
supervisor. Nor may the Department
award compensation for the period after
a worker is fired. Similarly, the
Department cannot require contractors
to compensate workers for the
difference in pay resulting from
retaliatory demotions or reductions in
hours. The addition of anti-retaliation
provisions is a logical extension of the
DBA and Related Acts debarment
remedial measure. It would supplement
debarment as an enforcement tool to
more effectively prevent retaliation,
interference, or any other such
discriminatory behavior. An antiretaliation mechanism would also build
on existing back-wage remedies by
extending compensation to a fuller
range of harms.
The Department therefore proposed to
add two new regulatory provisions
concerning anti-retaliation, as well as to
update several other regulations, to
238 One exception is ARRA, a Related Act, that
included a whistleblower protection provision
which provided that complaints were to be
investigated by agency inspectors general, not
WHD. See section 1553, Public Law 111–5, 123 Stat
115 (Feb. 17, 2009).
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reflect the new anti-retaliation
provisions.
(A) Proposed New § 5.5(a)(11) and (b)(5)
The Department proposed to
implement anti-retaliation in part by
adding a new anti-retaliation provision
to all contracts subject to the DBA or
Related Acts. The proposed contract
clauses provided for in § 5.5(a)(11) and
(b)(5) stated that it is unlawful for any
person to discharge, demote, intimidate,
threaten, restrain, coerce, blacklist,
harass, or in any other manner
discriminate, or to cause any person to
do the same, against any worker for
engaging in a number of protected
activities. The proposed protected
activities included notifying any
contractor of any conduct which the
worker reasonably believes constitutes a
violation; filing any complaints,
initiating or causing to be initiated any
proceeding, or otherwise asserting or
seeking to assert any right or protection;
cooperating in an investigation or other
compliance action, or testifying in any
proceeding; or informing any other
person about their rights under the
DBA, Related Acts, or the regulations in
29 CFR parts 1, 3, or 5, for proposed
§ 5.5(a)(11), or the CWHSSA or its
implementing regulations in 29 CFR
part 5, for proposed § 5.5(b)(5).
The scope of these anti-retaliation
provisions was intended to be broad to
better effectuate the remedial purpose of
the DBRA, to protect workers, and to
ensure that they are not paid
substandard wages. Workers must feel
free to speak openly—with contractors
for whom they work and contractors’
responsible officers and agents, with the
Department, with co-workers, and
others—about conduct that they
reasonably believe to be a violation of
the prevailing wage requirements or
other DBRA labor standards
requirements. The proposed antiretaliation provisions recognized that
worker cooperation is critical to
enforcement of the DBRA. They would
also incentivize compliance and seek to
eliminate any competitive disadvantage
borne by government contractors and
subcontractors that follow the rules.
In line with those remedial goals, the
Department intended the proposed antiretaliation provisions to protect workers
who make internal complaints to
supervisors or who otherwise assert or
seek to assert Davis-Bacon or CWHSSA
labor standards protections set forth in
§ 5.5(a)(11) and (b)(5), as well as to
remedy interference with Davis-Bacon
worker protections or WHD
investigations that may not have a direct
adverse monetary impact on the affected
workers. Similarly, the Department
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intended the anti-retaliation provisions
to also apply in situations where there
is no current work or employment
relationship between the parties. For
example, it would prohibit retaliation
by a prospective or former employer or
contractor (or both). Finally, the
Department’s proposed rule sought to
protect workers who make oral as well
as written complaints, notifications, or
other assertions of their rights protected
under § 5.5(a)(11) and (b)(5).
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(B) Proposed New § 5.18
The Department proposed remedies to
assist in enforcement of the DBRA labor
standards provisions. Section 5.18 set
forth the proposed remedies for
violations of the new anti-retaliation
provisions. This proposed section also
included the process for notifying
contractors and other persons found to
have violated the anti-retaliation
provisions of the Administrator’s
investigative findings, as well as for
Administrator directives to remedy such
violations and provide make-whole
relief.
Make-whole relief and remedial
actions under this proposed provision
were intended to restore the worker
subjected to the violation to the
position, both economically and in
terms of work or employment status
(e.g., seniority, leave balances, health
insurance coverage, 401(k)
contributions, etc.), that the worker
would have occupied had the violation
never taken place. Proposed available
remedies included, but were not limited
to, any back pay and benefits denied or
lost by reason of the violation; other
actual monetary losses or compensatory
damages sustained as a result of the
violation; interest on back pay or other
monetary relief from the date of the loss;
and appropriate equitable or other relief
such as reinstatement or promotion;
expungement of warnings, reprimands,
or derogatory references; the provision
of a neutral employment reference; and
posting of notices that the contractor or
subcontractor agrees to comply with the
DBRA anti-retaliation requirements.
In addition, proposed § 5.18 specified
that when contractors, subcontractors,
responsible officers, or other persons
dispute findings of violations of
§ 5.5(a)(11) or (b)(5), the procedures in
29 CFR 5.11 or 5.12 would apply.
Conforming revisions were proposed
to the withholding provisions at
§§ 5.5(a)(2) and (b)(3) and 5.9 to indicate
that withholding includes monetary
relief for violations of the antiretaliation provisions at § 5.5(a)(11) and
(b)(5), in addition to withholding of
back wages for DBRA prevailing wage
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violations and CWHSSA overtime
violations.
Similarly, conforming changes were
proposed to §§ 5.6(a)(4) and 5.10(a).
Computations of monetary relief for
violations of the anti-retaliation
provisions were added to the limited
investigatory material that may be
disclosed without the permission and
views of the Department under
§ 5.6(a)(4). In proposed § 5.10(a),
monetary compensation for violations of
anti-retaliation provisions were added
as a type of restitution.
As explained, contractors,
subcontractors, and their responsible
officers have long been subject to
debarment for their retaliatory actions.
The NPRM proposed to update DBRA
enforcement mechanisms by attempting
to ensure that workers can cooperate
with WHD or complain internally about
perceived prevailing wage violations
without fear of reprisal. The proposal
reflected a reasonable extension of the
Department’s broad regulatory authority
to enforce and administer the DBRA.
Further, the Department stated its belief
that adding anti-retaliation provisions
would amplify existing back wage and
debarment remedies by making workers
whole who suffer the effects of
retaliatory firings, demotions, and other
actions that reduce their earnings. The
Department explained that this
important new tool would help carry
out the DBRA’s remedial purposes by
bolstering WHD’s enforcement.
The Department received many
comments about this proposal. All but
a few of the comments expressed
support for the anti-retaliation proposal.
Most of the supporting comments were
from individuals, including as part of an
organized LIUNA member campaign.
The remaining supporting comments
were from many non-profit and workers’
rights organizations, unions, labormanagement groups, contractors
(including an organized SMACNA
member campaign), and various
appointed and elected government
officials. Most of the commenters
expressed general support for this
proposal in its entirety and a few
commenters recommended measures to
strengthen the proposal. The comments
opposing the proposal were submitted
by the group of U.S. Senators and
several contractor organizations, all of
whom opposed the proposal in its
entirety.
Commenters that supported the
proposed anti-retaliation provisions in
their entirety overwhelmingly agreed
that the proposed provisions would
both strengthen enforcement of the
Davis-Bacon and Related Acts and better
protect workers who speak out about
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57657
potential DBRA violations. See, e.g.,
LCCHR, several members of the U.S.
House of Representatives from Illinois,
International Union of Operating
Engineers Local 77 (IUOE Local 77), and
individual commenters. UBC noted that
the proposed anti-retaliation
provisions—both the contract clauses
and remedies—would also assist in
deterring retaliatory conduct. NABTU
emphasized that the anti-retaliation
proposal is consistent with the
Department’s broad enforcement
authority under Reorganization Plan No.
14 of 1950, which Congress has
consistently affirmed throughout the
years.
Various commenters provided
empirical support for the need to
strengthen worker protections,
including through the proposed antiretaliation provisions. WA BCTC and
LIUNA, for example, pointed to the
Department’s recent data showing that
the construction industry is consistently
one of the top two low-wage, high
violation industries.239 LCCHR
highlighted various reports and articles
documenting the widespread problem of
wage theft, workers’ fear of retaliation
which leads workers to not report
serious workplace problems, and
retaliation against workers who did so
report. Similarly, EPI referred to reports
that underscored the particular
importance of strengthening antiretaliation protections for low-wage and
immigrant workers who are
disproportionately affected by wage
theft in the construction industry, where
many wage payment violations go
unreported due to workers’ wellfounded fears of retaliation.
A number of commenters provided
anecdotal support for the proposed antiretaliation provisions as an effective
mechanism to enhance enforcement
through worker cooperation. PAAG and
PADLI stated that they have received
feedback from many workers that fear of
retaliation stopped them from coming
forward and reporting prevailing wage
violations. FFC noted their experience
with ‘‘how reluctant workers can be to
report misconduct,’’ explaining the
disincentive to come forward to report
violations when there is no possibility
that the workers will be made whole if
they are retaliated against. Affiliated
Construction Trades Foundation of Ohio
(ACT Ohio) and NCDCL commented
that they have witnessed workers’
reluctance to report misconduct for fear
of losing their jobs, thereby
compromising their ability to support
themselves and their families
239 See https://www.dol.gov/agencies/whd/data/
charts/low-wage-high-violation-industries.
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financially. LCCHR explained that the
risk of retaliation tends to be greater for
workers who are already in relatively
vulnerable positions and who are least
likely to be able to withstand the
consequences of retaliation, which can
quickly escalate as lost pay leads to
serious financial, emotional, and legal
issues.
A number of commenters, including
several members of the U.S. House of
Representatives from Illinois, lauded
this proposal, as well as the timing of
the Department’s proposed rulemaking,
which they asserted would help
maximize the economic benefits of the
bipartisan IIJA for workers, their
families, and their communities.
SMACNA members who supported the
proposed anti-retaliation protections,
among other proposals in the NPRM,
also supported providing substantial
resources to WHD. See, e.g., Mechanical
& Sheet Metal Contractors of Kansas.
A few commenters recommended
additional provisions to strengthen the
anti-retaliation proposal. PAAG and
PADLI recommended adding a
requirement to add the anti-retaliation
contract provisions to existing DBRA
mandatory postings. LCCHR described
the Department’s proposed make-whole
relief as a ‘‘good start,’’ but
recommended going further to account
for financial losses that are more
difficult to quantify, such as fees and
penalties for missed payments due to
loss of income, and non-financial harms
such as harassment. An individual
commenter asserted that the proposed
uniform and less stringent debarment
standard could also have a chilling
effect on workers’ willingness to report
violations since their hours could be cut
if the contractor for whom they work is
less profitable as a result of being
debarred. They noted that whether the
threat of a reduction in wages and harm
to career prospects comes from
retaliation or from the employer’s loss of
Federal contracting opportunities, the
fact that the economic consequence was
a result of speaking up remains the
same. This commenter, therefore,
recommended adding ‘‘predicted lost
pay’’ as an additional quasi-antiretaliation remedy to compensate
workers for reduced hours resulting
from possible debarment. UBC
suggested that the Department also
require notice posting in the first step of
the proposed administrative process in
§ 5.18(a), include interest on lost wages,
and include information in WHD casehandling manuals about how
investigators can assist immigrant
workers in obtaining deferred action
from the Department of Homeland
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Security (DHS), as well as applications
for T and U visas.
None of the commenters that opposed
the proposal rejected the proposed antiretaliation provisions squarely on their
merits. Rather, in opposing the
proposal, IEC claimed that it was
duplicative of another whistleblower
protection law for Federal contractor
employees, 41 U.S.C. 4712, as well as
various anti-retaliation provisions
issued under other statutes or regulatory
schemes, Executive Orders, and a trade
agreement. APCA claimed that the antiretaliation provisions, combined with
other proposals, would subject many—
particularly small—firms to significant
cost increases. And the group of U.S.
Senators and ABC claimed that the
proposed anti-retaliation provisions
were overbroad remedial measures that
exceeded the Department’s statutory
authority and should be withdrawn. The
group of U.S. Senators argued that
forcing private actors to reinstate
workers or pay them back wages
implicated unspecified constitutional
rights and, therefore, the broad
whistleblower enforcement scheme
envisioned by the Department ‘‘is
reserved for Congress to impose as
subject matter experts and elected
representatives.’’
After considering the comments, the
Department adopts the anti-retaliation
provisions as proposed, with one minor
addition to the anti-retaliation contract
clauses and one minor addition to the
remedies in § 5.18. The vast majority of
commenters expressed strong support
for this proposal in its entirety. The
Department echoes the support of the
many commenters that emphasized the
importance of worker cooperation to
effective enforcement of the DBRA and
reiterates the reasons for adding these
provisions that the Department
enumerated in the NPRM preamble—
primarily that the Department
anticipates that the anti-retaliation
provisions will significantly enhance
enforcement, compliance, and
deterrence, while making workers
whole who suffer reprisals in violation
of these provisions. In § 5.5(a)(11)(ii)
and (b)(5)(ii) the Department added
protection for otherwise asserting ‘‘or
seeking to assert’’ the enumerated DBRA
or CWHSSA labor standards
protections. This provision would
prohibit a contractor’s retaliation after,
for example, learning that a worker has
consulted with a third party about the
possibility of asserting such rights or
protections. In § 5.18, the Department
added to the illustrative list of remedies
front pay in lieu of reinstatement. This
type of relief is appropriate in situations
where either the contractor or worker
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does not want reinstatement and front
pay is provided instead.
While the Department appreciates the
recommendations of several
commenters to strengthen the antiretaliation provisions in particular
respects, the Department believes that
the anti-retaliation provisions as
proposed contain appropriate and
sufficient safeguards against retaliation.
The Department agrees, however, that
PAAG and PADLI’s recommendation to
require posting of the new antiretaliation contract provisions would
further enhance DBRA enforcement and
compliance as well as worker
protections. Therefore, the Department
will add anti-retaliation information to
the Davis-Bacon poster 240 (WH–1321)
that is currently required by
§ 5.5(a)(1)(i).
Concerning anti-retaliation remedies,
the Department agrees with LCCHR that
it is important to account for financial
losses that are difficult to quantify, like
fees and penalties for missed payments
due to loss of income, as well as nonfinancial harms such as harassment.
Nevertheless, the Department believes
that the regulatory remedies in the final
rule adequately encompass such relief.
If a worker or job applicant provides
sufficient justification of financial and
non-financial harms resulting from a
violation of § 5.5(a)(11) or (b)(5), such as
those that LCCHR identified, § 5.18(b) as
adopted contemplates relief for those
types of harms to remedy the violation.
Moreover, the examples in § 5.18(c) are
illustrative, not exclusive.
The Department also appreciates an
individual commenter’s concern that
speaking up could lead to debarment
with attendant adverse financial and/or
career impacts similar to those that
workers may experience as a result of
retaliation. But the Department declines
to adopt this commenter’s
accompanying recommendation for
predicted lost pay resulting from
debarment for several reasons. The final
rule’s anti-retaliation provisions are
intended to encourage more workers to
report potential DBRA violations and to
provide make-whole relief for workers
who have suffered specific incidents of
reprisals or interference as a result of
such reporting. In contrast, the
individual commenter’s proposal seeks
highly speculative damages based on a
possible future event—debarment—that
may not occur and, even if it did, might
not happen for years if the contractor
disputes the underlying violations and/
or debarment remedy through an
240 See https://www.dol.gov/agencies/whd/
posters/dbra and https://www.dol.gov/agencies/
whd/posters/dbra/espanol.
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administrative hearing and any
subsequent administrative or Federal
court appeals. This commenter’s
proposed predicted lost pay remedy is
far-reaching: it goes beyond financial
make-whole relief for the particular
workers who spoke up and could extend
to the whole workforce if they were
adversely impacted by the debarment.
The Department’s anti-retaliation
provisions are more narrowly tailored to
address specific harms. For example, if
a worker were given a bad reference by
a debarred DBRA contractor for whom
they had worked, or if a contractor
refused to hire a worker who had
spoken up about DBRA violations and
was then ‘‘blacklisted,’’ that worker
could seek relief under the final rule’s
anti-retaliation provisions.
While the Department also
appreciates UBC’s recommendation to
require the posting of a notice to
workers that the contractor or
subcontractor agrees to comply with the
DBRA anti-retaliation requirements in
the first step of the proposed
administrative process in § 5.18(a), the
Department declines to adopt this
recommendation because at that stage of
proceedings, the contractor or
subcontractor would still be able to
dispute the findings in an
administrative hearing. The Department
notes that the examples of make-whole
relief listed in § 5.18(c)—an illustrative,
not exhaustive list—include notice
posting as well as back pay and interest
among other types of make-whole relief.
Similarly, UBC’s suggestion to include
interest on lost wages is encompassed in
the final rule’s remedies under § 5.18.
Finally, the Department appreciates
UBC’s recommendation to include
information in WHD case-handling
manuals about assisting immigrant
workers in obtaining deferred action
from DHS, as well as applications for T
and U visas, and notes that WHD
currently has publicly available
guidance about these topics.241
The Department disagrees with IEC
that the proposed anti-retaliation
provisions are duplicative of other
whistleblower protections for contractor
employees and could unnecessarily
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241 See,
e.g., U and T Visa Certifications, Wage &
Hour Div., Dep’t of Lab., https://www.dol.gov/
agencies/whd/immigration/u-t-visa; Dep’t of Lab.,
‘‘FAQ: Process for Requesting Department of Labor
Support for Requests to the Department of
Homeland Security for Immigration-Related
Prosecutorial Discretion During Labor Disputes’’
(2022), https://www.dol.gov/sites/dolgov/files/
OASP/files/Process-For-Requesting-Department-OfLabor-Support-FAQ.pdf; Department of Labor U and
T Visa Process & Protocols Question—Answer,
Wage & Hour Div., Dep’t of Lab., https://
www.dol.gov/agencies/whd/immigration/u-t-visa/
faq.
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expand the number of claims against
contractors. There are Federal laws,
including one that IEC identified, that
provide protections from reprisal for
employees of Federal contractors and
grantees who disclose, among other
things, ‘‘information that [they]
reasonably believe[ ] is a . . . violation
of law, rule, or regulation related to a
Federal contract.’’ 41 U.S.C. 4712
(covering certain civilian contracts); see
10 U.S.C. 4701(a)(1) (covering certain
defense contracts).242 But these
statutory whistleblower protections are
not duplicative because they may not
apply to the same subsets of workers,
and they are not as specifically tailored
to protected activities under the DBRA.
Nor are they mutually exclusive.
In addition, enforcement under these
existing statutory whistleblower
protections appears to have been
uncommon. Specifically, the
Department is not aware of any Federal
courts deciding cases on the merits in
which DBRA or SCA workers have
availed themselves of section 4712, and
the Department is only aware of one
such case under 10 U.S.C. 2409. See
Rogers v. U.S. Army, 2007 WL 1217964,
at *3, *6–8 (S.D. Tex. Apr. 23, 2007)
(dismissing, among other claims,
employee’s claim under 10 U.S.C.
2409).243
The new DBRA anti-retaliation
provisions will coexist with these other
whistleblower statutory protections and
supplement them with additional
worker protections to further effectuate
the DBRA statutory and regulatory
scheme. For example, the final rule’s
anti-retaliation provisions cover
disclosures to a wider range of people
than in the above-mentioned two
whistleblower-protection laws. The
final rule protects worker disclosure of
information not only to law enforcement
entities, courts, and contractors, but also
to any other person (e.g., co-workers or
advocates for workers’ rights) about
their Davis-Bacon rights and assertions
of any right or protection under the
DBRA.
242 Formerly
cited as 10 U.S.C. 2409(a)(1).
the Department is aware of only one
Federal court decision about ARRA’s whistleblower
protection provisions in which the underlying
protected activity related to alleged prevailing wage
violations. See Business Commc’ns, Inc. v. U.S.
Dept. of Educ., 739 F.3d 374, 376, 383 (8th Cir.
2013) (worker filed complaint with the Department
of Education’s OIG alleging that cable installation
contractor had terminated his employment after he
complained about not being paid prevailing wages
as required by ARRA). In any event, most ARRA
funding has been spent by now or is no longer
available due to sunset provisions, so the
protections that flowed from that funding no longer
apply and ARRA’s anti-retaliation provisions will
soon be, if they are not already, inapplicable to any
existing or future DBRA-covered projects.
243 Similarly,
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The Department believes that it is
both efficient and consistent with the
remedial purpose of the DBRA as well
as the directive in Reorganization Plan
No. 14 of 1950 ‘‘to assure coordination
of administration and consistency of
enforcement’’ for WHD—not only
contracting agency inspectors general—
to investigate and adjudicate complaints
of retaliation or interference as part of
the Department’s Davis-Bacon labor
standards enforcement, particularly
given WHD’s expertise in interpreting
and enforcing DBRA labor standards
requirements. Potential retaliation and
interference with DBRA worker
protections are relevant to WHD’s
investigations of whether debarment is
warranted. Under the final rule, WHD’s
investigations will encompass the new
anti-retaliation remedies provisions as
part of the Department’s overarching
enforcement authority.
Finally, the Department declines to
withdraw its proposed anti-retaliation
provisions because, contrary to
assertions of ABC and the group of U.S.
Senators that this proposal exceeds the
Department’s statutory authority,244 the
proposed provisions fit within the
Department’s broad enforcement
authority under the DBA and
Reorganization Plan No. 14 of 1950. See
5 U.S.C. app. 1. The comments
submitted by the group of U.S. Senators
and ABC overlook the fact that
Reorganization Plan No. 14 of 1950 was
a Congressional delegation of
rulemaking authority to the Department.
The Plan was prepared by President
Truman and submitted to Congress in
March 1950 pursuant to the
Reorganization Act of 1949, Public Law
81–109, 63 Stat. 203 (1949). The
Reorganization Act, as passed in 1949,
provided that a plan submitted by the
President would become effective after
60 days unless disapproved by
Congress. See 63 Stat. at 205. Although
not required, the Senate Committee on
Expenditures in the Executive
Department reviewed the
Reorganization Plan and reported
favorably before the Plan became
244 The group of U.S. Senators’ apparent
suggestion that DBRA remedial purpose and
remedies are limited to those Congress expressly
provided for in the 1935 amendment to the DBA
(withholding, debarment, and affording laborers a
private right of action against a contractor) is
inconsistent with subsequent legislative, regulatory,
and judicial actions discussed in this section.
Furthermore, these commenters’ suggestion that
DBRA is not remedial as that term is defined
overlooks another meaning of ‘‘remedial statute,’’
which is ‘‘[one] that is designed to . . . introduce
regulations conducive to the public good.’’
Remedial statute, Black’s Law Dictionary Deluxe
4th Ed. (1951) & 6th Ed. (1990).
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effective on May 24, 1950. See 95 Cong.
Rep. 6792 (daily ed. May 10, 1950).
Since that time, as NABTU noted,
Congress has repeatedly recognized the
Secretary’s authority and functions
under Reorganization Plan No. 14 of
1950 with respect to the DBA’s
prevailing wage provisions in
subsequent legislation. See, e.g., 42
U.S.C. 18851(b), 42 U.S.C. 1440(g), 42
U.S.C. 3212, 20 U.S.C. 954(n), 42 U.S.C.
300j–9(e), 42 U.S.C. 5046. Additionally,
in 1984, Congress ratified and affirmed
as law each reorganization plan that was
implemented pursuant to the provision
of a prior reorganization act. Public Law
98–532, 98 Stat. 2705 (1984). The 1984
ratification went on to declare that
‘‘[a]ny actions taken prior to the date of
enactment of this Act pursuant to a
reorganization plan ratified [herein]
shall be considered to have been taken
pursuant to a reorganization expressly
approved by Act of Congress.’’ Id.
(emphasis added). Such prior actions
include the Department’s various
rulemakings for 29 CFR parts 1, 3, and
5. For example, the 1964 final rule
amending part 5 in turn had extended
the Department’s regulatory
enforcement and administration
authority to future Related Acts that the
Department anticipated Congress would
continue to enact from time to time. See
29 FR 95, 99 (Jan. 4, 1964) (adding the
following italicized language to § 5.1(a),
‘‘The regulations contained in this part
are promulgated in order to coordinate
the administration and enforcement of
the labor standards provisions of each of
the following acts by the Federal
agencies responsible for their
administration and such additional
statutes as may from time to time confer
upon the Secretary of Labor additional
duties and responsibilities similar to
those conferred upon him under
Reorganization Plan No. 14 of 1950.’’).
That regulation implemented by another
Department final rule in 1983 added to
the statutory sources of the
Department’s authority to promulgate
such regulations to include the
Copeland Act as well as Reorganization
Plan No. 14 of 1950. See 48 FR 19540–
41 (implementing provisions of final
rule that had not been enjoined by a
Federal district court and on appeal by
the Department).
Federal courts, the ARB, and the
ARB’s predecessor tribunals have all
explained that Reorganization Plan No.
14 of 1950 authorizes the Department
‘‘to issue regulations designed to ‘assure
coordination of administration and
consistency of enforcement’ of the
Davis-Bacon Act and all Davis-Bacon
related statutes.’’ Vulcan Arbor Hill
Corp. v. Reich, No. 87–3540, 1995 WL
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774603, at *2 (D.D.C. Mar. 31, 1995)
(emphasis added), aff’d, 81 F.3d 1110,
1112 (D.C. Cir. 1996) (‘‘[The
Reorganization Plan No. 14 of 1950]
confers on the Department of Labor the
authority and responsibility to
coordinate the enforcement not only of
the Davis-Bacon Act itself, but also
Davis-Bacon related statutes.’’); see also
Coutu, 450 U.S. at 759 (‘‘Pursuant to
Reorganization Plan No. 14 of 1950 the
Secretary of Labor . . . issued
regulations designed to ‘assure
coordination of administration and
consistency of enforcement’ of the Act
and some 60 related statutes.’’ (internal
citations omitted)); Quincy Hous. Auth.
LaClair Corp., WAB No. 87–32, 1989
WL 407468, at *2 (Feb. 17, 1989)
(‘‘Pursuant to [the] mandate [of
Reorganization Plan No. 14], the
Secretary has promulgated regulations
to enforce the labor standards
provisions of the Davis-Bacon Act and
the related acts.’’); cf. Coleman Constr.
Co., ARB No. 15–002, 2016 WL
4238468, at *2, *9–11 (June 8, 2016)
(stating that ‘‘the National Housing Act
and CWHSSA, the two Davis-Bacon
Related Acts under which this case is
being brought, do not include a
debarment provision,’’ but that ‘‘it is the
Department of Labor regulations, duly
promulgated pursuant to Reorganization
Plan No. 14 of 1950 that provide for
debarment for violations of a Related
Act’’).
The Department reiterates that like
regulatory debarment, the antiretaliation provisions adopted in the
final rule—as well as the revised
Related Act debarment provisions
discussed in section III.B.3.xxi
(‘‘Debarment’’)—are all permissible
exercises of the Department’s ‘‘implied
powers of administrative enforcement.’’
Janik Paving & Constr., 828 F.2d at 91.
Like the revised debarment provisions,
the anti-retaliation provisions will also
help achieve more effective enforcement
of DBRA labor standards requirements.
The Department does not agree with
ABC or the group of U.S. Senators that
Congress’s omission of express statutory
anti-retaliation provisions or authority
in the DBA and most Related Acts
prohibits the Secretary from regulating
such behavior. The new anti-retaliation
regulations are consistent with and a
permissible extension of current
remedies for retaliatory conduct. Courts
have recognized the Department’s broad
regulatory authority to enforce and
administer the DBRA, including the
appropriateness of measures such as
debarment under the Related Acts,
which was initially implemented
without explicit statutory authority. See
Janik Paving & Constr., 828 F.2d at 92
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(holding that Congressional silence on
debarment when it enacted the
CWHSSA did not preclude the
Department from enforcing its
regulatory debarment provision under
that statute and noting ‘‘[t]hat a later
Congress seeks to grant expressly a
power which an earlier Congress has
granted by implication does not negate
the existence of the power prior to the
express grant’’ (internal quotations
omitted)); Copper Plumbing & Heating
Co. v. Campbell, 290 F.2d 368, 372–73
(D.C. Cir. 1961) (holding that
Reorganization Plan No. 14 of 1950
authorized debarment under a Related
Act as ‘‘a means for securing
compliance with the wage and hour
standards and . . . obtaining
responsible bidding,’’ notwithstanding
that the Related Act was silent on
debarment but provided for other
sanctions and that Congress had
expressly authorized debarment in
similar statutes, like the DBA.).
The anti-retaliation provisions will
further Reorganization Plan No. 14 of
1950’s mandate by helping to ensure
workers are paid the prevailing wages
they are owed and to coordinate
effective administration of Davis-Bacon
labor standards on Federal and federally
assisted construction projects. As with
debarment, anti-retaliation is ‘‘integral
to the Secretary’s effective enforcement
of labor standards provisions.’’ Janik
Paving & Constr., 828 F.2d at 93.
Prohibiting retaliation against workers
for asserting their rights under the
DBRA and requiring contractors to
remedy such retaliation gives DOL and
contracting agencies a tool to help
ensure effective administration and
enforcement of the DBRA and to protect
the prevailing wage statutory scheme
‘‘from those who would abuse it.’’
Jacquet v. Westerfield, 569 F.2d 1339,
1345 (5th Cir. 1978). The final rule’s
anti-retaliation provisions will further
the DBA’s purposes of protecting
workers and preventing substandard
wages on Federal construction projects.
By further shielding workers who speak
out about violations that might not be
discovered otherwise, this final rule will
enhance the incentive to comply with
the law, foster construction worker
cooperation with the Department’s (and
contracting agencies’) enforcement
efforts, and improve the ability of WHD
investigators to respond to and discover
violations.
The final rule’s regulatory antiretaliation provisions are not novel. The
Department has promulgated antiretaliation regulations with make-whole
remedies to aid enforcement and worker
protection in other program areas where
the underlying statutes do not expressly
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provide for anti-retaliation. For
example, both the Department’s H–2A
and H–2B regulations include antiretaliation provisions. See 29 CFR 501.4
(H–2A); 29 CFR 503.20(a) (H–2B);
Temporary Non-Agricultural
Employment of H–2B Aliens in the
United States, 80 FR 24042, 24069 (Apr.
29, 2015) (Interim final rule; request for
comments) (‘‘Worker rights cannot be
secured unless there is protection from
all forms of intimidation or
discrimination resulting from any
person’s attempt to report or correct
perceived violations of the H–2B
provisions.’’). In addition, OSHA added
an anti-retaliation regulation to provide
an enforcement tool for the longstanding injury and illness
recordkeeping regulations despite also
having a statutory anti-retaliation
provision, section 11(c), 29 U.S.C.
660(c)—both of which had been in place
for over 40 years. See 29 CFR
1904.35(b)(1)(iv); Improve Tracking of
Workplace Injuries and Illnesses, 81 FR
29624, 29627 (May 12, 2016) (Final rule)
(‘‘Where retaliation threatens to
undermine a program that Congress
required the Secretary to adopt, the
Secretary may proscribe that retaliation
through a regulatory provision unrelated
to section 11(c).’’); cf. 57 FR 7533, 7535
(Mar. 3, 1992) (Final Rule) (stating that
the DOE’s regulatory anti-retaliation
DOE Contractor Employee Protection
Program found at 10 CFR part 708 was
‘‘issued pursuant to the broad authority
granted [DOE]’’ by various statutes ‘‘to
prescribe such rules and regulations as
necessary or appropriate to protect
health, life, and property and the
otherwise administer and manage the
responsibilities and functions of the
agency’’). The Department’s adoption of
anti-retaliation provisions in the final
rule similarly implements this
additional enforcement tool.
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xx. Post-Award Determinations and
Operation-of-Law
The Department proposed several
revisions in parts 1, 3, and 5 to update
and codify the administrative procedure
for enforcing Davis-Bacon labor
standards requirements when the
contract clauses and/or appropriate
wage determination(s) have been
wrongly omitted from a covered
contract.
(A) Current Regulations
The current regulations require the
insertion of the relevant contract clauses
and wage determination(s) in covered
contracts. 29 CFR 5.5. Section 5.5(a)
requires the appropriate contract clauses
to be inserted ‘‘in full’’ into any covered
contracts, though the FAR only requires
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the DBA contract clauses to be
incorporated by reference in FARcovered contracts. The contract clause
language at § 5.5(a)(1) currently states
that applicable wage determinations are
‘‘attached’’ to the contract.
The existing regulations at § 1.6(f)
provide instruction for how the
Department and contracting agencies
must act when a wage determination
has been wrongly omitted from a
contract. Those regulations provide a
procedure through which the
Administrator makes a finding that a
wage determination should have been
included in the contract. After the
finding by the Administrator, the
contracting agency must either
terminate and resolicit the contract with
the valid wage determination or
incorporate the wage determination
retroactively by supplemental
agreement or change order. The same
procedure applies where the
Administrator finds that the wrong wage
determination was incorporated into the
contract. The existing regulations at
§ 1.6(f) specify that the contractor must
be compensated for any increases in
wages resulting from any supplemental
agreement or change order issued in
accordance with the procedure.
As the Department explained in the
NPRM, WHD has faced multiple
longstanding enforcement challenges
under the current regulations. First, the
language of § 1.6(f) explicitly refers only
to omitted wage determinations and
does not expressly address the situation
where a contracting agency has
mistakenly omitted the contract clauses
from the contract. Although WHD has
historically relied on § 1.6(f) to address
this situation, the ambiguity in the
regulations has caused confusion in
communications between WHD and
contracting agencies and delay in
resolving conflicts. See, e.g., WHD
Opinion Letters DBRA–167 (Aug. 29,
1990); DBRA–131 (Apr. 18, 1985).
Second, under the existing
regulations, affected workers have
suffered from significant delays while
contracting agencies determine the
appropriate course of action. At a
minimum, such delays cause problems
for workers who must endure long waits
to receive their back wages. At worst,
the delay can result in no back wages
recovered at all where witnesses become
unavailable or there are no longer any
contract payments to withhold when a
contract is finally modified or
terminated. In all cases, the
identification of the appropriate
mechanism for contract termination or
modification can be difficult and
burdensome on Federal agencies—in
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57661
particular during later stages of a
contract or after a contract has ended.
The process provided in the current
§ 1.6(f) is particularly problematic
where a contracting agency has
questions about whether an existing
contract can be modified without
violating another non-DBRA statute or
regulation. This problem has arisen in
particular in the context of MAS
contracts, BPAs, and other similar
schedule contracts negotiated by
GSA.245 Contracting agencies that have
issued task orders under GSA schedule
contracts have been reluctant to modify
those task orders to include labor
standards provisions where the
governing Federal schedule contract
does not contain the provisions. Under
those circumstances, contracting
agencies have argued that such a
modification could render that task
order ‘‘out of scope’’ and therefore
arguably unlawful.
Although the Department believes it
is incorrect that a contract modification
to incorporate required labor standards
clauses or wage determinations could
render a contract or task order out of
scope,246 concerns about this issue have
interfered with the Department’s
enforcement of the labor standards. If a
contracting agency believes it cannot
modify a contract consistent with
applicable procurement law, it may
instead decide to terminate the contract
without retroactively including the
required clauses or wage
determinations. In those circumstances,
the regulations currently provide no
express mechanism that explains how
the Department or contracting agencies
should seek to recover the back wages
that the workers should have been paid
on the terminated contract. While in
many cases, the authority does exist, the
245 Sales on the GSA MAS, for example, have
increased dramatically in recent decades—from $4
billion in 1992 to $36.6 billion in 2020. Gov’t
Accountability Office, ‘‘High Risk Series: An
Update,’’ GAO–05–207 (Jan. 2005), at 25 (Figure 1)
(noting these types of contracting vehicles
‘‘contribute to a much more complex environment
in which accountability has not always been clearly
established’’), available at: https://www.gao.gov/
assets/gao-05-207.pdf; Gen. Servs. Admin., ‘‘GSA
FY 2020 Annual Performance Report,’’ at 11,
available at: https://www.gsa.gov/cdnstatic/
GSA%20FY%202020%20
Annual%20Performance%20Report%20v2.pdf.
246 This argument tends to conflate the change
associated with incorporating a missing contract
clause or wage determination with any unexpected
changes by the contracting agency to the actual
work to be performed under the task order or
contract. As a general matter, a Competition in
Contracting Act challenge based solely on the
incorporation of missing labor standards clauses or
appropriate wage determinations would be without
merit. See Booz Allen Hamilton Eng’g Servs., LLC,
B–411065 (May 1, 2015), available at: https://
www.gao.gov/products/b-411065.
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lack of an express mechanism can lead
to unnecessary delay and confusion.
The Department also engages in
various compliance assistance efforts to
decrease the risk that contract clauses
will be omitted from covered contracts
in the first place. The Department
routinely conducts trainings for
contracting agencies and other
stakeholders about Davis-Bacon
coverage principles, issues and
maintains guidance documents (such as
the PWRB and FOH), and responds to
requests for advice and rulings about
coverage matters. In tandem with this
rulemaking, the Department intends to
continue these efforts to reduce the
likelihood of erroneous omission of
contract clauses and wage
determinations. However, after decades
of experience with this problem, the
Department has determined that
additional measures are necessary.
To address these longstanding
enforcement challenges, the Department
proposed to exercise its authority under
Reorganization Plan No. 14 of 1950 and
40 U.S.C. 3145 to adopt several changes
to §§ 1.6, 5.5, and 5.6.
(B) Proposed Regulatory Revisions
In the NPRM, the Department
proposed to include language in a new
paragraph at § 5.5(e) to provide that the
labor standards contract clauses and
appropriate wage determinations will be
effective ‘‘by operation of law’’ in
circumstances where they have been
wrongly omitted from a covered
contract. The Department explained that
the purpose of the proposal was to
ensure that, in all cases, a mechanism
exists to enforce Congress’s mandate
that workers on covered contracts
receive prevailing wages—
notwithstanding any mistake by an
executive branch official in an initial
coverage decision or in an accidental
omission of the labor standards contract
clauses. The proposal would also ensure
that workers receive the correct
prevailing wages in circumstances
where the correct wage determination
has not been attached to the original
contract or has not been incorporated
during the exercise of an option.
Under the proposal, erroneously
omitted contract clauses and
appropriate wage determinations would
be effective by operation of law and
therefore enforceable retroactive to the
beginning of the contract or
construction. The proposed language
provided that all of the contract clauses
set forth in § 5.5—the contract clauses at
§ 5.5(a) and the CWHSSA contract
clauses at § 5.5(b)—are considered to be
a part of every covered contract,
whether or not they are physically
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incorporated into the contract. This
includes the contract clauses requiring
the payment of prevailing wages and
overtime at § 5.5(a)(1) and (b)(1),
respectively; the withholding clauses at
§ 5.5(a)(2) and (b)(3); and the laborstandards disputes clause at § 5.5(a)(9).
In the NPRM, the Department
explained that the operation-of-law
provision is intended to complement
the existing requirements in § 1.6(f) and
would not entirely replace them. Thus,
the contracting agency will still be
required to take action as appropriate to
terminate or modify the contract. Under
the new proposed procedure, however,
WHD would not need to await a
contract modification to assess back
wages and seek withholding, because
the wage requirements and withholding
clauses would be read into the contract
as a matter of law.247 The application of
the clauses and the correct wage
determination as a matter of law would
also provide WHD with an important
tool to enforce the labor standards on a
contract that a contracting agency
decides it must terminate instead of
modify.
The proposal included two important
provisions to protect both contractors
and contracting agencies. First, the
proposal included a provision requiring
that contracting agencies compensate
prime contractors for any increases in
wages resulting from a post-award
incorporation of a contract clause or
wage determination by operation of law
under § 5.5(e). This proposed language
was modeled after similar language that
has been included in § 1.6(f) since
1983.248 Under the proposal, when the
contract clause or wage determination is
incorporated into the prime contract by
operation of law, the prime contractor
would be responsible for the payment of
applicable prevailing wages to all
workers under the contract—including
the workers of its subcontractors—
retroactive to the contract award or
beginning of construction, whichever
occurs first. This is consistent with the
current Davis-Bacon regulations and
case law. See 29 CFR 5.5(a)(6); All Phase
Elec. Co., WAB No. 85–18 (June 18,
1986) (withholding contract payments
from the prime for subcontractor
employees even though the labor
standards had not been flowed down
into the subcontract). This
247 The Department proposed parallel language in
29 CFR 5.9 (Suspension of funds) to clarify that
funds may be withheld under the contract clauses
and appropriate wage determinations whether they
have been incorporated into the contract physically,
by reference, or by operation of law.
248 See 46 FR 4306, 4313 (Jan. 16, 1981); 47 FR
23644, 23654 (May 28, 1982) (implemented by 48
FR 19532 (Apr. 29, 1983)).
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responsibility, however, would be offset
by the compensation provision in
§ 5.5(e), which would require that the
prime contractor be compensated for
any increases in wages resulting from
any post-award incorporation by
operation of law.
The second important provision in
the proposed operation-of-law
paragraph was language that provides
protection for contracting agencies by
continuing to allow requests that the
Administrator grant a variance,
tolerance, or exemption from
application of the regulations. As noted
in the NPRM, this includes an
exemption from retroactive enforcement
of wage determinations and contract
clauses (or, where permissible, an
exemption from prospective
application) under the same conditions
currently applicable to post-award
determinations. See 29 CFR 1.6(f); 29
CFR 5.14; City of Ellsworth, ARB No.
14–042, 2016 WL 4238460, at *6–8
(June 6, 2016).249 In addition, as the
Department noted in the NPRM,
contracting agencies avoid difficulties
associated with post-award
incorporations by proactively
incorporating the Davis-Bacon labor
standards clauses and applicable wage
determinations into contracts or using
the existing process for requesting a
coverage ruling or interpretation from
the Administrator prior to contract
award. See 29 CFR 5.13.250
The operation-of-law provision in
proposed § 5.5(e) is similar to the
Department’s existing regulations
enacting Executive Order 11246—Equal
Employment Opportunity. See 41 CFR
60–1.4(e); United States v. Miss. Power
& Light Co., 638 F.2d 899, 905–06 (5th
Cir. 1981) (finding 41 CFR 60–1.4(e) to
be valid and have force of law). The
operation-of-law provision at 41 CFR
60–1.4(e), like the proposed language in
249 Factors that the Administrator considers in
making a determination regarding retroactive
application are discussed in the ARB’s ruling in
City of Ellsworth, ARB No. 14–042, 2016 WL
4238460, at *6–10. Among the non-exclusive list of
potential factors are ‘‘the reasonableness or good
faith of the contracting agency’s coverage decision’’
and ‘‘the status of the procurement (i.e., to what
extent the construction work has been completed).’’
Id. at *10. In considering the status of the
procurement, the Administrator will consider the
status of construction at the time that the coverage
or correction issue is first raised with the
Administrator.
250 Contracting agencies can also contest a
determination by the Administrator that a contract
is covered (either an initial determination or a postaward determination) or the Administrator’s denial
of a tolerance, variance, or exemption, by seeking
review of the determination with the ARB. 29 CFR
7.1, 7.9. A decision of the ARB on a coverage
question is a final agency action that in turn may
be reviewable under the APA in Federal district
court. See 5 U.S.C. 702, 704.
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§ 5.5(e), operates in addition to and
complements the other provisions in the
Executive Order’s regulations that
require the equal opportunity contract
clause to be included in the contract.
See 41 CFR 60–1.4(a).
Unlike 41 CFR 60–1.4(e), the
Department’s proposed language in the
new § 5.5(e) would apply the ‘‘operation
of law’’ provision only to prime
contracts and not to subcontracts. The
reason for this difference is that, as
noted above, the Davis-Bacon
regulations and case law provide that
the prime contractor is responsible for
the payment of applicable wages on all
subcontracts. If the prime contract
contains the labor standards as a matter
of law, then the prime contractor is
required to ensure that all employees on
the contract—including subcontractors’
employees—receive all applicable
prevailing wages. Accordingly, as the
Department explained in the NPRM,
extending the operation-of-law
provision itself to subcontracts is not
necessary to enforce the Congressional
mandate that all covered workers under
the contract are paid the applicable
prevailing wages.
The proposed operation-of-law
provision at § 5.5(e) is also similar in
many, but not all, respects to the
judicially-developed Christian doctrine,
named for the 1963 Court of Claims
decision G.L. Christian & Assocs. v.
United States, 312 F.2d 418 (Ct. Cl.),
reh’g denied, 320 F.2d 345 (Ct. Cl.
1963). Under the doctrine, courts and
administrative tribunals have held that
required contractual provisions may be
effective by operation of law in Federal
government contracts, even if they were
not in fact included in the contract. The
doctrine applies even when there is no
specific ‘‘operation of law’’ regulation as
proposed here.
The Christian doctrine flows from the
basic concept in all contract law that
‘‘the parties to a contract . . . are
presumed or deemed to have contracted
with reference to existing principles of
law.’’ 11 Williston on Contracts § 30:19
(4th ed. 2021); see Ogden v. Saunders,
25 U.S. 213, 231 (1827). Thus, those
who contract with the government are
charged with having ‘‘knowledge of
published regulations.’’ PCA Health
Plans of Texas, Inc. v. LaChance, 191
F.3d 1353, 1356 (Fed. Cir. 1999)
(citation omitted).
Under the Christian doctrine, a court
can find a contract clause effective by
operation of law if that clause ‘‘is
required under applicable [F]ederal
administrative regulations’’ and ‘‘it
expresses a significant or deeply
ingrained strand of public procurement
policy.’’ K-Con, Inc. v. Sec’y of Army,
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908 F.3d 719, 724 (Fed. Cir. 2018).
Where these prerequisites are satisfied,
it does not matter if the contract clause
at issue was wrongly omitted from a
contract. A court will find that a Federal
contractor had constructive knowledge
of the regulation and that the required
contract clause applies regardless of
whether it was included in the contract.
The recent decision of the Federal
Circuit in K-Con is helpful to
understanding why it is appropriate to
provide that the DBA labor standards
clauses are effective by operation of law.
In K-Con, the Federal Circuit held that
the Christian doctrine applies to the
1935 Miller Act. 908 F.3d at 724–26.
The Miller Act contains mandatory
coverage provisions that are similar to
those in the DBA, though with different
threshold contract amounts. The Miller
Act requires that contractors furnish
payment and performance bonds before
a contract is awarded for ‘‘the
construction, alteration, or repair of any
public building or public work.’’ 40
U.S.C. 3131(b). The DBA, as amended,
requires that the prevailing wage
stipulations be included in bid
specifications ‘‘for construction,
alteration, or repair, including painting
and decorating, of public buildings and
public works.’’ 40 U.S.C. 3142(a).
Like the Miller Act, the 90-year-old
Davis-Bacon Act also expresses a
significant and deeply ingrained strand
of public procurement policy. The
Miller Act and the Davis-Bacon Act are
of similar vintage. The DBA was enacted
in 1931. The DBA amendments were
enacted in 1935, almost simultaneously
with the Miller Act. Through both
statutes, Congress aimed to protect
participants on government contracts
from nonpayment by prime contractors
and subcontractors. Thus, the same
factors that the Federal Circuit found
sufficient to apply the Christian
doctrine to the Miller Act also apply to
the DBA and suggest that the proposed
operation-of-law regulation would be
appropriate.251
The Department’s proposal, however,
offers more consideration for contractor
equities than the Christian doctrine in
two critical respects. First, as noted
above, the proposed language at § 5.5(e)
would be paired with a contractor
compensation provision similar to the
existing provision in § 1.6(f). The
251 The Federal Circuit has also noted that the
Christian doctrine applies to in the context of the
SCA, which has a similar purpose as the DBA and
dates only to 1965. See Call Henry, Inc. v. United
States, 855 F.3d 1348, 1351 & n.1 (Fed. Cir. 2017).
Because the DBA and SCA are similar statutes with
the same basic purpose, the Department has long
noted that court decisions relating to one of these
acts may have a direct bearing on the other. See
WHD Opinion Letter SCA–3 (Dec. 7, 1973).
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Christian doctrine does not incorporate
such protection for contractors, and as
a result, can have the effect of shifting
cost burdens from the government to the
contractor. In K-Con, for example, the
doctrine supported the government’s
defense against a claim for equitable
adjustment by the contractor. 908 F.3d
at 724–28.
Second, the Christian doctrine is
effectively self-executing and renders
contract clauses applicable by operation
of law solely on the basis of the
underlying requirement that they be
inserted into covered contracts. The
doctrine contains no specific
mechanism through which the
government can limit its application to
avoid any unexpected or unjust
results—other than simply deciding not
to raise it as a defense or affirmative
argument in litigation. The proposed
provision here at § 5.5(e), on the other
hand, would pair the enactment of the
operation-of-law language with the
traditional authority of the
Administrator to waive retroactive
enforcement or grant a variance,
tolerance, or exemption from the
regulatory requirement under 29 CFR
1.6(f) and 5.14, which the Department
believes will foster a more orderly and
predictable process and reduce the
likelihood of any unintended
consequences.
In the NPRM, the Department also
discussed whether it was necessary or
advisable to create a different procedure
in which the operation-of-law rule
would only become effective after a
determination by the Administrator or a
contracting agency that a contract was
in fact covered. While the Department
stated that it did not believe that such
an approach was necessary, it
nonetheless sought comment regarding
this potential alternative.
(C) Discussion of Comments
(1) § 5.5(e) and Operation of Law
Many commenters expressed support
for the operation-of-law proposal at
§ 5.5(e) on the basis that it would be
protective of workers. The LCCHR and
other civil rights and employee
advocacy organizations supported the
proposal, stating that under the status
quo, workers on covered projects too
often do not receive DBRA-required
prevailing wages ‘‘on time or at all.’’
Several unions strongly supported the
proposal because it would ensure that,
as UBC commented, the burden of
‘‘intentional or mistaken omissions’’
would not be placed ‘‘on the backs of
construction workers.’’ The FFC and the
NCDCL wrote that technicalities or
accidental omissions should not prevent
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workers from ‘‘receiving the protection
of the DBRA and being paid the
prevailing wage.’’
Various commenters emphasized
other positive aspects of the proposal.
The III–FFC stated that the approach
will streamline enforcement. SMACNA
noted that the compensation provision
allows a contractor to rely on an initial
determination that the DBA does not
apply or a wage determination with
lower rates applies. Similarly, LCCHR
noted that the provision is more
favorable to contractors than traditional
operation-of-law doctrine because it
provides reimbursement to prime
contractors for any increase of wages
that results from its invocation.
Furthermore, LCCHR added that the
provision’s application only to prime
contracts, and not subcontracts, reflects
a targeted approach. This is appropriate,
they stated, because prime contractors
‘‘are frequently repeat recipients of
federal funds, engage directly with the
contracting agency, and may reasonably
be expected to be aware of generally
applicable legal requirements, such as
the DBRA.’’
Several commenters, including AFP–
I4AW, ABC, CC&M, IEC, the SBA Office
of Advocacy, and the group of U.S.
Senators, opposed the operation-of-law
proposal, arguing that it does not give
contractors sufficient notice of the
applicability of DBA requirements. IEC
and the group of U.S. Senators asserted
that a lack of notice is not consistent
with basic contract and procedural due
process principles. AFP–I4AW claimed
that ‘‘without direct contractual notice
to contractors, the risk of unknowing
violations will abound,’’ and stressed
the ‘‘risk of inadvertent and completely
avoidable noncompliance.’’ And CC&M
asserted that sometimes a local agency
does not inform a contractor that
Federal funds are being used on a
particular project.
Some commenters expressed concern
that the operation-of-law provision
would increase costs to contractors, and
that those costs in turn could be passed
on to the government. IEC, for example,
asserted that the provision would lead
to higher costs through two routes: first,
uncertainty could result in contractors
opting out of DBA-covered work,
resulting in less competition and thus,
higher prices; and second, through
contractors ‘‘hedging’’ about DBA
coverage by ‘‘submitting bids that
account for the DBA, when it is in fact
not covered, but still placing these
added costs onto the taxpayer.’’ IEC also
contended that ‘‘contractors would have
to track all the different regulatory
changes (wage rates) from location,’’
which would increase their cost of
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compliance. AFP–I4AW and two
partners from the law firm Wiley Rein
LLP expressed concern that the proposal
could lead to increased litigation, with
associated costs for contractors.252 ABC
and the SBA Office of Advocacy
expressed concern about costs and
burdens on subcontractors.
The Wiley Rein partners and the
group of U.S. Senators expressed
concern that the provision requiring
compensation for contractors would not
work as proposed. The Wiley Rein
partners stated that contracting officers
might simply refuse to provide an
equitable adjustment, notwithstanding
the express requirement in § 5.5(e). The
result could be unreimbursed cost
increases ‘‘and related adverse effects.’’
The Senators suggested that agencies
might ‘‘use the threat of refusing to
award contract bids in the future’’ in
order to pressure contractors not to seek
compensation. CC&M stated that it is
unfair for a contracting agency to
transfer liability to a contractor when it
is the agency that failed to meet its
obligations.
A few commenters expressed concern
that the Department lacks the authority
to implement the proposed rule. The
FTBA noted that the text of the DBA
explicitly requires contracting agencies
to insert the contract clauses in covered
contracts. Given this statutory language,
the comment asserted, ‘‘it is within the
sole power and domain of the federal
courts, not the DOL as a regulatory
agency, to make any determination that
the DBA requirements are applicable by
operation of law.’’ AFP–I4AW argued
that the there is no ‘‘legal justification’’
for the proposal because the statute
requires the government to include the
proper clauses in the contract. The
comment from the group of U.S.
Senators stated that the statute meant to
place the burden on procuring agencies,
not contractors.
Commenters disagreed about the
effect of the Supreme Court’s decision
in University Research Ass’n v. Coutu,
450 U.S. 754 (1981), and the state of the
law on the Christian doctrine. The
WileyRein partners noted the Court’s
statement in the Coutu decision that the
DBA is ‘‘not self-executing.’’ See also id.
at 784 n.38. Accordingly, the partners
expressed doubt that the Department
can ‘‘give away’’ its interpretive
authority by allowing arbitrators, courts,
or other administrative agencies to make
determinations about whether the DBA
252 The Wiley Rein partners also expressed
concern about how the operation-of-law provision
would function in contracts that may be jointly
covered by both the DBA and the SCA.
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should be found to be incorporated by
operation of law in a given contract.
The FTBA and the Wiley Rein
partners argued that the Department had
read too much into Federal Circuit
decisions discussing the Christian
doctrine. The Wiley Rein partners
suggested that Coutu and Bellsouth
Communications Systems, ASBCA No.
45955, 94–3 BCA ¶ 27231, a subsequent
decision issued by the Armed Services
Board of Contract Appeals, undermine
the significance of the Federal Circuit’s
decision about the Miller Act in K-Con,
908 F.3d at 724–26. In addition, both
the FTBA and the Wiley Rein partners
stated the Department had overread the
Federal Circuit’s decision in Call Henry,
855 F.3d at 1351 n.1, because, among
other reasons, that decision involved a
situation in which the core SCA clauses
had in fact been incorporated into the
contract.
On the other hand, the LCCHR and
other civil rights and worker advocacy
groups noted that multiple decisions
after Coutu have stated that the DBA
contract clauses may be effective by
operation of law. See, e.g., United States
ex rel. D.L.I. Inc. v. Allegheny Jefferson
Millwork, LLC, 540 F. Supp. 2d 165, 176
(D.D.C. 2008) (‘‘When such provisions
are omitted from a prime contract, they
do become part of the contract by
operation of law, and the prime
contractor is charged with constructive
knowledge of Davis–Bacon’s
requirements.’’); BUI Constr. Co. & Bldg.
Supply, ASBCA No. 28707, 84–1 B.C.A.
¶ 17183 (citing G.L. Christian, 312 F.2d
at 418). LCCHR noted that these
decisions were issued after Coutu,
which suggests that Coutu imposes no
bar to the proposed rule.
The Wiley Rein partners made several
recommendations in their comment.
They recommended that instead of the
Department’s current proposal, the
Department should adapt the SCA
regulation codified at 29 CFR 4.5(c) for
use in the DBRA rule. Section 4.5(c)
instructs contracting agencies to add
omitted SCA requirements to contracts
after award by modification but does not
make them effective by operation of law.
The partners stated that this approach
would reduce the risk that contractors
would not be made whole for increased
costs, while still addressing the
Department’s enforcement concerns.
They suggested that the SCA post-award
modification provision has been timetested because it was implemented
many years ago. See 48 FR 49736, 49766
(Oct. 27, 1983).
The Wiley Rein partners also made
two suggestions in the alternative. First,
if their recommendation to adapt the
SCA regulation is declined, the
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Department should instead finalize the
alternative option discussed in the
NPRM to require that the operation-oflaw provision at § 5.5(e) be effective
only after a determination by the
contracting agency or the Department
that the DBRA applies to the contract at
issue. The partners stated that this
option is consistent with the Christian
doctrine, ‘‘comports with existing
caselaw,’’ and offers certain practical
benefits as well.253 The Wiley Rein
partners also suggested that the
Department should defer the effective
date for the operation-of-law provision
until the FAR is updated to expressly
require equitable adjustments in these
circumstances.
A few other commenters requested
clarifications or made suggestions. AGC
stated that the Department ‘‘has always
maintained that the DBA clauses
required by the regulation are applicable
by operation of law.’’ They asserted,
however, that this has never been
‘‘official,’’ and they noted that the
Department’s practice is to require
retroactive incorporation of contract
clauses and appropriate wage
determinations into a contract before
enforcement. AGC acknowledged the
language in the proposal that would
require compensation for contractors
where the operation-of-law provision is
invoked but asked for ‘‘further
clarifications’’ because ‘‘[i]t is absolutely
necessary that prime contractors be
compensated for any increased costs
caused by a contracting agency failure.’’
The COSCDA similarly agreed that the
Department should take actions to
secure adequate compensation for
workers in a timely manner, but it stated
that proposals to do so should not
impose additional costs on contractors
or program administrators. CC&M
suggested that when compensation is
provided under the proposal, agencies
should be required to pay the contractor
‘‘150% of the delta between what the
contractor paid and the amount that
should have been paid,’’ to penalize the
agency for its error, and that
withholding or cross-withholding for
violations based on operation of law
should not be permitted unless such a
rule is implemented.
Lastly, a number of union and
contractor association commenters
expressed general support for the
provision ensuring that DBA provisions
are incorporated by ‘‘operation of law.’’
Those commenters included the Alaska
253 Conversely, two other commenters, UBC and
the III–FFC, stated that the Department’s proposed
rule as written was superior to the alternative
option in which the DBA provisions would only be
added by operation of law after a determination by
the Administrator.
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District Council of Laborers, Bricklayers
& Allied Craftworkers Local #1, LIUNA,
LIUNA Local 341, LIUNA Local 942, the
Massachusetts Building Trades Unions,
NABTU, the Southern Nevada Building
Trades Unions (SNBTU), the WA BCTC,
SMACNA, and CEA.
The Department considered the
comments submitted regarding the
operation-of-law provision at § 5.5(e)
and agrees with those commenters that
supported the implementation of the
provision as proposed in the NPRM.
Commenters noted that failures by
contracting agencies to properly
incorporate the DBRA contract clauses
and wage determinations have
significant consequences for the workers
that the DBA and Related Acts were
enacted to protect. For example, the
comment from LCCHR and other civil
rights and worker advocacy
organizations cited a news article that
discussed similar problems occurring
during the implementation of the 2009
Recovery Act. See Ben Penn, ‘‘Labor’s
Infrastructure Wins Depend on
Avoiding Problems of 2009,’’ Bloomberg
L. (Nov. 9, 2021).254 According to the
article, during the implementation of
the Recovery Act, the Department
‘‘struggled to secure commitments on
worker pay standards from government
agencies that awarded contracts,’’
problems ‘‘fueled interagency
breakdowns and debates over whether
prevailing wage standards were
applicable on particular projects,’’ and
‘‘[u]ltimately, workers paid the price
when Davis-Bacon wasn’t applied,
lowering their pay.’’ Id. As the
Department noted in the NPRM, it is not
appropriate for staff at an executive
agency to effectively nullify Congress’s
intent that Davis-Bacon standards apply
to certain categories of contracts.
While the operation-of-law provision
addressed an important subset of
enforcement problems, as a practical
matter it should not represent a broad
expansion of application of the DBRA.
As COSCDA noted in their comment,
the proposal is an ‘‘extension of the
retroactive modification procedures’’
that have been in effect in § 1.6 of the
regulations since the 1981–1982
rulemaking. While the § 1.6(f) procedure
in the existing regulations references
only wage determinations, the
Department has long interpreted the
procedure to also require the retroactive
modification of contracts to include
missing contract clauses themselves.
The operation-of-law provision has the
effect of extending the current status
254 Available at: https://news.bloomberglaw.com/
daily-labor-report/labors-infrastructure-winsdepend-on-avoiding-problems-of-2009.
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quo only to those situations in which a
contract has not been timely modified
through the retroactive modification
procedures in § 1.6(f).
MBI, BCCI, PCCA, and several others
asserted the proposal would function by
‘‘essentially eliminating the requirement
to publish specific Davis-Bacon wage
determinations in project bid and
contract documents.’’ However, this
characterization is not accurate. Under
the current procedures, contracting
agencies’ responsibility to insert
contract clauses and wage
determinations has long co-existed with
a post-award modification procedure
that allows the government to remedy
any circumstances when those clauses
have been omitted. Since the 1981–1982
rulemaking, § 5.5(a) has required a
contracting agency head to ‘‘cause or
require the contracting officer to insert’’
the required contract clauses into any
covered contracts. 29 CFR 5.5(a).
Likewise, § 5.6(a)(1)(i) has stated that
the Federal agency is responsible for
‘‘ascertain[ing] whether the clauses
required by § 5.5 and the appropriate
wage determination(s) have been
incorporated’’ into covered contracts. Id.
§ 5.6.
The proposed operation-of-law
proposal is not significantly different in
this respect from the current
incorporation and enforcement
procedures. Contrary to the concerns of
MBI and other commenters, § 5.5(a) in
the final rule continues to require
contracting agencies to insert the
contract clauses in full into covered
contracts, although the Department has
also added language to § 5.5(a) and (b)
to clarify that the FAR permits
incorporation by reference. The contract
clause at § 5.5(a)(1) continues to
contemplate that, for non-FAR
contracts, the applicable wage
determinations ‘‘will be attached hereto
and made a part thereof.’’ These
requirements are reinforced by practical
consequences. The new provision at
§ 5.5(e) requires that contracting
agencies compensate contractors for any
resulting increases in wages when the
agency fails to incorporate the contract
clauses and wage determinations and
those clauses or wage determinations
are subsequently incorporated into the
contract through the operation-of-law
provision. It is therefore not the case, as
the commenters contended, that this
rule eliminates contracting agencies’
obligations to include wage
determinations in covered contracts.
Given current enforcement
procedures already require agencies to
incorporate omitted contract clauses
and require compensation from
contracting agencies in those
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circumstances, it is unlikely that the
operation-of-law provision will
materially increase overall costs to
contractors or the government. In the
individual cases in which the provision
ultimately must be invoked, the costs
will be borne by the government, and
not the contractor, because the
operation-of-law provision at § 5.5(e)
requires agencies to compensate a prime
contractor for any increases in wages.
However, in such cases, the operationof-law provision should increase
efficiency and reduce administrative
costs for both contracting agencies and
the Department. It will reduce the need
for extended negotiations about
retroactive modification. It also may in
some circumstances reduce litigation
costs by reducing or eliminating
disputes about the method and timing of
modification. The existence of the
compensation provision significantly
reduces the potential that CC&M
identified of contractors being required
to pay the price for errors by contracting
agencies.
The Department also is not persuaded
by comments from IEC and others that
the operation-of-law provision will
increase contractors’ general compliance
costs because contractors will have to
newly track coverage provisions or may
prophylactically apply Davis-Bacon
wages even where they do not apply.
The Department already interprets the
DBRA to require employers to take
affirmative steps to ensure that they are
in compliance. See, e.g., Coleman
Construction Co., ARB No. 15–002, 2016
WL 4238468, at *6 (holding that ‘‘[t]he
law is clear that, if a contract subject to
Davis-Bacon lacks the wage
determination, it is the employer’s
obligation . . . to get it’’). And, the
Department’s current application of
§ 1.6(f) provides similar incentives and
consequences as will the operation-oflaw provision. As the comment from
LCCHR and other civil rights and
employee advocacy organizations noted,
trade publications already advise
contractors to be proactive in
determining whether a project is
covered.255 Because prime contractors
are already monitoring DBRA coverage,
the Department believes any increased
compliance burdens due to this change
will be minimal and are outweighed by
the Department’s goal of streamlining
coverage determinations, ensuring
effective enforcement, and reducing
255 See Kim Slowey, ‘‘The Dotted Line: Beefing up
Davis-Bacon compliance,’’ Construction Dive (Mar.
30, 2021), https://www.constructiondive.com/news/
the-dotted-line-beefing-up-davis-bacon-compliance/
597398.
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economic hardship to workers caused
by delays in receiving backpay.
The Department has also considered
specific concerns raised by ABC and the
SBA Office of Advocacy about the
effects on subcontractors of the
operation-of-law provision. ABC stated
that the result of the operation-of-law
provision would be to hold
subcontractors (as well as prime
contractors) responsible for DBRA
violations without notice. The SBA
Office of Advocacy stated that small
subcontractors are less equipped to
absorb withholding on a contract. As the
Department explained in the NPRM,
however, § 5.5(e) limits the reach of the
operation-of-law provision to prime
contractors only, rather than including
subcontractors. Accordingly, if neither a
prime contract nor a subcontract
thereunder references the DBA, the
Department would not hold a
subcontractor liable for unpaid back
wages under § 5.5(e). The Department
recognizes that there may still be
residual effects on a subcontractor
where the operation-of-law provision is
invoked and funds are withheld from a
prime contractor to ensure that workers
of a subcontractor are paid the required
prevailing wages. In such a situation, it
is possible the prime contractor might in
turn delay in paying its subcontractor in
full as a result. However, this
circumstance is not materially different
than any other enforcement action that
involves withholding, except that there
is a provision requiring compensation
that should make the effects of any
withholding temporary. Moreover,
because the operation-of-law provision
is likely to be invoked in only a small
portion of overall enforcement actions,
the Department believes that the
additional impact of such actions on
subcontractors will be minimal. The
Department thus has concluded that the
final rule’s limited effects on
subcontractors are outweighed by the
Department’s goal of streamlining and
ensuring the effectiveness of
enforcement.
The Department also disagrees with
those commenters that argued that the
proposal does not give contractors
sufficient notice of the applicability of
DBA requirements. As noted in the
NPRM, those that contract with the
government are charged with having
‘‘knowledge of published regulations.’’
PCA Health Plans of Texas, 191 F.3d at
1356 (citing Federal Crop Ins. Corp. v.
Merrill, 332 U.S. 380, 384–85 (1947)).
‘‘[T]he appearance of rules and
regulations in the Federal Register gives
legal notice of their contents.’’ Merrill,
332 U.S. at 384–385. Under the
Department’s final rule, contractors will
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be put on notice, through the language
of § 5.5(e), that the DBRA requirements
are effective by operation of law,
regardless of whether they have been
wrongly omitted from a contract.
Section 1.6(b)(2) also provides notice
that a contractor has an ‘‘affirmative
obligation to ensure that its pay
practices are in compliance with the
Davis-Bacon Act labor standards.’’
Further, any contractor can seek
guidance from the Department prior to
contract award regarding whether the
DBA provisions should apply to a
contract. See 29 CFR 5.13. These
regulations provide notice to prime
contractors of the potential that DBRA
contract clauses may be effective by
operation of law. For similar reasons,
the Department disagrees with the
comments from IEC and the group of
U.S. Senators that the proposal does not
comport with procedural due
process.256
In the NPRM, the Department
provided a review of legal
considerations regarding the application
of the operation-of-law provision. The
commenters suggesting that the statute
does not permit the provision, or, as the
AFP–I4AW argued, that the Department
lacked a ‘‘legal justification,’’ largely did
not engage with that reasoning in the
NPRM. The group of U.S. Senators, for
example, stated that the statute meant to
place the burden on procuring agencies,
not contractors. This comment,
however, did not acknowledge that the
compensation provision in the
operation-of-law proposal does in
practice place the ultimate
responsibility on the contracting agency
rather than contractors.
The commenters raising legal
questions about the operation-of-law
proposal based their arguments largely
on the DBA’s express requirement that
contracting agencies incorporate the
contract clauses into covered contracts.
The commenters suggested that this
language prevents the Department from
enforcing the Act where the clause is
not included. The mandatory nature of
this statutory requirement, however, is
itself the basis for the operation-of-law
provision. See K-Con, 908 F.3d at 724.
Where Congress has expressly stated
that a contract clause must be included
in certain types of contracts, that is
precisely where it is not appropriate to
allow a contracting agency to effectively
nullify the statutory command by failing
256 In addition to the notice provided by the
regulation itself, contractors are provided due
process through the administrative procedures that
allow contractors to challenge a ruling by the
Department that a contract is covered by the DBRA
or that back wages are owed. See generally 29 CFR
5.11.
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to act. See S.J. Amoroso Const. Co. v.
United States, 12 F.3d 1072, 1075 (Fed.
Cir. 1993) (discussing G.L. Christian &
Assocs., 312 F.2d at 426).257 As the
Court of Federal Claims explained in
denying rehearing on the original
decision in G.L. Christian & Assocs., the
animating principle is that ‘‘[o]bligatory
Congressional enactments are held to
govern federal contracts because there is
a need to guard the dominant legislative
policy against ad hoc encroachment or
dispensation by the executive.’’ G.L.
Christian & Assocs. v. United States,
320 F.2d 345, 350–51 (Ct. Cl. 1963)
(denying reconsideration). Therefore,
the Department does not interpret the
Davis-Bacon Act’s requirement that
agencies include a mandatory contract
clause in covered contracts to preclude
the proposed operation-of-law provision
as designed.258
The Department also disagrees with
FTBA and the Wiley Rein partners that
the NPRM read too much into Call
Henry, Inc. v. United States, 855 F.3d
1348, 1351 n.1 (Fed. Cir. 2017). The
FTBA stated that the Call Henry
decision only discussed operation of
law with regard to section 4(c) of the
SCA, under which a predecessor
contractor’s CBA is recognized by
operation of law as the contract wage
determination. That observation is not
accurate. While the opinion also
257 Like the K-Con decision, the S.J. Amoroso
Construction Co. matter also involved the
application of statutory coverage language which
mirrors the text of the DBA. Compare 41 U.S.C.
8303(a) (formerly cited as 41 U.S.C. 10b) (requiring,
under the 1933 Buy America Act, that ‘‘[e]very
contract for the construction, alteration, or repair of
any public building or public work in the United
States . . . shall contain’’ certain contract
provisions) with 40 U.S.C. 3142(a) (requiring, under
the DBA, that ‘‘[e]very contract . . . for
construction, alteration, or repair . . . of public
building or public works . . . shall contain a
provision’’ setting prevailing wages).
258 The Department disagrees with the FTBA that
this statutory language gives Federal courts ‘‘sole
power and domain’’ to determine whether any DBA
requirements are applicable by operation of law.
While the Christian doctrine is a judicially-made
rule, the concept of ‘‘operation of law’’ is not
limited to judge-made rules. See Operation of Law,
Black’s Law Dictionary (11th ed. 2019) (defining the
concept as ‘‘[t]he means by which a right or a
liability is created for a party regardless of the
party’s actual intent’’). Likewise, the potential for
such a judicially imposed outcome does not bar
administrative agencies from identifying specific
circumstances where a rule will be effective by
operation of law. See, e.g., 19 CFR 111.45(b)
(prescribing that if a customs broker fails to pay
user fee, permit is revoked by operation of law); 29
CFR 38.25 (prescribing that a grant applicant’s
nondiscrimination assurance is considered
incorporated by operation of law into grants and
other instruments under the Workforce Innovation
and Opportunity Act); 49 CFR 29.207 (prescribing
that if a Tribe submits a final offer to the
Department of Transportation to resolve a dispute
and the Department takes no action with the 45-day
review period, the offer is accepted by operation of
law).
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discusses section 4(c), the Department’s
citation was to the opinion’s separate
discussion of the SCA price adjustment
clauses. See Call Henry, 855 F.3d at
1351 n.1 (Fed. Cir. 2017). There, the
Federal Circuit noted that the
appropriate SCA price adjustment
clause at 48 CFR 52.222–43 had not
been included in the contract at issue in
that case, but explained that ‘‘[p]ursuant
to the Christian doctrine, the mandatory
SCA clauses applicable to this contract
are incorporated by reference, as those
clauses reflect congressionally enacted,
deeply ingrained procurement policy.’’
Id. (citing G.L. Christian & Assocs., 312
F.2d at 426). That the Federal Circuit
found the SCA price adjustment clauses
satisfy those elements of the Christian
doctrine is certainly relevant to whether
it is justifiable to require the DBRA
clauses to be effective by operation of
law as well.
The Wiley Rein partners also
questioned whether the Supreme
Court’s decision in Coutu casts doubt on
the Department’s reference to K-Con and
the Christian doctrine. As noted in the
NPRM, before proposing this new
regulatory provision, the Department
considered the implications of the
Supreme Court’s decision in Coutu. In
that case, the Court held that there was
no implied private right of action for
workers to sue under the Davis-Bacon
Act—at least when the contract clauses
were not included in the contract.
Coutu, 450 U.S. at 768–69 & nn.17, 19.
Although not the focus of the decision,
the Court also stated in dicta that the
workers in that case could not rely on
the Christian doctrine to read the
missing DBA contract clause into the
contract. Id. at 784 & n.38.259 For the
reasons discussed in the NPRM and
below, however, the Department has
concluded that the operation-of-law
provision in the final rule is consistent
with Coutu and that the distinctions
between the final rule and the Christian
doctrine address the concerns that
animated the Coutu Court in that case.
One of the Court’s fundamental
concerns in Coutu was that an implied
private right of action could allow
parties to evade the Department’s
review of whether a contract should be
covered by the Act. The Court noted
that there was at the time ‘‘no
administrative procedure that expressly
provides review of a coverage
determination after the contract has
been let.’’ 450 U.S. at 761 n.9.260 If an
259 See Steven Feldman, 1 Government Contract
Awards: Negotiation and Sealed Bidding § 1:7 n.16
(rev. Oct. 2022) (describing the discussion in Coutu
as ‘‘infrequently recognized dictum’’).
260 Section 1.6(f) did not go into effect until Apr.
29, 1983, nearly 2 years after the Coutu decision.
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implied private right of action existed
under those circumstances, private
parties could effectively avoid raising
any questions about coverage with the
Department or with the contracting
agency—and instead bring them directly
to a Federal court to second-guess the
administrative determinations. Id. at
783–84.
Another of the Court’s concerns was
that such an implied private right of
action would undermine Federal
contractors’ reliance on the wage
determinations that the Federal
government had (or had not)
incorporated into bid specifications.
The Supreme Court noted that one of
the purposes of the 1935 amendments to
the DBA was to ensure that contractors
could rely on the predetermination of
wage rates that apply to each contract.
450 U.S. at 776. If, after a contract had
already been awarded, a court could
find that a higher prevailing wage
applied to that contract than had been
previously determined, the contractor
could lose money because of its
mistaken reliance on the prior rates—all
of which would undermine Congress’s
intent. Id. at 776–77.
The operation-of-law procedure in
this final rule alleviates both of these
concerns. As noted, the procedure
differs from the Christian doctrine
because—like under the existing
regulation at § 1.6(f)—contractors will
be compensated for any increase in
costs caused by the government’s failure
to properly incorporate the clauses or
wage determinations. The proposed
procedure therefore will not undermine
contractors’ reliance on an initial
determination by the contracting agency
that the DBRA did not apply or that a
wage determination with lower rates
applied.261 In light of the clear rule
See 48 FR 19532. Moreover, although the
Department has used § 1.6(f) to address post-award
coverage determinations, as noted here, the
language of that paragraph references wage
determinations and does not explicitly address the
omission of required contract clauses. The
Department now seeks to remedy that ambiguity in
§ 1.6(f) by adding similar language to § 5.6, as
discussed below, in addition to the proposed
operation-of-law language at § 5.5(e).
261 For the same reason, the BellSouth case cited
by the Wiley Rein partners does not undermine the
Department’s logic. In that case, after the
government unilaterally modified a contract
pursuant to 29 CFR 1.6(f), the government denied
part of a request for compensation, and attempted
to use the Christian doctrine to circumvent the
requirement for compensation in § 1.6(f) and the
applicable FAR provisions. ASBCA No. 45955,
Sept. 27, 1994, 94–3 BCA ¶ 27231. Under the
proposed operation-of-law provision in § 5.5(e), to
the contrary, the Department is specifying that
when the contract clauses are effective by operation
of law, contractors will be compensated ‘‘for any
resulting increase in wages in accordance with
applicable law.’’
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requiring compensation, the Department
is not persuaded by the concerns raised
by commenters that contracting agencies
might simply ignore the compensation
requirement.262
Nor does the operation-of-law rule
risk creating an end-run around the
administrative procedures set up by
contracting agencies and the
Department pursuant to Reorganization
Plan No. 14. Instead, the provision will
function as part of an administrative
structure implemented by the
Administrator and subject to the
Administrator’s decision to grant a
variance, tolerance, or exemption. Its
enactment should not affect one way or
another whether any implied private
right of action exists under the statute.
Executive Order 11246 provides a
helpful comparator. In 1968, the
Department promulgated the regulation
clarifying that the Executive Order’s
equal opportunity contract clause would
be effective by ‘‘operation of the Order’’
regardless of whether it is physically
incorporated into the contract. 41 CFR
60–1.4(e). That regulation was upheld,
and the Christian doctrine was also
found to apply to the required equal
opportunity contract clause. See Miss.
Power & Light, 638 F.2d at 905–06.
Nonetheless, courts have widely held
that E.O. 11246 does not convey an
implied private right of action. See, e.g.,
Utley v. Varian Assocs., Inc., 811 F.2d
1279, 1288 (9th Cir. 1987).
The Department has also considered
whether the operation-of-law provision
will lead to an increase in bid protest
litigation or expand the authority of the
Court of Federal Claims or other
contracting appeal tribunals to develop
their own case law on the application of
the DBRA without the input of the
Department. In exploring this question,
the Department considered proposing
an alternative procedure in which the
operation-of-law rule would only
become effective after a determination
by the Administrator or a contracting
agency that a contract was in fact
covered. The Department, however,
does not believe that such an approach
is necessary because both the GAO and
the Federal Circuit maintain strict
waiver rules that prohibit post-award
bid protests based on errors or
ambiguities in the solicitation. See NCS/
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262 The
Department is not persuaded by the
speculation from the group of U.S. Senators that
contracting agencies might ‘‘use the threat of
refusing to award contracts in the future’’ in order
to pressure contractors not to seek compensation.
The Department is not aware of any basis on which
a contracting agency would be permitted to deny
future awards because a contractor sought
reimbursement under that regulation that expressly
provides for such compensation.
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335854, at *8 n.10 (Comp. Gen. Jan. 14,
2016) (collecting GAO decisions); Blue
& Gold Fleet, L.P. v. United States, 492
F.3d 1308, 1312–13 (Fed. Cir. 2007).263
The operation-of-law provision as
enacted in this final rule also will not
affect the well-settled case law in the
Court of Federal Claims—developed
after the Coutu decision—that only the
Department of Labor has jurisdiction to
resolve disputes arising out of the labor
standards provisions of the contract. As
part of the post-Coutu 1982 final rule,
the Department enacted a provision at
29 CFR 5.5(a)(9) that requires a disputes
clause with that jurisdictional limitation
to be included in all DBRA-covered
contracts. See 47 FR 23660–61 (final
rule addressing comments received on
the proposal). The labor standards
disputes clause creates an exception to
the Contract Disputes Act of 1974 and
effectively bars the Court of Federal
Claims from deciding substantive
matters related to the Davis-Bacon Act
and Related Acts. See, e.g., Emerald
Maint., Inc. v. United States, 925 F.2d
1425, 1428–29 (Fed. Cir. 1991). Under
the operation-of-law provision, the
disputes clause at § 5.5(a)(9) will
continue to be effective even when it
has been omitted from a contract
because the language of the operationof-law provision applies the principle to
all of the required contract clauses in
§ 5.5(a)—including § 5.5(a)(9). As a
result, under the operation-of-law
provision, disputes regarding DBRA
coverage or other related matters arising
under § 5.5(a)(9) should continue to be
heard only through the Department’s
administrative process instead of or
prior to any judicial review in the Court
of Federal Claims, and there is no
reason to believe that the
implementation of the operation-of-law
provision would lead to a parallel body
of case law in that venue.
The Department has also considered
the Wiley Rein partners’ concern that
the operation-of-law provision could
result in litigation pursuant to the False
Claims Act (FCA). See 31 U.S.C. 3729 et
seq. The FCA, which applies to claims
submitted by contractors for payment
under the DBRA, provides an important
avenue for private whistleblowers to
assist the government in recovering
funds that have been paid out as a result
263 In Blue & Gold, the National Park Service
failed to include the SCA contract clauses in a
contract that the Department of Labor later
concluded was covered by the Act. The Federal
Circuit denied the bid protest from a losing bidder
because ‘‘a party who has the opportunity to object
to the terms of a government solicitation containing
a patent error and fails to do so prior to the close
of the bidding process waives its ability to raise the
same objection subsequently in a bid protest action
in the Court of Federal Claims.’’ 492 F.3d at 1313.
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of false or fraudulent claims. See, e.g.,
United States ex rel. Int’l Bhd. of Elec.
Workers Loc. 98 v. Farfield Co., 5 F.4th
315, 343 (3d Cir. 2021). To be
actionable, the FCA requires false
claims to be ‘‘material’’ to the
Government’s decision to make
payments in response to the claims. Id.
at 342 (citing 31 U.S.C. 3729(a)(1)(B)).
Where a DBA contractor fails to comply
with the DBRA contract clauses, the
regulations require contracting agencies
to suspend payments to the contractor.
See 29 CFR 5.9 (stating in the event of
a contractor’s compliance failure, the
government ‘‘shall’’ take action if
necessary to suspend payments). And
where a contractor knowingly
misrepresents information on the
certified payroll it must submit, it
subjects itself to potential criminal
penalties for false statements (which are
referenced on the certified payroll forms
themselves) and debarment.264
The circumstances may be different,
however, where no certified payroll has
been submitted because the contract
clause has been omitted entirely from
the contract by the contracting agency.
As noted in the NPRM, debarment
requires some degree of intent, so it
would generally not be appropriate to
debar a contractor for violations where
the contracting agency omitted the
contract clause and the clause was
subsequently incorporated retroactively
or found to be effective by operation of
law. The FCA also has a scienter
requirement that, like the DBRA
debarment standard, requires a level of
culpability beyond negligence. See
United States v. Comstor Corp., 308 F.
Supp. 3d 56, 88 (D.D.C. 2018). Whether
the FCA scienter requirement can be
satisfied will depend on the facts and
circumstances of any individual case.
For example, where a contracting
agency omits the contract clauses based
on case law or guidance from the
Department that is public or shared with
the contractor, a relator would be
unlikely to be able to satisfy the FCA’s
scienter requirement for the same
reasons that debarment would generally
not be appropriate. For these reasons,
there is no certainty that the operationof-law provision will lead to a
264 The Department pursues recovery (and
suspension or withholding as necessary) regardless
of the amount of unpaid wages. Davis-Bacon
enforcement efforts at the Department in the last
decade have resulted in the recovery of more than
$229 million in back wages for over 76,000 workers.
see 2020 GAO Report, at 39, supra note 14. This
recovery occurred across 14,639 compliance
determinations, meaning that the average recovery
in a compliance investigation was under $16,000.
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significant expansion of FCA
disputes.265
Finally, the Wiley Rein partners’
concern about arbitrators potentially
deciding Davis-Bacon coverage issues
does not warrant a different approach.
The Department believes it is unlikely
that arbitrators will be asked to consider
Davis-Bacon questions with any
frequency. When a dispute turns on
Davis-Bacon determinations that
implicate the Department’s technical
expertise, arbitration is not appropriate.
See IBEW Local 113 v. T&H Services, 8
F.4th 950, 962–63 (10th Cir. 2021).
Moreover, mandatory pre-dispute
arbitration agreements neither prevent
workers from alerting agencies to
potential violations of the law nor limit
agencies’ authority to pursue
appropriate enforcement measures in
response to worker complaints. See
EEOC v. Waffle House, Inc., 534 U.S.
279, 287 (2002). To the extent that any
arbitrator considers a Davis-Bacon
coverage question, however, it would
not run the risk of creating a separate
body of law because arbitration
decisions are generally sealed and nonprecedential.
Given all of these continued
safeguards and considerations, the
Department believes it is not necessary
to expressly limit the proposed
operation-of-law provision to be
effective only after the Department or a
contracting agency determines that
contract clauses or wage determinations
were erroneously omitted, as the Wiley
Rein partners advocated.
The Department also considered the
Wiley Rein partners’ suggestion to
replace the operation-of-law provision
with post-award procedures similar to
the SCA regulation at 29 CFR 4.5(c). The
SCA regulation at § 4.5(c) is similar to
the existing DBRA regulation at § 1.6(f).
It covers situations where the
Department discovers that a contracting
agency made an erroneous
determination that the SCA did not
apply to a particular contract and/or
failed to include an appropriate wage
determination in the contract. Id.
§ 4.5(c). In those situations, the SCA
regulation states that the contracting
agency has 30 days from the notification
by the Department to incorporate the
missing clauses or wage determinations
through the exercise of any all authority
that may be needed, including through
265 AFP–I4AW also expressed a generalized
concern about increased litigation from the
operation-of-law provision. As there is no certainty
that the provision will increase bid protests, claims
in the Court of Federal Claims, or FCA litigation,
the Department does not agree that such generalized
concern is a persuasive reason to decline to adopt
the proposal.
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its authority to pay any additional costs.
Id. It also states that the Department can
require retroactive application. Id. The
Wiley Rein partners wrote that a
primary benefit of this proposal would
be to avert FCA litigation or other
disputes. For the reasons discussed
above, the Department is not persuaded
that the final rule will lead to a
significant increase in FCA or other
litigation.
This language from § 4.5(c), moreover,
does not fully address the underlying
problems that the Department is seeking
to address with the operation-of-law
provision. Section 4.5(c) still leaves the
Department’s enforcement efforts
dependent on the willingness or ability
of contracting agencies to pursue
modification of a contract at the
Department’s direction, and the speed
with which they accomplish the
necessary modification. While many
agencies timely act in response to the
Department’s requests under § 4.5(c),
the Department has also experienced
many of the same challenges enforcing
the SCA under § 4.5(c) as it has
experienced enforcing the DBRA under
§ 1.6(f). Thus, modeling the updated
DBRA post-award modification
regulations based on § 4.5(c) would be
an improvement over the current status
quo, but such a rule would not resolve
the contract-modification issues that
have motivated the operation-of-law
proposal.
While the Department declines to
replace the operation-of-law provision
with a § 4.5(c)–type provision, some of
the Wiley Rein partners’ animating
concerns are nonetheless addressed in
the related aspects of the final rule. For
example, for contracts covered by both
the DBA and SCA, the partners stated
that their proposal would simplify
contract administration by allowing
contracting agencies to be able to make
both DBA and SCA contract
modifications in the same contract
modification. Using similar contractmodification procedures for each Act
would allow this. However, the
existence of an operation-of-law
provision in the DBRA regulations is not
an obstacle to this sort of coordination.
As described in the NPRM, the
operation-of-law provision is intended
to work in tandem with the existing
wage-determination modification
procedure at § 1.6(f), as well as the new
contract-modification procedure in
§ 5.6(a)(1)(ii). Thus, notwithstanding an
operation-of-law provision, the
Department could still issue a direction
to a contracting agency to incorporate
new terms for application of both the
SCA and DBRA in the same contract.
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Similarly, the final rule addresses the
Wiley Rein partners’ concern about the
need for a clear date marking the
dividing line between prospective and
retroactive applicability. The language
in § 5.5(e) specifically subjects such a
determination to the Administrator’s
authority to grant a variance, tolerance,
or exemption. As noted in the NPRM,
this includes the authority to limit
retroactive enforcement traditionally
exercised under 29 CFR 1.6(f). Thus,
when the Administrator issues a
coverage determination pursuant to the
operation-of-law provision, the
Administrator will be authorized to
make a decision about the date back to
which the retroactive application will
be enforced and the date from which
prospective application is required. Cf.
FlightSafety Def. Corp., ARB No. 2022–
0001, slip op. at 16–19 (Feb. 28, 2022)
(affirming the Administrator’s
determination, in an SCA matter, that
under the circumstances of that case the
prospective application of a missing
contract clause should begin at the start
of the subsequent Contract Line Item
Number period). This authority should
sufficiently allay the Wiley Rein
partners’ concerns.
The Department has considered
AGC’s request for further clarification
regarding the manner in which the
compensation requirement would work.
The language of § 5.5(e) requires that
compensation should be made ‘‘in
accordance with applicable law.’’ As a
general matter, the FAR will provide the
applicable law for direct Federal
procurement contracts. The FAR
currently includes price adjustment
clauses applicable to different types of
Davis-Bacon contracts. See, e.g., 48 CFR
52.222–30, 52.222–31 and 52.222–32.
Because the FAR and its priceadjustment contract clauses provide
applicable law, the Department does not
believe it is appropriate to adopt
CC&M’s suggestion to mandate that
contractors be reimbursed 150 percent
of the difference between current and
required wage rates. The Department
also does not believe that it is necessary
to penalize contracting agencies when
the compensation provision alone
already provides sufficient incentive to
agencies to ensure that contract clauses
and applicable wage determinations are
correctly incorporated into covered
contracts.
Finally, the Wiley Rein partners
suggested that the Department should
defer the effective date for the
operation-of-law provision until the
FAR is updated to expressly require
equitable adjustments in these
circumstances. In the DATES section of
this final rule, the Department discusses
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the applicability date of the rule. See
also infra section III.C (‘‘Applicability
Date’’). The provisions of parts 3 and 5
of the final rule (including the
operation-of-law provisions at §§ 3.11(e)
and 5.5(e)) are generally applicable only
to contracts entered into after the
effective date of the final rule.
Once the operation-of-law provision
at § 5.5(e) is effective and applicable to
a contract, it will require the
incorporation as a matter of law of any
omitted contract clauses and wage
determinations that would have been
appropriate and necessary to include in
the contract at the time the contract was
entered into. Because § 5.5(e) will
generally only apply to contracts newly
entered into after the applicability date,
the Department would not interpret
§ 5.5(e) to require the contract clause
provisions as amended in this final rule
to be incorporated by operation of law
to replace the contract clauses that have
already been physically incorporated
into contracts entered into before the
applicability date. Similarly, § 5.5(e)
would not incorporate the contract
clauses into any contract from which
the clauses have been wrongly omitted,
unless that contract has been entered
into after the effective date of the final
rule. For any contracts entered into
prior to the effective date of the final
rule that are missing required contract
clauses or wage determinations, the
Department will seek to address any
omissions solely through the
modification provisions in the existing
regulation at § 1.6(f).
The Department declines to defer the
effective date of the operation-of-law
provision at § 5.5(e) for contracts
governed by the FAR, but has amended
§ 5.5(e) to clarify how the provision
interacts with the FAR. The final rule
clarifies that for contracts governed by
the FAR, the contract clauses that are
made effective by operation of law are
the Davis-Bacon contract clauses in the
FAR itself. Accordingly, for any
contracts that are entered into after the
effective date of the final rule but before
the effective date of any amendment to
the FAR (including an amendment to
the required FAR DBRA contract
clauses), § 5.5(e) would incorporate by
operation-of-law the FAR contract
clauses that are mandatory under the
FAR regulation in effect at the time the
FAR contract was entered into. As a
result, it is not necessary to defer the
effective date of § 5.5(e).
The final rule thus adopts the
regulatory text of § 5.5(e) as proposed,
with the limited modification discussed
above.
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(2) § 3.11 Application of Copeland Act
Regulations
The Department also proposed a
revision to § 3.11 to conform to the
‘‘operation of law’’ provision in § 5.5(e).
Section 3.11 currently requires all
covered contracts to ‘‘expressly bind the
contractor or subcontractor to comply’’
with the applicable regulations from
part 3. 29 CFR 3.11. The existing
regulations then reference § 5.5(a)’s
longstanding requirement that agency
heads require contracting officers to
insert appropriate contract clauses into
all covered contracts. See id. The
contract clause at § 5.5(a)(3)(ii) contains
the certified payroll requirements that
are derived from and mirror the
requirements in part 3. See section
III.B.3.iii.(B).
The proposed new operation-of-law
paragraph in § 5.5(e) makes all of the
contract clauses required by § 5.5(a)
effective by operation of law even when
they have been wrongly omitted from a
covered contract. Thus, in accordance
with § 5.5(e), the recordkeeping
requirements in the contract clause at
§ 5.5(a)(3)(ii) are made effective by
operation of law where necessary. The
Department proposed the amendment to
§ 3.11 as a conforming change to
provide notice to contractors that the
applicable part 3 regulations, required
to be included in every contract by that
provision, are effective by operation of
law where necessary.
UBC expressed support for the
proposed change to § 3.11, writing that
it would improve application and
enforcement of the DBRA standards.
AFPF–I4AW opposed the operation-oflaw addition to § 3.11, arguing that the
change will lead to greater litigation and
wasted resources. The Department has
considered these comments, which
parallel the comments received on
§ 5.5(e). The Department believes that
the proposed language in § 3.11
provides appropriate additional notice
that the regulations in part 3 govern
DBRA-covered contracts whether or not
their requirements have been physically
included through a contract clause or
otherwise. For the same reasons
articulated above with regard to § 5.5(e),
the Department does not believe that the
operation-of-law provision will
significantly increase litigation or
otherwise waste resources. By making
required contract clauses effective by
operation of law, the Department will
avoid the enforcement challenges that
have arisen in the application of the
current contract-modification provision
at § 1.6(f). The final rule therefore
adopts the language of § 3.11 as
proposed.
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(3) § 5.5(d) Incorporation of Contract
Clauses and Wage Determinations by
Reference
The Department proposed a new
provision at § 5.5(d) to clarify that the
clauses and wage determinations are
equally effective if they are incorporated
by reference, notwithstanding the
requirement in § 5.5(a) that contracting
agencies insert contract clauses ‘‘in full’’
into non-FAR contracts and the
language of the contract clause at
§ 5.5(a)(1)(i) that specifies that the
applicable wage determination ‘‘is
attached’’ to such contracts. As the
Department noted in the NPRM, this
follows from the FAR and the common
law of contract. Under the FAR, a
contract that contains a provision
expressly incorporating the clauses and
the applicable wage determination by
reference may be tantamount to
insertion in full. See 48 CFR 52.107,
52.252–2. And, as a general matter, the
terms of a document appropriately
incorporated by reference into a contract
effectively bind the parties to that
contract. See 11 Williston on Contracts
section 30:25 (4th ed.) (‘‘Interpretation
of several connected writings’’).
Only one commenter, CC&M,
referenced this proposed language. In
the comment, CC&M stated general
opposition to the idea that incorporation
by reference can be just as effective as
inserting the full Davis-Bacon contract
section. The comment did not address
the common use of incorporation by
reference in the FAR or in the common
law. The Department agrees with CC&M
that it is preferable for contracting
agencies to insert contract clauses and
wage determinations in full into covered
contracts. That is why the Department
maintained instructions to contracting
agencies in § 5.5(a) that they continue to
be required to insert the contract clauses
‘‘in full’’ into non-FAR-covered
contracts.266 The Department does not
agree, however, that the failure by a
contracting agency to do so should
result in a disregard of the statutory
command that a contract should be
covered and the workers on the contract
paid a prevailing wage. This is
particularly true where the contract
includes express language making
compliance with the DBRA a term of the
agreement. In such a situation, it
generally would be sufficient under the
common law to find the missing
contract clauses and wage
determinations to be effective through
incorporation by reference. The same
266 The Department, however, has revised its
instructions in § 5.5(a) to reflect that it is FAR
convention to incorporate clauses by reference, as
opposed to in full text.
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should be true under a statute that has
the recognized purpose of protecting
workers and ensuring that they are paid
prevailing wages. See Binghamton
Constr. Co., 347 U.S. at 178.
As the Department explained in the
NPRM, these various proposed parallel
regulatory provisions are consistent and
work together. They require the best
practice of physical insertion or
modification of contract documents (or,
where warranted, incorporation by
reference), so as to provide effective
notice to all interested parties, such as
contract assignees, subcontractors,
sureties, and employees and their
representatives. At the same time, they
create a safety net to ensure that where
any mistakes are made in initial
determinations, the prevailing wage
required by statute will still be paid to
the laborers and mechanics on covered
projects.
Accordingly, the final rule adopts the
language of § 5.5(d) as proposed.
(4) § 1.6(f) Post-Award Correction of
Wage Determinations
In addition to the operation-of-law
language at § 5.5(e), the Department
proposed to make several changes to the
regulation at § 1.6(f) that contains the
current post-award procedure requiring
contracting agencies to incorporate an
omitted wage determination. First, as
discussed above in section III.B.1.vi.
(§ 1.6 Use and effectiveness of wage
determinations), the Department
proposed adding titles to § 1.6(a)–(g) in
order to improve readability of the
section as a whole. The proposed title
for § 1.6(f) was ‘‘Post-award
determinations and procedures.’’ The
Department also proposed dividing
§ 1.6(f) into multiple paragraphs to
improve the organization and
readability of the important rules it
articulates.
At the beginning of the section, the
Department proposed a new § 1.6(f)(1),
which explains generally that if a
contract subject to the labor standards
provisions of the Acts referenced by
§ 5.1 is entered into without the correct
wage determination(s), the relevant
agency must incorporate the correct
wage determination into the contract or
require its incorporation. The
Department proposed to add language to
§ 1.6(f)(1) expressly providing for an
agency to incorporate the correct wage
determination post-award ‘‘upon its
own initiative’’ as well as upon the
request of the Administrator. The
current version of § 1.6(f) explicitly
provides only for a determination by the
Administrator that a correction must be
made. Some contracting agencies had
interpreted the existing language as
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precluding an action by a contracting
agency alone—without action by the
Administrator—to modify an existing
contract to incorporate a correct wage
determination. The Department
proposed the new language to clarify
that the contracting agency can take
such action alone. Where a contracting
agency does intend to take such an
action, proposed language at
§ 1.6(f)(3)(iii) would require it to notify
the Administrator of the proposed
action.
In the proposed reorganization of
§ 1.6(f), the Department located the
discussion of the Administrator’s
determination that a correction is
necessary in a new § 1.6(f)(2). The only
proposed change to the language of that
paragraph was not substantive. The
current text of § 1.6(f) refers to the
action that the Administrator may take
as an action to ‘‘issue a wage
determination.’’ However, in the
majority of cases, where a wage
determination is not included in the
contract, the proper action by the
Administrator will not be to issue a new
or updated wage determination, as that
term is used in § 1.6(c), but to identify
the appropriate existing wage
determination that applies to the
contract. Thus, to eliminate any
confusion, the Department proposed to
amend the language in this paragraph to
describe the Administrator’s action as
‘‘requir[ing] the agency to incorporate’’
the appropriate wage determination. To
the extent that, in an exceptional case,
the Department would need to ‘‘issue’’
a new project wage determination to be
incorporated into the contract, the
proposed new language would require
the contracting agency to incorporate or
require the incorporation of that newly
issued wage determination.
The Department also proposed to
amend the language in § 1.6(f) that
describes the potential corrective
actions that an agency may take. In a
non-substantive change, the Department
proposed to refer to the wage
determinations that must be newly
incorporated as ‘‘correct’’ wage
determinations instead of ‘‘valid’’ wage
determinations. This is because the
major problem addressed in § 1.6(f)—in
addition to the failure to include any
wage determination at all—is the use of
the wrong wage determinations. Even
while wrong for one contract, a wage
determination may be valid if used on
a different contract to which it properly
applies. It is therefore more precise to
describe a misused wage determination
as incorrect rather than invalid. The
proposed amendment would also add to
the reference in the current regulation at
§ 1.6(f) to ‘‘supplemental agreements’’ or
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‘‘change orders’’ as the methods for
modifying contracts post-award to
incorporate valid wage determinations.
The Department proposed, in a new
§ 1.6(f)(3), to instruct that agencies make
such modifications additionally through
the exercise of ‘‘any other authority that
may be needed.’’ This language parallels
the Department’s regulation at 29 CFR
4.5 for similar circumstances under the
SCA.
The Department also proposed to
make several changes to § 1.6(f) to
clarify that the requirements apply
equally to projects carried out with
Federal financial assistance as they do
to DBA projects. The proposed initial
paragraph at § 1.6(f)(1) contains new
language that states expressly that
where an agency is providing Federal
financial assistance, ‘‘the agency must
ensure that the recipient or subrecipient of the Federal assistance
similarly incorporates the correct wage
determination(s) into its contracts.’’
Similarly, the reference to agencies’
responsibilities in proposed new
§ 1.6(f)(3) requires an agency to
terminate and resolicit the contract or to
‘‘ensure’’ the incorporation (in the
alternative to ‘‘incorporating’’ the
correct wage determination itself)—in
recognition that this language applies
equally to direct procurement where the
agency is a party to a DBA-covered
contract and Related Acts where the
agency must ensure that the relevant
State or local agency incorporates the
corrected wage determination into the
covered contract. Finally, the
Department also proposed to amend the
requirement that the incorporation
should be ‘‘in accordance with
applicable procurement law’’ to instead
reference ‘‘applicable law.’’ This change
is intended to recognize that the
requirements in § 1.6 apply also to
projects executed with Federal financial
assistance under the Related Acts, for
which the Federal or State agency’s
authority may not be subject to Federal
procurement law. None of these
proposed changes represent substantive
changes, as the Department has
historically applied § 1.6(f) equally to
both DBA and Related Act projects. See,
e.g., City of Ellsworth, ARB No. 14–042,
2016 WL 4238460, at *6–8.
In the new § 1.6(f)(3)(iv), the
Department proposed to include the
requirements from the existing
regulations that contractors must be
compensated for any change and that
the incorporation must be retroactive to
the beginning of the construction. That
retroactivity requirement, however, is
amended to include the qualification
that the Administrator may direct
otherwise. As noted above, the
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Administrator may make determinations
of non-retroactivity on a case-by-case
basis. In addition, consistent with the
SCA regulation on post-award
incorporation of wage determinations at
29 CFR 4.5(c), the Department proposed
including language in a new
§ 1.6(f)(3)(ii) to require that
incorporation of the correct wage
determination be accomplished within
30 days of the Administrator’s request,
unless the agency has obtained an
extension.
The Department also proposed to
include new language at § 1.6(f)(3)(v),
applying to Related Acts, instructing
that the agency must suspend further
payments or guarantees if the recipient
refuses to incorporate the specified
wage determination and that the agency
must promptly refer the dispute to the
Administrator for further proceedings
under § 5.13. This language is a
clarification and restatement of the
existing enforcement regulation at
§ 5.6(a)(1), which provides that no such
payment or guarantee shall be made
‘‘unless [the agency] ensures that the
clauses required by § 5.5 and the
appropriate wage determination(s) are
incorporated into such contracts.’’
In proposed new language at
§ 1.6(f)(3)(vi), the Department included
additional safeguards for the
circumstances in which an agency does
not retroactively incorporate the missing
clauses or wage determinations and
instead seeks to terminate the contract.
The proposed language provided that
before termination, the agency must
withhold or cross-withhold sufficient
funds to remedy any back wage liability
or otherwise identify and obligate
sufficient funds through a termination
settlement agreement, bond, or other
satisfactory mechanism. This language
is consistent with the existing FAR
provision at 48 CFR 49.112–2(c) that
requires contracting officers to ascertain
whether there are any outstanding labor
violations and withhold sufficient funds
if possible before forwarding the final
payment voucher. It is also consistent
with the language of the template
termination settlement agreements at 48
CFR 49.602–1 and 49.603–3 that seek to
ensure that any termination settlement
agreement does not undermine the
government’s ability to fully satisfy any
outstanding contractor liabilities under
the DBRA or other labor clauses.
Finally, the Department included a
proposed provision at § 1.6(f)(4) to
clarify that the specific requirements of
§ 1.6(f) to physically incorporate the
correct wage determination operate in
addition to the proposed requirement in
§ 5.5(e) that makes the correct wage
determination applicable by operation
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of law. As discussed above, such
amendment and physical incorporation
(including incorporation by reference) is
helpful in order to provide notice to all
interested parties, such as contract
assignees, subcontractors, sureties, and
employees and their representatives.
Two contractor associations, CEA and
SMACNA, generally expressed support
for the Department’s proposed
amendments to § 1.6(f). They noted in
particular that the proposed
amendments would allow contracting
agencies to incorporate correct wage
determinations upon their own
initiative as well as at the request of the
Administrator. These two commenters,
along with the UBC, supported the
proposed language at § 1.6(f)(4) that
states the operation-of-law provision at
§ 5.5(e) would operate in tandem with
the requirement that contracting
agencies insert wage determinations
into contracts where they have been
omitted.
In contrast, ABC opposed the
proposed changes to § 1.6(f), stating that
the proposal would allow contracting
agencies to make a change ‘‘without a
determination from WHD of special
circumstances justifying such
incorporation’’ as required by current
rules. ABC argued that this ‘‘threatens
contractors with improper changes to
their government contracts post-award.’’
ABC also stated that the proposed new
language at § 1.6(f)(3)(vi) that requires
withholding before contract termination
‘‘imposes new withholding and crosswithholding requirements that violate
longstanding understandings of the
contract-based scope of the DBA and
FAR contract requirements.’’
AGC stated that the proposed
language needs additional clarification.
As AGC noted, the proposed rule stated
at § 1.6(f)(3)(i) that ‘‘[u]nless the
Administrator directs otherwise, the
incorporation of the clauses required by
§ 5.5 must be retroactive.’’ AGC
requested clarification about whether
the Administrator’s authority to
‘‘direct[ ] otherwise’’ applies only to the
retroactive incorporation or also to the
requirement that contractors must be
compensated for any increased costs as
a result. AGC also asked two other
questions regarding compensation: first,
whether the proposal would allow the
Administrator to deny compensation to
contractors when a wage determination
is retroactively included; and second,
what would happen if a missing wage
determination were not retroactively
included in a contract. AGC stated that
it is absolutely necessary that prime
contractors be compensated for
increased costs that result from a
contracting agency failure.
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The Department considered the
comments received regarding the
proposed revisions to § 1.6(f) and agrees
with the commenters supporting the
amendments to this section. Allowing
contracting agencies to take action to
correct missing or incorrect wage
determinations will streamline
compliance and enforcement. Earlier
action to remedy such problems will be
more protective of workers, who
otherwise may need to wait a longer
time to receive the prevailing wages
they are due. In response to ABC’s
comment about ‘‘improper changes,’’
the Department notes that proposed
§ 1.6(f)(3)(iii) requires agencies to
provide notice to the Administrator of
their proposed action before they
require incorporation on their own
initiative. This requirement provides the
Department with the opportunity to
help ensure that the contracting
agency’s proposed action is appropriate.
The Department also considered ABC’s
comments about withholding, but those
comments appear to be directed toward
the Department’s cross-withholding
proposals. The Department has
addressed comments regarding these
proposals in section III.B.3.xxiii
(‘‘Withholding’’).
The proposed language at § 1.6(f)(3)(i)
addressed the Administrator’s authority
to direct that a newly incorporated wage
determination should not be enforced
retroactively to the beginning of the
contract. The Administrator does not
have separate authority to ‘‘direct[]
otherwise’’ with regard to contractor
compensation. Rather, the proposed
language of § 1.6(f)(3)(iv) states that the
contractor must be compensated for any
increases in wages resulting from
incorporation of a missing wage
determination, and the language at
proposed § 1.6(f)(3) states that the
method of adjustment in contract prices
‘‘should be in accordance with
applicable law.’’ For direct Federal
procurement contracts, the extent to
which compensation is due, if any, is
governed by the FAR and any price
adjustment clauses applicable to
different types of Davis-Bacon contracts.
See, e.g., 48 CFR 52.222–30, 52.222–31
and 52.222–32.
The provisions regarding
compensation in § 1.6(f) apply where
the contracting agency incorporates the
correct wage determination into a
contract post-award. They do not apply
in the hypothetical AGC provides, in
which the contractor believes that a
wage determination is missing and the
missing wage determination is not
retroactively included in the contract.
While it is important for enforcement
purposes that the Department and
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contracting agencies have the ability to
modify an award to correct errors (with
appropriate compensation), the
Department has generally found it to be
inappropriate for a contractor to seek to
modify wage determinations post-award
to attempt to receive compensation for
wage rates it has been paying already.
See Joe E. Woods, Inc., ARB No. 96–127,
1996 WL 678774 (Nov. 19, 1996).
The Department proposed several of
the changes to § 1.6(f) in order to borrow
language from the similar SCA
provision at 29 CFR 4.5(c). That
provision, as noted in the comment by
the Wiley Rein partners, has been timetested in the many years it has been in
effect to address post-award
modifications under the SCA. The
changes proposed to § 1.6(f) are
common-sense changes that provide
clarity and consistency to the process of
addressing circumstances where no
wage determination, or the wrong wage
determination, was attached to a
covered contract. The changes will
benefit construction workers by
ensuring that they receive back wages
owed to them in a timely manner.
The final rule therefore adopts the
revisions to § 1.6(f) as proposed.
(6) § 5.6(a)(1) Post-Award Incorporation
of Contract Clauses
The Department proposed to revise
§ 5.6(a)(1) to include language expressly
providing a procedure for determining
that the required contract clauses were
wrongly omitted from a contract. As
noted above, the Department has
historically sought the retroactive
incorporation of missing contract
clauses by reference to the language
regarding wage determinations in
§ 1.6(f). In the NPRM, the Department
proposed to eliminate any confusion by
creating a separate procedure at
§ 5.6(a)(1)(ii) that will apply specifically
to missing contract clauses in a similar
manner as § 1.6(f) continues to apply to
missing or incorrect wage
determinations.
The Department proposed to revise
§ 5.6(a)(1) by renumbering the existing
regulatory text as § 5.6(a)(1)(i), and
adding an additional paragraph,
(a)(1)(ii), to include the provision
clarifying that where a contract is
awarded without the incorporation of
the Davis-Bacon labor standards clauses
required by § 5.5, the agency must
incorporate the clauses or require their
incorporation. This includes
circumstances where the agency does
not award a contract directly but instead
provides funding assistance for such a
contract. In such instances, the Federal
agency, or other agency where
appropriate, must ensure that the
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recipient or subrecipient of the Federal
assistance incorporates the required
labor standards clauses retroactive to
the date of contract award, or the start
of construction if there is no award.
The proposed paragraph at
§ 5.6(a)(1)(ii) contained a similar set of
provisions as § 1.6(f), as modified by the
amendments to that paragraph proposed
in the NPRM. These included that the
incorporation must be retroactive unless
the Administrator directs otherwise;
that retroactive incorporation may be
required by the request of the
Administrator or upon the agency’s own
initiative; that incorporation must take
place within 30 days of a request by the
Administrator, unless an extension is
granted; that the agency must withhold
or otherwise obligate sufficient funds to
satisfy back wages before any contract
termination; and that the contractor
should be compensated for any increase
in costs resulting from any change
required by the paragraph.
The Department also proposed to
clarify the application of the current
regulation at § 5.6(a)(1), which states
that no payment, advance, grant, loan,
or guarantee of funds will be approved
unless the Federal agency ensures that
the funding recipient or sub-recipient
has incorporated the required clauses
into any contract receiving the funding.
Similar to the proposed provision in
§ 1.6(f)(3)(v), a new proposed provision
at § 5.6(a)(1)(ii)(C) explains that such a
required suspension also applies if the
funding recipient refuses to
retroactively incorporate the required
clauses. In such circumstances, the
issue must be referred promptly to the
Administrator for resolution.
Similar to the proposed provision at
§ 1.6(f)(4), the Department also proposed
a provision at § 5.6(a)(1)(ii)(E) that
explains that the physical-incorporation
requirements of § 5.6(a)(1)(ii) would
operate in tandem with the proposed
language at § 5.5(e), making the contract
clauses and wage determinations
effective by operation of law.
The proposed changes clarify that the
requirement to incorporate the DavisBacon labor standards clauses is an
ongoing responsibility that does not end
upon contract award, and the changes
expressly state the Department’s
longstanding practice of requiring the
relevant agency to retroactively
incorporate, or ensure retroactive
incorporation of, the required clauses in
such circumstances. As discussed
above, such clarification is warranted
because agencies occasionally have
expressed confusion about—and even
questioned whether they possess—the
authority to incorporate, or ensure the
incorporation of, the required contract
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clauses after a contract has been
awarded or construction has started.
The proposed changes similarly make
clear that while agencies must
retroactively incorporate the required
clauses upon the request of the
Administrator, agencies also have the
authority to make such changes on their
own initiative when they discover that
an error has been made. The proposed
changes also eliminate any confusion of
the recipients of Federal funding as to
the extent of the Federal funding
agency’s authority to require such
retroactive incorporation in federally
funded contracts subject to the DavisBacon labor standards. Finally, the
proposed changes do not alter the
provisions of 29 CFR 1.6(g), including
its provisos.
The Department received only one
comment, from ABC, regarding the
proposed revisions to § 5.6(a). ABC
referenced its concerns about the
§ 5.5(e) operation-of-law provision and
stated that the proposal at § 5.6(a)
‘‘again holds contractors responsible
without notice of DBA requirements.’’
The comment added that ‘‘[u]ntil now,
contractors have not been held
responsible for DBA compliance’’ in
these circumstances and continued that
‘‘[c]hanging contract requirement after
award is forbidden unless specific
requirements of the FAR are satisfied.’’
ABC also stated that the NPRM is
‘‘unclear or else fails to justify the
apparent expansion in the scope of the
DBA’s coverage.’’
The Department disagrees with ABC.
As explained above, these revisions
merely codify the Department’s practice
of requiring contracting agencies to take
the necessary steps to correct contracts
which omit required clauses and does
not represent an expansion in ‘‘the
scope of the DBA’s coverage.’’ Although
§ 1.6(f) expressly references only the
authority of the Department to direct the
incorporation of missing wage
determinations, the Department has
consistently interpreted that language as
including by necessity the authority to
request the incorporation of erroneously
omitted contract clauses. See, e.g.,
DBRA–131 (Apr. 18, 1985) (requesting
the contracting agency take action ‘‘in
accordance with section 1.6(f) of
Regulations, 29 CFR part 1, to include
the Davis-Bacon provisions and an
applicable wage decision’’ in a contract
from which the contract clauses were
erroneously omitted). Accordingly, the
rule neither imposes new DBA
responsibilities on contractors nor
provides agencies with new authority to
amend contracts which they could not
have amended previously.
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Finally, this proposed revision to
§ 5.6(a)(ii) does not ‘‘hold[ ] contractors
responsible without notice of DBA
requirements,’’ as ABC states, for the
same reason that the new operation-oflaw provision at § 5.5(e) does not. Like
the operation-of-law provision, and like
the existing regulation at § 1.6(f), the
revision to § 5.6(a)(ii) contains a
compensation provision that states that
the contractor must be compensated for
any increases in wages resulting the
incorporation of a missing contract
clause. Contractors will also receive
sufficient notice through publication of
the final rule. See Merrill, 332 U.S. at
384–85.
Retroactive incorporation of the
required contract clauses ensures that
agencies take every available step to
ensure that workers on covered
contracts are paid the prevailing wages
that Congress intended. The final rule
therefore adopts the language in
§ 5.6(a)(ii) as proposed.
xxi. Debarment
In accordance with the Department’s
goal of updating and modernizing the
DBA and Related Act regulations, as
well as enhancing the implementation
of Reorganization Plan No. 14 of 1950,
the Department proposed a number of
revisions to the debarment regulations
that were intended both to promote
consistent enforcement of the DavisBacon labor standards provisions and to
clarify the debarment standards and
procedures for the regulated
community, adjudicators, investigators,
and other stakeholders.
The regulations implementing the
DBA and the Related Acts currently
reflect different standards for
debarment. Since 1935, the DBA has
mandated 3-year debarment ‘‘of persons
. . . found to have disregarded their
obligations to employees and
subcontractors.’’ 40 U.S.C. 3144(b)
(emphasis added); see also 29 CFR
5.12(a)(2) (setting forth the DBA’s
‘‘disregard of obligations’’ standard).
Although the Related Acts themselves
do not contain debarment provisions,
since 1951, their implementing
regulations have imposed a heightened
standard for debarment for violations
under the Related Acts, providing that
‘‘any contractor or subcontractor . . .
found . . . to be in aggravated or willful
violation of the labor standards
provisions’’ of any Related Act will be
debarred ‘‘for a period not to exceed 3
years.’’ 29 CFR 5.12(a)(1) (emphasis
added). The Department proposed to
harmonize the DBA and the Related Act
debarment-related regulations by
applying the longstanding DBA
debarment standard and related
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provisions to the Related Acts as well.
Specifically, in order to create a uniform
set of substantive and procedural
requirements for debarment under the
DBA and the Related Acts, the
Department proposed five changes to
the Related Act debarment regulations
so that they mirror the provisions
governing DBA debarment.
First, the Department proposed to
adopt the DBA statutory debarment
standard—disregard of obligations to
employees or subcontractors—for all
debarment cases and to eliminate the
Related Acts’ regulatory ‘‘aggravated or
willful’’ debarment standard. Second,
the Department proposed to adopt the
DBA’s mandatory 3-year debarment
period for Related Act cases and to
eliminate the process under the Related
Acts regulations for early removal from
the ineligible list (also known as the
debarment list).267 Third, the
Department proposed to expressly
permit debarment of ‘‘responsible
officers’’ under the Related Acts. Fourth,
the Department proposed to clarify that
under the Related Acts as under the
DBA, entities in which debarred entities
or individuals have an ‘‘interest’’ may
be debarred. Related Acts regulations
currently require a ‘‘substantial
interest.’’ Finally, the Department
proposed to make the regulatory scope
of debarment language under the
Related Acts consistent with the scope
of debarment under the DBA by
providing, in accordance with the
current scope of debarment under the
DBA, that Related Acts debarred
persons and firms may not receive ‘‘any
contract or subcontract of the United
States or the District of Columbia,’’ as
well as ‘‘any contract or subcontract
subject to the labor standards
provisions’’ of the DBRA. See 29 CFR
5.12(a)(2).
(A) Relevant Legal Authority
The 1935 amendments to the DBA
gave the Secretary authority to enforce—
not just set—prevailing wages,
including through the remedy of
debarment. See Coutu, 450 U.S. at 758
n.3, 759 n.5, 776–77; see also S. Rep.
No. 74–332, pt. 3, at 11, 14–15 (1935).
Since then, the DBA has required 3-year
debarment of persons or firms that have
been found to ‘‘have disregarded their
obligations to employees and
subcontractors.’’ 40 U.S.C. 3144(b)
(formerly 40 U.S.C. 276a-2 and known
as section 3(a) of the DBA). The DBA
also mandates debarment of entities in
267 There are several terms referring to the same
list (e.g., ineligible list, debarment list, debarred
bidders list) and the terms for this list may continue
to change over time.
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which debarred persons or firms have
an ‘‘interest.’’ 40 U.S.C. 3144(b)(2).
Approximately 15 years later, the
Truman Administration developed, and
Congress accepted, Reorganization Plan
No. 14 of 1950, a comprehensive plan to
improve Davis-Bacon enforcement and
administration. The Reorganization Plan
provided that ‘‘[i]n order to assure
coordination of administration and
consistency of enforcement’’ of the
DBRA by the agencies who are
responsible for administering them, the
Secretary of Labor was empowered to
‘‘prescribe appropriate standards,
regulations, and procedures, which
shall be observed by these agencies.’’
Reorganization Plan No. 14 of 1950, 15
FR 3176. In transmitting the
Reorganization Plan to Congress,
President Truman observed that ‘‘the
principal objective of the plan is more
effective enforcement of labor
standards’’ with ‘‘more uniform and
more adequate protection for workers
through the expenditures made for the
enforcement of the existing legislation.’’
1950 Special Message to Congress.
Shortly after Reorganization Plan No.
14 of 1950 was adopted, the Department
promulgated regulations adding ‘‘a new
Part 5,’’ effective July 1, 1951. 16 FR
4430. These regulations added the
‘‘aggravated or willful’’ debarment
standard for the Related Acts. Id. at
4431. The preamble to that final rule
explained that adding the new part 5
was to comply with Reorganization Plan
No. 14 of 1950’s directive to prescribe
standards, regulations, and procedures
‘‘to assure coordination of
administration and consistency of
enforcement.’’ Id. at 4430. Since then,
the two debarment standards—disregard
of obligations in DBA cases and willful
or aggravated violations in Related Acts
cases—have co-existed, but with
challenges along the way that the
Department seeks to resolve through
this rulemaking.
(B) Proposed Regulatory Revisions
(1) Debarment Standard
a. Proposed Change to Debarment
Standard
As noted previously, the DBA
generally requires the payment of
prevailing wages to laborers and
mechanics working on contracts with
the Federal Government or the District
of Columbia for the construction of
public buildings and public works. 40
U.S.C. 3142(a). In addition, Congress
has included DBA prevailing wage
provisions in numerous Related Acts
under which Federal agencies assist
construction projects through grants,
loans, guarantees, insurance, and other
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methods. The same contract clauses are
incorporated into DBA- and Related
Act- covered contracts, and the laws
apply the same labor standards
protections (including the obligation to
pay prevailing wages) to laborers and
mechanics without regard to whether
they are performing work on a project
subject to the DBA or one of the Related
Acts. Not only are some projects subject
to the requirements of both the DBA and
one of the Related Acts due to the
nature and source of Federal funding,
but also the great majority of DBAcovered projects are also subject to
CWHSSA, one of the Related Acts.
Against this backdrop, there is no
apparent need for a different level of
culpability for Related Acts debarment
than for DBA debarment. The sanction
for failing to compensate covered
workers in accordance with applicable
prevailing wage requirements should
not turn on the source or form of
Federal funding. Nor is there any
principled reason that it should be
easier for prime contractors,
subcontractors, and their responsible
officials to avoid debarment in Related
Acts cases. Accordingly, the Department
proposed to revise the governing
regulations so that conduct that
warrants debarment on DBA
construction projects would also
warrant debarment on Related Act
projects. This proposal fits within the
Department’s well-established authority
to adopt regulations governing
debarment of Related Act contractors.
See, e.g., Janik Paving & Constr., 828
F.2d at 91; Copper Plumbing & Heating
Co. v. Campbell, 290 F.2d 368, 372–73
(D.C. Cir. 1961).
The Department noted in the NPRM
that the potential benefits of adopting a
single, uniform debarment standard
outweigh any benefits of retaining the
existing dual-standard framework. Other
than debarment, contractors who violate
the DBA and Related Acts run the risk
only of having to pay back wages, often
long after violations occurred. Even if
these violations are discovered or
disclosed through an investigation or
other compliance action, contractors
that violate the DBA or Related Acts can
benefit in the short-term from the use of
workers’ wages, an advantage that can
enable such contractors to underbid
their more law-abiding competitors. If
the violations never come to light, such
non-compliant contractors pocket wages
that belong to workers. Strengthening
the debarment remedy encourages
unprincipled contractors to comply
with Davis-Bacon prevailing wage
requirements by expanding the reach of
this remedy when they do not.
Facchiano Constr. Co. v. U.S. Dep’t of
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Lab., 987 F.2d 206, 214 (3d Cir. 1993)
(observing that debarment ‘‘may in fact
‘be the only realistic means of deterring
contractors from engaging in willful
[labor] violations based on a cold
weighing of the costs and benefits of
non-compliance’ ’’ (quoting Janik Paving
& Constr., 828 F.2d at 91)).
In proposing a unitary debarment
standard, the Department intended that
well-established case law applying the
DBA ‘‘disregard of obligations’’
debarment standard would now also
apply to Related Act debarment
determinations. Under this standard, as
a 2016 ARB decision explained, ‘‘DBA
violations do not, by themselves,
constitute a disregard of an employer’s
obligations,’’ and, to support debarment,
‘‘evidence must establish a level of
culpability beyond negligence’’ and
involve some degree of intent. Interstate
Rock Prods., Inc., ARB No. 15–024, 2016
WL 5868562, at *4 (Sept. 27, 2016)
(footnotes omitted). For example, the
underpayment of prevailing wages,
coupled with the falsification of
certified payrolls, constitute a disregard
of a contractor’s obligations that
establish the requisite level of ‘‘intent’’
under the DBA debarment provisions.
See id. Bad faith and gross negligence
regarding compliance have also been
found to constitute a disregard of DBA
obligations. See id. The Department’s
proposal to apply the DBA ‘‘disregard of
obligations’’ standard as the sole
debarment standard would maintain
safeguards for law-abiding contractors
and responsible officers by retaining the
bedrock principle that DBA violations,
by themselves, generally do not
constitute a sufficient predicate for
debarment. Moreover, the determination
of whether debarment is warranted
would continue to be based on a
consideration of the particular facts
found in each investigation and to
include the same procedures and review
process that are currently in place to
determine whether debarment is to be
pursued.
For these reasons and those discussed
in more detail in this section below, the
Department’s proposal to harmonize
debarment standards included a
reorganization of § 5.12. Proposed
paragraph (a)(1) set forth the ‘‘disregard
of obligations’’ debarment standard,
which would apply to both DBA and
Related Acts violations. The proposed
changes accordingly removed the
‘‘willful or aggravated’’ language from
§ 5.12, with proposed conforming
changes in 29 CFR 5.6(b) (included in
renumbered 5.6(b)(4)) and 5.7(a).
Proposed paragraph (a)(2) combined the
parts of current § 5.12(a)(1) and (a)(2)
concerning the different procedures for
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effectuating debarment under the DBA
and Related Acts.
b. Impacts of Proposed Debarment
Standard Change
Because behavior that is willful or
aggravated is also a disregard of
obligations, in many instances the
proposed harmonization of the
debarment standards would apply to
conduct that under the current
regulations is already debarrable under
both the DBA and Related Acts. For
example, falsification of certified
payrolls to simulate compliance with
Davis-Bacon labor standards has long
warranted debarment under both the
DBA and Related Acts. See, e.g., R.J.
Sanders, Inc., WAB No. 90–25, 1991 WL
494734, at *1–2 (Jan. 31, 1991) (DBA);
Coleman Constr. Co., ARB No. 15–002,
2016 WL 4238468, at *11 (Related Acts).
Kickbacks also warrant debarment
under the DBA and Related Acts. See,
e.g., Killeen Elec. Co., Inc., WAB No.
87–49, 1991 WL 494685, at *5–6 (DBA
and Related Act). In fact, any violation
that meets the ‘‘willful or aggravated’’
standard would necessarily also be a
disregard of obligations.
Under the proposed revisions, a
subset of violations that would have
been debarrable only under the DBA
‘‘disregard of obligations’’ standard now
would be potentially subject to
debarment under both the DBA and
Related Acts. The ARB recently
discussed one example of this type of
violation, stating that intentional
disregard of obligations ‘‘may . . .
include acts that are not willful attempts
to avoid the requirements of the DBA’’
since contractors may not avoid
debarment ‘‘by asserting that they did
not intentionally violate the DBA
because they were unaware of the Act’s
requirements.’’ Interstate Rock Prods.,
ARB No. 15–024, 2016 WL 5868562, at
*4. Similarly, ‘‘failures to set up
adequate procedures to ensure that their
employees’ labor was properly
classified,’’ which might not have been
found to be willful or aggravated
Related Act violations, were debarrable
under the DBA ‘‘disregard of
obligations’’ standard. Id. at *8. Under
the Department’s proposed revisions to
§ 5.12, these types of violations could
now result in debarment in Related Acts
as well as DBA cases. Additionally,
under the ‘‘disregard of obligations’’
standard, prime contractors and uppertier subcontractors may be debarred if
they fail to flow down the required
contract clauses into their lower-tier
subcontracts as required by § 5.5(a)(6),
or if they otherwise fail to ensure that
their subcontractors are in compliance
with the Davis-Bacon labor standards
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provisions. See 29 CFR 5.5(a)(6), (7);
Ray Wilson Co., ARB No. 02–086, 2004
WL 384729, at *10 (affirming debarment
under DBA of upper-tier subcontractor
and its principals because of
subcontractor’s ‘‘abdication from—and,
thus, its disregard of—its obligations to
employees of . . . its own lower-tier
subcontractor’’). Such failures alone,
which might not have been found to be
a willful or aggravated violation
depending on the totality of the
circumstances, would under the
proposed harmonized standard be more
likely to satisfy the requirements for
debarment whether the failure had
occurred on a DBA or Related Act
project.
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c. Benefits of Proposed Debarment
Standard Change
i. Improved Compliance and
Enforcement
In the NPRM, the Department stated
its position that applying the DBA’s
‘‘disregard of obligations’’ debarment
standard in a uniform, consistent
manner would advance the purpose of
the DBA, ‘‘‘a minimum wage law
designed for the benefit of construction
workers.’’’ Abhe & Svoboda, Inc. v.
Chao, 508 F.3d 1052, 1055 (D.C. Cir.
2007) (quoting Binghamton Constr. Co.,
347 U.S. at 178). Both the DBA statutory
and the Related Acts regulatory
debarment provisions are ‘‘intended to
foster compliance with labor
standards.’’ Howell Constr., Inc., WAB
No. 93–12, 1994 WL 269361, at *7 (May
31, 1994); see also Interstate Rock
Prods., ARB No. 15–024, 2016 WL
5868562, at *8 (‘‘Debarment has
consistently been found to be a remedial
rather than punitive measure so as to
encourage compliance and discourage
employers from adopting business
practices designed to maximize profits
by underpaying employees in violation
of the Act.’’).
The Department explained that using
the ‘‘disregard of obligations’’
debarment standard for all DBA and
Related Act work would enhance
enforcement of and compliance with
Davis-Bacon labor standards in multiple
ways. First, it would better enlist the
regulated community in Davis-Bacon
enforcement by increasing contractors’
incentive to comply with the DavisBacon labor standards. See, e.g.,
Facchiano Constr., 987 F.2d at 214
(‘‘Both § 5.12(a)(1) and § 5.12(a)(2) are
designed to ensure the cooperation of
the employer, largely through selfenforcement.’’); Brite Maint. Corp., WAB
No. 87–07, 1989 WL 407462, at *2 (May
12, 1989) (debarment is a ‘‘preventive
tool to discourage violation[s]’’).
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Second, applying the ‘‘disregard of
obligations’’ standard to Related Act
cases would serve the important public
policy of holding contractors’
responsible officials accountable for
noncompliance in a more consistent
manner, regardless of whether they are
performing on a Federal or federally
funded project. Responsible officials
currently may be debarred under both
the DBA and the Related Acts. See, e.g.,
P.B.M.C., Inc., WAB No. 87–57, 1991
WL 494688, at *7 (Feb. 8, 1991) (stating
that ‘‘Board precedent does not permit
a responsible official to avoid
debarment by claiming that the labor
standards violations were committed by
agents or employees of the firm’’ in
Related Act case); P.J. Stella Constr.
Corp., WAB No. 80–13, 1984 WL
161738, at *3 (Mar. 1, 1984) (affirming
DBA debarment recommendation
because ‘‘an employer cannot take cover
behind actions of his inexperienced
agents or representatives or the
employer’s own inexperience in
fulfilling the requirements of
government construction contracts’’);
see also Howell Constr., Inc., WAB No.
93–12, 1994 WL 269361, at *7 (DBA
case) (debarment could not foster
compliance if ‘‘corporate officials . . .
are permitted to delegate . . .
responsibilities . . . [and] to delegate
away any and all accountability for any
wrong doing’’). Applying a unitary
debarment standard would further
incentivize compliance by all
contractors and responsible officers.
ii. Greater Consistency and Clarity
The Department also stated its view
that applying the DBA debarment and
debarment-related standards to all
Related Act prevailing wage cases
would eliminate the confusion and
attendant litigation that have resulted
from erroneous and inconsistent
application of the two different
standards. The incorrect debarment
standard has been applied in various
cases over the years, continuing to the
present, notwithstanding the ARB’s
repeated clarification. See, e.g., J.D.
Eckman, Inc., ARB No. 2017–0023, 2019
WL 3780904, at *3 (July 9, 2019)
(remanding for consideration of
debarment under the correct standard as
a result of ALJ’s legal error of using
inapplicable ‘‘disregard of obligations’’
standard rather than applicable
‘‘aggravated or willful’’ standard);
Coleman Constr. Co., ARB No. 15–002,
2016 WL 4238468, at *9–11 (noting that
the ALJ had applied the wrong
debarment standard but concluding that
the ALJ’s ‘‘conflat[ion of the] two
different legal standards’’ was harmless
error under the circumstances). Most
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recently, the ARB vacated and
remanded an ALJ’s decision to debar a
subcontractor and its principal under
the DBA, noting that, even though the
Administrator had not argued that the
DBA applied, the ALJ had applied the
incorrect standard because ‘‘the contract
was for a construction project of a non[F]ederal building that was funded by
the U.S. Government but did not
include the United States as a party.’’
Jamek Eng’g Servs., Inc., ARB No. 2020–
0043, 2021 WL 2935807, at *8 (June 23,
2021); see also Jamek Eng’g Servs., Inc.
(Jamek II), ARB No. 2022–0039, 2022
WL 6732171, at *8–9 (Sept. 22, 2022)
(affirming ALJ’s decision on remand,
including 3-year debarment for
aggravated or willful Related Acts
violations), appeal docketed, Jamek
Eng’g Servs., Inc. v. U.S. Dep’t of Lab.,
No. 22–cv–2656 (D. Minn. Oct. 21,
2022).
Additionally, the ‘‘aggravated or
willful’’ Related Acts standard has been
interpreted inconsistently over the past
decades. In some cases, the ARB has
required actual knowledge or awareness
of violations, while in others it has
applied (or at least recited with
approval) a less stringent standard that
encompasses intentional disregard or
plain indifference to the statutory
requirements but does not require actual
knowledge of violations. Compare J.D.
Eckman, Inc., ARB No. 2017–0023, 2019
WL 3780904, at *3 (requiring actual
knowledge or awareness of the
violation) and A. Vento Constr., WAB
No. 87–51, 1990 WL 484312, at *3 (Oct.
17, 1990) (aggravated or willful
violations are ‘‘intentional, deliberate,
knowing violations of the [Related
Acts’] labor standards provisions’’) with
Fontaine Bros., Inc., ARB No. 96–162,
1997 WL 578333, at *3 (Sept. 16, 1997)
(stating in Related Act case that ‘‘mere
inadvertent or negligent conduct would
not warrant debarment, [but] conduct
which evidences an intent to evade or
a purposeful lack of attention to, a
statutory responsibility does’’ and that
‘‘[b]lissful ignorance is no defense to
debarment’’ (quotation omitted)); see
also Pythagoras Gen. Contracting Corp.,
ARB Nos. 08–107, 09–007, 2011 WL
1247207, at *12 (‘‘[A] ‘willful’ violation
encompasses intentional disregard or
plain indifference to the statutory
requirements.’’).
The Department stated its belief that
a single debarment standard would
provide consistency for the regulated
community. Under the proposed single
‘‘disregard of obligations’’ debarment
standard, purposeful inattention, and
gross negligence with regard to DavisBacon labor standards obligations—as
well as actual knowledge of or
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participation in violations—could
warrant debarment. The Department
explained that it would continue to
carefully consider all of the facts
involved in determining whether a
particular contractor’s actions meet the
proposed single standard.
(2) Length of Debarment Period
The Department also proposed to
revise § 5.12(a)(1) and (2) to make 3-year
debarment mandatory under both the
DBA and Related Acts and to eliminate
the regulatory provision permitting
early removal from the debarment list
under the Related Acts.
As noted above, since 1935, the DBA
has mandated a 3-year debarment of
contractors whose conduct has met the
relevant standard. In 1964, the
Department added two regulatory
provisions that permit Related Acts
debarment for less than 3 years as well
as early removal from the debarment
list. According to the 1964 final rule
preamble, the Department added these
provisions ‘‘to improve the debarment
provisions under Reorganization Plan
No. 14 of 1950 by providing for a
flexible period of debarment up to three
years and by providing for removal from
the debarred bidders list upon a
demonstration of current
responsibility.’’ 29 FR 95.
The Department explained in the
proposal that its experience over the
nearly 60 years since then has shown
that those Related Act regulatory
provisions that differ from the DBA
standard have not improved the
debarment process (i.e., have not
assured consistency of enforcement) for
any of its participants. Rather, they have
added another element of confusion and
inconsistency to the administration and
enforcement of the DBA and Related
Acts. For example, contractors and
subcontractors have been confused
about which provision applies. See, e.g.,
Bob’s Constr. Co., Inc., WAB No. 87–25,
1989 WL 407467, at *1 (May 11, 1989)
(stating that ‘‘[t]he [DBA] does not
provide for less than a 3-year
debarment’’ in response to contractor’s
argument that ‘‘if the Board cannot
reverse the [ALJ’s DBA] debarment
order, it should consider reducing the 3year debarment’’).
Requiring a uniform 3-year debarment
period would reduce confusion and
increase consistency. Although the
regulations currently provide for an
exception to 3-year debarment,
debarment in Related Acts cases is
usually, but not always, for 3 years. In
some cases, the WAB treated a 3-year
debarment period as effectively
presumptive and therefore has reversed
ALJ decisions imposing debarment for
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fewer than 3 years. See, e.g., Brite Maint.
Corp., WAB No. 87–07, 1989 WL
407462, at *1, *3 (imposing a 3-year
debarment instead of the 2-year
debarment ordered by the ALJ); Early &
Sons, Inc., WAB No. 86–25, 1987 WL
247044, at *1–2 (Jan. 29, 1987) (same);
Warren E. Manter Co., Inc., WAB No.
84–20, 1985 WL 167228, at *2–3 (June
21, 1985) (same). Under current case
law, ‘‘aggravated or willful’’ violations
of the Related Acts labor standards
provisions warrant a 3-year debarment
period ‘‘absent extraordinary
circumstances.’’ A. Vento Constr., WAB
No. 87–51, 1990 WL 484312, at *6. ALJs
have grappled with determining the
appropriate length of debarment in
Related Acts cases. Id. In the NPRM,
Department noted its belief that setting
a uniform 3-year debarment period
would provide clarity and promote
consistency.
Further, the Department remarked
that it had concluded that in instances—
usually decades ago—when debarment
for a period of less than 3 years had
been found to be warranted, it had not
improved the debarment process or
compliance. See, e.g., Rust Constr. Co.,
Inc., WAB No. 87–15, 1987 WL 247054,
at *2 (Oct. 2, 1987) (1-year debarment),
aff’d sub nom. Rust Constr. Co., Inc. v.
Martin, 779 F. Supp. 1030, 1032 (E.D.
Mo. 1992) (affirming WAB’s imposition
of 1-year debarment instead of no
debarment, noting ‘‘plaintiffs could
have easily been debarred for three
years’’); Progressive Design & Build Inc.,
WAB No. 87–31, 1990 WL 484308, at *3
(Feb. 21, 1990) (18-month debarment);
Morris Excavating Co., Inc., WAB No.
86–27, 1987 WL 247046, at *1 (Feb. 4,
1987) (6-month, instead of no,
debarment).
For the above reasons, the Department
proposed to modify the period of
Related Acts debarment to mirror the
DBA’s mandatory 3-year debarment
when contractors are found to have
disregarded their obligations to workers
or subcontractors.
The Department also proposed to
eliminate the provision at 29 CFR
5.12(c) that allows for the possibility of
early removal from the debarment list
for Related Acts contractors and
subcontractors. The Department stated
that in its experience, the possibility of
early removal from the debarment list
has not improved the debarment
process. Just as Related Acts debarment
for fewer than 3 years has rarely been
permitted, early removal from the
debarment list has seldom been
requested, and it has been granted even
less often.
Similarly, the ARB and WAB do not
appear to have addressed early removal
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57677
for decades. When they have, the ARB
and WAB affirmed denials of early
removal requests. See Atl. Elec. Servs.,
Inc., ARB No. 96–191, 1997 WL 303981,
at *1–2 (May 28, 1997); Fred A.
Nemann, WAB No. 94–08, 1994 WL
574114, at *1, *3 (June 27, 1994).
Around the same time, early removal
was affirmed on the merits in only one
case. See IBEW Loc. No. 103, ARB No.
96–123, 1996 WL 663205, at *4–6 (Nov.
12, 1996). Additionally, the earlyremoval provision has caused confusion
among judges and the regulated
community concerning the proper
debarment standard. For example, an
ALJ erroneously relied on the regulation
for early relief from Related Acts
debarment in recommending that a
contractor not be debarred under the
DBA. See Jen-Beck Assocs., Inc., WAB
No. 87–02, 1987 WL 247051, at *1–2
(July 20, 1987) (remanding case to ALJ
for a decision ‘‘in accordance with the
proper standard for debarment for
violations of the [DBA]’’). Accordingly,
the Department proposed to amend
§ 5.12 by deleting paragraph (c) and
renumbering the remaining paragraph to
accommodate that revision.
(3) Debarment of Responsible Officers
The Department also proposed to
revise 29 CFR 5.12 to expressly state
that responsible officers of both DBA
and Related Acts contractors and
subcontractors may be debarred if they
disregard obligations to workers or
subcontractors. The purpose of
debarring individuals along with the
entities in which they are, for example,
owners, officers, or managers is to close
a loophole where such individuals
could otherwise continue to receive
Davis-Bacon contracts by forming or
controlling another entity that was not
debarred. The current regulations
mention debarment of responsible
officers only in the paragraph
addressing the DBA debarment
standard. See 29 CFR 5.12(a)(2). But it
is well-settled that they can be debarred
under both the DBA and Related Acts.
See Facchiano Constr., 987 F.2d at 213–
14 (noting that debarment of responsible
officers is ‘‘reasonable in furthering the
remedial goals of the Davis-Bacon Act
and Related Acts’’ and observing that
there is ‘‘no rational reason for
including debarment of responsible
officers in one regulation, but not the
other’’); Hugo Reforestation, Inc., ARB
No. 99–003, 2001 WL 487727, at *12
(Apr. 30, 2001) (CWHSSA; citing
Related Acts cases); see also Coleman
Constr. Co., ARB No. 15–002, 2016 WL
4238468, at *12 (‘‘Although the
regulations do not explicitly grant
authority to debar individual corporate
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officers in Related Act cases, the
regulations have been interpreted to
grant such authority for decades.’’).
Thus, by expressly stating that
responsible officers may be debarred
under both the DBA and Related Acts,
this proposed revision merely codifies
current law. The Department explained
that it intended that Related Acts
debarment of individuals would
continue to be interpreted in the same
way as debarment of DBA responsible
officers has been interpreted.
(4) Debarment of Other Entities
The Department proposed another
revision so that the Related Acts
regulations mirror the DBA regulations
not only in practice, but also in letter.
Specifically, the Department proposed
to revise 29 CFR 5.12(a)(1) (with
conforming changes in § 5.12 and
elsewhere in part 5) to state that ‘‘any
firm, corporation, partnership, or
association in which such contractor,
subcontractor, or responsible officer has
an interest’’ must be debarred under the
Related Acts, as well as the DBA. The
DBA states that ‘‘No contract shall be
awarded to persons appearing on the list
or to any firm, corporation, partnership,
or association in which the persons
have an interest.’’ 40 U.S.C. 3144(b)(2)
(emphasis added); see 29 CFR 5.12(a)(2).
In contrast, the current regulations for
Related Acts require debarment of ‘‘any
firm, corporation, partnership, or
association in which such contractor or
subcontractor has a substantial
interest.’’ 29 CFR 5.12(a)(1) (emphasis
added); see 29 CFR 5.12(b)(1), (d).
The 1982 final rule preamble for these
provisions indicated that the
determination of ‘‘interest’’ (DBA) and
‘‘substantial interest’’ (Related Acts) was
intended to be the same: ‘‘In both cases,
the intent is to prohibit debarred
persons or firms from evading the
ineligibility sanctions by using another
legal entity to obtain Government
contracts.’’ 47 FR 23658, 23661 (May 28,
1982), implemented by 48 FR 19540
(Apr. 29, 1983). It is ‘‘not intended to
prohibit bidding by a potential
contractor where a debarred person or
firm holds only a nominal interest in the
potential contractor’s firm,’’ and
‘‘[d]ecisions as to whether ‘an interest’
exists will be made on a case-by-case
basis considering all relevant factors.’’
Id. In the NPRM, the Department
proposed to eliminate any confusion by
requiring the DBA ‘‘interest’’ standard to
be the standard for both DBA and
Related Acts debarment.
(5) Debarment Scope
The Department proposed to revise
the regulatory language specifying the
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scope of Related Acts debarment so that
it mirrors the language specifying the
scope of DBA debarment set forth in
current 29 CFR 5.12(a)(2). Currently,
under the corresponding Related Acts
regulation, § 5.12(a)(1), contractors are
not generally debarred from being
awarded all contracts or subcontracts of
the United States or the District of
Columbia, but rather are only barred
from being awarded contracts or
subcontracts subject to Davis-Bacon
and/or CWHSSA labor standards
provisions, i.e., ‘‘subject to any of the
statutes listed in § 5.1.’’ As proposed in
revised § 5.12(a)(1), in Related Acts as
well as DBA cases, any debarred
contractor, subcontractor, or responsible
officer would be barred for 3 years from
‘‘[being] awarded any contract or
subcontract of the United States or the
District of Columbia and any contract or
subcontract subject to the labor
standards provisions of any of the
statutes referenced by § 5.1.’’
The Department’s belief is that there
is no reasoned basis to prohibit debarred
contractors or subcontractors whose
violations have warranted debarment for
Related Acts violations from receiving
DBRA contracts or subcontracts, but to
permit them to continue to be awarded
other, non-DBRA-covered contracts or
subcontracts with the United States or
the District of Columbia that parties
debarred under the DBA are statutorily
prohibited from receiving during their
debarment period. The proposed
changes to § 5.12(a)(1) would eliminate
this anomalous situation, and apply
debarment consistently to contractors,
subcontractors, and their responsible
officers who have disregarded their
obligations to workers or subcontractors,
regardless of the nature of the of Federal
contract or subcontract for the work.
(C) Discussion
The Department received many
comments about its proposed debarment
provisions. Most of the comments,
including organized IUOE and
SMACNA member campaign comments,
expressed general support for the
debarment proposals in their entirety. A
few organizations, including a group of
civil rights and workers’ rights
organizations, unions, and labormanagement organizations, specified
the detailed reasons for their support.
Several commenters opposed the
proposals entirely, giving reasons for
their opposition.
As an overarching matter,
commenters that supported the
debarment proposals did so because the
proposal would promote consistent
enforcement of the DBRA labor
standards provisions. Supporting
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commenters generally agreed that the
proposed uniform debarment standards
and procedures (e.g., mandatory 3-year
debarment, no option for early removal,
responsible officer, and/or interest
proposals) would provide clarity for,
among others, the regulated community
and, thus, enhance compliance with the
DBRA labor standards provisions. See,
e.g., Balance America, Inc., CEA,
LCCHR, Fair Contracting Foundation of
Minnesota, UBC, LIUNA.
Commenters like FFC noted that
having one debarment standard would
be easier to understand for both workers
and contractors. UBC supported the
single debarment standard because it
would eliminate confusion for
adjudicators and the regulated
community and improve efficiency for
the Department. LCCHR also supported
the uniform 3-year debarment period
without early removal to promote clarity
as to regulatory obligations and
compliance.
Among supporters, many comments
praised the proposal’s impact on worker
protection. For example, III–FFC and
LCCHR supported the uniform
‘‘disregard of obligation’’ debarment
standard because it would reach
contractor behavior that is essential for
compliance with Davis-Bacon and
CWHSSA labor standards, but that may
not have been deemed to rise to the
level of aggravated or willful behavior
under the existing Related Act
debarment standard. LCCHR gave as
examples of such behavior a contractor’s
failure to establish appropriate
procedures to classify laborers or
mechanics correctly and to ensure that
lower-tier subcontractors are in
compliance with DBRA labor standards
requirements. These and other
commenters applauded the proposed
harmonized debarment standards
because they would strengthen worker
protections, in part by reducing
disincentives to underpay workers—in
some cases repeatedly—as well as by
enhancing enforcement. See, e.g., FFC,
IUOE Local 77, LIUNA.
Several commenters emphasized the
importance of uniform, clear debarment
standards to further protect workers and
DBRA-compliant contractors by
deterring contractors that treat
violations as part of their business
model due in part to the unlikelihood of
being debarred. The Fair Contracting
Foundation of Minnesota explained that
in their experience, contractors that
show a disregard for labor standards
obligations on one project without
significant consequences often go on to
demonstrate a similar disregard on
future projects. They, therefore,
supported the single debarment
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standard as well as the mandatory 3year debarment and interest provisions
to further protect workers and DBRAcompliant contractors, incentivize
compliance, and promote consistent
enforcement of labor standards
requirements. ACT Ohio asserted that
violators of the DBRA rarely face
debarment from Federal contracts, no
matter how egregious the violation. And
LCCHR highlighted watchdog group
findings that the Federal government
has awarded contracts to contractors
that have repeatedly violated Federal
laws like the DBA, such as a report
asserting that in fiscal year 2017 Federal
agencies spent over $425 million on
contractors that had been found to have
violated the DBA in 2016. UBC noted
that applying the lower debarment
threshold to Related Act violations
would increase deterrence.
A number of commenters similarly
supported the harmonized debarment
standard as a way to hold repeat
contractors accountable. See, e.g., ACT
Ohio, Foundation for Fair Contracting of
Connecticut, Inc. (FFC–CT). They noted
that the different debarment standards
could allow violators to remain out of
compliance without facing real
consequences beyond just paying back
wages. FFC–CT explained that
debarment is a real consequence that
sends a message to government
contractors that ‘‘we expect them to be
responsible stewards of public monies.’’
Those commenters that supported the
proposed changes also affirmed the
importance of the Department’s
proposal to codify existing law
regarding debarment of responsible
officers. The UA emphasized the need
to debar individuals so that they cannot
‘‘avoid accountability by setting up shop
as another entity.’’ LCCHR noted their
support for the responsible officers
proposal, which is consistent with
existing law.
Some supporting commenters went
further and claimed that the current two
debarment standards are inconsistent,
see, e.g., FFC, or even arbitrary and
capricious, see, e.g., NABTU. NCDCL
claimed that the heightened Related Act
standard ‘‘arbitrarily makes it more
difficult to debar contractors for
violations of the DBRA.’’ LCCHR
asserted that there is no principled
reason for employing two different
debarment standards for contractors that
are otherwise subject to the same
contractual requirements. NABTU cited
Transactive Corp. v. United States, 91
F.3d 232, 237 (D.C. Cir. 1996) and
Encino Motorcars, LLC v. Navarro, 136
S. Ct. 2117, 2127 (2016) in support of its
claim that the different DBA and
Related Act debarment standards ‘‘are
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arbitrary and capricious because they
treat identical situations differently
without a reasonable basis.’’ LCCHR
also objected to the inconsistent
consequences for similar behavior under
the current DBRA debarment
framework.
Among commenters who opposed the
Department’s debarment proposals in
their entirety, several challenged the
Department’s authority to change the
debarment standard for Related Acts.
ABC and IEC questioned the
Department’s authority to implement a
uniform standard for DBA and Related
Act debarments. ABC argued that since
Congress had not adopted the DBA
standard for Related Act debarments,
the Department could not ‘‘unilaterally
impose a unitary debarment test.’’ ABC
claimed that if in the 70 years since the
Department established by regulation in
1951 Congress had wanted to impose
the DBA’s ‘‘inflexible and easier to
prove’’ ‘‘disregard of obligations’’
debarment standard, it could easily have
done so, and that the Department had
provided no specific justification for
this ‘‘radical change.’’ IEC objected to
applying the DBA debarment standard
to Related Acts, stating without further
explanation that this broadening would
likely exceed ‘‘the statutory authority of
several if not all of the ‘Related Acts.’ ’’
Next, unlike commenters that noted
that a uniform debarment standard
would lead to more consistent
enforcement, a few commenters
contended that the Department’s
proposed changes would not achieve
these results or were too burdensome.
The group of U.S. Senators claimed that
the fact-specific nature of the DBA
‘‘disregard of obligations’’ standard is
‘‘ambiguous’’ and would lead to ‘‘the
same supposed ‘inconsistencies’ ’’ the
Department sought to address in the
proposed rule. They also claimed that in
the NPRM, the Department failed to
explain the ‘‘disregard of obligations’’
standard, which would pose a greater
obstacle to small firms bidding on
‘‘federal contracts covered by the DBRA
[that are] in essence nearly the entirety
of federal procurement.’’ In addition,
the group of U.S. Senators questioned
the Department’s claim that the willful
or aggravated standard has been
interpreted inconsistently over the
decades, alleging that this claim is
‘‘dubious’’ because of ‘‘the volatile
manner in which DOL calculates
prevailing wage rates.’’
Unlike commenters who lauded the
proposal’s enhanced enforcement and
worker protection and clarity for the
regulated community and other
stakeholders, FTBA and the group of
U.S. Senators asserted that the proposed
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57679
harmonized debarment provisions
would have a negative impact on
contractors, especially small and midsize contractors. FTBA asserted that
compliance with certain aspects of DBA
requirements like the classification of
work and coverage issues such as the
site-of-the-work limitation can be
‘‘extraordinarily difficult even for
contractors with robust compliance
processes.’’ FTBA and ABC faulted the
Department for not proposing changes
such as greater transparency about
proper classification of workers on wage
determinations, instead of relying on
‘‘unpublished union scope of work
claims’’ or ‘‘unpublished union work
rules’’ that make it challenging for nonunion contractors to properly determine
job classifications.268 The group of U.S.
Senators asserted that small and midsize contractors are at greater
vulnerability of ‘‘unintentionally
violating incomprehensible prevailing
wage requirements.’’
To support its claim that the
Department’s debarment and other
proposals would be an ‘‘impermissible
burden on the private sector,’’ the group
of U.S. Senators alleged that the
Department’s proposal to eliminate the
aggravated or willful debarment
standard would ‘‘lower[ ] the burden of
persuasion to a ‘disregard of obligations’
[and] ensnare many small contractors
into debarment proceedings.’’
According to the group of U.S. Senators,
given the ‘‘non-transparent and wasteful
manner in which prevailing wages are
calculated’’ and ‘‘less than consistent’’
survey methods, small and mid-size
contractors who ‘‘lack administrative
resources to keep abreast of DOL’s
nightmarishly bureaucratic
administration of DBRA’’ would be
vulnerable to ‘‘an ocean of legal liability
as a result of the new debarment
standard.’’ FTBA asserted that there was
no compelling reason for the
Department to choose the ‘‘more rigid
threshold and longer debarment period’’
given that debarment is a remedial, not
punitive measure.
ABC also objected to the Department’s
proposals to revise § 5.12(a)(2) to
268 The Department did not include the
publication of ‘‘union work rules’’ in the proposed
rule, and therefore, such an initiative is outside the
scope of this rulemaking. However, the Department
recognizes that it is important that contractors be
able to understand wage determinations and
comply with their obligations to pay laborers and
mechanics prevailing wages based on the
appropriate labor classifications in the applicable
wage determination. Therefore, the Department will
continue to address the clarity of wage
determinations at the subregulatory level. The
Department believes that the modifications to the
enforcement procedures in part 5 of this rulemaking
should be implemented along with continued
efforts to improve compliance.
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expressly include responsible officers
and entities in which they have a
‘‘substantial [sic] interest’’ for
debarment purposes, claiming that the
NPRM offered little guidance as to how
responsible officers would be
determined or what constitutes a
substantial interest in a debarred
company. ABC requested additional
guidance about these provisions.
The Department considered all the
comments it received about its
proposals to harmonize the DBA and
Related Act debarment standards by
adopting the DBA’s debarment
provisions for all DBRA debarments. As
explained below, the Department adopts
the debarment provisions as proposed.
As many of the supporting
commenters underscored, a primary
benefit of the harmonized debarment
provisions, most notably the change to
a single ‘‘disregard of obligations’’
debarment standard, will be to improve
consistency of—and, thus, effectiveness
of—enforcement and coordination of
administration of the DBRA, as
Reorganization Plan No. 14 of 1950
directs the Department to do. The
unitary debarment standard will also
advance Reorganization Plan No. 14 of
1950’s related objective of ‘‘more
uniform and adequate protection for
workers.’’ 1950 Special Message to
Congress.
Although the Related Act debarment
standard adopted in 1951 was also
implemented to try to accomplish
Reorganization Plan No. 14 of 1950’s
directive, it has become evident that
more change is needed to achieve this
objective. As explained in the NPRM,
the dual debarment standard and related
provisions have not achieved the goals
the Department intended that they
would, and, in some instances, have led
to counterproductive results from
inconsistent or erroneous application of
the applicable standard(s), as well as
from confusion about which standard
applies. For example, in one case, a
subcontractor and its principal claimed
that they should not be debarred under
the DBA because their violations were
not ‘‘willful or fraudulent,’’ an apparent
misunderstanding of the ‘‘disregard of
obligation’’ standard. NCC Elec. Servs.,
Inc., ARB No. 13–097, 2015 WL
5781073, at *6 n.25 (Sept. 30, 2015).269
269 While misunderstanding the applicable
debarment standard has led to counterproductive
results, contrary to the assertion of the group of U.S.
Senators, for debarment purposes, it is irrelevant if
contractors do not understand how WHD calculated
or periodically adjusted applicable prevailing wages
and fringe benefits. Although contractors are free to
challenge the wage rates on a wage determination
prior to contract award, if they do not challenge the
rates prior to that date and instead agree to
incorporation of the wage determination into their
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As some commenters that supported
this change asserted, the current dual
debarment standard could be viewed as
arbitrary or inconsistent to the extent
that it treats contractors, subcontractors,
and their responsible officers—who are
subject to the same DBRA labor
standards requirements and doing the
same types of work—differently based
solely on the source of Federal funding
or assistance. The Department, however,
does not agree with NABTU that the
current dual debarment standards are
impermissibly arbitrary or capricious.
The Department also disagrees with
FTBA that it did not explain why there
were different debarment standards. As
explained in the NPRM, the Department
adopted a new part 5 in 1951 to comply
with Reorganization Plan No. 14 of
1950’s directive and made changes to
Related Act debarment in 1964 in an
effort to improve debarment provisions
under that Reorganization Plan. The
Department posits that the willful or
aggravated Related Act standard may
have been chosen in 1951 to lessen the
effect on the regulated community of the
expansion of debarment to Related Act
violations by limiting debarment to
more egregious violations, in an
acknowledgement of the relative novelty
of Related Act work at that time. This
heightened standard may have been
intended to accommodate the regulated
community’s relative inexperience with
Related Act work, as well as the new
part 5 provisions, most of which were
new (other than Copeland Act
requirements, which had existed since
the mid-1930s).
The Department’s 1964 changes to the
Related Act 3-year debarment period
may have corresponded with growing
criticism in the early 1960s of Federal
agency use of debarment and
suspension without sufficient due
process safeguards. See, e.g., Robert F.
Meunier & Trevor B. A. Nelson, ‘‘Is It
Time for a Single Federal Suspension
and Debarment Rule?,’’ 46 Pub. Cont.
L.J. 553, 558–59, 559 n.29 (2017)
(discussing judicial ‘‘due process and
fundamental fairness requirements’’
developments in debarment and
suspension beginning in the 1960s and
extending through the 1990s); see also
contract without modification, they have thereby
accepted the wage rates as a part of their contract
and have agreed to comply with those wage rates.
In this context, given their commitment to pay no
less than the wage rates listed in the wage
determination that they have accepted as
contractually binding, contractors do not need to
understand how prevailing wage rates are
determined to comply, but merely need to be able
to look at the applicable wage determination and
pay required rates listed on that wage
determination, a task well within the capacity of
even small firms.
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Copper Plumbing & Heating Co., 290
F.2d at 371–73 (affirming the
Department’s regulatory authority to
debar contractors for willful or
aggravated violations of Related Acts
such as the Eight Hour Laws, and in
dicta mentioning that ‘‘upon a proper
showing [of responsibility] it appears’’
the contractor’s petition for removal
from the Comptroller General’s
ineligible list ‘‘would have been
granted’’).
There are now more than 70 Related
Acts, and federally assisted construction
work is prevalent. Since the same DavisBacon contractual obligations apply on
Related Act projects as on DBA projects,
with a few exceptions mandated by
statute,270 the regulated community’s
familiarity with their labor standards
obligations on Related Acts has also
increased over this time. Due process
safeguards include that the DBRA
regulations require notification of
violation findings and an opportunity to
request a hearing when WHD finds
reasonable cause to believe that
debarment is warranted.
Moreover, in the decades since the
Related Act debarment provisions went
into effect, as explained in the NPRM,
it has become clear that having two
debarment standards has not always
improved consistency of enforcement
and administration and, at times, has
had the opposite effect. It has become
evident that the flexibility of a possible
shorter debarment period of under 3
years and the possibility of early
removal from the debarment list, aside
from rarely being used over the past 2
or 3 decades, have not improved the
effectiveness of debarment, and at times,
have impaired it. The Department agrees
with commenters that the unitary
debarment standard and concomitant
related provisions (mandatory 3-year
debarment period with no early
removal, interest, responsible officers,
and scope of debarment) will be easier
to understand for the regulated
community and adjudicators, and more
consistent in application and result.
The final rule thus adopts a uniform
debarment framework comprised of the
longstanding DBA provisions. The DBA
debarment provisions will enhance
worker protection by eliminating the
heightened Related Act standards, and
the DBA standards are well-known to
the regulated community. The
270 Such exceptions include the ‘‘site of the work’’
provision, which applies to DBA and most Related
Act work, with the exception of CWHSSA and
certain HUD projects under ‘‘development
statutes.’’ Another difference is that under the DBA,
the Department recommends debarment to the GAO
for implementation, while under the Related Acts,
the Department effectuates debarment.
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Department emphasizes that the
‘‘disregard of obligations’’ standard is
not ‘‘new,’’ as the group of U.S. Senators
asserted. The Department also disagrees
with ABC that this rule is a ‘‘radical
change.’’ Rather, it takes the original,
longstanding ‘‘disregard of obligations’’
debarment standard and applies it to all
debarments, not only DBA debarments.
Since 1935, the DBA has required
debarment of ‘‘persons or firms’’ who
have ‘‘disregarded their obligations to
employees and subcontractors’’ as well
as debarment of firms and other entities
in which such debarred persons or firms
have an ‘‘interest.’’ 40 U.S.C. 3144(b).
Since willful or aggravated violations
are, by definition, also a disregard of a
contractor’s obligations to workers or
subcontractors, debarment for such
violations will continue.
The Department disagrees with the
allegation from the group of U.S.
Senators that the fact-specific nature of
the ‘‘disregard of obligations’’ standard
is ‘‘ambiguous’’ and will lead to
inconsistencies the Department is trying
to address. First, aggravated or willful
Related Act violations are also
determined on a case-specific basis.
Second, such totality of the
circumstances analyses are common
legal approaches, even in criminal law
where a person’s liberty is at stake. See,
e.g., Florida v. Harris, 568 U.S. 237, 244
(2013) (describing the ‘‘fluid concept’’ of
probable cause under the Fourth
Amendment as a ‘‘common-sensical
standard’’ that should evaluated by
looking at the ‘‘totality of the
circumstances . . . a more flexible, allthings-considered approach’’ and
‘‘reject[ing] rigid rules, bright-line tests,
and mechanistic inquiries’’ for
determining probable cause in case
involving police search of a vehicle
during a traffic stop); see also Monasky
v. Taglieri, 140 S. Ct. 719, 723 (2020)
(holding that a child’s ‘‘habitual
residence’’ for purposes of the Hague
Convention ‘‘depends on the totality of
the circumstances specific to the case’’);
Octane Fitness, LLC v. ICON Health &
Fitness, Inc., 572 U.S. 545, 553–54
(2014) (holding that courts may consider
the totality of the circumstances when
determining whether a case is
‘‘exceptional’’ under Federal Patent Act
provision concerning the award of
attorney’s fees to prevailing parties).
The Department is confident that its
case-by-case approach in the DBRA
debarment context will continue to be
fairly administered and readily
understood by the regulated
community.
Contractors on DBRA projects are
charged with knowing the law,
including the Davis-Bacon and
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CWHSSA labor standards requirements
and the consequences, such as
debarment, for violating them. See, e.g.,
NCC Elec. Servs., Inc., ARB No. 13–097,
2015 WL 5781073, at *7 (‘‘[T]here has
to be a presumption that the employer
who has the savvy to understand
government bid documents and to bid
on a Davis-Bacon Act job knows what
wages the company is paying its
employees and what the company and
its competitors must pay when it
contracts with the federal government’’
(quotation marks omitted)); cf. Abhe &
Svoboda, Inc., 508 F.3d at 1059–60
(‘‘Existing administrative and judicial
decisions and the [DBA] itself put the
Company on fair notice of what was
required’’ regarding classification of
employees despite contractor’s claim
that ‘‘general wage determinations did
not indicate the proper method of
classifying employees.’’).
Being a government contractor carries
with it attendant responsibilities, not
least of which is complying with DBRA
labor standards requirements. These
obligations apply to all DBRA
contractors, subcontractors, and
responsible officers. Government
contractors may be subject to debarment
regardless of size and even if their
disregard of obligations occurs on their
first DBRA contract, or if WHD has not
previously found violations. See, e.g.,
Stop Fire, Inc., WAB No. 86–17, 1987
WL 247040, at *2 (June 18, 1987) (‘‘The
contention that this was a company’s
first Davis-Bacon Act job is not
sufficient to relieve it from being placed
on the ineligible list, absent other
additional justification.’’); Morris
Excavating Co., Inc., WAB No. 86–27,
1987 WL 247046, at *1 (rejecting
‘‘principle that each contractor’’
violating the DBRA ‘‘gets one free shot
at underpaying laborers and mechanics
on a Davis-Bacon project until the time
of enforcement’’ and finding that 6month debarment of a small contractor
on relatively small contract doing
‘‘localized specialty work’’ was
warranted despite workers’
‘‘agree[ment] that [the firm] would pay
them their regular wages now and the
additional Davis-Bacon amount later’’).
The Department believes that existing
mechanisms are sufficient to address
FTBA’s concern about debarment in
light of what they allege to be a lack of
‘‘transparency’’ about applicable
classifications. If there is any
uncertainty about which classifications
apply to particular work, contractors
may request clarification and
information on local area practice,
including from the contracting agency
or WHD. If that further guidance
indicates that the work in question is
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not performed by a classification listed
on the wage determination, the issue
may be resolved through the
conformance process. Further,
‘‘[c]ontractors who seek to perform work
on a federal construction project subject
to the Davis-Bacon Act have an
obligation ‘to familiarize themselves
with the applicable wage standards
contained in the wage determination
incorporated into the contract
solicitation documents.’ ’’ Am. Bldg.
Automation, Inc., ARB No. 00–067,
2001 WL 328123, at *3–4 (Mar. 30,
2001) (citation omitted) (denying
subcontractor’s appeal of denial of
conformance request in which
subcontractor claimed it had no reason
to believe that building automation and
controls work fell within plumber
classification). Firms of any size may
also consult the extensive subregulatory
materials that are available on WHD’s
website (including FOH chapters and
the PWRB), request informal
compliance assistance from WHD, or
seek guidance in accordance with 29
CFR 5.13. More formally, contractors
may request ruling letters from the
Administrator.
The Department disagrees with the
group of U.S. Senators that the NPRM
did not adequately explain the
‘‘disregard of obligations’’ standard such
that small firms could understand it.
Not only did the NPRM contain an
explanation of the standard, but also the
Department has resources available on
its website for those who desire more
information about debarment criteria.
Nevertheless, the Department takes this
opportunity to expand upon the
explanation in the NPRM about the
types of actions and inactions that could
constitute a debarrable disregard of
obligations to workers or subcontractors
under the rule. The additional examples
of debarrable actions or omissions in
this section are illustrative, not
exhaustive.
As the Department highlighted in the
NPRM, it is well settled that contractors,
subcontractors, and responsible officers
will be debarred for certain egregious or
deliberate and knowing violations under
both the disregard of obligations and
aggravated or willful standards. For
example, falsification of certified
payroll combined with underpayment
or misclassification—thus simulating
compliance with Davis-Bacon or
CWHSSA obligations—constitute
aggravated and willful violations and,
necessarily, a disregard of obligations to
workers too. Falsification of certified
payrolls can take various forms
including, but not limited to,
overreporting prevailing wages and/or
fringe benefits paid; underreporting
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hours worked; misclassifying workers
who performed skilled trade work as
laborers; omitting workers (often
because they are paid less that required
wages) from the payroll; and listing
managers or principals who did not
perform manual labor as laborers and
mechanics.
Making workers ‘‘kick back’’ or return
any portion of the prevailing wages is
another DBRA violation that has
warranted debarment under both the
willful or aggravated and the ‘‘disregard
of obligations’’ standards for decades.
See, e.g., Killeen Elec. Co., WAB No. 87–
49, 1991 WL 494685, at *5. Such
kickbacks have been illegal since 1934,
when the Copeland ‘‘Anti-Kickback’’
Act was passed and can even result in
criminal prosecution. See 48 Stat. 948
(June 13, 1934); see also section
III.B.3.xix (‘‘Anti-Retaliation’’). When
the DBA was amended in 1935,
Congress not only added the debarment
sanction, but also ‘‘the provision that
each contract shall contain a stipulation
requiring unconditional weekly
payments without subsequent
deductions or rebates’’ to try to
eliminate the ‘‘illegal practices of
exacting rebates or kick-backs.’’ H. Rep.
No. 74–1756, at 3 (1935); S. Rep. No.
74–1155, at 3 (1935); 40 U.S.C.
3142(c)(1). Regulations implementing
the Copeland Act’s requirement that
contractors and subcontractors submit
weekly statements about wages paid
each worker—with some variation and
changes over the years—have been in
place since 1935, except for a ‘‘threeyear hiatus from 1948 to 1951.’’
Donovan, 712 F.2d at 630; see also 6 FR
1210, 1210–1211 (Mar. 1, 1941)
(requiring contractors and
subcontractors to provide weekly sworn
affidavits regarding wages paid during
preceding pay roll period); 7 FR 686,
687–88 (Feb. 4, 1942).
Other categories of willful or
aggravated actions that necessarily
warrant debarment under the lower
‘‘disregard of obligations’’ standard
include, but are not limited to,
contractor efforts to require or coerce
workers to lie to the Department or
contracting agencies about their wages
paid and hours worked, or to refuse to
cooperate with such enforcement efforts
at all by instructing workers to leave the
job site when investigators are
conducting worker interviews. These
actions are akin to falsification of
payroll or destruction of records to the
extent that such actions are intended to
simulate compliance or, at least, hide
noncompliance.
While disregard of obligations ‘‘need
not be the equivalent of intentional
falsification,’’ DBA violations alone do
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not constitute a disregard of obligations
warranting debarment. See NCC Elec.
Servs., Inc., ARB No. 13–097, 2015 WL
5781073, at *6, *10; Structural
Concepts, Inc., WAB No. 95–02, 1995
WL 732671, at *3 (Nov. 30, 1995) (the
strict liability standard for holding
prime contractors liable for back wages
owed to workers has not been extended
to debarment under the DBA). For
example, in Structural Concepts, the
Board reversed an ALJ’s debarment
order because the Board could not
conclude from the evidence presented
that the prime contractor’s principal
knew or should have known of the
subcontractor’s falsified certified
payrolls, and when the principal did
find out about the subcontractor’s DBA
violations, they took reasonable action
by cancelling the subcontract. Id.
The Department reiterates, as it
explained in the NPRM, that
contractors’ bad faith or grossly
negligent actions or inactions can be a
disregard of their DBRA obligations
warranting 3-year debarment. While
merely inadvertent or negligent conduct
or innocuous mistakes would not
warrant debarment, conduct evidencing
an intent to evade, or a purposeful lack
of attention to, statutory or regulatory
obligations warrant debarment. ‘‘Blissful
ignorance is no[t]’’ and will continue
not to be a ‘‘defense to debarment.’’
Fontaine Bros., Inc., ARB No. 96–162,
1997 WL 578333, at *3.
Debarment under the ‘‘disregard of
obligations’’ standard requires some
element of intent or culpability beyond
mere negligence. P&N, Inc./Thermodyn
Mech. Contractors, Inc., ARB No. 96–
116, 1996 WL 697838, at *4, *7 (Oct. 25,
1996); NCC Elec. Servs., Inc., ARB No.
13–097, 2015 WL 5781073, at *6. The
Department, thus, disagrees with the
claim from the group of U.S. Senators
that small and mid-size contractors are
at greater vulnerability of debarment for
‘‘unintentionally violating’’ prevailing
wage requirements. Truly unintentional
violations that are merely negligent
would not merit debarment as a
disregard of obligations.
The Board has explained the
difference between violations that
constitute a disregard of obligations to
workers or subcontractors and those that
are willful or aggravated violations. For
example, an ‘‘intentional failure to look
at what the law requires’’ may not rise
to a deliberate, knowing, and intentional
action that constitutes a willful or
aggravated violation of the Related Acts.
Interstate Rock Prods., Inc., ARB No.
15–024, 2016 WL 5868562, at *4
(‘‘Intentional disregard of obligations
may therefore include acts that are not
willful attempts to avoid the
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requirements of the DBA.’’). The Board
went on to explain that ‘‘contractors and
subcontractors [may not] ignore the
rules and regulations applicable to DBA
contracts, pay their employees less than
prevailing wages, and avoid debarment
by asserting that they did not
intentionally violate the DBA because
they were unaware of the Act’s
requirements.’’ Id. Similarly, gross
negligence and bad faith can constitute
a disregard of obligations. NCC Elec.
Servs., Inc., ARB No. 13–097, 2015 WL
5781073, at *6 & n.22.
For example, a contractor or
subcontractor’s failure to ‘‘look to [their]
obligations under DBA,’’ a failure to
read DBA provisions on a contract, a
failure ‘‘to keep proper records tracking
the actual work performed,’’ and failing
to flow down Davis-Bacon labor
standards provisions to lower-tier
subcontractors would be a disregard of
obligations because government
contractors are expected to know the
law. Id. at *7. A subcontractor’s failure
to read DBRA provisions the prime
contractor included in its subcontract
and its failure to include the DBA
provision in its own subcontract with a
lower-tier contractor also has been held
to constitute a disregard of the debarred
subcontractor’s obligations to be aware
of the DBA requirements and to ensure
its lower-tier subcontractor complied
with wage payment and record keeping
requirements. See Ray Wilson Co., ARB
No. 02–086, 2004 WL 384729, at *10.
Recordkeeping violations short of
falsification have led to debarment in
various Related Act cases. See, e.g.,
Fontaine Bros., Inc., ARB No. 96–162,
1997 WL 578333, at *3 (affirming
debarment of a contractor that failed to
keep records of any payroll deductions
or to keep any records for workers paid
in cash); P.B.M.C., Inc., WAB No. 87–57,
1991 WL 494688, at *7 (debarment
appropriate where contractor failed to
record workers’ piecework production
and hours worked). The regulations
notify contractors that ‘‘failure to submit
the required records upon request or to
make such records available may be
grounds for debarment.’’ 29 CFR
5.5(a)(3)(iii) (current). Under the final
rule, such required records now also
include contracts and related
documents. See 29 CFR 5.5(a)(3)(iii). In
one case, a contractor’s failure to submit
certified payrolls on a timely basis—it
waited 9 weeks before submitting the
first nine certified payrolls—also
constituted a disregard of its obligations
warranting debarment. Sealtite Corp.,
WAB No. 87–06, 1988 WL 384962, at *4
(Oct. 4 1988).
A disregard of contractors’
compliance and oversight
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responsibilities could also result in
debarment under the DBA standard.
‘‘[F]ailure to properly instruct
[subordinates] in the preparation of the
payrolls’’ could result in debarment
under the DBA. C.M. Bone, WAB No.
78–04, 1978 WL 22712, at *1 (Sept. 13,
1978); see also Ray Wilson Co., ARB No.
02–086, 2004 WL 384729, at *10.
Another example of actions or
omissions that could result in
debarment under the unitary standard
includes a failure to flow down the
applicable wage determination and
Davis-Bacon and/or CWHSSA labor
standards provisions to lower-tier
subcontractors.
While there will be a subset of
violations that would only have been
debarrable under the DBA ‘‘disregard of
obligations’’ standard but now will be
potentially subject to debarment under
both the DBA and Related Acts, the
Department does not anticipate that this
subset of violations will be particularly
large or the violations novel. First, as
explained in the NPRM and reiterated in
this section above, many of the same
types of violations have long been
debarrable under both the DBA and
Related Acts (e.g., falsification of
certified payrolls coupled with
underpayment or misclassification,
kickbacks). Second, in some cases
involving projects subject to both DBA
and Related Acts, the Board previously
has decided debarment based on the
laxer DBA ‘‘disregard of obligations’’
standard. See, e.g., Interstate Rock
Prods., ARB No. 15–024, 2016 WL
5868562, at *8 n.36 (affirming
debarment for misclassification under
the DBA ‘‘laxer standard’’ which
‘‘render[ed] debarment under the
[Related Acts] redundant and moot);
P&N, Inc./Thermodyn Mech.
Contractors, Inc., ARB No. 96–116, 1996
WL 697838, at *2 & n.7 (distinguishing
between the DBA and Related Act
standards and applying the less strict
DBA standard because case involved
violations of both DBA and CWHSSA).
The Department expects the change to
a single debarment standard—the
current ‘‘disregard of obligations’’
standard instead of the heightened
aggravated or willful standard—will
further the remedial goals of the DBRA
by more effectively enlisting the
regulated community in compliance
with the Davis-Bacon and CWHSSA
labor standards requirements. The
Department’s decision to change to a
single debarment standard rests in part
on its belief that extending the current
‘‘disregard of obligations’’ standard to
all DBA and Related Act debarments
will promote ‘‘the cooperation of the
employer, largely through self-
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enforcement,’’ in complying with the
DBRA requirements. Facchiano Constr.,
987 F.2d at 214. As echoed by various
commenters, this change makes
particular sense since DBA and Related
Act construction work is otherwise
generally subject to the same DavisBacon labor standards.
The Department agrees with the many
commenters who emphasized the
importance of preventing repeat
violations by contractors who may not
be debarred the first time they are found
to have violated the DBA or Related
Acts. The Department echoes the
importance of incentivizing compliance
by contractors and their responsible
officers on every project, particularly in
light of limited enforcement resources
vis-a-vis the number of potentially
affected workers on DBRA-covered
projects. To the extent some
unscrupulous contractors’ business
models even rely on the likelihood of
their violations going undetected, as
some commenters asserted,
strengthening the debarment remedy
takes on an even greater importance for
repeat, or potential repeat, violators.
Similar concerns animated the 1935
amendments to the DBA, which until
then had no enforcement provisions.
The legislative history indicates that
Congress added debarment, one such
enforcement power, in part to address
the problem of repeat violators getting
new Davis-Bacon contracts. See, e.g., S.
Rep. No. 74–332, pt. 3, at 11 (1935)
(noting the need to ‘‘speedily remed[y]’’
the situation in which the requirement
to award contracts to the lowest
responsible bidder resulted in ‘‘the
anomaly . . . where violators of
prevailing wage scales and even
contractors who have actually been
guilty of dishonest practices, such as
defrauding their workmen . . . were
granted additional contracts by the
Government’’). Congress in 1935, thus,
implemented a ‘‘[s]ystem of
coordination between various
Government Departments to assure that
the Government will not be in the
position of continuing to contract with
a contractor who disregards his
obligations to his employees and
subcontractors.’’ H. Rep. No. 74–1756, at
2 (1935); S. Rep. No. 74–1155, at 2
(1935). The debarment provision
‘‘further penalizes offending contractors
and subcontractors by disqualifying
them for 3 years from their privilege of
bidding for Government contracts’’—a
measure to arm the Department and
contracting agencies with another tool
for departments not to have to
‘‘continue to deal’’ with ‘‘bidders [who]
had been notorious violators of the
Davis-Bacon Act in the past.’’ H. Rep.
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No. 74–1756, at 3; S. Rep. No. 74–1155,
at 3.
As commenters asserted, it is not
uncommon for contractors and their
responsible officers found to have
engaged in debarrable conduct under
the DBRA to have committed similar
violations on other projects. The
Department expects that adopting the
‘‘disregard of obligations’’ debarment
standard for Related Act violations may
reduce repeat violations by contractors,
subcontractors, and their responsible
officers, since they will face the
possibility of debarment on Related Actonly projects for a broader range of
actions and inactions than under the
current dual debarment framework.
The Department is authorized to
harmonize the DBRA debarment
standards by substituting the DBA
standard for that of the Related Acts.
Contrary to commenters who asserted
the Department does not have the
authority to do so, and as discussed in
more detail in section III.B.3.xix (‘‘AntiRetaliation’’), since 1950, Congress has
repeatedly recognized the Secretary’s
authority and functions under
Reorganization Plan No. 14 of 1950—as
recently as November 2021. See IIJA
41101, 42 U.S.C. 18851(b). And in 1984
Congress ratified and affirmed
Reorganization Plan No. 14 of 1950 as
law. Reorganization Plan No. 14 of 1950
expressly authorizes the Department to
adopt regulations that promote
consistent enforcement and more
efficient administration of the DBRA.
The Department anticipates that having
one debarment standard instead of two
will do just that. Just as the Department
was authorized to implement regulatory
debarment under the willful or
aggravated standard under the Related
Acts in 1951, so too may it now adjust
that standard to the ‘‘disregard of
obligations’’ standard in order to more
effectively promote the remedial goals
of the DBRA.
The Department, therefore, disagrees
with commenters that claimed that it
lacks authority to adopt the ‘‘disregard
of obligations’’ standard for debarment
under the Related Acts. IEC, for
example, did not cite any specific
statutory provision or other law to
support their contention that this rule
exceeds the Department’s authority
under ‘‘several if not all’’ of the Related
Acts. Reorganization Plan No. 14 of
1950 has consistently been applied to
Related Acts even where it is not
specifically referenced in the Related
Act.
Regulatory debarment outside the
DBRA context as a ‘‘means for
accomplishing [a] congressional
purpose,’’ Gonzalez v. Freeman, 334
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F.2d 570, 577 (D.C. Cir. 1964), or to
support ‘‘the integrity and effectiveness
of federally funded activities,’’ Meunier
& Nelson, supra, at 556–57, is not
uncommon. In the 1980s, debarment
and suspension from Federal
procurement and nonprocurement
transactions was promulgated in the
FAR and the Non-procurement Common
Rule, respectively. See FAR Subpart 9.4,
48 CFR 9.400–409 (procurement
debarment, suspension, and
ineligibility); 2 CFR part 180 (OMB
guidelines to agencies on
governmentwide debarment and
suspension (nonprocurement, e.g.,
Federal grants, loans, and other forms of
assistance)); see also 48 FR 42102,
42148 (Sept. 19, 1983) (establishing the
FAR); 53 FR 19161 (May 26, 1988)
(memorandum about publication of
final government-wide nonprocurement
common rule); Meunier & Nelson,
supra, at 554–57. As such, the regulated
community is or should be familiar with
the general concept of debarment or
suspension being a consequence for
misuse of Federal funding or
assistance.271
In addition to the decisions upholding
regulatory debarment for Related Act
willful or aggravated violations
discussed in the NPRM, courts have
upheld regulatory debarment and
suspension measures absent express
Congressional authority for such
provisions, provided there are certain
minimum fairness safeguards. See, e.g.,
Gonzalez, 334 F.2d at 576–77 (finding
statute that made no explicit provision
for debarring contractors doing business
with the agency authorized debarment
of ‘‘irresponsible, defaulting or
dishonest’’ bidders and contractors, a
power ‘‘inherent and necessarily
incidental to the effective
administration of the statutory
scheme’’); cf. Jacquet, 569 F.2d at 1345
(upholding regulation temporarily
disqualifying households that
fraudulently acquired food stamps,
which was ‘‘appropriate for the effective
and efficient administration of the
program’’ and ‘‘[gave] the administrative
authorities a tool with which to protect
the program from those who would
abuse it’’ and was authorized despite
the Food Stamp Act’s silence about such
271 As with debarment under the DBA and
Related Acts, the policy for debarment, suspension,
and ineligibility under the FAR underscores that
‘‘[t]he serious nature of debarment and suspension
requires that these sanctions be imposed only in the
public interest for the Government’s protection and
not for purposes of punishment.’’ 48 CFR 9.402(b);
see also Gonzalez, 334 F.2d at 576–77
(‘‘Notwithstanding its severe impact upon a
contractor, debarment is not intended to punish but
is a necessary ‘means for accomplishing the
congressional purpose’’’ at issue in that case).
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disqualification). Such administrative
debarment power comes with ‘‘an
obligation to deal with uniform
minimum fairness as to all.’’ Gonzalez,
334 F.2d at 577. Specifically,
‘‘[c]onsiderations of basic fairness
require administrative regulations
establishing standards for debarment
and procedures which will include
notice of specific charges, opportunity
to present evidence and to crossexamine adverse witnesses, all
culminating in administrative findings
and conclusions based upon the record
so made.’’ Id. at 578. Although the
Department’s rule eliminates the
provisions providing for the possibility
of debarment for fewer than 3 years and
early removal from the debarment list,
as mentioned above, the Department’s
debarment procedures accord
contractors and responsible officers
extensive due process protections to
challenge their debarment in the first
instance.272
The Department also disagrees with
FTBA that it should (or could) make the
unitary debarment standard the
heightened Related Act standard with
the possibility of a shorter period and
early removal. The Department cannot
change the DBA disregard of obligation
standard, the mandatory 3-year period,
or the extension of debarment to entities
in which a debarred person or firm has
an interest because those provisions are
statutory, not regulatory. The
Department may, however, under its
statutory and implied powers of
enforcement, bring Related Act
debarments within the DBA debarment
framework of a lower standard,
mandatory 3-year period, and no
possibility of early removal. The
Department has long had procedures in
place that provide contractors,
‘‘responsible officers,’’ and other
affected parties ample notice of the
findings against them, an opportunity to
request a hearing in which they could
contest those findings, and the ability to
appeal adverse decisions. See 29 CFR
5.11, 5.12, pts. 6, 7, 18. These robust
procedures include safeguards for the
regulated community if they choose to
challenge—as they have been able to do
for decades—3-year debarment for
disregarding their obligations, albeit in
all DBRA cases under the final rule, not
just DBA cases. The rule’s harmonized
debarment provisions will further the
DBRA’s remedial goals of protecting
272 The Department notes that contrary to the
comment from the group of U.S. Senators, the
regulations do not change any of the existing
evidentiary burdens (e.g., ‘‘burden of persuasion’’).
WHD will continue to have to prove violations in
administrative proceedings by a preponderance of
the evidence.
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workers, with all the attendant
procedural safeguards for the regulated
community.
As part of the revisions to harmonize
debarment provisions, the Department
is codifying both existing case law about
debarment of ‘‘responsible officers’’ in
Related Act cases and the Department’s
position about debarment of entities in
which debarred parties have an
‘‘interest.’’ The Department agrees with
the UA that absent debarment of such
individuals and entities, debarred
parties could avoid debarment sanctions
by setting up shop as a new entity to
obtain government contracts. In
response to ABC’s request for more
guidance about how responsible officers
would be determined or what
constitutes a substantial interest in a
debarred company, the Department
reiterates that these changes do not
effect a substantive change in the law or
how it is applied, as noted in the NPRM
(and restated above). These
determinations—both in the current
regulations and final rule—are made on
a case-by-case basis considering all
relevant facts, and in the relatively rare
circumstances in which there are issues
regarding who qualifies as a responsible
officer or what constitutes an interest in
a debarred company, information
regarding those issues is available
through various public Departmental
resources. See e.g., 47 FR 23661 (1982
final rule).
In determining whether an individual
responsible officer’s debarment is
warranted, the Department evaluates
factors such as involvement in and
responsibility for running the company;
status as an officer and/or principal of
the entity (although status alone is not
determinative); actual or constructive
knowledge of or gross negligence with
respect to DBRA obligations (e.g., failure
to ensure present or future compliance
with applicable labor standards, failure
to correct ongoing violations, etc.); and/
or violations (e.g., underpayments,
misclassification, incomplete,
inaccurate, or falsified payroll and
timekeeping, etc.). See, e.g., Facchiano
Constr., 987 F.2d at 213–15; Pythagoras
Gen. Contracting Corp., ARB Nos. 08–
107, 09–007, 2011 WL 1247207, at *13–
14, *13 n.94. Responsible company
officials cannot ‘‘avoid debarment by
claiming that the labor standards
violations were committed by
employees of the firm.’’ Superior
Masonry, Inc., WAB No. 94–19, 1995
WL 256782, at *5 (Apr. 28, 1995). The
Department notes much of the same
analysis to determine whether a firm
has disregarded its obligations and
should be debarred will apply to
determine whether an individual is a
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responsible officer of the firm whose
debarment is warranted.
To determine whether a debarred firm
or person has an ‘‘interest’’ in another
entity that should also be debarred, the
Department will consider such factors
as the debarred party’s ownership
interest, extent of control of the related
entity’s operations, whether the related
entity was formed by a person
previously affiliated with or a relative of
the debarred party, and whether there is
common management. See, e.g., R.C.
Foss & Son, Inc., WAB No. 87–46, 1990
WL 484311, at *2, *4 (Dec. 31, 1990)
(affirming Related Act debarment of
entity owned by wife of debarred
subcontractor’s principal owner and for
which debarred owner was performing
same functions as he had performed for
debarred subcontractor); see generally
Charles Randall, LBSCA No. 87–SCA–
32, 1991 WL 733572 (Dec. 9, 1991) (SCA
and CWHSSA). Entities in which a
debarred person or firm holds only a
‘‘nominal interest’’ will not be debarred.
47 FR 23661.
Finally, because the Department
received no comments specifically
about the scope of the debarment
proposal, the final rule therefore adopts
the change as proposed.
For the foregoing reasons, the final
rule adopts the harmonized debarment
standards so that—regardless of the
source or type of Federal funding—all
DBRA contractors, subcontractors, and
responsible officers (as well as firms in
which they have an interest) that
disregard their obligations to workers or
subcontractors are subject to a 3-year
debarment during which they may not
receive any contract or subcontract of
the United States or the District of
Columbia, as well as any contract or
subcontract subject to the labor
standards provisions of the laws
referenced in § 5.1. Specifically, the
Department adopts with no
modification the proposed changes to
§ 5.12 as well as the proposed
conforming changes to § 5.6(b)
(included in renumbered §§ 5.6(b)(4)
and 5.7(a)). In addition, the Department
adopts the changes to § 5.5(a)(10) as
proposed, except that an inadvertent
error in the proposed regulatory text has
been corrected. That section referred to
ineligibility ‘‘by virtue of 40 U.S.C.
3144(b) or § 5.12(a) or (b),’’ but it should
only have referred to—and this
correction has been made in the final
rule—ineligibility ‘‘by virtue of 40
U.S.C. 3144(b) or § 5.12(a)’’ to conform
to the harmonized debarment provisions
in revised § 5.12. Paragraph 5.12(a)(2)
has been revised to specify that
debarment actions are reflected on the
SAM website.
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xxii. Employment Relationship Not
Required
The Department proposed a few
changes throughout parts 1, 3, and 5 to
reinforce the well-established principle
that Davis-Bacon labor standards
requirements apply even when there is
no employment relationship between a
contractor and worker.
In relevant part, the DBA states that
‘‘the contractor or subcontractor shall
pay all mechanics and laborers
employed directly on the site of the
work, unconditionally and at least once
a week, and without subsequent
deduction or rebate on any account, the
full amounts accrued at time of
payment, computed at wage rates not
less than those stated in the advertised
specifications, regardless of any
contractual relationship which may be
alleged to exist between the contractor
or subcontractor and the laborers and
mechanics.’’ 40 U.S.C. 3142(c)(1). The
Department has interpreted this
language to cover ‘‘[a]ll laborers and
mechanics employed or working upon
the site of the work,’’ § 5.5(a)(1)(i), and
the definitions of ‘‘employed’’ in parts
3 and 5 of the existing regulations
similarly reflect that the term includes
all workers on the project and extends
beyond the traditional common-law
employment relationship. See § 3.2(e)
(‘‘Every person paid by a contractor or
subcontractor in any manner for his
labor . . . is employed and receiving
wages, regardless of any contractual
relationship alleged to exist between
him and the real employer.’’); § 5.2(o)
(‘‘Every person performing the duties of
a laborer or mechanic [on DBRA work]
is employed regardless of any
contractual relationship alleged to exist
between the contractor and such
person.’’); cf. 41 U.S.C. 6701(3)(B)
(defining ‘‘service employee’’ under the
SCA to ‘‘include[ ] an individual
without regard to any contractual
relationship alleged to exist between the
individual and a contractor or
subcontractor’’); 29 CFR 4.155
(providing that whether a person is a
‘‘service employee’’ does not depend on
any alleged contractual relationship).
The ARB and its predecessors have
similarly recognized that the DBRA
apply to workers even in the absence of
an employment relationship. See Star
Brite Constr. Co., Inc., ARB No. 98–113,
2000 WL 960260, at *5 (June 30, 2000)
(‘‘[T]he fact that the workers [of a
subcontractor] were engaged in
construction of the . . . project triggered
their coverage under the prevailing
wage provisions of the [DBA]; lack of a
traditional employee/employer
relationship between [the prime
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57685
contractor] and these workers did not
absolve [the prime contractor] from the
responsibility to insure that they were
compensated in accordance with the
requirements of the [DBA].’’); Labor
Servs., Inc., WAB No. 90–14, 1991 WL
494728, at *2 (May 24, 1991) (stating
that the predecessor to section 3142(c)
‘‘applies a functional rather than a
formalistic test to determine coverage: if
someone works on a project covered by
the Act and performs tasks
contemplated by the Act, that person is
covered by the Act, regardless of any
label or lack thereof,’’ and requiring a
contractor to pay DBA prevailing wages
to workers labeled as ‘‘subcontractors’’).
This broad scope of covered workers
also extends to CWHSSA, the Copeland
Act, and other Related Acts. See 40
U.S.C. 3703(e) (providing that
Reorganization Plan No. 14 of 1950 and
40 U.S.C. 3145 apply to CWHSSA); 29
CFR 3.2(e); see also, e.g., Ray Wilson
Co., ARB No. 02–086, 2004 WL 384729,
at *6 (finding that workers met the
DBA’s ‘‘functional [rather than
formalistic] test of employment’’ and
affirming an ALJ’s order of prevailing
wages and overtime pay due to workers
of a second-tier subcontractor); Joseph
Morton Co., WAB No. 80–15, 1984 WL
161739, at *2–3 (July 23, 1984)
(rejecting a contractor’s argument that
workers were subcontractors not subject
to DBA requirements and affirming an
ALJ finding that the contractor owed the
workers prevailing wage and overtime
back wages for work performed on a
contract subject to DBA and CWHSSA);
cf. Charles Igwe, ARB No. 07–120, 2009
WL 4324725, at *3–5 (Nov. 25, 2009)
(rejecting contractors’ claim that
workers were independent contractors
not subject to SCA wage requirements,
and affirming an ALJ finding that
contractors ‘‘violated both the SCA and
the CWHSSA by failing to pay required
wages, overtime, fringe benefits, and
holiday pay, and failing to keep proper
records’’).
The Department proposed a few
specific changes to the regulations in
recognition of this principle. First, the
Department proposed to amend § 1.2 to
add a definition of ‘‘employed’’ that is
substantively identical to the definition
in § 5.2 and to amend § 3.2 to clarify the
definition of ‘‘employed’’ in part 3.
These changes clarify that the DBA’s
expansive coverage of workers even in
the absence of an employment
relationship is also relevant to wage
surveys and wage determinations under
part 1 and certified payrolls under part
3. Second, the Department proposed to
change references to employment (e.g.,
‘‘employee,’’ ‘‘employed,’’ ‘‘employing,’’
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etc.) in § 5.5(a)(3) and (c), as well as
elsewhere in the regulations, to refer
instead to ‘‘workers,’’ ‘‘laborers and
mechanics,’’ or ‘‘work.’’
Notwithstanding the broad scope of
worker coverage reflected in the existing
definitions and in case law, the
Department explained that the
additional language proposed,
particularly in the DBRA contract
clauses, would further clarify the scope
of worker coverage and eliminate any
ambiguity that laborers and mechanics
are covered by the DBRA even in the
absence of an employment relationship.
Consistent with the above, however, the
words ‘‘employee,’’ ‘‘employed,’’ or
‘‘employment’’ when used in this
preamble or in the regulations
(including the existing regulations),
should be interpreted expansively and
do not limit coverage to workers in an
employment relationship. Finally, the
Department proposed to clarify in the
definition of ‘‘employed’’ in parts 1, 3,
and 5 that the broad understanding of
that term applies equally in the context
of ‘‘public building[s] or public work[s]’’
and in the context of ‘‘building[s] or
work[s] financed in whole or in part by
assistance from the United States
through loan, grant, loan guarantee or
insurance, or otherwise.’’
The Department received several
dozen comments on this proposal, most
of which supported the proposed
changes. Many of these comments
contended that this proposal would
help address the widespread
misclassification of employees as
independent contractors in the
construction industry by reducing or
eliminating the perceived incentives to
misclassify employees as independent
contractors. Several comments cited to
numerous misclassification studies
substantiating widespread
misclassification of employees as
independent contractors. For example,
the National Employment Law Project
(NELP) cited to a 2007 study of New
York’s unemployment insurance audits
which concluded that the
misclassification rate in the
construction industry is almost 50
percent higher than the overall
misclassification rate in the private
sector. LCCHR cited to a study finding
23 percent of Minnesota’s, 20 percent of
Illinois’, and 10 percent of Wisconsin’s
construction workers were misclassified
or paid off-the-books. LCCHR further
noted that, according to the study, such
misclassification or off-the-books
payments cost the three states a
combined $360 million in lost tax
revenues per year. LCCHR also cited to
an estimate that U.S. construction
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workers were denied over $811 million
in overtime premium in 2017 due to
misclassification and off-the-books
payments.
NELP also stated that the NPRM’s
proposals to clarify coverage of laborers
and mechanics regardless of their
employment status would increase
accountability and improve work
standards in multitiered contracting
relationships. TAUC expressed their
support for the NPRM’s proposed
changes because the misclassification of
employees as independent contractors
gives an unfair competitive advantage to
contractors and subcontractors who
misclassify and underpay their workers.
The Department appreciates the
commenters’ concerns about
misclassification in the construction
industry and expects the NPRM’s
proposed changes, which are adopted in
this final rule, to further emphasize that
the DBRA’s labor standards
requirements apply to workers even in
the absence of an employment
relationship. The changes may also help
to reduce misclassification in the
construction industry by eliminating
any misperception that DBRA
requirements can be avoided by
classifying workers as independent
contractors or by otherwise denying the
existence of an employment
relationship.
Smith, Summerset & Associates also
supported the proposed changes, but
commented that the ‘‘irrelevancy’’ of
employee status should be further
amplified by the specific mention of
irrelevancy in the regulations or at least
in the preamble. Smith, Summerset &
Associates stated that DBRA contractors
are overburdened with contracting
agency requests for additional
documentation that workers are selfemployed when workers are listed on
certified payrolls without payroll taxes
withheld. However, the Department
believes that the proposed changes
adequately explain that employee status
is not relevant to worker coverage under
the DBRA, but agencies may still have
other relevant purposes for requesting
such documentation. As stated in
section III.B.3.iii.(B) of this preamble,
contracting agencies are free to provide
certified payrolls to other enforcement
agencies without the Department’s
authorization or permission where the
contracting agency has determined that
such a submission is appropriate and is
in accordance with relevant legal
obligations. In other words, even though
employee status is not relevant to
worker coverage under the DBRA, there
may be other legitimate reasons to
request documentation regarding
whether a worker has been properly
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identified as ‘‘self-employed’’ or as an
independent contractor, and the
revisions discussed in this section are
not intended to discourage such
requests.
CC&M expressed concern over the
cost shifting of payroll taxes to workers
when they are misclassified as
independent contractors. CC&M also
noted that even when contractors pay
the correct prevailing wages to workers
who are misclassified as independent
contractors, such workers are excluded
from unemployment insurance and
other State or Federal employment
benefits. Though the Department
acknowledges the issues raised by
CC&M, these concerns are outside the
scope of this rulemaking. The DBA does
not address issues related to payroll
taxes, unemployment insurance or
Federal, State, or local benefit programs
that are outside the scope of the wage
determinations. Contractors on DBRAcovered projects are required to comply
with other applicable laws. Payroll tax
laws and other employment benefit
programs often have statutory
definitions of employment that are
properly interpreted and applied by the
government agencies with appropriate
enforcement and/or regulatory authority
over such laws. The Department may,
however, refer its findings of
misclassification of employees as
independent contractors to other tax
agencies for further action under their
respective authority and discretion.
On the other hand, NAHB opposed
the NPRM’s proposed changes to
employment terms in parts 1, 3, and 5,
asserting that such changes would
‘‘seemingly remove[ ] the defining line
between general contractor and
subcontractor liability by implying [an
employment] relationship ‘regardless of
any contractual relationship alleged to
exist between the contractor and such
person.’’’ NAHB further asserted that
the Department’s proposals would
constitute an expansion of joint
employer liability, and thus, in NAHB’s
view, would place nearly all the burden
for subcontractor compliance on the
prime contractor. Consequently, NAHB
requested that the Department clarify in
the final rule that ‘‘joint employer’’
status will be governed by FLSA case
law.
The Department believes that NAHB’s
concerns about changes to employment
terms in the existing regulations are
misplaced. As explained in the NPRM,
the Department seeks to reinforce the
well-established principle that, as
already reflected in the statute and
existing regulations, Davis-Bacon labor
standards requirements apply even
when there is no employment
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relationship between a contractor and
worker. The existing regulations at 29
CFR part 3 and part 5 have long stated
that workers are considered to be
‘‘employed’’ for the purposes of
prevailing wage and certified payroll
requirements, regardless of any
contractual relationship which may be
alleged to exist. The definitional
changes adopted in this final rule
simply emphasize this fact. Similarly,
defining ‘‘employed’’ in part 1 clarifies
that, just as workers are entitled to
prevailing wage rates even where there
is no employment relationship, it is
appropriate to include wage data for
independent contractors and others who
are not ‘‘employed’’ by a contractor or
subcontractor within the meaning of the
FLSA in determining prevailing wages
under the Davis-Bacon wage survey
program. Thus, this final rule does not
change the standard for joint employer
liability for contractors on Davis-Bacon
contracts, as the concept of an
employment relationship is simply not
relevant to the application of prevailing
wage requirements to workers. The
Department specifically rejects NAHB’s
suggestion to incorporate or crossreference the FLSA standard for joint
employer liability in parts 1, 3, and 5,
because contractor obligations under the
DBA may exist even in the absence of
an employment relationship with
covered laborers and mechanics.
Despite NAHB’s assertion that the
proposal was contrary to legal
precedent, the ARB has repeatedly
affirmed that DBRA requirements apply
even in the absence of an employment
relationship as discussed above in this
section.
NAHB’s concerns with respect to the
proposed changes in § 5.5(a)(6) are more
fully discussed in that section of the
preamble. However, the Department
notes here that a prime contractor’s
liability for subcontractor violations is
based primarily on statutory language of
the DBRA and the contract provisions
that flow from that language, rather than
based on any concept of joint
employment between the prime
contractor and the workers of its
subcontractors.
For the foregoing reasons, the final
rule adopts the described changes to
reinforce the well-established principle
that Davis-Bacon labor standards apply
even when there is no employment
relationship between a contractor and
worker in parts 1, 3, and 5 as proposed.
xxiii. Withholding
The DBA, CWHSSA, and the
regulations at 29 CFR part 5 authorize
withholding from the contractor accrued
payments or advances equal to the
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amount of unpaid wages due laborers
and mechanics under the DBRA. See 40
U.S.C. 3142(c)(3), 3144(a)(1) (DBA
withholding), 3702(d), 3703(b)(2)
(CWHSSA withholding); 29 CFR
5.5(a)(2) and (b)(3) and 5.9. Withholding
helps to realize the goal of protecting
workers by ensuring that money is
available to pay them for the work they
performed but for which they were
undercompensated. Withholding plays
an important role in the statutory
schemes to ensure payment of
prevailing wages and overtime to
laborers and mechanics on Federal and
federally assisted construction projects.
The regulations currently require,
among other things, that upon a request
from the Department, contracting
agencies must withhold so much of the
contract funds as may be considered
necessary to pay the full amount of
wages required by the contract, and in
the case of CWHSSA, liquidated
damages. See 29 CFR 5.5(a)(2) and (b)(3)
and 5.9. The Department proposed a
number of regulatory revisions to
reinforce the current withholding
provisions.
(A) Cross-Withholding
Cross-withholding is a procedure
through which agencies withhold
contract monies due a contractor from
contracts other than those on which the
alleged violations occurred. Prior to the
1981–1982 rulemaking, Federal agencies
generally refrained from crosswithholding for DBRA liabilities
because neither the DBA nor the
CWHSSA regulations specifically
provided for it. In 1982, however, the
Department amended the contract
clauses to expressly provide for crosswithholding. See 47 FR 23659–60 273
(cross-withholding permitted as stated
in § 5.5(a)(2) and (b)(3)); Grp. Dir.,
Claims Grp./GGD, B–225091, 1987 WL
101454, at *2 (Comp. Gen. Feb. 20,
1987) (the Department’s 1983 DavisBacon regulatory revisions, e.g.,
§ 5.5(a)(2), ‘‘now provide that the
contractor must consent to crosswithholding by an explicit clause in the
contract’’).
In the NPRM, the Department
proposed additional amendments to the
cross-withholding contract clause
language at § 5.5(a)(2) and (b)(3) to
clarify and strengthen the Department’s
ability to cross-withhold when
contractors use single-purpose entities,
joint ventures or partnerships, or other
similar vehicles to bid on and enter into
DBRA-covered contracts. As noted in
273 The May 28, 1982, final rule was implemented
in part, including § 5.5(a)(2) and (b)(3), in 1983. 48
FR 19540, 19540, 19545–47 (Apr. 29, 1983).
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the earlier discussion of the definition
of prime contractor in section
III.B.3.ii.(D), the interposition of another
entity between the contracting agency
and the general contractor is not a new
phenomenon. However, the use of
single-purpose LLC entities and similar
joint ventures and teaming agreements
in government contracting generally has
been increasing in recent decades. See,
e.g., John W. Chierichella & Anne Bluth
Perry, ‘‘Teaming Agreements and
Advanced Subcontracting Issues,’’ Fed.
Publ’ns LLC, TAASI GLASS–CLE A, at
*1–6 (2007); A. Paul Ingrao, ‘‘Joint
Ventures: Their Use in Federal
Government Contracting,’’ 20 Pub. Cont.
L.J. 399 (1991).
The Department explained in the
NPRM that in response to this increase
in the use of such single-purpose legal
entities or arrangements, Federal
agencies have often required special
provisions to assure that liability among
joint venturers will be joint and several.
See, e.g., Ingrao, supra, at 402–03 (‘‘Joint
and several liability special provisions
vary with each procuring agency and
range from a single statement to
complex provisions regarding joint and
several liability to the government or
third parties.’’). While the corporate
form may be a way for joint venturers
to attempt to insulate themselves from
liability, commenters have noted that
this ‘‘advantage will rarely be available
in a Government contracts context,
because the Government will
customarily demand financial and
performance guarantees from the parent
companies as a condition of its
‘responsibility’ determination.’’
Chierichella & Perry, supra, at *15–16.
Under the existing regulations,
however, the Government is not able to
obtain similar guarantees to secure
performance of Davis-Bacon labor
standards and CWHSSA requirements.
It is necessary for the cross-withholding
regulations to be amended to ensure that
the core DBRA remedy of crosswithholding is available when singlepurpose LLCs and similar contracting
vehicles are used to contract with the
Federal Government. This enforcement
gap exists because, as a general matter,
cross-withholding (referred to as
‘‘offset’’ under the common law) is not
available unless there is a ‘‘mutuality of
debts’’ in that the creditor and debtor
involved are exactly the same person or
legal entity. See R.P. Newsom, 39 Comp.
Gen. 438, 439 (1959). That general rule,
however, can be waived by agreement of
the parties. See Lila Hannebrink, 48
Comp. Gen. 365, 365 (1968) (allowing
cross-withholding against a joint
venture for debt of an individual joint
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venturer on a prior contract, where all
parties agreed).
The structure of the Davis-Bacon Act,
with its implementation in part through
the mechanism of contract clauses,
provides both the opportunity and the
responsibility of the Government to
ensure—by contract—that the use of the
corporate form does not interfere with
Congress’s mandate that workers be
paid the required prevailing wage and
that withholding ensures the availability
of funds to pay any back wages and
other monetary relief owed. It is a
cardinal rule of law that ‘‘the
interposition of a corporation will not
be allowed to defeat a legislative policy,
whether that was the aim or only the
result of the arrangement.’’ Anderson v.
Abbott, 321 U.S. 349, 363 (1944). This
principle is generally applied to allow,
in appropriate circumstances, for
corporate forms to be disregarded by
‘‘piercing the corporate veil.’’ 274
However, where a policy is effectuated
through contract terms, it can be
inefficient and unduly limiting to rely
on post hoc veil-piercing to implement
that policy. The Government may
instead, by contract, make sure that the
use of single-purpose entities,
subsidiaries, or joint ventures
interposed as nominal ‘‘prime
contractors’’ does not frustrate the
Congressional mandate to ensure back
wages are available through
withholding.275
Accordingly, the Department
proposed to amend the withholding
contract clauses at § 5.5(a)(2) and
§ 5.5(b)(3), as well as to amend § 5.9, to
ensure that any entity that directly
enters into a contract covered by DavisBacon labor standards must agree to
cross-withholding against it to cover
liabilities for any DBRA violations on
not just that contract, but also on other
274 The Department has long applied corporate
veil-piercing principles under the DBRA. See, e.g.,
Thomas J. Clements, Inc., ALJ No. 82–DBA–27,
1984 WL 161753, at *9 (June 14, 1984) (recognizing,
in the context of a Davis-Bacon Act enforcement
action, that a court may ‘‘pierce the corporation veil
where failure to do so will produce an unjust
result’’), aff’d, WAB No. 84–12, 1985 WL 167223,
at *1 (Jan. 25, 1985) (adopting ALJ’s decision as the
WAB’s own decision); Griffin v. Sec’y of Lab., ARB
Nos. 00–032, 00–033, 2003 WL 21269140, at *8, n.2
(May 30, 2003) (various contractors and their
common owner, who ‘‘made all decisions regarding
operations of all of the companies,’’ were one
another’s ‘‘alter egos’’ in a DBRA debarment action),
aff’d sub nom Phoenix-Griffin Grp. II, Ltd. v. Chao,
376 F. Supp. 2d 234, 247 (D.R.I. 2005).
275 Cf. Robert W. Hamilton, The Corporate Entity,
49 Tex. L. Rev. 979, 984 (1971) (noting the
difference in application of ‘‘piercing the veil’’
concepts in contract law because ‘‘the creditor more
or less assumed the risk of loss when he dealt with
a ‘shell’; if he was concerned, he should have
insisted that some solvent third person guarantee
the performance by the corporation’’).
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covered contracts entered into by the
entity that directly entered into the
contract or by specified affiliates. The
covered affiliates were those entities
included within the proposed definition
of prime contractor in § 5.2, including
controlling shareholders or members
and joint venturers or partners. Thus,
for example, if a general contractor
secures two prime contracts for two
Related Act-covered housing projects
through separate single-purpose entities
that it controls, the proposed crosswithholding language would allow the
Department to seek cross-withholding
against either contract even though the
contracts are nominally with separate
legal entities.
The Department also proposed to add
language to § 5.5(a)(2) and (b)(3) to
clarify that the Government may pursue
cross-withholding regardless of whether
the contract on which withholding is
sought was awarded by, or received
Federal assistance from, the same
agency that awarded or assisted the
prime contract on which the violations
necessitating the withholding occurred.
This revision is in accordance with the
Department’s longstanding policy, the
current language of the withholding
clauses, and case law on the use of
setoff procedures in other contexts
dating to 1946. See, e.g., United States
v. Maxwell, 157 F.3d 1099, 1102 (7th
Cir. 1998) (‘‘[T]he federal government is
considered to be a single-entity that is
entitled to set off one agency’s debt to
a party against that party’s debt to
another agency.’’); Cherry Cotton Mills,
Inc. v. United States, 327 U.S. 536, 539
(1946) (same). However, because the
current Davis-Bacon regulatory language
does not explicitly state that funds may
be withheld from contracts awarded or
assisted by other Federal agencies, some
agencies have questioned whether crosswithholding is appropriate in such
circumstances. This proposed addition
would expressly dispel any such
uncertainty or confusion. Conforming
edits were also proposed to § 5.9.
The Department also proposed certain
non-substantive changes to streamline
the withholding clauses. The
Department proposed to include in the
withholding clause at § 5.5(a)(2)(i)
similar language as in the CWHSSA
withholding clause at § 5.5(b)(3)
authorizing withholding necessary ‘‘to
satisfy the liabilities . . . for the full
amount of wages . . . and monetary
relief’’ of the contractor or subcontractor
under the contract without reference to
the specific, and duplicative, language
currently in § 5.5(a)(2) that re-states the
lists of the types of covered workers
already listed in § 5.5(a)(1)(i). The
Department also proposed using the
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same phrase ‘‘so much of the accrued
payments or advances’’ in both
§ 5.5(a)(2) and (b)(3), instead of simply
‘‘sums’’ as currently written in
§ 5.5(b)(3). Finally, the Department
proposed to adopt in § 5.5(b)(3) the use
of the term ‘‘considered,’’ as used in
§ 5.5(a)(2), instead of ‘‘determined’’ as
currently used in § 5.5(b)(3), to refer to
the determination of the amount of
funds to withhold, as this mechanism
applies in the same manner under both
clauses.
Conforming edits for each of the
above changes to the withholding
clauses at § 5.5(a)(2) and (b)(3) were also
proposed for § 5.9. In addition, the
Department proposed clarifying in a
new paragraph (c) of § 5.9 that crosswithholding from a contract held by a
different legal entity is not appropriate
unless the withholding provisions in
that different legal entity’s contract were
incorporated in full or by reference.
Absent exceptional circumstances,
cross-withholding would not be
permitted from a contract held by a
different legal entity where Davis-Bacon
labor standards were incorporated only
by operation of law into that contract.
The Department received multiple
comments in support of the proposed
revisions to the regulatory language for
cross-withholding. Several commenters
noted that as the construction industry
has evolved over the years to include an
increased use of contracting entities that
are closely related, particularly singlepurpose contracting entities, the
Department’s regulations must similarly
change to ensure that the use of such
contracting vehicles does not undercut
the remedial purpose of the DBA. These
commenters noted that the proposed
revisions are necessary both to ensure
that workers receive the prevailing
wages that they are entitled to for their
work and to prevent law-abiding
contractors from being undercut by
contractors taking advantage of these
contracting entities to underpay their
workers. They also pointed out that the
provisions would make it more difficult
for entities to move from contract to
contract without making their workers
whole for any wage underpayment. See,
e.g., ACT Ohio, FFC, III–FFC, LIUNA,
NCDCL, REBOUND, SMACNA, UBC.
The Department agrees with such
commenters that it is necessary for the
Davis-Bacon regulations to take modern
contracting processes into account, to
safeguard the payment of applicable
prevailing wages to workers, and to
ensure uniform compliance across the
industry.
ABC and IEC opposed the proposal
and stated that cross-withholding in any
circumstances is not authorized by the
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Davis-Bacon Act. They asserted the DBA
limits withholding to the contract on
which the violations occurred. A
comment from Practus, LLP claimed
that legislative action was required for
the ‘‘ambiguous’’ cross-withholding
policy. An individual commenter
argued that the Davis-Bacon Act does
not expressly provide for crosswithholding, and that cross-withholding
could result in violations of the
‘‘Purpose Statute’’ and the AntiDeficiency Act when the crosswithholding is effectuated by a
contracting agency other than the
agency with the contract on which
DBRA violations had been found. This
commenter requested that language be
added to the regulation to clarify that
cross-withholding is ‘‘subject to
availability of funds in accordance with
law.’’ IEC also claimed that the
Department’s explanation for the
proposed language acknowledged that
there is no ‘‘mutuality of debts’’
between a contractor and the
government when a contractor owes a
worker wages that would justify a crosswithholding. FTBA did not object to
cross-withholding as a whole, but
objected to cross-withholding on
contracts held by separate legal entities
that merely have some form of common
ownership or control, on the ground
that cross-withholding in such
circumstances ignores the separate legal
status (for contract award, tax, payroll,
and myriad other purposes) of such
contracting entities.
FTBA and ABC also stated that there
is no indication that cross-withholding
is necessary to ensure that workers
receive back pay for prevailing wage
violations. ABC suggested that the
Department has ample resources
available to enforce findings of
violations on a particular DBA-covered
contract without the use of crosswithholding. IEC and the group of U.S.
Senators also expressed general concern
that the cross-withholding process
would not provide sufficient due
process for contractors, and IEC
proposed that the regulations should
prohibit funds from being withheld
until the ARB had reviewed and
approved the proposed withholding.
Practus similarly emphasized the need
for specific due process safeguards
especially when ‘‘underlying claims
involving a subcontractor are not yet
liquidated or ripe for adjudication.’’
Finally, APCA stated that the changes
(among others) would have negative
effects on contractors’ costs, compliance
responsibilities, enforcement exposure,
and penalties.
The Department does not agree with
comments that suggest the DBRA does
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not permit the use of cross-withholding.
The DBA provides that ‘‘there may be
withheld from the contractor so much of
accrued payments as the contracting
officer considers necessary to pay to
laborers and mechanics employed by
the contractor or any subcontractor on
the work the difference between the
rates of wages required by the contract
to be paid laborers and mechanics on
the work and the rates of wages received
by the laborers and mechanics and not
refunded to the contractor or
subcontractors or their agents.’’ 40
U.S.C. 3142(c)(3). The statute does not
specify from which contract the funds
should be withheld or state that the
funds should be only withheld from the
contract on which the violations
occurred or from payments due for work
on that specific contract.276 The
Department rejects IEC’s claim that the
use of the term ‘‘the work’’ in section
3142(c)(3) limits the contracts from
which accrued payments may be
withheld to the contract on which ‘‘the
work’’ occurred for which workers were
not properly paid, and that this
statutory provision therefore does not
authorize withholding of funds from a
DRBA contract on which no violations
were found. The term ‘‘on the work’’ in
section 3142(c)(3) specifies which
workers are to benefit from the
withholding—those on the DBRAcovered work on which the violations
occurred; ‘‘on the work’’ does not limit
the accrued payments from which
monies can be withheld. Rather, the
statute directs that funds may be
‘‘withheld from the contractor’’ in an
amount considered necessary to pay the
difference between the rates required
and the rates paid to laborers and
mechanics on the work.277 The
regulations have expressly provided for
cross-withholding for the past 40 years,
as previously explained. And, contrary
to commenters’ assertions that crosswithholding is unnecessary to make
workers whole, the Department has
276 Similarly, CWHSSA does not specify the
contract from which funds should be withheld for
the payment of unpaid wages, as it states that ‘‘the
governmental agency . . . may withhold, or have
withheld, from money payable because of work
performed by a contractor or subcontractor,
amounts administratively determined to be
necessary to satisfy the liabilities of the contractor
or subcontractor for unpaid wages and liquidated
damages as provided in this section.’’ 40 U.S.C.
3702(d).
277 One commenter indicated that by stating that
withholding should be for the difference between
wages paid and the prevailing wage due to laborers
or mechanics on the work, Congress intended to say
that funds could only be withheld from the contract
on which the violations occurred. However, this
language merely addresses the amount of funds that
may be withheld, and hence does not identify or
limit the contracts from which such withholding
may occur.
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57689
repeatedly used the cross-withholding
process to obtain back wages for
workers where there would otherwise
be insufficient contract funds available
to ensure that workers are paid the
applicable prevailing wages. Cf.
Silverton Constr. Co., Inc., WAB No. 92–
09, 1992 WL 515939, at *2–3 (Sept. 29,
1992) (reversing ALJ’s decision that
prime contractor was not liable for its
subcontractor’s underpayments because
no money had been withheld under the
contract on which violations were found
because this decision was inconsistent
with the Department’s regulations in
effect since 1983 that permit crosswithholding if necessary to satisfy
Davis-Bacon and CWHSSA obligations).
Moreover, as noted in this section
above, cross-withholding is related to
the common-law right of ‘‘offset.’’ It is
well settled that no statutory authority
at all is necessary for the Federal
government to assert the right of offset.
‘‘Like private creditors, the federal
government has long possessed the right
of offset at common law.’’ Amoco Prod.
Co. v. Fry, 118 F.3d 812, 817 (D.C. Cir.
1997) (citing, among other cases, Gratiot
v. United States, 40 U.S. 336, 370
(1841)).278 To accept the commenters’
assertion that the DBA does not permit
cross-withholding would mean that, by
enacting the withholding provisions in
the Act, Congress had limited—and not
expanded—the government’s authority.
There is no basis for such a conclusion.
To the contrary, the legislative history of
the 1935 amendments to the Act reflects
Congress’s intent that withholding
operate to ensure that workers would be
made whole. See Liberty Mut. Ins. Co.,
ARB No. 00–018, 2003 WL 21499861, at
*6 (citing S. Rep. No. 74–1155 (1935)).
As the ARB noted in the Liberty Mutual
decision, ‘‘neither the DBA’s terms nor
the legislative history indicate
Congress’s intention to limit the
Administrator’s withholding authority
to the detriment of the laborers and
mechanics that are the intended
beneficiaries of the Act.’’ Id.
The Department also disagrees with
the individual commenter that crosswithholding contravenes the AntiDeficiency Act, the Purpose Statute, or
other statutes governing the use of
appropriated funds, and declines to
revise the regulatory text as they
278 In Gratiot, the Supreme Court explained that
‘‘[t]he United States possess[es] the general right to
apply all sums due for such pay and emoluments,
to the extinguishment of any balances due to them
by the defendant, on any other account, whether
owed by him as a private individual, or as chief
engineer. It is but the exercise of the common right,
which belongs to every creditor, to apply the
unappropriated moneys of his debtor, in his hands,
in extinguishment of the debts due to him.’’ Gratiot,
40 U.S. at 370.
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requested. The Anti-Deficiency Act
prohibits, in relevant part, an officer or
employee of the United States from
‘‘mak[ing] or authoriz[ing] an
expenditure or obligation exceeding an
amount available in an appropriation or
fund for the expenditure or obligation.’’
31 U.S.C. 1341(a)(1)(A). The commenter
appears to have conflated the AntiDeficiency Act with another general
prohibition on unauthorized transfers of
funds between appropriations accounts.
See U.S. Gov’t Accountability Off., 1
Principles of Federal Appropriations
Law ch. 2, at 2–38–39 (3d ed. 2015)
(GAO Red Book). Specifically, 31 U.S.C.
1532 provides that ‘‘[a]n amount
available under law may be withdrawn
from one appropriation account and
credited to another or to a working fund
only when authorized by law.’’ An
unauthorized transfer could lead to a
violation of the Anti-Deficiency Act or
Purpose Statute if the transfer ‘‘led to
overobligating the receiving
appropriation’’ or ‘‘the use of
appropriations for other than their
intended purpose,’’ respectively. GAO
Red Book ch. 2 at 38–40. The
commenter also apparently relies on ‘‘a
general rule that an agency may not
augment its appropriations from outside
sources without specific statutory
authority.’’ NRC Authority to Collect
Annual Charges From Federal Agencies,
15 Op. O.L.C. 74, 78 (1991) (referring to
the ‘‘anti-augmentation principle’’). The
commenter’s concerns are misplaced
because cross-withholding does not
involve any impermissible transfer or
augmentation, and because crosswithholding and disbursement of crosswithheld funds are authorized by law.
Contrary to this individual
commenter’s concerns, crosswithholding does not involve an
impermissible augmentation of any
agency’s appropriation. Nor, relatedly,
is the cross-withholding agency making
payments on the other agency’s contract
(i.e., augmenting that agency’s
appropriation) as the individual
commenter also appeared to suggest.
First, when funds are cross-withheld,
they remain in the account of the
contracting agency from whose contract
the funds are being withheld, typically
before being disbursed to workers by the
Department, as discussed below. The
contracting agency implementing an
inter-agency cross-withholding does not
actually or effectively transfer the crosswithheld funds to the contracting
agency on whose contract DBRA
violations occurred. The contracting
agency on whose contract DBRA
violations were found has no remaining
payment obligations to the contractor,
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thereby creating the need for crosswithholding in the first place, which
underscores why cross-withholding
does not implicate the purpose of, or
impermissibly augment, that agency’s
appropriation. Second, in the context of
inter-agency cross-withholding,
contracting agencies neither make
payments on another agency’s contract
nor could be required to do so, as the
DBA imposes liability for paying back
wages on contractors, not contracting
agencies. See 40 U.S.C. 3142(c)(1)
(‘‘[T]he contractor or subcontractor shall
pay all mechanics and laborers
employed directly on the site of the
work . . . the full amounts accrued at
time of payment.’’ (emphasis added));
see also 40 U.S.C. 3702(b)(2) (‘‘[T]he
contractor and any subcontractor
responsible for the [CWHSSA overtime]
violation are liable’’). Rather, the crosswithholding agency is ensuring, at the
Department’s request, that the
contractor is not overpaid given the
contractor’s (or its subcontractor(s)’s)
failure to satisfy their statutory and
contractual obligation to workers. As
such, inter-agency cross-withholding
functions as a mechanism to satisfy the
contractor’s DBRA underpayment
liability. The cross-withholding
contracting agency thus is not
augmenting (by transfer or otherwise)
appropriated funds of the contracting
agency on whose contract the DBRA
violations occurred.
Consistent with the DBA’s directive
that the Department pay withheld
monies ‘‘directly to laborers and
mechanics,’’ 40 U.S.C. 3144(a), see also
40 U.S.C. 3703(b)(3), the crosswithholding contracting agency may
eventually transfer the cross-withheld
funds to WHD—in its capacity as
enforcement agency—for distribution
directly to workers to whom the
contractor owes DBRA back wages.
WHD in turn may only distribute crosswithheld funds to such workers after
any challenge to the finding of
violations has been resolved. Until then,
the withheld funds are effectively held
in trust for the benefit of the underpaid
workers and cannot be used by DOL for
purposes other than disbursement to
workers. Cf. In re Quinta Contractors,
Inc., 34 B.R. 129, 131 (Bankr. M.D. Pa.
1983) (invoking statutory trust
principles in concluding that funds
withheld under the DBA were not
property of an estate in bankruptcy
except to the extent that the amount
withheld exceeded the amount of the
debtor’s liability under the DBA).279 If
279 Similarly, when an SCA-covered contractor
fails to pay required prevailing wages and fringe
benefits, the underpaid funds are ‘‘impressed with
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there are any unclaimed funds after 3
years, WHD is required to send such
funds to the U.S. Treasury.280 Cf. B–
256568 (Comp. Gen. Mar. 18, 1994)
(finding that, under predecessor
provision of DBA under which
Comptroller General, not the
Department, disbursed withheld funds
to workers, 3 years was a suitable period
of time for GAO to wait before
transferring unclaimed withheld funds
to the Treasury). The Department’s
cross-withholding and distribution
process is thus an enforcement
mechanism authorized by statute under
which WHD acts as an intermediary to
return funds to the workers to whom
they are owed. Cf. Grp. Dir., Claims
Grp./GGD, B–225091, 1987 WL 101454,
at *2 (stating that under CWHSSA,
disbursement of withheld funds is
‘‘purely ministerial’’); Glaude d/b/a
Nationwide Indus. Svcs., ARB No. 98–
081, 1999 WL 1257839, at *1–2, *4
(Nov. 24, 1999) (affirming pre-hearing
withholding and cross-withholding
from contractor under contracts with
two Federal agencies for SCA back
wages ALJ found due to contractor’s
workers on one of those contracts); Nissi
Corp., BSCA No. SCA–1233, 1990 WL
656138 (Sept. 25, 1990) (finding it was
proper to cross-withhold funds on a
contract with one agency for SCA
underpayments that an ALJ had found
due on another agency’s contract with
the same contractor).
In any event, the Anti-Deficiency Act
permits transfers, expenditures, and
obligations where ‘‘specified in . . . any
other provision of law.’’ 31 U.S.C.
1341(a)(1). The ‘‘other provision of law’’
exception applies here because the DBA
and CWHSSA authorize contracting
agencies to withhold accrued payments
needed to pay back wages, see 40 U.S.C.
secs. 3142(c)(3) & 3702(d), respectively,
and require the Department to distribute
back wages to underpaid workers, see
40 U.S.C. 3144(a)(1) (‘‘The Secretary of
Labor shall pay directly to laborers and
mechanics from any accrued payments
withheld under the terms of a contract
any wages found due to laborers and
mechanics under this subchapter.’’); 40
U.S.C. 3703(b)(3) (‘‘The Secretary of
Labor shall pay the amount
administratively determined to be due
directly to the laborers and mechanics
from amounts withheld on account of
a trust, either constructive or statutory, for the
benefit of the undercompensated employees.’’
Brock v. Career Consultants, Inc. (In re Career
Consultants, Inc.), 84 B.R. 419, 424 (Bankr. E.D. Va.
1988); see also, e.g., In re Frank Mossa Trucking,
Inc., 65 B.R. 715, 718 (Bankr. D. Mass. 1985).
280 See, e.g., ‘‘Workers Owed Wages,’’ Wage &
Hour Div., Dep’t of Lab., https://www.dol.gov/
agencies/whd/wow.
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underpayments of wages if the amount
withheld is adequate. If the amount
withheld is not adequate, the Secretary
of Labor shall pay an equitable
proportion of the amount due.’’). Thus,
these statutes expressly contemplate
that the funds withheld will be
transferred to the custody of the
Department of Labor so that it can
distribute those withheld funds to
remedy violations of the DBRA. The
Department’s authority to disburse
withheld funds to underpaid workers
would be meaningless if contracting
agencies could not transfer crosswithheld (and withheld) funds to
DOL—or withhold accrued payments to
begin with.
For similar reasons, cross-withholding
does not violate the Purpose Statute.
The Purpose Statute states that
appropriations ‘‘shall be applied only to
the objects for which the appropriations
were made except as otherwise
provided by law.’’ See 31 U.S.C.
1301(a). As with the Anti-Deficiency
Act, the DBA and CWHSSA satisfy the
‘‘otherwise provided by law’’ element.
Specifically, contrary to the individual
commenter’s assertion, both the DBA
and CWHSSA authorize contracting
agencies to withhold accrued payments
needed to pay back wages and expressly
authorize the Department to pay such
funds directly to underpaid workers. To
the extent such withholding and
payments could be construed as outside
‘‘the objects for which’’ the
appropriation underlying the withheld
funds was made, the withholding and
payment nonetheless are consistent
with the Purpose Statute because
Congress expressly authorized such
actions through the DBA and CWHSSA.
The fact that Congress in the SCA
expressly stated that withholding may
be from ‘‘the contract or any other
contract between the same contractor
and the Federal government,’’ as this
individual commenter noted, does not
mean that Congress did not authorize
the same practice in the DBA or any
Related Acts. As noted above, the DBA
authorizes the withholding of funds
‘‘from the contractor,’’ without limiting
such withholding to the contract on
which Davis-Bacon violations occurred.
That the SCA and DBA contain
differently worded withholding
provisions does not establish that crosswithholding is not also authorized
under the DBA, or that the DBA should
be interpreted as prohibiting crosswithholding. Indeed, Congressional
hearings shortly before the SCA’s
enactment reflect Congressional
awareness that both the SCA and DBA
provided for withholding, without
suggesting that withholding under the
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SCA was broader than under the DBA.
Service Contract Act of 1965: Hearing
before the Subcomm. on Lab. of the S.
Comm. on Lab. & Pub. Welfare, 89th
Cong. 11, 15–16 (1965). Moreover, as
detailed further in sections II.A
(‘‘Statutory and regulatory history’’) and
III.B.3.xix (‘‘Anti-Retaliation’’), in 1984,
Congress ratified and affirmed as law
Reorganization Plan No. 14 of 1950 and
declared that previous actions taken
pursuant to such reorganization plans
were considered to have been taken
pursuant to a reorganization expressly
approved by Congress. The 1983 crosswithholding regulation is one such prior
action.
It is also not accurate to state that the
Department’s explanation of the
proposed language in the NPRM
acknowledged that there is no
‘‘mutuality of debts’’ between a
contractor and the government when a
contractor owes back wages that would
justify a cross-withholding. As
explained above, under the common
law, cross-withholding is generally not
available unless there is a ‘‘mutuality of
debts’’ in that the creditor and debtor
involved are exactly the same person or
legal entity. Under the DBA, however,
Congress specifically implemented a
withholding provision with the goal of
ensuring that workers receive the
prevailing wages they are owed, and the
provision contemplated that the
withholding would be made effective
through the use of a contract clause. As
the Department noted in the NPRM, any
question about mutuality of debts does
not prohibit offset or withholding where
the parties have expressly contracted to
provide for such withholding. For these
same reasons, the Department does not
agree that the proposed language ignores
the separate legal status of such
contracting entities for a variety of other
purposes; it merely recognizes that
while this separate legal status may be
valid in other situations, it should not
be permitted to undermine one of the
DBA’s key enforcement mechanisms.
The Department appreciates
commenters’ suggestion that the
Department should be able to obtain
back wages for workers in all instances
where there has been a finding of
violations even without the use of crosswithholding. In WHD’s experience in
Davis-Bacon enforcement, withholding
is the remedy of first resort when DavisBacon violations are identified and
funds remain to be paid on the contract.
However, cross-withholding is
necessary and appropriate to satisfy the
contractor’s potential DBRA liability
when there are insufficient funds
remaining to be paid under the contract
on which violations have been found. In
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some instances, the Department does
not learn of, and does not have the
opportunity to fully investigate,
potential violations until contract
performance is well underway, nearing
completion, or even completed. In such
circumstances, it is not realistic that the
Department or the relevant contracting
agency will be able to determine
whether violations have occurred, and
determine the back wage amount from
such violations, in sufficient time to
ensure that 100 percent of the back wage
liability can be satisfied by straight
withholding on the contract. Resource
constraints also contribute to the need
for cross-withholding as a remedy. As
discussed in section V.A.2,
approximately 61,200 firms currently
hold DBA contracts or subcontracts and
approximately 91,700 firms perform on
Related Act contracts. While there is
probably some overlap in those
numbers, many of these contractors
hold multiple contracts or subcontracts,
resulting in hundreds of thousands of
DBRA contracts or subcontracts each
year. In contrast, the Department had
only 757 Wage and Hour investigators
as of December 31, 2021, each of whom
is also responsible for enforcing
multiple other employment laws. In
these circumstances, it is clearly not
possible that the Department will be
able to determine the nature and extent
of any Davis-Bacon violations on every
contract before all funds due on the
prime contract have been disbursed.
Where all funds have been disbursed on
such a prime contract, crosswithholding is critical to obtaining the
wages that workers are owed.
Similarly, while the Department
appreciates commenters’ concerns as to
whether the cross-withholding
procedure provides sufficient due
process to contractors, the Department
believes that the withholding process,
which is the same for both withholding
and cross-withholding, provides ample
due process. Contractors and
subcontractors that choose to dispute
WHD’s violation findings are afforded
an opportunity to request an
administrative hearing and appellate
process before any withheld funds are
disbursed to workers. If the appeal
process results in a final determination
in favor of the contractor or
subcontractor, WHD requests that the
contracting agency release withheld
funds in accordance with applicable law
and contract documents. Moreover,
contractors do not have a present
entitlement to contract funds, as the
contractor is only entitled to payment
under the contract to the extent that the
contractor has complied with the
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contract terms, including the
requirement to pay laborers and
mechanics the applicable prevailing
wage rate. See Ray Wilson Co., ARB No.
02–086, 2004 WL 384729, at * 3–4
(citing Lujan v. G & G Fire Sprinklers,
Inc., 532 U.S. 189, 195–97 (2001)).
For the foregoing reasons, the final
rule adopts these changes as proposed,
except for the following additional
clarifying edits to the proposed
withholding contract clauses in
§§ 5.5(a)(2), (b)(3), and 5.9(b).
First, the Department deletes the
references to § 5.5(a)(1), (a)(11), (b)(2),
and (b)(5) to make clear that the scope
of withholding has been and continues
to be broad. The final rule therefore
states that withholding for the full
amount of unpaid wages and monetary
relief, including interest, and liquidated
damages required by the clauses in
§ 5.5(a) or (b) is appropriate. The
references to paragraphs § 5.5(a)(1) and
(11) and (b)(2) and (5) are deleted so as
not to unintentionally exclude from the
scope of withholding any monies
determined to be due under other
paragraphs of § 5.5, such as § 5.5(a)(6) or
(b)(4) for lower-tier subcontractor
violations. Similarly, the final rule in
§ 5.5(a)(2) replaces the current reference
to ‘‘Davis-Bacon prevailing wage
requirements’’ with ‘‘Davis-Bacon labor
standards requirements’’ to be
consistent with the definition of DavisBacon labor standards in § 5.2.
Second, the Department deleted
‘‘under this contract’’ from the first
paragraph of § 5.5(a)(2) to clarify
(consistent with current § 5.5(a)(2)) that
withholding may be from the prime
contract, as well as from other contracts
or federally assisted contracts with the
same prime contractor as defined in
§ 5.2.
Third, the Department added clauses
to § 5.5(a)(2)(i) and 5.5(b)(3)(i) to
emphasize that withheld and crosswithheld funds ‘‘may be used to satisfy
the contractor liability for which the
funds were withheld,’’ as well as a
similar clause in § 5.9(b). These
additions were made in response to
questions about the source of the DBRA
liability, to clarify that the back wage
liability is the contractor’s and not the
contracting agency’s.
Fourth, the Department changed
‘‘loan or grant recipient’’ to ‘‘recipient of
Federal assistance’’ in the first sentences
of § 5.5(a)(2) and (b)(3) to encompass
Related Act assistance other than loans
and grants.
Fifth, the Department revised
§ 5.5(b)(3) to refer to contracts subject to
CWHSSA (consistent with current
§ 5.5(b)(3)) instead of subject to ‘‘Davis-
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Bacon prevailing wage requirements’’ as
proposed in the NPRM.
Sixth, the Department clarified in
§§ 5.5(a)(2)(i), 5.5(b)(3)(i), and 5.9(a) that
Federal and other agencies may
withhold on their own initiative and
must withhold at the Department’s
request.
The Department also added language
to § 5.9(a) to specify that, as in the
withholding contract clause provisions,
the suspension of funds must occur
until funds are withheld ‘‘as may be
considered necessary’’—like the similar
language in current § 5.5(a)(2) and
(b)(3)—to compensate workers, even
though there may not yet be a final
administrative determination of the
back wages and other monetary relief
which workers are owed, or of
liquidated damages, at the time of the
withholding.
(B) Suspension of Funds for
Recordkeeping Violations
The Department also proposed to add
language in § 5.5(a)(3)(iv) to clarify that
funds may be suspended when a
contractor has failed to submit certified
payroll or provide the required records
as set forth at § 5.5(a)(3). Comments
relating to this proposal are discussed in
the preamble regarding § 5.5(a)(3). In
accordance with that discussion, the
final rule adopts this change as
proposed.
(C) The Department’s Priority to
Withheld Funds
The Department proposed to revise
§§ 5.5(a)(2), 5.5(b)(3), and 5.9 to codify
the Department’s longstanding position
that, consistent with the DBRA’s
remedial purpose to ensure that
prevailing wages are fully paid to
covered workers, the Department has
priority to funds withheld (including
funds that have been cross-withheld) for
violations of Davis-Bacon prevailing
wage requirements and CWHSSA
overtime requirements. See also
PWRB,281 DBA/DBRA/CWHSSA
Withholding and Disbursement, at 4. To
ensure that underpaid workers receive
the monies to which they are entitled,
contract funds that are withheld to
reimburse workers owed Davis-Bacon or
CWHSSA wages, or both, must be
reserved for that purpose and may not
be used or set aside for other purposes
until such time as the prevailing wage
and overtime issues are resolved.
Affording the Department first
priority to withheld funds, above
competing claims, ‘‘effectuate[s] the
plain purpose of these federal labor
standards laws . . . [to] insure that
281 See
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every laborer and mechanic is paid the
wages and fringe benefits to which [the
DBA and DBRA] entitle them.’’ Quincy
Hous. Auth. LaClair Corp., WAB No.
87–32, 1989 WL 407468, at *3 (Feb. 17,
1989) (holding that ‘‘the Department of
Labor has priority rights to all funds
remaining to be paid on a federal or
federally-assisted contract, to the extent
necessary to pay laborers and mechanics
employed by contractors and
subcontractors under such contract the
full amount of wages required by federal
labor standards laws and the contract’’).
Withholding priority serves an
important public policy of providing
restitution for work that laborers and
mechanics have already performed, but
for which they were not paid the full
DBA or Related Act wages they were
owed.
Specifically, the Department proposed
to set forth expressly that it has priority
to funds withheld for DBA, CWHSSA,
and other Related Act wage
underpayments over competing claims
to such withheld funds by:
(1) A contractor’s surety(ies),
including without limitation
performance bond sureties, and
payment bond sureties;
(2) A contracting agency for its
reprocurement costs;
(3) A trustee(s) (either a courtappointed trustee or a U.S. trustee, or
both) in bankruptcy of a contractor, or
a contractor’s bankruptcy estate;
(4) A contractor’s assignee(s);
(5) A contractor’s successor(s); or
(6) A claim asserted under the Prompt
Payment Act, 31 U.S.C. 3901–07.
To the extent that a contractor did not
have rights to funds withheld for DavisBacon wage underpayments, its sureties,
assignees, successors, creditors (e.g.,
IRS), or bankruptcy estate likewise do
not have such rights, as it is well
established that such entities do not
have greater rights to contract funds
than the contractor does. See, e.g.,
Liberty Mut. Ins. Co., ARB No. 00–018,
2003 WL 21499861, at *7–9 (The
Department’s priority to DBA withheld
funds where surety ‘‘ha[d] not satisfied
all of the bonded [and defaulted prime]
contractor’s obligations, including the
obligation to ensure the payment of
prevailing wages’’); Unity Bank & Tr.
Co. v. United States, 5 Cl. Ct. 380, 384
(1984) (assignees acquire no greater
rights than their assignors); Richard T.
D’Ambrosia, 55 Comp. Gen. 744, 746
(1976) (IRS tax levy cannot attach to
money withheld for DBA
underpayments in which contractor has
no interest).
Withheld funds always should, for
example, be used to satisfy DBA and
Related Act wage claims before any
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reprocurement costs (e.g., following a
contractor’s default or termination from
all or part of the covered work) are
collected by the Government. See WHD
Opinion Letter DBRA–132 (May 8,
1985). The Department has explained
that ‘‘[t]o hold otherwise . . . would be
inequitable and contrary to public
policy since the affected employees
already have performed work from
which the Government has received the
benefit and that to give contracting
agency reprocurement claims priority in
such instances would essentially require
the employees to unfairly pay for the
breach of contract between their
employer and the Government.’’ Id.; see
also PWRB, DBA/DBRA/CWHSSA
Withholding and Disbursement, at 4.282
This rationale applies with equal force
in support of the Department’s priority
to withheld funds over the other types
of competing claims listed in this
proposed regulation.
The Department’s rights to withheld
funds for unpaid earnings also are
superior to performance and payment
bond sureties of a DBA or DBRA
contractor. See Westchester Fire Ins. Co.
v. United States, 52 Fed. Cl. 567, 581–
82 (2002) (surety did not acquire rights
that contractor itself did not have);
Liberty Mut. Ins. Co., ARB No. 00–018,
2003 WL 21499861, at *7–9 (ARB found
that Administrator’s claim to withheld
contract funds for DBA wages took
priority over performance (and
payment) bond surety’s claim); Quincy
Hous. Auth. LaClair Corp., WAB No.
87–32, 1989 WL 407468, at *3–4. The
Department can withhold unaccrued
funds such as advances until ‘‘sufficient
funds are withheld to compensate
employees for the wages to which they
are entitled’’ under the DBA. Liberty
Mut. Ins. Co., ARB No. 00–018, 2003 WL
21499861, at *6 (quoting 29 CFR 5.9).
Similarly, the Department also
explained that it has priority over
assignees (e.g., assignees under the
Assignment of Claims Act, see 31 U.S.C.
3727, 41 U.S.C. 6305) to DBRA withheld
funds. For example, in Unity Bank &
Trust Co., 5 Cl. Ct. at 383, the
employees’ claim to withheld funds for
a subcontractor’s DBA wage
underpayments had priority over a
claim to those funds by the assignee—
a bank that had lent money to the
subcontractor to finance the work.
Nor are funds withheld pursuant to
the DBRA for prevailing wage
underpayments property of a
contractor’s (debtor’s) bankruptcy estate.
See In re Quinta Contractors, Inc., 34
B.R. 129; cf. Pearlman v. Reliance Ins.
Co., 371 U.S. 132, 135–36 (1962)
282 See
note 19, supra.
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(concluding, in a case under the Miller
Act, that ‘‘[t]he Bankruptcy Act simply
does not authorize a trustee to distribute
other people’s property among a
bankrupt’s creditors’’). When a
contractor has violated its contract with
the government—as well as the DBA or
DBRA—by failing to pay required wages
and fringe benefits, it has not earned its
contractual payment. Therefore,
withheld funds are not property of the
contractor-debtor’s bankruptcy estate.
Cf. Pro. Tech. Servs., Inc. v. IRS, No. 87–
780C(2), 1987 WL 47833, at *2 (E.D. Mo.
Oct. 15, 1987) (when the Department
finds [an SCA] violation and issues a
withholding letter, that act
‘‘extinguishe[s]’’ whatever property
right the debtor (contractor) might
otherwise have had to the withheld
funds, subject to administrative review
if the contractor chooses to pursue it);
In re Frank Mossa Trucking, Inc., 65
B.R. 715, 718–19 (Bankr. D. Mass. 1985)
(pre-petition and post-petition SCA
withholding was not property of the
contractor-debtor’s bankruptcy estate).
Various Comptroller General
decisions further underscore these
principles. See, e.g., Carlson Plumbing
& Heating, B–216549, 1984 WL 47039
(Comp. Gen. Dec. 5, 1984) (DBA and
CWHSSA withholding has first priority
over IRS tax levy, payment bond surety,
and trustee in bankruptcy); Watervliet
Arsenal, B–214905, 1984 WL 44226, at
*2 (Comp. Gen. May 15, 1984) (DBA and
CWHSSA wage claims for the benefit of
unpaid workers had first priority to
retained contract funds, over IRS tax
claim and claim of payment bond
surety), aff’d on reconsideration sub
nom. Int’l Fid. Ins. Co., B–214905, 1984
WL 46318 (Comp. Gen. July 10, 1984);
Forest Serv. Request for Advance
Decision, B–211539, 1983 WL 27408, at
*1 (Comp. Gen. Sept. 26, 1983) (The
Department’s withholding claim for
unpaid DBA wages prevailed over
claims of payment bond surety and
trustee in bankruptcy).
The Department proposed codifying
its position that DBRA withholding has
priority over claims under the Prompt
Payment Act, 31 U.S.C. 3901–07. The
basis for this proposed provision is that
a contractor’s right to prompt payment
does not have priority over legitimate
claims—such as withholding—arising
from the contractor’s failure to fully
satisfy its obligations under the contract.
See, e.g., 31 U.S.C. 3905(a) (requiring
that payments to prime contractors be
for performance by such contractor that
conforms to the specifications, terms,
and conditions of its contract).
The Department welcomed comments
on whether the listed priorities should
be effectuated by different language in
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the contract clause, such as an
agreement between the parties that a
contractor forfeits any legal or equitable
interest in withheld payments once it
commits violations, subject to
procedural requirements that allow the
contractor to contest the violations.
The Department received multiple
comments generally supporting the
proposed language explicitly stating that
the Department has priority to funds
withheld for violations of Davis-Bacon
prevailing wage requirements and
CWHSSA overtime requirements over
other competing claims. These
commenters noted that the Department’s
priority over other competing claims is
necessary to ensure that funds are
available to pay workers the prevailing
wages that they are due. NCDCL and
FFC additionally noted that these
provisions are particularly important as
contractors who underpay their workers
frequently have other significant debts.
The Department did not receive any
suggestions as to alternative language in
the contract clause to effectuate these
priorities, nor did the Department
receive any comments opposing the
proposed language prioritizing DBRA
withholding over other competing
claims. Accordingly, the final rule
adopts the changes as proposed.
xxiv. Subpart C—Severability
The Department proposed to add a
new subpart C, titled ‘‘Severability,’’
which would contain a new § 5.40, also
titled ‘‘Severability.’’ The proposed
severability provision explained that
each provision is capable of operating
independently from one another, and
that if any provision of part 5 is held to
be invalid or unenforceable by its terms,
or as applied to any person or
circumstance, or stayed pending further
agency action, the Department intended
that the remaining provisions remain in
effect.
The Department received no
comments on this proposal. The final
rule therefore adopts this change as
proposed. An expanded discussion of
severability is below in section III.B.5.
4. Non-Substantive Changes
i. Plain Language
The Plain Writing Act of 2010 (Pub.
L. 111–274) requires Federal agencies to
write documents in a clear, concise,
well-organized manner. The Department
has written this document to be
consistent with the Plain Writing Act as
well as the Presidential Memorandum,
‘‘Plain Language in Government
Writing,’’ published June 10, 1998 (63
FR 31885). The Department encouraged
comment with respect to clarity and
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effectiveness of the language used.
Comments addressing plain language
and plain meaning are discussed in
their respective sections.
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ii. Other Changes
The Department proposed to make
non-substantive revisions throughout
the regulations to address typographical
and grammatical errors and to remove or
update outdated or incorrect regulatory
and statutory cross-references. The
Department also proposed to adopt
more inclusive language, including
terminology that is gender-neutral, in
the proposed regulations. These changes
are consistent with general practice for
Federal government publications; for
example, guidance from the Office of
the Federal Register advises agencies to
avoid using gender-specific job titles
(e.g., ‘‘foremen’’).283 These nonsubstantive revisions do not alter the
substantive requirements of the
regulations.
5. Severability
With respect to this final rule, it is the
Department’s intent that all provisions
and sections be considered separate and
severable and operate independently
from one another. In this regard, the
Department intends that: (1) In the event
that any provision within a section of
the rule is stayed, enjoined, or
invalidated, all remaining provisions
within that section will remain effective
and operative; (2) in the event that any
whole section of the rule is stayed,
enjoined, or invalidated, all remaining
sections will remain effective and
operative; and (3) in the event that any
application of a provision is stayed,
enjoined, or invalidated, the provision
will be construed so as to continue to
give the maximum effect to the
provision permitted by law.
It is the Department’s position, based
on its experience enforcing and
administering the DBRA, that with
limited exceptions described below, the
provisions and sections of the rule can
function sensibly in the event that any
specific provisions, sections, or
applications are invalidated, enjoined,
or stayed. As an initial matter, the
Department notes that this is the first
comprehensive update of the DBRA
regulations in four decades, and as such
covers a wide range of diverse topics.
Moreover, parts 1, 3, and 5 function
independently as a legal and practical
matter. The regulations in part 1
concern the procedures for
predetermination of wage rates and
283 See Office of the Federal Register, ‘‘Drafting
Legal Documents: Principles of Clear Writing’’
section 18, available at https://www.archives.gov/
Federal-register/write/legal-docs/clear-writing.html.
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fringe benefits, such as the definition of
the prevailing wage, the Department’s
wage surveys, and the circumstances
under which state or local wage rates
may be adopted. The regulations in part
5, in contrast, establish rules providing
for the payment of these minimum
wages and fringe benefits, coverage
principles and enforcement mechanisms
for these obligations, and the clauses to
be included in all covered contracts.
The incorporation and enforcement of
wage determinations and fringe benefits
contained within part 5 are functionally
independent from the development of
those wage determinations discussed in
part 1. Therefore, the Department’s
intent is that all the provisions of part
5 remain in effect if a court should
invalidate, stay, or enjoin any provision
of part 1, or vice versa. The same is true
with regard to part 3, which concerns
the anti-kickback and other provisions
of the Copeland Act.
Similarly, the Department believes
that the various provisions within part
1 and part 5 are generally able to operate
independently from one another and
need not rise or fall as a whole. For
example, the three-step process for
calculating the prevailing wage in § 1.2
operates independently from § 1.6,
which concerns the appropriate use of
general and project wage determinations
and when and how wage determinations
should be incorporated into contracts,
and the description of the wage survey
process in § 1.3 operates independently
from agencies’ obligations to furnish an
annual report on their construction
programs to the Administrator. Each
provision addressing various aspects of
how wages are determined also stands
on its own as a practical matter,
including, for example, the various
definitions within § 1.2, and the scope
of consideration at § 1.7. Likewise, the
final rule’s provisions describing
specific principles applicable to fringe
benefits in §§ 5.22–5.33 are wholly
separate from the provisions in § 5.6
concerning enforcement or provisions in
§ 5.12 concerning debarment
proceedings. Accordingly, as described
above in sections III.B.1.ix and
III.B.3.xxiv, the Department has
finalized, as proposed, new severability
provisions in §§ 1.10 and 5.40.
The Department recognizes that a
limited exception to the general
principle of severability will apply
where provisions of the final rule or the
regulations are contingent upon other
provisions for their existence and
viability. For example, as discussed in
section III.B.3.xx.C above, the
Department’s proposed revisions to
§ 3.11 were made to conform this
section to the operation-of-law
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provision in § 5.5(e). If a court were to
stay, invalidate, or enjoin § 5.5(e), the
Department would have to consider
whether changes to § 3.11 would be
necessary. However, the Department
intends that this exception be applied as
narrowly as practicable so as to give
maximum effect to the final rule and
each regulatory provision within it.
C. Applicability Date
As a part of the Department’s general
review of potential reliance interests
affected by this final rule, it has
considered how the rule will affect
contractors with contracts that were
entered into before the final rule’s
effective date. With limited exceptions,
the final rule will not affect such
contracts. The Department concluded,
however, that it would be helpful to
address the timing of implementation in
an ‘‘Applicability Date’’ subsection
within the DATES section of the final
rule.
The Applicability Date section of the
final rule states that the provisions of
the rule regarding wage determination
methodology and related part 1
provisions prescribing the content of
wage determinations may be applied
only to wage determination revisions
completed by the Department on or after
the effective date of the final rule on
October 23, 2023. This means that the
Department will apply the amendments
to §§ 1.2 (including the definitions of
‘‘prevailing wage’’ and ‘‘area’’), 1.3
(discussion of functional equivalence),
and 1.7 (scope of consideration) only to
wage surveys for which data collection
is completed after the effective date of
the final rule. Similarly, the Department
will be able to implement the new
provisions in §§ 1.3(f) (frequently
conformed rates), 1.3(g)–(j) (adoption of
State/local prevailing rates), 1.5(b)
(project wage determinations), and
1.6(c)(1) (periodic adjustments to noncollectively bargained rates) only in
wage determination revisions and
project wage determinations that are
issued and applicable after that date.
The Department’s wage determination
methodology and related provisions
prescribing the content of wage
determinations, as amended in this final
rule, will generally apply only to
contracts that are entered into after the
effective date of the final rule. This is
because, as explained in § 1.6 (‘‘Use and
effectiveness of wage determinations’’),
whenever a new wage determination or
wage determination revision is issued
(for example, after the completion of a
new wage survey or through the new
periodic adjustment mechanism), that
revision will only apply to contracts
that are entered into after the wage
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determination is issued and will not
apply to contracts which have already
been entered into, with three
exceptions. These exceptions are
explained in § 1.6(c)(2)(iii). The first
exception, discussed in
§ 1.6(c)(2)(iii)(A), is where a contract or
order is changed to include substantial
covered work that was not within the
scope of work of the original contract.
The second exception, discussed in the
same paragraph of the rule, is where an
option to extend the term of a contract
is exercised. Each of these situations is
effectively considered to be a new
contract for which the most recent wage
determination must be included, even if
the wage determination was issued after
the date that the original contract was
first entered into. The third exception is
for certain ongoing contracts that are not
tied to the completion of any particular
project (such as multiyear IDIQ
contracts) for which new wage
determinations must be incorporated on
an annual basis under § 1.6(c)(2)(iii)(B)
of the final rule. Accordingly, only for
these limited types of contracts may
wage determinations issued in
accordance with the final rule be
incorporated into contracts that were
entered into prior to the effective date
of the final rule.
The Applicability Date section
provides that contracting agencies must
apply the terms of § 1.6(c)(2)(iii) to
existing contracts of the types
referenced in that regulatory provision,
without regard to the date of contract
award, ‘‘if practicable and consistent
with applicable law.’’ With regard to
ongoing contracts covered by
§ 1.6(c)(2)(iii), such as long-term IDIQ
contracts, this language requires
contracting agencies to ensure, to the
extent practicable, that any existing
umbrella contract be amended to
include the most updated wage
determination on an annual basis, and
to do so through the exercise of any and
all authority that may be needed,
including, where necessary, a
contracting agency’s authority to
negotiate or amend, its authority to pay
any necessary additional costs, and its
authority under any contract provision
authorizing changes, cancellation, and
termination. This requirement applies to
both FAR-covered contracts and those
that are not. Because this requirement
only applies where practicable, it is not
necessary for contracting agencies to
amend contracts to retroactively impose
recent wage determinations. Rather,
umbrella contracts must be amended
only if they are indefinite or if more
than one year remains in their period of
performance. In addition, amendment
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need not be immediate following the
effective date of the final rule. Rather,
contracting agencies only need to
amend covered umbrella contracts
within one year of the effective date.
The Department considered whether
the applicability of the new wage
determination methodologies in this
manner would result in harm to reliance
interests of contractors that have entered
into contracts covered by the exceptions
in § 1.6(c)(2)(iii) and determined that
there are no such reliance interests that
would outweigh the benefits of the
implementation of the final rule as
described above. The final rule’s
exceptions for new substantial out-ofscope covered work and for exercises of
options represent regulatory
codifications of existing subregulatory
principles, not substantive changes to
the Davis-Bacon program. They are
consistent with the Department’s
guidance, case law, and historical
practice, under which such
modifications are considered new
contracts. See discussion above in
section III.B.1.vi.(B). Accordingly,
contractors should already expect that
in any such covered circumstance, any
new wage determination will be
incorporated into the contract, and
contracts therefore should already
account for any resulting changes to
prevailing wage rates in a manner that
does not adversely affect contractors.
Finally, as noted above in section
III.B.1.vi.(B), many existing umbrella
contracts that might be affected by this
requirement may well have mechanisms
requiring the contracting agency to
compensate the contractor for increases
in labor costs over time generally. Other
contracts may not currently have such
mechanisms, but compensation may be
negotiated consistent with applicable
law.
With the exception of § 1.6(c)(2)(iii),
all of the remaining provisions of parts
1, 3, and 5 will be applicable only to
new contracts entered into after the
effective date of October 23, 2023. For
any contracts entered into before
October 23, 2023, the terms of those
contracts and the regulations that were
effective at the time those contracts
were entered into (as interpreted by case
law and the Department’s guidance) will
continue to govern the duties of
contractors and contracting agencies
and the enforcement actions of the
Department. Accordingly, with regard to
the new operation-of-law provision at
§ 5.5(e), if a contract was entered into
prior to the effective date and is missing
a required contract clause or wage
determination, the Department will seek
to address the omission solely through
the modification provisions in the
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existing regulation at § 1.6(f) as it has
been interpreted prior to this
rulemaking. In other circumstances,
where the Department has acted in this
final rule only to clarify or codify
existing interpretations and practices,
the question of whether a contract was
entered into prior to or after the
applicability date of this final rule may
not in practical terms change contractor
duties or the parameters of any
enforcement action. For contracts
entered into after the effective date of
this final rule, but before the Federal
Acquisition Regulation or the relevant
Related Act program regulations are
amended to conform to this rule,
agencies must use the contract clauses
set forth in § 5.5(a) and (b) of this rule
to the maximum extent possible under
applicable law.
IV. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(PRA), 44 U.S.C. 3501 et seq., and its
attendant regulations, 5 CFR part 1320,
require the Department to consider the
agency’s need for its information
collections, their practical utility, as
well as the impact of paperwork and
other information collection burdens
imposed on the public, and how to
minimize those burdens. The PRA
typically requires an agency to provide
notice and seek public comments on
any proposed collection of information
contained in a proposed rule. See 44
U.S.C. 3506(c)(2)(B); 5 CFR 1320.8. The
Department invited public comments as
part of the NPRM. 87 FR 15762 (Mar. 18,
2022).
This final rule would affect existing
information collection requirements
previously approved under OMB
control number 1235–0008 (DavisBacon Certified Payroll) and OMB
control number 1235–0023 (Requests to
Approve Conformed Wage
Classifications and Unconventional
Fringe Benefit Plans Under the DavisBacon and Related Acts/Contract Work
Hours and Safety Standards Act). As
required by the PRA, the Department
submitted proposed information
collection revisions as part of the NPRM
to OMB for review to reflect changes
that will result from this rulemaking.
OMB issued a Notice of Action related
to each Information Collection Request
(ICR) continuing the collection and
asking the Department to address any
comments received and resubmit with
the final rule.
Circumstances Necessitating this
Collection: The Department administers
enforcement of the Davis-Bacon labor
standards that apply to Federal and
federally assisted construction projects.
The Copeland Act requires contractors
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and subcontractors performing work on
federally financed or assisted
construction contracts to furnish weekly
a statement on the wages paid each
employee during the prior week. See 40
U.S.C. 3145; 29 CFR 3.3(b). The
Copeland Act specifically requires the
regulations to ‘‘include a provision that
each contractor and subcontractor each
week must furnish a statement on the
wages paid each employee during the
prior week.’’ 40 U.S.C. 3145(a). This
requirement is implemented by 29 CFR
3.3 and 3.4 and the standard DavisBacon contract clauses set forth at 29
CFR 5.5. The provision at 29 CFR 5.5
(a)(3)(ii)(A) requires contractors to
submit weekly a copy of all payrolls to
the Federal agency contracting for or
financing the construction project. This
information collection is assigned OMB
control number 1235–0008. Regulations
at 29 CFR part 5 prescribe labor
standards for federally financed and
assisted construction contracts subject
to the DBA, 40 U.S.C. 3141 et seq., and
Related Acts, including all contracts
subject to the CWHSSA, 40 U.S.C. 3701,
et seq. The DBA and DBRA require
payment of locally prevailing wages and
fringe benefits, as determined by the
Department, to laborers and mechanics
on most federally financed or federally
assisted construction projects. See 40
U.S.C. 3142(a); 29 CFR 5.5(a)(1).
CWHSSA requires the payment of one
and one-half times the basic rate of pay
for hours worked over 40 in a week on
most Federal contracts involving the
employment of laborers or mechanics.
See 40 U.S.C. 3702(c); 29 CFR 5.5(b)(1).
The requirements of this information
collection consist of (A) reports of
conformed classifications and wage
rates, and (B) requests for approval of
unfunded fringe benefit plans. This
information collection is assigned OMB
control number 1235–0023.
Summary: This final rule amends
regulations issued under the DavisBacon and Related Acts that set forth
rules for the administration and
enforcement of the Davis-Bacon labor
standards that apply to Federal and
federally assisted construction projects.
In the NPRM, the Department
proposed to add a new paragraph to
§ 5.5(a)(1), and has recodified the
paragraphs as follows:
Current paragraph
New paragraph
§ 5.5(a)(1)(ii)(A) .........
§ 5.5(a)(1)(iii)(A).
§ 5.5(a)(1)(iii)(B)
[paragraph added].
§ 5.5(a)(1)(iii)(C).
§ 5.5(a)(1)(iii)(D).
§ 5.5(a)(1)(iii)(E).
§ 5.5(a)(1)(ii)(B) .........
§ 5.5(a)(1)(ii)(C) .........
§ 5.5(a)(1)(ii)(D) .........
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The final rule adopts the additions
and revisions to § 5.5(a)(1) as proposed
in the NPRM.
The Department also proposed to
make non-substantive revisions to
§ 5.5(a)(1)(iii)(C) and (D) to describe the
conformance request process more
clearly, including by providing that
contracting officers should submit the
required conformance request
information to WHD via email using a
specified WHD email address. The
Department adopted these proposals
without changes as the changes merely
clarified the existing conformance
request process and did not alter the
information collection burden on the
public or on the Department.
Additionally, in the NPRM, the
Department proposed adding a new
paragraph (b)(5) to § 5.28, explicitly
stating that unfunded benefit plans or
programs must be approved by the
Secretary in order to qualify as bona fide
fringe benefits, and to replace the text in
current paragraph (c) with language
explaining the process contractors and
subcontractors must use to request such
approval. To accommodate these
changes, the Department proposed to
add a new paragraph (d) that contains
the text currently located in paragraph
(c) with non-substantive edits for clarity
and readability. These changes are
summarized as follows:
Current
paragraph
New paragraph
§ 5.28(c) .........
§ 5.28(b)(5) [paragraph
added].
§ 5.28(c) [paragraph added].
§ 5.28(d).
The final rule adopts the additions
and revisions to § 5.28 as proposed in
the NPRM, as these changes merely
conformed regulatory language in § 5.28
to the existing approval process for
unfunded fringe benefit plan under 29
CFR 5.5(a)(1)(iv). These changes did not
alter the information collection burden
on the public. The Department is adding
regulatory citations to the collection
under 1235–0023, however there is no
change in burden.
The Department is adding two new
recordkeeping requirements for
contractors (telephone number and
email address) to the collection under
1235–0008. However, it did not propose
that such data be added to the ‘‘certified
payrolls’’ submission (often collected on
the WH–347 instrument); rather, this
information must be provided to DOL
and contracting agencies on request.
The Department is adding a new
requirement to 29 CFR 5.5 at
renumbered paragraph (a)(3)(iii), which
will require all contractors,
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subcontractors, and recipients of
Federal assistance to maintain and
preserve Davis-Bacon contracts,
subcontracts, and related documents for
3 years after all the work on the prime
contract is completed. These related
documents include contractor and
subcontractor bids and proposals,
amendments, modifications, and
extensions to contracts, subcontracts,
and agreements. The Department is
amending § 5.5(a)(3)(i) to clarify that
regular payrolls and other basic records
required by this section must be
preserved for a period of at least 3 years
after all the work on the prime contract
is completed. In other words, even if a
project takes more than 3 years to
complete, contractors and
subcontractors must keep payroll and
basic records for at least 3 years after all
the work on the prime contract has been
completed. This revision expressly
states the Department’s longstanding
interpretation and practice concerning
the period of time that contractors and
subcontractors must keep payroll and
basic records required by § 5.5(a)(3).
This is not a change. The Department
notes that it is a normal business
practice to keep such documents and
previously explained that it does not
expect an increase in burden associated
with this requirement.
Purpose and use: This final rule
continues the already existing
requirements that contractors and
subcontractors must certify their
payrolls by attesting that persons
performing work on DBRA covered
contracts have received the proper
payment of wages and fringe benefits.
Contracting officials and WHD
personnel use the records and certified
payrolls to verify contractors pay the
required rates for work performed.
Additionally, the Department reviews
a proposed conformance action report to
determine the appropriateness of a
conformance action. Upon completion
of review, the Department approves,
modifies, or disapproves a conformance
request and issues a determination. The
Department also reviews requests for
approval of unfunded fringe benefit
plans to determine the propriety of the
plans.
WHD obtains PRA clearance under
control number 1235–0008 for an
information collection covering the
Davis-Bacon Certified Payroll. An ICR
Revision will be submitted with this
final rule to incorporate the regulatory
citations in this final rule and adjust
burden estimates to reflect a slight
increase in burden associated with the
new recordkeeping requirements
finalized in this document.
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WHD obtains PRA clearance under
OMB control number 1235–0023 for an
information collection related to
reporting requirements related to
Conformance Reports and Unfunded
Fringe Benefit Plans. An ICR Revision
will be submitted with the final rule
that includes the shifting regulation
citations as well as the addition of
references to 29 CFR 5.28. The Agencies
will notify the public when OMB
approves the ICRs.
Information and technology: There is
no particular order or form of records
prescribed by the regulations. A
respondent may meet the requirements
of this final rule using paper or
electronic means.
Public comments: The Department
invited public comment on its analysis
that the final rule created a slight
increase in paperwork burden
associated with ICR 1235–0008 and no
increase in burden to ICR 1235–0023.
The Department received some
comments related to the PRA aspect of
the NPRM.
The FFC–CT indicated their support
for an update to the Department’s
recordkeeping requirements, expressing
the view that accurate records are
critical to transparency and
accountability in the construction
industry. McKanna, Bishop, Joffe, LLP,
and WA BCTC also expressed that they
fully support strengthened
recordkeeping requirements. Weinberg,
Roger, and Rosenfeld, on behalf of the
NCDCL concurred, stating the
recordkeeping requirements in the
proposed rule were ‘‘vast
improvements’’ that would ‘‘increase
transparency and allow the District
Council and other organizations to
ensure that contractors are complying
with the law.’’ The comment also stated
that the proposed rule’s ‘‘clarifications
and supplemental requirements
modernize the DBRA’s recordkeeping
requirements and ensure that
contractors maintain their records for
years after projects are completed.’’ The
UBC suggested that additional
recordkeeping requirements should be
enacted, including requirements to
retain timesheets, job site orientation
records, contact information for
subcontractors, and records of payments
to subcontractors.
Alternatively, a comment submitted
by the group of U.S. Senators expressed
the view that adding to recordkeeping
requirements places an impermissible
administrative burden on small to midsize contractors, many of whom lack the
administrative resources to keep up
with paperwork burdens. The
commenters indicated that in addition
to the certified payroll data, contractors
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are required to maintain all contracts
and subcontracts, as well as bids,
proposals, amendments, modifications,
and extensions for those contracts and
subcontracts. This requirement is not
novel, and the time period for DBRA
record retention is consistent with other
such regulatory requirements for
contractors. For example, the SCA
requires that contractors and
subcontractors maintain many pay and
time records ‘‘for 3 years from the
completion of the work.’’ 29 CFR
4.6(g)(1). The FAR requires contractors
to retain certain records for 3 or 4 years.
See, e.g., 48 CFR 4.705–2(a) (contractors
must retain certain pay administration
records for 4 years); 48 CFR 4.703(a)(1)
(requiring contractor retention for 3
years after final payment of ‘‘records,
which includes books, documents,
accounting procedures and practices,
and other data, regardless of type and
regardless of whether such items are in
written form, in the form of computer
data, or in any other form, and other
supporting evidence to satisfy contract
negotiation, administration, and audit
requirements of the contracting agencies
and the Comptroller General’’).
Moreover, maintaining copies of
contracts to which you are a party is a
sound business practice to document
the parties’ obligations under the
contracts, among other reasons. Not
only are DBRA-covered construction
contracts needed for reference during
performance and completion about
scope of work, specifications, pricing,
etc., but if there is any dispute about the
contract provisions, performance, etc.,
contract documents are the starting
point for resolving contractual disputes.
In addition, contract payment terms
may be supporting documents for a
contractor’s business tax filings. The
Department is not requiring that
contractors maintain originals or even
paper copies of contracts and related
documents; electronic copies are
acceptable so long as they contain a
valid electronic signature.
The III–FFC wrote in support of the
Department’s proposal to add a
recordkeeping requirement to retain
telephone number and email address,
noting that ‘‘[t]he proposed
requirements, including maintaining
relevant bid and contract information,
as well as payroll record information
like contact information and correct
classifications, help further the purpose
of the Act.’’ III–FFC added that such
requirements are ‘‘particularly necessary
where DOL must contact a worker for
investigation or audit purposes and will
further reduce the incentive to
misclassify workers and commit wage
theft.’’ Some individual commenters
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57697
supported recordkeeping requirements
indicating that it effectively deters
misclassification.
However, ABC opposed this
requirement, writing that a requirement
to disclose worker telephone numbers
and email addresses ‘‘constitutes an
invasion of employee privacy and
exposes employees to the increased
possibility of identity theft.’’ At a
minimum, ABC stated, ‘‘such
information should be redacted and not
publicly disclosed under any
circumstances.’’
After consideration of the comments
on this topic, the final rule adopts the
changes to § 5.5(a)(3)(i) as proposed. As
the various comments in support
indicate, the proposed changes will
clarify the recordkeeping requirements
for contractors, discourage
misclassification of workers, and
increase the efficiency of the
Department’s enforcement. While the
Department appreciates ABC’s concerns
for workers’ privacy and the need to
protect workers from the danger of
identity theft, the final rule does not
require contractors to provide workers’
telephone numbers or emails on
certified payrolls or post them on a
publicly available database, but rather
requires contractors to maintain this,
like other worker contact information,
in contractors’ internal records, and
make this information available to DOL
and contracting agencies upon request
for use in the enforcement and
administration of the DBRA.
The Department believes that email
and telephone number are minimal
additional recordkeeping requirements
and does not require in this final rule
that such data be added to the weekly
certified payroll thereby minimizing
burden. The Department is, therefore,
finalizing these additional
recordkeeping requirements as
proposed.
The Department received some
comments on the proposed changes to
§ 5.5(a)(1)(iii)(B), which prohibits the
use of conformances to ‘‘split, subdivide
or otherwise avoid application of
classifications listed in the wage
determination.’’ Similarly, the
Department also received comments
regarding other revisions to part 1 and
part 5 of the DBA regulations.
Commenters like the SNBTU supported
the Department’s proposed rule, as did
SMART and SMACNA, and LIUNA.
The Department also received some
comments expressing concern about
scrutiny related to unfunded fringe
benefit plans. CC&M, and IUOE
expressed their concerns. The
comments appear to be premised on a
misconception that the revisions impose
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new substantive requirements with
respect to unfunded plans. Nothing in
these revisions alters the four
substantive conditions for unfunded
plans set out in § 5.28(b)(1)–(4) or the
overall requirements that an unfunded
plan must be ‘‘bona fide’’ and able to
‘‘withstand a test . . . of actuarial
soundness.’’ Consistent with
§§ 5.5(a)(1)(iv) and 5.29(e), the
Department has long required written
approval if a contractor seeks credit for
the reasonably anticipated costs of an
unfunded benefit plan towards its
Davis-Bacon prevailing wage
obligations, including with respect to
vacation and holiday plans. The
revisions to § 5.28 merely clarify this
preexisting requirement and detail the
process through which contractors may
request such approval from the
Department.
The FTBA expressed the view that the
Department’s proposal that contractors
and subcontractors must make available
‘‘any other documents deemed
necessary to determine compliance with
the labor standards provisions of any of
the statutes referenced by § 5.1’’ is too
broad and vague, and they expressed
concern that such a requirement would
have the effect of subjecting contractors
to ‘‘burdensome, varied, unreasonable
requests’’ left to the discretion of
enforcement staff. Alternatively, LIUNA
supported the proposed recordkeeping
requirements as ‘‘clarifying DOL’s
‘longstanding’ approach to requiring
contractors to maintain basic records
and certified payrolls, including regular
payroll and additional records relating
to fringe benefit and apprenticeship and
training.’’
Smith, Summerset & Associates, LLC,
suggested that the WH–347 collection
instrument used to collect data for the
Davis-Bacon Certified Payroll (under
OMB control number 1235–0008) is
difficult to understand and indicated
that the form needs simplification and
rearrangement. The commenter added
that, ‘‘[t]he same changes—replacing
‘employee’ references with ‘worker’
references—should also be made asap to
the WH–347 payroll reporting form. The
WH–347 is the primary customer-facing
document in the DBRA universe. It is
used by thousands of contractors who
still submit paper CPRs and, via
operation of the computer programs, by
other thousands of contractors who
submit e-CPRs. It is frequently their
main source of information about
DBRA. WH–347 page 2, the signature
page, still uses the terms ‘employees’
and ‘employed by.’ Those references
need to be changed asap.’’ Smith,
Summerset & Associates also suggested
additional changes to WH–347 to
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expand the universe of authorized
persons who may sign the WH–347 and
to simplify the tool for users. As we note
below, changes to the WH–347 are
beyond the scope of this rulemaking,
but the Department will consider
comments submitted as part of the
form’s revision process.
The MnDOT, commenting on the
Department’s proposal to require the
Social Security number and last known
address in payroll records, added that
this information should also be
included in the certified payroll. They
suggested that excluding such data on
the certified payroll would make it more
difficult to track workers between
contractors. With respect to comments
about the WH–347, the Department
reiterates that it proposed no changes to
the form in the NPRM. However, the
form is currently under review and the
Department is considering such
comments in the revision process. The
Department appreciates this feedback
and invites commenters to provide
feedback and suggestions when the
notice for revision is published in the
Federal Register.
A copy of these ICRs may be obtained
at https://www.reginfo.gov or by
contacting the Wage and Hour Division
as shown in the FOR FURTHER
INFORMATION CONTACT section of this
preamble.
Total burden for the subject
information collections, including the
burdens that will be unaffected by this
final rule and any changes are
summarized as follows:
Type of review: Revision to currently
approved information collections.
Agency: Wage and Hour Division,
Department of Labor.
Title: Davis-Bacon Certified Payroll.
OMB Control Number: 1235–0008.
Affected public: Private sector,
businesses or other for-profits and
Individuals or Households.
Estimated number of respondents:
152,900 (0 from this rulemaking).
Estimated number of responses:
9,194,616 (1,200,000 from this
rulemaking).
Frequency of response: On occasion.
Estimated annual burden hours:
7,464,975 (3,333 burden hours due to
this rulemaking).
Capital/Start-up costs: $1,143,229 ($0
from this rulemaking).
Type of review: Revision to currently
approved information collections.
Agency: Wage and Hour Division,
Department of Labor.
Title: Requests to Approve Conformed
Wage Classifications and
Unconventional Fringe Benefit Plans
Under the Davis-Bacon and Related Acts
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and Contract Work Hours and Safety
Standards Act.
OMB Control Number: 1235–0023.
Affected public: Private sector,
businesses or other for-profits and
Individuals or Households.
Estimated number of respondents:
8,518 (0 from this rulemaking).
Estimated number of responses: 8,518
(0 from this rulemaking).
Frequency of response: on occasion.
Estimated annual burden hours: 2,143
(0 from this rulemaking).
Estimated annual burden costs: 0.
Capital/Start-up costs: $5,366 ($0
from this rulemaking).
V. Executive Order 12866, Regulatory
Planning and Review; Executive Order
13563, Improved Regulation and
Regulatory Review
Under Executive Order 12866, OMB’s
Office of Information and Regulatory
Affairs (OIRA) determines whether a
regulatory action is significant and,
therefore, subject to the requirements of
the Executive Order and OMB
review.284 Section 3(f) of Executive
Order 12866 defines a ‘‘significant
regulatory action’’ as a regulatory action
that is likely to result in a rule that may:
(1) have an annual effect on the
economy of $100 million or more, or
adversely affect in a material way a
sector of the economy, productivity,
competition, jobs, the environment,
public health or safety, or State, local,
or Tribal governments or communities
(also referred to as economically
significant); (2) create serious
inconsistency or otherwise interfere
with an action taken or planned by
another agency; (3) materially alter the
budgetary impact of entitlements,
grants, user fees or loan programs or the
rights and obligations of recipients
thereof; or (4) raise novel legal or policy
issues arising out of legal mandates, the
President’s priorities, or the principles
set forth in the Executive Order. OIRA
has determined that this final rule is a
‘‘significant regulatory action’’ within
the scope of section 3(f)(1) of Executive
Order 12866. OIRA has also designated
this rule as a major rule under Subtitle
E of the Small Business Regulatory and
Enforcement Fairness Act of 1996.
Although the Department has only
quantified costs of $39.3 million in Year
1, there are multiple components of the
rule that could not be quantified due to
data limitations, so it is possible that the
aggregate effect of the rule is larger.
Executive Order 13563 directs
agencies to, among other things, propose
or adopt a regulation only upon a
reasoned determination that its benefits
284 See
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justify its costs; that it is tailored to
impose the least burden on society,
consistent with obtaining the regulatory
objectives; and that, in choosing among
alternative regulatory approaches, the
agency has selected those approaches
that maximize net benefits. Executive
Order 13563 recognizes that some costs
and benefits are difficult to quantify and
provides that, when appropriate and
permitted by law, agencies may
consider and discuss qualitatively
values that are difficult or impossible to
quantify, including equity, human
dignity, fairness, and distributive
impacts. The analysis below outlines
the impacts that the Department
anticipates may result from this rule and
was prepared pursuant to the abovementioned executive orders.
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A. Introduction
1. Background and Need for Rulemaking
In order to provide greater clarity and
enhance their usefulness in the modern
economy, the Department is updating
and modernizing the regulations that
implement the Davis-Bacon and Related
Acts. The DBA, enacted in 1931,
requires the payment of locally
prevailing wages and fringe benefits on
Federal contracts for construction. See
40 U.S.C. 3142. The law applies to
workers on contracts awarded directly
by Federal agencies and the District of
Columbia that are in excess of $2,000
and for the construction, alteration, or
repair of public buildings or public
works. Congress subsequently
incorporated DBA prevailing wage
requirements into numerous statutes
(referred to as Related Acts) under
which Federal agencies assist
construction projects through grants,
loans, guarantees, insurance, and other
methods.
The Department seeks to address a
number of outstanding challenges in the
program while also providing greater
clarity in the DBRA regulations and
enhancing their usefulness in the
modern economy. In this rulemaking,
the Department is updating and
modernizing the regulations
implementing the DBRA at 29 CFR parts
1, 3, and 5. Among other updates, as
discussed more fully earlier in this
preamble, under this rule the
Department will:
• Return to the definition of
‘‘prevailing wage’’ in § 1.2 that it used
from 1935 to 1983.285 Currently, a wage
rate may be identified as prevailing in
the area only if it is paid to a majority
of workers in a classification on the
wage survey; otherwise, a weighted
285 The 1981–1982 rulemaking went into effect
Apr. 29, 1983. 48 FR 19532.
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average is used. The Department will
return instead to the ‘‘three-step’’
method in effect before 1983. Under that
method, in the absence of a wage rate
paid to a majority of workers in a
particular classification, a wage rate will
be considered prevailing if it is paid to
at least 30 percent of such workers.
Only if no wage rate is paid to at least
30 percent of workers in a classification
will an average rate be used.
• Revise § 1.6(c)(1) to provide a
mechanism to regularly update certain
non-collectively bargained prevailing
wage rates based on the ECI. The
mechanism is intended to keep such
rates more current between surveys so
that they do not become out-of-date and
fall behind prevailing wage rates in the
area.
• Expressly give the Administrator
authority and discretion to adopt State
or local wage determinations as the
Davis-Bacon prevailing wage where
certain specified criteria are satisfied.
• Return to a prior policy made
during the 1981–1982 rulemaking
related to the delineation of wage survey
data submitted for ‘‘metropolitan’’ or
‘‘rural’’ counties in § 1.7(b). Through
this change, the Department seeks to
more accurately reflect modern labor
force realities, to allow more wage rates
to be determined at smaller levels of
geographical aggregation, and to
increase the sufficiency of data at the
statewide level.
• Include provisions to reduce the
need for the use of ‘‘conformances’’
where the Department has received
insufficient data to publish a prevailing
wage for a classification of worker—a
process that currently is burdensome for
contracting agencies, contractors, and
the Department.
• Strengthen enforcement, including
by making effective, by operation of law,
any contract clauses or wage
determinations that were wrongly
omitted from contracts, and by
codifying the principle of annualization
used to calculate the amount of DavisBacon credit that a contractor may
receive for contributions to a fringe
benefit plan when the contractor’s
workers also work on private projects.
• Clarify and strengthen the scope of
coverage under the DBRA, including by
revising the definition of ‘‘site of the
work’’ to further encompass certain
construction of significant portions of a
building or work at secondary
worksites, to better clarify when
demolition and similar activities are
covered by the Davis-Bacon labor
standards, and to clarify that the
regulatory definitions of ‘‘building or
work’’ and ‘‘public building or public
work’’ can be met even when the
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57699
construction activity involves only a
portion of an overall building, structure,
or improvement.
2. Summary of Affected Contractors,
Workers, Costs, Transfers, and Benefits
The Department evaluates the impacts
of two components of this rule in this
regulatory impact analysis:
• The return to the ‘‘three-step’’
method for determining the prevailing
wage, and
• The provision of a mechanism to
regularly update certain noncollectively bargained prevailing wage
rates based on ECI data.
The numbers presented in this final
rule are generally very similar to the
numbers in the proposed rule.
Differences are due to the use of more
recent data and a larger time estimate
for regulatory familiarization costs in
response to comments. This rule
predominantly affects firms that hold
federally funded or assisted
construction contracts, with the primary
impact resulting from the rule’s changes
affecting prevailing wage and fringe
benefit rate determinations. The
Department identified a range of
potentially affected firms. The more
narrowly defined population (those
actively holding DBRA-covered
contracts) includes 152,900 firms. The
broader population (including those
bidding on contracts but without active
contracts, or those considering bidding
in the future) includes 184,500 firms.
Only a subset of potentially affected
firms will be substantively affected and
fewer may experience a change in
payroll costs because some firms
already pay above the prevailing wage
rates that may result from this proposal.
The Department estimated there are
1.2 million workers on DBRA-covered
contracts and who therefore may be
potentially affected by this final rule.
Some of these workers will not be
affected because they work in
occupations not covered by DBRA or, if
they are covered by DBRA, workers may
not be affected by the prevailing wage
updates of this final rule because they
may already earn above the updated
prevailing wage and fringe benefit rates.
The Department estimated both
regulatory familiarization costs and
implementation costs for affected firms.
Year 1 costs are estimated to total $39.3
million. Average annualized costs
across the first 10 years are estimated to
be $7.3 million (using a 7 percent
discount rate). The transfer analysis
discussed in section V.D. (‘‘Transfer
Payments’’) draws on two illustrative
analyses conducted by the Department.
However, the Department does not
definitively quantify annual transfer
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payments due to data limitations and
uncertainty. Similarly, benefits are
discussed qualitatively due to data
limitations and uncertainty. See Table 1
for a summary of affected contractor
firms, workers, and costs.
TABLE 1—SUMMARY OF AFFECTED CONTRACTOR FIRMS, WORKERS, AND COSTS
[2021 Dollars]
Future years
Average annualized value
Year 1
Year 2
Firms: Narrow definition a .............................................................................
Firms: Broad definition b ...............................................................................
Potentially affected workers (millions) .........................................................
Direct employer costs (million) ....................................................................
Regulatory familiarization .....................................................................
Implementation .....................................................................................
a Firms
b Firms
152,900
184,500
1.2
$2.4
$0.0
$2.4
152,900
184,500
1.2
$2.4
$0.0
$2.4
3% Real rate
7% Real rate
........................
........................
........................
$7.5
$5.1
$2.4
........................
........................
........................
$7.3
$4.9
$2.4
actively holding DBRA-covered contracts.
actively holding DBRA-covered contracts or who may be bidding on DBRA contracts or considering bidding in the future.
B. Number of Potentially Affected
Contractor Firms and Workers
1. Number of Potentially Affected
Contractor Firms
The Department identified a range of
potentially affected firms. The more
narrowly defined population (firms
actively holding DBRA-covered
contracts) includes 152,900 firms:
61,200 impacted by DBA and 91,700
impacted by the Related Acts (Table 2).
The broader population (including those
bidding on DBA contracts but without
active contracts, or those considering
bidding in the future) includes 184,500
firms: 92,800 impacted by DBA and
91,700 impacted by the Related Acts.
The Department explains how the three
components of affected contractor firms
were derived separately: (1) firms
currently holding DBA contracts, (2) all
potentially affected DBA contractors,
and (3) firms holding DBRA contracts.
The Department notes that only a
subset of these firms will experience a
change in payroll costs. Those firms that
already pay above the new wage
determination rates will not be
substantively affected. Because there are
no readily usable data on the earnings
of workers of these affected firms, the
Department cannot definitively identify
the number of firms that will experience
changes in payroll costs due to changes
in prevailing wage rates.
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152,900
184,500
1.2
$39.3
$36.9
$2.4
Year 10
i. Firms Currently Holding DBA
Contracts
USASpending.gov—the official source
for spending data for the U.S.
Government—contains Government
award data from the Federal
Procurement Data System Next
Generation (FPDS–NG), which is the
system of record for Federal
procurement data. The Department used
these data to identify the number of
firms that currently hold DBA contracts.
Although more recent data are available,
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the Department used data from 2019 to
avoid any shifts in the data associated
with the COVID–19 pandemic that
began in 2020. Additionally, for the
final rule, the Department considered
updating to 2021 data, but ultimately
decided against it because of the
reasoning above as well as variable
differences between the 2019 and 2021
data. Any long-run impacts of COVID–
19 are speculative because this is an
unprecedented situation, so using data
from 2019 may be the best
approximation the Department has for
future impacts. However, the pandemic
could cause structural changes to the
economy, resulting in shifts in industry
employment and wages.
The Department identified firms
working on DBA contracts as contracts
with either an assigned NAICS code of
23 or if the ‘‘Construction Wage Rate
Requirements’’ element is ‘‘Y,’’ meaning
that the contracting agency flagged that
the contract is covered by DBA.286 287
The Department excluded (1) contracts
for financial assistance such as direct
payments, loans, and insurance; and (2)
contracts performed outside the U.S.
because DBA coverage is limited to the
50 states, the District of Columbia, and
the U.S. territories.288
286 The North American Industry Classification
System (NAICS) is a method by which Federal
statistical agencies classify business establishments
in order to collect, analyze, and publish data about
certain industries. Each industry is categorized by
a sequence of codes ranging from two digits (most
aggregated level) to six digits (most granular level).
https://www.census.gov/naics/.
287 The Department acknowledges that there may
be affected firms that fall under other NAICS codes
and for which the contracting agency did not flag
in the FPDS–NG system that the contract is covered
by DBA. Including these additional NAICS codes
could result in an overestimate because they would
only be affected by this rule if DBA-covered
construction occurs. The data does not allow the
Department to determine this.
288 The DBA only applies in the 50 States and the
District of Columbia and does not apply in the
territories. However, some Related Acts provide
Federal funding of construction in the territories
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In 2019, there were 14,000 unique
prime contractors with active
construction contracts in USASpending.
However, subcontractors are also
impacted by this final rule. The
Department examined 5 years of
USASpending data (2015 through 2019)
and identified 47,200 unique
subcontractors who did not hold
contracts as primes in 2019. The
Department used 5 years of data for the
count of subcontractors to compensate
for lower-tier subcontractors that may
not be included in USASpending.gov. In
total, the Department estimates 61,200
firms currently hold DBA contracts and
are potentially affected by this
rulemaking under the narrow definition;
however, to the extent that any of these
firms already pay above the prevailing
wage rates as determined under this
final rule they will not actually be
impacted by the rule.
ii. Potentially Affected Contractors
Under the DBA
The Department also cast a wider net
to identify other potentially affected
contractors, both those directly affected
(i.e., holding contracts) and those that
plan to bid on DBA-covered contracts in
the future. To determine the number of
these firms, the Department identified
construction firms registered in the
GSA’s System for Award Management
(SAM) since all entities bidding on
Federal procurement contracts or grants
must register in SAM. The Department
believes that firms registered in SAM
include those that may be affected if the
rulemaking impacts their decision to bid
on contracts or their competitiveness in
the bidding process. However, it is
possible that some firms that are not
already registered in SAM could decide
that, by virtue of the Related Act, is subject to DBA
prevailing wage requirements. For example, the
DBA does not apply in Guam, but a Related Act
provides that base realignment construction in
Guam is subject to DBA requirements.
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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations
to bid on DBA-covered contracts after
this rulemaking; these firms are not
included in the Department’s estimate.
The rule could also impact them if they
are awarded a future contract.
Using August 2022 SAM data, the
Department identified 45,600 registered
firms with construction listed as the
primary NAICS code.289 The
Department excluded firms with
expired registrations, firms only
applying for grants,290 government
entities (such as city or county
governments),291 foreign organizations,
and companies that only sell products
and do not provide services. SAM
includes all prime contractors and some
subcontractors (those who are also
prime contractors or who have
otherwise registered in SAM). However,
the Department is unable to determine
the number of subcontractors that are
not in the SAM database. Therefore, the
Department added the subcontractors
identified in USASpending to this
estimate. Adding these 47,200 firms
identified in USASpending to the
number of firms in SAM, results in
92,800 potentially affected firms.
Source
Number
Total Count (Davis-Bacon and Related
Acts)
Narrow definition a ..........................
Broad definition b ............................
152,900
184,500
DBA (Narrow Definition)
Total ................................................
Prime contractors from
USASpending ......................
Subcontractors from
USASpending ......................
61,200
14,000
47,200
DBA (Broad Definition)
Total ................................................
SAM .........................................
Subcontractors from
USASpending ......................
92,800
45,600
47,200
Related Acts
Total ................................................
Related Acts workers ..............
Employees per firm (SUSB) ....
91,700
883,900
9.6
DBRA contracts, representing the
number of ‘‘potentially affected
workers,’’ is 1.2 million potentially
affected workers. Some of these workers
will not be affected because while they
work on DBRA-covered contracts, they
are not in occupations covered by the
DBRA prevailing wage requirements.
The Department estimated the
number of potentially affected workers
in three parts. First, the Department
estimated employees and self-employed
workers working on DBA contracts in
the 50 States and the District of
Columbia. Second, the Department
estimated the number of potentially
affected workers working on contracts
covered by the Related Acts in the 50
States and the District of Columbia.
Third, the Department estimated the
number of potentially affected workers
working on contracts covered by the
Related Acts in the territories.
i. Workers on DBA Contracts in the 50
States and the District of Columbia
USASpending does not adequately
capture all work performed under the
Related Acts. Additionally, there is not
a central database, such as SAM, where
contractors working on Related Acts
contracts must register. Therefore, the
Department used a different
methodology to estimate the number of
firms impacted by the Related Acts. The
Department estimated 883,900 workers
work on Related Acts contracts (see
section V.B.2.iii.), then divided that
number by the average number of
workers per firm (9.6) in the
construction industry.292 This results in
91,700 firms. Some of these firms likely
also perform work on DBA contracts.
However, because the Department has
no information on the size of this
overlap, the Department has assumed all
are unique firms.
2. Number of Potentially Affected
Workers
There are no readily available
government data on the number of
workers working on DBA contracts;
therefore, to estimate the number of
these workers, the Department
employed the approach used in the
2021 final rule, ‘‘Increasing the
Minimum Wage for Federal
Contractors,’’ which implemented
Executive Order 14026.293 That
methodology is based on the 2016
rulemaking implementing Executive
Order 13706’s paid sick leave
requirements, which contained an
updated version of the methodology
used in the 2014 rulemaking for
Executive Order 13658.294 Using this
methodology, the Department estimated
the number of workers who work on
First, the Department calculated the
share of construction activity that is
covered by DBA by taking the ratio of
Federal contracting expenditures 295 to
gross output in NAICS 23:
Construction.296 This results in an
estimated 3.27 percent of output in the
construction industry covered by
Federal Government contracts (Table 3).
The Department then multiplied the
ratio of covered-to-gross output by
private sector employment in the
construction industry (9.1 million) to
estimate the share of employees working
on covered contracts. The Department’s
private sector employment number is
primarily comprised of construction
industry employment from the May
2019 OEWS, formerly the Occupational
Employment Statistics.297 However, the
OEWS excludes unincorporated selfemployed workers, so the Department
supplemented OEWS data with data
from the 2019 Current Population
Survey Merged Outgoing Rotation
Group (CPS MORG) to include the
unincorporated self-employed.
289 Data released in monthly files. Available at:
https://www.sam.gov/SAM/pages/public/extracts/
samPublicAccessData.jsf.
290 Entities registering in SAM are asked if they
wish to bid on contracts. If the firm answers ‘‘yes,’’
then they are included as ‘‘All Awards’’ in the
‘‘Purpose of Registration’’ column in the SAM data.
The Department included only firms with a value
of ‘‘Z2,’’ which denotes ‘‘All Awards.’’
291 The Department believes that there may be
certain limited circumstances in which State and
local governments may be contractors but believes
that this number would be minimal and including
government entities would result in an
inappropriate overestimation.
292 2019 Statistics of U.S. Businesses (SUSB).
U.S., NAICS sectors, larger employment sizes up to
20,000+. https://www.census.gov/data/tables/2019/
econ/susb/2019-susb-annual.html.
293 See 86 FR 38816, 38816–38898.
294 See 81 FR 9591, 9591–9671 and 79 FR 60634–
60733.
295 The Department used 2019 Federal contracting
expenditures from USASpending.gov data
excluding (1) financial assistance such as direct
payments, loans, and insurance; and (2) contracts
performed outside the U.S.
296 Bureau of Economic Analysis. (2020). Table 8.
Gross Output by Industry Group. https://
www.bea.gov/news/2020/gross-domestic-productindustry-fourth-quarter-and-year-2019. ‘‘Gross
output of an industry is the market value of the
goods and services produced by an industry,
including commodity taxes. The components of
gross output include sales or receipts and other
operating income, commodity taxes, plus inventory
change. Gross output differs from value added,
which measures the contribution of the industry’s
labor and capital to its gross output.’’
297 BLS. OEWS. May 2019. Available at: https://
www.bls.gov/oes/.
iii. Firms Impacted by the Related Acts
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TABLE 2—RANGE OF NUMBER OF
POTENTIALLY AFFECTED FIRMS
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a Firms
actively holding DBRA-covered con-
tracts
b Firms actively holding DBRA-covered contracts or who may be bidding on DBRA contracts or considering bidding in the future.
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According to this methodology, the
Department estimated there are 297,900
workers on DBA covered contracts in
the 50 States and the District of
Columbia. However, this estimate is
imprecise for two reasons; one of which
results in an overestimate and one that
results in an underestimate. First, these
laws only apply to wages for mechanics
and laborers, so some of these workers
would not be affected by these changes
to DBA. Second, this methodology
represents the number of year-roundequivalent potentially affected workers
who work exclusively on DBA
contracts. Thus, when the Department
refers to potentially affected employees
in this analysis, the Department is
referring to this conceptual number of
people working exclusively on covered
contracts. Because workers often work
on a combination of covered and noncovered contracts, this bias
underestimates the number of unique
workers.
ii. Workers on Related Acts Contracts in
the 50 States and the District of
Columbia
This rulemaking will also impact
workers on Related Acts contracts in the
where
i = territory
The rest of the methodology follows
the methodology for the 50 States and
the District of Columbia. To determine
the share of all output associated with
Government contracts, the Department
50 States and the District of Columbia.
Data are not available on the number of
workers covered by the Related Acts.
Additionally, neither USASpending nor
any other database fully captures this
population.298 Therefore, the
Department used a different approach to
estimate the number of potentially
affected workers for Related Acts
contracts.
The Census Bureau reports total State
and local government construction
spending was $318 billion in 2019.299
The Department then applied an
adjustment factor to account for the
share of State and local expenditures
that are covered by the Related Acts.
The Department assumed half of the
total State and local government
construction expenditures are subject to
a DBRA, resulting in estimated
expenditures of $158 billion. To this,
the Department added $3 billion to
represent HUD backed mortgage
insurance for private construction
projects.300
As was done for DBA, the Department
divided contracting expenditures ($161
billion) by gross output ($1.7 billion)
and multiplied that ratio by the estimate
of private sector employment used
The methodology to estimate
potentially affected workers in the U.S.
territories is similar to the methodology
above for the 50 States and the District
of Columbia. The primary difference is
that data on gross output in the
territories are not available, and so the
Department had to make some
additional assumptions. The
Department approximated gross output
in the territories by calculating the ratio
of gross output to Gross Domestic
Product (GDP) for the U.S. (1.8), then
multiplying that ratio by GDP in each
territory to estimate total gross
output.301 To limit gross output to the
construction industry, the Department
multiplied it by the share of the
territory’s payroll in NAICS 23. For
example, the Department estimated that
Puerto Rico’s gross output in the
construction industry totaled $3.6
billion.302
divided contract expenditures by gross
output. Federal contracting
expenditures from USASpending.gov
data show that the Government spent
$993.3 million on construction contracts
in 2019 in American Samoa, the
Commonwealth of the Northern Mariana
Islands, Guam, Puerto Rico, and the U.S.
Virgin Islands. The Department then
multiplied the ratio of covered contract
spending to gross output by private
sector employment to estimate the
number of workers working on covered
contracts (6,100).303
above (9.1 million) to estimate the share
of workers working on Related Actscovered contracts (883,900).
iii. Workers on Related Acts Contracts
in the U.S. Territories
TABLE 3—NUMBER OF POTENTIALLY AFFECTED WORKERS
a
b
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DBA, excl. territories ........................
Related Acts, territories ...................
$1,662
5
298 USASpending includes information on grants,
assistance, and loans provided by the Federal
government. However, this does not include all
covered projects, it does not capture the full value
of the project because it is just the Federal share
(i.e., excludes spending by State and local
governments or private institutions that are also
subject to DBRA labor standards because of the
Federal share on the project), and it cannot easily
be restricted to construction projects because there
is no NAICS or product service code (PSC) variable.
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Share output
from covered
contracting
(%)
$54,400
993
Frm 00178
Fmt 4701
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Workers on
covered
contracts (1,000s)
c
d
3.27
(e)
299 Census Bureau. ‘‘Annual Value of Public
Construction Put in Place 2009–2020.’’ Available at:
https://www.census.gov/construction/c30/
historical_data.html.
300 Estimate based on personal communications
with the Office of Labor Standards Enforcement and
Economic Opportunity at HUD.
301 GDP limited to personal consumption
expenditures and gross private domestic
investment.
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Private-sector
workers
(1,000s)
9,100
35
297.9
6.1
302 In Puerto Rico, personal consumption
expenditures plus gross private domestic
investment equaled $71.2 billion. Therefore, Puerto
Rico gross output was calculated as $71.2 billion ×
1.8 × 2.7 percent.
303 For the U.S. territories, the unincorporated
self-employed are excluded because CPS data are
not available on the number of unincorporated selfemployed workers in U.S. territories.
E:\FR\FM\23AUR2.SGM
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ER23AU23.001</GPH>
Contracting
output
(millions)
ER23AU23.000</GPH>
Private
output
(billions)
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TABLE 3—NUMBER OF POTENTIALLY AFFECTED WORKERS—Continued
Related Acts, excl. territories ...........
Total ..........................................
Private
output
(billions)
Contracting
output
(millions)
a
b
................................
1,667
161,297
216,700
Share output
from covered
contracting
(%)
Private-sector
workers
(1,000s)
Workers on
covered
contracts (1,000s)
c
d
9.68
................................
9,135
............................
883.9
1,188.0
a Bureau of Economic Analysis, NIPA Tables, Gross output. 2019. For territories, gross output estimated by multiplying (1) total GDP for the
territory by the ratio of total gross output to total GDP for the U.S. and (2) the share of national gross output in the construction industry.
b For DBA, and Related Acts in the territories, data from USASpending.gov for contracting expenditures for covered contracts in 2019. For Related Acts, data from Census Bureau on value of State and local government construction put in place, adjusted for coverage ratios. The Census
data includes some data for territories but may be underestimated.
c OEWS May 2019. For non-territories, also includes unincorporated self-employed workers from the 2019 CPS MORG.
d Assumes share of expenditures on contracting is same as share of employment. Assumes workers work exclusively, year-round on DBRA
covered contracts.
e Varies by U.S. Territory.
3. Demographics of the Construction
Industry
To provide information on the types
of workers that may be affected by this
rule, the Department presents
demographic characteristics of
production workers in the construction
industry. For purposes of this
demographic analysis only, the
Department is defining the construction
industry as workers in the following
occupations:
• Construction and extraction
occupations
• Installation, maintenance, and
repair occupations
• Production occupations
• Transportation and material moving
occupations
The Department notes that the
demographic characteristics of workers
on DBRA projects may differ from the
general construction industry; however,
data on the demographics of workers on
DBRA projects is unavailable.
Demographics of the general workforce
are also presented for comparison.
Tabulated numbers are based on 2019
CPS data for consistency with the rest
of the analysis and to avoid potential
impacts of COVID–19. Additional
information on the demographics of
workers in the construction industry
can be found in ‘‘The Construction
Chart Book: The U.S. Construction
Industry and Its Workers.’’ 304
The vast majority of workers in the
construction industry are men, 97
percent (Table 4), which is significantly
higher than the general workforce where
53 percent are men. Workers in
construction are also significantly more
likely to be Hispanic than the general
workforce; 38 percent of construction
workers are Hispanic, compared with 18
percent of the workforce.
Lastly, while many construction
workers may have completed registered
apprenticeship programs, 84 percent of
workers in the construction industry
have a high school diploma or less,
compared with 54 percent of the general
workforce. The Department also looked
at data on disability status in the
construction industry and found that 6.4
percent of workers with a disability
work in the construction industry,
compared to 7.2 percent of workers with
no disability.305
TABLE 4—DEMOGRAPHICS OF WORKERS IN THE CONSTRUCTION INDUSTRY
Production
workers in
construction
(%)
Total
workforce
(%)
By Region
Northeast .................................................................................................................................................................
Midwest ....................................................................................................................................................................
South ........................................................................................................................................................................
West .........................................................................................................................................................................
16.4
16.4
41.7
25.5
17.9
21.9
36.9
23.3
97.1
2.9
53.4
46.6
87.1
7.5
5.4
77.2
12.4
10.4
38.0
18.1
By Sex
Male .........................................................................................................................................................................
Female .....................................................................................................................................................................
By Race
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White only ................................................................................................................................................................
Black only ................................................................................................................................................................
All others ..................................................................................................................................................................
By Ethnicity
Hispanic ...................................................................................................................................................................
304 Dong, Xiuwen, Xuanwen Wang, Rebecca Katz,
Gavin West, and Bruce Lippy, ‘‘The Construction
Chart Book: The U.S. Construction Industry and Its
Workers,’’ (6th ed. Silver Spring: CPWR—The
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Center for Construction Research and Training,
2018) at 18. https://www.cpwr.com/wp-content/
uploads/publications/The_6th_Edition_
Construction_eChart_Book.pdf.
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305 Persons with a Disability: Labor Force
Characteristics—2019. Table 4. https://www.bls.gov/
news.release/archives/disabl_02262020.pdf.
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TABLE 4—DEMOGRAPHICS OF WORKERS IN THE CONSTRUCTION INDUSTRY—Continued
Production
workers in
construction
(%)
Not Hispanic ............................................................................................................................................................
Total
workforce
(%)
62.0
81.9
52.2
6.2
61.1
11.6
15.2
71.6
13.3
16.7
64.2
19.1
23.0
60.6
9.3
7.2
8.9
45.3
10.7
35.1
By Race and Ethnicity
White only, not Hispanic ..........................................................................................................................................
Black only, not Hispanic ..........................................................................................................................................
By Age
16–25 .......................................................................................................................................................................
26–55 .......................................................................................................................................................................
56+ ...........................................................................................................................................................................
By Education
No degree ................................................................................................................................................................
High school diploma ................................................................................................................................................
Associate’s degree ..................................................................................................................................................
Bachelor’s degree or advanced ...............................................................................................................................
Note: CPS data for 2019.
The Department has also presented
some demographic data on Registered
Apprentices, as they are the pipeline for
future construction workers. These
demographics come from Federal
Workload data, which covers the 25
states administered by the Department’s
OA and national registered
apprenticeship programs.306 Note that
this data includes apprenticeships for
other industries beyond construction,
but 68 percent of the active apprentices
are in the construction industry, so the
Department believes this data could be
representative of that industry. Of the
active apprentices in this data set, 9.1
percent are female, and 90.9 percent are
male. The data show that 78.7 percent
of active apprentices are White, 14.1
percent are Black or African American,
3.2 percent are American Indian or
Alaska Native, 2.1 percent are Asian,
and 1.1 percent are Native Hawaiian or
Other Pacific Islander.307 The data also
show that 23.6 percent of active
apprentices are Hispanic.
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C. Costs of the Final Rule
This section quantifies direct
employer costs associated with the final
rule. The Department estimated both (1)
regulatory familiarization costs and (2)
implementation costs associated with
more frequently updated rates. Year 1
costs are estimated to total $39.3
million. Average annualized costs
306 U.S. Department of Labor, Office of
Apprenticeship. ‘‘FY2019 Data and Statistics.’’
https://www.dol.gov/agencies/eta/apprenticeship/
about/statistics/2019.
307 This excludes apprentices who did not wish
to answer or for whom race was not provided.
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across the first 10 years of
implementation are estimated to be $7.3
million (using a 7 percent discount
rate). These cost estimates are higher
than presented in the proposed rule due
a larger estimate of the time required to
review the regulation. Non-quantified
costs are discussed in sections V.C.3
and V.C.4. Transfers resulting from
these provisions are discussed in
section V.D.
1. Regulatory Familiarization Costs
This rule’s direct costs on some
covered contractors who will review the
regulations to understand how the
prevailing wage determination
methodology will change and how
certain non-collectively bargained rates
will be periodically updated will likely
be small because not all of these firms
will choose to familiarize themselves
with the methodologies used to develop
those prevailing wage rates, or any
periodic adjustments to them.
Regulatory familiarization time for other
components of this final rule, such as
the provisions clarifying regulatory
language and coverage, are likely to take
time when reviewed but will only be
reviewed by a subset of firms. For
example, a roofing company does not
need to understand how the rule relates
to prefabrication or truckers. Costs
associated with ensuring compliance are
included as implementation costs.
For this analysis, the Department has
included all firms that either hold DBA
or Related Acts contracts or are
considering bidding on work (184,500
firms). However, this may be an
overestimate, because firms that are
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registered in SAM might not bid on a
DBRA contract, and therefore may not
review these regulations. ABC asserted
that this rule extends coverage to new
types of construction, industries, and
occupations and the associated firms are
not covered by the Department’s
estimate. The Department believes most
of these firms are already included in
the estimate because the methodology
covers all firms bidding, or considering
bidding, on Federal construction
contracts, not just DBA contracts.
Furthermore, as explained below in
section V.C.4.v, while some covered
firms engaged in construction at
secondary worksites may not be
classified in the construction industry
under NAICS and consequently may not
be captured by this methodology, the
Department believes that the number of
such firms is small given the limited
scope of this change to ‘‘site of the
work’’ in the final rule.
The Department assumes that, on
average, 4 hours of a human resources
staff member’s time will be spent
reviewing the rulemaking. This time
estimate is the average time per firm;
some firms will spend more time
reviewing the rule, but others will
spend less or no time reviewing the
rule. In the proposed rule, the
Department used a time estimate of 1
hour. In response to commenters
asserting that it would take more time,
the Department increased this estimate
to 4 hours. Commenters emphasized
that the length of the rule and the need
to have several employees review
necessitate a longer review time
estimate. For example, ABC noted,
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‘‘reading the 432-page NPRM–clocking
in at a robust 118,450 words—would
actually take 8.3 hours per person at an
average silent reading rate.’’ The
Department acknowledges that it may
take some reviewers at least this long to
read the entire rule but, because some
of the firms in the cost calculation will
not bid on a Davis-Bacon contract and
therefore will not spend any time
reviewing this rule, an average time
estimate of 4 hours is more appropriate.
The cost of this time is the median
loaded wage for a Compensation,
Benefits, and Job Analysis Specialist of
$49.94 per hour.308 Therefore, the
Department has estimated regulatory
familiarization costs to be $36.9 million
($49.94 per hour × 4.0 hours × 184,500
contractors) (Table 5). The Department
has included all regulatory
familiarization costs in Year 1. New
entrants who would have been covered
by previous DBA regulations will not
incur any additional regulatory
familiarization costs attributable to this
rule; had this rule not been proposed,
they still would have incurred the costs
of regulatory familiarization with
existing provisions. In addition, while
the provision regarding periodic
adjustments is new and could involve
additional review time, the Department
believes that any increased costs
associated with that familiarization will
be offset by a decrease in time needed
to review some of the simplified or
harmonized provisions, such as
debarment. ABC disagreed with this
approach to new entrants and claimed
that this rule constitutes an added
regulation and cost. The Department
acknowledges that for the subset of
firms that would not have been covered
by Davis-Bacon prior to the
implementation of this rule and who
may enter Davis-Bacon covered
contracting in future years, they may
incur future rule familiarization costs.
However, the Department does not have
data to determine how many firms
would be newly-covered in future years.
Given these considerations, the
Department believes it is appropriate to
assume that new entrants in future years
would not spend significantly more
time reviewing this rule than they
would the existing regulations.
Average annualized regulatory
familiarization costs over 10 years,
using a 7 percent discount rate, are $4.9
million.
308 This includes the median base wage of $30.83
from the 2021 OEWS plus benefits paid at a rate of
45 percent of the base wage, as estimated from the
BLS’s Employer Costs for Employee Compensation
(ECEC) data, and overhead costs of 17 percent.
OEWS data available at: https://www.bls.gov/oes/
current/oes131141.htm.
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2. Implementation Costs for More
Frequently Updated Rates
Firms will incur costs associated with
implementing updated prevailing wage
rates. When preparing a bid on a DBRAcovered contract, the contractor must
review the wage determination
identified by the contracting agency as
appropriate for the work and determine
the wage rates applicable for each
occupation or classification to perform
work on the contract. Once that contract
is signed, the specified prevailing wages
generally remain in effect through the
life of that contract.309 This section
considers only the additional time
necessary to update pay rates that
change more frequently over time due to
the provision to periodically adjust outof-date prevailing wage and fringe rates.
Implementation costs associated with
other provisions, such as the provision
to clarify and strengthen the scope of
coverage under the DBRA, are discussed
in section V.C.4.
The periodic adjustment rule will
generally affect the frequency with
which prevailing wage rates are updated
on wage determinations, through both
the anticipated initial updates to old,
outmoded rates, and moving forward,
the periodic updates to certain rates that
have not been published through the
survey process for the past 3 or more
years (see section V.D.). Affected firms
may incur implementation costs if they
need to update compensation rates in
their payroll systems. Currently, only a
fraction of non-collectively bargained
prevailing wages can be expected to
change each year. Firms may spend
more time than they have in the past
updating payroll systems to account for
new prevailing wage rates that the firms
must pay as a result of being awarded
a DBRA contract that calls for such new
rates. This change is because the
Department will update older noncollectively bargained rates—as it
currently does with collectively
bargained prevailing rates—to better
represent current wages and benefits
being paid in the construction industry.
In addition, moving forward, WHD
expects to publish wage rates more
frequently than in the past.
To estimate the additional cost
attributable updated non-collectively
bargained rates, it is necessary to
estimate the number of firms with
DBRA contracts that will need to pay
updated rates, the subset of such firms
that do not already pay updated
prevailing wage rates regularly, and the
additional time these firms will spend
implementing the new wage and fringe
309 With the exception of certain significant
changes; see section III.B.1.vi.(B).
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57705
benefit rates. To do so, the Department
estimated the number of firms with
DBRA contracts that already pay
updated prevailing wage rates regularly
and will not incur additional
implementation costs attributable to the
periodic update provision.
First, the Department estimates that
new wage rates are published from on
average 7.8 wage surveys per year.310
These surveys may cover an entire State
or a subset of counties, and multiple
construction types or a single type of
construction. For simplicity, the
Department assumed that each survey
impacts all contractors in the State, all
construction types, and all classes of
laborers and mechanics covered by
DBRA. Under these assumptions, the
Department assumed that each year 15.6
percent of firms with DBRA contracts,
roughly 23,900 firms (0.156 × 152,900
firms), might already be affected by
changes in prevailing wage rates in any
given year and thus will not incur
additional implementation costs
attributable to the rule.311
Additionally, there may be some firms
that already update prevailing wage
rates periodically to reflect CBA
increases. These firms generally will not
incur any additional implementation
costs because of this rule. The
Department lacks specific data on how
many firms fall into this category but
used information on the share of rates
that are collectively bargained under the
current method to help refine the
estimate of firms with implementation
costs. According to section V.D., 24
percent of rates are CBA rates under the
current method, meaning 31,000 firms
(0.24 × (152,900¥23,900)) might already
be affected by changes in prevailing
wages in any given year. Combining this
number with the 23,900 firms calculated
above, 54,800 firms in total would not
incur additional implementation costs
with this rule.
Therefore, 98,100 firms (152,900
firms¥54,800 firms) are assumed to not
update prevailing wage information in
any given year, absent this rule, because
prevailing wage rates were unchanged
in their areas of operation and would
therefore incur implementation costs.
The Department intends to first update
310 The Department used the number of surveys
started between 2002 (first year with data readily
available) and 2019 (last year prior to COVID–19)
to estimate that 7.8 surveys are started annually.
This is a proxy for the number of surveys published
on average in a year.
311 The Department divided 7.8 surveys per year
by 50 States to arrive at the 15.6 percent of firms
assumption. The District of Columbia and the
territories were excluded from the denominator
because these tend to be surveyed less often (with
the exception of Guam which is surveyed regularly
due to Related Act funding).
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certain outdated non-collectively
bargained rates 312 (currently designated
as ‘‘SU’’ rates) up to their current value
to better track wages and benefits being
paid in the construction industry, as
soon as reasonably possible. Then, in
the future, the Department intends to
update non-collectively bargained rates
afterward as needed, and not more
frequently than every 3 years. The
Department assumes that 98,100 firms
may be expected to incur additional
costs updating rates each year. The
Department acknowledges that this
estimate of firms may be an
overestimate because this rule states
that rates will be updated no more
frequently than every 3 years. In each
year, only a fraction of firms will have
to update their prevailing wage rates,
but the Department has included all
firms in the estimate to not
underestimate costs.
The Department estimated it will take
a half hour on average for firms to adjust
their wage rates each year for purposes
of bidding on DBRA contracts. The
Department believes that this average
estimated time is appropriate because
only a subset of firms will experience a
change in costs associated with
adjusting payroll systems. Firms that
already pay above the new wage
determination rates will not need to
incur any implementation costs.
Several commenters criticized the
Department’s implementation time
estimate as too low. For example, ABC
noted that according to their 2022
survey of member contractors, the
proposed rule would take more than 30
minutes to implement. ABC states that
a more accurate implementation cost is
more likely closer to 10–15 hours per
impacted company but does not provide
specifics as to how that estimate was
derived. The Department clarifies here
that the time estimate used in the
implementation cost calculation is
strictly for the marginal time to identify
updated rates and insert those rates into
the contractor’s bid and/or payroll
system. Costs associated with other
provisions are discussed in section
V.C.4. The Department also notes that
the estimate of 30 minutes represents an
average, because although some firms
may spend more time adjusting payroll
systems, firms that already pay above
the new wage determination rates will
not need to spend any time adjusting
payroll.
Implementation time will be incurred
by human resource workers (or a
similarly compensated employee) who
will implement the changes. As with
previous costs, these workers earn a
loaded hourly wage of $49.94.
Therefore, total Year 1 implementation
costs were estimated to equal $2.4
million ($49.94 × 0.5 hour × 98,100
firms). The average annualized
implementation cost over 10 years,
using a 7 percent discount rate, is $2.4
million.
TABLE 5—SUMMARY OF COSTS
[2021 Dollars]
Variable
Total costs
Implementation
costs for more
frequently
updated rates
Regulatory
familiarization
costs
Year 1 Costs
Potentially affected firms .....................................................................................................
Hours per firm ......................................................................................................................
Loaded wage rate a ..............................................................................................................
Cost ($1,000s) .....................................................................................................................
......................
......................
......................
$39,300
184,500
4
$49.94
$36,900
98,100
0.5
$49.94
$2,400
$2,400
$0
$2,400
$7,500
$7,300
$5,100
$4,900
$2,400
$2,400
Years 2–10 ($1,000s)
Annual cost ..........................................................................................................................
Average Annualized Costs ($1,000s)
3% discount rate ..................................................................................................................
7% discount rate ..................................................................................................................
a 2021 OEWS median wage for Compensation, Benefits, and Job Analysis Specialists (SOC 13–1141) of $30.83 multiplied by 1.62: the ratio of
loaded wage to unloaded wage from the 2021 ECEC (45 percent) plus 17 percent for overhead.
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3. Construction Costs and Inflation
Several commenters asserted that this
rule will increase wages and
construction costs, thereby increase
government expenditures, and
contribute to inflation. The Department
believes both the impact on wages will
be marginal, as demonstrated in the
conceptual transfers analyses (see
section V.D.) and the direct employer
costs will be manageable. Additionally,
the estimated 1.2 million potentially
affected workers represent less than 1
312 The ‘‘SU’’ designation currently is used on
general wage determinations when the prevailing
wage is set through the weighted average method
based on non-collectively bargained rates or a mix
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percent of the total national workforce.
Therefore, any impact on government
budgets or inflation should be small.
The III–FFC reviewed the relevant
literature and reached the same
conclusion. They assert that ‘‘[t]he
economic consensus is that prevailing
wages have no impact on total
construction costs.’’313 This conclusion
is drawn based on ‘‘19 studies on the
impact of prevailing wages on the cost
of school construction, highway
construction, and municipal building
projects that have been published in
peer-reviewed academic journals since
2000.’’
of collectively bargained rates and non-collectively
bargained rates, or when a non-collectively
bargained rate prevails.
313 Kevin Duncan & Russell Ormiston, ‘‘What
Does the Research Tell Us about Prevailing Wage
Laws,’’ 44 Lab. Stud. J., 139 (2018).
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4. Other Provisions Not Analyzed
The Department provides a qualitative
discussion of other provisions of the
rule in this section.
i. Adopting of State and Local
Governments Prevailing Wage Rates
Under the final rule, prevailing wage
rates set by State and local governments
may be adopted as Davis-Bacon
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prevailing wage rates under specified
conditions. Specifically, the Department
proposes that the Administrator may
adopt such a rate if the Administrator
determines that: (1) the State or local
government sets wage rates, and collects
relevant data, using a survey or other
process that is open to full participation
by all interested parties; (2) the wage
rate reflects both a basic hourly rate of
pay as well as any prevailing fringe
benefits, each of which can be
calculated separately; (3) the State or
local government classifies laborers and
mechanics in a manner that is
recognized within the field of
construction; and (4) the State or local
government’s criteria for setting
prevailing wage rates are substantially
similar to those the Administrator uses
in making wage determinations. These
conditions are intended to provide
WHD with the flexibility to adopt State
and local rates where appropriate while
also ensuring that adoption of such rates
is consistent with the statutory
requirements of the Davis-Bacon Act.
These conditions are also intended to
ensure that arbitrary distinctions are not
created between jurisdictions where
WHD makes wage determinations using
its own surveys and jurisdictions where
WHD adopts State or local prevailing
wage rates.
The Department does not currently
possess sufficient data to conduct an
analysis comparing all prevailing wage
rates set by State and local governments
nationwide to those established by the
Department. However, by definition,
any adopted State or local prevailing
wage must be set using criteria that are
substantially similar to those used by
the Administrator, so the resulting wage
rates are likely to be similar to those
which would have been established by
the Administrator. This change will also
allow WHD to have more current rates
in places where wage surveys are outof-date, and to avoid WHD duplicating
wage survey work that States and
localities are already doing. The
Department believes that this could
result in cost savings, which are
discussed further in section V.E.
ii. Combining Rural and Metropolitan
County Data
This final rule also eliminates the
across-the-board restriction on
combining rural and metropolitan
county data to allow for a more flexible
case-by-case approach to using such
data. If sufficient data are not available
to determine a prevailing wage in a
county, the Department is permitted to
use data from surrounding counties,
regardless of whether those counties are
designated as rural or metropolitan.
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While sufficient data for analyzing the
impact of this provision are not
available, the Department believes this
provision will improve the quality and
accuracy of wage determinations by
including data from counties that likely
share and reflect the same labor market
conditions when appropriate.
iii. Publishing Prevailing Wages When
Receiving Insufficient Data
The provision to expressly authorize
WHD to list classifications and
corresponding wage and fringe benefit
rates on wage determinations even
when WHD has received insufficient
data through its wage survey process is
expected to ease the burden on
contracting entities, both public and
private, by improving the timeliness of
information about conformed wage
rates. For classifications for which
conformance requests are regularly
submitted, the Administrator would be
authorized to list the classification on
the wage determination along with wage
and fringe benefit rates that bear a
‘‘reasonable relationship’’ to the wage
and fringe benefit rates contained in the
wage determination, in the same
manner that such classifications and
rates are currently conformed by WHD
pursuant to current § 5.5(a)(1)(ii)(A)(3).
In other words, for a classification for
which conformance requests are
regularly submitted, WHD would be
expressly authorized to essentially ‘‘preapprove’’ certain conformed
classifications and wage rates, thereby
providing contracting agencies,
contractors, and workers with advance
notice of the minimum wage and fringe
benefits required to be paid for work
within those classifications, reducing
uncertainty and delays in determining
wage rates for the classifications.
For example, suppose the Department
was not able to publish a prevailing
wage rate for carpenters on a building
wage determination for a county due to
insufficient data. Currently, every
contractor in that county working on a
Davis-Bacon building project that
needed a carpenter would have to
submit a conformance request for each
of their building projects in that county.
Moreover, because conformances cannot
be submitted until after contract award,
those same contractors would have a
certain degree of uncertainty in their
bidding procedure, as they would not
know the exact rate that they would
have to pay to their carpenters. This
proposal would eliminate that
requirement for classifications where
conformance requests are common.
While the Department does not have
information on how much
administrative time and money is spent
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57707
on these tasks, for the commonly
requested classifications, this provision
could make the process more
streamlined and efficient for the
contractors.
iv. Clarification of Existing Policies
The final rule adds language in a few
places to clarify existing policies. For
example, the Department added
language to the definitions of ‘‘building
or work’’ and ‘‘public building or public
work’’ to clarify that these definitions
can be met even when the construction
activity involves only a portion of an
overall building, structure, or
improvement. Also, the Department
added or revised language regarding the
‘‘material suppliers’’ exemption,
application of the ‘‘site of the work’’
principle to flaggers, when crew
members are laborers or mechanics, and
coverage requirements for truck drivers.
Although, for the most part, this
language is just a clarification of
existing guidelines and not a change in
policy, the Department understands that
contracting agencies may have differed
in their implementation of Davis-Bacon
labor standards. In these cases, there
may be firms that are newly applying
Davis-Bacon labor standards because of
the clarifications in this rule. This could
result in additional rule familiarization,
implementation, and administrative
costs for these firms, and transfers to
workers in the form of higher wages and
benefits if the contractors are currently
paying below the prevailing wage.
Commenters asserted that these
provisions would result in additional
firms being covered and consequently
incurring familiarization,
implementation, and administration
costs. The Department continues to
believe that these provisions are
generally clarifications rather than an
expansion of scope and, therefore, has
not estimated the number of potentially
affected small businesses.
v. Modification of Site of the Work
Definition To Include Certain Secondary
Worksites
In this final rule, the Department
revises the definition of ‘‘site of the
work’’ to further encompass certain
construction of significant portions of a
building or work at secondary worksites
that are dedicated exclusively or nearly
so to a project covered by the DBRA.
Under this provision, some additional
companies may be covered by the
DBRA. Specifically, some firms that
engage in construction at secondary
worksites, such as modular construction
firms, may potentially engage in work
that was not previously covered by the
DBRA regulations, but is now covered.
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These firms could incur larger
familiarization and implementation
costs than currently covered firms
(whose costs are discussed above).
However, the Department does not have
data to determine how many firms
would be newly covered by DBRA
requirements as a result of this
provision and is unable to provide a
quantitative estimate of these costs.
Although some commenters asserted
that the increased costs under this
aspect of the proposed rule would be
substantial, no commenters provided
applicable data that the Department
could use to quantify the costs. The
Department does not anticipate that any
increased costs associated with this
aspect of the final rule will be
substantial. Whereas the proposed rule
would have revised Davis-Bacon
coverage of off-site construction to
include sites at which ‘‘significant
portions’’ of covered buildings or works
were constructed for specific use in a
designated building or work, the final
rule significantly limits the scope of this
expansion to sites dedicated exclusively
or nearly so to the covered contract or
project. Thus, while the Department
does not have data to determine how
many firms and workers will be newly
covered by DBRA requirements as a
result of this provision, these significant
limitations will ensure that any
associated costs will similarly be
extremely limited.314 Cf. 65 FR 80277
(projecting that the prevailing wage
implications associated with a similar
expansion of coverage of off-site
construction in the 2000 final rule
would not be substantial).
Commenters also noted other
potential costs associated with this
314 A theoretical upper bound of newly-covered
firms would likely be the 1,364 total firms in NAICS
codes 321991, Manufactured Home (Mobile Home)
Manufacturing, 321992, Prefabricated Wood
Building Manufacturing, and 332311 Prefabricated
Metal Building and Component Manufacturing. See
U.S. Census Bureau, 2019 Survey of U.S. Businesses
data, https://www2.census.gov/programs-surveys/
susb/datasets/2019/us_state_naics_detailedsizes_
2019.txt. However, as a result of the limits in the
final rule, Davis-Bacon coverage will apply only
when such firms (1) are working on DBRA-covered
projects, (2) are constructing ‘‘significant portions’’
of such projects, as defined in the final rule, as
opposed to prefabricated components, (3) are
building such significant portions for specific use
in a designated building or work, and (4) are doing
so at a site either established for a particular
covered contract or project or dedicated exclusively
or nearly so to a single covered contract or project.
While the Department does not have the data to
estimate how many firms not already covered by
the DBRA would meet all of these criteria, the
Department believes that the number be small,
particularly given the numerous comments from
stakeholders indicating that modular construction
facilities typically work on multiple projects at a
time and therefore will not be covered under the
final rule. See supra section III.B.3.ii.G.2.a.
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provision. The CHC stated this
provision will ‘‘limit the use of this
technology which is currently
facilitating construction of affordable
housing developments in rural areas
where labor is scarcer and costs can be
higher.’’ Several commenters asserted
that this will increase the price of
modular construction.
The Department believes any
potential cost increases related to this
issue will be minimal and will not
materially impact the use of modular
construction technology. As explained
above, based on the comments received,
the Department believes that most
modular construction facilities are
engaged in more than one project at a
time and therefore will not be
considered ‘‘sites of the work’’ under
this rule. Conversely, at secondary
worksites that are dedicated exclusively
or nearly so to a single DBRA-covered
project for a period of time, application
of the appropriate wage determination
to workers at the site during that period
of time should not be appreciably more
difficult or burdensome than the
application of a wage determination at
such a site established specifically for
contract performance, which is required
under current regulations. Additionally,
as noted above, the Department intends
to work with contractors, agencies, and
other stakeholders to resolve any
questions associated with the
application of wage determinations and
classifications at secondary sites as early
as possible. Finally, the Department
notes that at least two state prevailing
wage laws—Washington’s and New
Jersey’s—cover custom components of
public buildings or works to a greater
degree than this final rule, and the
Department is unaware of such laws
having had significant detrimental
impacts to modular construction in
those states. See N.J.S.A. section 34:11–
56.26(5), (12) (applying state prevailing
wage requirements to components and
structures ‘‘pre-fabricated to
specifications for a particular project of
public work’’); Wash. Admin. Code
section 296–127–010(7)(a)(vi) (applying
prevailing wage regulations to ‘‘[t]he
fabrication and/or manufacture of
nonstandard items produced by contract
specifically for a public works project’’).
The revisions regarding offsite
construction are significantly less
expansive than those proposed in the
NPRM. The final rule only expands
coverage to sites dedicated exclusively
or nearly so to a single covered contract
or project, and therefore will not
encompass offsite facilities engaged in
modular construction for more than one
project or area.
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vi. Post-Award Determinations and
Operation-of-Law
This final rule also updates and
codifies the procedures through which
the Department enforces DBRA
requirements when contract clauses and
appropriate wage determinations are
wrongly omitted from a contract. The
final rule includes a provision that
requires contract clauses and applicable
wage determinations to be effective by
operation of law in covered contracts, a
requirement that will affect those cases
in which the clauses and/or wage
determinations have not been either
properly included in a covered contract
when awarded or otherwise
retroactively incorporated at a later date
by contract modification. These changes
are intended to improve efficiency,
reduce delays in investigations, and
remedy enforcement challenges WHD
has encountered under current
regulations.
The Department does not have
sufficient data to estimate how many
firms would be affected by this
provision, because any calculation
would require information on the
number of contracts that do not already
include contract clauses and
appropriate wage determinations, and
those that would not include these
requirements in absence of this rule.
However, the Department believes that
any impacts associated with this rule
change will be minimal, because the
Department already interprets the postaward modification provision at 29 CFR
1.6(f) to require agencies to incorporate
missing contract clauses and wage
determinations with retroactive effect in
appropriate circumstances, and the new
operation-of-law provision will
therefore affect only a limited subset of
matters in which the current regulations
would not have resulted in timely
compliance.
Some commenters expressed concerns
that this provision would lead to
increased costs, because firms would
need to spend more time familiarizing
themselves with the regulations in order
to ensure that they are in compliance
even if the contract clauses are not
included in a contract. The Department
notes that many such compliance costs
are already borne by contractors as a
best practice because under the current
regulations contracts may be modified
post-award to incorporate missing
clauses retroactively—which has a
similar effect as the operation-of-law
provision. In addition, the Department’s
cost estimates already account for rule
familiarization.
To the extent that there are any
workers who, in the absence of this final
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rule, would not have received timely
compensation required under the
DBRA, this provision could lead to
limited transfers to workers in the form
of increased wages. Because the
operation-of-law provision requires
contractors to be compensated for any
increases in wages that result from a
determination of missing clauses or
wage determinations, any transfers
associated with the rule change would
ultimately come from the government in
the way of reimbursement to
contractors. The Department has not
estimated these limited transfers
because there is not sufficient data on
the prevalence of missing contract
clauses or wage determinations, or the
extent to which the inclusion of these
items by operation-of-law would lead to
increases in wages for contract workers.
vii. Other Provisions
Some contracts call for construction,
alteration, and/or repair work over a
period of time that is not tied to the
completion of any particular project.
The requirement for the contracting
agency to incorporate into the contract
the most recent revision(s) of any
applicable wage determination(s) on
each anniversary date of the contract’s
award could result in some minimal
increased burden for contracting
agencies. The contracting officer would
need to locate the wage determinations
that are currently incorporated in the
master contract and incorporate the
applicable wage determinations into
their task or purchase order. As noted in
the preamble, however, in the
Department’s experience contracting
agencies’ procedures for updating wage
determinations for these types of
contracts vary widely. Some contracting
agencies incorporate the most recent
wage determination modification in
effect at the time each task order is
issued, a process that would generally
take more time than merely flowing
down wage determination modifications
that have already been incorporated into
the master contract, as those contracting
officers must identify the correct wage
determination modification on sam.gov
before incorporating it for each of the
multiple task orders issued each year.
Other agencies are already updating
these orders annually and incorporating
the updated wage determination, while
others do not update wage
determinations at all for at least some of
these contracts. The Department does
not have data to determine how many
additional contracts would have to be
updated annually following this rule or
how many contracts currently require
wage determinations to be flowed down
to or updated for each task order. As a
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result, the Department cannot determine
the extent to which this revision would
result in an increased or reduced
administrative burden across agencies.
However, the Department anticipates
that to the extent that additional time
would be needed to update these
contracts and task orders, the total
amount of time involved would not be
significant.
Other provisions are also likely to
have no significant economic impact,
such as the provision regarding the
applicable apprenticeship ratios and
wage rates when work is performed by
apprentices in a different State than the
State in which the apprenticeship
program was originally registered.
Recordkeeping revisions are also
expected to have a negligible cost and
to generate benefits from enhanced
compliance, enforcement, and clarity for
the regulated community that outweigh
such costs. The Department expanded
on this topic and addressed public
comments in section III.B.3.iii.B.
D. Transfer Payments
The Department conducted
demonstrations to provide an indication
of the possible transfers attributable to
the provision revising the definition of
‘‘prevailing wage,’’ and the provision to
update out-of-date SU rates using the
ECI. Both provisions may cause some
prevailing wage rates to increase
(relative to the existing method), while
the former may cause other prevailing
wage rates to decrease (relative to the
existing method). However, due to many
uncertainties in calculating a transfer
estimate, the Department instead only
presents this demonstration
characterizing how wage and fringe
rates may change.
1. The Return to the ‘‘Three-Step’’
Method for Determining the Prevailing
Wage
i. Overview
The revision to the definition of
prevailing wage (i.e., the return to the
‘‘three-step process’’) may lead to
income transfers to or from workers.
Under the ‘‘three-step process’’ when a
wage rate is not paid to a majority of
workers in a particular classification, a
wage rate will be considered prevailing
if it is paid to at least 30 percent of such
workers. Thus, fewer future wage
determinations will be established
based on a weighted average. The
Department is not able to quantify the
impact of this change because it will
apply to surveys yet to be conducted,
covering classifications and projects in
locations not yet determined.
Nonetheless, in an effort to illustrate the
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57709
potential impact, the Department
conducted a retrospective analysis that
considers the impact of the 30-percent
threshold had it been used to set the
wage determinations for several
occupations in recent years.
Specifically, to demonstrate the
impact of this provision, the Department
compiled data for 7 key classifications
from 19 surveys across 17 states from
2015 to 2018 (see Appendix A).315 This
sample covers all four construction
types, and includes metro and rural
counties, and a variety of geographic
regions. The seven select key
classifications considered are as follows:
• Building and residential
construction: Bricklayers, common
laborers, plumbers, and roofers.
• Heavy and highway construction:
Common laborers, cement masons, and
electricians.
In total, the sample is comprised of
3,097 county-classification observations.
Because this sample only covers seven
out of the many occupations covered by
DBRA and all classification-county
observations are weighted equally in the
analysis, the Department believes the
results need to be interpreted with care
and cannot be extrapolated to
definitively quantify the overall impact
of the 30-percent threshold. Instead,
these results should be viewed as an
informative illustration of the potential
direction and magnitude of transfers
that will be attributed to this provision.
The Department began its
retrospective analysis by applying the
current prevailing wage setting
protocols (see Appendix B) to this
sample of wage data to calculate the
current prevailing wage and fringe
benefit rates.316 The Department then
applied the 30-percent threshold to the
same sample of wage data.317 Then the
Department compared the wage rates
determined under the two methods.
Results are reported at the county level
315 Data were obtained from the Automated
Survey Data System (ASDS), the data system used
by the Department to compile and process WD–10
submissions. Out of the 21 surveys that occurred
during this time period and met sufficiency
standards, these 19 surveys are all of the ones with
usable data for this analysis; the other two had
anomalies that could not be reconciled.
316 The calculated current rates generally match
the published wage and the fringe benefit rates
within a few cents. However, there are a few
instances that do not match, but the Department
does not believe these differences bias the
comparisons to the calculated 30 percent prevailing
definition.
317 This model, while useful for this illustrative
analysis, may not be relevant for future surveys.
The methodology assumes that the level of
participation by firms in WHD’s wage survey
process would be the same if the standard were 30
percent and is mostly reflective of states with lower
union densities.
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(i.e., one observation represents one
classification in one county).
The results differ depending on how
heavily unionized the construction
industry is in the states analyzed (and
thus how many union rates are
submitted in response to surveys). In
Connecticut, for example, the
Department found that estimated rates
were little changed because the
construction industry in Connecticut is
highly unionized and union rates
prevail under both the 30 percent and
the 50 percent threshold. Conversely, in
Florida, which is less unionized, there
is more variation in how wage rates
would change. For the rates that
changed in Florida, calculated
prevailing wage rates generally changed
from an average rate (e.g., insufficient
identical rates to determine a modal
prevailing rate under the current
protocol) to a non-collectively bargained
modal prevailing rate. Depending on the
classification and county, the prevailing
hourly wage rate may have increased or
decreased because of the change in
methodology.
Results may also differ by
construction type. In particular, changes
to highway prevailing wages may differ
from changes in other construction
types because they frequently rely on
certified payroll. Thus, many of the
wages used to calculate the prevailing
wage reflect prevailing wages at the time
of the survey.
ii. Results
Tables 6 and 7 compare the share of
counties with calculated wage
determinations by ‘‘publication rule’’
(i.e., the rule under which the wage rate
was or would be published): (1) an
average rate, (2) a collectively bargained
single (modal) prevailing rate, and (3) a
non-collectively bargained single
(modal) prevailing rate. Fringe benefit
rate results also include the number of
counties where the majority of workers
received zero fringe benefits. The tables
also show the change in the number of
rates in each publication rule category.
For the surveys analyzed, the majority
of current county wage rates were based
on averages (1,954 ÷ 3,097 = 63 percent),
about 25 percent were a single (modal)
prevailing collectively bargained rate,
and 12 percent were a modal prevailing
non-collectively bargained rate. Using
the 30 percent requirement for a modal
prevailing rate, the number of county
wage rates that would be based on
averages decreased to 31 percent (948 ÷
3,097). The percentage of rates that
would be based on a modal wage rate
increased for both non-collectively
bargained and collectively bargained
rates, although more wage rates would
be based on non-collectively bargained
rates than collectively bargained rates.
For fringe benefit rates, fringe benefits
do not prevail for a similar percent in
both scenarios, (i.e., ‘‘no fringes’’): 50
percent of current rates, 48 percent of
‘‘three-step process’’ rates. The share
determined as average rates decreased
from 22 percent to 10 percent. The
prevalence of modal prevailing fringe
benefit rates increased for both noncollectively bargained and collectively
bargained rates, with slightly more
becoming collectively bargained rates
than non-collectively bargained rates.
The total number of counties will
differ by classification based on the
State, applicable survey area (e.g.,
statewide, metro only), and whether the
data submitted for the classification met
sufficiency requirements.
TABLE 6—PREVALENCE OF CALCULATED PREVAILING WAGES IN ANALYZED SUBSET, BY PUBLICATION RULE, BY
CLASSIFICATION
Laborers
Plumbers
949
504
Count ....................................................................
Roofers
Bricklayers
545
Cement
masons
Electricians
Total
379
360
360
3,097
42%
39%
19%
68%
4%
28%
53%
44%
4%
63%
25%
12%
18%
45%
37%
40%
7%
53%
11%
80%
9%
31%
34%
36%
¥23
5
18
¥28
3
25
¥42
36
5
¥32
9
23
13%
39%
2%
46%
9%
4%
2%
85%
48%
44%
0%
8%
22%
25%
3%
50%
6%
46%
2%
46%
5%
7%
3%
85%
13%
80%
7%
0%
10%
34%
7%
48%
Current Hourly Rate
Average ................................................................
Modal Prevailing—Union .....................................
Modal Prevailing—Non-Union ..............................
82%
12%
6%
57%
40%
3%
55%
23%
22%
‘‘Three-Step Process’’ Hourly Rate a
Average ................................................................
Modal Prevailing-Union ........................................
Modal Prevailing-Non-Union ................................
47%
21%
32%
22%
46%
31%
26%
25%
49%
Change for Hourly Rate (Percentage Points)
¥35
9
26
Average ................................................................
Modal Prevailing-Union ........................................
Modal Prevailing-Non-Union ................................
¥35
7
28
¥29
2
27
Current Fringe Benefit Rate
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Average ................................................................
Modal Prevailing-Union ........................................
Modal Prevailing-Non-Union ................................
No fringes .............................................................
23%
14%
4%
59%
27%
41%
5%
27%
12%
23%
3%
62%
‘‘Three-Step Process’’ Fringe Benefit Rate a
Average ................................................................
Modal Prevailing-Union ........................................
Modal Prevailing-Non-Union ................................
No fringes .............................................................
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21%
9%
57%
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27%
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4%
62%
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57711
TABLE 6—PREVALENCE OF CALCULATED PREVAILING WAGES IN ANALYZED SUBSET, BY PUBLICATION RULE, BY
CLASSIFICATION—Continued
Laborers
Plumbers
Roofers
Cement
masons
Bricklayers
Electricians
Total
Change for Fringe Benefit Rate (Percentage Points)
¥11
7
6
¥2
Average ................................................................
Modal Prevailing¥Union .....................................
Modal Prevailing¥Non¥Union ...........................
No fringes .............................................................
a Using
¥14
6
8
0
¥3
2
1
0
¥7
7
0
0
¥4
3
1
0
¥35
36
7
¥8
¥11
9
4
¥2
a threshold of 30 percent of employees’ wage or fringe benefit rates being identical.
TABLE 7—PREVALENCE OF CALCULATED PREVAILING WAGES IN ANALYZED SUBSET, BY PUBLICATION RULE, BY
CONSTRUCTION TYPE
Residential
Count ....................................................................................
Building
563
Heavy
Highway
Total
1,436
810
288
3,097
769
456
211
573
143
94
189
64
35
1,954
762
381
313
570
553
331
257
222
107
104
77
948
1,049
1,100
¥456
114
342
¥242
114
128
¥82
40
42
¥1006
287
719
347
470
76
543
235
154
19
402
65
64
1
158
673
787
96
1,541
185
578
150
523
115
259
51
385
23
105
14
146
323
1,060
222
1,492
¥162
108
74
¥20
¥120
105
32
¥17
¥42
41
13
¥12
¥350
273
126
¥49
Current Hourly Rate
Average ................................................................................
Majority—Union ....................................................................
Majority—Non-Union ............................................................
423
99
41
Proposed ‘‘Three-Step Process’’ Hourly Rate a
Average ................................................................................
Modal Prevailing—Union .....................................................
Modal Prevailing—Non-Union ..............................................
197
118
248
Change for Hourly Rate
Average ................................................................................
Modal Prevailing—Union .....................................................
Modal Prevailing—Non-Union ..............................................
¥226
19
207
Current Fringe Benefit Rate
Average ................................................................................
Modal Prevailing—Union .....................................................
Modal Prevailing—Non-Union ..............................................
No fringes .............................................................................
26
99
0
438
Proposed ‘‘Three-Step Process’’ Fringe Benefit Rate a
Average ................................................................................
Modal Prevailing—Union .....................................................
Modal Prevailing—Non-Union ..............................................
No fringes .............................................................................
0
118
7
438
Change for Fringe Benefit Rate
Average ................................................................................
Modal Prevailing-Union ........................................................
Modal Prevailing—Non-Union ..............................................
No fringes .............................................................................
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a Using
¥26
19
7
0
a threshold of 30 percent of employees’ wage or fringe benefit rates being identical.
Table 8 and Table 9 summarize the
difference in calculated prevailing wage
rates using the three-step process
compared to the current process. Table
8 disaggregates results by craft and
Table 9 disaggregated results by
construction type. The first row entitled
‘‘Total’’ refers to the number of rates for
the classification in the subset of
surveys that the Department analyzed.
The results show both average changes
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across all observations and average
changes when limited to those
classification-county observations
where rates are different (about 32
percent of all observations in the
sample). Notably, all classificationcounty observations are weighted
equally in the calculations. On average:
• Across all observations, the average
hourly rate increases by only one cent,
or 0.1 percent of the average hourly
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wage rate. Across affected classificationcounties only, the calculated hourly rate
increases by 4 cents on average, or 0.2
percent of the average hourly wage rate.
However, there is significant variation.
The calculated hourly rate increased by
as much as $7.80 and decreased by as
much as $5.78.
• Across all observations, the average
hourly fringe benefit rate increases by
19 cents, or 3.7 percent of the average
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hourly fringe rate. Across affected
classification-counties only, the
calculated hourly fringe benefit rate
increases by $1.42 on average, or 26.8
percent of the average hourly fringe rate.
As a percent of the average fringe rate,
this percent change is large because
many of these prevailing wage rates
previously did not have prevailing
fringes. The change ranges from ¥$6.17
to $11.16.
• Some crafts and construction types
have larger changes than others.
However, it should be noted that when
considering only one craft or
construction type, the results are based
on smaller samples and consequently
less precise.
Based on this demonstration of the
impact of changing from the current to
the new definition of ‘‘prevailing,’’ some
published wage rates and fringe benefit
rates may increase and others may
decrease. In the sample considered,
wage rates changed very little on
average, but fringe benefit rates
increased on average. As discussed
above, the Department believes that
these results need to be interpreted with
care and cannot be extrapolated to
definitively quantify the overall impact
of the 30-percent threshold. Instead,
these results should be viewed as an
informative illustration of the potential
direction and magnitude of transfers
that will be attributed to this provision.
TABLE 8—CHANGE IN RATES ATTRIBUTABLE TO CHANGE IN DEFINITION OF ‘‘PREVAILING’’
Laborers
Plumbers
Roofers
Cement
masons
Bricklayers
Electricians
Total
Hourly Rate
Total .....................................................................
Number changed .................................................
Increased ......................................................
Decreased .....................................................
Percent changed ..................................................
Increased ......................................................
Decreased .....................................................
Average (non-zero) ..............................................
Average (all) .........................................................
Maximum ..............................................................
Minimum ...............................................................
949
330
121
209
35%
13%
22%
$0.37
$0.13
$7.80
¥$3.93
504
175
130
45
35%
26%
9%
$1.10
$0.38
$7.07
¥$4.23
545
160
36
124
29%
7%
23%
¥$1.06
¥$0.31
$4.40
¥$2.51
379
89
66
23
23%
17%
6%
$0.44
$0.10
$1.02
¥$0.95
360
101
17
84
28%
5%
23%
¥$1.35
¥$0.38
$2.54
¥$5.78
360
150
106
44
42%
29%
12%
$0.94
$0.39
$4.14
¥$4.74
3,097
1,005
476
529
32%
15%
17%
$0.04
$0.01
$7.80
¥$5.78
379
26
19
7
7%
5%
2%
$1.21
$0.08
$2.19
¥$0.17
360
14
11
3
4%
3%
1%
$0.74
$0.03
$6.00
¥$6.17
360
184
174
10
51%
48%
3%
$2.11
$1.08
$4.61
¥$0.86
3,097
447
381
66
14%
12%
2%
$1.42
$0.19
$11.16
¥$6.17
Fringe Benefit Rate
Total .....................................................................
Number changed .................................................
Increased ......................................................
Decreased .....................................................
Percent changed ..................................................
Increased ......................................................
Decreased .....................................................
Average (non-zero) ..............................................
Average (all) .........................................................
Max ......................................................................
Min .......................................................................
949
137
109
28
14%
11%
3%
$2.10
$0.30
$9.42
¥$4.82
504
69
59
10
14%
12%
2%
$2.14
$0.29
$11.16
¥$1.35
545
17
9
8
3%
2%
1%
¥$1.67
¥$0.05
$1.42
¥$4.61
TABLE 9—CHANGE IN RATES ATTRIBUTABLE TO CHANGE IN DEFINITION OF ‘‘PREVAILING,’’ BY CONSTRUCTION TYPE
Residential
Building
Heavy
Highway
Total
Hourly Rate
Total .....................................................................................
Number changed .................................................................
Increased ......................................................................
Decreased .....................................................................
Percent changed ..................................................................
Increased ......................................................................
Decreased .....................................................................
Average (non-zero) ..............................................................
Average (all) .........................................................................
Maximum ..............................................................................
Minimum ...............................................................................
563
226
102
124
40%
18%
22%
$0.45
$0.18
$6.57
¥$1.73
1,436
455
215
240
32%
15%
17%
$0.04
$0.01
$7.07
¥$4.23
810
242
118
124
30%
15%
15%
¥$0.09
¥$0.03
$7.80
¥$5.78
288
82
41
41
28%
14%
14%
$1.10
$0.31
$4.14
¥$4.74
3,097
1,005
476
529
32%
15%
17%
$0.04
$0.01
$7.80
¥$5.78
1,436
201
163
38
14%
11%
3%
810
154
139
15
19%
17%
2%
288
66
53
13
23%
18%
5%
3,097
447
381
66
14%
12%
2%
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Fringe Benefit Rate
Total .....................................................................................
Number changed .................................................................
Increased ......................................................................
Decreased .....................................................................
Percent changed ..................................................................
Increased ......................................................................
Decreased .....................................................................
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57713
TABLE 9—CHANGE IN RATES ATTRIBUTABLE TO CHANGE IN DEFINITION OF ‘‘PREVAILING,’’ BY CONSTRUCTION TYPE—
Continued
Residential
Average (non-zero) ..............................................................
Average (all) .........................................................................
Max ......................................................................................
Min .......................................................................................
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2. Adjusting Out-of-Date Prevailing
Wage and Fringe Benefit Rates
Updating older Davis-Bacon
prevailing wage and fringe benefit rates
will increase the minimum required
hourly compensation paid to workers on
Davis-Bacon projects. This would result
in transfers of income to workers on
Davis-Bacon projects who are currently
being paid only the required minimum
hourly rate and fringe benefits. To the
extent that the Federal Government pays
for increases to the prevailing wage
through higher contract bids, an
increase in the prevailing wage will
transfer income from the Federal
Government to the worker. This transfer
will be reflected in increased costs paid
by the Federal Government for
construction.
However, to estimate transfers, many
assumptions need to be made. For
example, the Department would need to
determine if workers really are being
paid the prevailing wage rate; some
published rates are so outdated that it is
highly likely effective labor market rates
exceed the published rates, and the
published prevailing wage rates are
functionally irrelevant. In addition, the
Department would need to predict
which Davis-Bacon projects would
occur each year, in which counties these
projects will occur, and the number of
hours of work required from each class
of laborer and mechanic. Because of
many uncertainties, the Department
instead characterizes the number and
size of the changes in published DavisBacon hourly rates and fringe benefits
rather than formally estimating the
income change to those potentially
affected by the proposal to update rates.
To provide an illustrative analysis,
the Department used the entire set of
wage and fringe benefit rates published
on wage determinations as of May 2019
to demonstrate the potential changes in
Davis-Bacon wage and fringe benefit
rates resulting from updating certain
out-of-date non-collectively bargained
rates to 2021 values using the BLS ECI.
For this demonstration, the Department
considered the impact of updating rates
for key classifications published prior to
2019 that were based on weighted
averages, which comprises 172,112
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Building
$6.89
$0.32
$9.42
$0.01
$1.27
$0.18
$11.16
¥$4.82
wage and fringe benefit rates lines in
3,999 wage determinations.318 The
Department has focused on wage and
fringe benefit rates prior to 2019 because
these are the universe of key
classification rates that are likely to be
more than 3 years old at the time of this
final rule, and the rule calls for updating
non-collectively-bargained wage rates
that are 3 or more years old.
After dropping hourly wages greater
than $100 and wage rates that were less
than $7.25 when originally published
but were updated to the minimum wage
of $7.25 in 2009, 159,562 wage rates
were updated for this analysis.319 To
update these wage rates, the Department
used the BLS ECI, which measures the
change over time in the cost of labor
total compensation.320 The Department
believes that the ECI for private industry
workers, total compensation,
‘‘construction, and extraction, farming,
fishing, and forestry’’ occupations, not
seasonally adjusted, is the most
appropriate index. However, the index
for this group is only available starting
in 2001. Thus, for updating wages and
fringe benefits from 1979 through 2000,
the Department determined the ECI for
private industry workers, total
compensation, in the goods-producing
industries was the most appropriate
series to use that was available back to
1979.321
To consider potential transfers to
workers due to changes in wages, the
full increase in the hourly rate would
only occur if workers on DBRA projects
318 In each type of construction covered by the
DBRA, some classifications are called ‘‘key’’
because most projects require these workers.
Building construction has 16 key classifications,
residential construction has 12 key classifications
and heavy and highway construction each have the
same eight key classifications. A line reflects a key
classification by construction type in a specific
geographic area. For example, a line could reflect
a plumber in building construction in Fulton
County, GA.
319 The 54 wage rates greater than $100 were day
or shift rates. The remaining 12,496 rates excluded
were less than $7.25 prior to July 24, 2009, but were
published from surveys conducted before the
establishment of the Department’s ASDS in 2002.
The Department no longer has records of the
original published wage rates in these cases.
320 Available at: https://www.bls.gov/ect/.
321 Continuous Occupational and Industry Series,
Table 5. https://www.bls.gov/web/eci/ecicontinuous-dollar.txt.
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Heavy
$1.34
$0.26
$4.61
¥$6.17
Highway
$2.95
$0.68
$6.19
¥$2.21
Total
$1.42
$0.19
$11.16
¥$6.17
are currently paid the exact prevailing
rates.322 However, due to market
conditions in some areas, workers
already may be receiving more than the
published rate. While completely
comparable data on wages paid to
workers on DBRA projects in specific
classifications and counties are not
readily available and usable for this
analysis, the BLS OEWS data provide a
general estimate of wages paid to certain
categories of workers performing
construction and construction-related
duties. Although the OEWS data can be
informative for this illustrative analysis,
it is not a representative data set of
professional construction workers
performing work on DBRA projects and
it does not include benefits.
To provide an example of transfers,
the Department compared the ECIupdated Davis-Bacon wage rates to the
applicable median hourly rate in the
OEWS data.323 To estimate the
approximate median 2021 wage rates,
the Department used the median hourly
wage rate for each key classification in
the construction industry in the May
2021 State OEWS data. Using the OEWS
as a general measure of the market
conditions for construction worker
wages in a given State, the Department
assumed that an updated Davis-Bacon
wage rate below the median OEWS rates
would likely not lead to sizable income
transfers to construction workers
because most workers are likely already
paid more than the updated DavisBacon rate. After removing the 99,337
updated Davis-Bacon wage rates that
were less than the corresponding OEWS
median rates, there remained 60,225
updated Davis-Bacon wage rates that
may result in transfers to workers.
However, the Department notes that
some of the updated Davis-Bacon rates
may be lower than the median because
they are a wage rate for a rural county,
and the OEWS data represents the
statewide median.
322 The hourly wage rate increase would only
occur when the next contract goes into effect and
a new wage determination with an updated wage
rate is incorporated into the contract.
323 The Department used OEWS data for certain
occupations matching key classifications in the
construction industry by State.
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Further investigating the ECI-updated
Davis-Bacon wage rates in this example
that were substantially above the OEWS
median wage rate, the Department
found that 23,200 of the originally
published Davis-Bacon wage rates were
already higher than the OEWS median.
For at least some of these wage rates, the
comparison to the OEWS median may
not be appropriate because such DavisBacon wage rates are for work in
specialty construction. For example,
most of the prevailing wage rates
published specifically for a 2014 wage
determination for Iowa Heavy
Construction River Work exceed the
2021 OEWS median rates for the same
classifications in Iowa.324 This may be
an indication that comparing DavisBacon rates for this type of construction
to a more general measure of wages may
not be appropriate because workers are
generally paid more for this type of
specialty construction than for other
types of construction work measured by
the OEWS data.
Therefore, to measure possible
transfers per hour to workers on DavisBacon projects due to the periodic
updating of certain non-collectively
bargained wage rates, the Department
began by taking the lesser of:
• The difference between the updated
wage rate and the OEWS median wage
rate.
• The difference between the updated
and currently published wage rates.
The second difference accounts for
the 23,200 Davis-Bacon wage rates that
were higher than the 2021 OEWS
median rate even before they were
updated, because otherwise the
Department would overestimate the
potential hourly wage transfer.
The Department also examined an
additional adjustment for DBA wage
rates because they are also subject to
Executive Order 13658: Establishing a
Minimum Wage for Contractors, which
sets the minimum wage paid to workers
on Federal contracts at $11.25 in
2022.325 Thus, the Department analyzed
an additional restriction that the
maximum possible hourly transfer to
workers on Davis-Bacon projects cannot
exceed the difference between the
updated wage rate and $11.25.
However, the added restriction has no
impact on estimated transfers because
any updated wage rates that were less
than $11.25 were also less than the
OEWS median wage rate. Thus, the
potential possible hourly transfers
attributable to updated Davis-Bacon
wage rates are identical for construction
projects covered by the Davis-Bacon Act
and by the Related Acts.
Table 10 provides the summary
statistics of the per hour transfers to
workers that may occur due to updating
out-of-date non-collectively bargained
Davis-Bacon wage rates. Among the
wage rates considered in this
demonstration, there are 60,225 wage
rate updates that may result in transfers
to workers. On average, the potential
hourly transfer is $4.11.
TABLE 10—DISTRIBUTION OF POTENTIAL PER HOUR TRANSFERS DUE TO UPDATED RATES
Number of
rates
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Wage rates ......................................................................................................
Fringe benefits .................................................................................................
Total compensation .........................................................................................
Of the 172,112 pre-2019 noncollectively bargained key classification
fringe benefit rates, 75,480 were nonzero, and thus would be updated,
possibly resulting in some transfers to
workers (Table 10). On average, these
non-zero fringe benefits would increase
by $1.50 per hour.
Adding the required Davis-Bacon
wage and fringe benefit rates together
measures the required total
compensation rate on DBRA projects.
Due to updating old rates, 94,050 DavisBacon total compensation hourly rates
would increase by $3.83 on average.326
The two demonstrations provide an
indication of the possible changes to
Davis-Bacon wage rates and fringe
benefit rates attributable to the proposed
provision revising the definition of
‘‘prevailing,’’ and the provision to
update out-of-date SU rates using the
ECI (only one of which would affect a
location-occupation pair at a particular
time). Both provisions may lead to
higher hourly payments, while the
324 WD
IA20190002.
Department also ran an analysis using the
minimum wage of $15.00 as proposed by Executive
325 The
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60,225
75,480
94,050
former also has the potential to lead to
lower hourly payments.
Because accurate data to measure the
current county-level labor conditions for
specific construction classifications are
not available, it is unclear if an increase
or decrease in Davis-Bacon minimum
required rates will impact what workers
earn on DBRA projects. Furthermore,
even if some of these rate changes do
lead to different rates paid to workers on
DBRA projects, data are not available to
estimate how large transfers might be.
To do so would require detailed
information on what federally funded
construction contracts will be issued,
the types of projects funded, where the
projects will occur (specific county or
counties), the value of the projects, and
the labor mix needed to complete the
project.
E. Cost Savings
This final rule could lead to cost
savings for both contractors and the
Federal Government because the rule
would reduce ambiguity and increase
efficiency, which could reduce the
Order 14026, ‘‘Increasing the Minimum Wage for
Federal Contractors.’’ The results were similar.
326 The average increase in total compensation is
less than the average wage increase because more
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Mean
Median
$4.11
1.50
3.83
$3.29
1.06
2.32
Standard
deviation
$3.93
1.62
4.70
amount of time necessary to comply
with the rule. For example, as discussed
in section V.C.4, expressly authorizing
WHD to list classifications and
corresponding wage and fringe benefit
rates on wage determinations when
WHD has received insufficient data
through its wage survey process will
increase certainty and reduce
administrative burden for contracting
entities. It would reduce the number of
conformance requests needed, which
could save time for the contractors,
contracting agencies, and the
Department. Additionally, permitting
the Administrator to adopt prevailing
wage rates set by State and local
governments could result in cost savings
for the Department, because it avoids
WHD duplicating wage survey work that
states and localities are already doing. It
could also result in cost savings in the
form of time savings for contractors, as
they will only have one wage
determination that they will have to
reference.
wage and fringe benefit lines are included for total
compensation.
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Additionally, the Department is
providing clarifications throughout the
rule, which will make clear which
contract workers are covered by DBRA.
For example, the Department is
clarifying provisions related to the site
of work, demolition and removal
workers, and truck drivers and their
assistants, among others. These
clarifications will make it clear to both
contractors and contract workers who is
covered, and therefore could help
reduce legal disputes between the two,
resulting in cost savings.
Because the Department does not
have information on how much
additional time contractors and the
Federal Government currently spend
complying with this rule due to lack of
clarity, these cost savings are discussed
qualitatively.
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F. Benefits
Among the multiple provisions
discussed above, the Department
recognizes that the provision to update
the definition of prevailing wage using
the ‘‘30 percent rule’’ could have
various impacts on wage rates. The
effect of this proposal on actual wages
paid is uncertain for the reasons
discussed in section V.D.1. However,
the Department’s proposal to update
out-of-date wage rates using the ECI
would result in higher prevailing wage
rates due to the increases in employer
costs over time. Any DBRA-covered
workers that were not already being
paid above these higher wage rates
would receive a raise when these
updated rates were implemented. These
higher wages could lead to benefits such
as improved government services,
increased productivity, and reduced
turnover, which are all discussed here
qualitatively. The magnitude of these
wage increases could influence the
magnitude of these benefits.
The Department notes that the
literature cited in this section
sometimes does not directly consider
changes in the DBRA prevailing wages.
Additionally, much of the literature is
based on voluntary changes made by
firms. However, the Department has
presented the information here because
the general findings may still be
applicable in this context.
1. Improved Government Services
For workers who are paid higher wage
rates as a result of this rulemaking, the
Department expects that the quality of
construction could improve. Higher
wages can be associated with a higher
number of bidders for Government
contracts, which can be expected to
generate greater competition and an
improved pool of contractors. Multiple
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studies have shown that the bidding for
municipal contracts remained
competitive or even improved when
living wage ordinances were
implemented (Thompson and Chapman,
2006).327 In a study on the impact of bid
competition on final outcomes of State
department of transportation
construction projects, Delaney (2018)
demonstrated that each additional
bidder reduces final project cost
overruns by 2.2 percent and increases
the likelihood of achieving a highquality bid by 4.9 times.328
A comment submitted by two
individuals agreed with the
Department’s assertion that the number
of bidders would not decrease. They
pointed to a paper that found no
difference in the number of bidders on
federally funded projects and statefunded projects.329 Conversely, the
NAHB asserted that DBRA requirements
can be a deterrent to small businesses
considering bidding and that this rule
could further discourage these
contractors from participating. The
Department believes this final rule
clarifies the requirements and thus
would not deter small businesses from
participating.
2. Increased Productivity
For workers whose wages increase as
a result of the Department’s provision to
update out-of-date wage rates, these
increases could result in increased
productivity. Increased productivity
could occur through numerous
channels, such as employee morale,
level of effort, and reduced absenteeism.
A strand of economic research,
commonly referred to as ‘‘efficiency
wage’’ theory, considers how an
increase in compensation may be met
with greater productivity.330 Efficiency
wages may elicit greater effort on the
part of workers, making them more
effective on the job.331 A comment
submitted by two individuals affirmed
327 Thompson, J. and J. Chapman. (2006). ‘‘The
Economic Impact of Local Living Wages,’’ EPI,
Briefing Paper #170, 2006.
328 Delaney, J. (2018). ‘‘The Effect of Competition
on Bid Quality and Final Results on State DOT
Projects.’’ https://www.proquest.com/openview/
33655a0e4c7b8a6d25d30775d350b8ad/1?pqorigsite=gscholar&cbl=18750.
329 Duncan, K. (2015). ‘‘The Effect of Federal
Davis-Bacon and Disadvantaged Business
Enterprise Regulations on Highway Maintenance
Costs.’’ ILR Review, 68(1), pp. 212–237. https://
doi.org/10.1177/0019793914546304.
330 Akerlof, G.A. (1982). ‘‘Labor Contracts as
Partial Gift Exchange.’’ The Quarterly Journal of
Economics, 97(4), 543–569.
331 Another model of efficiency wages, which is
less applicable here, is the adverse selection model
in which higher wages raise the quality of the pool
of applicants.
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57715
the likely relationship between this final
rule and increased productivity.
Allen (1984) estimates the ratio of the
marginal product of union and nonunion labor.332 He finds that union
workers are 17 to 22 percent more
productive than non-union members.
Although it is unclear whether this
entire productivity difference is
attributable to higher wages, it is likely
a large contributing factor. The
Construction Labor Research Council
(2004) compared the costs to build a
mile of highway in higher wage and
lower wage states using data reported to
the FHWA from 1994 to 2002.333 They
found that in higher wage states, 32
percent fewer labor hours are needed to
complete a mile of highway than in
lower wage states, despite hourly wage
rates being 69 percent higher in those
states. While this increased worker
productivity could be due in part to
other factors such as greater worker
experience or more investment in
capital equipment in higher wage states,
the higher wages likely contribute.
Conversely, Vedder (1999) compared
output per worker across states with and
without prevailing wage laws.334 Data
on construction workers is from the
Department of Labor and data on
construction contracts is from the
Department of Commerce. A worker in
a prevailing wage law State produced
$63,116 of value in 1997 while a worker
from a non-prevailing wage law State
produced $65,754. Based on this simple
comparison, workers are more
productive without prevailing wage
laws. However, this is a somewhat basic
comparison in that it does not control
for other differences between states that
may influence productivity (for
example, the amount of capital used or
other State regulations) and it is unclear
whether this difference is statistically
significant.
Studies on absenteeism have
demonstrated that there is a negative
effect on firm productivity as absentee
rates increase.335 Zhang et al., in their
study of linked employer-employee data
in Canada, found that a 1 percent
332 Allen, S.G. (1984). ‘‘Unionized Construction
Workers are More Productive.’’ The Quarterly
Journal of Economics, 251–174.
333 The Construction Labor Research Council
(2004). ‘‘The Impact of Wages on Highway
Construction Costs.’’ https://niabuild.org/
WageStudybooklet.pdf.
334 Vedder, R. (1999). ‘‘Michigan’s Prevailing
Wage Law and Its Effects on Government Spending
and Construction Employment. Midland, Michigan:
Mackinac Center for Public Policy,’’ https://
www.mackinac.org/archives/1999/s1999–07.pdf.
335 Allen, S.G. (1983). ‘‘How Much Does
Absenteeism Cost?,’’ Journal of Human Resources,
18(3), 379–393. https://www.jstor.org/stable/
145207?seq=1.
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decline in the attendance rate reduces
productivity by 0.44 percent.336 Allen
(1983) similarly noted that a 10percentage point increase in
absenteeism corresponds to a decrease
of 1.6 percent in productivity.337 Hanna
et al. (2005) find that while absenteeism
rates of between 0 and 5 percent among
contractors on electrical construction
projects lead to no loss of productivity,
absenteeism rates of between 6 and 10
percent can spark a 24.4 percent drop in
productivity.338
Fairris et al. (2005) demonstrated that
as a worker’s wage increases there is a
reduction in unscheduled
absenteeism.339 They attribute this
effect to workers standing to lose more
if forced to look for new employment
and an increase in pay paralleling an
increase in access to paid time off.
Pfeifer’s (2010) study of German
companies provides similar results,
indicating a reduction in absenteeism if
workers experience an overall increase
in pay.340 Conversely, Dionne and
Dostie (2007) attribute a decrease in
absenteeism to mechanisms other than
an increase in worker pay, specifically
scheduling that provides both the
option to work-at-home and for fewer
compressed work weeks.341 However,
the relevance of such policies in the
context of construction is unclear. The
Department believes both the
connection between prevailing wages
and absenteeism, and the connection
between absenteeism and productivity
are well enough established that this is
a feasible benefit of this final rule.
336 Zhang, W., Sun, H., Woodcock, S., & Anis, A.
(2013). ‘‘Valuing Productivity Loss Due to
Absenteeism: Firm-level Evidence from a Canadian
Linked Employer-Employee Data.’’ Health
Economics Review, 7(3). https://
healtheconomicsreview.biomedcentral.com/
articles/10.1186/s13561-016-0138-y.
337 Allen, S.G. (1983). ‘‘How Much Does
Absenteeism Cost?,’’ Journal of Human Resources,
18(3), 379–393. https://www.jstor.org/stable/
145207?seq=1.
338 Hanna, A., Menches, C., Sullivan, K., &
Sargent, J. (2005) ‘‘Factors Affecting Absenteeism in
Electrical Construction.’’ Journal of Construction
Engineering and Management 131(11). https://
ascelibrary.org/doi/abs/10.1061/(ASCE)07339364(2005)131:11(1212).
339 Fairris, D., Runstein, D., Briones, C., &
Goodheart, J. (2005). ‘‘Examining the Evidence: The
Impact of the Los Angeles Living Wage Ordinance
on Workers and Businesses.’’ LAANE. https://
laane.org/downloads/Examinig_the_Evidence.pdf.
340 Pfeifer, C. (2010). ‘‘Impact of Wages and Job
Levels on Worker Absenteeism.’’ International
Journal of Manpower 31(1), 59–72. https://doi.org/
10.1108/01437721011031694.
341 Dionne, G., & Dostie, B. (2007). ‘‘New
Evidence on the Determinants of Absenteeism
Using Linked Employer-Employee Data.’’ Industrial
and Labor Relations Review 61(1), 108–120. https://
journals.sagepub.com/doi/abs/10.1177/
001979390706100106.
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3. Reduced Turnover
Little evidence is available on the
impact of prevailing wage laws and
turnover, but an increase in the
minimum wage has been shown to
decrease both turnover rates and the rate
of worker separation (Dube, Lester and
Reich, 2011; Liu, Hyclak and Regmi,
2015; Jardim et al., 2018).342 This
decrease in turnover and worker
separation can lead to an increase in the
profits of firms, as the hiring process
can be both expensive and time
consuming. A review of 27 case studies
found that the median cost of replacing
an employee was 21 percent of the
employee’s annual salary.343 Fairris et
al. (2005) 344 found the cost reduction
due to lower turnover rates ranges from
$137 to $638 for each worker.
Although the impacts cited here are
not limited to government construction
contracting, because data specific to
government contracting and turnover
are not available, the Department
believes that a reduction in turnover
could be observed among those workers
on DBRA contracts whose wages
increase following this final rule. The
potential reduction in turnover is a
function of several variables: the current
wage, the change in the wage rate, hours
worked on covered contracts, and the
turnover rate. Therefore, the Department
has not quantified the impacts of
potential reduction in turnover.
4. Additional Benefits
A comment submitted by two
individuals mentioned several other
potential benefits. First, they noted that
research has shown a positive
correlation between state prevailing
wage laws and apprenticeship
enrollment. Second, they pointed to
literature demonstrating that states with
prevailing wage laws have lower injury
342 Dube, A., Lester, T.W., & Reich, M. (2011). ‘‘Do
Frictions Matter in the Labor Market? Accessions,
Separations, and Minimum Wage Effects.’’
(Discussion Paper No. 5811). IZA. https://
www.iza.org/publications/dp/5811/do-frictionsmatter-in-the-labor-market-accessions-separationsand-minimum-wage-effects.
Liu, S., Hyclak, T.J., & Regmi, K. (2015). ‘‘Impact
of the Minimum Wage on Youth Labor Markets.’’
Labour 29(4). https://doi.org/10.1111/labr.12071.
Jardim, E., Long, M.C., Plotnick, R., van Inwegen,
E., Vigdor, J., & Wething, H. (Oct. 2018). ‘‘Minimum
Wage Increases and Individual Employment
Trajectories’’ (Working paper No. 25182). NBER.
https://doi.org/10.3386/w25182.
343 Boushey, H. and Glynn, S. (2012). ‘‘There are
Significant Business Costs to Replacing Employees.
Center for American Progress.’’ Available at: https://
www.americanprogress.org/wp-content/uploads/
2012/11/CostofTurnover.pdf.
344 Fairris, D., Runstein, D., Briones, C., &
Goodheart, J. (2005). ‘‘Examining the Evidence: The
Impact of the Los Angeles Living Wage Ordinance
on Workers and Businesses.’’ LAANE. https://
laane.org/downloads/Examinig_the_Evidence.pdf.
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and disability rates. Depending on the
channel through which these
correlations occur, this final rule could
result in more apprenticeships and
reduced workplace injuries, disabilities
and fatalities. The extent to which these
impacts occur would likely depend on
the extent of coverage expansion and
wage rate changes.
VI. Final Regulatory Flexibility Act
(FRFA) Analysis
The Regulatory Flexibility Act of 1980
(RFA), 5 U.S.C. 601 et seq., as amended
by the Small Business Regulatory
Enforcement Fairness Act of 1996,
Public Law 104–121 (Mar. 29, 1996),
requires Federal agencies engaged in
rulemaking to consider the impact of
their proposals on small entities,
consider alternatives to minimize that
impact, and solicit public comment on
their analyses. The RFA requires the
assessment of the impact of a regulation
on a wide range of small entities,
including small businesses, not-for
profit organizations, and small
governmental jurisdictions. Agencies
must perform a review to determine
whether a proposed or final rule would
have a significant economic impact on
a substantial number of small entities. 5
U.S.C. 603, 604.
Response to comments from small
businesses and SBA’s Office of
Advocacy are incorporated throughout
the FRFA where applicable.
A. Need for Rulemaking and Objectives
of the Final Rule
In order to provide greater clarity and
enhance their usefulness in the modern
economy, this final rule updates and
modernizes the regulations at 29 CFR
parts 1, 3, and 5, which implement the
DBRA. The Department has not
undertaken a comprehensive revision of
the DBRA regulations since 1982. Since
that time, Congress has expanded the
reach of the DBRA regulations
significantly, adding numerous new
Related Act statutes to which they
apply. The DBA and now more than 70
active Related Acts collectively apply to
an estimated tens of billions of dollars
in Federal and federally assisted
construction spending per year and
provide minimum wage rates for
hundreds of thousands of U.S.
construction workers. The Department
expects these numbers to continue to
grow as Congress seeks to address the
significant infrastructure needs in the
country, including, in particular, energy
and transportation infrastructure
necessary to address climate change.
These regulations will provide
additional clarity that will be helpful
given the increased number of
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construction projects subject to DavisBacon labor standards requirements,
due to the substantial increases in
federally funded construction provided
for in legislation such as the IIJA.
Additionally, the Federal contracting
system itself has undergone significant
changes since 1982. Federal agencies
have increased spending through the
use of interagency Federal schedules.
Contractors have increased their use of
single-purpose entities such as joint
ventures and teaming agreements.
Offsite construction of significant
components of public buildings and
works has also increased. The
regulations need to be updated to ensure
their continued effectiveness in the face
of changes such as these.
In this final rule, the Department
seeks to address a number of
outstanding challenges in the program
while also providing greater clarity in
the DBRA regulations and enhancing
their usefulness in the modern
economy. Specifically, the Department
returns to the definition of ‘‘prevailing
wage’’ that was used from 1935 to 1983
to address the overuse of average rates
and ensure that prevailing wages reflect
actual wages paid to workers in the
local community. The Department will
also periodically update noncollectively bargained prevailing wage
rates to address out-of-date wage rates.
The final rule will allow WHD to adopt
State or local wage determinations as
the Federal prevailing wage where
certain specified criteria are satisfied, to
issue supplemental rates for key
classifications where there is
insufficient survey data, to modernize
the scope of work to include energy
infrastructure and the site of work to
include certain secondary worksites, to
ensure that DBRA requirements protect
workers by operation of law, and to
strengthen enforcement, including
through debarment and anti-retaliation
protections. See section III.B. for a full
discussion of the Department’s changes
to these regulations.
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B. Significant Issues Raised by Public
Comment, Including Those Filed by the
Chief Counsel for Advocacy of the Small
Business Administration
SBA Advocacy commented that
DOL’s Initial Regulatory Flexibility
Analysis did not properly inform the
public about the impact of this rule on
small entities. They asserted that DOL
should have estimated the compliance
costs of expanding DBRA coverage to
new industries and state that the
proposed rule expands coverage to
prefabrication companies, material
suppliers, and truck drivers,
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professional surveyors, and additional
small businesses.
As explained above, neither the
proposed nor the final rule expanded
coverage to prefabrication companies,
which remain generally outside the
scope of the DBRA. While the proposed
rule would have broadened coverage to
include secondary construction sites at
which ‘‘significant portions’’ of
buildings or works (as opposed to
prefabricated components) are
constructed, the final rule limits such
coverage to facilities dedicated
exclusively or nearly so to a particular
covered contract or project. While the
Department cannot estimate the precise
number of small entities that will be
impacted by this change, as explained
above in Section V.C.4.v, the
Department expects that number to be
small since, based on the comments
received, most modular construction
companies’ facilities are engaged in
more than one project at a time and
therefore will be outside the scope of
the ‘‘site of the work’’ under the final
rule. Additionally, as explained above,
the final rule does not expand coverage
to material suppliers or truck drivers but
rather codifies existing policy with
minor changes. Likewise, the preamble’s
guidance on coverage of survey crews is
consistent with the Department’s
current interpretation and emphasizes
that coverage of survey crews is highly
fact-dependent. As such, the
Department does not anticipate that it
will substantially broaden coverage to
entities not previously covered.
Small business commenters also
noted that DOL underestimated rule
familiarization costs. As discussed
further in Section V.C.1, the Department
reconsidered the time it would take for
the regulated community to read this
Final Rule and has increased the time
estimate to an average of 4 hours. The
Department believes that this average
estimate is appropriate, because while
some firms will spend more time
reading the rule, other firms in our
estimate will not bid on a DBA contract
and will spend zero time reading the
rule.
They also claimed that the changes to
the methodology for calculating
prevailing wages will increase wages for
covered Federal contractors, which will
add costs for covered contractors. As
explained in Section V.D., the
Department does not have data on the
current wages of DBRA-covered
workers, so it is not possible to
definitively calculate how wages will
change following this proposed rule.
Although the Department performed an
illustrative analysis of example changes
in wage rates, without data on actual
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57717
wages paid this analysis cannot be used
to estimate the total impact of this rule
on wages. Furthermore, if businesses do
see a significant increase in the wage
that they must pay for a classification of
worker because of an increase prevailing
wage rate for that classification (beyond
the rate the business is already paying
its workers in that classification), the
business will be able to account for this
cost by incorporating the increased cost
into their bid or price negotiation and
will be in effect reimbursed by the
Federal government.
Overall, the Department believes that
the data analysis it has provided is
sufficient given the lack of available
data on covered workers.
C. Estimating the Number of Small
Businesses Affected by the Rulemaking
As discussed in section V.B., the
Department identified a range of firms
potentially affected by this rulemaking.
This includes both firms impacted by
the Davis-Bacon Act and firms impacted
by the Related Acts. The more narrowly
defined population includes firms
actively holding Davis-Bacon contracts
and firms affected by the Related Acts.
The broader population includes those
bidding on Davis-Bacon and Related
Acts contracts but without active
contracts, or those considering bidding
in the future. As described in section
V.B., the total number of potentially
affected firms ranges from 152,900 to
184,500. This includes firms that pay at
or above the new wage determination
rates and thus will not be substantially
affected. The Department does not have
data to identify the number of firms that
will experience changes in payroll costs.
To identify the number of small firms,
the Department began with the total
population of firms and identified some
of these firms as small based on several
methods.
• For prime contractors in
USASpending, the Department used the
variable ‘‘Contracting Officer’s
Determination of Business Size.’’ 345
• For subcontractors from
USASpending, the Department
identified those with ‘‘small’’ or ‘‘SBA’’
in the ‘‘Subawardee Business Types’’
variable.346
345 The description of this variable in the
USAspending.gov Data Dictionary is: ‘‘The
Contracting Officer’s determination of whether the
selected contractor meets the small business size
standard for award to a small business for the
NAICS code that is applicable to the contract.’’ The
Data Dictionary is available at: https://
www.usaspending.gov/data-dictionary.
346 The description of this variable in the
USAspending.gov Data Dictionary is: ‘‘Comma
separated list representing sub-contractor business
types pulled from FPDS–NG or the System for
Award Management (SAM).’’
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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations
• For SAM data, the Department used
the small business determination in the
data, in variable ‘‘NAICS Code String.’’
This is flagged separately for each
NAICS reported for the firm; therefore,
the Department classified a company as
a small business if SAM identified it as
a small business in any 6-digit NAICS
beginning with 23.
This results in an estimated number
of potentially affected small businesses
ranging from 101,700 to 127,800 (Table
11).
TABLE 11—RANGE OF NUMBER OF POTENTIALLY AFFECTED SMALL FIRMS
Source
Small firms
Total Count (Davis-Bacon and Related Acts)
Narrow definition ..................................................................................................................................................................................
Broad definition ....................................................................................................................................................................................
101,700
127,800
DBA (Narrow Definition)
Total .....................................................................................................................................................................................................
Prime contractors from USASpending .........................................................................................................................................
Subcontractors from USASpending [a] .........................................................................................................................................
26,700
11,200
15,500
DBA (Broad Definition)
Total .....................................................................................................................................................................................................
SAM ..............................................................................................................................................................................................
Subcontractors from USASpending [a] .........................................................................................................................................
52,800
37,300
15,500
Related Acts
Total .....................................................................................................................................................................................................
75,000
[a] Determination based on inclusion of ‘‘small’’ or ‘‘SBA’’ in the business types.
Several commenters believe the
number of small businesses is
underestimated. ABC and SBA’s Office
of Advocacy assert that the methodology
excludes newly covered firms. The
Department believes most of these firms
are included in the estimate because the
methodology covers all firms bidding, or
considering bidding, on Federal
construction contracts, not just those
currently holding DBA contracts.
However, the Department notes that
there may be limited cases in which
some firms covered by the final rule’s
modification of the ‘‘site of the work’’ to
include certain secondary worksites
may not be classified in the construction
industry and consequently may not be
captured by this methodology. As noted
in the Executive Order 12866 analysis,
the Department believes the extent to
which these firms are not captured is
small, given that the final rule
significantly limits the circumstances
under which such secondary worksites
are covered.347 The Department
estimated in section V.B. that 1.2
million employees are potentially
affected by the rulemaking. That
methodology does not include a
variation to identify only workers
employed by small firms. The
Department therefore assumed that the
share of contracting expenditures
attributed to small businesses is the best
approximation of the share of
employment in small businesses. In
USASpending, expenditures are
available by firm size. In 2019, $55.4
billion was spent on DBA covered
contracts (see section V.B.2.) and of that,
$19.8 billion (36 percent) was awarded
to small business prime contractors.348
For territories, the share of expenditures
allocated to small businesses is 38
percent.
Data on expenditures by firm size are
unavailable for the Related Acts (Table
12). Therefore, the Department assumed
the same percentage applies to such
expenditures as for Davis-Bacon
contracts. In total, an estimated 424,800
workers are employed by potentially
affected small businesses.
TABLE 12—NUMBER OF POTENTIALLY AFFECTED WORKERS IN SMALL COVERED CONTRACTING FIRMS
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Total
workers
(thousands)
Percent of
expenditures
in small
contracting
firms [a]
Workers in
small
businesses
(thousands)
DBA, excl. territories ........................................................................................................
DBA, territories ................................................................................................................
Related Acts [b] ................................................................................................................
297.9
6.1
883.9
35.7
38.2
35.8
106.4
2.3
316.0
Total ..........................................................................................................................
1,188.0
............................
424.8
[a] Source:
USASpending.gov. Percentage of contracting expenditures for covered contracts in small businesses in 2019.
[b] Because data on expenditures by firm size are unavailable for Related Acts. The Department assumed the same percentage applied as for
Davis-Bacon.
347 See
section V.C.4.v and supra note 314.
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348 If subcontractors are more likely to be small
businesses than prime contractors, then this
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methodology may underestimate the number of
workers who are employed by small businesses.
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In several places, the final rule adds
or revises language to clarify existing
policies rather than substantively
changes them. For example, the final
rule adds language to the definitions of
‘‘building or work’’ and ‘‘public
building or public work’’ to clarify that
these definitions can be met even when
the construction activity involves only a
portion of an overall building, structure,
or improvement. Also, the Department
added language clarifying the
applicability of the ‘‘material supplier’’
exemption, the applicability of the
DBRA to truck drivers and flaggers, and
the extent to which demolition activities
are covered by the DBRA. However, the
Department acknowledges that some
contracting agencies may not have been
applying Davis-Bacon in accordance
with those policies. Where this was the
case, the clarity provided by this rule
could lead to expanded application of
the Davis-Bacon labor standards, which
could lead to more small firms being
required to comply with Davis-Bacon
labor standards. Additionally, the
Department’s provision to revise the
definition of ‘‘site of the work’’ to
further encompass certain construction
of significant portions of a building or
work at secondary worksites, which
could clarify and strengthen the scope
of coverage under DBA and would also
lead to more small firms being required
to comply with Davis-Bacon labor
standards. The Department does not
have data to determine how many of
these small firms exist.
D. Compliance Requirements, Including
Reporting and Recordkeeping
Many of the provisions in this rule
only affect how the prevailing wage rate
is calculated. For these provisions there
will be no new compliance
requirements for small firms, as they
will still need to pay the published
prevailing wage. The Department is also
making a number of revisions to existing
recordkeeping requirements to better
effectuate compliance and enforcement,
including revisions to clarify the record
retention period and add requirements
to maintain worker telephone numbers
and email addresses. The Department is
clarifying language used to better
distinguish the records that contractors
must make and maintain (regular
payrolls and other basic records) from
the payroll documents that contractors
must submit weekly to contracting
agencies (certified payrolls). The
Department is also clarifying that
electronic signatures and certified
payroll submission methods may be
used.
E. Calculating the Impact of the Final
Rule on Small Business Firms
The Department considered employer
costs associated with both (a) the change
in determining the prevailing wage
based on a 30 percent threshold instead
of a 50 percent threshold and (b) the
incorporation of using the change in the
ECI to update certain non-collectively
bargained prevailing wage rates. The
Department estimated both regulatory
familiarization costs and
implementation costs associated with
these two provisions. An overview of
these costs is explained here but
additional details can be found in
section V.C. Non-quantified direct
employer costs are explained in section
V.C.4.
The Department acknowledges that if
some wage rates increase due to either
of the provisions listed above, there
could be an increase in payroll costs for
some small firms. Due to data
limitations and uncertainty, the
Department did not quantify payroll
costs (i.e., transfers). The change in the
definition of prevailing wage will only
be applied to wage data received
through surveys finalized after the
effective date of this rule, for geographic
areas and classifications that have not
yet been identified. Both this provision
and the updating of out-of-date rates
will not have any impact if firms are
already paying at or above the new
prevailing wage rate because of labor
market forces. Please see section V.D.
for a more thorough discussion of these
57719
potential payroll costs, including an
illustrative example of the potential
impact of the rule on prevailing wage
rates.
Year 1 direct employer costs for small
businesses are estimated to total $39.3
million. Average annualized costs
across the first 10 years are estimated to
be $7.3 million (using a 7 percent
discount rate). On a per firm basis,
direct employer costs are estimated to
be $224.73 in Year 1. These costs are
somewhat higher than the costs
presented in the NPRM because the
Department increased the time for
regulatory familiarization in response to
comments.
The rule will impose direct costs on
some covered contractors who will
review the regulations to understand
how the prevailing wage setting
methodology will change. However, the
Department believes these regulatory
familiarization costs will be small
because firms are not required to
understand how the prevailing wage
rates are set in order to comply with
DBRA requirements, they are just
required to pay the prevailing wage
rates. The Department included all
small potentially affected firms (127,800
firms). The Department assumed that on
average, 4 hours of a human resources
staff member’s time will be spent
reviewing the rulemaking. This was
increased from 1 hour in the NPRM per
comments.
The cost of this time is the median
loaded wage for a Compensation,
Benefits, and Job Analysis Specialist of
$49.94 per hour.349 Therefore, the
Department has estimated regulatory
familiarization costs to be $25.5 million
($49.94 per hour × 4.0 hour × 127,800
contractors) (Table 13). The Department
has included all regulatory
familiarization costs in Year 1. New
entrants will not incur any additional
regulatory familiarization costs
attributable to this rule. Average
annualized regulatory familiarization
costs over 10 years, using a 7 percent
discount rate, are $3.4 million.
TABLE 13—DIRECT EMPLOYER COSTS TO SMALL BUSINESSES
(2021 Dollars)
Variable
Regulatory
familiarization
costs
Total
Implementation
costs
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Year 1 Costs
Potentially affected firms .................................................................................................
Hours per firm ..................................................................................................................
Loaded wage rate ............................................................................................................
349 This includes the median base wage of $30.83
from the May 2020 OEWS estimates plus benefits
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........................
........................
paid at a rate of 45 percent of the base wage, as
estimated from the BLS’s ECEC data, and overhead
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127,800
4
$49.94
65,200
0.5
$49.94
costs of 17 percent. OEWS data available at: https://
www.bls.gov/oes/current/oes131141.htm.
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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations
TABLE 13—DIRECT EMPLOYER COSTS TO SMALL BUSINESSES—Continued
(2021 Dollars)
Variable
Regulatory
familiarization
costs
Total
Cost ($1,000s) .................................................................................................................
Implementation
costs
$27,157
$25,529
$1,628
$1,628
$0
$1,628
$5,156
$2,025
$3,528
$3,397
$1,628
$1,628
Years 2–10 ($1,000s)
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Annual cost ......................................................................................................................
Average Annualized Costs ($1,000s):
3% discount rate .......................................................................................................
7% discount rate .......................................................................................................
When firms update prevailing wage
rates, they can incur costs associated
with adjusting payrolls, adjusting
contracts, and communicating this
information to employees (if
applicable). This rule will generally
affect the frequency with which
prevailing wage rates are updated
through the anticipated update of old,
outmoded rates to their present value,
and moving forward, to periodically
update rates when that does not occur
through the survey process. Currently,
only a fraction of non-collectively
bargained prevailing wages can be
expected to change each year. Firms
may spend more time than they have in
the past updating payroll systems to
account for new prevailing wage rates
that the firms must pay as a result of
being awarded a DBRA contract that
calls for such new rates. This change is
because the Department will update
older non-collectively bargained rates—
as it currently does with collectively
bargained prevailing rates—to better
represent current wages and benefits
being paid in the construction industry.
In addition, moving forward, WHD
expects to publish wage rates more
frequently than in the past.
The Department does not believe that
there will be additional implementation
costs associated with the proposal to
update the definition of the prevailing
wage (30 percent threshold). This
change will only apply to new surveys,
for which employers would have
already had to update wage rates.
To estimate the size of the
implementation cost associated with the
periodic updates, the Department
assumed that each year a share of
potentially affected firms are already
checking rates due to newly published
surveys (section V.C.2.).350 Multiplying
the remaining 64.1 percent by the
350 15.6 percent update rates due to newly
published survey data and 24 percent of the
remainder update rates due to CBA escalators.
Therefore, 64.1 percent are impacted [(1–0.156) ×
(1–0.24)].
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101,700 small firms holding DBRA
contracts results in 65,200 firms
impacted annually (Table 13). The
change to update current noncollectively bargained rates will have a
one-time implementation cost to firms.
The change to update non-collectively
bargained rates moving forward will
result in ongoing implementation costs.
Each time a non-collectively bargained
weighted average rate is updated on a
wage determination applicable to a
newly awarded DBRA contract, firms
will incur some costs to adjust payroll
(if applicable) and communicate the
new rates to employees. The
Department assumed that this provision
would impact all small firms currently
holding DBRA contracts (65,200 firms).
For the initial increase, the Department
estimated this will take approximately
0.5 hours for firms to adjust their rates.
As with previous costs, implementation
time costs are based on a loaded hourly
wage of $49.94. Therefore, total Year 1
implementation costs were estimated to
equal $1.6 million ($49.94 × 0.5 hour ×
65,200 firms). The average annualized
implementation cost over 10 years,
using a 7 percent discount rate, is $1.6
million.
To determine direct employer costs
on a per firm basis, the Department
considers only those firms who are fully
affected. These are firms who actively
hold DBRA contracts, and who have
new wage rates to incorporate into their
bids and, as needed, into their payroll
systems. For these firms, the Year 1
costs are estimated as four and a half
hours of time (4 hour for regulatory
familiarization and 0.5 hours for
implementation) valued at $49.94 per
hour. This totals $224.73 in Year 1 costs
per firm.
Several commenters believed the
costs presented here are too low. Some
commenters noted that regulatory
familiarization time will be much longer
than the one hour estimated. The
Department agrees and has
consequently increased this time to 4
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hours. Many commenters focus on
implementation and administration
costs for newly covered firms. As noted
above, the Department only quantified
implementation costs for impacts of the
provision to update out-of-date SU rates
using the ECI. Costs associated with
provisions that clarify coverage are not
quantified because they are merely
clarifications, and thus are not an
expansion of scope. Additionally, data
are not available to estimate the number
of newly covered firms.
Commenters asserted that compliance
costs for newly covered small firms will
be prohibitive. MBI wrote that ‘‘[m]any
small and disadvantaged businesses in
the modular sector will not have the
budget to cover the costs of DBA
prevailing wages.’’ ABC similarly noted
that this rule will discourage small
businesses participation. They also
presented findings from a survey of
members demonstrating that many
small businesses believe the DBA
increases administrative costs and labor
costs. The Department disagrees that
costs are prohibitive and points to the
many contractors, both large and small,
who already work on DBRA covered
projects. Additionally, the added clarity
from this rule may increase small
business participation.
Commenters noted a range of costs for
newly covered small entities. These
commenters asserted that small
businesses do not employ staff familiar
with regulatory or legal affairs, and
consequently this rule will entail hiring
outside consultants. The Department
provides compliance assistance
resources to assist small businesses
comply but acknowledges that
sometimes businesses will want to
engage their own counsel. The SBA
noted that any potential scope
expansion could also deter small
businesses from participating due to the
associated risks, such as citations and
back wages. They also stated that newly
covered small businesses will incur
paperwork costs, such as submitting
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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations
certified payroll and evaluating
prevailing wages, and administrative
burdens. As discussed above, the
Department believes that the number of
newly covered entities will be small.
The final rule does not significantly
expand the scope of Davis-Bacon
coverage, as most of the coverage-related
regulatory provisions primarily
represent clarifications of existing
coverage principles, not expansions of
coverage.
Furthermore, the Department does not
believe that this rule would deter small
businesses from participating. For
example, a study that looked at the
highway construction industry found no
difference in bids between Federal
projects with Davis-Bacon prevailing
wage determinations and less-regulated
state projects.351 Also, as discussed
above, the Department estimated that
101,700 small firms currently hold
Davis-Bacon contracts, representing 67
percent of all firms holding Davis-Bacon
contracts. Given the prevalence of small
businesses in performing DBRA-covered
construction, it seems reasonable to
conclude that existing Davis-Bacon
requirements do not impose a
substantial barrier to entry for small
businesses. To the extent that any firms
would see a significant increase in
wages paid to covered contract workers,
the firms could incorporate any
increased labor costs into their bids or
contract price negotiations with the
contacting agency.
F. Alternatives to the Final Rule and
Steps Taken To Minimize Significant
Economic Impact on Small Entities
The RFA directs agencies to assess the
impacts that various regulatory
alternatives would have on small
entities and to consider ways to
minimize those impacts. Regarding the
alternatives considered by the
Department in the NPRM, the NFIB
commented that the Department should
‘‘tailor its Davis-Bacon regulations to
meet the needs of small and
independent businesses.’’ SBA’s Office
of Advocacy also suggested the
Department develop less-costly
alternatives for small businesses. ABC
noted that the Department should
discuss the impact of the proposed rule
and describe the steps the agency took
to minimize the significant economic
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date
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impact of the rule on small entities.
Accordingly, the Department has
revised its discussion of alternatives,
but believes the approach taken in this
final rule is the best way to provide
greater clarity in the DBRA regulations
and enhance their usefulness in the
modern economy.
One potential alternative to this rule
would be to relax the requirements
regarding recordkeeping. Currently the
regulations require contractors and
subcontractors to keep payrolls and
basic records (including the name,
address, and social security number of
each worker, their correct classification,
hourly rates of wages paid, daily and
weekly number of hours worked,
deductions made and actual wages paid)
and records related to apprentices. It
would be within the Department’s
discretion to not require some of these
records, but the Department has decided
that continuing to require these
documents would promote substantially
more effective compliance and
enforcement. Furthermore, it is likely
that many contractors already keep
these records of their workers, so the
requirement does not represent too large
of a burden.
Another alternative would be for the
Department not to finalize the proposed
rule, which would therefore result in no
rule familiarization or implementation
costs to small businesses. However, as
discussed throughout the rule, the
Department believes that the changes in
this regulation will lead to improved
government services, increased
productivity, and reduced turnover.
Clarifications made in this rule will also
help businesses comply with the DavisBacon regulations and improve
enforcement efforts for the Department.
The Department notes that in other
places in this final rule, the Department
has chosen alternatives that minimize
the impact of the rule on small
businesses. For example, in their
comments on the proposed rule, small
businesses stated that the potential
administrative costs associated with the
proposed expansion to the site of the
work would deter them from
participating, because tracking time and
wage rates at facilities engaged in work
on multiple projects at once would be
infeasible. In the final rule, the
Department has chosen to narrow the
State
57721
scope of coverage at secondary
construction sites to locations where
specific portions of a building or work
are constructed and were either
established specifically for contract
performance or are dedicated
exclusively or nearly so to the contract
or project. This narrower scope will
help alleviate the cost concerns of small
businesses.
VII. Unfunded Mandates Reform Act of
1995
The Unfunded Mandates Reform Act
of 1995, 2 U.S.C. 1532, requires agencies
to prepare a written statement, which
includes an assessment of anticipated
costs and benefits, before proposing any
unfunded Federal mandate that may
result in excess of $100 million
(adjusted annually for inflation) in
expenditures in any one year by State,
local, and Tribal governments in the
aggregate, or by the private sector. This
rulemaking is not expected exceed that
threshold. See section V. for an
assessment of anticipated costs,
transfers, and benefits.
VIII. Executive Order 13132,
Federalism
The Department has (1) reviewed this
rule in accordance with Executive Order
13132 regarding federalism and (2)
determined that it does not have
federalism implications. The rule would
not have substantial direct effects on the
States, on the relationship between the
National Government and the States, or
on the distribution of power and
responsibilities among the various
levels of government.
IX. Executive Order 13175, Indian
Tribal Governments
This rule would not have Tribal
implications under Executive Order
13175 that would require a Tribal
summary impact statement. The rule
would not have substantial direct effects
on one or more Indian Tribes, on the
relationship between the Federal
Government and Indian Tribes, or on
the distribution of power and
responsibilities between the Federal
Government and Indian Tribes.
Appendix A: Surveys Included in the
Prevailing Wage Demonstration
Metro/rural
Construction type(s)
Surveys Included
2018 ............................................
12/25/2020
351 Duncan, K. ‘‘Do Federal Davis-Bacon and
Disadvantaged Business Enterprise Regulations
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Utah ............................................
Metro ..........................................
Affect Aggressive Bidding? Evidence from Highway
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Heavy.
Resurfacing Procurement Actions,’’ Journal of
Public Procurement 15(3), 291–316. 2015.
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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations
Publication
date
Survey year
2017
2017
2017
2017
2017
2017
2016
2016
2016
2016
2016
2015
2016
2015
2015
2015
2015
2014
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
12/14/2018
12/25/2020
12/25/2020
2/7/2020
2/7/2020
1/24/2020
12/14/2018
12/14/2018
9/29/2017
2/7/2020
12/8/2017
10/6/2017
2/7/2020
4/21/2017
9/28/2018
7/28/2017
9/29/2017
12/16/2016
State
Metro/rural
Nevada .......................................
New York ...................................
North Dakota ..............................
Oklahoma ...................................
Pennsylvania ..............................
Vermont ......................................
Connecticut ................................
New Mexico ...............................
New York ...................................
North Carolina ............................
South Carolina ...........................
Alabama .....................................
Alabama .....................................
Arkansas ....................................
Minnesota ...................................
Mississippi ..................................
New Hampshire .........................
Florida ........................................
Both ............................................
Rural ...........................................
Both ............................................
Metro ..........................................
East Metro ..................................
Both ............................................
Metro b ........................................
Metro ..........................................
4 metro counties ........................
Both ............................................
Metro c ........................................
Both d ..........................................
Both ............................................
Both ............................................
Both ............................................
Both ............................................
Both ............................................
Metro c ........................................
Construction type(s)
Highway.
Building.
Heavy.
Residential.
Residential.
Heavy, highway.a
Building.
Building and heavy.
Building.
Residential.
Residential.
Building and heavy.
Highway.
Building and heavy.
Building.
Building and heavy.
Building and heavy.
Building.
a Building
component not sufficient.
one rural county so excluded.
c Rural component of survey was not sufficient.
d Excludes heavy rural which were not sufficient.
b Only
This includes most surveys with published
rates that began in 2015 or later. They
include all four construction types, metro
and rural counties, and a variety of
geographic regions. Two surveys were
excluded because they did not meet
sufficiency standards (2016 Alaska
residential and 2015 Maryland highway). A
few surveys were excluded due to anomalies
that could not be reconciled. These include:
• 2016 Kansas highway
• 2016 Virginia highway
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Appendix B: Current DOL Wage
Determination Protocols
Sufficiency requirement: For a
classification to have sufficient responses
there generally must be data on at least six
workers from at least three contractors.
Additionally, if data is received for either
exactly six workers or exactly three
contractors, then no more than 60 percent of
the total can be employed by any one
contractor. Exceptions to these criteria are
allowed under limited circumstances.
Examples include surveys conducted in rural
counties, or residential and heavy surveys
with limited construction activity, or for
highly specialized classifications. In these
circumstances, the rule can be three workers
and two contractors.
Aggregation: If the classification is not
sufficient at the county level, data are
aggregated to the surrounding-counties group
level, an intermediate grouping level, and a
Statewide level (metro or rural), respectively.
For building and residential construction, at
each level of aggregation (as well as at the
county level) WHD first attempts to calculate
a prevailing rate using data only for projects
not subject to Davis-Bacon labor standards; if
such data are insufficient to calculate a
prevailing rate, then data for projects subject
to Davis-Bacon labor standards is also
included.
Majority rate: If more than 50 percent of
workers are paid the exact same hourly rate,
then that rate prevails. If not, the Department
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calculates a weighted average. If a majority of
workers are not paid the same wage rate, but
all of the data reflects the payment of
collectively bargained rates, then a union
weighted average rate is calculated.
Prevailing fringe benefits: Before a fringe
benefit is applicable, it must prevail. The first
step is to determine if more than 50 percent
of the workers in the reported classification
receive a fringe benefit. If more than 50
percent of the workers in a single
classification are paid any fringe benefits,
then fringe benefits prevail. If fringe benefits
prevail in a classification and:
• more than 50 percent of the workers
receiving fringe benefits are paid the same
total fringe benefit rate, then that total fringe
benefit rate prevails.
• more than 50 percent of the workers
receiving benefits are not paid at the same
total rate, then the average rate of fringe
benefits weighted by the number of workers
who received fringe benefits prevails. If more
than 50 percent are not paid the same total
rate, but 100 percent of the data are union,
then a union weighted average is calculated.
However, if 50 percent or less of the
workers in a single classification are paid a
fringe benefit, then fringe benefits will not
prevail, and a fringe benefit rate of $0.00 will
be published for that classification.
Penalties, Reporting and recordkeeping
requirements, Wages.
29 CFR Part 5
Administrative practice and
procedure, Construction industry,
Government contracts, Government
procurement, Law enforcement,
Penalties, Reporting and recordkeeping
requirements, Wages.
For reasons stated in the preamble,
the Wage and Hour Division,
Department of Labor, amends 29 CFR
subtitle A as follows:
PART 1—PROCEDURES FOR
PREDETERMINATION OF WAGE
RATES
1. The authority citation for part 1 is
revised to read as follows:
■
Authority: 5 U.S.C. 301; Reorganization
Plan No. 14 of 1950, 5 U.S.C. appendix; 40
U.S.C. 3141 et seq.; 40 U.S.C. 3145; 40 U.S.C.
3148; Secretary of Labor’s Order 01–2014, 79
FR 77527; and the laws referenced by 29 CFR
5.1.
List of Subjects
2. Amend § 1.1 by revising paragraphs
(a) and (b) to read as follows:
29 CFR Part 1
§ 1.1
Administrative practice and
procedure, Construction industry,
Government contracts, Government
procurement, Law enforcement,
Reporting and recordkeeping
requirements, Wages.
(a) The procedural rules in this part
apply under the Davis-Bacon Act (46
Stat. 1494, as amended; 40 U.S.C. 3141
et seq.), and any laws now existing or
subsequently enacted, which require the
payment of minimum wages, including
fringe benefits, to laborers and
mechanics engaged in construction
activity under contracts entered into or
financed by or with the assistance of
agencies of the United States or the
District of Columbia, based on
29 CFR Part 3
Administrative practice and
procedure, Construction industry,
Government contracts, Government
procurement, Law enforcement,
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■
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determinations by the Secretary of Labor
of the wage rates and fringe benefits
prevailing for the corresponding classes
of laborers and mechanics employed on
projects similar to the contract work in
the local areas where such work is to be
performed.
(1) A listing of laws requiring the
payment of wages at rates
predetermined by the Secretary of Labor
under the Davis-Bacon Act can be found
at www.dol.gov/agencies/whd/
government-contracts or its successor
website.
(2) Functions of the Secretary of Labor
under these statutes and under
Reorganization Plan No. 14 of 1950 (15
FR 3176, effective May 24, 1950,
reprinted as amended in 5 U.S.C. app.
1 and in 64 Stat. 1267), except for
functions assigned to the Office of
Administrative Law Judges (see part 6 of
this subtitle) and appellate functions
assigned to the Administrative Review
Board (see part 7 of this subtitle) or
reserved by the Secretary of Labor (see
Secretary’s Order 01–2020 (Feb. 21,
2020)), have been delegated to the
Administrator of the Wage and Hour
Division and authorized representatives.
(b) The regulations in this part set
forth the procedures for making and
applying such determinations of
prevailing wage rates and fringe benefits
pursuant to the Davis-Bacon Act and
any laws now existing or subsequently
enacted providing for determinations of
such wages by the Secretary of Labor in
accordance with the provisions of the
Davis-Bacon Act.
*
*
*
*
*
■ 3. Revise § 1.2 to read as follows:
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§ 1.2
Definitions.
Administrator. The term
‘‘Administrator’’ means the
Administrator of the Wage and Hour
Division, U.S. Department of Labor, or
authorized representative.
Agency. The term ‘‘agency’’ means
any Federal, State, or local agency or
instrumentality, or other similar entity,
that enters into a contract or provides
assistance through loan, grant, loan
guarantee or insurance, or otherwise, to
a project subject to the Davis-Bacon
labor standards, as defined in § 5.2 of
this subtitle.
(1) Federal agency. The term ‘‘Federal
agency’’ means an agency or
instrumentality of the United States or
the District of Columbia, as defined in
this section, that enters into a contract
or provides assistance through loan,
grant, loan guarantee or insurance, or
otherwise, to a project subject to the
Davis-Bacon labor standards.
(2) [Reserved]
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Area. The term ‘‘area’’ means the city,
town, village, county or other civil
subdivision of the State in which the
work is to be performed.
(1) For highway projects, the area may
be State department of transportation
highway districts or other similar State
geographic subdivisions.
(2) Where a project requires work in
multiple counties, the area may include
all counties in which the work will be
performed.
Department of Labor-approved
website for wage determinations (DOLapproved website). The term
‘‘Department of Labor-approved website
for wage determinations’’ means the
government website for both DavisBacon Act and Service Contract Act
wage determinations. In addition, the
DOL-approved website provides
compliance assistance information. The
term will also apply to any other
website or electronic means that the
Department of Labor may approve for
these purposes.
Employed. Every person performing
the duties of a laborer or mechanic in
the construction, prosecution,
completion, or repair of a public
building or public work, or building or
work financed in whole or in part by
assistance from the United States
through loan, grant, loan guarantee or
insurance, or otherwise, is employed
regardless of any contractual
relationship alleged to exist between the
contractor and such person.
Prevailing wage. The term ‘‘prevailing
wage’’ means:
(1) The wage paid to the majority
(more than 50 percent) of the laborers or
mechanics in the classification on
similar projects in the area during the
period in question;
(2) If the same wage is not paid to a
majority of those employed in the
classification, the prevailing wage will
be the wage paid to the greatest number,
provided that such greatest number
constitutes at least 30 percent of those
employed; or
(3) If no wage rate is paid to 30
percent or more of those so employed,
the prevailing wage will be the average
of the wages paid to those employed in
the classification, weighted by the total
employed in the classification.
Type of construction (or construction
type). The term ‘‘type of construction (or
construction type)’’ means the general
category of construction, as established
by the Administrator, for the
publication of general wage
determinations. Types of construction
may include, but are not limited to,
building, residential, heavy, and
highway. As used in this part, the terms
‘‘type of construction’’ and
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‘‘construction type’’ are synonymous
and interchangeable.
United States or the District of
Columbia. The term ‘‘United States or
the District of Columbia’’ means the
United States, the District of Columbia,
and all executive departments,
independent establishments,
administrative agencies, and
instrumentalities of the United States
and of the District of Columbia, and any
corporation for which all or
substantially all of the stock of which is
beneficially owned by the United States,
by the District of Columbia, or any of
the foregoing departments,
establishments, agencies, and
instrumentalities.
■ 4. Revise § 1.3 to read as follows:
§ 1.3 Obtaining and compiling wage rate
information.
For the purpose of making wage
determinations, the Administrator will
conduct a continuing program for the
obtaining and compiling of wage rate
information. In determining the
prevailing wages at the time of issuance
of a wage determination, the
Administrator will be guided by the
definition of prevailing wage in § 1.2
and will consider the types of
information listed in this section.
(a) The Administrator will encourage
the voluntary submission of wage rate
data by contractors, contractors’
associations, labor organizations, public
officials and other interested parties,
reflecting wage rates paid to laborers
and mechanics on various types of
construction in the area. The
Administrator may also obtain data from
agencies on wage rates paid on
construction projects under their
jurisdiction. The information submitted
should reflect the wage rates paid to
workers employed in a particular
classification in an area, the type or
types of construction on which such
rate or rates are paid, and whether or
not such wage rates were paid on
Federal or federally assisted projects
subject to Davis-Bacon prevailing wage
requirements.
(b) The following types of information
may be considered in making wage rate
determinations:
(1) Statements showing wage rates
paid on projects, including the names
and addresses of contractors, including
subcontractors; the locations,
approximate costs, dates of construction
and types of projects, as well as whether
or not the projects are Federal or
federally assisted projects subject to
Davis-Bacon prevailing wage
requirements; and the number of
workers employed in each classification
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on each project and the respective wage
rates paid such workers.
(2) Signed collective bargaining
agreements, for which the Administrator
may request that the parties to such
agreements submit statements certifying
to their scope and application.
(3) Wage rates determined for public
construction by State and local officials
pursuant to State and local prevailing
wage legislation.
(4) Wage rate data submitted to the
Department of Labor by contracting
agencies pursuant to § 5.5(a)(1)(iii) of
this subtitle.
(5) For Federal-aid highway projects
under 23 U.S.C. 113, information
obtained from the highway
department(s) of the State(s) in which
the project is to be performed. For such
projects, the Administrator must consult
the relevant State highway department
and give due regard to the information
thus obtained.
(6) Any other information pertinent to
the determination of prevailing wage
rates.
(c) The Administrator may initially
obtain or supplement such information
obtained on a voluntary basis by such
means, including the holding of
hearings, and from any sources
determined to be necessary. All
information of the types described in
paragraph (b) of this section, pertinent
to the determination of the wages
prevailing at the time of issuance of the
wage determination, will be evaluated
in light of the definition of prevailing
wage in § 1.2.
(d) In compiling wage rate data for
building and residential wage
determinations, the Administrator will
not use data from Federal or federally
assisted projects subject to Davis-Bacon
prevailing wage requirements unless it
is determined that there is insufficient
wage data to determine the prevailing
wages in the absence of such data. Data
from Federal or federally assisted
projects will be used in compiling wage
rate data for heavy and highway wage
determinations.
(e) In determining the prevailing
wage, the Administrator may treat
variable wage rates paid by a contractor
or contractors to workers within the
same classification as the same wage
where the pay rates are functionally
equivalent, as explained by one or more
collective bargaining agreements or
written policies otherwise maintained
by a contractor or contractors.
(f) If the Administrator determines
that there is insufficient wage survey
data to determine the prevailing wage
for a classification for which
conformance requests are regularly
submitted pursuant to § 5.5(a)(1)(iii) of
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this subtitle, the Administrator may list
the classification and wage and fringe
benefit rates for the classification on the
wage determination, provided that:
(1) The work performed by the
classification is not performed by a
classification in the wage determination;
(2) The classification is used in the
area by the construction industry; and
(3) The wage rate for the classification
bears a reasonable relationship to the
wage rates contained in the wage
determination.
(g) Under the circumstances described
in paragraph (h) of this section, the
Administrator may make a wage
determination by adopting, with or
without modification, one or more
prevailing wage rates determined for
public construction by State and/or
local officials. Provided that the
conditions in paragraph (h) are met, the
Administrator may do so even if the
methods and criteria used by State or
local officials differ in some respects
from those that the Administrator would
otherwise use under the Davis-Bacon
Act and the regulations in this part.
Such differences may include, but are
not limited to, a definition of prevailing
wage under a State or local prevailing
wage law or regulation that differs from
the definition in § 1.2, a geographic area
or scope that differs from the standards
in § 1.7, and/or the restrictions on data
use in paragraph (d) of this section.
(h) The Administrator may adopt a
State or local wage rate as described in
paragraph (g) of this section if the
Administrator, after reviewing the rate
and the processes used to derive the
rate, determines that:
(1) The State or local government sets
wage rates, and collects relevant data,
using a survey or other process that is
open to full participation by all
interested parties;
(2) The wage rate reflects both a basic
hourly rate of pay as well as any
prevailing fringe benefits, each of which
can be calculated separately;
(3) The State or local government
classifies laborers and mechanics in a
manner that is recognized within the
field of construction; and
(4) The State or local government’s
criteria for setting prevailing wage rates
are substantially similar to those the
Administrator uses in making wage
determinations under this part. This
determination will be based on the
totality of the circumstances, including,
but not limited to, the State or local
government’s definition of prevailing
wage; the types of fringe benefits it
accepts; the information it solicits from
interested parties; its classification of
construction projects, laborers, and
mechanics; and its method for
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determining the appropriate geographic
area(s).
(i) In order to adopt wage rates of a
State or local government entity
pursuant to paragraphs (g) and (h) of
this section, the Administrator must
obtain the wage rates and any relevant
supporting documentation and data
from the State or local government
entity. Such information may be
submitted via email to
dba.statelocalwagerates@dol.gov, via
mail to U.S. Department of Labor, Wage
and Hour Division, Branch of Wage
Surveys, 200 Constitution Avenue NW,
Washington, DC 20210, or through other
means directed by the Administrator.
(j) Nothing in paragraphs (g), (h), and
(i) of this section precludes the
Administrator from otherwise
considering State or local prevailing
wage rates, consistent with paragraph
(b)(3) of this section, or from giving due
regard to information obtained from
State highway departments, consistent
with paragraph (b)(4) of this section, as
part of the Administrator’s process of
making prevailing wage determinations
under this part.
■
5. Revise § 1.4 to read as follows:
§ 1.4 Report of agency construction
programs.
On an annual basis, each Federal
agency using wage determinations
under the Davis-Bacon Act or any of the
laws referenced by § 5.1 of this subtitle,
must furnish the Administrator with a
report that contains a general outline of
its proposed construction programs for
the upcoming 3 fiscal years based on
information in the Federal agency’s
possession at the time it furnishes its
report. This report must include a list of
proposed projects (including those for
which options to extend the contract
term of an existing construction contract
are expected during the period covered
by the report); the estimated start date
of construction; the anticipated type or
types of construction; the estimated cost
of construction; the location or locations
of construction; and any other projectspecific information that the
Administrator requests. The report must
also include notification of any
significant changes to previously
reported construction programs, such as
the delay or cancellation of previously
reported projects. Reports must be
submitted no later than April 10 of each
year by email to DavisBaconFedPlan@
dol.gov, and must include the name,
telephone number, and email address of
the official responsible for coordinating
the submission.
■
6. Revise § 1.5 to read as follows:
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§ 1.5 Publication of general wage
determinations and procedure for
requesting project wage determinations.
(a) General wage determinations. A
‘‘general wage determination’’ contains,
among other information, a list of wage
and fringe benefit rates determined to be
prevailing for various classifications of
laborers or mechanics for specified
type(s) of construction in a given area.
The Department of Labor publishes
‘‘general wage determinations’’ under
the Davis-Bacon Act on the DOLapproved website.
(b) Project wage determinations. (1) A
‘‘project wage determination’’ is specific
to a particular project. An agency may
request a ‘‘project wage determination’’
for an individual project under any of
the following circumstances:
(i) The project involves work in more
than one county and will employ
workers who may work in more than
one county;
(ii) There is no general wage
determination in effect for the relevant
area and type(s) of construction for an
upcoming project, or
(iii) All or virtually all of the work on
a contract will be performed by a
classification that is not listed in the
general wage determination that would
otherwise apply, and contract award (or
bid opening, in contracts entered into
using sealed bidding procedures) has
not yet taken place.
(2) To request a project wage
determination, the agency must submit
Standard Form (SF) 308, Request for
Wage Determination and Response to
Request, to the Department of Labor,
either by mailing the form to U.S.
Department of Labor, Wage and Hour
Division, Branch of Construction Wage
Determinations, Washington, DC 20210,
or by submitting the form through other
means directed by the Administrator.
(3) In completing Form SF–308, the
agency must include the following
information:
(i) A sufficiently detailed description
of the work to indicate the type(s) of
construction involved, as well as any
additional description or separate
attachment, if necessary, for
identification of the type(s) of work to
be performed. If the project involves
multiple types of construction, the
requesting agency must attach
information indicating the expected cost
breakdown by type of construction.
(ii) The location (city, county, state,
zip code) or locations in which the
proposed project is located.
(iii) The classifications needed for the
project. The agency must identify only
those classifications that will be needed
in the performance of the work.
Inserting a note such as ‘‘entire
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schedule’’ or ‘‘all applicable
classifications’’ is not sufficient.
Additional classifications needed that
are not on the form may be typed in the
blank spaces or on a separate list and
attached to the form.
(iv) Any other information requested
in Form SF–308.
(4) A request for a project wage
determination must be accompanied by
any pertinent wage information that
may be available. When the requesting
agency is a State highway department
under the Federal-Aid Highway Acts as
codified in 23 U.S.C. 113, such agency
must also include its recommendations
as to the wages which are prevailing for
each classification of laborers and
mechanics on similar construction in
the area.
(5) The time required for processing
requests for project wage determinations
varies according to the facts and
circumstances in each case. An agency
should anticipate that such processing
by the Department of Labor will take at
least 30 days.
■ 7. Revise § 1.6 to read as follows:
§ 1.6 Use and effectiveness of wage
determinations.
(a) Application, validity, and
expiration of wage determinations—(1)
Application of incorporated wage
determinations. Once a wage
determination is incorporated into a
contract (or once construction has
started when there is no contract
award), the wage determination
generally applies for the duration of the
contract or project, except as specified
in this section.
(2) General wage determinations. (i)
‘‘General wage determinations’’
published on the DOL-approved website
contain no expiration date. Once issued,
a general wage determination remains
valid until revised, superseded, or
canceled.
(ii) If there is a current general wage
determination applicable to a project, an
agency may use it without notifying the
Administrator, Provided that questions
concerning its use are referred to the
Administrator in accordance with
paragraph (b) of this section.
(iii) When a wage determination is
revised, superseded, or canceled, it
becomes inactive. Inactive wage
determinations may be accessed on the
DOL-approved website for informational
purposes only. Contracting officers may
not use such an inactive wage
determination in a contract action
unless the inactive wage determination
is the appropriate wage determination
that must be incorporated to give
retroactive effect to the post-award
incorporation of a contract clause under
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§ 5.6(a)(1)(ii) of this subtitle or a wage
determination under paragraph (f) of
this section. Under such circumstances,
the agency must provide prior notice to
the Administrator of its intent to
incorporate an inactive wage
determination and may not incorporate
it if the Administrator instructs
otherwise.
(3) Project wage determinations. (i)
‘‘Project wage determinations’’ initially
issued will be effective for 180 calendar
days from the date of such
determinations. If a project wage
determination is not incorporated into a
contract (or, if there is no contract
award, if construction has not started) in
the period of its effectiveness it is void.
(ii) Accordingly, if it appears that a
project wage determination may expire
between bid opening and contract
award (or between initial endorsement
under the National Housing Act or the
execution of an agreement to enter into
a housing assistance payments contract
under section 8 of the U.S. Housing Act
of 1937, and the start of construction)
the agency must request a new project
wage determination sufficiently in
advance of the bid opening to assure
receipt prior thereto.
(iii) However, when due to
unavoidable circumstances a project
wage determination expires before
award but after bid opening (or before
the start of construction, but after initial
endorsement under the National
Housing Act, or before the start of
construction but after the execution of
an agreement to enter into a housing
assistance payments contract under
section 8 of the U.S. Housing Act of
1937), the head of the agency or the
agency head’s designee may request the
Administrator to extend the expiration
date of the project wage determination
in the bid specifications instead of
issuing a new project wage
determination. Such request must be
supported by a written finding, which
must include a brief statement of factual
support, that the extension of the
expiration date of the project wage
determination is necessary and proper
in the public interest to prevent
injustice or undue hardship or to avoid
serious impairment in the conduct of
Government business. The
Administrator will either grant or deny
the request for an extension after
consideration of all of the
circumstances, including an
examination to determine if the
previously issued rates remain
prevailing. If the request for extension is
denied, the Administrator will proceed
to issue a new wage determination for
the project.
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(b) Identifying and incorporating
appropriate wage determinations. (1)
Contracting agencies are responsible for
making the initial determination of the
appropriate wage determination(s) for a
project and for ensuring that the
appropriate wage determination(s) are
incorporated in bid solicitations and
contract specifications and that
inapplicable wage determinations are
not incorporated. When a contract
involves construction in more than one
area, and no multi-county project wage
determination has been obtained, the
solicitation and contract must
incorporate the applicable wage
determination for each area. When a
contract involves more than one type of
construction, the solicitation and
contract must incorporate the applicable
wage determination for each type of
construction involved that is anticipated
to be substantial. The contracting
agency is responsible for designating the
specific work to which each
incorporated wage determination
applies.
(2) The contractor or subcontractor
has an affirmative obligation to ensure
that its pay practices are in compliance
with the Davis-Bacon Act labor
standards.
(3) Any question regarding
application of wage rate schedules or
wage determinations must be referred to
the Administrator for resolution. The
Administrator should consider any
relevant factors when resolving such
questions, including, but not limited to,
relevant area practice information.
(c) Revisions to wage determinations.
(1) General and project wage
determinations may be revised from
time to time to keep them current. A
revised wage determination replaces the
previous wage determination.
‘‘Revisions,’’ as used in this section,
refers both to modifications of some or
all of the rates in a wage determination,
such as periodic updates to reflect
current rates, and to instances where a
wage determination is re-issued
entirely, such as after a new wage
survey is conducted. Revisions include
adjustments to non-collectively
bargained prevailing wage and fringe
benefit rates on general wage
determinations, with the adjustments
based on U.S. Bureau of Labor Statistics
Employment Cost Index (ECI) data or its
successor data. Such rates may be
adjusted based on ECI data no more
frequently than once every 3 years, and
no sooner than 3 years after the date of
the rate’s publication. Such periodic
revisions to wage determinations are
distinguished from the circumstances
described in paragraphs (d), (e), and (f)
of this section.
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(2)(i) Whether a revised wage
determination is effective with respect
to a particular contract or project
generally depends on the date on which
the revised wage determination is
issued. The date on which a revised
wage determination is ‘‘issued,’’ as used
in this section, means the date that a
revised general wage determination is
published on the DOL-approved website
or the date that the contracting agency
receives actual written notice of a
revised project wage determination.
(ii) If a revised wage determination is
issued before contract award (or the
start of construction when there is no
award), it is effective with respect to the
project, except as follows:
(A) For contracts entered into
pursuant to sealed bidding procedures,
a revised wage determination issued at
least 10 calendar days before the
opening of bids is effective with respect
to the solicitation and contract. If a
revised wage determination is issued
less than 10 calendar days before the
opening of bids, it is effective with
respect to the solicitation and contract
unless the agency finds that there is not
a reasonable time still available before
bid opening to notify bidders of the
revision and a report of the finding is
inserted in the contract file. A copy of
such report must be made available to
the Administrator upon request. No
such report is required if the revision is
issued after bid opening.
(B) In the case of projects assisted
under the National Housing Act, a
revised wage determination is effective
with respect to the project if it is issued
prior to the beginning of construction or
the date the mortgage is initially
endorsed, whichever occurs first.
(C) In the case of projects to receive
housing assistance payments under
section 8 of the U.S. Housing Act of
1937, a revised wage determination is
effective with respect to the project if it
is issued prior to the beginning of
construction or the date the agreement
to enter into a housing assistance
payments contract is signed, whichever
occurs first.
(D) If, in the case of a contract entered
into pursuant to sealed bidding
procedures under paragraph (c)(2)(ii)(A)
of this section the contract has not been
awarded within 90 days after bid
opening, or if, in the case of projects
assisted under the National Housing Act
or receiving housing assistance
payments section 8 of the U.S. Housing
Act of 1937 under paragraph (c)(2)(ii)(B)
or (C) of this section, construction has
not begun within 90 days after initial
endorsement or the signing of the
agreement to enter into a housing
assistance payments contract, any
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revised general wage determination
issued prior to award of the contract or
the beginning of construction, as
appropriate, is effective with respect to
that contract unless the head of the
agency or the agency head’s designee
requests and obtains an extension of the
90-day period from the Administrator.
Such request must be supported by a
written finding, which includes a brief
statement of the factual support, that the
extension is necessary and proper in the
public interest to prevent injustice or
undue hardship or to avoid serious
impairment in the conduct of
Government business. The
Administrator will either grant or deny
the request for an extension after
consideration of all the circumstances.
(iii) If a revised wage determination is
issued after contract award (or after the
beginning of construction where there is
no contract award), it is not effective
with respect to that project, except
under the following circumstances:
(A) Where a contract or order is
changed to include additional,
substantial construction, alteration, and/
or repair work not within the scope of
work of the original contract or order, or
to require the contractor to perform
work for an additional time period not
originally obligated, including where an
option to extend the term of a contract
is exercised, the contracting agency
must include the most recent revision of
any wage determination(s) at the time
the contract is changed or the option is
exercised. This does not apply where
the contractor is simply given additional
time to complete its original
commitment or where the additional
construction, alteration, and/or repair
work in the modification is merely
incidental.
(B) Some contracts call for
construction, alteration, and/or repair
work over a period of time that is not
tied to the completion of any particular
project. Examples of such contracts
include, but are not limited to,
indefinite-delivery-indefinite-quantity
construction contracts to perform any
necessary repairs to a Federal facility
over a period of time; long-term
operations-and-maintenance contracts
that may include construction,
alteration, and/or repair work covered
by Davis-Bacon labor standards; or
schedule contracts or blanket purchase
agreements in which a contractor agrees
to provide certain construction work at
agreed-upon prices to Federal agencies.
These types of contracts often involve a
general commitment to perform
necessary construction as the need
arises, but do not necessarily specify the
exact construction to be performed. For
the types of contracts described here,
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the contracting agency must incorporate
into the contract the most recent
revision(s) of any applicable wage
determination(s) on each anniversary
date of the contract’s award (or each
anniversary date of the beginning of
construction when there is no award)
unless the agency has sought and
received prior written approval from the
Department for an alternative process.
The Department may grant such an
exception when it is necessary and
proper in the public interest or to
prevent injustice and undue hardship.
Such revised wage determination(s) will
apply to any construction work that
begins or is obligated under such a
contract during the 12 months following
that anniversary date until such
construction work is completed, even if
the completion of that work extends
beyond the twelve-month period. Where
such contracts have task orders,
purchase orders, or other similar
contract instruments awarded under the
master contract, the master contract
must specify that the applicable
updated wage determination must be
included in such task orders, purchase
orders, or other similar contract
instrument, and the ordering agency
must so incorporate the applicable
updated wage determinations into their
orders. Once the applicable updated
wage determination revision has been
incorporated into such task orders,
purchase orders, or other similar
contract instruments, that wage
determination revision remains
applicable for the duration of such
order, unless the order is changed to
include additional, substantial
construction, alteration, and/or repair
work not within the scope of work,
when the wage determination must be
updated as set forth in paragraph
(c)(2)(iii)(A) of this section, or the order
itself includes the exercise of options.
Where such orders do include the
exercise of options, updated applicable
wage determination revision, as
incorporated into the master contract
must be included when an option is
exercised on such an order.
(C) For contracts to which both
paragraphs (c)(2)(iii)(A) and (B) of this
section apply, updated wage
determinations must be incorporated
pursuant to the requirements of both
paragraphs. For example, if a contract
calls for construction, alteration, and/or
repair work over a period of time that
is not tied to the completion of any
particular project and also has an option
provision to extend the contract’s term,
the most recent revision(s) of any
applicable wage determination(s) must
be incorporated any time an option is
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exercised, as described in paragraph
(c)(2)(iii)(A) of this section, and on the
contract anniversary date, as described
in paragraph (c)(2)(iii)(B) of this section.
However, when a contract has been
changed as described in paragraph
(c)(2)(iii)(A) of this section, including by
the exercise of an option, the date of
that modification will be considered the
contract anniversary date for the
purpose of annually updating the wage
determination(s) in accordance with
paragraph (c)(2)(iii)(B) of this section for
that year and any subsequent years of
contract performance.
(d) Corrections for clerical errors.
Upon the Administrator’s own initiative
or at the request of an agency, the
Administrator may correct any wage
determination, without regard to
paragraph (a) or (c) of this section,
whenever the Administrator finds that it
contains clerical errors. Such
corrections must be included in any
solicitations, bidding documents, or
ongoing contracts containing the wage
determination in question, and such
inclusion, and application of the
correction(s), must be retroactive to the
start of construction if construction has
begun.
(e) Pre-award determinations that a
wage determination may not be used. A
wage determination may not be used for
a contract, without regard to whether
bid opening (or initial endorsement or
the signing of a housing assistance
payments contract) has occurred, if,
prior to the award of a contract (or the
start of construction under the National
Housing Act, under section 8 of the U.S.
Housing Act of 1937, or where there is
no contract award), the Administrator
provides written notice that:
(1) The wrong wage determination or
the wrong schedule was included in the
bidding documents or solicitation; or
(2) A wage determination included in
the bidding documents or solicitation
was withdrawn by the Department of
Labor as a result of a decision by the
Administrative Review Board.
(f) Post-award determinations and
procedures. (1) If a contract subject to
the labor standards provisions of the
laws referenced by § 5.1 of this subtitle
is entered into without the correct wage
determination(s), the agency must, upon
the request of the Administrator or upon
its own initiative, incorporate the
correct wage determination into the
contract or require its incorporation.
Where the agency is not entering
directly into such a contract but instead
is providing Federal financial
assistance, the agency must ensure that
the recipient or sub-recipient of the
Federal assistance similarly
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incorporates the correct wage
determination(s) into its contracts.
(2) The Administrator may require the
agency to incorporate a wage
determination after contract award or
after the beginning of construction if the
agency has failed to incorporate a wage
determination in a contract required to
contain prevailing wage rates
determined in accordance with the
Davis-Bacon Act or has used a wage
determination which by its terms or the
provisions of this part clearly does not
apply to the contract. Further, the
Administrator may require the
application of the correct wage
determination to a contract after
contract award or after the beginning of
construction when it is found that the
wrong wage determination has been
incorporated in the contract because of
an inaccurate description of the project
or its location in the agency’s request for
the wage determination.
(3) Under any of the circumstances
described in paragraphs (f)(1) and (2) of
this section, the agency must either
terminate and resolicit the contract with
the correct wage determination or
incorporate the correct wage
determination into the contract (or
ensure it is so incorporated) through
supplemental agreement, change order,
or any other authority that may be
needed. The method of incorporation of
the correct wage determination, and
adjustment in contract price, where
appropriate, should be in accordance
with applicable law. Additionally, the
following requirements apply:
(i) Unless the Administrator directs
otherwise, the incorporation of the
correct wage determination(s) must be
retroactive to the date of contract award
or start of construction if there is no
award.
(ii) If incorporation occurs as the
result of a request from the
Administrator, the incorporation must
take place within 30 days of the date of
that request, unless the agency has
obtained an extension from the
Administrator.
(iii) Before the agency requires
incorporation upon its own initiative, it
must provide notice to the
Administrator of the proposed action.
(iv) The contractor must be
compensated for any increases in wages
resulting from incorporation of a
missing wage determination.
(v) If a recipient or sub-recipient of
Federal assistance under any of the
applicable laws referenced by § 5.1 of
this subtitle refuses to incorporate the
wage determination as required, the
agency must make no further payment,
advance, grant, loan, or guarantee of
funds in connection with the contract
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until the recipient incorporates the
required wage determination into its
contract, and must promptly refer the
dispute to the Administrator for further
proceedings under § 5.13 of this subtitle.
(vi) Before terminating a contract
pursuant to this section, the agency
must withhold or cross-withhold
sufficient funds to remedy any backwage liability resulting from the failure
to incorporate the correct wage
determination or otherwise identify and
obligate sufficient funds through a
termination settlement agreement, bond,
or other satisfactory mechanism.
(4) Under any of the above
circumstances, notwithstanding the
requirement to incorporate the correct
wage determination(s) within 30 days,
the correct wage determination(s) will
be effective by operation of law,
retroactive to the date of award or the
beginning of construction (under the
National Housing Act, under section 8
of the U.S. Housing Act of 1937, or
where there is no contract award), in
accordance with § 5.5(e) of this subtitle.
(g) Approval of Davis-Bacon Related
Act Federal funding or assistance after
contract award. If Federal funding or
assistance under a statute requiring
payment of wages determined in
accordance with the Davis-Bacon Act is
not approved prior to contract award (or
the beginning of construction where
there is no contract award), the
applicable wage determination must be
incorporated based upon the wages and
fringe benefits found to be prevailing on
the date of award or the beginning of
construction (under the National
Housing Act, under section 8 of the U.S.
Housing Act of 1937, or where there is
no contract award), as appropriate, and
must be incorporated in the contract
specifications retroactively to that date,
Provided that upon the request of the
head of the Federal agency providing
the Federal funding or assistance, in
individual cases the Administrator may
direct incorporation of the wage
determination to be effective on the date
of approval of Federal funds or
assistance whenever the Administrator
finds that it is necessary and proper in
the public interest to prevent injustice
or undue hardship, Provided further
that the Administrator finds no
evidence of intent to apply for Federal
funding or assistance prior to contract
award or the start of construction, as
appropriate.
■ 8. Revise § 1.7 to read as follows:
§ 1.7
Scope of consideration.
(a) In making a wage determination,
the ‘‘area’’ from which wage data will be
drawn will normally be the county
unless sufficient current wage data (data
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on wages paid on current projects or,
where necessary, projects under
construction no more than 1 year prior
to the beginning of the survey or the
request for a wage determination, as
appropriate) is unavailable to make a
wage determination.
(b) If sufficient current wage data is
not available from projects within the
county to make a wage determination,
wages paid on similar construction in
surrounding counties may be
considered.
(c) If sufficient current wage data is
not available in surrounding counties,
the Administrator may consider wage
data from similar construction in
comparable counties or groups of
counties in the State, and, if necessary,
overall statewide data.
(d) If sufficient current statewide
wage data is not available, wages paid
on projects completed more than 1 year
prior to the beginning of the survey or
the request for a wage determination, as
appropriate, may be considered.
(e) The use of ‘‘helpers and
apprentices’’ is permitted in accordance
with part 5 of this subtitle.
■ 9. Revise § 1.8 to read as follows:
§ 1.8 Reconsideration by the
Administrator.
(a) Any interested party may seek
reconsideration of a wage determination
issued under this part or of a decision
of the Administrator regarding
application of a wage determination.
(b) Such a request for reconsideration
must be in writing, accompanied by a
full statement of the interested party’s
views and any supporting wage data or
other pertinent information. Requests
must be submitted via email to
dba.reconsideration@dol.gov; by mail to
Administrator, Wage and Hour Division,
U.S. Department of Labor, 200
Constitution Ave., NW, Washington, DC
20210; or through other means directed
by the Administrator. The
Administrator will respond within 30
days of receipt thereof, or will notify the
requestor within the 30-day period that
additional time is necessary.
(c) If the decision for which
reconsideration is sought was made by
an authorized representative of the
Administrator of the Wage and Hour
Division, the interested party seeking
reconsideration may request further
reconsideration by the Administrator of
the Wage and Hour Division. Such a
request must be submitted within 30
days from the date the decision is
issued; this time may be extended for
good cause at the discretion of the
Administrator upon a request by the
interested party. The procedures in
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paragraph (b) of this section apply to
any such reconsideration requests.
■ 10. Add § 1.10 to read as follows:
§ 1.10
Severability.
The provisions of this part are
separate and severable and operate
independently from one another. If any
provision of this part is held to be
invalid or unenforceable by its terms, or
as applied to any person or
circumstance, or stayed pending further
agency action, the provision is to be
construed so as to continue to give the
maximum effect to the provision
permitted by law, unless such holding
is one of utter invalidity or
unenforceability, in which event the
provision is severable from this part and
will not affect the remaining provisions.
Appendix A to Part 1—[Removed]
■
11. Remove appendix A to part 1.
Appendix B to Part 1—[Removed]
■
12. Remove appendix B to part 1.
PART 3—CONTRACTORS AND
SUBCONTRACTORS ON PUBLIC
BUILDING OR PUBLIC WORK
FINANCED IN WHOLE OR IN PART BY
LOANS OR GRANTS FROM THE
UNITED STATES
13. The authority citation for part 3
continues to read as follows:
■
Authority: R.S. 161, 48 Stat. 848, Reorg.
Plan No. 14 of 1950, 64 Stat. 1267; 5 U.S.C.
301; 40 U.S.C. 3145; Secretary’s Order 01–
2014 (Dec. 19, 2014), 79 FR 77527 (Dec. 24,
2014).
■
14. Revise § 3.1 to read as follows:
§ 3.1
Purpose and scope.
This part prescribes ‘‘anti-kickback’’
regulations under section 2 of the Act of
June 13, 1934, as amended (40 U.S.C.
3145), popularly known as the Copeland
Act. This part applies to any contract
which is subject to Federal wage
standards and which is for the
construction, prosecution, completion,
or repair of public buildings, public
works or buildings or works financed in
whole or in part by loans or grants from
the United States. The part is intended
to aid in the enforcement of the
minimum wage provisions of the DavisBacon Act and the various statutes
dealing with federally assisted
construction that contain similar
minimum wage provisions, including
those provisions which are not subject
to Reorganization Plan No. 14 of 1950
(e.g., the College Housing Act of 1950,
the Federal Water Pollution Control Act,
and the Housing Act of 1959), and in the
enforcement of the overtime provisions
of the Contract Work Hours and Safety
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Standards Act whenever they are
applicable to construction work. The
part details the obligation of contractors
and subcontractors relative to the
weekly submission of statements
regarding the wages paid on work
covered thereby; sets forth the
circumstances and procedures
governing the making of payroll
deductions from the wages of those
employed on such work; and delineates
the methods of payment permissible on
such work.
■ 15. Revise § 3.2 to read as follows:
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§ 3.2
Definitions.
As used in the regulations in this part:
Affiliated person. The term ‘‘affiliated
person’’ includes a spouse, child,
parent, or other close relative of the
contractor or subcontractor; a partner or
officer of the contractor or
subcontractor; a corporation closely
connected with the contractor or
subcontractor as parent, subsidiary, or
otherwise, and an officer or agent of
such corporation.
Agency. The term ‘‘agency’’ means
any Federal, State, or local government
agency or instrumentality, or other
similar entity, that enters into a contract
or provides assistance through loan,
grant, loan guarantee or insurance, or
otherwise, for a project subject to the
Davis-Bacon labor standards, as defined
in § 5.2 of this subtitle.
(1) Federal agency. The term ‘‘Federal
agency’’ means an agency or
instrumentality of the United States or
the District of Columbia, as defined in
this section, that enters into a contract
or provides assistance through loan,
grant, loan guarantee or insurance, or
otherwise, to a project subject to the
Davis-Bacon labor standards.
(2) [Reserved]
Building or work. The term ‘‘building
or work’’ generally includes
construction activity of all types, as
distinguished from manufacturing,
furnishing of materials, or servicing and
maintenance work. The term includes,
without limitation, buildings,
structures, and improvements of all
types, such as bridges, dams, solar
panels, wind turbines, broadband
installation, installation of electric car
chargers, plants, highways, parkways,
streets, subways, tunnels, sewers,
mains, powerlines, pumping stations,
heavy generators, railways, airports,
terminals, docks, piers, wharves, ways,
lighthouses, buoys, jetties, breakwaters,
levees, and canals; dredging, shoring,
rehabilitation and reactivation of plants,
scaffolding, drilling, blasting,
excavating, clearing, and landscaping.
The term ‘‘building or work’’ also
includes a portion of a building or work,
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or the installation (where appropriate)
of equipment or components into a
building or work.
(1) Building or work financed in
whole or in part by loans or grants from
the United States. The term ‘‘building or
work financed in whole or in part by
loans or grants from the United States’’
includes any building or work for which
construction, prosecution, completion,
or repair, as defined in this section,
payment or part payment is made
directly or indirectly from funds
provided by loans or grants by a Federal
agency. The term includes any building
or work for which the Federal assistance
granted is in the form of loan guarantees
or insurance.
(2) [Reserved]
Construction, prosecution,
completion, or repair. The term
‘‘construction, prosecution, completion,
or repair’’ mean all types of work done
on a particular building or work at the
site thereof as specified in § 5.2 of this
subtitle, including, without limitation,
altering, remodeling, painting and
decorating, installation on the site of the
work of items fabricated offsite, covered
transportation as reflected in § 5.2,
demolition and/or removal as reflected
in § 5.2, and the manufacturing or
furnishing of materials, articles,
supplies, or equipment on the site of the
building or work, performed by laborers
and mechanics at the site.
Employed (and wages). Every person
paid by a contractor or subcontractor in
any manner for their labor in the
construction, prosecution, completion,
or repair of a public building or public
work or building or work financed in
whole or in part by assistance from the
United States through loan, grant, loan
guarantee or insurance, or otherwise, is
‘‘employed’’ and receiving ‘‘wages’’,
regardless of any contractual
relationship alleged to exist between the
contractor and such person.
Public building (or public work). The
term ‘‘public building (or public work)’’
includes a building or work the
construction, prosecution, completion,
or repair of which, as defined in this
section, is carried on directly by
authority of or with funds of a Federal
agency to serve the general public
regardless of whether title thereof is in
a Federal agency. The construction,
prosecution, completion, or repair of a
portion of a building or work, or the
installation (where appropriate) of
equipment or components into a
building or work, may still be
considered a public building or work,
even where the entire building or work
is not owned, leased by, or to be used
by the Federal agency, as long as the
construction, prosecution, completion,
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or repair of that portion of the building
or work, or the installation (where
appropriate) of equipment or
components into that building or work,
is carried on by authority of or with
funds of a Federal agency to serve the
interest of the general public.
United States or the District of
Columbia. The term ‘‘United States or
the District of Columbia’’ means the
United States, the District of Columbia,
and all executive departments,
independent establishments,
administrative agencies, and
instrumentalities of the United States
and of the District of Columbia, and any
corporation for which all or
substantially all of the stock of which is
beneficially owned by the United States,
by the District of Columbia, or any of
the foregoing departments,
establishments, agencies, and
instrumentalities.
■ 16. Revise § 3.3 to read as follows:
§ 3.3
Certified payrolls.
(a) [Reserved]
(b) Each contractor or subcontractor
engaged in the construction,
prosecution, completion, or repair of
any public building or public work, or
building or work financed in whole or
in part by loans or grants from the
United States, each week must provide
a copy of its weekly payroll for all
laborers and mechanics engaged on
work covered by this part and part 5 of
this chapter during the preceding
weekly payroll period, accompanied by
a statement of compliance certifying the
accuracy of the weekly payroll
information. This statement must be
executed by the contractor or
subcontractor or by an authorized
officer or employee of the contractor or
subcontractor who supervises the
payment of wages, and must be on the
back of Form WH–347, ‘‘Payroll (For
Contractors Optional Use)’’ or on any
form with identical wording. Copies of
WH–347 may be obtained from the
contracting or sponsoring agency or
from the Wage and Hour Division
website at https://www.dol.gov/
agencies/whd/government-contracts/
construction/forms or its successor site.
The signature by the contractor,
subcontractor, or the authorized officer
or employee must be an original
handwritten signature or a legally valid
electronic signature.
(c) The requirements of this section
do not apply to any contract of $2,000
or less.
(d) Upon a written finding by the
head of a Federal agency, the Secretary
of Labor may provide reasonable
limitations, variations, tolerances, and
exemptions from the requirements of
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§ 3.5 Payroll deductions permissible
without application to or approval of the
Secretary of Labor.
this section subject to such conditions
as the Secretary of Labor may specify.
■
17. Revise § 3.4 to read as follows:
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§ 3.4 Submission of certified payroll and
the preservation and inspection of weekly
payroll records.
(a) Certified payroll. Each certified
payroll required under § 3.3 must be
delivered by the contractor or
subcontractor, within 7 days after the
regular payment date of the payroll
period, to a representative at the site of
the building or work of the agency
contracting for or financing the work, or,
if there is no representative of the
agency at the site of the building or
work, the statement must be delivered
by mail or by any other means normally
assuring delivery by the contractor or
subcontractor, within that 7 day time
period, to the agency contracting for or
financing the building or work. After the
certified payrolls have been reviewed in
accordance with the contracting or
sponsoring agency’s procedures, such
certified payrolls must be preserved by
the agency for a period of 3 years after
all the work on the prime contract is
completed and must be produced for
inspection, copying, and transcription
by the Department of Labor upon
request. The certified payrolls must also
be transmitted together with a report of
any violation, in accordance with
applicable procedures prescribed by the
United States Department of Labor.
(b) Recordkeeping. Each contractor or
subcontractor must preserve the regular
payroll records for a period of 3 years
after all the work on the prime contract
is completed. The regular payroll
records must set out accurately and
completely the name; Social Security
number; last known address, telephone
number, and email address of each
laborer and mechanic; each worker’s
correct classification(s) of work actually
performed; hourly rates of wages paid
(including rates of contributions or costs
anticipated for bona fide fringe benefits
or cash equivalents thereof); daily and
weekly number of hours actually
worked in total and on each covered
contract; deductions made; and actual
wages paid. The contractor or
subcontractor must make such regular
payroll records, as well as copies of the
certified payrolls provided to the
contracting or sponsoring agency,
available at all times for inspection,
copying, and transcription by the
contracting officer or their authorized
representative, and by authorized
representatives of the Department of
Labor.
■
18. Revise § 3.5 to read as follows:
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Deductions made under the
circumstances or in the situations
described in the paragraphs of this
section may be made without
application to and approval of the
Secretary of Labor:
(a) Any deduction made in
compliance with the requirements of
Federal, State, or local law, such as
Federal or State withholding income
taxes and Federal social security taxes.
(b) Any deduction of sums previously
paid to the laborer or mechanic as a
bona fide prepayment of wages when
such prepayment is made without
discount or interest. A bona fide
prepayment of wages is considered to
have been made only when cash or its
equivalent has been advanced to the
person employed in such manner as to
give him complete freedom of
disposition of the advanced funds.
(c) Any deduction of amounts
required by court process to be paid to
another, unless the deduction is in favor
of the contractor, subcontractor, or any
affiliated person, or when collusion or
collaboration exists.
(d) Any deduction constituting a
contribution on behalf of the laborer or
mechanic employed to funds
established by the contractor or
representatives of the laborers or
mechanics, or both, for the purpose of
providing either from principal or
income, or both, medical or hospital
care, pensions or annuities on
retirement, death benefits,
compensation for injuries, illness,
accidents, sickness, or disability, or for
insurance to provide any of the
foregoing, or unemployment benefits,
vacation pay, savings accounts, or
similar payments for the benefit of the
laborers or mechanics, their families
and dependents: Provided, however,
That the following standards are met:
(1) The deduction is not otherwise
prohibited by law;
(2) It is either:
(i) Voluntarily consented to by the
laborer or mechanic in writing and in
advance of the period in which the work
is to be done and such consent is not a
condition either for the obtaining of or
for the continuation of employment; or
(ii) Provided for in a bona fide
collective bargaining agreement between
the contractor or subcontractor and
representatives of its laborers or
mechanics;
(3) No profit or other benefit is
otherwise obtained, directly or
indirectly, by the contractor or
subcontractor or any affiliated person in
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the form of commission, dividend, or
otherwise; and
(4) The deductions must serve the
convenience and interest of the laborer
or mechanic.
(e) Any deduction requested by the
laborer or mechanic to enable him or
her to repay loans to or to purchase
shares in credit unions organized and
operated in accordance with Federal
and State credit union statutes.
(f) Any deduction voluntarily
authorized by the laborer or mechanic
for the making of contributions to
governmental or quasi-governmental
agencies, such as the American Red
Cross.
(g) Any deduction voluntarily
authorized by the laborer or mechanic
for the making of contributions to
charitable organizations as defined by
26 U.S.C. 501(c)(3).
(h) Any deductions to pay regular
union initiation fees and membership
dues, not including fines or special
assessments: Provided, however, That a
collective bargaining agreement between
the contractor or subcontractor and
representatives of its laborers or
mechanics provides for such deductions
and the deductions are not otherwise
prohibited by law.
(i) Any deduction not more than for
the ‘‘reasonable cost’’ of board, lodging,
or other facilities meeting the
requirements of section 3(m) of the Fair
Labor Standards Act of 1938, as
amended, and 29 CFR part 531. When
such a deduction is made the additional
records required under 29 CFR 516.25(a)
must be kept.
(j) Any deduction for the cost of safety
equipment of nominal value purchased
by the laborer or mechanic as their own
property for their personal protection in
their work, such as safety shoes, safety
glasses, safety gloves, and hard hats, if
such equipment is not required by law
to be furnished by the contractor, if such
deduction does not violate the Fair
Labor Standards Act or any other law,
if the cost on which the deduction is
based does not exceed the actual cost to
the contractor where the equipment is
purchased from the contractor and does
not include any direct or indirect
monetary return to the contractor where
the equipment is purchased from a third
person, and if the deduction is either:
(1) Voluntarily consented to by the
laborer or mechanic in writing and in
advance of the period in which the work
is to be done and such consent is not a
condition either for the obtaining of
employment or its continuance; or
(2) Provided for in a bona fide
collective bargaining agreement between
the contractor or subcontractor and
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§ 3.11
representatives of its laborers and
mechanics.
■ 19. Revise § 3.7 to read as follows:
§ 3.7 Applications for the approval of the
Secretary of Labor.
Any application for the making of
payroll deductions under § 3.6 must
comply with the requirements
prescribed in the following paragraphs
of this section:
(a) The application must be in writing
and addressed to the Secretary of Labor.
The application must be submitted by
email to dbadeductions@dol.gov, by
mail to the United States Department of
Labor, Wage and Hour Division,
Director, Division of Government
Contracts Enforcement, 200 Constitution
Ave., NW, Room S–3502, Washington,
DC 20210, or by any other means
normally assuring delivery.
(b) The application need not identify
the contract or contracts under which
the work in question is to be performed.
Permission will be given for deductions
on all current and future contracts of the
applicant for a period of 1 year. A
renewal of permission to make such
payroll deduction will be granted upon
the submission of an application which
makes reference to the original
application, recites the date of the
Secretary of Labor’s approval of such
deductions, states affirmatively that
there is continued compliance with the
standards set forth in the provisions of
§ 3.6, and specifies any conditions
which have changed in regard to the
payroll deductions.
(c) The application must state
affirmatively that there is compliance
with the standards set forth in the
provisions of § 3.6. The affirmation must
be accompanied by a full statement of
the facts indicating such compliance.
(d) The application must include a
description of the proposed deduction,
the purpose of the deduction, and the
classes of laborers or mechanics from
whose wages the proposed deduction
would be made.
(e) The application must state the
name and business of any third person
to whom any funds obtained from the
proposed deductions are to be
transmitted and the affiliation of such
person, if any, with the applicant.
■ 20. Revise § 3.8 to read as follows:
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§ 3.8 Action by the Secretary of Labor
upon applications.
The Secretary of Labor will decide
whether or not the requested deduction
is permissible under provisions of § 3.6;
and will notify the applicant in writing
of the decision.
■ 21. Revise § 3.11 to read as follows:
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Regulations part of contract.
All contracts made with respect to the
construction, prosecution, completion,
or repair of any public building or
public work or building or work
financed in whole or in part by loans or
grants from the United States covered by
the regulations in this part must
expressly bind the contractor or
subcontractor to comply with such of
the regulations in this part as may be
applicable. In this regard, see § 5.5(a) of
this subtitle. However, these
requirements will be considered to be
effective by operation of law, whether or
not they are incorporated into such
contracts, as set forth in § 5.5(e) of this
subtitle.
PART 5—LABOR STANDARDS
PROVISIONS APPLICABLE TO
CONTRACTS COVERING FEDERALLY
FINANCED AND ASSISTED
CONSTRUCTION (ALSO LABOR
STANDARDS PROVISIONS
APPLICABLE TO NONCONSTRUCTION
CONTRACTS SUBJECT TO THE
CONTRACT WORK HOURS AND
SAFETY STANDARDS ACT)
22. The authority citation for part 5 is
revised to read as follows:
■
Authority: 5 U.S.C. 301; Reorganization
Plan No. 14 of 1950, 5 U.S.C. appendix; 28
U.S.C. 2461 note; 40 U.S.C. 3141 et seq.; 40
U.S.C. 3145; 40 U.S.C. 3148; 40 U.S.C. 3701
et seq.; Secretary’s Order No. 01–2014, 79 FR
77527; and the laws referenced by § 5.1(a).
■
23. Revise § 5.1 to read as follows:
§ 5.1
Purpose and scope.
(a) The regulations contained in this
part are promulgated under the
authority conferred upon the Secretary
of Labor by Reorganization Plan No. 14
of 1950 (64 Stat. 1267, as amended, 5
U.S.C. appendix) and the Copeland Act
(48 Stat. 948; 18 U.S.C. 874; 40 U.S.C.
3145) in order to coordinate the
administration and enforcement of labor
standards provisions contained in the
Davis-Bacon Act (46 Stat. 1494, as
amended; 40 U.S.C. 3141 et seq.) and its
related statutes (‘‘Related Acts’’).
(1) A listing of laws requiring DavisBacon labor standards provisions can be
found at www.dol.gov/agencies/whd/
government-contracts or its successor
website.
(2) [Reserved]
(b) Part 1 of this subtitle contains the
Department’s procedural rules
governing requests for wage
determinations and the issuance and
use of such wage determinations under
the Davis-Bacon Act and its Related
Acts.
■ 24. Revise § 5.2 to read as follows:
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Definitions.
Administrator. The term
‘‘Administrator’’ means the
Administrator of the Wage and Hour
Division, U.S. Department of Labor, or
authorized representative.
Agency. The term ‘‘agency’’ means
any Federal, State, or local government
agency or instrumentality, or other
similar entity, that enters into a contract
or provides assistance through loan,
grant, loan guarantee or insurance, or
otherwise, to a project subject to the
Davis-Bacon labor standards, as defined
in this section.
(1) Federal agency. The term ‘‘Federal
agency’’ means an agency or
instrumentality of the United States or
the District of Columbia, as defined in
this section, that enters into a contract
or provides assistance through loan,
grant, loan guarantee or insurance, or
otherwise, to a project subject to the
Davis-Bacon labor standards.
(2) [Reserved]
Agency Head. The term ‘‘Agency
Head’’ means the principal official of an
agency and includes those persons duly
authorized to act on behalf of the
Agency Head.
Apprentice and helper. The terms
‘‘apprentice’’ and ‘‘helper’’ are defined
as follows:
(1) ‘‘Apprentice’’ means:
(i) A person employed and
individually registered in a bona fide
apprenticeship program registered with
the U.S. Department of Labor,
Employment and Training
Administration, Office of
Apprenticeship, or with a State
Apprenticeship Agency recognized by
the Office of Apprenticeship; or
(ii) A person in the first 90 days of
probationary employment as an
apprentice in such an apprenticeship
program, who is not individually
registered in the program, but who has
been certified by the Office of
Apprenticeship or a State
Apprenticeship Agency (where
appropriate) to be eligible for
probationary employment as an
apprentice;
(2) These provisions do not apply to
apprentices and trainees employed on
projects subject to 23 U.S.C. 113 who
are enrolled in programs which have
been certified by the Secretary of
Transportation in accordance with 23
U.S.C. 113(c).
(3) A distinct classification of helper
will be issued in wage determinations
applicable to work performed on
construction projects covered by the
labor standards provisions of the DavisBacon and Related Acts only where:
(i) The duties of the helper are clearly
defined and distinct from those of any
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other classification on the wage
determination;
(ii) The use of such helpers is an
established prevailing practice in the
area; and
(iii) The helper is not employed as a
trainee in an informal training program.
A ‘‘helper’’ classification will be added
to wage determinations pursuant to
§ 5.5(a)(1)(iii)(A) only where, in
addition, the work to be performed by
the helper is not performed by a
classification in the wage determination.
Building or work. The term ‘‘building
or work’’ generally includes
construction activities of all types, as
distinguished from manufacturing,
furnishing of materials, or servicing and
maintenance work. The term includes,
without limitation, buildings,
structures, and improvements of all
types, such as bridges, dams, solar
panels, wind turbines, broadband
installation, installation of electric car
chargers, plants, highways, parkways,
streets, subways, tunnels, sewers,
mains, power lines, pumping stations,
heavy generators, railways, airports,
terminals, docks, piers, wharves, ways,
lighthouses, buoys, jetties, breakwaters,
levees, canals, dredging, shoring,
rehabilitation and reactivation of plants,
scaffolding, drilling, blasting,
excavating, clearing, and landscaping.
The term ‘‘building or work’’ also
includes a portion of a building or work,
or the installation (where appropriate)
of equipment or components into a
building or work.
Construction, prosecution,
completion, or repair. The term
‘‘construction, prosecution, completion,
or repair’’ means the following:
(1) These terms include all types of
work done—
(i) On a particular building or work at
the site of the work, as defined in this
section, by laborers and mechanics
employed by a contractor or
subcontractor, or
(ii) In the construction or
development of a project under a
development statute.
(2) These terms include, without
limitation (except as specified in this
definition):
(i) Altering, remodeling, installation
(where appropriate) on the site of the
work of items fabricated offsite;
(ii) Painting and decorating;
(iii) Manufacturing or furnishing of
materials, articles, supplies or
equipment, but only if such work is
done by laborers or mechanics
(A) Employed by a contractor or
subcontractor, as defined in this section,
on the site of the work, as defined in
this section, or
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(B) In the construction or
development of a project under a
development statute;
(iv) ‘‘Covered transportation,’’ defined
as any of the following activities:
(A) Transportation that takes place
entirely within a location meeting the
definition of ‘‘site of the work’’ in this
section;
(B) Transportation of one or more
‘‘significant portion(s)’’ of the building
or work between a ‘‘secondary
construction site’’ as defined in this
section and a ‘‘primary construction
site’’ as defined in this section;
(C) Transportation between an
‘‘adjacent or virtually adjacent
dedicated support site’’ as defined in
this section and a ‘‘primary construction
site’’ or ‘‘secondary construction site’’ as
defined in this section;
(D) ‘‘Onsite activities essential or
incidental to offsite transportation,’’
defined as activities conducted by a
truck driver or truck driver’s assistant
on the site of the work that are essential
or incidental to the transportation of
materials or supplies to or from the site
of the work, such as loading, unloading,
or waiting for materials to be loaded or
unloaded, but only where the driver or
driver’s assistant’s time spent on the site
of the work is not de minimis; and
(E) Any transportation and related
activities, whether on or off the site of
the work, by laborers and mechanics
employed in the construction or
development of the project under a
development statute.
(v) Demolition and/or removal, under
any of the following circumstances:
(A) Where the demolition and/or
removal activities themselves constitute
construction, alteration, and/or repair of
an existing building or work. Examples
of such activities include the removal of
asbestos, paint, components, systems, or
parts from a facility that will not be
demolished; as well as contracts for
hazardous waste removal, land
recycling, or reclamation that involve
substantial earth moving, removal of
contaminated soil, re-contouring
surfaces, and/or habitat restoration.
(B) Where subsequent construction
covered in whole or in part by the labor
standards in this part is contemplated at
the site of the demolition or removal,
either as part of the same contract or as
part of a future contract. In determining
whether covered construction is
contemplated within the meaning of
this provision, relevant factors include,
but are not limited to, the existence of
engineering or architectural plans or
surveys of the site; the allocation of, or
an application for, Federal funds;
contract negotiations or bid
solicitations; the stated intent of the
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relevant government officials; and the
disposition of the site after demolition.
(C) Where otherwise required by
statute.
(3) Except for transportation that
constitutes ‘‘covered transportation’’ as
defined in this section, construction,
prosecution, completion, or repair does
not include the transportation of
materials or supplies to or from the site
of the work.
Contract. The term ‘‘contract’’ means
any prime contract which is subject
wholly or in part to the labor standards
provisions of any of the laws referenced
by § 5.1 and any subcontract of any tier
thereunder, let under the prime
contract. With the exception of work
performed under a development statute,
the terms contract and subcontract do
not include agreements with employers
that meet the definition of a material
supplier under this section.
Contracting officer. The term
‘‘contracting officer’’ means the
individual, a duly appointed successor,
or authorized representative who is
designated and authorized to enter into
contracts on behalf of an agency,
sponsor, owner, applicant, or other
similar entity.
Contractor. The term ‘‘contractor’’
means any individual or other legal
entity that enters into or is awarded a
contract that is subject wholly or in part
to the labor standards provisions of any
of the laws referenced by § 5.1,
including any prime contract or
subcontract of any tier under a covered
prime contract. In addition, the term
contractor includes any surety that is
completing performance for a defaulted
contractor pursuant to a performance
bond. The U.S. Government, its
agencies, and instrumentalities are not
contractors, subcontractors, employers
or joint employers for purposes of the
labor standards provisions of any of the
laws referenced by § 5.1. A State or local
government is not regarded as a
contractor or subcontractor under
statutes providing loans, grants, or other
Federal assistance in situations where
construction is performed by its own
employees. However, under
development statutes or other statutes
requiring payment of prevailing wages
to all laborers and mechanics employed
on the assisted project, such as the U.S.
Housing Act of 1937, State and local
recipients of Federal-aid must pay these
workers according to Davis-Bacon labor
standards. The term ‘‘contractor’’ does
not include an entity that is a material
supplier, except if the entity is
performing work under a development
statute.
Davis-Bacon labor standards. The
term ‘‘Davis-Bacon labor standards’’ as
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used in this part means the
requirements of the Davis-Bacon Act,
the Contract Work Hours and Safety
Standards Act (other than those relating
to safety and health), the Copeland Act,
and the prevailing wage provisions of
the other statutes referenced in § 5.1,
and the regulations in this part and in
parts 1 and 3 of this subtitle.
Development statute. The term
‘‘development statute’’ includes the
United States Housing Act of 1937; the
Housing Act of 1949; and the Native
American Housing Assistance and SelfDetermination Act of 1996, and any
other Davis-Bacon Related Act that
requires payment of prevailing wages
under the Davis-Bacon labor standards
to all laborers and mechanics employed
in the development of a project and for
which the Administrator determines
that the statute’s language and/or
legislative history reflected clear
congressional intent to apply a coverage
standard different from the Davis-Bacon
Act itself.
Employed. Every person performing
the duties of a laborer or mechanic in
the construction, prosecution,
completion, or repair of a public
building or public work, or building or
work financed in whole or in part by
assistance from the United States
through loan, grant, loan guarantee or
insurance, or otherwise, is ‘‘employed’’
regardless of any contractual
relationship alleged to exist between the
contractor and such person.
Laborer or mechanic. The term
‘‘laborer or mechanic’’ includes at least
those workers whose duties are manual
or physical in nature (including those
workers who use tools or who are
performing the work of a trade), as
distinguished from mental or
managerial. The term ‘‘laborer’’ or
‘‘mechanic’’ includes apprentices,
helpers, and, in the case of contracts
subject to the Contract Work Hours and
Safety Standards Act, watchpersons or
guards. The term does not apply to
workers whose duties are primarily
administrative, executive, or clerical,
rather than manual. Persons employed
in a bona fide executive, administrative,
or professional capacity as defined in 29
CFR part 541 are not deemed to be
laborers or mechanics. Forepersons who
devote more than 20 percent of their
time during a workweek to mechanic or
laborer duties, and who do not meet the
criteria of part 541, are laborers and
mechanics for the time so spent.
Material supplier. The term ‘‘material
supplier’’ is defined as follows:
(1) A material supplier is an entity
meeting all of the following criteria:
(i) Its only obligations for work on the
contract or project are the delivery of
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materials, articles, supplies, or
equipment, which may include pickup
of the same in addition to, but not
exclusive of, delivery, and which may
also include activities incidental to such
delivery and pickup, such as loading,
unloading, or waiting for materials to be
loaded or unloaded; and
(ii) Its facility or facilities that
manufactures the materials, articles,
supplies, or equipment used for the
contract or project:
(A) Is not located on, or does not itself
constitute, the project or contract’s
primary construction site or secondary
construction site as defined in this
section; and
(B) Either was established before
opening of bids on the contract or
project, or is not dedicated exclusively,
or nearly so, to the performance of the
contract or project.
(2) If an entity, in addition to being
engaged in the activities specified in
paragraph (1)(i) of this definition, also
engages in other construction,
prosecution, completion, or repair work
at the site of the work, it is not a
material supplier.
Prime contractor. The term ‘‘prime
contractor’’ means any person or entity
that enters into a contract with an
agency. For the purposes of the labor
standards provisions of any of the laws
referenced by § 5.1, the term prime
contractor also includes the controlling
shareholders or members of any entity
holding a prime contract, the joint
venturers or partners in any joint
venture or partnership holding a prime
contract, and any contractor (e.g., a
general contractor) that has been
delegated the responsibility for
overseeing all or substantially all of the
construction anticipated by the prime
contract. For the purposes of the
provisions in §§ 5.5 and 5.9, any such
related entities holding different prime
contracts are considered to be the same
prime contractor.
Public building or public work. The
term ‘‘public building or public work’’
includes a building or work, the
construction, prosecution, completion,
or repair of which, as defined in this
section, is carried on directly by
authority of or with funds of a Federal
agency to serve the interest of the
general public regardless of whether
title thereof is in a Federal agency. The
construction, prosecution, completion,
or repair of a portion of a building or
work, or the installation (where
appropriate) of equipment or
components into a building or work,
may still be considered a public
building or work, even where the entire
building or work is not owned, leased
by, or to be used by a Federal agency,
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as long as the construction, prosecution,
completion, or repair of that portion of
the building or work, or the installation
(where appropriate) of equipment or
components into that building or work,
is carried on by authority of or with
funds of a Federal agency to serve the
interest of the general public.
Secretary. The term ‘‘Secretary’’
includes the Secretary of Labor, and
their authorized representative.
Site of the work. The term ‘‘site of the
work’’ is defined as follows:
(1) ‘‘Site of the work’’ includes all of
the following:
(i) The primary construction site(s),
defined as the physical place or places
where the building or work called for in
the contract will remain.
(ii) Any secondary construction
site(s), defined as any other site(s)
where a significant portion of the
building or work is constructed,
provided that such construction is for
specific use in that building or work and
does not simply reflect the manufacture
or construction of a product made
available to the general public, and
provided further that the site is either
established specifically for the
performance of the contract or project,
or is dedicated exclusively, or nearly so,
to the performance of the contract or
project for a specific period of time. A
‘‘significant portion’’ of a building or
work means one or more entire
portion(s) or module(s) of the building
or work, such as a completed room or
structure, with minimal construction
work remaining other than the
installation and/or final assembly of the
portions or modules at the place where
the building or work will remain. A
‘‘significant portion’’ does not include
materials or prefabricated component
parts such as prefabricated housing
components. A ‘‘specific period of time’’
means a period of weeks, months, or
more, and does not include
circumstances where a site at which
multiple projects are in progress is
shifted exclusively or nearly so to a
single project for a few hours or days in
order to meet a deadline.
(iii) Any adjacent or virtually adjacent
dedicated support sites, defined as:
(A) Job headquarters, tool yards, batch
plants, borrow pits, and similar facilities
of a contractor or subcontractor that are
dedicated exclusively, or nearly so, to
performance of the contract or project,
and adjacent or virtually adjacent to
either a primary construction site or a
secondary construction site, and
(B) Locations adjacent or virtually
adjacent to a primary construction site
at which workers perform activities
associated with directing vehicular or
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pedestrian traffic around or away from
the primary construction site.
(2) With the exception of locations
that are on, or that themselves
constitute, primary or secondary
construction sites as defined in
paragraphs (1)(i) and (ii) of this
definition, site of the work does not
include:
(i) Permanent home offices, branch
plant establishments, fabrication plants,
tool yards, etc., of a contractor or
subcontractor whose location and
continuance in operation are
determined wholly without regard to a
particular Federal or federally assisted
contract or project; or
(ii) Fabrication plants, batch plants,
borrow pits, job headquarters, tool
yards, etc., of a material supplier, which
are established by a material supplier
for the project before opening of bids
and not on the primary construction site
or a secondary construction site, even
where the operations for a period of
time may be dedicated exclusively, or
nearly so, to the performance of a
contract.
Subcontractor. The term
‘‘subcontractor’’ means any contractor
that agrees to perform or be responsible
for the performance of any part of a
contract that is subject wholly or in part
to the labor standards provisions of any
of the laws referenced in § 5.1. The term
subcontractor includes subcontractors of
any tier.
United States or the District of
Columbia. The term ‘‘United States or
the District of Columbia’’ means the
United States, the District of Columbia,
and all executive departments,
independent establishments,
administrative agencies, and
instrumentalities of the United States
and of the District of Columbia,
including non-appropriated fund
instrumentalities and any corporation
for which all or substantially all of its
stock is beneficially owned by the
United States or by the foregoing
departments, establishments, agencies,
or instrumentalities.
Wages. The term ‘‘wages’’ means the
basic hourly rate of pay; any
contribution irrevocably made by a
contractor or subcontractor to a trustee
or to a third person pursuant to a bona
fide fringe benefit fund, plan, or
program; and the rate of costs to the
contractor or subcontractor which may
be reasonably anticipated in providing
bona fide fringe benefits to laborers and
mechanics pursuant to an enforceable
commitment to carry out a financially
responsible plan or program, which was
communicated in writing to the laborers
and mechanics affected. The fringe
benefits enumerated in the Davis-Bacon
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Act include medical or hospital care,
pensions on retirement or death,
compensation for injuries or illness
resulting from occupational activity, or
insurance to provide any of the
foregoing; unemployment benefits; life
insurance, disability insurance, sickness
insurance, or accident insurance;
vacation or holiday pay; defraying costs
of apprenticeship or other similar
programs; or other bona fide fringe
benefits. Fringe benefits do not include
benefits required by other Federal, State,
or local law.
Wage determination. The term ‘‘wage
determination’’ includes the original
decision and any subsequent decisions
revising, modifying, superseding,
correcting, or otherwise changing the
provisions of the original decision. The
application of the wage determination
must be in accordance with the
provisions of § 1.6 of this subtitle.
■ 25. Amend § 5.5 by:
■ a. Revising paragraphs (a)
introductory text and (a)(1) through (4),
(6), and (10);
■ b. Adding paragraph (a)(11);
■ c. Revising paragraphs (b)
introductory text and (b)(2) through (4);
■ d. Adding paragraph (b)(5);
■ e. Revising paragraph (c); and
■ f. Adding paragraphs (d) and (e).
The revisions and additions read as
follows:
§ 5.5 Contract provisions and related
matters.
(a) Required contract clauses. The
Agency head will cause or require the
contracting officer to require the
contracting officer to insert in full, or
(for contracts covered by the Federal
Acquisition Regulation (48 CFR chapter
1)) by reference, in any contract in
excess of $2,000 which is entered into
for the actual construction, alteration
and/or repair, including painting and
decorating, of a public building or
public work, or building or work
financed in whole or in part from
Federal funds or in accordance with
guarantees of a Federal agency or
financed from funds obtained by pledge
of any contract of a Federal agency to
make a loan, grant or annual
contribution (except where a different
meaning is expressly indicated), and
which is subject to the labor standards
provisions of any of the laws referenced
by § 5.1, the following clauses (or any
modifications thereof to meet the
particular needs of the agency,
Provided, That such modifications are
first approved by the Department of
Labor):
(1) Minimum wages—(i) Wage rates
and fringe benefits. All laborers and
mechanics employed or working upon
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the site of the work (or otherwise
working in construction or development
of the project under a development
statute), will be paid unconditionally
and not less often than once a week, and
without subsequent deduction or rebate
on any account (except such payroll
deductions as are permitted by
regulations issued by the Secretary of
Labor under the Copeland Act (29 CFR
part 3)), the full amount of basic hourly
wages and bona fide fringe benefits (or
cash equivalents thereof) due at time of
payment computed at rates not less than
those contained in the wage
determination of the Secretary of Labor
which is attached hereto and made a
part hereof, regardless of any
contractual relationship which may be
alleged to exist between the contractor
and such laborers and mechanics. As
provided in paragraphs (d) and (e) of
this section, the appropriate wage
determinations are effective by
operation of law even if they have not
been attached to the contract.
Contributions made or costs reasonably
anticipated for bona fide fringe benefits
under the Davis-Bacon Act (40 U.S.C.
3141(2)(B)) on behalf of laborers or
mechanics are considered wages paid to
such laborers or mechanics, subject to
the provisions of paragraph (a)(1)(v) of
this section; also, regular contributions
made or costs incurred for more than a
weekly period (but not less often than
quarterly) under plans, funds, or
programs which cover the particular
weekly period, are deemed to be
constructively made or incurred during
such weekly period. Such laborers and
mechanics must be paid the appropriate
wage rate and fringe benefits on the
wage determination for the
classification(s) of work actually
performed, without regard to skill,
except as provided in paragraph (a)(4) of
this section. Laborers or mechanics
performing work in more than one
classification may be compensated at
the rate specified for each classification
for the time actually worked therein:
Provided, That the employer’s payroll
records accurately set forth the time
spent in each classification in which
work is performed. The wage
determination (including any additional
classifications and wage rates
conformed under paragraph (a)(1)(iii) of
this section) and the Davis-Bacon poster
(WH–1321) must be posted at all times
by the contractor and its subcontractors
at the site of the work in a prominent
and accessible place where it can be
easily seen by the workers.
(ii) Frequently recurring
classifications. (A) In addition to wage
and fringe benefit rates that have been
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determined to be prevailing under the
procedures set forth in 29 CFR part 1,
a wage determination may contain,
pursuant to § 1.3(f), wage and fringe
benefit rates for classifications of
laborers and mechanics for which
conformance requests are regularly
submitted pursuant to paragraph
(a)(1)(iii) of this section, provided that:
(1) The work performed by the
classification is not performed by a
classification in the wage determination
for which a prevailing wage rate has
been determined;
(2) The classification is used in the
area by the construction industry; and
(3) The wage rate for the classification
bears a reasonable relationship to the
prevailing wage rates contained in the
wage determination.
(B) The Administrator will establish
wage rates for such classifications in
accordance with paragraph
(a)(1)(iii)(A)(3) of this section. Work
performed in such a classification must
be paid at no less than the wage and
fringe benefit rate listed on the wage
determination for such classification.
(iii) Conformance. (A) The contracting
officer must require that any class of
laborers or mechanics, including
helpers, which is not listed in the wage
determination and which is to be
employed under the contract be
classified in conformance with the wage
determination. Conformance of an
additional classification and wage rate
and fringe benefits is appropriate only
when the following criteria have been
met:
(1) The work to be performed by the
classification requested is not performed
by a classification in the wage
determination; and
(2) The classification is used in the
area by the construction industry; and
(3) The proposed wage rate, including
any bona fide fringe benefits, bears a
reasonable relationship to the wage rates
contained in the wage determination.
(B) The conformance process may not
be used to split, subdivide, or otherwise
avoid application of classifications
listed in the wage determination.
(C) If the contractor and the laborers
and mechanics to be employed in the
classification (if known), or their
representatives, and the contracting
officer agree on the classification and
wage rate (including the amount
designated for fringe benefits where
appropriate), a report of the action taken
will be sent by the contracting officer by
email to DBAconformance@dol.gov. The
Administrator, or an authorized
representative, will approve, modify, or
disapprove every additional
classification action within 30 days of
receipt and so advise the contracting
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officer or will notify the contracting
officer within the 30–day period that
additional time is necessary.
(D) In the event the contractor, the
laborers or mechanics to be employed in
the classification or their
representatives, and the contracting
officer do not agree on the proposed
classification and wage rate (including
the amount designated for fringe
benefits, where appropriate), the
contracting officer will, by email to
DBAconformance@dol.gov, refer the
questions, including the views of all
interested parties and the
recommendation of the contracting
officer, to the Administrator for
determination. The Administrator, or an
authorized representative, will issue a
determination within 30 days of receipt
and so advise the contracting officer or
will notify the contracting officer within
the 30–day period that additional time
is necessary.
(E) The contracting officer must
promptly notify the contractor of the
action taken by the Wage and Hour
Division under paragraphs (a)(1)(iii)(C)
and (D) of this section. The contractor
must furnish a written copy of such
determination to each affected worker or
it must be posted as a part of the wage
determination. The wage rate (including
fringe benefits where appropriate)
determined pursuant to paragraph
(a)(1)(iii)(C) or (D) of this section must
be paid to all workers performing work
in the classification under this contract
from the first day on which work is
performed in the classification.
(iv) Fringe benefits not expressed as
an hourly rate. Whenever the minimum
wage rate prescribed in the contract for
a class of laborers or mechanics
includes a fringe benefit which is not
expressed as an hourly rate, the
contractor may either pay the benefit as
stated in the wage determination or may
pay another bona fide fringe benefit or
an hourly cash equivalent thereof.
(v) Unfunded plans. If the contractor
does not make payments to a trustee or
other third person, the contractor may
consider as part of the wages of any
laborer or mechanic the amount of any
costs reasonably anticipated in
providing bona fide fringe benefits
under a plan or program, Provided, That
the Secretary of Labor has found, upon
the written request of the contractor, in
accordance with the criteria set forth in
§ 5.28, that the applicable standards of
the Davis-Bacon Act have been met. The
Secretary of Labor may require the
contractor to set aside in a separate
account assets for the meeting of
obligations under the plan or program.
(vi) Interest. In the event of a failure
to pay all or part of the wages required
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57735
by the contract, the contractor will be
required to pay interest on any
underpayment of wages.
(2) Withholding—(i) Withholding
requirements. The [write in name of
Federal agency or the recipient of
Federal assistance] may, upon its own
action, or must, upon written request of
an authorized representative of the
Department of Labor, withhold or cause
to be withheld from the contractor so
much of the accrued payments or
advances as may be considered
necessary to satisfy the liabilities of the
prime contractor or any subcontractor
for the full amount of wages and
monetary relief, including interest,
required by the clauses set forth in
paragraph (a) of this section for
violations of this contract, or to satisfy
any such liabilities required by any
other Federal contract, or federally
assisted contract subject to Davis-Bacon
labor standards, that is held by the same
prime contractor (as defined in § 5.2).
The necessary funds may be withheld
from the contractor under this contract,
any other Federal contract with the
same prime contractor, or any other
federally assisted contract that is subject
to Davis-Bacon labor standards
requirements and is held by the same
prime contractor, regardless of whether
the other contract was awarded or
assisted by the same agency, and such
funds may be used to satisfy the
contractor liability for which the funds
were withheld. In the event of a
contractor’s failure to pay any laborer or
mechanic, including any apprentice or
helper working on the site of the work
(or otherwise working in construction or
development of the project under a
development statute) all or part of the
wages required by the contract, or upon
the contractor’s failure to submit the
required records as discussed in
paragraph (a)(3)(iv) of this section, the
[Agency] may on its own initiative and
after written notice to the contractor,
sponsor, applicant, owner, or other
entity, as the case may be, take such
action as may be necessary to cause the
suspension of any further payment,
advance, or guarantee of funds until
such violations have ceased.
(ii) Priority to withheld funds. The
Department has priority to funds
withheld or to be withheld in
accordance with paragraph (a)(2)(i) or
(b)(3)(i) of this section, or both, over
claims to those funds by:
(A) A contractor’s surety(ies),
including without limitation
performance bond sureties and payment
bond sureties;
(B) A contracting agency for its
reprocurement costs;
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(C) A trustee(s) (either a courtappointed trustee or a U.S. trustee, or
both) in bankruptcy of a contractor, or
a contractor’s bankruptcy estate;
(D) A contractor’s assignee(s);
(E) A contractor’s successor(s); or
(F) A claim asserted under the Prompt
Payment Act, 31 U.S.C. 3901–3907.
(3) Records and certified payrolls—(i)
Basic record requirements—(A) Length
of record retention. All regular payrolls
and other basic records must be
maintained by the contractor and any
subcontractor during the course of the
work and preserved for all laborers and
mechanics working at the site of the
work (or otherwise working in
construction or development of the
project under a development statute) for
a period of at least 3 years after all the
work on the prime contract is
completed.
(B) Information required. Such
records must contain the name; Social
Security number; last known address,
telephone number, and email address of
each such worker; each worker’s correct
classification(s) of work actually
performed; hourly rates of wages paid
(including rates of contributions or costs
anticipated for bona fide fringe benefits
or cash equivalents thereof of the types
described in 40 U.S.C. 3141(2)(B) of the
Davis-Bacon Act); daily and weekly
number of hours actually worked in
total and on each covered contract;
deductions made; and actual wages
paid.
(C) Additional records relating to
fringe benefits. Whenever the Secretary
of Labor has found under paragraph
(a)(1)(v) of this section that the wages of
any laborer or mechanic include the
amount of any costs reasonably
anticipated in providing benefits under
a plan or program described in 40 U.S.C.
3141(2)(B) of the Davis-Bacon Act, the
contractor must maintain records which
show that the commitment to provide
such benefits is enforceable, that the
plan or program is financially
responsible, and that the plan or
program has been communicated in
writing to the laborers or mechanics
affected, and records which show the
costs anticipated or the actual cost
incurred in providing such benefits.
(D) Additional records relating to
apprenticeship. Contractors with
apprentices working under approved
programs must maintain written
evidence of the registration of
apprenticeship programs, the
registration of the apprentices, and the
ratios and wage rates prescribed in the
applicable programs.
(ii) Certified payroll requirements—
(A) Frequency and method of
submission. The contractor or
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subcontractor must submit weekly, for
each week in which any DBA- or
Related Acts-covered work is
performed, certified payrolls to the
[write in name of appropriate Federal
agency] if the agency is a party to the
contract, but if the agency is not such
a party, the contractor will submit the
certified payrolls to the applicant,
sponsor, owner, or other entity, as the
case may be, that maintains such
records, for transmission to the [write in
name of agency]. The prime contractor
is responsible for the submission of all
certified payrolls by all subcontractors.
A contracting agency or prime
contractor may permit or require
contractors to submit certified payrolls
through an electronic system, as long as
the electronic system requires a legally
valid electronic signature; the system
allows the contractor, the contracting
agency, and the Department of Labor to
access the certified payrolls upon
request for at least 3 years after the work
on the prime contract has been
completed; and the contracting agency
or prime contractor permits other
methods of submission in situations
where the contractor is unable or
limited in its ability to use or access the
electronic system.
(B) Information required. The certified
payrolls submitted must set out
accurately and completely all of the
information required to be maintained
under paragraph (a)(3)(i)(B) of this
section, except that full Social Security
numbers and last known addresses,
telephone numbers, and email addresses
must not be included on weekly
transmittals. Instead, the certified
payrolls need only include an
individually identifying number for
each worker (e.g., the last four digits of
the worker’s Social Security number).
The required weekly certified payroll
information may be submitted using
Optional Form WH–347 or in any other
format desired. Optional Form WH–347
is available for this purpose from the
Wage and Hour Division website at
https://www.dol.gov/sites/dolgov/files/
WHD/legacy/files/wh347/.pdf or its
successor website. It is not a violation
of this section for a prime contractor to
require a subcontractor to provide full
Social Security numbers and last known
addresses, telephone numbers, and
email addresses to the prime contractor
for its own records, without weekly
submission by the subcontractor to the
sponsoring government agency (or the
applicant, sponsor, owner, or other
entity, as the case may be, that
maintains such records).
(C) Statement of Compliance. Each
certified payroll submitted must be
accompanied by a ‘‘Statement of
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Compliance,’’ signed by the contractor
or subcontractor, or the contractor’s or
subcontractor’s agent who pays or
supervises the payment of the persons
working on the contract, and must
certify the following:
(1) That the certified payroll for the
payroll period contains the information
required to be provided under
paragraph (a)(3)(ii) of this section, the
appropriate information and basic
records are being maintained under
paragraph (a)(3)(i) of this section, and
such information and records are correct
and complete;
(2) That each laborer or mechanic
(including each helper and apprentice)
working on the contract during the
payroll period has been paid the full
weekly wages earned, without rebate,
either directly or indirectly, and that no
deductions have been made either
directly or indirectly from the full wages
earned, other than permissible
deductions as set forth in 29 CFR part
3; and
(3) That each laborer or mechanic has
been paid not less than the applicable
wage rates and fringe benefits or cash
equivalents for the classification(s) of
work actually performed, as specified in
the applicable wage determination
incorporated into the contract.
(D) Use of Optional Form WH–347.
The weekly submission of a properly
executed certification set forth on the
reverse side of Optional Form WH–347
will satisfy the requirement for
submission of the ‘‘Statement of
Compliance’’ required by paragraph
(a)(3)(ii)(C) of this section.
(E) Signature. The signature by the
contractor, subcontractor, or the
contractor’s or subcontractor’s agent
must be an original handwritten
signature or a legally valid electronic
signature.
(F) Falsification. The falsification of
any of the above certifications may
subject the contractor or subcontractor
to civil or criminal prosecution under
18 U.S.C. 1001 and 31 U.S.C. 3729.
(G) Length of certified payroll
retention. The contractor or
subcontractor must preserve all certified
payrolls during the course of the work
and for a period of 3 years after all the
work on the prime contract is
completed.
(iii) Contracts, subcontracts, and
related documents. The contractor or
subcontractor must maintain this
contract or subcontract and related
documents including, without
limitation, bids, proposals,
amendments, modifications, and
extensions. The contractor or
subcontractor must preserve these
contracts, subcontracts, and related
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documents during the course of the
work and for a period of 3 years after all
the work on the prime contract is
completed.
(iv) Required disclosures and access—
(A) Required record disclosures and
access to workers. The contractor or
subcontractor must make the records
required under paragraphs (a)(3)(i)
through (iii) of this section, and any
other documents that the [write the
name of the agency] or the Department
of Labor deems necessary to determine
compliance with the labor standards
provisions of any of the applicable
statutes referenced by § 5.1, available for
inspection, copying, or transcription by
authorized representatives of the [write
the name of the agency] or the
Department of Labor, and must permit
such representatives to interview
workers during working hours on the
job.
(B) Sanctions for non-compliance
with records and worker access
requirements. If the contractor or
subcontractor fails to submit the
required records or to make them
available, or refuses to permit worker
interviews during working hours on the
job, the Federal agency may, after
written notice to the contractor,
sponsor, applicant, owner, or other
entity, as the case may be, that
maintains such records or that employs
such workers, take such action as may
be necessary to cause the suspension of
any further payment, advance, or
guarantee of funds. Furthermore, failure
to submit the required records upon
request or to make such records
available, or to permit worker
interviews during working hours on the
job, may be grounds for debarment
action pursuant to § 5.12. In addition,
any contractor or other person that fails
to submit the required records or make
those records available to WHD within
the time WHD requests that the records
be produced will be precluded from
introducing as evidence in an
administrative proceeding under 29 CFR
part 6 any of the required records that
were not provided or made available to
WHD. WHD will take into consideration
a reasonable request from the contractor
or person for an extension of the time
for submission of records. WHD will
determine the reasonableness of the
request and may consider, among other
things, the location of the records and
the volume of production.
(C) Required information disclosures.
Contractors and subcontractors must
maintain the full Social Security
number and last known address,
telephone number, and email address of
each covered worker, and must provide
them upon request to the [write in name
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of appropriate Federal agency] if the
agency is a party to the contract, or to
the Wage and Hour Division of the
Department of Labor. If the Federal
agency is not such a party to the
contract, the contractor, subcontractor,
or both, must, upon request, provide the
full Social Security number and last
known address, telephone number, and
email address of each covered worker to
the applicant, sponsor, owner, or other
entity, as the case may be, that
maintains such records, for transmission
to the [write in name of agency], the
contractor, or the Wage and Hour
Division of the Department of Labor for
purposes of an investigation or other
compliance action.
(4) Apprentices and equal
employment opportunity—(i)
Apprentices—(A) Rate of pay.
Apprentices will be permitted to work
at less than the predetermined rate for
the work they perform when they are
employed pursuant to and individually
registered in a bona fide apprenticeship
program registered with the U.S.
Department of Labor, Employment and
Training Administration, Office of
Apprenticeship (OA), or with a State
Apprenticeship Agency recognized by
the OA. A person who is not
individually registered in the program,
but who has been certified by the OA or
a State Apprenticeship Agency (where
appropriate) to be eligible for
probationary employment as an
apprentice, will be permitted to work at
less than the predetermined rate for the
work they perform in the first 90 days
of probationary employment as an
apprentice in such a program. In the
event the OA or a State Apprenticeship
Agency recognized by the OA
withdraws approval of an
apprenticeship program, the contractor
will no longer be permitted to use
apprentices at less than the applicable
predetermined rate for the work
performed until an acceptable program
is approved.
(B) Fringe benefits. Apprentices must
be paid fringe benefits in accordance
with the provisions of the
apprenticeship program. If the
apprenticeship program does not
specify fringe benefits, apprentices must
be paid the full amount of fringe
benefits listed on the wage
determination for the applicable
classification. If the Administrator
determines that a different practice
prevails for the applicable apprentice
classification, fringe benefits must be
paid in accordance with that
determination.
(C) Apprenticeship ratio. The
allowable ratio of apprentices to
journeyworkers on the job site in any
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57737
craft classification must not be greater
than the ratio permitted to the
contractor as to the entire work force
under the registered program or the ratio
applicable to the locality of the project
pursuant to paragraph (a)(4)(i)(D) of this
section. Any worker listed on a payroll
at an apprentice wage rate, who is not
registered or otherwise employed as
stated in paragraph (a)(4)(i)(A) of this
section, must be paid not less than the
applicable wage rate on the wage
determination for the classification of
work actually performed. In addition,
any apprentice performing work on the
job site in excess of the ratio permitted
under this section must be paid not less
than the applicable wage rate on the
wage determination for the work
actually performed.
(D) Reciprocity of ratios and wage
rates. Where a contractor is performing
construction on a project in a locality
other than the locality in which its
program is registered, the ratios and
wage rates (expressed in percentages of
the journeyworker’s hourly rate)
applicable within the locality in which
the construction is being performed
must be observed. If there is no
applicable ratio or wage rate for the
locality of the project, the ratio and
wage rate specified in the contractor’s
registered program must be observed.
(ii) Equal employment opportunity.
The use of apprentices and
journeyworkers under this part must be
in conformity with the equal
employment opportunity requirements
of Executive Order 11246, as amended,
and 29 CFR part 30.
*
*
*
*
*
(6) Subcontracts. The contractor or
subcontractor must insert in any
subcontracts the clauses contained in
paragraphs (a)(1) through (11) of this
section, along with the applicable wage
determination(s) and such other clauses
or contract modifications as the [write
in the name of the Federal agency] may
by appropriate instructions require, and
a clause requiring the subcontractors to
include these clauses and wage
determination(s) in any lower tier
subcontracts. The prime contractor is
responsible for the compliance by any
subcontractor or lower tier
subcontractor with all the contract
clauses in this section. In the event of
any violations of these clauses, the
prime contractor and any
subcontractor(s) responsible will be
liable for any unpaid wages and
monetary relief, including interest from
the date of the underpayment or loss,
due to any workers of lower-tier
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subcontractors, and may be subject to
debarment, as appropriate.
*
*
*
*
*
(10) Certification of eligibility. (i) By
entering into this contract, the
contractor certifies that neither it nor
any person or firm who has an interest
in the contractor’s firm is a person or
firm ineligible to be awarded
Government contracts by virtue of 40
U.S.C. 3144(b) or § 5.12(a).
(ii) No part of this contract shall be
subcontracted to any person or firm
ineligible for award of a Government
contract by virtue of 40 U.S.C. 3144(b)
or § 5.12(a).
(iii) The penalty for making false
statements is prescribed in the U.S.
Code, Title 18 Crimes and Criminal
Procedure, 18 U.S.C. 1001.
(11) Anti-retaliation. It is unlawful for
any person to discharge, demote,
intimidate, threaten, restrain, coerce,
blacklist, harass, or in any other manner
discriminate against, or to cause any
person to discharge, demote, intimidate,
threaten, restrain, coerce, blacklist,
harass, or in any other manner
discriminate against, any worker or job
applicant for:
(i) Notifying any contractor of any
conduct which the worker reasonably
believes constitutes a violation of the
DBA, Related Acts, this part, or 29 CFR
part 1 or 3;
(ii) Filing any complaint, initiating or
causing to be initiated any proceeding,
or otherwise asserting or seeking to
assert on behalf of themselves or others
any right or protection under the DBA,
Related Acts, this part, or 29 CFR part
1 or 3;
(iii) Cooperating in any investigation
or other compliance action, or testifying
in any proceeding under the DBA,
Related Acts, this part, or 29 CFR part
1 or 3; or
(iv) Informing any other person about
their rights under the DBA, Related
Acts, this part, or 29 CFR part 1 or 3.
(b) Contract Work Hours and Safety
Standards Act (CWHSSA). The Agency
Head must cause or require the
contracting officer to insert the
following clauses set forth in paragraphs
(b)(1) through (5) of this section in full,
or (for contracts covered by the Federal
Acquisition Regulation) by reference, in
any contract in an amount in excess of
$100,000 and subject to the overtime
provisions of the Contract Work Hours
and Safety Standards Act. These clauses
must be inserted in addition to the
clauses required by paragraph (a) of this
section or 29 CFR 4.6. As used in this
paragraph (b), the terms ‘‘laborers and
mechanics’’ include watchpersons and
guards.
*
*
*
*
*
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(2) Violation; liability for unpaid
wages; liquidated damages. In the event
of any violation of the clause set forth
in paragraph (b)(1) of this section the
contractor and any subcontractor
responsible therefor shall be liable for
the unpaid wages and interest from the
date of the underpayment. In addition,
such contractor and subcontractor shall
be liable to the United States (in the
case of work done under contract for the
District of Columbia or a territory, to
such District or to such territory), for
liquidated damages. Such liquidated
damages shall be computed with respect
to each individual laborer or mechanic,
including watchpersons and guards,
employed in violation of the clause set
forth in paragraph (b)(1) of this section,
in the sum of $31 for each calendar day
on which such individual was required
or permitted to work in excess of the
standard workweek of forty hours
without payment of the overtime wages
required by the clause set forth in
paragraph (b)(1).
(3) Withholding for unpaid wages and
liquidated damages—(i) Withholding
process. The [write in the name of the
Federal agency or the recipient of
Federal assistance] may, upon its own
action, or must, upon written request of
an authorized representative of the
Department of Labor, withhold or cause
to be withheld from the contractor so
much of the accrued payments or
advances as may be considered
necessary to satisfy the liabilities of the
prime contractor or any subcontractor
for any unpaid wages; monetary relief,
including interest; and liquidated
damages required by the clauses set
forth in this paragraph (b) on this
contract, any other Federal contract
with the same prime contractor, or any
other federally assisted contract subject
to the Contract Work Hours and Safety
Standards Act that is held by the same
prime contractor (as defined in § 5.2).
The necessary funds may be withheld
from the contractor under this contract,
any other Federal contract with the
same prime contractor, or any other
federally assisted contract that is subject
to the Contract Work Hours and Safety
Standards Act and is held by the same
prime contractor, regardless of whether
the other contract was awarded or
assisted by the same agency, and such
funds may be used to satisfy the
contractor liability for which the funds
were withheld.
(ii) Priority to withheld funds. The
Department has priority to funds
withheld or to be withheld in
accordance with paragraph (a)(2)(i) or
(b)(3)(i) of this section, or both, over
claims to those funds by:
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(A) A contractor’s surety(ies),
including without limitation
performance bond sureties and payment
bond sureties;
(B) A contracting agency for its
reprocurement costs;
(C) A trustee(s) (either a courtappointed trustee or a U.S. trustee, or
both) in bankruptcy of a contractor, or
a contractor’s bankruptcy estate;
(D) A contractor’s assignee(s);
(E) A contractor’s successor(s); or
(F) A claim asserted under the Prompt
Payment Act, 31 U.S.C. 3901–3907.
(4) Subcontracts. The contractor or
subcontractor must insert in any
subcontracts the clauses set forth in
paragraphs (b)(1) through (5) of this
section and a clause requiring the
subcontractors to include these clauses
in any lower tier subcontracts. The
prime contractor is responsible for
compliance by any subcontractor or
lower tier subcontractor with the
clauses set forth in paragraphs (b)(1)
through (5). In the event of any
violations of these clauses, the prime
contractor and any subcontractor(s)
responsible will be liable for any unpaid
wages and monetary relief, including
interest from the date of the
underpayment or loss, due to any
workers of lower-tier subcontractors,
and associated liquidated damages and
may be subject to debarment, as
appropriate.
(5) Anti-retaliation. It is unlawful for
any person to discharge, demote,
intimidate, threaten, restrain, coerce,
blacklist, harass, or in any other manner
discriminate against, or to cause any
person to discharge, demote, intimidate,
threaten, restrain, coerce, blacklist,
harass, or in any other manner
discriminate against, any worker or job
applicant for:
(i) Notifying any contractor of any
conduct which the worker reasonably
believes constitutes a violation of the
Contract Work Hours and Safety
Standards Act (CWHSSA) or its
implementing regulations in this part;
(ii) Filing any complaint, initiating or
causing to be initiated any proceeding,
or otherwise asserting or seeking to
assert on behalf of themselves or others
any right or protection under CWHSSA
or this part;
(iii) Cooperating in any investigation
or other compliance action, or testifying
in any proceeding under CWHSSA or
this part; or
(iv) Informing any other person about
their rights under CWHSSA or this part.
(c) CWHSSA required records clause.
In addition to the clauses contained in
paragraph (b) of this section, in any
contract subject only to the Contract
Work Hours and Safety Standards Act
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and not to any of the other laws
referenced by § 5.1, the Agency Head
must cause or require the contracting
officer to insert a clause requiring that
the contractor or subcontractor must
maintain regular payrolls and other
basic records during the course of the
work and must preserve them for a
period of 3 years after all the work on
the prime contract is completed for all
laborers and mechanics, including
guards and watchpersons, working on
the contract. Such records must contain
the name; last known address,
telephone number, and email address;
and social security number of each such
worker; each worker’s correct
classification(s) of work actually
performed; hourly rates of wages paid;
daily and weekly number of hours
actually worked; deductions made; and
actual wages paid. Further, the Agency
Head must cause or require the
contracting officer to insert in any such
contract a clause providing that the
records to be maintained under this
paragraph must be made available by
the contractor or subcontractor for
inspection, copying, or transcription by
authorized representatives of the (write
the name of agency) and the Department
of Labor, and the contractor or
subcontractor will permit such
representatives to interview workers
during working hours on the job.
(d) Incorporation of contract clauses
and wage determinations by reference.
Although agencies are required to insert
the contract clauses set forth in this
section, along with appropriate wage
determinations, in full into covered
contracts, and contractors and
subcontractors are required to insert
them in any lower-tier subcontracts, the
incorporation by reference of the
required contract clauses and
appropriate wage determinations will be
given the same force and effect as if they
were inserted in full text.
(e) Incorporation by operation of law.
The contract clauses set forth in this
section (or their equivalent under the
Federal Acquisition Regulation), along
with the correct wage determinations,
will be considered to be a part of every
prime contract required by the
applicable statutes referenced by § 5.1 to
include such clauses, and will be
effective by operation of law, whether or
not they are included or incorporated by
reference into such contract, unless the
Administrator grants a variance,
tolerance, or exemption from the
application of this paragraph. Where the
clauses and applicable wage
determinations are effective by
operation of law under this paragraph,
the prime contractor must be
compensated for any resulting increase
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in wages in accordance with applicable
law.
■ 26. Revise § 5.6 to read as follows:
§ 5.6
Enforcement.
(a) Agency responsibilities. (1)(i) The
Federal agency has the initial
responsibility to ascertain whether the
clauses required by § 5.5 and the
appropriate wage determination(s) have
been incorporated into the contracts
subject to the labor standards provisions
of the laws referenced by § 5.1.
Additionally, a Federal agency that
provides Federal financial assistance
that is subject to the labor standards
provisions of the Act must promulgate
the necessary regulations or procedures
to require the recipient or sub-recipient
of the Federal assistance to insert in its
contracts the provisions of § 5.5. No
payment, advance, grant, loan, or
guarantee of funds will be approved by
the Federal agency unless it ensures that
the clauses required by § 5.5 and the
appropriate wage determination(s) are
incorporated into such contracts.
Furthermore, no payment, advance,
grant, loan, or guarantee of funds will be
approved by the Federal agency after the
beginning of construction unless there is
on file with the Federal agency a
certification by the contractor that the
contractor and its subcontractors have
complied with the provisions of § 5.5 or
unless there is on file with the Federal
agency a certification by the contractor
that there is a substantial dispute with
respect to the required provisions.
(ii) If a contract subject to the labor
standards provisions of the applicable
statutes referenced by § 5.1 is entered
into without the incorporation of the
clauses required by § 5.5, the agency
must, upon the request of the
Administrator or upon its own
initiative, either terminate and resolicit
the contract with the required contract
clauses, or incorporate the required
clauses into the contract (or ensure they
are so incorporated) through
supplemental agreement, change order,
or any and all authority that may be
needed. Where an agency has not
entered directly into such a contract but
instead has provided Federal financial
assistance, the agency must ensure that
the recipient or sub-recipient of the
Federal assistance similarly
incorporates the clauses required into
its contracts. The method of
incorporation of the correct wage
determination, and adjustment in
contract price, where appropriate,
should be in accordance with applicable
law. Additionally, the following
requirements apply:
(A) Unless the Administrator directs
otherwise, the incorporation of the
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57739
clauses required by § 5.5 must be
retroactive to the date of contract award
or start of construction if there is no
award.
(B) If this incorporation occurs as the
result of a request from the
Administrator, the incorporation must
take place within 30 days of the date of
that request, unless the agency has
obtained an extension from the
Administrator.
(C) The contractor must be
compensated for any increases in wages
resulting from incorporation of a
missing contract clause.
(D) If the recipient refuses to
incorporate the clauses as required, the
agency must make no further payment,
advance, grant, loan, or guarantee of
funds in connection with the contract
until the recipient incorporates the
required clauses into its contract, and
must promptly refer the dispute to the
Administrator for further proceedings
under § 5.13.
(E) Before terminating a contract
pursuant to this section, the agency
must withhold or cross-withhold
sufficient funds to remedy any back
wage liability resulting from the failure
to incorporate the correct wage
determination or otherwise identify and
obligate sufficient funds through a
termination settlement agreement, bond,
or other satisfactory mechanism.
(F) Notwithstanding the requirement
to incorporate the contract clauses and
correct wage determination within 30
days, the contract clauses and correct
wage determination will be effective by
operation of law, retroactive to the
beginning of construction, in
accordance with § 5.5(e).
(2)(i) Certified payrolls submitted
pursuant to § 5.5(a)(3)(ii) must be
preserved by the Federal agency for a
period of 3 years after all the work on
the prime contract is completed, and
must be produced at the request of the
Department of Labor at any time during
the 3-year period, regardless of whether
the Department of Labor has initiated an
investigation or other compliance
action.
(ii) In situations where the Federal
agency does not itself maintain certified
payrolls required to be submitted
pursuant to § 5.5(a)(3)(ii), upon the
request of the Department of Labor the
Federal agency must ensure that such
certified payrolls are provided to the
Department of Labor. Such certified
payrolls may be provided by the
applicant, sponsor, owner, or other
entity, as the case may be, directly to the
Department of Labor, or to the Federal
agency which, in turn, must provide
those records to the Department of
Labor.
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(3) The Federal agency will cause
such investigations to be made as may
be necessary to assure compliance with
the labor standards clauses required by
§ 5.5 and the applicable statutes
referenced in § 5.1. Investigations will
be made of all contracts with such
frequency as may be necessary to assure
compliance. Such investigations will
include interviews with workers, which
must be taken in confidence, and
examinations of certified payrolls,
regular payrolls, and other basic records
required to be maintained under
§ 5.5(a)(3). In making such
examinations, particular care must be
taken to determine the correctness of
classification(s) of work actually
performed, and to determine whether
there is a disproportionate amount of
work by laborers and of apprentices
registered in approved programs. Such
investigations must also include
evidence of fringe benefit plans and
payments thereunder. Federal agencies
must give priority to complaints of
alleged violations.
(4) In accordance with normal
operating procedures, the contracting
agency may be furnished various
investigatory material from the
investigation files of the Department of
Labor. None of the material, other than
computations of back wages, liquidated
damages, and monetary relief for
violations of § 5.5(a)(11) or (b)(5), and
the summary of back wages due, may be
disclosed in any manner to anyone
other than Federal officials charged with
administering the contract or program
providing Federal assistance to the
contract, without requesting the
permission and views of the Department
of Labor.
(b) Department of Labor investigations
and other compliance actions. (1) The
Administrator will investigate and
conduct other compliance actions as
deemed necessary in order to obtain
compliance with the labor standards
provisions of the applicable statutes
referenced by § 5.1, or to affirm or reject
the recommendations by the Agency
Head with respect to labor standards
matters arising under the statutes
referenced by § 5.1.
(2) Federal agencies, contractors,
subcontractors, sponsors, applicants,
owners, or other entities, as the case
may be, must cooperate with any
authorized representative of the
Department of Labor in the inspection of
records, in interviews with workers, and
in all other aspects of the investigations
or other compliance actions.
(3) The findings of such an
investigation or other compliance
action, including amounts found due,
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may not be altered or reduced without
the approval of the Department of Labor.
(4) Where the underpayments
disclosed by such an investigation or
other compliance action total $1,000 or
more, where there is reason to believe
that the contractor or subcontractor has
disregarded its obligations to workers or
subcontractors, or where liquidated
damages may be assessed under
CWHSSA, the Department of Labor will
furnish the Federal agency an
enforcement report detailing the labor
standards violations disclosed by the
investigation or other compliance action
and any action taken by the contractor
or subcontractor to correct the
violations, including any payment of
back wages or any other relief provided
workers or remedial actions taken for
violations of § 5.5(a)(11) or (b)(5). In
other circumstances, the Department of
Labor will furnish the Federal agency a
notification summarizing the findings of
the investigation or other compliance
action.
(c) Confidentiality requirements. It is
the policy of the Department of Labor to
protect from disclosure the identity of
its confidential sources and to prevent
an unwarranted invasion of personal
privacy. Accordingly, the identity of a
worker or other informant who makes a
written or oral statement as a complaint
or in the course of an investigation or
other compliance action, as well as
portions of the statement which would
tend to reveal the identity of the
informant, will not be disclosed in any
manner to anyone other than Federal
officials without the prior consent of the
informant. Disclosure of such
statements is also governed by the
provisions of the ‘‘Freedom of
Information Act’’ (5 U.S.C. 552, see part
70 of this subtitle) and the ‘‘Privacy Act
of 1974’’ (5 U.S.C. 552a, see part 71 of
this subtitle).
■ 27. Amend § 5.7 by revising paragraph
(a) to read as follows:
§ 5.7
Reports to the Secretary of Labor.
(a) Enforcement reports. (1) Where
underpayments by a contractor or
subcontractor total less than $1,000,
where there is no reason to believe that
the contractor or subcontractor has
disregarded its obligations to workers or
subcontractors, and where restitution
has been effected and future compliance
assured, the Federal agency need not
submit its investigative findings and
recommendations to the Administrator,
unless the investigation or other
compliance action was made at the
request of the Department of Labor. In
the latter case, the Federal agency will
submit a factual summary report
detailing any violations including any
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data on the amount of restitution paid,
the number of workers who received
restitution, liquidated damages assessed
under the Contract Work Hours and
Safety Standards Act, corrective
measures taken (such as ‘‘letters of
notice’’ or remedial action taken for
violations of § 5.5(a)(11) or (b)(5)), and
any information that may be necessary
to review any recommendations for an
appropriate adjustment in liquidated
damages under § 5.8.
(2) Where underpayments by a
contractor or subcontractor total $1,000
or more, or where there is reason to
believe that the contractor or
subcontractor has disregarded its
obligations to workers or subcontractors,
the Federal agency will furnish within
60 days after completion of its
investigation, a detailed enforcement
report to the Administrator.
*
*
*
*
*
■ 28. Revise § 5.9 to read as follows:
§ 5.9
Suspension of funds.
(a) Suspension and withholding. In
the event of failure or refusal of the
contractor or any subcontractor to
comply with the applicable statutes
referenced by § 5.1 and the labor
standards clauses contained in § 5.5,
whether incorporated into the contract
physically, by reference, or by operation
of law, the Federal agency (and any
other agency), may, upon its own action,
or must, upon written request of an
authorized representative of the
Department of Labor, take such action as
may be necessary to cause the
suspension of the payment, advance, or
guarantee of funds until such time as
the violations are discontinued and/or
until sufficient funds are withheld as
may be considered necessary to
compensate workers for the full amount
of wages and monetary relief to which
they are entitled, and to cover any
liquidated damages and pre-judgment or
post-judgment interest which may be
due.
(b) Cross-withholding. To satisfy a
contractor’s liability for back wages on
a contract, in addition to the suspension
and withholding of funds from the
contract(s) under which the violation(s)
occurred, the necessary funds also may
be withheld under any other Federal
contract with the same prime contractor,
or any other federally assisted contract
that is subject to Davis-Bacon labor
standards and/or the Contract Work
Hours and Safety Standards Act and is
held by the same prime contractor,
regardless of whether the other contract
was awarded or assisted by the same
agency.
(c) Cross-withholding from different
legal entities. Cross-withholding of
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funds may be requested from contracts
held by other entities that may be
considered to be the same prime
contractor as that term is defined in
§ 5.2. Such cross-withholding is
appropriate where the separate legal
entities have independently consented
to it by entering into contracts
containing the withholding provisions
at § 5.5(a)(2) and (b)(3). Crosswithholding from a contract held by a
different legal entity is not appropriate
unless the withholding provisions were
incorporated in full or by reference in
that different legal entity’s contract.
Absent exceptional circumstances,
cross-withholding is not permitted from
a contract held by a different legal entity
where the Davis-Bacon labor standards
were incorporated only by operation of
law into that contract.
■ 29. Revise § 5.10 to read as follows:
§ 5.10
Restitution, criminal action.
(a) In cases other than those
forwarded to the Attorney General of the
United States under paragraph (b) of
this section where violations of the
labor standards clauses contained in
§ 5.5 and the applicable statutes
referenced by § 5.1 result in
underpayment of wages to workers or
monetary damages caused by violations
of § 5.5(a)(11) or (b)(5), the Federal
agency or an authorized representative
of the Department of Labor will request
that restitution be made to such workers
or on their behalf to plans, funds, or
programs for any type of bona fide
fringe benefits within the meaning of 40
U.S.C. 3141(2)(B), including interest
from the date of the underpayment or
loss. Interest on any back wages or
monetary relief provided for in this part
will be calculated using the percentage
established for the underpayment of
taxes under 26 U.S.C. 6621 and will be
compounded daily.
(b) In cases where the Agency Head or
the Administrator finds substantial
evidence that such violations are willful
and in violation of a criminal statute,
the matter will be forwarded to the
Attorney General of the United States
for prosecution if the facts warrant. In
all such cases the Administrator will be
informed simultaneously of the action
taken.
■ 30. Revise § 5.11 to read as follows:
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§ 5.11 Disputes concerning payment of
wages.
(a) This section sets forth the
procedure for resolution of disputes of
fact or law concerning payment of
prevailing wage rates, overtime pay,
proper classification, or monetary relief
for violations of § 5.5(a)(11) or (b)(5).
The procedures in this section may be
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initiated upon the Administrator’s own
motion, upon referral of the dispute by
a Federal agency pursuant to § 5.5(a)(9),
or upon request of the contractor or
subcontractor.
(b)(1) In the event of a dispute
described in paragraph (a) of this
section in which it appears that relevant
facts are at issue, the Administrator will
notify the affected contractor and
subcontractor, if any, by registered or
certified mail to the last known address
or by any other means normally
assuring delivery, of the investigation
findings. If the Administrator
determines that there is reasonable
cause to believe that either the
contractor, the subcontractor, or both,
should also be subject to debarment
under the Davis-Bacon Act or any of the
other applicable statutes referenced by
§ 5.1, the notification will so indicate.
(2) A contractor or subcontractor
desiring a hearing concerning the
Administrator’s investigation findings
must request such a hearing by letter or
by any other means normally assuring
delivery, sent within 30 days of the date
of the Administrator’s notification. The
request must set forth those findings
which are in dispute and the reasons
therefor, including any affirmative
defenses.
(3) Upon receipt of a timely request
for a hearing, the Administrator will
refer the case to the Chief
Administrative Law Judge by Order of
Reference, with an attached copy of the
notification from the Administrator and
the response of the contractor or
subcontractor, for designation of an
Administrative Law Judge to conduct
such hearings as may be necessary to
resolve the disputed matters. The
hearings will be conducted in
accordance with the procedures set
forth in part 6 of this subtitle.
(c)(1) In the event of a dispute
described in paragraph (a) of this
section in which it appears that there
are no relevant facts at issue, and where
there is not at that time reasonable cause
to institute debarment proceedings
under § 5.12, the Administrator will
notify the contractor and subcontractor,
if any, by registered or certified mail to
the last known address or by any other
means normally assuring delivery, of
the investigation findings, and will
issue a ruling on any issues of law
known to be in dispute.
(2)(i) If the contractor or subcontractor
disagrees with the factual findings of the
Administrator or believes that there are
relevant facts in dispute, the contractor
or subcontractor must advise the
Administrator by letter or by any other
means normally assuring delivery, sent
within 30 days of the date of the
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Administrator’s notification. In the
response, the contractor or
subcontractor must explain in detail the
facts alleged to be in dispute and attach
any supporting documentation.
(ii) Upon receipt of a response under
paragraph (c)(2)(i) of this section
alleging the existence of a factual
dispute, the Administrator will examine
the information submitted. If the
Administrator determines that there is a
relevant issue of fact, the Administrator
will refer the case to the Chief
Administrative Law Judge in accordance
with paragraph (b)(3) of this section. If
the Administrator determines that there
is no relevant issue of fact, the
Administrator will so rule and advise
the contractor and subcontractor, if any,
accordingly.
(3) If the contractor or subcontractor
desires review of the ruling issued by
the Administrator under paragraph
(c)(1) or (2) of this section, the
contractor or subcontractor must file a
petition for review thereof with the
Administrative Review Board within 30
days of the date of the ruling, with a
copy thereof to the Administrator. The
petition for review must be filed in
accordance with part 7 of this subtitle.
(d) If a timely response to the
Administrator’s findings or ruling is not
made or a timely petition for review is
not filed, the Administrator’s findings or
ruling will be final, except that with
respect to debarment under the DavisBacon Act, the Administrator will
advise the Comptroller General of the
Administrator’s recommendation in
accordance with § 5.12(a)(2). If a timely
response or petition for review is filed,
the findings or ruling of the
Administrator will be inoperative unless
and until the decision is upheld by the
Administrative Law Judge or the
Administrative Review Board.
■
31. Revise § 5.12 to read as follows:
§ 5.12
Debarment proceedings.
(a) Debarment standard and ineligible
list. (1) Whenever any contractor or
subcontractor is found by the Secretary
of Labor to have disregarded their
obligations to workers or subcontractors
under the Davis-Bacon Act, any of the
other applicable statutes referenced by
§ 5.1, this part, or part 3 of this subtitle,
such contractor or subcontractor and
their responsible officers, if any, and
any firm, corporation, partnership, or
association in which such contractor,
subcontractor, or responsible officer has
an interest will be ineligible for a period
of 3 years to be awarded any contract or
subcontract of the United States or the
District of Columbia and any contract or
subcontract subject to the labor
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standards provisions of any of the
statutes referenced by § 5.1.
(2) In cases arising under contracts
covered by the Davis-Bacon Act, the
Administrator will transmit to the
Comptroller General the name(s) of the
contractors or subcontractors and their
responsible officers, if any, and any
firms, corporations, partnerships, or
associations in which the contractors,
subcontractors, or responsible officers
are known to have an interest, who have
been found to have disregarded their
obligations to workers or subcontractors,
and the recommendation of the
Secretary of Labor or authorized
representative regarding debarment. In
cases arising under contracts covered by
any of the applicable statutes referenced
by § 5.1 other than the Davis-Bacon Act,
the Administrator determines the
name(s) of the contractors or
subcontractors and their responsible
officers, if any, and any firms,
corporations, partnerships, or
associations in which the contractors,
subcontractors, or responsible officers
are known to have an interest, to be
debarred. The names of such ineligible
persons or firms will be published on
SAM or its successor website, and an
ineligible person or firm will be
ineligible for a period of 3 years from
the date of publication of their name on
the ineligible list, to be awarded any
contract or subcontract of the United
States or the District of Columbia and
any contract or subcontract subject to
the labor standards provisions of any of
the statutes referenced by § 5.1.
(b) Procedure. (1) In addition to cases
under which debarment action is
initiated pursuant to § 5.11, whenever as
a result of an investigation conducted by
the Federal agency or the Department of
Labor, and where the Administrator
finds reasonable cause to believe that a
contractor or subcontractor has
committed violations which constitute a
disregard of its obligations to workers or
subcontractors under the Davis-Bacon
Act, the labor standards provisions of
any of the other applicable statutes
referenced by § 5.1, this part, or part 3
of this subtitle, the Administrator will
notify by registered or certified mail to
the last known address or by any other
means normally assuring delivery, the
contractor or subcontractor and
responsible officers, if any, and any
firms, corporations, partnerships, or
associations in which the contractors,
subcontractors, or responsible officers
are known to have an interest of the
finding.
(i) The Administrator will afford such
contractor, subcontractor, responsible
officer, and any other parties notified an
opportunity for a hearing as to whether
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debarment action should be taken under
paragraph (a) of this section. The
Administrator will furnish to those
notified a summary of the investigative
findings.
(ii) If the contractor, subcontractor,
responsible officer, or any other parties
notified wish to request a hearing as to
whether debarment action should be
taken, such a request must be made by
letter or by any other means normally
assuring delivery, sent within 30 days of
the date of the notification from the
Administrator, and must set forth any
findings which are in dispute and the
basis for such disputed findings,
including any affirmative defenses to be
raised.
(iii) Upon timely receipt of such
request for a hearing, the Administrator
will refer the case to the Chief
Administrative Law Judge by Order of
Reference, with an attached copy of the
notification from the Administrator and
the responses of the contractor,
subcontractor, responsible officers, or
any other parties notified, for
designation of an Administrative Law
Judge to conduct such hearings as may
be necessary to determine the matters in
dispute.
(iv) In considering debarment under
any of the statutes referenced by § 5.1
other than the Davis-Bacon Act, the
Administrative Law Judge will issue an
order concerning whether the
contractor, subcontractor, responsible
officer, or any other party notified is to
be debarred in accordance with
paragraph (a) of this section. In
considering debarment under the DavisBacon Act, the Administrative Law
Judge will issue a recommendation as to
whether the contractor, subcontractor,
responsible officers, or any other party
notified should be debarred under 40
U.S.C. 3144(b).
(2) Hearings under this section will be
conducted in accordance with part 6 of
this subtitle. If no hearing is requested
within 30 days of the date of the
notification from the Administrator, the
Administrator’s findings will be final,
except with respect to recommendations
regarding debarment under the DavisBacon Act, as set forth in paragraph
(a)(2) of this section.
(c) Interests of debarred parties. (1) A
finding as to whether persons or firms
whose names appear on the ineligible
list have an interest under 40 U.S.C.
3144(b) or paragraph (a) of this section
in any other firm, corporation,
partnership, or association, may be
made through investigation, hearing, or
otherwise.
(2)(i) The Administrator, on their own
motion or after receipt of a request for
a determination pursuant to paragraph
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(c)(3) of this section, may make a
finding on the issue of interest.
(ii) If the Administrator determines
that there may be an interest but finds
that there is insufficient evidence to
render a final ruling thereon, the
Administrator may refer the issue to the
Chief Administrative Law Judge in
accordance with paragraph (c)(4) of this
section.
(iii) If the Administrator finds that no
interest exists, or that there is not
sufficient information to warrant the
initiation of an investigation, the
requesting party, if any, will be so
notified and no further action taken.
(iv)(A) If the Administrator finds that
an interest exists, the person or firm
affected will be notified of the
Administrator’s finding (by certified
mail to the last known address or by any
other means normally assuring
delivery), which will include the
reasons therefore, and such person or
firm will be afforded an opportunity to
request that a hearing be held to decide
the issue.
(B) Such person or firm will have 20
days from the date of the
Administrator’s ruling to request a
hearing. A person or firm desiring a
hearing must request it by letter or by
any other means normally assuring
delivery, sent within 20 days of the date
of the Administrator’s notification. A
detailed statement of the reasons why
the Administrator’s ruling is in error,
including facts alleged to be in dispute,
if any, must be submitted with the
request for a hearing.
(C) If no hearing is requested within
the time mentioned in paragraph
(c)(2)(iv)(B) of this section, the
Administrator’s finding will be final and
the Administrator will notify the
Comptroller General in cases arising
under the DBA. If a hearing is requested,
the ruling of the Administrator will be
inoperative unless and until the
Administrative Law Judge or the
Administrative Review Board issues an
order that there is an interest.
(3)(i) A request for a determination of
interest may be made by any interested
party, including contractors or
prospective contractors and associations
of contractors, representatives of
workers, and interested agencies. Such
a request must be submitted in writing
to the Administrator, Wage and Hour
Division, U.S. Department of Labor, 200
Constitution Avenue NW, Washington,
DC 20210.
(ii) The request must include a
statement setting forth in detail why the
petitioner believes that a person or firm
whose name appears on the ineligible
list has an interest in any firm,
corporation, partnership, or association
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that is seeking or has been awarded a
contract or subcontract of the United
States or the District of Columbia, or a
contract or subcontract that is subject to
the labor standards provisions of any of
the statutes referenced by § 5.1. No
particular form is prescribed for the
submission of a request under this
section.
(4) The Administrator, on their own
motion under paragraph (c)(2)(ii) of this
section or upon a request for hearing
where the Administrator determines
that relevant facts are in dispute, will by
order refer the issue to the Chief
Administrative Law Judge, for
designation of an Administrative Law
Judge who will conduct such hearings
as may be necessary to render a decision
solely on the issue of interest. Such
proceedings must be conducted in
accordance with the procedures set
forth in part 6 of this subtitle.
(5) If the person or firm affected
requests a hearing and the
Administrator determines that relevant
facts are not in dispute, the
Administrator will refer the issue and
the record compiled thereon to the
Administrative Review Board to render
a decision solely on the issue of interest.
Such proceeding must be conducted in
accordance with the procedures set
forth in part 7 of this subtitle.
■
32. Revise § 5.13 to read as follows:
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§ 5.13
Rulings and interpretations.
(a) All questions relating to the
application and interpretation of wage
determinations (including the
classifications therein) issued pursuant
to part 1 of this subtitle, of the rules
contained in this part and in parts 1 and
3 of this subtitle, and of the labor
standards provisions of any of the laws
referenced in § 5.1 must be referred to
the Administrator for appropriate ruling
or interpretation. These rulings and
interpretations are authoritative and
those under the Davis-Bacon Act may be
relied upon as provided for in section
10 of the Portal-to-Portal Act of 1947 (29
U.S.C. 259). Requests for such rulings
and interpretations should be submitted
via email to dgceinquiries@dol.gov; by
mail to Administrator, Wage and Hour
Division, U.S. Department of Labor, 200
Constitution Ave., NW, Washington, DC
20210; or through other means directed
by the Administrator.
(b) If any such ruling or interpretation
is made by an authorized representative
of the Administrator of the Wage and
Hour Division, any interested party may
seek reconsideration of the ruling or
interpretation by the Administrator of
the Wage and Hour Division. The
procedures and time limits set out in
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§ 1.8 of this subtitle apply to any such
request for reconsideration.
33. Amend § 5.15 by revising
paragraphs (c)(4) and (d)(1) to read as
follows:
■
§ 5.15 Limitations, variations, tolerances,
and exemptions under the Contract Work
Hours and Safety Standards Act.
*
*
*
*
*
(c) * * *
(4)(i) Time spent in an organized
program of related, supplemental
instruction by laborers or mechanics
employed under bona fide
apprenticeship programs may be
excluded from working time if the
criteria prescribed in paragraphs
(c)(4)(ii) and (iii) of this section are met.
(ii) The apprentice comes within the
definition contained in § 5.2.
(iii) The time in question does not
involve productive work or performance
of the apprentice’s regular duties.
(d) * * *
(1) In the event of failure or refusal of
the contractor or any subcontractor to
comply with overtime pay requirements
of the Contract Work Hours and Safety
Standards Act, if the funds withheld by
Federal agencies for the violations are
not sufficient to pay fully the unpaid
wages and any back pay or other
monetary relief due laborers and
mechanics, with interest, and the
liquidated damages due the United
States, the available funds will be used
first to compensate the laborers and
mechanics for the wages to which they
are entitled (or an equitable portion
thereof when the funds are not adequate
for this purpose); and the balance, if
any, will be used for the payment of
liquidated damages.
*
*
*
*
*
§ 5.16
■
[Removed and Reserved]
34. Remove and reserve § 5.16.
§ 5.17
[Removed and Reserved]
35. Remove and reserve § 5.17.
36. Add § 5.18 to subpart A to read as
follows:
■
■
§ 5.18
Remedies for retaliation.
(a) Administrator request to remedy
violation. When the Administrator finds
that any person has discriminated in
any way against any worker or job
applicant in violation of § 5.5(a)(11) or
(b)(5), or caused any person to
discriminate in any way against any
worker or job applicant in violation of
§ 5.5(a)(11) or (b)(5), the Administrator
will notify the person, any contractors
for whom the person worked or on
whose behalf the person acted, and any
upper tier contractors, as well as the
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57743
relevant contracting agency(ies) of the
discrimination and request that the
person and any contractors for whom
the person worked or on whose behalf
the person acted remedy the violation.
(b) Administrator directive to remedy
violation and provide make-whole relief.
If the person and any contractors for
whom the person worked or on whose
behalf the person acted do not remedy
the violation, the Administrator in the
notification of violation findings issued
under § 5.11 or § 5.12 will direct the
person and any contractors for whom
the person worked or on whose behalf
the person acted to provide appropriate
make-whole relief to affected worker(s)
and job applicant(s) or take appropriate
remedial action, or both, to correct the
violation, and will specify the particular
relief and remedial actions to be taken.
(c) Examples of available make-whole
relief and remedial actions. Such relief
and remedial actions may include, but
are not limited to, employment,
reinstatement, front pay in lieu of
reinstatement, and promotion, together
with back pay and interest;
compensatory damages; restoration of
the terms, conditions, and privileges of
the worker’s employment or former
employment; the expungement of
warnings, reprimands, or derogatory
references; the provision of a neutral
employment reference; and the posting
of a notice to workers that the contractor
or subcontractor agrees to comply with
the Davis-Bacon Act and Related Acts
anti-retaliation requirements.
■ 37. Revise § 5.20 to read as follows:
§ 5.20 Scope and significance of this
subpart.
The 1964 amendments (Pub. L. 88–
349) to the Davis-Bacon Act require,
among other things, that the prevailing
wage determined for Federal and
federally assisted construction include
the basic hourly rate of pay and the
amount contributed by the contractor or
subcontractor for certain fringe benefits
(or the cost to them of such benefits).
The purpose of this subpart is to explain
the provisions of these amendments and
make available in one place official
interpretations of the fringe benefits
provisions of the Davis-Bacon Act.
These interpretations will guide the
Department of Labor in carrying out its
responsibilities under these provisions.
These interpretations are intended also
to provide guidance to contractors and
their associations; laborers and
mechanics and their organizations; and
local, State, and Federal agencies. The
interpretations contained in this subpart
are authoritative and may be relied
upon as provided for in section 10 of the
Portal-to-Portal Act of 1947 (29 U.S.C.
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259). The omission to discuss a
particular problem in this subpart or in
interpretations supplementing it should
not be taken to indicate the adoption of
any position by the Secretary of Labor
with respect to such problem or to
constitute an administrative
interpretation, practice, or enforcement
policy. Questions on matters not fully
covered by this subpart may be referred
to the Secretary for interpretation as
provided in § 5.13.
■ 38. Revise § 5.22 to read as follows:
§ 5.22 Effect of the Davis-Bacon fringe
benefits provisions.
The Davis-Bacon Act and the
prevailing wage provisions of the
statutes referenced in § 1.1 of this
subtitle confer upon the Secretary of
Labor the authority to predetermine, as
minimum wages, those wage rates found
to be prevailing for corresponding
classes of laborers and mechanics
employed on projects of a character
similar to the contract work in the area
in which the work is to be performed.
See the definitions of the terms
‘‘prevailing wage’’ and ‘‘area’’ in § 1.2 of
this subtitle. The fringe benefits
amendments enlarge the scope of this
authority by including certain bona fide
fringe benefits within the meaning of
the terms ‘‘wages’’, ‘‘scale of wages’’,
‘‘wage rates’’, ‘‘minimum wages’’, and
‘‘prevailing wages’’, as used in the
Davis-Bacon Act.
■ 39. Revise § 5.23 to read as follows:
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§ 5.23
The statutory provisions.
Pursuant to the Davis-Bacon Act, as
amended and codified at 40 U.S.C.
3141(2), the term ‘‘prevailing wages’’
and similar terms include the basic
hourly rate of pay and, for the listed
fringe benefits and other bona fide
fringe benefits not required by other
law, the contributions irrevocably made
by a contractor or subcontractor to a
trustee or third party pursuant to a bona
fide fringe benefit fund, plan, or
program, and the costs to the contractor
or subcontractor that may be reasonably
anticipated in providing bona fide fringe
benefits pursuant to an enforceable
commitment to carry out a financially
responsible plan or program, which was
communicated in writing to the affected
laborers and mechanics. Section 5.29
discusses specific fringe benefits that
may be considered to be bona fide.
■ 40. Amend § 5.25 by adding paragraph
(c) to read as follows:
§ 5.25 Rate of contribution or cost for
fringe benefits.
*
*
*
*
*
(c) Except as provided in this section,
contractors must ‘‘annualize’’ all
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contributions to fringe benefit plans (or
the reasonably anticipated costs of an
unfunded benefit plan) to determine the
hourly equivalent for which they may
take credit against their fringe benefit
obligation. The ‘‘annualization’’
principle reflects that DBRA credit for
contributions made to bona fide fringe
benefit plans (or the reasonably
anticipated costs of an unfunded benefit
plan) is allowed based on the effective
rate of contributions or costs incurred
for total hours worked during the year
(or a shorter time period) by a laborer
or mechanic.
(1) Method of computation. To
annualize the cost of providing a fringe
benefit, a contractor must divide the
total cost of the fringe benefit
contribution (or the reasonably
anticipated costs of an unfunded benefit
plan) by the total number of hours
worked on both private (non-DBRA)
work and work covered by the DavisBacon Act and/or Davis-Bacon Related
Acts (DBRA-covered work) during the
time period to which the cost is
attributable to determine the rate of
contribution per hour. If the amount of
contribution varies per worker, credit
must be determined separately for the
amount contributed on behalf of each
worker.
(2) Exception requests. Contractors,
plans, and other interested parties may
request an exception from the
annualization requirement by
submitting a request to the WHD
Administrator. A request for an
exception may be granted only if each
of the requirements of paragraph (c)(3)
of this section is satisfied. Contributions
to defined contribution pension plans
(DCPPs) are excepted from the
annualization requirement, and
exception requests therefore are not
required in connection with DCPPs,
provided that each of the requirements
of paragraph (c)(3) is satisfied and the
DCPP provides for immediate
participation and essentially immediate
vesting (i.e., the benefit vests within the
first 500 hours worked). Requests must
be submitted in writing to the Division
of Government Contracts Enforcement
by email to DBAannualization@dol.gov
or by mail to Director, Division of
Government Contracts Enforcement,
Wage and Hour Division, U.S.
Department of Labor, 200 Constitution
Ave. NW, Room S–3502, Washington,
DC 20210.
(3) Exception requirements.
Contributions to a bona fide fringe
benefit plan (or the reasonably
anticipated costs of an unfunded benefit
plan) are excepted from the
annualization requirement if all of the
following criteria are satisfied:
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(i) The benefit provided is not
continuous in nature. A benefit is not
continuous in nature when it is not
available to a participant without
penalty throughout the year or other
time period to which the cost of the
benefit is attributable; and
(ii) The benefit does not compensate
both private work and DBRA-covered
work. A benefit does not compensate
both private and DBRA-covered work if
any benefits attributable to periods of
private work are wholly paid for by
compensation for private work.
■
41. Revise § 5.26 to read as follows:
§ 5.26 ‘‘* * * contribution irrevocably made
* * * to a trustee or to a third person’’.
(a) Requirements. The following
requirements apply to any fringe benefit
contributions made to a trustee or to a
third person pursuant to a fund, plan, or
program:
(1) Such contributions must be made
irrevocably;
(2) The trustee or third person may
not be affiliated with the contractor or
subcontractor;
(3) A trustee must adhere to any
fiduciary responsibilities applicable
under law; and
(4) The trust or fund must not permit
the contractor or subcontractor to
recapture any of the contributions paid
in or any way divert the funds to its
own use or benefit.
(b) Excess payments. Notwithstanding
the above, a contractor or subcontractor
may recover sums which it had paid to
a trustee or third person in excess of the
contributions actually called for by the
plan, such as excess payments made in
error or in order to cover the estimated
cost of contributions at a time when the
exact amount of the necessary
contributions is not yet known. For
example, a benefit plan may provide for
definite insurance benefits for
employees in the event of contingencies
such as death, sickness, or accident,
with the cost of such definite benefits
borne by the contractor or
subcontractor. In such a case, if the
insurance company returns the amount
that the contractor or subcontractor paid
in excess of the amount required to
provide the benefits, this will not be
deemed a recapture or diversion by the
employer of contributions made
pursuant to the plan. (See Report of the
Senate Committee on Labor and Public
Welfare, S. Rep. No. 963, 88th Cong., 2d
Sess., p. 5.)
■
42. Revise § 5.28 to read as follows:
§ 5.28
Unfunded plans.
(a) The costs to a contractor or
subcontractor which may be reasonably
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anticipated in providing benefits of the
types described in the Act, pursuant to
an enforceable commitment to carry out
a financially responsible plan or
program, are considered fringe benefits
within the meaning of the Act (see 40
U.S.C. 3141(2)(B)(ii)). The legislative
history suggests that these provisions
were intended to permit the
consideration of fringe benefits meeting
these requirements, among others, and
which are provided from the general
assets of a contractor or subcontractor.
(Report of the House Committee on
Education and Labor, H. Rep. No. 308,
88th Cong., 1st Sess., p. 4; see also S.
Rep. No. 963, p. 6.)
(b) Such a benefit plan or program,
commonly referred to as an unfunded
plan, may not constitute a fringe benefit
within the meaning of the Act unless:
(1) It could be reasonably anticipated
to provide the benefits described in the
Act;
(2) It represents a commitment that
can be legally enforced;
(3) It is carried out under a financially
responsible plan or program;
(4) The plan or program providing the
benefits has been communicated in
writing to the laborers and mechanics
affected; and
(5) The contractor or subcontractor
requests and receives approval of the
plan or program from the Secretary, as
described in paragraph (c) of this
section.
(c) To receive approval of an
unfunded plan or program, a contractor
or subcontractor must demonstrate in its
request to the Secretary that the
unfunded plan or program, and the
benefits provided under such plan or
program, are ‘‘bona fide,’’ meet the
requirements set forth in paragraphs
(b)(1) through (4) of this section, and are
otherwise consistent with the Act. The
request must include sufficient
documentation to enable the Secretary
to evaluate these criteria. Contractors
and subcontractors may request
approval of an unfunded plan or
program by submitting a written request
in one of the following manners:
(1) By mail to the United States
Department of Labor, Wage and Hour
Division, Director, Division of
Government Contracts Enforcement, 200
Constitution Ave. NW, Room S–3502,
Washington, DC 20210;
(2) By email to unfunded@dol.gov (or
its successor email address); or
(3) By any other means directed by
the Administrator.
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(d) Unfunded plans or programs may
not be used as a means of avoiding the
Act’s requirements. The words
‘‘reasonably anticipated’’ require that
any unfunded plan or program be able
to withstand a test of actuarial
soundness. Moreover, as in the case of
other fringe benefits payable under the
Act, an unfunded plan or program must
be ‘‘bona fide’’ and not a mere
simulation or sham for avoiding
compliance with the Act. To prevent
these provisions from being used to
avoid compliance with the Act, the
Secretary may direct a contractor or
subcontractor to set aside in an account
assets which, under sound actuarial
principles, will be sufficient to meet
future obligations under the plan. Such
an account must be preserved for the
purpose intended. (S. Rep. No. 963, p.
6.)
■ 43. Amend § 5.29 by revising
paragraph (e) and adding paragraph (g)
to read as follows:
§ 5.29
Specific fringe benefits.
*
*
*
*
*
(e) Where the plan is not of the
conventional type described in
paragraph (d) of this section, the
Secretary must examine the facts and
circumstances to determine whether
fringe benefits under the plan are ‘‘bona
fide’’ in accordance with requirements
of the Act. This is particularly true with
respect to unfunded plans discussed in
§ 5.28. Contractors or subcontractors
seeking credit under the Act for costs
incurred for such plans must request
specific approval from the Secretary
under § 5.5(a)(1)(iv).
*
*
*
*
*
(g) For a contractor or subcontractor to
take credit for the costs of an
apprenticeship program, the following
requirements must be met:
(1) The program, in addition to
meeting all other relevant requirements
for fringe benefits in this subpart, must
be registered with the Department of
Labor’s Employment and Training
Administration, Office of
Apprenticeship (‘‘OA’’), or with a State
Apprenticeship Agency recognized by
the OA.
(2) The contractor or subcontractor
may only take credit for amounts
reasonably related to the costs of the
apprenticeship benefits actually
provided to the contractor’s employees,
such as instruction, books, and tools or
materials. It may not take credit for
voluntary contributions beyond such
costs. Amounts the employer is required
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57745
to contribute by a collective bargaining
agreement or by a bona fide
apprenticeship plan will be presumed to
be reasonably related to such costs in
the absence of evidence to the contrary.
(3) Costs incurred for the
apprenticeship for one classification of
laborer or mechanic may not be used to
offset costs incurred for another
classification.
(4) In applying the annualization
principle to compute the allowable
fringe benefit credit pursuant to § 5.25,
the total number of working hours of
employees to which the cost of an
apprenticeship program is attributable is
limited to the total number of hours
worked by laborers and mechanics in
the apprentice’s classification. For
example, if a contractor enrolls an
employee in an apprenticeship program
for carpenters, the permissible hourly
Davis-Bacon credit is determined by
dividing the cost of the program by the
total number of hours worked by the
contractor’s carpenters and carpenters’
apprentices on covered and non-covered
projects during the time period to which
the cost is attributable, and such credit
may only be applied against the
contractor’s prevailing wage obligations
for all carpenters and carpenters’
apprentices for each hour worked on the
covered project.
■ 44. Revise § 5.30 to read as follows:
§ 5.30
Types of wage determinations.
(a) When fringe benefits are prevailing
for various classes of laborers and
mechanics in the area of proposed
construction, such benefits are
includable in any Davis-Bacon wage
determination. The examples contained
in paragraph (c) of this section
demonstrate how fringe benefits may be
listed on wage determinations in such
cases.
(b) Wage determinations do not
include fringe benefits for various
classes of laborers and mechanics
whenever such benefits do not prevail
in the area of proposed construction.
When this occurs, the wage
determination will contain only the
basic hourly rates of pay which are
prevailing for the various classes of
laborers and mechanics. An illustration
of this situation is contained in
paragraph (c) of this section.
(c) The following illustrates examples
of the situations discussed in paragraph
(a) and (b) of this section:
BILLING CODE 4510–27–P
Figure 1 to Paragraph (c)
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BILLING CODE 4510–27–C
■
45. Revise § 5.31 to read as follows:
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§ 5.31 Meeting wage determination
obligations.
(a) A contractor or subcontractor
performing work subject to a DavisBacon wage determination may
discharge their minimum wage
obligations for the payment of both
straight time wages and fringe benefits
by paying in cash, making payments or
incurring costs for ‘‘bona fide’’ fringe
benefits of the types listed in the
applicable wage determination or
otherwise found prevailing by the
VerDate Sep<11>2014
18:27 Aug 22, 2023
Jkt 259001
Secretary of Labor, or by a combination
thereof.
(b) A contractor or subcontractor may
discharge their obligations for the
payment of the basic hourly rates and
the fringe benefits where both are
contained in a wage determination
applicable to their laborers or
mechanics in the following ways:
(1) By paying not less than the basic
hourly rate to the laborers or mechanics
and by making contributions for ‘‘bona
fide’’ fringe benefits in a total amount
not less than the total of the fringe
benefits required by the wage
determination. For example, the
PO 00000
Frm 00222
Fmt 4701
Sfmt 4700
obligations for ‘‘Laborer: common or
general’’ in § 5.30, figure 1 to paragraph
(c), will be met by the payment of a
straight time hourly rate of not less than
$21.93 and by contributions of not less
than a total of $6.27 an hour for ‘‘bona
fide’’ fringe benefits; or
(2) By paying in cash directly to
laborers or mechanics for the basic
hourly rate and by making an additional
cash payment in lieu of the required
benefits. For example, where an
employer does not make payments or
incur costs for fringe benefits, they
would meet their obligations for
‘‘Laborer: common or general’’ in § 5.30,
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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations
figure 1 to paragraph (c), by paying
directly to the laborers a straight time
hourly rate of not less than $28.60
($21.93 basic hourly rate plus $6.27 for
fringe benefits); or
(3) As stated in paragraph (a) of this
section, the contractor or subcontractor
may discharge their minimum wage
obligations for the payment of straight
time wages and fringe benefits by a
combination of the methods illustrated
in paragraphs (b)(1) and (2) of this
section. Thus, for example, their
obligations for ‘‘Laborer: common or
general’’ may be met by an hourly rate,
partly in cash and partly in payments or
costs for fringe benefits which total not
less than $28.60 ($21.93 basic hourly
rate plus $6.27 for fringe benefits).
■ 46. Add § 5.33 to read as follows:
§ 5.33 Administrative expenses of a
contractor or subcontractor.
lotter on DSK11XQN23PROD with RULES2
(a) Creditable costs. The costs
incurred by a contractor’s insurance
carrier, third-party trust fund, or other
third-party administrator that are
directly related to the administration
and delivery of bona fide fringe benefits
to the contractor’s laborers and
mechanics can be credited towards the
contractor’s obligations under a DavisBacon wage determination. Thus, for
example, a contractor may take credit
for the premiums it pays to an insurance
carrier or the contributions it makes to
a third-party trust fund that both
administers and delivers bona fide
fringe benefits under a plan, where the
insurance carrier or third-party trust
fund uses those monies to pay for bona
fide fringe benefits and for the
administration and delivery of such
benefits, including evaluating benefit
VerDate Sep<11>2014
18:27 Aug 22, 2023
Jkt 259001
claims, deciding whether they should be
paid, approving referrals to specialists,
and other reasonable costs of
administering the plan. Similarly, a
contractor may also take credit for
monies paid to a third-party
administrator to perform tasks that are
directly related to the administration
and delivery of bona fide fringe benefits,
including under an unfunded plan.
(b) Noncreditable costs. A contractor’s
own administrative expenses incurred
in connection with the provision of
fringe benefits are considered business
expenses of the firm and are therefore
not creditable towards the contractor’s
prevailing wage obligations, including
when the contractor pays a third party
to perform such tasks in whole or in
part. For example, a contractor may not
take credit for the costs of office
employees who perform tasks such as
filling out medical insurance claim
forms for submission to an insurance
carrier, paying and tracking invoices
from insurance carriers or plan
administrators, updating the
contractor’s personnel records when
workers are hired or separate from
employment, sending lists of new hires
and separations to insurance carriers or
plan administrators, or sending out tax
documents to the contractor’s workers,
nor can the contractor take credit for the
cost of paying a third-party entity to
perform these tasks. Additionally,
recordkeeping costs associated with
ensuring the contractor’s compliance
with the Davis-Bacon fringe benefit
requirements, such as the cost of
tracking the amount of a contractor’s
fringe benefit contributions or making
sure contributions cover the fringe
PO 00000
Frm 00223
Fmt 4701
Sfmt 9990
57747
benefit amount claimed, are considered
a contractor’s own administrative
expenses and are not considered
directly related to the administration
and delivery of bona fide fringe benefits.
Thus, such costs are not creditable
whether the contractor performs those
tasks itself or whether it pays a third
party a fee to perform those tasks.
(c) Questions regarding administrative
expenses. Any questions regarding
whether a particular cost or expense is
creditable towards a contractor’s
prevailing wage obligations should be
referred to the Administrator for
resolution prior to any such credit being
claimed.
47. Add subpart C, consisting of
§ 5.40, to read as follows:
■
Subpart C—Severability
§ 5.40
Severability.
The provisions of this part are
separate and severable and operate
independently from one another. If any
provision of this part is held to be
invalid or unenforceable by its terms, or
as applied to any person or
circumstance, or stayed pending further
agency action, the provision is to be
construed so as to continue to give the
maximum effect to the provision
permitted by law, unless such holding
is one of utter invalidity or
unenforceability, in which event the
provision is severable from this part and
will not affect the remaining provisions.
Julie A. Su,
Acting Secretary, Department of Labor.
[FR Doc. 2023–17221 Filed 8–10–23; 4:15 pm]
BILLING CODE 4510–27–P
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]]>Agencies
[Federal Register Volume 88, Number 162 (Wednesday, August 23, 2023)]
[Rules and Regulations]
[Pages 57526-57747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17221]
[[Page 57525]]
Vol. 88
Wednesday,
No. 162
August 23, 2023
Part II
Department of Labor
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29 CFR Parts 1, 3, and 5
Updating the Davis-Bacon and Related Acts Regulations; Final Rule
Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 /
Rules and Regulations
[[Page 57526]]
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DEPARTMENT OF LABOR
Office of the Secretary
29 CFR Parts 1, 3, and 5
RIN 1235-AA40
Updating the Davis-Bacon and Related Acts Regulations
AGENCY: Wage and Hour Division, Department of Labor.
ACTION: Final rule.
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SUMMARY: In this final rule, the Department of Labor (Department or
DOL) updates regulations issued under the Davis-Bacon and Related Acts.
As the first comprehensive regulatory review in nearly 40 years,
revisions to these regulations will promote compliance, provide
appropriate and updated guidance, and enhance their usefulness in the
modern economy.
DATES:
Effective date: This final rule is effective on October 23, 2023.
Applicability date: The provisions of this final rule regarding
wage determination methodology and related part 1 provisions
prescribing the content of wage determinations may be applied only to
wage determination revisions completed by the Department on or after
October 23, 2023. Except with regard to Sec. 1.6(c)(2)(iii), the
provisions of this final rule are applicable only to contracts entered
into after October 23, 2023. Contracting agencies must apply the terms
of Sec. 1.6(c)(2)(iii) to existing contracts of the types addressed in
that regulatory provision, without regard to the date a contract was
entered into, if practicable and consistent with applicable law. For
additional information, see the discussion of Applicability Date in
section III.C. below.
FOR FURTHER INFORMATION CONTACT: Amy DeBisschop, Director, Division of
Regulations, Legislation, and Interpretation, Wage and Hour Division,
U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW,
Washington, DC 20210; telephone: (202) 693-0406 (this is not a toll-
free number). Alternative formats are available upon request by calling
1-866-487-9243. If you are deaf, hard of hearing, or have a speech
disability, please dial 7-1-1 to access telecommunications relay
services.
Questions of interpretation or enforcement of the agency's existing
regulations may be directed to the nearest WHD district office. Locate
the nearest office by calling the WHD's toll-free help line at (866)
4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time
zone, or log onto WHD's website at https://www.dol.gov////offices for a
nationwide listing of WHD district and area offices.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
In order to provide greater clarity and enhance their usefulness in
the modern economy, on March 18, 2022, the Department published a
notice of proposed rulemaking (NPRM), 87 FR 15698, proposing to update
and modernize the regulations at 29 CFR parts 1, 3, and 5, which
implement the Davis-Bacon Act and the Davis-Bacon Related Acts
(collectively, the DBRA). The Davis-Bacon Act (DBA or Act), enacted in
1931, requires the payment of locally prevailing wages and fringe
benefits on Federal contracts for construction. See 40 U.S.C. 3142. The
DBA applies to workers on contracts entered into by Federal agencies
and the District of Columbia that are in excess of $2,000 and for the
construction, alteration, or repair of public buildings or public
works. Congress subsequently incorporated DBA prevailing wage
requirements into numerous statutes (referred to as ``Related Acts'')
under which Federal agencies assist construction projects through
grants, loans, loan guarantees, insurance, and other methods.
The Supreme Court has described the DBA as ``a minimum wage law
designed for the benefit of construction workers.'' United States v.
Binghamton Constr. Co., 347 U.S. 171, 178 (1954). The Act's purpose is
``to protect local wage standards by preventing contractors from basing
their bids on wages lower than those prevailing in the area.'' Univs.
Research Ass'n, Inc. v. Coutu, 450 U.S. 754, 773 (1981) (quoting H.
Comm. on Educ. & Lab., Legislative History of the Davis-Bacon Act, 87th
Cong., 2d Sess., 1 (Comm. Print 1962)). By requiring the payment of
minimum prevailing wages, Congress sought to ``ensure that Government
construction and federally assisted construction would not be conducted
at the expense of depressing local wage standards.'' Determination of
Wage Rates Under the Davis-Bacon & Serv. Cont. Acts, 5 Op. O.L.C. 174,
176 (1981) (citation and internal quotation marks omitted).\1\
---------------------------------------------------------------------------
\1\ Available at: https://www.justice.gov/sites/default/files/olc/opinions/1981/06/31/op-olc-v005-p0174_0.pdf.
---------------------------------------------------------------------------
Congress has delegated authority to the Department to issue
prevailing wage determinations and prescribe rules and regulations for
contractors and subcontractors on DBA-covered construction projects.\2\
See 40 U.S.C. secs. 3142, 3145. It has also directed the Department,
through Reorganization Plan No. 14 of 1950, to ``prescribe appropriate
standards, regulations and procedures'' to be observed by Federal
agencies responsible for the administration of the Davis-Bacon and
Related Acts. 15 FR 3173, 3176 effective May 24, 1950, reprinted as
amended in 5 U.S.C. app. 1 and in 64 Stat. 1267. These regulations,
which have been updated and revised periodically over time, are
primarily located in parts 1, 3, and 5 of title 29 of the Code of
Federal Regulations.
---------------------------------------------------------------------------
\2\ The DBA and the Related Acts apply to both prime contracts
and subcontracts of any tier thereunder. In this final rule, as in
the regulations themselves, where the terms ``contracts'' or
``contractors'' are used, they are intended to include reference to
subcontracts and subcontractors of any tier.
---------------------------------------------------------------------------
The Department last engaged in a comprehensive revision of the
regulations governing the DBA and the Related Acts in a 1981-1982
rulemaking.\3\ Since that time, Congress has expanded the reach of the
Davis-Bacon \4\ labor standards \5\ significantly, adding numerous
Related Act statutes to which these regulations apply. The Davis-Bacon
Act and now more than 70 active Related Acts \6\ collectively apply to
an estimated $217 billion in Federal and federally assisted
construction spending per year and provide minimum wage rates for an
estimated 1.2 million U.S. construction workers.\7\ The Department
expects these numbers to continue to grow as Federal and State
governments seek to address the significant infrastructure needs of the
country, including, in particular, the energy and transportation
infrastructure necessary to mitigate climate change.\8\
---------------------------------------------------------------------------
\3\ See 46 FR 41444 (1981 NPRM); 47 FR 23644 (1982 final rule);
48 FR 19532 (1983 revised final rule).
\4\ The term ``Davis-Bacon'' is used in this final rule as a
shorthand reference for the Davis-Bacon and Related Acts.
\5\ In this final rule, the term ``Davis-Bacon labor standards''
means, as defined in Sec. 5.2 of the final rule, ``the requirements
of the Davis-Bacon Act, the Contract Work Hours and Safety Standards
Act (other than those relating to safety and health), the Copeland
Act, and the prevailing wage provisions of the other statutes
referenced in Sec. 5.1, and the regulations in parts 1 and 3 of
this subtitle and this part.''
\6\ The Department maintains a list of the Related Acts at
https://www.dol.gov/agencies/whd/government-contracts/.
\7\ These estimates are discussed below in section V (Executive
Order 12866, Regulatory Planning and Review et al.).
\8\ See Executive Order 14008, ``Tackling the Climate Crisis at
Home and Abroad,'' section 206 (Jan. 27, 2021), available at:
https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-abroad/.
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[[Page 57527]]
In addition to the expansion of the prevailing wage rate
requirements of the DBA and the Related Acts, the Federal contracting
system itself has undergone significant changes since the 1981-1982
rulemaking. Federal agencies have dramatically increased spending
through interagency Federal schedules such as the Multiple Award
Schedule (MAS). Contractors have increased their use of single-purpose
entities, such as joint ventures and teaming agreements, in
construction contracts with Federal, State and local governments.
Federal procurement regulations have been overhauled and consolidated
in the Federal Acquisition Regulation (FAR; 48 CFR chapter 1), which
contains a subpart on the Davis-Bacon Act and related contract clauses.
See 48 CFR 22.400 et seq. Court and agency administrative decisions
have developed and clarified myriad aspects of the laws governing
Federal procurement.
During the past 40 years, the Department's DBRA program also has
continued to evolve. Where the program initially was focused on
individual project-specific wage determinations, contracting agencies
now incorporate the Department's general wage determinations for the
construction type in the locality in which the construction project is
to occur. The program also now uniformly uses wage surveys to develop
general wage determinations, eliminating an earlier practice of
developing wage determinations based solely on other evidence about the
general level of unionization in the targeted area. In a 2006 decision,
the Department's Administrative Review Board (ARB) identified several
survey-related wage determination procedures as inconsistent with the
1982 final rule. See Mistick Constr., ARB No. 04-051, 2006 WL 861357,
at *5-7 (Mar. 31, 2006).\9\ As a consequence of these developments, the
use of averages of wage rates from survey responses has increasingly
become the methodology used to issue new wage determinations--
notwithstanding the Department's long-held interpretation that the DBA
allows the use of such averages only as a methodology of last resort.
---------------------------------------------------------------------------
\9\ Decisions of the ARB from 1996 to the present are available
on the Department's website at https://www.dol.gov/agencies/arb/decisions.
---------------------------------------------------------------------------
The Department has also received significant feedback from
stakeholders and others since the last comprehensive rulemaking. In a
2011 report, the Government Accountability Office (GAO) reviewed the
Department's wage survey and wage determination process and found that
the Department was often behind schedule in completing wage surveys,
leading to a backlog of wage determinations and the use of out-of-date
wage determinations in some areas.\10\ The report also identified
dissatisfaction among regulated parties regarding the rigidity of the
Department's county-based system for identifying prevailing rates,\11\
and missing wage rates requiring an overuse of ``conformances'' for
wage rates for specific job classifications.\12\ A 2019 report from the
Department's Office of the Inspector General (OIG) made similar
findings regarding out-of-date wage determinations.\13\
---------------------------------------------------------------------------
\10\ See Gov't Accountability Office, GAO-11-152, ``Davis-Bacon
Act: Methodological Changes Needed to Improve Wage Survey'' (2011)
(2011 GAO Report), at 12-19, available at: https://www.gao.gov/assets/gao-11-152.pdf.
\11\ Id. at 23-24.
\12\ Id. at 32-33.
\13\ See Department of Labor, Office of the Inspector General,
``Better Strategies Are Needed to Improve the Timeliness and
Accuracy of Davis-Bacon Act Prevailing Wage Rates'' (2019) (2019 OIG
Report), at 10, available at: https://www.oversight.gov/sites/
default/files/oig-reports/04-19-001_Davis%20Bacon.pdf.
---------------------------------------------------------------------------
Ensuring that construction workers are paid the wages required
under the DBRA also requires effective enforcement in addition to an
efficient wage determination process. In the last decade, enforcement
efforts at the Department have resulted in the recovery of more than
$229 million in back wages for over 76,000 workers.\14\ But the
Department has also encountered significant enforcement challenges.
Among the most critical of these is the omission of DBRA contract
clauses from contracts that are clearly covered by the DBRA. In one
recent case, a contracting agency agreed with the Department that a
blanket purchase agreement (BPA) it had entered into with a contractor
had mistakenly omitted the Davis-Bacon clauses and wage determination,
but the omission still resulted in an 8-year delay before the workers
were paid the wages they were owed.
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\14\ The listed figures have been corrected from the NPRM. The
updated figures reflect the sum of the annual enforcement statistics
from 2010-2019 in Gov't Accountability Office, GAO-21-13, ``Fair
Labor Standards Act: Tracking Additional Complaint Data Could
Improve DOL's Enforcement'' (2020) (2020 GAO Report), at 39,
available at: https://www.gao.gov/assets/gao-21-13.pdf.
_____________________________________-
Through this rulemaking, the Department seeks to address a number
of these outstanding challenges in the program while also providing
greater clarity in the DBRA regulations and enhancing their usefulness
in the modern economy. In the NPRM, the Department proposed to update
and modernize the regulations implementing the DBRA at 29 CFR parts 1,
3, and 5. In some of these proposed revisions, the Department had
determined that changes it made in the 1981-1982 rulemaking were
mistaken or ultimately resulted in outcomes that are increasingly in
tension with the DBA statute itself. In others, the Department sought
to expand further on procedures that were introduced in that last major
revision, or to propose new procedures that will increase efficiency of
administration of the DBRA and enhance protections for covered
construction workers. The Department invited comments on these proposed
updates and received 40,938 timely comments after a 60-day comment
period.
The comments were from a broad array of constituencies, including
contractors, unions, employer and industry associations, worker
advocacy groups, non-profit organizations, social scientists, law
firms, think tanks, Members of Congress, a state attorney general, a
state department of labor, and other interested members of the public.
All timely received comments may be viewed on the regulations.gov
website, docket ID WHD-2022-0001. Some of the comments the Department
received were general statements of support or opposition, and the
Department also received approximately 40,200 ``campaign'' comments
sent in response to organized initiatives. Commenters expressed a wide
variety of views on the merits of particular aspects of the
Department's proposal; however, most commenters favored some, if not
all, of the changes proposed in the NPRM. The Department has considered
the timely submitted comments addressing the proposed changes.
The Department also received a number of comments that are beyond
the scope of this rulemaking. These included requests that would
require Congress to amend statutory language in the DBRA. For example,
many commenters suggested a change to the $2,000 threshold for DBA and
certain Related Acts to apply. Others suggested eliminating or changing
the weekly certified payroll requirement that is expressly required by
40 U.S.C. sec 3145.
Other comments beyond the scope of the rulemaking included those
that suggested significant new regulatory provisions or changes that
were not proposed in the NPRM. Among these, for example, the Iron
Workers International Union suggested the codification of the
requirement to thoroughly investigate ``area practice'' issues that
arise during the wage survey
[[Page 57528]]
process. See Fry Bros. Corp., WAB No. 76-06, 1977 WL 24823, at *6 (June
14, 1977), aff'd sub nom. Fry Bros. Corp. v. Dep't of Hous. & Urb.
Dev., 614 F.2d 732, 732-33 (10th Cir. 1980). The Iron Workers also
suggested creation of a new administrative process for issuing ``right
to sue'' notices to workers to pursue rights of action authorized by 40
U.S.C. sec 3144(a)(2). As noted in the comment, such an initiative
would be better proposed in a separate and subsequent notice-and-
comment rulemaking.
The Department reviewed the comments submitted in particular for
assertions by interested parties of their reliance on the existing
regulations in a way that would be adversely affected by the proposed
rule. Although many comments stated that the current regulations had
been in place for many years, few specified that parties had relied on
the regulations so as to raise questions about the fairness or
reasonableness of amending them in the current rulemaking. Nonetheless,
the Department considered whether the rule as a whole, as well as its
individual proposed provisions, could plausibly implicate significant
and legitimate reliance interests, and the Department has concluded
that the proposed amendments to the regulations do not raise reliance
interests that would outweigh the agency objectives discussed
throughout this preamble.
The Department did not identify significant reliance interests
among contractors or others in the existing part 1 regulations. The
part 1 regulations involve the Department's methodology for determining
the prevailing wage rates that are required on covered contracts. Some
of the changes the Department proposed to this part may lead to higher
required wage rates in places and lower wage rates in others, and the
new periodic adjustments of certain non-collectively bargained wage
rates will result in a smoother increase in such wage rates over time
instead of longer periods of the same wage rates for an area followed
by steeper increases after the publication of new survey rates.
Similarly, the new language clarifying the procedure for incorporating
prevailing wage rates into multiple award schedules and other similar
contracts may result in more frequent updates to prevailing wage rates
on such contracts when options are executed. These types of changes,
however, should not be significantly different in their effect on
contractors than the fluctuations in prevailing wage rates that already
occur between wage surveys as a result of changes in local economies
and shifts in regional labor markets. Even if the part 1 changes were
to have significant effects on prevailing wage rates in certain local
areas, any reliance interests of local contractors, governmental
agencies, or workers on prior prevailing wage rates would be limited,
given that the changes to the wage determination processes generally
will not affect current contracts--which will continue to be governed
by the wage determinations incorporated at the time of their award,
with limited exceptions. Most of the revisions to part 1 will only
apply to wage surveys that are finalized after the rule becomes
effective, and thus they will generally apply only to contracts awarded
after such new wage determinations are issued.\15\ Contractors will
therefore be able to factor any new wage rates into their bids on
future contracts.
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\15\ As explained in Sec. 1.6(c), whenever a new wage
determination is issued (either after the completion of a new wage
survey or through the new periodic adjustment mechanism), that
revision as a general matter does not and will not apply to
contracts which have already been awarded, with three exceptions.
These exceptions are explained in Sec. 1.6(c)(2)(iii), and they
include where a contract or order is changed to include substantial
covered work that was not within the original scope of work, where
an option is exercised, and also certain ongoing contracts that are
not for specific construction, for which new wage determinations
must be incorporated on an annual basis under Sec.
1.6(c)(2)(iii)(B) of the final rule. The final rule instructs
contracting agencies to apply the terms of Sec. 1.6(c)(2)(iii) to
all existing contracts, without regard to the date of contract
award, if practicable and consistent with applicable law. The
Department does not anticipate that the application of the amended
wage determination methodologies in these situations will result in
unfair harm to reliance interests in a manner sufficient to outweigh
the benefits of the final rule implementation as planned. See also
section III.C. (``Applicability Date'') below.
---------------------------------------------------------------------------
Many of the amendments to part 5 of the regulations are regulatory
changes that codify the Department's current practices and
interpretations of existing regulations. As a result, such changes do
not, in practical terms, impose new obligations on contractors or
contracting agencies. Other changes, such as the new anti-retaliation
provision, provide new remedies to address conduct that already may
subject contractors to potential debarment. Any reliance interest in
the ability to carry out such conduct with lesser potential
consequences is particularly weak. Regardless, these new amendments to
part 5 will generally only apply to contracts that are awarded after
the effective date of this final rule. Contractors entering into new
contracts issued after the rule is published and becomes applicable
will have notice of the regulatory changes and will be able to take the
changes into consideration as they analyze internal controls and
develop their bids or negotiate contract pricing.
ABC argued that the Department's denial of requests to extend the
public comment period beyond the 60 days provided was arbitrary and
capricious, and other commenters expressed disappointment that the
comment period had not been extended. As explained in the Department's
public response to the extension requests in regulations.gov, the
Department concluded that the 60-day period provided the public with a
meaningful opportunity to comment on the proposed rule. The Davis-Bacon
and Related Acts' applicability is limited to Federal and federally
assisted construction projects, and therefore applies to a defined
group of stakeholders. Additionally, various elements of the proposed
and final rules codify or clarify longstanding policies, practices, and
interpretations. As a result, stakeholders were familiar with many of
the issues addressed in the NPRM. The public had additional time to
review the NPRM, which was available on the Department's website on
March 11, 2022, seven days in advance of its publication in the Federal
Register. The comprehensive nature and substance of the comments
received--both in favor of and opposing the proposed rule--support the
Department's view that the 60-day period was appropriate and
sufficient. Finally, the Department and the Office of Management and
Budget have participated in several meetings pursuant to E.O. 12866 at
which stakeholders have had opportunities to elaborate on their public
comments.
Finally, some commenters raised concerns about the administrative
or paperwork burdens contractors might face while adjusting to, and
under, the Department's final rule. The Department considered such
concerns in its economic analyses and concluded that the paperwork
burdens associated with the rule are limited and are outweighed by the
benefits of the regulation.
Having considered all of the comments, the Department has decided
to adopt the NPRM's proposed changes with some modifications.
Significant issues raised in the comments are discussed in more detail
below in section III (``Final Regulatory Revisions''), along with the
Department's responses to those comments.
This final rule includes several elements targeted at increasing
the amount of information available for wage determinations and
speeding up the determination process. In particular, the final rule
amends Sec. 1.3 of the
[[Page 57529]]
regulations by outlining a new methodology to expressly give the Wage
and Hour Division (WHD) Administrator authority and discretion to adopt
State or local wage determinations as the Davis-Bacon prevailing wage
where certain specified criteria are satisfied. Such a change will help
improve the currentness and accuracy of wage determinations, as many
States and localities conduct surveys more frequently than the
Department and have relationships with stakeholders that may facilitate
the process and foster more widespread participation. This revision
will also increase efficiency and reduce confusion for the regulated
community where projects are covered by both DBRA and local or State
prevailing wage laws and contractors are already familiar with
complying with the local or State prevailing wage requirement.
The Department also amends the definition of ``prevailing wage'' in
Sec. 1.2, and in Sec. 1.7, the scope of data considered to identify
the prevailing wage in a given area. To address the overuse of weighted
average rates, the Department returns to the definition of ``prevailing
wage'' in Sec. 1.2 that it used from 1935 to 1983.\16\ Currently, a
wage rate may be identified as prevailing in the area only if it is
paid to a majority of workers in a classification on the wage survey;
otherwise, a weighted average is used. The Department returns instead
to the ``three-step'' method that was in effect before 1983. Under that
method (also known as the 30-percent rule), in the absence of a wage
rate paid to a majority of workers in a particular classification, a
wage rate will be considered prevailing if it is paid to at least 30
percent of such workers. The Department also returns to a prior policy
on another change made during the 1981-1982 rulemaking related to the
delineation of wage survey data submitted for ``metropolitan'' or
``rural'' counties in Sec. 1.7(b). Through this change, the Department
will more accurately reflect modern labor force realities, allow more
wage rates to be determined at smaller levels of geographical
aggregation, and will increase the sufficiency of data at the statewide
level.
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\16\ The 1981-1982 rulemaking went into effect on Apr. 29, 1983.
48 FR 19532.
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Revisions to Sec. Sec. 1.3 and 5.5 are aimed at reducing the need
for the use of ``conformances'' where the Department has received
insufficient data to publish a prevailing wage for a classification of
worker--a process that currently is burdensome on contracting agencies,
contractors, and the Department. This final rule codifies a new
procedure through which the Department may identify (and list on the
wage determination) wage and fringe benefit rates for certain
classifications for which WHD received insufficient data through its
wage survey program. The procedure will reduce the need for
conformances of classifications for which conformances are now often
required.
The Department also revises Sec. 1.6(c)(1) to provide a mechanism
to regularly update certain non-collectively bargained prevailing wage
rates based on the Employment Cost Index (ECI) published by the Bureau
of Labor Statistics (BLS).\17\ The mechanism is intended to keep such
rates more current between surveys so that they do not become out-of-
date and fall behind prevailing rates in the area.
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\17\ Available at: https://www.bls.gov/news.release/eci.toc.htm.
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The Department also strengthens enforcement in several critical
ways. The Department addresses the challenges caused by the omission of
contract clauses. In a manner similar to its rule under Executive Order
11246 (Equal Employment Opportunity), the Department designates the
DBRA contract clauses in Sec. 5.5(a) and (b), and applicable wage
determinations, as effective by ``operation of law'' notwithstanding
their mistaken omission from a contract. This is an extension of the
retroactive modification procedures that were put into effect in Sec.
1.6 by the 1981-1982 rulemaking, and it will expedite enforcement
efforts to ensure the timely payment of prevailing wages to all workers
who are owed such wages under the relevant statutes.
In addition, the Department finalizes new anti-retaliation
provisions in the Davis-Bacon contract clauses in new paragraphs at
Sec. 5.5(a)(11) (DBRA) and (b)(5) (Contract Work Hours and Safety
Standards Act (CWHSSA)), and in a new section of part 5 at Sec. 5.18.
The language ensures that workers who raise concerns about payment
practices or assist agencies or the Department in investigations are
protected from termination or other adverse employment actions.
Finally, to reinforce the remedies available when violations are
discovered, the Department clarifies and strengthens the cross-
withholding procedure for recovering back wages by including new
language in the withholding contract clauses at Sec. 5.5(a)(2) (DBRA)
and (b)(3) (CWHSSA) to clarify that cross-withholding may be
accomplished on contracts held by agencies other than the agency that
awarded the contract. The Department also creates a mechanism through
which contractors will be required to consent to cross-withholding for
back wages owed on contracts held by different but related legal
entities in appropriate circumstances--if, for example, those entities
are controlled by the same controlling shareholder or are joint
venturers or partners on a Federal contract. The revisions also include
a harmonization of the DBA and Related Act debarment standards.
II. Background
A. Statutory and Regulatory History
The Davis-Bacon Act, as enacted in 1931 and subsequently amended,
requires the payment of minimum prevailing wages determined by the
Department to laborers and mechanics working on Federal contracts in
excess of $2,000 for the construction, alteration, or repair, including
painting and decorating, of public buildings and public works. See 40
U.S.C. 3141 et seq. Congress has also included the Davis-Bacon
requirements in numerous other laws, known as the Davis-Bacon Related
Acts (the Related Acts and, collectively with the Davis-Bacon Act, the
DBRA), which provide Federal assistance for construction projects
through grants, loans, loan guarantees, insurance, and other methods.
Congress intended the Davis-Bacon Act to ``protect local wage standards
by preventing contractors from basing their bids on wages lower than
those prevailing in the area.'' Coutu, 450 U.S. at 773 (quoting H.
Comm. on Educ. and Lab., Legis. History of the Davis-Bacon Act, 87th
Cong., 2d Sess., 1 (Comm. Print 1962)).
The Copeland Act, enacted in 1934, added the requirement that
contractors working on Davis-Bacon projects must submit weekly
certified payrolls for work performed on the contract. See 40 U.S.C.
3145. The Copeland Act also prohibits contractors from inducing any
worker to give up any portion of the wages due to them on such
projects. See 18 U.S.C. 874. In 1962, Congress passed CWHSSA, which, as
amended, requires an overtime payment of additional half-time for hours
worked over 40 in the workweek by laborers and mechanics, including
watchpersons and guards, on Federal contracts or federally assisted
contracts containing Federal prevailing wage standards. See 40 U.S.C.
3701 et seq.
As initially enacted, the DBA did not take into consideration the
provision of fringe benefits to workers. In 1964, Congress expanded the
Act to require the Department to include an analysis of fringe benefits
as part of the wage determination process. The amendment
[[Page 57530]]
requires contractors and subcontractors to provide fringe benefits
(such as vacation pay, sick leave, health insurance, and retirement
benefits), or the cash equivalent thereof, to their workers at the
level prevailing for the labor classification on projects of a similar
character in the locality. See Act of July 2, 1964, Public Law 88-349,
78 Stat. 238.
Congress has delegated broad rulemaking authority under the DBRA to
the Department. The DBA, as amended, contemplates regulatory and
administrative action by the Department to determine the prevailing
wages that must be paid and to ``prescribe reasonable regulations'' for
contractors and subcontractors. 40 U.S.C. 3142(b); 40 U.S.C. 3145.
Congress also, through Reorganization Plan No. 14 of 1950, directed the
Department to ``prescribe appropriate standards, regulations and
procedures'' to be observed by Federal agencies responsible for the
administration of the Davis-Bacon and Related Acts. 15 FR 3176; 5
U.S.C. app. 1.
The Department promulgated its initial regulations implementing the
Act in 1935 and has since periodically revised them. See U.S.
Department of Labor, Regulations No. 503 (Sept. 30, 1935). In 1938,
these initial regulations, which set forth the procedures for the
Department to follow in determining prevailing wages, were included in
part 1 of Title 29 of the new Code of Federal Regulations. See 29 CFR
1.1 et seq. (1938). The Department later added regulations to implement
the payroll submission and anti-kickback provisions of the Copeland
Act--first in part 2 and then relocated to part 3 of Title 29. See 6 FR
1210 (Mar. 1, 1941); 7 FR 687 (Feb. 4, 1942); 29 CFR part 2 (1942); 29
CFR part 3 (1943). After the Reorganization Plan No. 14 of 1950, the
Department issued regulations setting forth procedures for the
administration and enforcement of the Davis-Bacon and Related Acts in a
new part 5. 16 FR 4430 (May 12, 1951); 29 CFR part 5. The Department
made significant revisions to the regulations in 1964, and again in the
1981-1982 rulemaking.\18\
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\18\ See 29 FR 13462 (Sept. 30, 1964); 46 FR 41444-70 (NPRM
parts 1 and 5) (Aug. 14, 1981); 47 FR 23644-79 (final rule parts 1,
3, and 5) (May 28, 1982). The Department also proposed a significant
revision of parts 1 and 5 of the regulations in 1979 and issued a
final rule in 1981. See 44 FR 77026 (Dec. 28, 1979) (NPRM Part 1);
44 FR 77080 (Dec. 28, 1979) (NPRM part 5); 46 FR 4306 (Jan. 16,
1981) (final rule part 1); 46 FR 4380 (Jan. 16, 1981) (final rule
part 5). The 1981 final rules, however, were delayed and
subsequently replaced by the 1981-1982 rulemaking. The 1982 final
rule was delayed by litigation and re-published with amendments in
1983 and 1985. 48 FR 19532-53 (Apr. 29, 1983) (final rule parts 1
and 5); 50 FR 4506 (Jan. 31, 1985) (final rule Sec. Sec. 1.3(d) and
1.7(b)).
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While the Department has made periodic revisions to the regulations
in recent years, such as to better protect the personal privacy of
workers, 73 FR 77511 (Dec. 19, 2008); to remove references to the
``Employment Standards Administration,'' 82 FR 2225 (Jan. 9, 2017); and
to adjust Federal civil money penalties, 81 FR 43450 (July 1, 2016), 83
FR 12 (Jan. 2, 2018), 84 FR 218 (Jan. 23, 2019), 87 FR 2328 (Jan. 14,
2022), 88 FR 2210 (Jan. 13, 2023), the Department has not engaged in a
comprehensive review and revision since the 1981-1982 rulemaking.
B. Overview of the Davis-Bacon Program
WHD, an agency within the U.S. Department of Labor, administers the
Davis-Bacon program for the Department. WHD carries out its
responsibilities in partnership with the Federal agencies that enter
into direct DBA-covered contracts for construction and/or administer
Federal assistance to State and local governments and other funding
recipients that is covered by the Related Acts. The State and local
governmental agencies and authorities that receive covered financial
assistance also have important responsibilities in administering
Related Act program rules, as they manage programs through which
covered funding flows or the agencies themselves directly enter into
covered contracts for construction.
The DBRA program includes three basic components in which these
government entities have responsibilities: (1) wage surveys and wage
determinations; (2) contract formation and administration; and (3)
enforcement and remedies.
1. Wage Surveys and Determinations
The DBA delegates to the Secretary of Labor the responsibility to
determine the wage rates that are ``prevailing'' for each
classification of covered laborers and mechanics on similar projects
``in the civil subdivision of the State in which the work is to be
performed.'' 40 U.S.C. 3142(b). WHD carries out this responsibility for
the Department through its wage survey program and derives the
prevailing wage rates from survey information that responding
contractors and other interested parties voluntarily provide. The
program is carried out in accordance with the program regulations in
part 1 of Title 29 of the Code of Federal Regulations, see 29 CFR 1.1
through 1.7, and its procedures are described in guidance documents
such as the ``Davis-Bacon Construction Wage Determinations Manual of
Operations'' (1986) (Manual of Operations) and ``Prevailing Wage
Resource Book'' (2015) (PWRB).\19\ Although part 1 of the regulations
provides the authority for WHD to create project-specific wage
determinations, such project wage determinations, once more common, now
are rarely employed. Instead, nearly all wage determinations are
general wage determinations issued for general types of construction
(building, residential, highway, and heavy) and applicable to a
specific geographic area. General wage determinations can be
incorporated into the vast majority of contracts and create uniform
application of the DBRA for that area.
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\19\ The Manual of Operations is a 1986 guidance document that
is still used internally for reference within WHD. The PWRB is a
2015 document that is intended to provide practical information to
contracting agencies and other interested parties, and is available
at https://www.dol.gov/agencies/whd/government-contracts/prevailing-wage-resource-book.
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2. Contract Formation and Administration
The Federal agencies that enter into DBA-covered contracts or
administer Related Act programs have the initial responsibility to
determine whether a contract is covered by the DBA or one of the
Related Acts and identify the contract clauses and the applicable wage
determinations that must be included in the contract. See 29 CFR
1.6(b). In addition to the Department's regulations, this process is
also guided by parallel regulations in part 22 of the FAR for those
contracts that are subject to the FAR. See 48 CFR part 22. Federal
agencies also maintain their own regulations and guidance governing
agency-specific aspects of the process. See, e.g., 48 CFR subpart 222.4
(Defense); 48 CFR subpart 622.4 (State); U.S. Department of Housing and
Urban Development (HUD), HUD Handbook 1344.1, Federal Labor Standards
Requirements in Housing and Urban Development Programs (2013).\20\
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\20\ Available at: https://www.hud.gov/sites/dfiles/OCHCO/documents/Work-Schedule-Request.pdf.
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Where contracting agencies or interested parties have questions
about such matters as coverage under the DBRA or the applicability of
the appropriate wage determination to a specific contract, they are
directed to submit those questions to the Administrator of WHD (the
Administrator) for resolution. See 29 CFR 5.13. The Administrator
responds to such questions and provides periodic guidance on other
aspects of the DBRA program to contracting agencies and other
interested parties, particularly through All Agency Memoranda
[[Page 57531]]
(AAMs) and ruling letters. In addition, the Department maintains a
guidance document, the Field Operations Handbook (FOH), to provide
guidance for the regulated community and for WHD investigators and
staff on contract administration and enforcement policies.\21\
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\21\ The FOH reflects policies established through changes in
legislation, regulations, significant court decisions, and the
decisions and opinions of the WHD Administrator. It is not used as a
device for establishing interpretive policy. Chapter 15 of the FOH
covers the DBRA, including CWHSSA, and is available at https://www.dol.gov/agencies/whd/field-operations-handbook/Chapter-15.
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During the administration of a DBRA-covered contract, contractors
and subcontractors are required to provide certified payrolls to the
contracting agency to demonstrate their compliance with the
incorporated wage determinations on a weekly basis. See generally 29
CFR part 3. Contracting agencies have the duty to ensure compliance by
engaging in periodic audits or investigations of contracts, including
examinations of payroll data and confidential interviews with workers.
See 29 CFR 5.6. Prime contractors have the responsibility for the
compliance of all the subcontractors on a covered prime contract. 29
CFR 5.5(a)(6). WHD conducts investigations of covered contracts, which
include determining if the DBRA contract clauses or appropriate wage
determinations were mistakenly omitted from the contract. See 29 CFR
1.6(f). If WHD determines that there was such an omission, it will
request that the contracting agency either terminate and resolicit the
contract or modify it to incorporate the required clauses or wage
determinations retroactively. Id.
3. Enforcement and Remedies
In addition to WHD, contracting agencies have enforcement authority
under the DBRA. When a contracting agency's investigation reveals
underpayments of wages of the DBA or one of the Related Acts, the
Federal agency generally is required to provide a report of its
investigation to WHD, and to seek to recover the underpayments from the
contractor responsible. See 29 CFR 5.6(a), 5.7. If violations
identified by the contracting agency or by WHD through its own
investigation are not promptly remedied, contracting agencies are
required to suspend payment on the contract until sufficient funds are
withheld to compensate the workers for the underpayments. 29 CFR 5.9.
The DBRA contract clauses also provide for ``cross-withholding'' if
sufficient funds are no longer available on the contract under which
the violations took place. Under this procedure, funds may be withheld
from any other covered Federal contract or federally assisted contract
held by the same prime contractor in order to remedy the underpayments
on the contract at issue. See 29 CFR 5.5(a)(2), (b)(3). Contractors
that violate the DBRA may also be subject to debarment from future
Federal contracts and federally assisted contracts. See 29 CFR 5.12.
Where WHD conducts an investigation and finds that violations have
occurred, it will notify the affected prime contractor(s) and
subcontractor(s) of the findings of the investigation--including any
determination that workers are owed back wages and whether there is
reasonable cause to believe the contractor may be subject to debarment.
See 29 CFR 5.11(b). Contractors can request a hearing regarding these
findings through the Department's Office of Administrative Law Judges
(OALJ) and may appeal any ruling by the OALJ to the Department's ARB.
Id.; see also 29 CFR parts 6 and 7 (OALJ and ARB rules of practice for
Davis-Bacon proceedings). Decisions of the ARB are final agency actions
that may be reviewable under the Administrative Procedure Act (APA) in
Federal district court. See 5 U.S.C. 702, 704.\22\
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\22\ In addition to reviewing liability determinations and
debarment, the ARB, the Secretary (when exercising discretionary
review), and the courts also have jurisdiction in certain
circumstances to review general wage determinations. Judicial
review, however, is strictly limited to any procedural
irregularities, as there is no jurisdiction to review the
substantive correctness of a wage determination under the DBA. See
Binghamton Constr. Co., 347 U.S. at 177.
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III. Final Regulatory Revisions
A. Legal Authority
The Davis-Bacon Act, as enacted in 1931 and subsequently amended,
requires the payment of certain minimum ``prevailing'' wages determined
by the Department to laborers and mechanics working on Federal
contracts in excess of $2,000 for the construction, alteration, or
repair, including painting and decorating, of public buildings and
public works. See 40 U.S.C. 3141 et seq. The DBA authorizes the
Secretary of Labor to develop a definition for the term ``prevailing''
wage and a methodology for setting it based on wages paid on similar
projects in the civil subdivision of the State in which a covered
project will occur. See 40 U.S.C. 3142(b); Bldg. & Constr. Trades'
Dep't, AFL-CIO v. Donovan, 712 F.2d 611, 616 (D.C. Cir. 1983).
The Secretary of Labor has the responsibility to ``prescribe
reasonable regulations'' for contractors and subcontractors on covered
projects. 40 U.S.C. 3145. The Secretary, through Reorganization Plan
No. 14 of 1950, also has the responsibility to ``prescribe appropriate
standards, regulations and procedures'' to be observed by Federal
agencies responsible for the administration of the Davis-Bacon and
Related Acts ``[i]n order to assure coordination of administration and
consistency of enforcement of the labor standards provisions'' of the
DBRA. 15 FR 3176; 5 U.S.C. app. 1.
The Secretary has delegated authority to promulgate these
regulations to the Administrator and to the Deputy Administrator of the
WHD if the Administrator position is vacant. See Secretary's Order No.
01-2014, 79 FR 77527 (Dec. 24, 2014); Secretary's Order No. 01-2017, 82
FR 6653 (Jan. 19, 2017).
B. Overview of the Final Rule
The Department finalizes its proposals to update and modernize the
regulations at 29 CFR parts 1, 3, and 5, which implement the DBRA. The
sections below address these regulatory revisions as adopted in the
final rule.
1. 29 CFR Part 1
The procedures for determining the prevailing wage rates and fringe
benefits applicable to laborers and mechanics engaged in construction
activity covered by the Davis-Bacon and Related Acts are set forth in
29 CFR part 1. The regulations in this part also set forth the
procedures for the application of such prevailing wage determinations
to covered construction projects.
i. Section 1.1 Purpose and Scope
The Department proposed technical revisions to Sec. 1.1 to update
the statutory reference to the Davis-Bacon Act, now recodified at 40
U.S.C. 3141 et seq. The Department also proposed to eliminate outdated
references to the Deputy Under Secretary of Labor for Employment
Standards at the Employment Standards Administration. The Employment
Standards Administration was eliminated as part of an agency
reorganization in 2009, and its authorities and responsibilities were
devolved into its constituent components, including the WHD. See
Secretary's Order No. 09-2009 (Nov. 6, 2009), 74 FR 58836 (Nov. 13,
2009), 82 FR 2221 (Jan. 9, 2017). The Department further proposed to
revise Sec. 1.1 to reflect the removal of Appendix A of part 1, as
discussed below. The Department also proposed to add new paragraph
(a)(1) to reference the WHD website (https://
[[Page 57532]]
www.dol.gov/agencies/whd/government-contracts, or its successor
website) on which a listing of laws requiring the payment of wages at
rates predetermined by the Secretary of Labor under the Davis-Bacon Act
is currently found.
The Department received one comment in favor of this proposal. The
United Association of Journeymen and Apprentices of the Plumbing and
Pipe Fitting Industry of the United States & Canada (UA) commented in
support of the proposal, noting that the current information was
outdated. The final rule therefore adopts this change as proposed, with
one technical edit to delete an unnecessary conjunction that is not
intended to reflect a change in the substance of this section.
ii. Section 1.2 Definitions
(A) Prevailing Wage
Section 1.2 contains the definition of the term ``prevailing
wage.'' The DBA and the Related Acts require laborers and mechanics on
covered projects to be paid a prevailing wage as set by the Secretary
of Labor, but the statutes do not define the term ``prevailing.'' The
Department's regulatory definition of the term ``prevailing wage'' in
29 CFR 1.2 specifies the basic methodology with which the Department
determines whether a certain wage rate is prevailing in a given
geographic area. The Department uses this methodology to prepare wage
determinations that are incorporated into DBRA-covered contracts to set
minimum wage rates for each classification of covered workers on a
project.
In the NPRM, the Department proposed to redefine the term
``prevailing wage'' in Sec. 1.2 to return to the original methodology
for determining whether a wage rate is prevailing. This original
methodology has been referred to as the ``three-step process.''
Since 1935, the Secretary has interpreted the word ``prevailing''
in the Davis-Bacon Act to be consistent with the common understanding
of the term as meaning ``predominant'' or ``most frequent.'' From 1935
until the 1981-1982 rulemaking, the Department employed a three-step
process to identify the most frequently used wage rate for each
classification of workers in a locality. See Regulation 503 section 2
(1935); 47 FR 23644.\23\ This process identified as prevailing: (1) any
wage rate paid to a majority of workers; and, if there was none, then
(2) the wage rate paid to the greatest number of workers, provided it
was paid to at least 30 percent of workers, and, if there was none,
then (3) the weighted average rate. The second step has been referred
to as the ``30-percent rule.''
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\23\ Implemented Apr. 29, 1983. See 48 FR 19532.
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The three-step process relegated the average rate to a final,
fallback method of determining the prevailing wage. In 1962
congressional testimony, Solicitor of Labor Charles Donahue explained
the reasoning for this sequence in the determination: An average rate
``does not reflect a true rate which is actually being paid by any
group of contractors in the community being surveyed.'' Instead, ``it
represents an artificial rate which we create ourselves, and which does
not reflect that which a predominant amount of workers are paid.'' \24\
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\24\ Administration of the Davis Bacon Act: Hearings before the
Spec. Subcomm. of Lab. of the H. Comm. on Educ. & Lab., 87th Cong.
811-12 (1962) (testimony of Charles Donahue, Solicitor of Labor).
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In 1982, the Department published a final rule that amended the
definition of ``prevailing wage'' by eliminating the second step in the
three-step process--the 30-percent threshold. See 47 FR 23644. The new
process required only two steps: first identifying if there was a wage
rate paid to more than 50 percent of workers, and then, if not, relying
on a weighted average of all the wage rates paid. Id. at 23644-45.
In eliminating the 30-percent threshold, however, the Department
did not change its underlying interpretation of the word
``prevailing''--that it means ``the most widely paid rate'' must be the
``definition of first choice'' for the prevailing wage. 47 FR 23645.
While the 1982 rule continued to allow the Department to use an average
rate as a fallback, the Department rejected commenters' suggestions
that the weighted average could be used in all cases. See 47 FR 23644-
45. As the Department explained, this was because the term
``prevailing'' contemplates that wage determinations mirror, to the
extent possible, those rates ``actually paid'' to workers. 47 FR 23645.
This interpretation--that the definition of first choice for the
term ``prevailing wage'' should be an actual wage rate that is most
widely paid--has now been shared across administrations for over 85
years. In the intervening decades, Congress has amended and expanded
the reach of the Act's prevailing wage requirements dozens of times
without altering the term ``prevailing'' or the grant of broad
authority to the Secretary of Labor to define it.\25\ In addition, the
question was also reviewed by the Office of Legal Counsel (OLC) at the
Department of Justice, which independently reached the same
conclusions: ``prevailing wage'' means the current and predominant
actual rate paid, and an average rate should only be used as a last
resort. See Determination of Wage Rates Under the Davis-Bacon & Serv.
Cont. Acts, 5 Op. O.L.C. 174, 176-77 (1981).\26\
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\25\ See, e.g., Act of Mar. 23, 1941, ch. 26, 55 Stat. 53 (1941)
(applying the Act to alternative contract types); CWHSSA of 1962,
Public Law 87-581, 76 Stat. 357 (1962) (requiring payment of
overtime on contracts covered by the Act); Act of July 2, 1964,
Public Law 88-349, 78 Stat. 238 (1964) (extending the Act to cover
fringe benefits); 29 CFR 5.1 (referencing 57 Related Acts into which
Congress incorporated Davis-Bacon Act requirements between 1935 and
1978).
\26\ Available at: https://www.justice.gov/sites/default/files/olc/opinions/1981/06/31/op-olc-v005-p0174_0.pdf.
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In the 1982 final rule, when the Department eliminated the 30-
percent threshold, it anticipated that this change would increase the
use of artificial average rates. 47 FR 23648-49. Nonetheless, the
Department believed a change was preferable because the 30-percent
threshold could in some cases not account for up to 70 percent of the
remaining workers. See 46 FR 41444. The Department also stated that it
agreed with the concerns expressed by certain commenters that
establishing a prevailing wage rate based on 30-percent of survey wage
rates was ``inflationary'' and gave ``undue weight to collectively
bargained rates.'' 47 FR 23644-45.
After reviewing the development of the Davis-Bacon Act program
since the 1981-1982 rulemaking, the Department has concluded that
eliminating the 30-percent threshold has ultimately resulted in an
overuse of average rates. On paper, the weighted average remains the
fallback method to be used only when there is no majority rate. In
practice, though, it has become a central mechanism to set the
prevailing wage rates included in Davis-Bacon wage determinations and
covered contracts.
Prior to the 1982 rule change, the use of averages to set a
prevailing wage rate was relatively rare. In a Ford Administration
study of Davis-Bacon Act prevailing wage rates in commercial-type
construction in 19 cities, none of the rates were based on averages
because all of the wage rates were ``negotiated'' rates, i.e., based on
collective bargaining agreements (CBAs) that represented a predominant
wage rate in the locality.\27\ The Department
[[Page 57533]]
estimates that prior to the 1982 final rule, as low as 15 percent of
classification rates across all wage determinations were based on
averages. After the 1982 rule was implemented, the use of averages may
have initially increased to approximately 26 percent of all wage
determinations.\28\
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\27\ See Robert S. Goldfarb & John F. Morrall, ``An Analysis of
Certain Aspects of the Administration of the Davis-Bacon Act,''
Council on Wage and Price Stability (May 1976), reprinted in Bureau
of Nat'l Affs., Construction Labor Report, No. 1079, D-1, D-2
(1976).
\28\ See Oversight Hearing on the Davis-Bacon Act, Before the
Subcomm. on Lab. Standards of the H. Comm. on Educ. & Lab., 96th
Cong. 58 (1979) (statement of Ray Marshall, Secretary of Labor)
(discussing study of 1978 determinations showing only 24 percent of
classification rates were based on the 30-percent rule); Jerome
Staller, ``Communications to the Editor,'' Policy Analysis, Vol. 5,
No. 3 (Summer 1979), pp. 397-98 (noting that 60 percent of
determinations in the internal Department 1976 and 1978 studies were
based on the 30-percent rule or the average-rate rule). The authors
of the Council on Wage and Price Stability study, however, pointed
out that the Department's figures were for rates that had been based
on survey data, while 57 percent of rates in the mid-1970's were
based solely on CBAs without the use of surveys (a practice that the
Department no longer uses to determine new rates). See Robert S.
Goldfarb & John F. Morrall II., ``The Davis-Bacon Act: An Appraisal
of Recent Studies,'' 34 Indus. & Lab. Rel. Rev. 191, 199-200 & n.35
(1981). Thus, the actual percentage of annual classification
determinations that were based on average rule before 1982 may have
been as low as 15 percent, and the percent based on the average rule
after 1982 would have been expected to be around 26 percent.
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The Department's current use of weighted averages is now
significantly higher than this 26 percent figure. To analyze the
current use of weighted averages and the potential impacts of this
rulemaking, the Department compiled data for select classifications for
19 recent wage surveys--nearly all of the completed surveys that WHD
began in 2015 or later. The data show that the Department's reliance on
average rates has increased significantly, and now accounts for 63
percent of the observed classification determinations in this recent
time period.\29\
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\29\ See below section V (Executive Order 12866, Regulatory
Planning and Review et al.).
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Such an overuse of weighted averages is inconsistent with the
Department's longstanding interpretation of Congress's use of the word
``prevailing'' in the text of the Act--including the Department's
statements in the preamble to the 1982 rule itself that the definition
of first choice for the ``prevailing'' wage should be the most widely
paid rate that is actually paid to workers in the relevant locality. If
nearly two-thirds of rates that are now being published based on recent
surveys are based on a weighted average, it is no longer fair to say
that it is a fallback method of determining the prevailing wage.
The use of averages as the dominant methodology for issuing wage
determinations is also in tension with the recognized purpose of the
Act ``to protect local wage standards by preventing contractors from
basing their bids on wages lower than those prevailing in the area.''
Coutu, 450 U.S. at 773 (internal quotation marks and citation omitted).
Using an average to determine the minimum wage rate on contracts allows
a single low-wage contractor in the area to depress wage rates on
Federal contracts below the higher rate that may be generally more
prevalent in the community--by factoring into (and lowering) the
calculation of the average that is used to set the minimum wage rates
on local Federal contracts.\30\
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\30\ For example, the 2001 wage determination for electricians
in Eddy County, New Mexico, was an average rate based on responses
that included lower-paid workers that had been brought in from Texas
by a Texas electrical contractor to work on a single job. As the ARB
noted in reviewing a challenge to the wage determination, the result
was that ``contract labor from Texas, where wages reportedly are
lower, effectively has determined the prevailing wage for
electricians in this New Mexico county.'' New Mexico Nat'l Elec.
Contractors Ass'n, ARB No. 03-020, 2004 WL 1261216, at *8 (May 28,
2004).
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To address the increasing tension between the current methodology
and the purpose and definition of ``prevailing,'' the Department
proposed in the NPRM to return to the original three-step process. The
Department expects that re-introducing the 30-percent threshold will
reduce the use of average rates roughly by half--from 63 percent to 31
percent. The data from the regulatory impact analysis included in
section V suggests that returning to the three-step process will
continue to result in 37 percent of prevailing wage rates based on the
majority rule, with the balance of 32 percent based on the 30-percent
threshold, and 31 percent based on the weighted average.
As part of its review of the wage determination definition and
methodology, the Department also considered, but decided against,
proposing to use the median wage rate as the ``prevailing'' rate. The
median, like the average (mean), is a number that can be unrelated to
the wage rate paid with the greatest frequency to employees working in
the locality. Using either the median or the average as the primary
method of determining the prevailing rate is not consistent with the
Department's long-held interpretation of the meaning of the term
``prevailing'' in the Davis-Bacon Act. See 47 FR 23645. The Department
therefore proposed to return to the three-step process and the 30-
percent threshold, and did not propose as alternatives the use of
either the median or mean as the primary or sole methods for making
wage determinations.
(1) Comments on the Definition of ``Prevailing Wage''
The Department received many comments regarding the definition of
the term ``prevailing wage'' and the proposed return to the three-step
process and the 30-percent threshold. These included comments in favor
of the proposal, comments in favor of keeping the current definition,
comments suggesting that the Department abandon the ``modal''
methodology entirely and use only an average, and comments suggesting
the Department should use data from sources other than its wage surveys
before applying any specific methodology. Having reviewed and
considered all the comments, the Department has decided that the best
course is to adopt the re-definition of ``prevailing wage'' as proposed
and return to the three-step process that was in effect from 1935 to
1983.
The Department continues to believe, as it has consistently for
over 85 years, that the best methodology for determining the
``prevailing wage'' under the Davis-Bacon Act is one that uses a
mathematical mode to determine ``the most widely paid rate'' as the
``definition of first choice.'' 47 FR 23645. The modal definition of
prevailing as ``the most widely paid rate'' is the methodology that is
most consistent with Congress's use of the word ``prevailing'' in the
statutory text. Commenters in support of the Department's proposal
cited to various dictionary definitions of the word ``prevailing'' that
support this conclusion. The Construction Employers of America (CEA),
for example, noted the definition of ``prevailing'' as ``most
frequent'' or ``generally current'' and descriptive of ``what is in
general or wide circulation or use'' from Webster's Third New
International Dictionary (1976). Accord 5 Op. O.L.C. at 175. The
Department agrees that this and other similar dictionary definitions
support the use of a modal methodology as the method of first choice.
Although the legislative history of the Act does not suggest that
Congress understood there to be only one possible way of determining
the prevailing wage,\31\ there is no question that a modal methodology
was within the common and ordinary public meaning of the term
``prevailing'' at the time. One
[[Page 57534]]
contemporaneous exchange from 1932 is particularly instructive. During
an early debate over potential amendments to the Act, the Associated
General Contractors (AGC) explained that union representatives believed
the prevailing rate should always be a collectively bargained union
wage, while the contractors, many members of Congress, and Federal
contracting agencies believed it should be ``the rate paid to the
largest number in a particular locality at a given time''--in other
words, the modal rate.\32\
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\31\ See, e.g., 74 Cong. Rec. H6516 (daily ed. Feb 28, 1931)
(statement of Rep. William Kopp) (noting that some might argue ``the
term `prevailing rate' has a vague and indefinite meaning,'' but
that this was not an obstacle because ``the power will be given . .
. to the Secretary of Labor to determine what the prevailing rates
are'').
\32\ See Regulation of Wages Paid to Employees by Contractors
Awarded Government Building Contracts: Hearings before the Committee
on Labor, House of Representatives, 72nd Cong., 1st Sess., on S.
3847 and H. R. 11865 (Apr. 28, 1932) at 34-35. The National
Association of Manufacturers, similarly, argued that the prevailing
wages should be ``considered as that being paid to the largest
number in the particular locality at a particular time.'' Id. at 71-
72. See also 5 Op. O.L.C. at 175-76 (noting that this testimony
leading up to the 1935 amendments ``indicates a common understanding
by spokesmen for labor and management, as well as individual
legislators, that the `prevailing' wage was the wage paid to the
largest number of workers in the relevant classification and
locality'').
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Several commenters on the Department's current proposal also argued
that a modal methodology is generally more consistent with the purpose
of Davis-Bacon Act. These commenters, including the National Black
Worker Center, the International Union of Bricklayers and Allied
Craftworkers, and others, argued that the use of a modal methodology
results in a prevailing wage rate that is ``actually paid'' to workers
in the area. These commenters said that average rates are less
preferable because they are ``artificial'' and may not mirror any of
the actual wage rates paid in the community. North America's Building
Trade Union (NABTU), among others, asserted that ``average rates paid
to no one are not `prevailing[.]' '' Many unions and contractor
associations, including the Washington State Building and Construction
Trades Council (WA BCTC) and NABTU, noted that the use of wage rates
that are actually paid to workers in the community is more likely to
protect local construction firms from being underbid by unscrupulous
low-wage contractors, which is the purpose of the Act.\33\ Accordingly,
commenters in favor of the proposal said averages should only be used
as a fallback method when there is no clear rate prevailing in a given
area.
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\33\ See also Staff of the H. Subcomm. on Lab., 88th Cong.,
Administration of the Davis-Bacon Act, Rep. of the Subcomm. on Lab.
of the Comm. on Educ. & Lab. (Comm. Print 1963) (1963 House
Subcommittee Report), at 7-8; 5 Op. O.L.C. at 177 (quoting the 1963
House Subcommittee Report).
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A wide range of commenters that supported the proposal agreed with
the Department that the use of an average--rather than a ``modal''
number identifying the most prevalent wage rate--is less preferable
because the use of an average allows outlier wage rates paid to very
few workers to influence the prevailing wage. The Leadership Conference
on Civil and Human Rights (LCCHR), the National Women's Law Center,
Oxfam America, and several other civil rights and worker advocacy
organizations similarly commented that ``reliance on weighted averages
creates the potential for a single employer's rates that are
exceptionally high or exceptionally low having outsize influence in
determining the prevailing wage.'' Commenters noted that this feature
of averages makes the overuse of averages less consistent with the
Act's purposes of limiting the depressive effect of low-wage
contractors on the wage rates in the local community.
Commenters supportive of the Department's proposal also argued that
this characteristic of average rates is particularly problematic for
maintaining prevailing local construction standards where the use of an
average results in a prevailing wage rate that is lower than a modal
rate. As a Professor of Economics at the University of Utah commented,
``[b]ecause the mean is sensitive to a long tail of lower wages
compared to the mode, the mode is less likely to undercut local labor
standards, including fringe benefits which underpin training and
apprenticeship programs.'' Conversely, the commenter noted, ``the modal
wage will deter market failures associated with short-run bidding
practices that incentivize bidders to jettison all but the most
necessary short-run costs of specific projects.''
In addition to determining that a modal methodology continues to be
preferable, the Department proposed to return to the lower 30-percent
threshold for using the mode, before falling back to the use of an
average rate. Several commenters, including think tanks such as
Americans for Prosperity and Institute for the American Worker (AFP-
I4AW) and Competitive Enterprise Institute (CEI), opposed this proposal
because they asserted that only a wage rate paid to a ``majority'' of
workers fits the term ``prevailing.'' The National Federation of
Independent Business (NFIB) asserted that 30 percent did not fall
within the meaning of ``prevailing'' when Congress enacted the DBA in
1931 and the Department's initial regulation was ``erroneous'' at the
time. CEI cited to a definition of ``prevailing'' as meaning
``accepted, used, or practiced by most people.'' \34\ CEI asserted that
the term ``most people'' used in that context ``can only mean `a
majority' '' and therefore that ``30 percent is not `prevailing' under
any meaningful sense of the term.''
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\34\ The comment raising this language cited to an entry for
``prevailing'' in the online version of Merriam-Webster's
dictionary. The Department was not able to find that language at the
cited location, but was able to find it in an online version of a
thesaurus from the same publisher. See Prevailing, Merriam-Webster's
Thesaurus, https://www.merriam-webster.com/thesaurus/prevailing.
---------------------------------------------------------------------------
On the other hand, many commenters supported the Department's
proposal and criticized the 1982 rule for seeming to conflate the
dictionary definitions of ``prevailing'' with a ``majority.'' These
commenters, including Mechanical Contractors Association of America
(MCAA), National Electrical Contractors Association (NECA), and the UA,
argued that the term ``prevailing'' is properly understood and defined
as the most common or prevalent--which may be, but is not necessarily,
a ``majority.'' If Congress had intended for the Department to
determine only a ``majority'' wage, they argue, Congress would have
explicitly stated as much in the statutory text. NECA and CEA noted
that the interpretation of ``prevailing'' as not necessarily a majority
was supported by the 1963 report of the House Subcommittee that
examined the 30-percent threshold in depth before the passage of the
1964 amendments to the Act.\35\ A joint comment from the Pennsylvania
Attorney General and the Pennsylvania State Department of Labor and
Industry (PAAG and PADLI) supported the reversion to the original
definition, noting that it ``aligns with the underlying interpretation
of the word `prevailing' as the `most widely paid rate.' ''
---------------------------------------------------------------------------
\35\ 1963 House Subcommittee Report, at 8.
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The Department agrees with these commenters that the 30-percent
threshold is consistent with the meaning of the word ``prevailing''
because ``prevailing'' is not coextensive with ``majority.'' A statute
is normally interpreted with reference to the ordinary public meaning
of its terms ``at the time of its enactment.'' Bostock v. Clayton
Cnty., 140 S. Ct. 1731, 1738 (2020). Dictionaries from around the time
of the 1935 amendments to the Act, when Congress revised the DBA to
require the Secretary to predetermine prevailing wage rates, had
definitions similar to the one cited in the 1981 OLC opinion. See,
e.g., Prevailing, Merriam-Webster, Webster's Collegiate Dictionary (5th
ed. 1936) (``Very generally current; most frequent; predominant'' with
synonyms of common, widespread,
[[Page 57535]]
extensive, and prevalent); Prevailing, Oxford English Dictionary, Vol.
VIII (1933) at 1334 (``2. Predominant in extent or amount; most widely
occurring or accepted; generally current''); 5 Op. O.L.C. at 175. When
there are only two kinds being compared, the ``most frequent'' or
``most widely occurring'' of the two kinds will be a majority, and thus
only a majority will be prevailing. But the same is not true when a
variety of kinds are compared. In such circumstances, even if a
majority will still necessarily be prevailing, it does not follow that
anything less than a majority cannot be considered prevailing. Rather,
as the 1963 House Subcommittee Report concluded, `` `prevailing' means
only a greater number. It need not be a majority.'' \36\
---------------------------------------------------------------------------
\36\ 1963 House Subcommittee Report, at 8.
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In opposing the proposal, AFP-I4AW noted that in the 1981-1982
rulemaking the Department had agreed with commenters that stated ``a
rate based on 30 percent does not comport with the definition of
`prevailing[.]' '' \37\ The Department did not provide further
explanation of this argument in the 1982 final rule, but had stated in
the 1981 NPRM that the 30-percent rule ``ignores the rate paid to up to
70 percent of the workers.'' See 46 FR 41444. Several commenters that
opposed the return to the 30-percent rule, including AFP-I4AW,
Associated Builders and Contractors (ABC), and Clark Pacific, stated
that they still found this reasoning persuasive.\38\
---------------------------------------------------------------------------
\37\ 47 FR 23644.
\38\ Similarly, CEI opposed the use of the 30-percent rule
because it stated that the fact that other workers may earn less
than the wage determined to be the prevailing wage is ``highly
significant,'' because it indicates that the labor market is ``more
competitive in terms of wages.'' Under this reasoning, however, only
an average rate would be sufficient, because any modal (or median)
rate would not include all of the wage rates paid. Using only an
average is not consistent with the Department's long-held
understanding of the meaning of the term ``prevailing.'' See 47 at
FR 23644-45. Neither the text nor the legislative history of the Act
suggests that the term prevailing wage was intended to necessarily
capture and reflect all of the wage rates that are paid in an area.
Instead, the Department has understood the statute as better carried
out with a methodology that seeks to determine which among those
wage rates is prevailing.
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The Department disagrees. As an initial matter, the
characterization of the 30-percent threshold as ``ignoring'' rates is
not unique to that specific threshold. Rather, it is a feature of any
rule based on a mathematical ``mode,'' in which the only value that is
ultimately used is the value of the number that appears most
frequently. This is in contrast to using a mean (average), in which the
values of all the numbers are averaged together, or a median, which
uses only the midpoint value. Both the 30-percent threshold and the
majority rule are modal rules in which the values of the non-prevailing
wage rates do not factor into the final analysis. This feature of a
modal analysis can be viewed as particularly helpful for avoiding an
unwarranted downward or upward impact from outlier wage rates. As the
International Association of Sheet Metal, Air, Rail and Transportation
Workers and the Sheet Metal and Air Conditioning Contractors National
Association (SMART and SMACNA) noted in a joint comment, ``[w]hen using
the mean, unusually low or high values distort the data; the mode, by
contrast, eliminates from the analysis data that grossly deviate from
what workers are actually paid and, therefore, would depress labor
standards if included.''
Moreover, the characterization of the 30-percent threshold as
ignoring up to 70 percent of wage rates distorts how the analysis is
applied in practice. In the three-step process, the first step is to
adopt the majority rate if there is one. Under both the proposed three-
step process and the current majority-only rule, any wage rate that is
paid to a majority of workers would be identified as prevailing. Under
either method, the weighted average will be used whenever there is no
wage rate that is paid to more than 30 percent of employees in the
survey response. The difference between the current majority process
and the three-step methodology is solely in how a wage rate is
determined when there is no majority, but there is a significant
plurality wage rate paid to between 30 and 50 percent of workers. In
that circumstance, the current ``majority'' rule uses averages instead
of the rate that is actually paid to that significant plurality of the
survey population. This is true, for example, even where the same wage
rate is paid to 45 percent of workers and no other rate is paid to as
high a percentage of workers. In such circumstances, the Department
believes that a wage rate paid to between 30 and 50 percent of
workers--instead of an average rate that may be actually paid to few
workers or none at all--is more of a ``prevailing'' wage rate.\39\
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\39\ As the OLC concluded in 1981, the use of an average instead
of the 30-percent rule may be particularly inappropriate in
circumstances where ``there is a wide variation in rates of wages
and a large minority of persons paid significantly lower wages; use
of an average in such a case might result in a contract wage well
below the actual wages paid a majority of employees.'' 5 Op. O.L.C.
at 177 n.3.
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NABTU and other commenters in favor of the Department's proposed
return to the 30-percent threshold noted that Congress specifically
considered on numerous occasions whether to abolish the 30-percent rule
and declined to do so.\40\ Similarly, CEA commented that Congress's
repeated expansion and amendment of the Act from 1935 to 1982 without
changing or addressing the definition of prevailing wage should be
interpreted as ``persuasive evidence that the interpretation is the one
intended by Congress.' '' CFTC v. Schor, 478 U.S. 833, 846 (1986)
(quoting NLRB v. Bell Aerospace Co., 416 U.S. 267, 274-75 (1974)
(footnotes omitted)). The Department agrees that this legislative
acquiescence is significant. It may not necessarily mean that the 30-
percent rule was the only interpretation that was intended by
Congress--especially in light of the subsequent Congressional
acquiescence to the imposition of the majority-only rule.\41\ However,
the expansion of the Act, particularly in 1964 after the extensive
hearings regarding the 30-percent rule, suggests that Congress did not
believe that the 30-percent rule was ``erroneous'' at the time of its
enactment or otherwise believe that it ``did not comport'' with the
definition of prevailing. Cf. 5. Op. O.L.C. at 176 (noting Congress had
acquiesced to the Department's interpretation of the term prevailing as
embodied in its 1935 regulations).
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\40\ See, e.g., Federal Construction Costs Reduction Act of 1977
(S. 1540, H.R. 6100); Davis-Bacon Act--Fringe Benefits (H.R. 404):
Hearings Before the General Subcomm. on Labor of the H. Comm. on
Educ. & Labor, 88th Cong. at 38-39, 125, 219, 225-230 (Mar. 1, 7,
12, 21, 22, and 26, 1963).
\41\ One individual commenter opposing the Department's proposal
asserted that Congress's inaction in reimposing the 30-percent rule
should be considered evidence that the 30-percent rule
``contravenes, rather than is required by, the statutory text.'' But
given the wide discretion the courts have found the DBA affords to
the Secretary of Labor, the Department does not believe that the
acquiescence to the Department's decision to use one specific modal
threshold can be understood as barring it from using another.
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In addition to considering questions regarding Congressional
acquiescence, the Department has also considered whether the length of
time that the majority-only rule has been in place has led to reliance
interests among regulated entities that would counsel against reversion
to the three-step process. While some commenters referred to the length
of time the rule had been in effect, their comments generally did not
focus on related reliance interests. The Department does not believe
that any potential reliance interests would be so significant as to
outweigh the objectives of seeking to align the prevailing wage
methodology better with the longstanding meaning of the term prevailing
and of seeking to better protect workers against the depressive
[[Page 57536]]
effect on wage rates of low-wage contractors. The Department's
illustrative study of the proposed methodology change, in section V.D.
below, suggests that the change may lead to higher required prevailing
wage rates in some places and lower wage rates in others. The magnitude
and direction of changes, however, should not be significantly
different in their effect on contractors than the fluctuations in
prevailing wage rates that already occur between wage surveys as a
result of changes in local economies and shifts in regional labor
markets. Even if the part 1 changes were to have significant effects on
wage rates in certain local areas, any reliance interests of local
contractors, governmental agencies, or workers on prior wage rates
would be minimal, given that the changes to the wage determination
processes generally will not affect current contracts--which will
continue to be governed by the wage determinations incorporated at the
time of their award, with limited exceptions. Most of the revisions to
part 1 will only apply to wage surveys that are finalized after the
rule becomes effective, and thus they will generally apply only to
contracts awarded after such new wage determinations are issued.\42\
Contractors will therefore be able to factor any new wage rates into
their bids or negotiations on future contracts.
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\42\ As explained in Sec. 1.6(c), whenever a new wage
determination is issued (either after the completion of a new wage
survey or through the new periodic adjustment mechanism), that
revision as a general matter does not and will not apply to
contracts which have already been awarded, with three exceptions.
These exceptions are explained in Sec. 1.6(c)(2)(iii), and they
include where a contract or order is changed to include substantial
covered work that was not within the original scope of work, where
an option is exercised, and also certain ongoing contracts that are
not for specific construction, for which new wage determinations
must be incorporated on an annual basis under Sec.
1.6(c)(2)(iii)(B) of the final rule. The final rule instructs
contracting agencies to apply the terms of Sec. 1.6(c)(2)(iii) to
all existing contracts, without regard to the date of contract
award, if practicable and consistent with applicable law. The
Department does not anticipate that the application of the amended
wage determination methodologies in these situations will result in
unfair harm to reliance interests in a manner sufficient to outweigh
the benefits of the final rule implementation as planned. See also
section III.C. (``Applicability Date'') below.
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The Department received many comments in favor of and opposed to
the use of the 30-percent threshold for other reasons. A number of
commenters commented favorably on the use of 30 percent specifically as
a reasonable modal threshold to choose. As the LCCHR, the National
Women's Law Center, Oxfam America, and several other civil rights and
worker advocacy organizations commented, the choice of the 30-percent
threshold appropriately aligns the rate selected with the actual wages
paid to ``significant shares'' of workers in a covered job
classification. The Dakotas Mechanical Contractors Association (DMCA)
and the Sheet Metal, Air Conditioning and Roofing Contractors
Association stated that if 30 percent are paid the same rate, it is
likely the prevailing rate for skilled workers in the area. The Center
for American Progress Action Fund noted that the 30-percent rule is
also followed by some states in the implementation of their own State
prevailing wage programs.\43\ Some commenters argued that a 50-percent
threshold for using a modal rate is simply too high for many geographic
areas. The DMCA, for example, noted that when there are multiple large
construction projects going on in the Dakotas, many contractors travel
from outside the area, and counting wage rates from these out-of-town
contractors can make it difficult for the actual local rate to satisfy
a 50-percent threshold.
---------------------------------------------------------------------------
\43\ See, e.g., Haw. Code R. section 12-22-2(b) (30-percent
threshold in Hawaii); 820 Ill. Comp. Stat. 130/4 section 4(a) (30-
percent threshold in Illinois). Wyoming uses a version of the three-
step process in which the prevailing wage is a majority, or 30-
percent, unless more than one wage rate reaches the 30-percent
threshold, in which case a weighted average is used. See https://dws.wyo.gov/wp-content/uploads/2022/04/Labor-Standards-2022-Prevailing-Wage-Rates.pdf. Minnesota and California use modal
methodologies, but do not have specific thresholds. See Minn. Stat.
section 177.42; Cal. Lab. Code section 1773.9(b)(1).
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Several commenters opposing the proposed reversion to the 30-
percent rule asserted that a reversion to the 30-percent rule would
result in rates that are less accurate or less likely to reflect the
actual wage and fringe benefit rates in a locality, and therefore are
inherently not ``prevailing'' under the meaning of the statute. ABC
stated that a survey of its Federal contractor members showed that only
12.6 percent of its respondents stated that the reversion to the 30-
percent rule would increase the accuracy of wage determinations. The
Modular Building Institute (MBI) commented that a 30-percent threshold
is too small a sample on which to base a prevailing wage. According to
the Taxpayers Protection Alliance, returning to the 30-percent rule
``invites cherry-picking rather than serious analysis.'' On the other
hand, several commenters in favor of the Department's proposal
asserted, similar to the minority of respondents to ABC's survey, that
returning to the 30-percent rule would increase the accuracy of wage
determinations.
In making arguments about accuracy, most commenters for and against
the proposal did not reference data or evidence to support their views.
Commenters opposing the proposal that did cite data compared potential
outcomes under the 30-percent threshold--or any modal determinations
based on voluntary wage surveys--with average rates calculated by other
sources or by reference to studies that found increases in total costs
from the use of any prevailing wage at all. Commenters also argued that
accuracy can be judged by the potential for the percentage of wage
determinations based on CBAs to be higher than the union density in the
local area.\44\ The Department does not agree with these measurements
of accuracy and instead understands these arguments as fundamentally
about what the meaning of ``prevailing'' should be, or whether
prevailing wage laws are good policy in the first place. While a
comparison of costs in jurisdictions in which a State prevailing wage
law applies with those where there is no such requirement may be
helpful to understanding the cost impacts of prevailing wage
requirements, that comparison is not helpful in understanding whether a
certain prevailing wage methodology results in wage determinations that
are ``accurate'' or not, because the point of the prevailing wage law
is to eliminate the payment of substandard wage rates that may be paid
in the absence of the law. For similar reasons, a comparison with
average rates or union density does not reflect accuracy--rather it
reflects different understandings of the term ``prevailing.'' \45\
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\44\ ABC and the National Association of Home Builders (NAHB)
cited data from a 2010 GAO report and subsequent data showing that
as of 2010, a union rate prevailed in 63 percent of all then-
existing wage determinations; in 2018, a union rate prevailed in 48
percent of determinations; and in 2022, a union rate prevailed in 42
percent of determinations. The commenters contrasted these numbers
with data from the BLS that shows union density currently at less
than 20 percent of the construction labor market.
\45\ The Department also notes that, while the percentage of
overall wage determinations based on collective bargaining rates
nationwide has been higher than measures of union density in the
construction industry generally, the percentage of wage
determinations based on collectively bargained rates has
significantly declined in recent years. NAHB and ABC pointed out
that the 2011 GAO report stated that at the time 63 percent of
published wage rates were union prevailing. See 2011 GAO Report, at
20. ABC notes current statistics from the Department show 42 percent
are based on collectively bargained rates.
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AFP-I4AW asserted that it is arbitrary to choose 30 percent instead
of one of the other ``infinite percentages that might be chosen between
0 and 50 percent.'' The Department disagrees with the premise that the
30-percent threshold is arbitrary and therefore
[[Page 57537]]
impermissible. As one commenter in favor of the proposal, the Iron
Workers International Union (Iron Workers), stated, the ``30 percent''
rule can be seen as a ``middle position'' that the Department adopted
in 1935. Among modal rates, the wage rate based on a 20 percent modal
rate or even lower might also have been considered a reasonable
interpretation of the term ``prevailing wage,'' rendering 30-percent a
compromise among all of the different definitions being advanced at the
time. See Bldg. & Constr. Trades Dep't v. Donovan, 553 F. Supp. 352,
354 (D.D.C. 1982) (``There is nothing intrinsically appropriate or
inappropriate to the thirty percent rule or to any other figure as
representing the `prevailing wage.' '').\46\ The fact that the
Department could have chosen an even lower number, or no modal
threshold at all, does not make the choice of 30 percent impermissible.
The number is a familiar one that the Department used over five
decades; as commenters noted, it represents at least a significant
share of workers in a survey; and the Department has tested the
potential outcome of returning to the number and found that it will
alleviate concerns about overuse of average rates. Cf. Ralph Knight,
Inc. v. Mantel, 135 F.2d 514, 518-19 (8th Cir. 1943) (holding the
percentage threshold in an FLSA regulation was not arbitrary because it
was reasonable).
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\46\ The 1982 Donovan district court decision enjoined several
elements of the 1981-1982 rulemaking but upheld the Department's
decision to eliminate the 30-percent threshold. In affirming the
district court's decision on the 30-percent threshold, the D.C.
Circuit stated that it affirmed ``generally for the reasons stated
in [the district court's] opinion.'' Donovan, 712 F.2d at 616.
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The ABC and several other commenters criticized the Department for
proposing to return to the 30-percent threshold without addressing
concerns they have about the methodology of the wage survey program
that produces the underlying numbers to which the three-step process
would be applied. According to ABC and others, the Department should
use more sophisticated representative sampling and statistical
regression methods to come up with prevailing rates because of low
response rates, low sufficiency thresholds and therefore small sample
sizes, and response bias in the Department's voluntary Davis-Bacon wage
survey program. ABC and the National Association of Home Builders
(NAHB) referenced reports by the Department's OIG expressing concern
about low response rates to WHD's wage surveys, including a 2019 report
in which OIG calculated that as many as 53 percent of eligible
contractors had not provided wage data on 7 surveys that were
analyzed.\47\ ABC and others argued that union contractors have a
higher interest in responding to the wage surveys, and so the surveys
tend to disproportionately reflect union rates and are therefore
unreliable.\48\ In a joint comment, a group of housing industry
associations and entities stated that certain segments of the
residential building industry have ``no incentive to participate in a
survey method that provides no direct benefit to their business.''
Without making changes to the survey process to better account for non-
union contractors, ABC argued, the Department should not be changing
the threshold for identifying the prevailing wage. ABC stated that the
survey process in its current form is ``incapable of accurately
determining whether a single rate is paid to 30% (or a majority) of
local construction workers.''
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\47\ See OIG, U.S. Department of Labor, No. 04-19-001-15-001,
``Better Strategies are Needed to Improve the Timeliness and
Accuracy of Davis-Bacon Act Prevailing Wage Rates,'' 8, 15 (2019).
Available at https://www.oig.dol.gov/public/reports/oa/2019/04-19-001-15-001.pdf.
\48\ As evidence that the Department's Davis-Bacon wage surveys
are statistically unrepresentative of the construction workforce,
ABC asserted that average wages--both economywide and in specific
occupations (construction or otherwise)--are consistently higher
than median wages in the United States and most industrialized
economies. For example, ABC points to BLS's May 2021 Occupational
Employment and Wage Statistics (OEWS) survey showing that,
nationally, average wages exceed median wages in 51 of 64 detailed
construction occupations. ABC argues that the Department's surveys
are unrepresentative because, in the wage determinations developed
using the survey data and using the majority rule, the majority rate
(which should be the same as the median) consistently exceeds wages
calculated as survey averages.
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ABC, NAHB, and other commenters stated that the Department should
have considered using data from the BLS, which performs representative
sampling on surveys with higher response rates and larger sample sizes
and uses other more sophisticated regression methods, and therefore
would be more accurate. According to ABC and an individual commenter,
the use of BLS data would result in more timely wage determinations and
decrease the costs of Federal construction, making more projects viable
and increasing construction employment. ABC acknowledged that the
Department has previously declined to use BLS data for DBA wage
determinations for a number of reasons, including that BLS data does
not have the same benefits information, data by county level, or by
construction type. But ABC asserted that none of these reasons entirely
foreclose the use of such data, and it cited the fact that the
Department already uses BLS data for wage determinations under the
Service Contract Act (SCA), which has similar statutory parameters, as
well as the Foreign Labor Certification Program, and with some
statistical modeling, for Federal employee pay under the Federal
Employee Pay Comparability Act. ABC also argued that the Department's
current use of larger county groupings to identify wage rates for
counties with insufficient data and the proposal in the NPRM to remove
the bar on cross-consideration of rural and metropolitan data both
undercut the Department's arguments against using BLS data. NAHB and
the Mortgage Bankers Association (MBA) also suggested that the
Department should consider outsourcing the wage data collection process
to third-party organizations they believe would be better equipped to
collect greater quantities of data.
A joint comment from the National Asphalt Pavement Association,
National Ready Mixed Concrete Association, and National Stone, Sand &
Gravel Association (NAPA, NRMPCA, and NSSGA) suggested that reverting
to the use of a 30-percent threshold is ``unnecessary'' because there
are other ways to improve the survey process. They suggested using the
certified payrolls that are submitted on DBRA projects to help identify
prevailing wages.\49\ They also suggested updating and standardizing
classifications that are ``outdated'' and confusing where they differ
across political subdivisions. AGC suggested that the Department should
revise the wage survey process to allow contractors to report wage
information by individual craft classifications in each county by
construction type, instead of broken-down project-by-project.
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\49\ The Department appreciates this suggestion, but notes that
using certified payrolls instead of the wage survey process would
result in prevailing rates based entirely on data from DBRA-covered
projects. While such data could be helpful in certain circumstances
in which there is not sufficient data from private sources, it could
not be used instead of the wage survey process because the DBA
contemplates a wider analysis of wage rates that includes those on
wholly privately funded projects where such data is available. See
generally infra section III.B.1.iii.(B) (``29 CFR 1.3(d)'').
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Several commenters stated that even if the 30-percent rule had been
permissible previously, the Department could not reasonably return to
it because the construction labor market has changed and prevailing
rates ``rarely occur in the modern economy.'' ABC noted that union
density has declined in the construction labor market from 34 percent
in 1981 to under 14 percent in recent years. The Association of
Washington Housing Authorities (AWHA) stated that the increase in
[[Page 57538]]
reliance on weighted averages actually reflects reality in certain
construction types where union participation is lacking. AWHA also
stated that there is no need to return to the 30-percent rule because
there is better labor market wage information now available than there
was when the 30-percent rule was last in effect, with both proprietary
and public databases now containing ``up-to-date wage and salary
information on thousands of job classifications at varying geographic
levels.''
Finally, comments from ABC and a group of U.S. Senators asserted
that the Department's reasoning for its proposal is contrary to the
D.C. Circuit's decision in Building & Construction Trades' Department
v. Donovan, 712 F.2d 611, 616-17 (D.C. Cir. 1983). In that decision,
the Department's 1981-1982 rulemaking eliminating the 30-percent
threshold had been challenged. The D.C. Circuit stated that the
Department's new definition of ``prevailing'' as, first, the majority
rate, and second, a weighted average, was ``within a common and
reasonable reading of the term'' and ``would not defeat the essential
purpose of the statute, which was to ensure that federal wages
reflected those generally paid in the area.'' Id. at 616-17. ABC stated
that this holding allowing the Department to eliminate the 30-percent
threshold could not be squared with the Department's reasoning in the
NPRM that the overuse of averages was inconsistent with the text and
purpose of the Act. See 87 FR 15704.
Considering these comments, the Department agrees with the
commenters in favor of the proposal that the 30-percent threshold is a
reasonable threshold that represents the best course for making wage
determinations based on wage rates that are actually paid to workers in
the relevant area. The Department also believes that returning to the
use of the 30-percent threshold at the second step in the wage
determination process is preferable for the same reasons that it is
preferable to use a modal methodology at all instead of using averages
or the median for all wage determinations. The mode is more consistent
with the term ``prevailing,'' and it is in general more protective of
prevailing wage rates against the depressive effect of low-wage
contractors. Even when adopting the current majority threshold for
modal wage determinations in 1982, the Department reiterated this long-
held interpretation that the ``most widely paid rate'' should be the
``definition of first choice'' for the prevailing wage, and that wage
determinations should ``mirror, to the extent possible, those rates
actually paid in appropriate labor markets.'' 47 FR 23645.
The Department disagrees that the D.C. Circuit's Donovan decision
precludes a return to the 30-percent threshold or prevents the
Department from concluding that an overuse of averages is in tension
with the Department's long-held interpretation of the Act. In Donovan,
the court stated that the majority-only rule was ``within a common and
reasonable reading'' of the term prevailing, and ``would not defeat the
essential purpose of the statute.'' 712 F.2d at 616-17. The court did
not, however, state or even suggest that the majority rule represented
the only proper reading of the statute. To the contrary, the court
stated that it was upholding the new rule because ``the statute
delegates to the Secretary, in the broadest terms imaginable, the
authority to determine which wages are prevailing.'' 712 F.2d at 616.
As the Department explained in the NPRM, there has been a
significant increase in the use of weighted averages between 1983 and
the present--from as low as 15 percent prior to the implementation of
the current regulations to 63 percent in the Department's review of 19
recent surveys. Several commenters noted that this increase in the use
of averages appears to be far beyond what was expected at the time the
Department implemented the majority-only rule and at the time of the
D.C. Circuit opinion. For example, the unions that opposed the 1981-
1982 rulemaking in court argued that it could result in ``a third or
more'' of wage rates based on weighted averages. Donovan, 712 F.2d at
616. Now, nearly double that number--two thirds--of prevailing wage
rates published from recent surveys have been based on weighted
averages. These new circumstances represent a departure from the
Department's longstanding interpretation of the Act. 5 Op. O.L.C. at
176-77.
The Department also disagrees with comments suggesting the
Department can only justify its return to the 30-percent threshold by
finding that the current majority rule is per se not allowed by the
statute and suggesting furthermore that the Donovan decision bars the
Department from reaching that conclusion. As noted, however, the
decision in Donovan reflects that there can be more than one possible
threshold for determining whether a wage rate is prevailing, and that
the statute delegates the decision about methodology to the Secretary
of Labor. 712 F.2d at 616. The Department has concluded that the
original three-step process is preferable to the majority-only rule
because it is more consistent with the meaning of the word
``prevailing'' and will be more protective against the depression of
wage rates by low-wage contractors. Under these circumstances, the
Department does not need to find that the current overuse of averages
renders the majority-only rule effectively barred by the statute.
The Department also considered the comments critiquing the
interface between the wage survey program and the Department's use of a
modal methodology to determine prevailing wages and the use of the 30-
percent modal threshold in particular. The Department does not believe
it is necessary or preferable to abandon the current Davis-Bacon wage
survey process, or to require by regulation that survey data be
adjusted with regression or other similar statistical analyses. The
process of adjusting survey data using weighting, imputation, or other
representative sampling methods would require additional data regarding
the universe of projects and classifications of workers--divided by
construction type--that does not currently exist and would be overly
burdensome and costly to obtain.\50\ Moreover, other commenters on the
rule specifically opposed the use of sampling or other similar
methodologies because the decisions about the underlying assumptions
used in the calculations or modeling would give the Department too much
discretion that would be difficult for stakeholders to scrutinize.
Finally, such sampling or other statistical methods could also
significantly increase the likelihood that the wage rates the
Department publishes would be akin to weighted averages and would not
be wage rates that are actually paid to workers in the relevant areas.
The Department declines to impose such requirements in this final rule.
---------------------------------------------------------------------------
\50\ Similarly, the 2019 OIG report noted WHD officials' concern
that using statistical sampling during the clarification process
instead of manual reviews of survey data might be less efficient and
effective than current processes, and that ``use of statistical
sampling in lieu of comprehensive clarification would likely result
in the publication of fewer, and less robust, wage determinations.''
Report at 7, 43.
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The Department also considered ABC's and others' arguments that it
should entirely discontinue the Davis-Bacon wage surveys and instead
use data from BLS surveys to determine prevailing wages in the first
instance. As ABC recognized in its comment, the Department has explored
this possibility on various occasions in the past at the recommendation
of the GAO and others. For example, ABC cited a 2004 letter
[[Page 57539]]
from the Assistant Secretary for Employment Standards, to the
Department's OIG, noting the actions the Department had taken to
consider this option, including funding pilot surveys to determine the
feasibility of collecting fringe benefit data as part of BLS's National
Compensation Survey (NCS), and working with BLS to examine the extent
to which the Occupational Employment and Wage Statistics (OEWS) survey
might provide detailed construction industry wage rate information by
locality and occupation.\51\
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\51\ Letter from Victoria A. Lipnic, Assistant Secretary for
Employment Standards, to Elliot P. Lewis, Assistant Inspector
General for Audit (Feb. 18, 2004). Available at: https://www.oig.dol.gov/public/reports/oa/2004/04-04-003-04-420x.pdf.
---------------------------------------------------------------------------
The Department has repeatedly concluded that relying on BLS data
sources to determine prevailing wages instead of continuing to conduct
Davis-Bacon wage surveys is not preferable, and the Department again
reaches this conclusion. No BLS survey publishes, at a county level,
the wage data, fringe benefit data, data for sufficiently specific
construction craft classifications, and data by construction type, that
would align with the Department's interpretations of the statutory
requirements to determine prevailing wages for ``corresponding
class[es]'' of workers on ``projects of a character similar'' within
``civil subdivisions of the State'' in which the work is to be
performed. 40 U.S.C. 3142(b).\52\ The Department does not agree with
ABC that the Department's current use of larger geographic groupings
under certain conditions suggests that the Department should adopt BLS
data that is compiled for areas larger than a county. The scope of
consideration regulations at Sec. 1.7 allow the Department to consider
data from larger geographic areas only when there is insufficient wage
survey data in a given county. This reflects the Department's long-
established position that the county level is the appropriate level at
which to determine prevailing wage rates where possible, and as such
that the wholesale adoption of BLS data compiled for larger areas
generally would not be appropriate. The Department also considered
whether it would be possible to combine BLS surveys or use underlying
BLS microdata instead of the Department's wage surveys but determined
that the BLS's methodology does not allow such a procedure because,
among other reasons, BLS does not collect data on a project-by-project
basis and therefore does not capture circumstances in which employees
may be paid different hourly rates for work based on the type of
project. Finally, the Department's conclusion is bolstered by the
widespread practice of states, many of which have adopted prevailing
wage laws, that have likewise determined that wage surveys are an
appropriate mechanism to set prevailing wages.\53\
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\52\ The BLS OEWS program produces employment and wage estimates
for the nation as a whole, for individual states, for metropolitan
areas delineated by the Office of Management and Budget (OMB), and
nonmetropolitan areas, but it does not produce wage estimates at the
county level, which is the default ``civil subdivision'' that the
Department uses to determine prevailing wages. See Michael K. Lettau
and Dee A. Zamora, BLS, ``Wage estimates by job characteristic: NCS
and OES program data'' (2013). Available at: https://doi.org/10.21916/mlr.2013.27. Additionally, the data for metropolitan and
nonmetropolitan areas do not allow for wage rates for occupations by
industry. The NCS program provides measures of compensation trends
and the incidence of employer-sponsored benefits, but only at the
national and Census region levels. The BLS's Quarterly Census of
Employment and Wages has data at the county level, but the data are
not available by craft. Both the OEWS and NCS programs classify
occupations based on job duties and responsibilities that apply
nationwide in accordance with the Standard Occupational
Classification system. WHD's survey program, on the other hand, has
always considered local area practice in determining how work is
classified for each occupation.
\53\ See, e.g., 26 Me. Rev. Stat. Ann. section 1308 (requiring
the Maine Bureau of Labor Standards to determine prevailing wages
through a regularly conducted wage and benefits survey); Minn. R.
section 5200.1020 (providing for annual surveys to calculate
prevailing wages on covered highway and construction projects);
Mont. Code Ann. section 18-2-414 (authorizing the Montana Commission
of Labor and Industry to either perform a wage survey or adopt the
rates set by the United States Department of Labor); Tex. Gov't Code
Ann. section 2258.022 (setting the state prevailing wage either
through wage surveys or by incorporating the rates set by the United
States Department of Labor).
---------------------------------------------------------------------------
ABC is correct that the Department uses BLS data for wage
determinations under the SCA, which has important statutory
similarities with the DBA in that it requires payment of wages ``in
accordance with prevailing rates in the locality.'' 41 U.S.C. 6703(1).
There are several reasons, however, why the Department's decisions have
been different under the SCA than under the DBA. The first is that the
SCA does not contain the same statutory text as the DBA requiring
prevailing wages to be based on ``projects of a character similar.'' 40
U.S.C. 3142(b). This distinction underscores the Department's need to
survey DBA wage rates by construction type, a level of detail that does
not exist in any BLS data source. In addition, the SCA contains an
alternative mechanism that gives weight to collectively bargained rates
by requiring them to govern certain successor contracts where the
predecessor contract was covered by a CBA. 41 U.S.C. 6703(1).
Comparisons between the DBA and SCA can also be fraught because
construction work is significantly different from most service work. As
a Professor of Economics at the University of Utah commented on this
rulemaking, the construction industry is based on a ``craft
classification'' model--in which crafts are understood to be a
collection of related skills that allow a craft worker to address a
range of jobs as that worker goes from project to project, and which
can only be supported with proper investment and skills training.
Protecting craft classifications where they prevail was one of the core
original purposes of the Davis-Bacon Act. See Charles Donahue, ``The
Davis-Bacon Act and the Walsh-Healey Public Contracts Act: A Comparison
of Coverage and Minimum Wage Provisions,'' 29 Law & Contemp. Probs.
488, 508 (1964) (noting the Department's deference to local craft
organization in wage determinations because ``[t]o do otherwise would
destroy craft lines which the statute seeks to preserve''); see also
Donovan, 712 F.2d at 625 (noting that Congress was ``quite clear'' in
1935 that it was an ``evasion of the Act'' to break down craft
classifications where they prevail). This industrial organization and
the legislative history support the Department's stricter approach
under the DBRA to protecting actual wage rates that prevail because
when those rates are higher than the average wage, they are often
higher because they are incorporating apprenticeship and other training
costs that are critical for the maintenance of the craft organization
of the local construction market.\54\ It also explains why the
Department does not agree with ABC's suggestions that the Davis-Bacon
program should adopt the standardized national Standard Occupational
Classification system for identifying construction worker
classifications and also abandon the division of wage rates by
``construction type,'' so as to align all Davis-Bacon classifications
with the format of BLS program data. Similarly, the differences between
the SCA and the DBA and the industry sectors they cover, and the craft-
protection focus of the DBA, also explain why the Department does not
believe it is appropriate, as ABC suggests, to adopt a single
nationwide
[[Page 57540]]
fringe benefit rate under the DBRA in the same way that it has under
the SCA.
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\54\ Notwithstanding these differences, under the SCA
regulations, the Department also may publish prevailing collectively
bargained rates rather than rely on BLS data. See 29 CFR 4.51(b)
(``Where a single rate is paid to a majority (50 percent or more) of
the workers in a class of service employees engaged in similar work
in a particular locality, that rate is determined to prevail.'').
---------------------------------------------------------------------------
ABC commented that the Department should be more flexible with how
it analyzes the statutory requirements and find that the statute
permits the use of averages or modal approximations derived from
statistical modeling rather than revert to the three-step process and
retain the current wage survey process. ABC and other commenters also
suggested the use of BLS data would have other important benefits. ABC
stated that directly using BLS data would improve the timeliness of
wage determinations because BLS surveys are updated annually. ABC and
the group of U.S. Senators stated that using BLS data would eliminate
an impediment preventing small firms from bidding on Davis-Bacon
contracts because it would eliminate the problem of missing
classifications on wage determinations. The commenters said that such
missing classifications can be an impediment for small firms because it
is costly and complicated to request conformances. ABC suggested that
the Department should consider transferring funding from WHD to BLS by
contracting with BLS to provide data, with the additional funding to
BLS going to address any ways in which BLS methods are deficient for
DBRA purposes.
Having considered these arguments, the Department continues to
believe that the best course of action is to adopt the proposed
reversion from the majority rule to the three-step process as the
methodology for making wage determinations. The Department agrees that
it is important to continue seeking ways to improve contractor
participation in its voluntary wage surveys, which will have the
benefit of increasing sample sizes for wage determinations and making
wage determinations possible for more classifications. The Department
has initiated a process to revise the wage survey form (WD-10 form)
that is used during wage surveys. In that process, it proposed a number
of changes in order to decrease the burden on contractors of responding
to the survey and lead to higher survey response rates. See 87 FR
36152, 36152-53 (June 15, 2022). The Department, through that process,
is also considering updates to the directory of classifications that is
listed on the form, and to procedures to assist in capturing
information about local area practice and industry changes in
classifications over time. Thus, the Department does not believe NAPA,
NRMPCA, and NSSGA's concerns about outdated classifications is a
persuasive reason not to adopt the changes to the methodology of
determining prevailing wages from survey data. Collecting more accurate
data and returning to the 30-percent threshold are supplementary, not
mutually exclusive, means to determining appropriate wage rates. The
Department is therefore not only returning to the use of the 30-percent
threshold in this final rule, but also will continue to promote greater
participation in its surveys and take related steps, such as its
revision to the WD-10 form outside this rulemaking, in order to
increase the pool of data that is available to determine accurate
prevailing wage rates.
While the Department appreciates AGC's suggestions regarding
revising the wage survey process to allow contractors to report data
for workers more generally instead of on a project-by-project basis,
the Department notes that the statute discusses the determination of
the prevailing wage on the basis of ``projects of a similar
character,'' 40 U.S.C. 3142(b), and that project-by-project reporting
promotes accuracy in the survey process because it more readily enables
the Department to identify the number of workers that were paid each
reported rate (and hence to properly calculate the prevailing wage) in
a given area. A data submission consisting solely of the wages and
fringe benefits paid generally to a particular classification,
particularly if such a submission did not identify how many workers
received each identified rate, would at a minimum create challenges and
inefficiencies in determining the prevailing wage rate.
The Department also agrees with commenters that addressing
timeliness issues and the overuse of conformances are important goals.
The use of BLS data, however, could cause its own problems with missing
classifications. BLS's OEWS program, for example, uses the Office of
Management and Budget's (OMB) Standard Occupational Classification
(SOC) system when publishing wage estimates. The SOC system does not
include a number of individual classifications that the Department
commonly uses to appropriately account for local area practice and the
craft system. For example, the Department often issues separate wage
rates for Plumbers, Pipefitters, and Steamfitters. The OEWS program
only issues a single wage rate in a given locality under SOC code 47-
2152 (``Plumbers, Pipefitters, and Steamfitters''). For this reason,
the Department believes that ABC's proposal to directly use the SOC
system would result in less accurate craft classifications. As
discussed further below, in this rulemaking, the Department is adopting
new methods of reducing the need for conformances and more frequently
updating wage determinations, including through the limited use of BLS
data where it can reasonably be used to estimate wage-rate increases in
between voluntary surveys. The Department believes these changes, once
implemented, will improve the wage determination program without making
a significant departure from longstanding interpretations of the
statutory text and purpose of the DBRA.
(2) Comments Regarding Costs of the 30-Percent Threshold
In proposing the return to the 30-percent threshold, the Department
also considered the other explanations it provided in 1982 for
eliminating the rule in the first place--in particular, the potential
for a possible upward pressure on wages, contract costs, or prices. In
the 1982 final rule, the Department summarized comments stating that
the rule is ``inflationary because it sometimes results in wage
determination rates higher than the average.'' 47 FR 23644. The
Department did not explain exactly what the commenters meant by the
term ``inflationary.'' See id. Later, the Department stated simply that
it ``agree[d] with the criticisms of the 30-percent rule,'' without
specifically referencing the wage-inflation concerns. Id. at 23645.
Later still, in a discussion of the final regulatory impact and
regulatory flexibility analysis, the Department estimated that
eliminating the 30-percent rule could result in a cost savings of $120
million per year. Id. at 23648. The Department then stated that it was
adopting the new rule ``not only because it will result in substantial
budgetary savings, but also because it is most consistent with the
`prevailing wage' concept contemplated in the legislation.'' Id.
In the current rulemaking, many commenters opposing the
Department's proposed reversion to the 30-percent threshold, including
several housing industry associations and entities, referenced and
restated the earlier concerns about an ``inflationary effect.'' ABC and
the group of Senators referenced criticism of the 30-percent rule by
the GAO in the 1960's and 1970's, including the 1979 report that urged
the repeal of the Act as a whole and related congressional hearings in
which the GAO referred to the 30-percent rule as resulting in
``inflated wage rates.'' \55\ Several commenters
[[Page 57541]]
pointed to two studies finding that prevailing wages under the DBA
increase costs to taxpayers. The NAHB pointed to a 2008 study by the
Beacon Hill Institute, finding that Davis-Bacon wage determinations
increase the cost of Federal construction by ``nearly 10 percent,''
\56\ and a study by the Congressional Budget Office (CBO) that
estimated a $12 billion reduction in Federal spending from 2019 through
2028 if DBA requirements were not applied to covered projects.\57\ CEI,
stating that no more recent data is available on the economic impact of
the 30-percent rule, cited a 1983 CBO estimate that the DBA's
requirements added 3.7 percent to the overall cost of Federal
construction projects.\58\ They also cited a later estimate from after
implementation of the majority rule, estimating that DBA requirements
added 3.4 percent to the cost of Federal construction projects.\59\
Comparing these two studies, CEI claimed, shows the difference between
the 30-percent threshold and the majority-only rule accounts for about
8 percent in the overall cost of complying with the Act (or, presented
differently, about 0.3 percent in the total cost of Federal
construction projects).
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\55\ See Administration of the Davis-Bacon Act, Hearings before
the Spec. Subcomm. on Lab. of the H. Comm. on Educ. & Lab., 87th
Cong. 283 (1962) (testimony of J.E. Welch, Deputy General Counsel,
General Accounting Office) (``Our experience indicates that the
methods and procedures by which minimum wage requirements for
Federal and federally assisted construction contracts are
established and enforced under present law have not kept pace with
the expansion and increased use of such requirements.''); Oversight
Hearing on the Davis-Bacon Act, Before the Subcomm. on Lab.
Standards of the H. Comm. on Educ. & Lab., 96th Cong. 4 (1979)
(testimony of Comptroller General Elmer Staats) and 60-64 (testimony
of Secretary of Labor Ray Marshall criticizing GAO methodology).
\56\ Paul Bachman, Michael Head, Sarah Glassman, & David G.
Tuerck, Beacon Hill Inst., ``The Federal Davis-Bacon Act: The
Prevailing Mismeasure of Wages,'' (2008). ABC cited this 2008
report, as well as a subsequent Beacon Hill report, which updated
it. See William F. Burke & David G. Tuerck, Beacon Hill Inst., ``The
Federal Davis-Bacon Act: Mismeasuring the Prevailing Wage,'' (2022).
\57\ CBO, ``Repeal the Davis-Bacon Act,'' Dec. 13, 2018, https://www.cbo.gov/budget-options/54786.
\58\ CBO, ``Modifying the Davis-Bacon Act: Implications for the
Labor Market and the Federal Budget,'' July 1983, https://www.cbo.gov/sites/default/files/98th-congress-1983-1984/reports/doc12-entire_0.pdf.
\59\ CBO, ``Toll Funding of U.S. Highways,'' Dec. 1985, https://www.cbo.gov/sites/default/files/99th-congress-1985-1986/reports/1985_12_tollfinancing.pdf.
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Several commenters, in particular in the residential building
industry, expressed general concern that higher labor costs could put
some projects at risk of being financially infeasible. The NAHB stated
that ``relatively small price increases can have an immediate impact on
low-to moderate-income homebuyers and renters who are more susceptible
to being priced out of the market.'' According to NAHB, there are
already a number of other current difficulties with building housing
that the proposed change does not address, including rising costs for
materials, an increasingly transient and aging workforce, and the
economic impact of COVID-19. The National Association of Housing and
Redevelopment Officials (NAHRO) stated that Congress has underfunded
affordable and public housing, and that because there is a limited
amount of funding for such efforts, the number of units built will go
down if costs go up. Because of this, the organization recommended that
the HUD programs be excluded from the final rule.
Some commenters stated their opposition to the proposed reversion
to the three-step process but appeared to misunderstand that the rule
does not require, or always result in, the highest wage rate being
identified as prevailing. AFP-I4AW, for example, stated that the 30-
percent rule would ``serve to inflate the wage determination by relying
only on the highest wage earners in the locality.'' This assumption is
not correct. The 30-percent threshold does not distinguish between
rates based on whether they are higher or lower. Rather, under the
rule, the Department will determine that a wage rate is prevailing if
that wage rate is earned by the most workers in a wage survey and if
that number is also more than 30 percent of workers in the survey--
whether that wage rate is higher or lower than any other wage rate in
the survey, and whether it is collectively bargained or not. The
Department's review of recent wage surveys suggests that the return to
the 30-percent threshold will in some cases result in wage rates that
are higher than the currently used average and in other cases lower
rates. See section V.D.1.ii. This is consistent with the results of the
30-percent threshold when it was last in effect before the 1981-1982
rulemaking. See 1979 GAO Report, at 53 (noting the data showed that
under the 30-percent rule, where a lower hourly rate prevailed, the
Department identified the lower rate as the prevailing rate).
In contrast to the commenters that opposed the proposal, many
commenters that supported the proposal argued that the rule would not
significantly increase project costs or increase inflation. Several of
these commenters noted studies regarding the cost effects of prevailing
wage regulations in general. For example, the III-FFC noted that the
``economic consensus'' today is that prevailing wage requirements
generally do not raise total construction costs. III-FFC cited a
literature review that analyzed the 19 peer-reviewed studies that have
been published since 2000 about the impacts of prevailing wage
regulations in public construction (together covering more than 22,000
public works projects). See Kevin Duncan & Russell Ormiston, ``What
Does the Research Tell Us About Prevailing Wage Laws,'' 44 Lab. Stud.
J. 139, 141-42 (2018). A significant majority of those peer-reviewed
studies did not find evidence that prevailing wages affected overall
construction costs. As III-FFC noted, a key driver of this outcome is
that contractors on covered projects will tend to hire higher-skilled
workers and utilize more capital equipment. See William Blankenau &
Steven Cassou, ``Industry Differences in the Elasticity of Substitution
and Rate of Biased Technological Change between Skilled and Unskilled
Labor,'' 43 Applied Econ. 3129-42 (2011); Edward Balistreri, Christine
McDaniel, & Eina V. Wong, ``An Estimation of U.S. Industry-Level
Capital-Labor Substitution Elasticities: Support for Cobb-Douglas,'' 14
N. Am. J. of Econ. & Fin 343-56 (2003). Other commenters submitted
similar research showing that prevailing wages are associated with
higher productivity and that labor costs are only a small part of
overall project costs in many segments of the construction industry,
limiting the impact of any increased wage costs on overall project
costs. See Frank Manzo & Kevin Duncan, Midwest Econ. Policy Inst.,
Examination of Minnesota's Prevailing Wage Law: Effects on Costs,
Training, and Economic Development 4 (2018); Nooshin Mahalia, Econ.
Policy Inst., Prevailing Wages and Government Contracting Costs 3-4
(2008).
Several of these commenters specifically criticized the
Department's apparent reliance in 1982 on arguments that the 30-percent
rule had an ``inflationary effect.'' These commenters noted that the
concerns about an ``inflationary effect'' at the time were drawn from
the same 1979 GAO report on which the opponents of the proposal now
rely.\60\ The Iron Workers, for
[[Page 57542]]
example, noted that in 1979 the Department had strongly criticized the
GAO report's statistical methods. In 1979, the Department maintained
that the GAO's conclusions lacked ``statistical validity'' because it
was methodologically flawed and failed to consider important variables,
such as productivity. See 1979 GAO Report, at 15. However, in its 1982
rulemaking, the Department did not acknowledge other evidence
undermining the GAO's conclusions, or the Department's own prior
position that the 1979 GAO report could not be relied upon. Another
commenter noted that the GAO itself had conceded that its sample size
was insufficient for projecting results with statistical validity. Id.
---------------------------------------------------------------------------
\60\ The GAO issued a report in 1979 urging Congress to repeal
the Act because of ``inflationary'' concerns. See Gov't
Accountability Office, HRD-79-18, ``The Davis Bacon Act Should be
Repealed'' (1979) (1979 GAO Report). Available at: https://www.gao.gov/assets/hrd-79-18.pdf. The report argued that even using
only weighted averages for prevailing rates would be inflationary
because they could increase the minimum wage paid on contracts and
therefore result in wages that were higher than they otherwise would
be. The House Subcommittee on Labor Standards reviewed the report
during oversight hearings in 1979, but Congress did not amend or
repeal the Act, and instead continued to expand its reach. See,
e.g., Cranston-Gonzalez National Affordable Housing Act, Public Law
101-625, Sec. 811(j)(6), 104 Stat. 4329 (1990); Energy Independence
and Security Act of 2007, Public Law No, 110-140, Sec. 491(d), 121
Stat. 1651 (2007); American Recovery and Reinvestment Act, Public
Law 111-5, Sec. 1606, 123 Stat. 303 (2009); Consolidated
Appropriations Act of 2021, Public Law 116-260, Sec. 9006(b), 134
Stat. 1182 (2021).
---------------------------------------------------------------------------
The commenters supporting the Department's current proposed
reversion to the 30-percent rule also noted that, whatever its
persuasiveness at the time, the 1979 GAO report cannot be relied on now
because of its outdated statistical methods and because of the
existence of other, more contemporary, evidence undermining its
conclusions. Commenters noted that the three main studies relied on by
opponents of the 30-percent threshold, including the GAO report, the
Department's 1981-1982 regulatory flexibility analysis, and the Beacon
Hill studies, were all based on a ``wage differential'' calculation
methodology that has been discredited by peer-reviewed scholarship
published since the 1981-1982 rulemaking.\61\ In a comment, two
Professors of Economics argued that ``the results of any study that
measures the cost of prevailing wages based on [the wage differential
method] should be interpreted with extreme caution and is not suitable
as a basis of public policy decisions.'' Commenters noted that more
advanced statistical methods than those used by GAO have since
established that in the construction industry, the substitution of
lower-wage and lower-skilled workers for higher-paid and higher-skilled
workers does not necessarily reduce project costs because the lower
productivity of lower-skilled workers can offset incrementally higher
wages paid to more-skilled workers.\62\ That is why, they asserted, the
preponderance of peer-reviewed studies conclude that prevailing wage
laws as a whole have little or no effect on overall project costs.\63\
Given the evidence for prevailing wage laws as a whole, the commenters
expressed skepticism that the return to the 30-percent rule would have
an effect on project costs.
---------------------------------------------------------------------------
\61\ See Kevin Duncan & Russell Ormiston, ``What Does the
Research Tell Us About Prevailing Wage Laws,'' 44 Lab. Stud. J. 139,
141-42 (2018). The Beacon Hill Report was not peer-reviewed. Id. at
141. The 2022 Beacon Hill Report uses the same methodology as the
2008 Beacon Hill Report.
\62\ See William Blankenau & Steven Cassou, ``Industry
Differences in the Elasticity of Substitution and Rate of Biased
Technological Change between Skilled and Unskilled Labor,'' 43
Applied Econ. 3129-42 (2011); Edward Balistreri, Christine McDaniel,
& Eina V. Wong, ``An Estimation of U.S. Industry-Level Capital-Labor
Substitution Elasticities: Support for Cobb-Douglas,'' 14 N. Am. J.
of Econ. & Fin 343-56 (2003).
\63\ See Duncan & Ormiston, supra note 61, at 142-48 (collecting
peer-reviewed studies).
---------------------------------------------------------------------------
The Department agrees with those commenters that found the 1979 GAO
Report and the Department's 1981-1982 analysis unpersuasive. The
Department does not believe that these analyses are reliable or
accurate.\64\ For example, the Department's 1981-1982 analysis did not
consider labor market forces that could prevent contractors from
lowering wage rates in the short run. The analysis also did not attempt
to address productivity losses or other costs of setting a lower
minimum wage, such as higher turnover and a reduced ability to recruit
high-skilled workers. For these reasons, the Department does not
believe that the analysis in the 1982 final rule implies that the
current proposed reversion to the 30-percent rule would have a
significant impact on contract costs. Moreover, even if the Department
were to rely on this analysis as an accurate measure of impact, such
purported cost savings (adjusted to 2019 dollars) would only amount to
approximately two-tenths of a percent of total estimated covered
contract costs.
---------------------------------------------------------------------------
\64\ The Department has not attempted to assess the relative
accuracy of the $120 million estimate over the decades, which would
be challenging given the dynamic nature of the construction industry
and the relatively small impact of even $120 million in savings. The
Department at the time acknowledged that its estimate had been
heavily criticized by commenters and was only a ``best guess''--in
part because it could not foresee how close a correlation there
would be between the wage rates that are actually paid on covered
contracts and the wage determinations that set the Davis-Bacon
minimum wages. 47 FR 23648.
---------------------------------------------------------------------------
The two CBO reports from 1983 and 1985 cited in a comment by CEI
are not persuasive for the same reason. The 1983 CBO study projected
that the elimination of the 30-percent rule would save an average of
$112 million per year from 1984 to 1988. Id. at 36. That report,
however, was based on the Department's own analysis in the 1981-1982
rulemaking, id. at xii, which was flawed as previously noted. The 1985
CBO report did not contain an independent analysis and simply cited to
the 1983 report. See 1985 CBO Report, at 16 n.2. Thus, the reports
provide no additional helpful evidence and instead suffer from the same
analytical problems as the Department's own 1981-1982 study and other
simple wage-differential analyses.\65\
---------------------------------------------------------------------------
\65\ The 1983 CBO study acknowledged these issues. It noted that
the 1979 GAO study had been questioned because of inadequate sample
sizes, the choice of projects covering small volumes of
construction, and inappropriate assumptions. See 1983 CBO Report, at
48. It also noted that ``questions have been raised regarding the
general approach of translating wage increases directly into cost
increases.'' Such an approach, the report notes, ``may be incorrect
. . . to the extent that workers at different wage levels may not be
equally productive.'' Id. at 48-49. The 2018 CBO projection that
NAHB cites does not explain its methodology, but it estimates
savings from eliminating the entire Davis-Bacon Act as amounting to
only 0.8 percentage points in project costs associated with a
reduction in wages and benefits. See supra note 57, https://www.cbo.gov/budget-options/54786.
---------------------------------------------------------------------------
After considering the available data, and assuming for the purposes
of this discussion that costs are in fact a permissible consideration
in defining the term ``prevailing wage,'' the Department is not
persuaded that returning to the 30 percent threshold will cause a
meaningful increase in Federal construction costs. Based on the
Department's demonstration in the economic analysis of what the
prevailing wage would be after applying the 30-percent threshold to a
sample of recently published prevailing wage rates, the Department
found no clear evidence of a systematic increase in the prevailing wage
sufficient to affect prices across the economy. The illustrative
analysis in section V.D. shows returning to the 30-percent rule will
significantly reduce the reliance on the weighted average method to
produce prevailing wage rates. Applying the 30-percent threshold, some
prevailing wage determinations may increase and others may decrease,
but the magnitude of these changes will, overall, be negligible. Even
where wage determinations may increase, the Department is persuaded by
recent peer-reviewed research, which generally has not found a
significant effect from wage increases related to prevailing wage
requirements on the total construction costs of public works projects.
For similar reasons, the Department is not persuaded that the
reversion to the 30-percent threshold would have any impact on national
inflation rates. Several commenters, including CEI and certain members
of Congress, stated that the Department's proposal is ill-timed because
of the current levels of
[[Page 57543]]
economy-wide inflation and the risks of a wage-price spiral. Returning
to the 30-percent rule, CEI claimed, ``would likely contribute to the
pressures'' that could create such a spiral. Although CEI referenced
the 1983 CBO Report to support its argument that the 30-percent
threshold would increase construction costs, CEI did not note the
conclusion in that study that the DBA as a whole ``seems to have no
measurable effect on the overall rate of inflation.'' 1983 CBO Report,
at xii, 30-31.
One individual commenter asserted that the Department should be
required to consider not only whether the 30-percent rule can alone
cause inflation, but also whether the proposal, in combination with
other regulatory and spending measures, would have an effect on
inflation and what that effect would be. The commenter stated that the
infusion of Federal infrastructure spending from the Infrastructure
Investment and Jobs Act (IIJA), Public Law 117-58, will likely lead to
substantial compensation premiums for construction workers. The
commenter stated that such wage increases would occur ``because a
sudden increase in federal infrastructure spending does not necessarily
lead to a commensurate increase in construction sector employment.''
The Department disagrees that this rule will substantially impact
inflation. As noted, the Department's illustrative analysis in section
V.D. suggests that the reimplementation of the 30-percent threshold
will result in some prevailing wage determinations increasing and
others decreasing, but the magnitude of these changes will, overall, be
negligible. In addition, even if this rule leads to an increase in some
required prevailing wage rates, it will not have an equal impact on
actual wages paid to workers on DBRA-covered contracts, because some
workers may already be earning above the new prevailing wage rate.
If wages for potentially affected workers were to increase, the
Department does not believe that it would lead to inflation. Recent
research shows that wage increases, particularly at the lower end of
the distribution, do not cause significant economy-wide price
increases.\66\ For example, a 2015 Federal Reserve Board study found
little evidence that changes in labor costs have had a material effect
on price inflation in recent years.\67\ Even in the recent period of
increased inflation, there was little evidence that the inflation was
caused by increases in wages. A study of producer price inflation and
hourly earnings from December 2020 to November 2021 found that
inflation and wage growth were uncorrelated across industries.\68\
Additionally, as two Professors of Economics commented, ``since
prevailing wages are not associated with increased construction costs,
there is no reason to assume that the policy causes inflation in the
macroeconomy.''
---------------------------------------------------------------------------
\66\ See, e.g., J.P. Morgan, ``Why Higher Wages Don't Always
Lead to Inflation'' (Feb. 7, 2018), available at: https://www.jpmorgan.com/commercial-banking/insights/higher-wages-inflation;
Daniel MacDonald & Eric Nilsson, ``The Effects of Increasing the
Minimum Wage on Prices: Analyzing the Incidence of Policy Design and
Context,'' Upjohn Institute working paper; 16-260 (June 2016),
available at https://research.upjohn.org/up_workingpapers/260/;
Nguyen Viet Cuong, ``Do Minimum Wage Increases Cause Inflation?
Evidence from Vietnam,'' ASEAN Economic Bulletin Vol. 28, No. 3
(2011), pp. 337-59, available at: https://www.jstor.org/stable/41445397; Magnus Jonsson & Stefan Palmqvist, ``Do Higher Wages Cause
Inflation?,'' Sveriges Riksbank Working Paper Series 159 (Apr.
2004), available at: https://archive.riksbank.se/Upload/WorkingPapers/WP_159.pdf; Kenneth M. Emery & Chih-Ping Chang, ``Do
Wages Help Predict Inflation?,'' Federal Reserve Bank of Dallas,
Economic Review First Quarter 1996 (1996), available at: https://
www.dallasfed.org/~/media/documents/research/er/1996/er9601a.pdf.
\67\ Ekaterina V. Peneva & Jeremy B. Rudd, ``The Passthrough of
Labor Costs to Price Inflation,'' Federal Reserve Board (2015),
available at: https://www.federalreserve.gov/econres/feds/the-passthrough-of-labor-costs-to-price-inflation.htm.
\68\ Josh Bivens, ``U.S. Workers Have Already Been Disempowered
in the Name of Fighting Inflation,'' Figure A, Economic Policy
Institute (Jan. 2022), available at: https://www.epi.org/blog/u-s-workers-have-already-been-disempowered-in-the-name-of-fighting-inflation-policymakers-should-not-make-it-even-worse-by-raising-interest-rates-too-aggressively/.
---------------------------------------------------------------------------
More importantly, DBRA-covered contracts make up a small share of
overall economic output. Because federally-funded construction only
makes up approximately 13 percent of total construction output and the
number of potentially affected workers (1.2 million) is less than 1
percent of the total workforce, the Department does not believe that
any wage increase associated with this rule would significantly
increase prices or have any appreciable effect on the macroeconomy.\69\
---------------------------------------------------------------------------
\69\ Federally funded construction as a share of total
construction output can be calculated from the data in Table 3
($216,700,000,000 / $1,667,000,000,000 = 0.13). The estimate of 1.2
million potentially affected workers is calculated in section V.B.2.
---------------------------------------------------------------------------
In sum, the factual conclusions about ``inflationary effects''
underlying the 1982 elimination of the 30-percent rule are no longer
supportable because they have been discounted over the past 40 years by
more sophisticated analytical tools. Furthermore, the available
evidence does not suggest that concerns about the 30-percent threshold
increasing project costs or national inflation rates are justified.
The Department also considered the comments that express concern
about whether the 30-percent threshold may affect certain sectors or
areas, and the residential construction industry in particular,
differently than the national economy as a whole. As they are for other
types of construction, respectively, prevailing wage rates for DBRA-
covered residential construction are based on WHD wage surveys of
residential construction projects. Residential construction can be
distinguished from other construction types in several important ways:
it tends to be less capital- and skill- intensive and thus generally
has fewer barriers to entry for firms as well as for workers, projects
tend to be of smaller and shorter duration, workers tend to move more
often between firms, and firms tend to provide less training.\70\ Wages
also tend to be lower in residential construction than in
nonresidential construction types, and unionization rates have
historically been lower. Because of lower unionization rates in the
residential construction industry, where the methodology for
determining prevailing rates is based on the mode (whether majority or
30-percent threshold), the rates that prevail are more likely to come
from non-union wage rates than from higher, collectively bargained
rates. As a result, in comparison to other construction types, it is
less likely--not more likely--that the 30-percent threshold will result
in increases in prevailing wage rates on residential construction
projects. However, in the more limited circumstances in which
residential construction rates may change from averages to rates based
on CBAs, the increases in wage rates could be larger given the
generally lower wage floors in the industry.\71\
---------------------------------------------------------------------------
\70\ See Russell Ormiston et al., ``Rebuilding Residential
Construction,'' in Creating Good Jobs: An Industry-Based Strategy
75, 78-79 (Paul Osterman ed., 2020).
\71\ Although the transfer analysis presented in Section V.D.1
is simply illustrative and may not be representative of the impact
of this rule, the results of this analysis reflect that only 5
percent of the residential fringe benefit rates analyzed were
affected by the reversion to the 30-percent threshold, compared to
14 percent of building fringe rates, 19 percent of heavy fringe
rates and 23 percent of highway fringe rates. In those limited
circumstances where residential fringe rates were affected, however,
they tended to increase more significantly given their largely
nonunion baseline.
---------------------------------------------------------------------------
Moreover, even if implementation of the proposal were to lead in
some areas to increased wages, and even assuming those increased wages
resulted in increased project costs for federally financed residential
construction, the
[[Page 57544]]
effects on overall housing prices or rents would not be significant.
DBRA-covered construction makes up only a very small percentage of the
total new construction in the residential construction market--only 1
percent as of July 2022.\72\ And, annual new residential construction
itself tends to be less than 1 percent of all available residential
units.\73\ Among the residential construction covered by the DBRA, many
projects would be unaffected by the proposed reversion to the 30-
percent threshold. The Department's illustrative analysis suggests that
the proposal would only affect the methodology for approximately one-
third of new wage determinations, and of those, some would result in
decreases in the required wage rate, not an increase. See section
V.D.1.ii.\74\ The most reasonable conclusion is that any limited
potential increase in some construction costs for such a small
percentage of the residential market would not affect housing prices or
rents generally.\75\
---------------------------------------------------------------------------
\72\ According to the Census Bureau, the Seasonally Adjusted
Annual Value of Private Residential Construction Put in Place, as of
July 2022, was $920.4 billion; public residential construction was
$9.3 billion. https://www.census.gov/construction/c30/c30index.html.
\73\ See U.S. Census Bureau, National and State Housing Unit
Estimates: 2010 to 2019, https://www.census.gov/data/tables/time-series/demo/popest/2010s-total-housing-units.html,
\74\ There are additional reasons why increasing labor costs do
not have a one-to-one correlation with housing and rent prices. In
recent decades, housing prices have significantly outpaced real
construction costs. See Joseph Gyourko & Raven Molloy, ``Regulation
and Housing Supply,'' (Nat'l Bureau of Econ. Rsch., Working Paper
No. 20536, 2014), https://www.nber.org/system/files/working_papers/w20536/w20536.pdf. Gyourko and Molloy conclude that, as a general
matter, labor and material costs do not appear to act as a major
constraint on residential development, in comparison to land-use
policy constraints.
\75\ In addition, the reversion to the 30-percent threshold will
not result in any wage increases in the short-term. Any effect on
wage increase will only occur after wage new residential
construction-type surveys are initiated and completed, and then wage
determinations based on those surveys are incorporated into new
construction contracts.
---------------------------------------------------------------------------
The Department also considered the concerns commenters raised about
the construction of publicly funded affordable housing in particular.
In a comment, two Professors of Economics said that three studies have
found that the application of prevailing wage laws in general may be
correlated with increased project costs for affordable housing
projects.\76\ But, for two reasons, these studies are of limited value
for forecasting the effects of reversion to the 30-percent rule. First,
as noted, the Department's illustrative analysis of the effects of the
30-percent threshold, which included residential construction survey
data, does not show a systematic increase in prevailing wage rates.
Second, the peer-reviewed studies showing potential increased project
costs on affordable housing projects do not compare different
prevailing wage methodologies, but instead compare whether projects are
either covered or not covered at all by prevailing wage requirements.
Where studies compare the existence of prevailing wage requirements at
all (as opposed to a simple change in wage determination
methodologies), other factors can explain project cost increases.\77\
---------------------------------------------------------------------------
\76\ See also Duncan & Ormiston, supra n. 61, at 142-48
(discussing peer-reviewed studies).
\77\ For example, cost differences may be attributable in part
to reductions in independent-contractor misclassification, failure
to pay overtime, and other basic wage violations that are
disincentivized because of the prevailing-wage requirement to submit
certified payroll. Id. at 146.
---------------------------------------------------------------------------
The Department also considered the comments regarding the potential
effects of economic conditions that may result from increased
infrastructure spending. While it is true that increases in
construction spending can lead to increases in construction wage rates
in the short run,\78\ this potential does not suggest the Department's
proposal is unwarranted. Under the 30-percent threshold, as under the
current majority rule or any other measure of prevailing wages, wage
determinations will and should generally reflect increases in wage
rates that result from separate policy decisions by Federal, State, or
Local governments, or other macro-economic phenomena. The commenters
did not suggest, and the Department did not identify, any specific
mechanism through which the 30-percent threshold would interact with
construction spending increases in a way that would materially affect
the results of the Department's illustrative analyses or suggest
outcomes other than those supported by the peer-reviewed literature.
Finally, the prevailing wage methodology in this rule is not a short-
term policy; it is intended to apply during timeframes when public
infrastructure spending is lower, as well as those when it is higher,
and during all phases of the construction industry business cycle.
---------------------------------------------------------------------------
\78\ One commenter suggested that increased infrastructure
spending could lead to an increase in demand for construction
workers, and that the supply of skilled workers might not be
commensurate in the short term, which could lead to an increase in
wage rates.
---------------------------------------------------------------------------
Finally, the Department disagrees with NAHB that the proposal
should be withdrawn because, among other reasons, the proposal does not
address certain challenges in the residential building industry,
including ``an increasingly transient and aging workforce, increased
building costs resulting from supply shortages, and the economic impact
of COVID-19, among other things.'' NAHB explains, in addition, that the
residential construction industry has been ``suffering from a skilled
labor shortage for many years.'' The Department agrees with NAHB that
these topics are important for policymakers to consider. NAHB does not
explain why the methodology for determining the prevailing wage under
the DBRA is relevant to addressing these challenges, or why a
methodology other than the Department's proposed reversion to the
three-step process would be more beneficial. However, to the extent
that the 30-percent threshold could increase wage rates in some areas,
as NAHB also asserts, such an outcome would be beneficial to the
industry by attracting more workers to the construction labor market
and allowing required prevailing wages to more often support the
maintenance of apprenticeship and training costs that will contribute
to the expansion of the skilled workforce.
In addition to all of these factual arguments about whether costs
or inflation may increase, however, several unions and contractor
associations argued that the Department should not be permitted as a
legal matter to consider contract costs or other similar effects of any
wage increases when it determines the proper prevailing wage
methodology. The United Brotherhood of Carpenters and Joiners of
America (UBC) and NABTU argued that the Department's apparent goal in
1981-1982 of reducing construction costs was not consistent with the
purpose of the Act. NABTU stated that such a reliance on cost
considerations was arbitrary and capricious under the Supreme Court's
decision in Motor Vehicle Manufacturers Ass'n of the United States v.
State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43 (1983)
(State Farm), because it relied on a factor (cost) that Congress had
not intended to be considered. To the contrary, commenters noted,
statements in the legislative history suggest that Congress's ``chief
concern'' was ``to maintain the wages of our workers and to increase
them wherever possible.'' 74 Cong. Rec. 6513 (1931) (remarks of Rep.
Mead); see also United States v. Binghamton Constr. Co., 347 U.S. 171,
176-77 (1954) (noting that the legislative history demonstrates that
the DBA was ``not enacted for the benefit of contractors, but rather to
protect their employees from substandard earnings'').
The Department agrees with these commenters that there is a
legitimate question as to whether it would be appropriate to use a
methodology that is
[[Page 57545]]
less consistent with the definition of ``prevailing wage'' in order to
reduce contract costs. Such a determination would not seem to be
consistent with Congressional intent. As Solicitor Donahue testified in
the 1962 hearings on the Act, ``Congress has not injected a cost factor
into the Davis-Bacon Act as one of the standards to be used in
determining which wage rates will apply.'' \79\ The ``basic purpose of
the Davis-Bacon Act is to protect the wages of construction workers
even if the effect is to increase costs to the [F]ederal
[G]overnment.'' Bldg. & Constr. Trades Dep't, 543 F. Supp. at 1290.
Congress considered cost concerns and enacted and expanded the DBA
notwithstanding them. Id. at 1290-91; 1963 House Subcommittee Report,
at 2-3; Reorganization Plan No. 14 of 1950, 15 FR 3176, 5 U.S.C. app.
1.\80\
---------------------------------------------------------------------------
\79\ Administration of the Davis-Bacon Act: Hearings before the
Spec. Subcomm. Of Lab. Of the H. Comm. On Educ. & Lab., 87th Cong.
153 (1962).
\80\ In his message accompanying Reorganization Plan No. 14,
President Truman noted that ``[s]ince the principal objective of the
plan is more effective enforcement of labor standards, it is not
probable that it will result in savings. But it will provide more
uniform and more adequate protection for workers through the
expenditures made for the enforcement of the existing legislation.''
15 FR 3176; 5 U.S.C. app. 1.
---------------------------------------------------------------------------
Thus, even if concerns about an inflationary effect on government
contract costs or speculative effects on the national macro economy
were used to justify eliminating the 30-percent rule in 1982, the
Department does not believe such reasoning now provides a persuasive
factual basis or legal requirement to maintain the current majority
rule. While the Department agrees with the commenters that are
skeptical about the permissibility of considering costs or cost effects
at all in deciding the appropriate definition of ``prevailing,'' the
Department considered these cost-related arguments nonetheless and does
not find them convincing, given the weakness of the wage-differential
analyses on which they are based. However, even if the reversion to the
30-percent rule were to add 0.3 percent to total Federal construction
contract costs (as CEI estimates and the Department disputes), and have
idiosyncratic cost effects in certain localities or construction types,
the Department would still conclude that this is the better course in
order to more often ensure that the prevailing wage rates incorporated
into covered contracts are rates that are actually paid to workers in
an area and that are therefore, on balance, more protective of local
construction wage rates.\81\
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\81\ The Department also considered NAHRO's narrower suggestion
that HUD programs should be excepted from the final rule because of
concerns about potential cost impacts on affordable housing
development. As discussed, the Department disagrees with the
assertion that the reversion to the 30-percent threshold will
necessarily raise costs to affordable housing projects in a
significant or systematic manner so as to suggest the threshold
should not be applied.
---------------------------------------------------------------------------
The Department also considered whether the 30-percent threshold
gives ``undue weight'' to collectively bargained rates. In the 1982
final rule, the Department noted criticism of the 30-percent rule on
that basis, and later--though without specifically discussing the
issue--the Department stated generally that it agreed with the comments
criticizing the rule. Now, certain commenters opposing the Department's
proposal to return to the 30-percent rule have made similar arguments.
ABC pointed to the phenomenon of ``wage dispersion,'' which affects
non-union contractors more than it does union contractors. According to
ABC, non-union contractors more often base compensation on skills or
productivity rather than job category, unlike union contractors. Thus,
they argue, union contractors are more likely than non-union
contractors to pay their workers the same rate.\82\ AFP-I4AW commented
that nothing in the NPRM contradicts the conclusion in 1982 that the
30-percent rule gives undue weight to collectively bargained rates.
---------------------------------------------------------------------------
\82\ See also 1979 GAO Report, at 52 (describing the difference
between CBA pay scales and non-union contractor pay practices).
---------------------------------------------------------------------------
On the other hand, commenters supporting a return to the 30-percent
rule criticized the reasoning in 1982 that the 30-percent rule provided
``undue weight'' to collectively bargained rates. These commenters
argued that this reasoning was a symptom of anti-union bias and had no
basis in the statute. The Iron Workers quoted the 1962 congressional
testimony of Solicitor of Labor Charles Donahue regarding the interface
between the rule and union rates. As Solicitor Donahue pointed out, the
30-percent rule did not uniformly lead to the identification of union
rates as prevailing, but, in any case, the question of whether union or
non-union contractors are disadvantaged by the Department's prevailing
wage determinations is not something that the Department should be
properly taking into consideration in making its wage
determinations.\83\ In a related comment, two Professors of Economics
noted that the potential for union rates being identified as the
prevailing rate does not necessarily mean that project costs will
increase. The comment cited several peer-reviewed studies that found no
statistically significant cost difference between projects built with
prevailing rates based on union rates and projects that were not.\84\
---------------------------------------------------------------------------
\83\ Administration of the Davis Bacon Act: Hearings before the
Spec. Subcomm. of Lab. of the H. Comm. on Educ. & Lab., 87th Cong.
819-20 (1962) (statement and submission of Charles Donahue,
Solicitor of Labor).
\84\ See Lamek Onsarigo et al., ``The Effect of Prevailing Wages
on Building Costs, Bid Competition, and Bidder Behaviour: Evidence
from Ohio School Construction,'' 38 Constr. Mgmt. & Econ. 917
(2020); Kevin Duncan & Jeffrey Waddoups, ``Unintended Consequences
of Nevada's Ninety-Percent Prevailing Wage Rule,'' 45 Lab. Stud. J.
166 (2020); Jaewhan Kim et al., ``The Effect of Prevailing Wage
Regulations on Contractor Bid Participation and Behavior: A
Comparison of Palo Alto, California with Four Nearby Prevailing Wage
Municipalities,'' 51 Indus. Rels. 874 (2012).
---------------------------------------------------------------------------
The Department is no longer persuaded that the 30-percent threshold
gives undue weight to collectively bargained rates or that whatever
weight it gives to collectively bargained rates is a convincing basis
to maintain the status quo. The underlying concern in 1982 was, as ABC
explained, that identification of a modal prevailing wage could give
more weight to union rates that more often tend to be the same across
companies. If this occurs, however, it is a function of the statutory
term ``prevailing,'' which, as both the Department and OLC have
concluded, refers to a predominant modal wage rate. If a modal
methodology with a modal threshold is used, then the modal threshold--
regardless of the number used--may on balance be more likely to be
satisfied by collectively bargained rates than by non-collectively
bargained rates. Said differently, the same weight is given to
collectively bargained rates whether the Department chooses a 50-
percent or 30-percent threshold; thus any ``undue weight'' to
collectively bargained rates should not be a basis for distinguishing
between these two thresholds. The Department, accordingly, now
understands the concerns about undue weight to collectively bargained
rates to be concerns about the potential outcome (of more wage
determinations based on collectively bargained rates) instead of
concerns about any actual weight given to collectively bargained rates
by the choice of the modal threshold. To choose a threshold because the
outcome would be more beneficial to non-union contractors--as the
Department seems to have suggested it was doing in 1982--does not have
any basis in the statute. Donovan, 543 F. Supp. at 1291 n.16 (noting
that the Secretary's concern about weight to collectively bargained
rates ``bear[s] no relationship to the purposes of the statute'').
The Department also notes that there appears to be confusion among
some
[[Page 57546]]
commenters about what it means when the prevailing wage in a wage
determination is set based on a collectively bargained wage rate. A
comment on the Department's proposal from the group of U.S. Senators
characterized the 1982 rule as having changed the definition of
prevailing wage ``to allow open-shop contractors to bid on DBRA covered
contracts on an equal footing with their unionized counterparts.'' This
description seems to conflate the basis of a wage determination with
its effect on competition. Whether wage determinations are based on
collectively bargained rates or on non-collectively bargained rates,
both non-union and union contractors are on similar footing in that
they have similar notice of the Department's wage determinations and
are required to pay at least the same specified minimum rates. See 74
Cong. Rec. 6510 (1931) (Statement of Rep. Bacon) (``If an outside
contractor gets the contract . . . it means that he will have to pay
the prevailing wages, just like the local contractor.'').\85\ To the
extent that a non-union contractor has to pay higher rates on a
contract than it would have paid without the prevailing wage
requirement, it is not unfairly harmed because all other bidders are
required to pay at least the same prevailing rate.\86\
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\85\ As the AGC noted in a comment, the same is not necessarily
true when the prevailing wage rate is set below a collectively
bargained wage rate, as contractors bound by CBAs may not be able to
pay their workers less than the collectively bargained rate on a
covered project, while a non-union contractor could. For this
reason, another commenter that is a member of a larger contractor
association asserted the belief that its association was taking a
position against the proposal because non-union contractors ``do not
appear to want to compete on a level playing field by paying rates
consistent with the determination. Rather, their position indicates
they prefer to be able to undercut the wage/benefit determination by
paying rates below these to gain an advantage over competitors.''
Thus, to the extent that eliminating the 30-percent rule in 1982 led
to a decrease in the use of collectively bargained rates to set the
prevailing wage, the effect was not to place non-union contractors
on ``equal footing'' as union contractors, but to give non-union
contractors an advantage.
\86\ As the Department explains in section V.F.1., significant
benefits flow from ensuring that as many contractors as possible can
bid on a contract. One study on the impact of bid competition on
final outcomes of State department of transportation construction
projects, demonstrated that each additional bidder reduces final
project cost overruns by 2.2 percent and increases the likelihood of
achieving a high-quality bid by 4.9 times. See Delaney, J. (2018).
``The Effect of Competition on Bid Quality and Final Results on
State DOT Projects.'' https://www.proquest.com/openview/33655a0e4c7b8a6d25d30775d350b8ad/1?pq-origsite=gscholar&cbl=18750.
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Regardless, the Department's regulatory impact analysis does not
suggest that a return to the 30-percent rule would give undue weight to
collectively bargained rates. Among a sample of rates considered in an
illustrative analysis, one-third of all rates (or about half of rates
currently established based on weighted averages) would shift to a
different method. Among these rates that would be set based on a new
method, the majority would be based on non-collectively bargained
rates. In the illustrative example, the Department estimates that the
use of single (modal-based) prevailing wage rates that are not the
product of CBAs would increase from 12 percent to 36 percent of all
wage rates--an overall increase of 24 percentage points. See Table 6,
section V.D.1.ii. The use of modal wage rates that are based on CBAs
would increase from 25 percent to 34 percent--an overall increase of 9
percentage points. Id.\87\
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\87\ As discussed in the regulatory impact analysis, the
Department found that fringe benefits currently do not prevail in
slightly over half of the classification-county observations it
reviewed--resulting in no required fringe benefit rate for that
classification. See Table 6, section V.D.1.ii. This would be largely
unchanged under the proposed reversion to the three-step process,
with nearly half of classification rates still not requiring the
payment of fringe benefits. Only about 13 percent of fringe rates
would shift from no fringes or an average rate to a modal prevailing
fringe rate. Overall, under the estimate, the percentage of fringe
benefit rates based on CBAs would increase from 25 percent to 34
percent. The percentage of fringe benefit rates not based on
collective bargaining rates would increase from 3 percent to 7
percent.
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Having considered the comments both for and against the
Department's proposed reversion to the three-step process for
determining the prevailing wage, the final rule adopts the amended
definition of prevailing wage in Sec. 1.2 of the regulations as
proposed.
(3) Former Sec. 1.2(a)(2)
In a non-substantive change, the Department proposed to move the
language currently at Sec. 1.2(a)(2) that explains the interaction
between the definition of prevailing wage and the sources of
information in Sec. 1.3. The Department proposed to move that language
(altered to update the cross-reference to the definition of prevailing
wage) to the introductory section of Sec. 1.3. The Department received
no comments on this proposal. The final rule therefore adopts this
change as proposed.
(4) Variable Rates That Are Functionally Equivalent
The Department also proposed to amend the regulations on compiling
wage rate information at Sec. 1.3 to allow for variable rates that are
functionally equivalent to be counted together for the purpose of
determining whether a wage rate prevails under the proposed definition
of ``prevailing wage'' in Sec. 1.2. The Department generally followed
this proposed approach until after the 2006 decision of the ARB in
Mistick Constr., ARB No. 04-051, 2006 WL 861357.
Historically, when reviewing wage survey data, the Department has
considered wage rates that may not be exactly the same to be
functionally equivalent--and therefore counted as the same--as long as
there was an underlying logic that explained the difference between
them. For example, some workers may perform work under the same labor
classification for the same contractor or under the same CBA on
projects in the same geographical area being surveyed and get paid
different wages based on the time of day that they performed work--
e.g., a ``night premium.'' In that circumstance, the Department would
count the normal and night-premium wage rates as the ``same wage'' rate
for purposes of calculating whether that wage rate prevailed under the
majority rule that is discussed in Sec. 1.2. Similarly, where workers
in the same labor classification were paid different ``zone rates'' for
work on projects in different zones covered by the same CBA, the
Department considered the difference between those rates to be
compensating workers for the burden of traveling or staying away from
home instead of reflecting fundamentally different underlying wage
rates for the work actually completed. Variable zone rates would
therefore be considered the ``same wage'' for the purpose of
determining the prevailing wage rate.
In another example, the Department took into consideration
``escalator clauses'' in CBAs that may have increased wage rates across
the board at some point during the survey period. Manual of Operations
(1986), at 58-59. Wages for workers working under the same CBA could be
reported differently on a survey solely because of the week their
employer used in responding to the wage survey rather than an actual
difference in prevailing wages. The Department has historically treated
such variable rates the same for the purposes of determining the
prevailing wages paid to laborers or mechanics in the survey area. Id.
The Department has also considered wage rates to be the same where
workers made the same combination of basic hourly rates and fringe
rates, even if the basic hourly rates (and also the fringe rates)
differed slightly.
In these circumstances, where the Department has treated certain
variable rates as the same, it has generally chosen one of those rates
to use as the
[[Page 57547]]
prevailing rate. In the case of rates that are variable because of an
escalator-clause issue, it uses the most current rate under the CBA.
Similarly, where the Department identified combinations of hourly and
fringe rates as the ``same,'' the Department previously identified one
specific hourly rate and one specific fringe rate that prevailed,
following the guidelines in 29 CFR 5.24, 5.25, and 5.30.
In 2006, the ARB strictly interpreted the regulatory language of
Sec. 1.2(a) in a way that limited some of these practices. See Mistick
Constr., ARB No. 04-051, 2006 WL 861357, at *5-7. The decision affirmed
the Administrator's continued use of the escalator-clause practice; but
the ARB also found that the combination of basic hourly and fringe
rates did not amount to a single ``wage,'' and thus the payment of the
same combination of hourly and fringe rates could not justify a finding
that the ``same wage,'' as used in Sec. 1.2(a), had been paid. Id. The
ARB also viewed the flexibility shown to CBAs as inconsistent with the
``purpose'' of the 1982 final rule, which the Administrator had
explained was in part to avoid giving ``undue weight'' to collectively
bargained rates. Id. The ARB held that, with the exception of escalator
clauses, the Administrator could not consider variable rates under a
CBA to be the ``same wage'' under Sec. 1.2(a) as the regulation was
written. Id. If no ``same wage'' prevailed under the majority rule for
a given classification, the Administrator would have to use the
fallback weighted average to determine the prevailing wage. Id. at * 7.
The ARB's conclusion in Mistick--particularly its determination
that even wage data reflecting the same aggregate compensation but
slight variations in the basic hourly rate and fringe benefit rates did
not reflect the ``same wage'' as that term was used under the current
regulations--could be construed as a determination that wage rates need
to be identical ``to the penny'' in order to be regarded as the ``same
wage,'' and that nearly any variation in wage rates, no matter how
small and regardless of the reason for the variation, might need to be
regarded as reflecting different, unique wage rates.
The ARB's decision in Mistick limited the Administrator's
methodology for determining a prevailing rate, thus contributing to the
increased use of weighted average rates. As noted in the discussion of
the definition of ``prevailing wage'' in Sec. 1.2, however, both the
Department and OLC have agreed that averages should generally only be
used as a last resort for determining prevailing wages. See section
III.B.1.ii.A. As the OLC opinion noted, the use of an average is
difficult to justify, ``particularly in cases where it coincides with
none of the actual wage rates being paid.'' 5 Op. O.L.C. at 177.\88\ In
discussing those cases, OLC quoted from the 1963 House Subcommittee
Report summarizing extensive congressional oversight hearings of the
Act. Id. The report had concluded that ``[u]se of an average rate would
be artificial in that it would not reflect the actual wages being paid
in a local community,'' and ``such a method would be disruptive of
local wage standards if it were utilized with any great frequency.''
Id.\89\ To the extent that an inflexible approach to determining if
wage data reflects the ``same wage'' promotes the use of average rates
even when wage rate variations are based on CBAs or other written
policies reflecting that the rates, while not identical, are
functionally equivalent, such an approach would be inconsistent with
these authorities and the statutory purpose they reflect.
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\88\ See note 1, supra.
\89\ See 1963 House Subcommittee Report, supra, at 7-8.
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As reflected in Mistick, the existing regulation does not clearly
authorize the use of functionally equivalent wages to determine the
local prevailing wage. See ARB No. 04-051, 2006 WL 861357, at *5-7.
Accordingly, the Department proposed in the NPRM to amend Sec. 1.3 to
include a new paragraph at Sec. 1.3(e) that would permit the
Administrator to count wage rates together--for the purpose of
determining the prevailing wage--if the rates are functionally
equivalent and the variation can be explained by a CBA or the written
policy of a contractor.
The Department received a number of comments from unions and
contractor associations that supported the proposed new language in
Sec. 1.3(e). These commenters noted that there are various ways that
CBAs and management decisions can create slight compensation variations
that may reflect special circumstances and not simply different wages
paid for the same underlying work. NABTU explained that the same
principle explains why the Department does not count an overtime
premium as a separate wage rate from the worker's base hourly rate for
the purpose of calculating the prevailing wage.
The commenters in favor of the Department's proposal asserted that
the reversion to the pre-Mistick practice of counting functionally
equivalent rates as the same is consistent with the DBA's legislative
history and the Department's longstanding preference for prevailing
wages that reflect actual wages paid to workers instead of artificial
averages. According to these commenters, the Mistick decision led to an
increase in the unnecessary use of average rates for wage
determinations, and it failed to adequately capture and reflect local
area practice. See Fry Bros. Corp., WAB No. 76-06, 1977 WL 24823, at *
6.\90\ One commenter, MCAA, also asserted that the decision in the
Mistick case was based on a ``non-statutory aim, if not animus, of
limiting the impact of CBA rates in the process.''
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\90\ In Fry Brothers, the Wage Appeals Board (WAB) described the
importance of using CBAs to help determine classifications based on
job content where collectively bargained rates prevail. 1977 WL
24823, at *6. The WAB was the Department's administrative appellate
entity from 1964 until 1996, when it was eliminated and the ARB was
created and provided jurisdiction over appeals from decisions of the
Administrator and the Department's ALJs under a number of statutes,
including the Davis-Bacon and Related Acts. 61 FR 19978 (May 3,
1996). WAB decisions from 1964 to 1996 are available on the
Department's website at https://www.dol.gov/agencies/oalj/public/dba_sca/references/caselists/wablist.
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Conversely, ABC and several of its members stated that the
Department's proposal conflicts with the Department's intended
definition of ``prevailing wage'' and contradicts the ARB's Mistick
decision. Numerous other contractors and individual commenters, as part
of an organized initiative, stated that the ``functionally equivalent''
proposal, in combination with the return to the three-step process and
the elimination of the bar on cross-consideration of metropolitan and
rural wage data, was likely to ``further distort the accuracy'' of WHD
wage determinations, a process that the commenters stated was ``already
deeply flawed.'' These commenters urged the Department to abandon these
proposed changes to the rule, including the proposed language in Sec.
1.3(e).
The Independent Electrical Contractors (IEC) and AFP-I4AW stated
their opposition to the proposal because it would authorize the finding
that rates are functionally equivalent on the basis of CBAs. AFP-I4AW
stated that the modal analysis in the definition of prevailing wage in
Sec. 1.2 already favors the more uniform rates characteristic of CBAs,
and that the functional equivalence proposal's direction to the agency
to look to these agreements for the analysis ``will only increase the
likelihood of finding union rates to be the prevailing rates, leading
to the unjustified inflation of labor costs.'' IEC stated that, while
they appreciate the Department's intention of obtaining additional data
points for the purpose of determining a predominant wage rate, it
[[Page 57548]]
is not sufficiently clear what principle will guide the Department's
finding that varied rates are nonetheless functionally equivalent.
The Department has reviewed the many comments received regarding
the proposed language at Sec. 1.3(e) and agrees with the commenters
that advocated in favor of the proposal. The Department's intent in the
proposal is to ensure that prevailing wage rates reflect wage rates
paid for the same underlying work, and do not instead give undue weight
to artificial differences that can be explained because workers are
being compensated for something other than the underlying work. This is
consistent with the text and purpose of the Davis-Bacon Act and has the
salutary effect of reducing the unnecessary reliance on average wage
rates that are less protective of local construction wages.
The Department disagrees with the comments, sent in response to an
organized initiative, that the proposal conflicts with the Department's
intended definition of ``prevailing wage.'' The three-step process and
the functional-equivalence rule are consistent because they both seek
to reduce the reliance on averages and increase the use of wage rates
that are actually paid to workers in the area. In doing so, they both
seek to protect local prevailing wage rates and the craft
classifications of local area practice, which is the core purpose of
the DBRA. Moreover, the Department disagrees that there is any conflict
between the two regulatory sections. The proposed language at Sec.
1.3(e) explicitly cross-references the definition in Sec. 1.2 and
explains how it should apply to the real-world circumstances that WHD
encounters when analyzing survey data. The new language in Sec. 1.3(e)
is an amendment to, and becomes an element of, the definition itself.
The Department also does not agree that the new language contradicts
the Mistick decision; rather, the new language changes the rule that
would be interpreted by the ARB in the future. The Mistick decision was
an interpretation of the text of the Department's 1983 regulations that
required a determination of whether wage rates were the ``same wage''
and its fundamental holding was that the Department had not abided by
the regulatory language as it was then written. There would be no basis
for the ARB to come to the same conclusion under the proposed new
language at Sec. 1.3(e), which expressly authorizes the Administrator
to count variable wage rates together as the ``same wage'' in
appropriate circumstances.
While no commenter made the argument explicitly, the Department
also considered whether the comments regarding the proposed departure
from the post-Mistick status quo should be understood as assertions
that contractors have reliance interests in the Department's recent
practice. To the extent that any assertion of reliance interest was
made, however, the Department concludes that it is not sufficient to
override the value of the functionally equivalent analysis. The
functionally equivalent analysis, like the return to the 30-percent
threshold, is a change that will likely lead to increased use of modal
prevailing wages and decreased use of averages on wage determinations.
As with the 30-percent threshold, this change should reasonably be
expected to lead in some circumstances to increases in prevailing wage
rates and in other circumstances to decreases. Similar to the 30-
percent rule and to other amendments to the wage determination process
in part 1 of the regulations, the effects of this rule change will
apply only to future wage determinations and the future contracts that
incorporate them, with limited exception of certain ongoing contracts
covered in Sec. 1.6(d) of the final rule. Accordingly, contractors
will generally be able to adjust their bids or price negotiations on
future contracts to account for any effects of the regulatory change on
prevailing wages in a particular area.
Many of the comments in opposition to the proposal, for example
from IEC and AFP-I4AW, explained their opposition to be in part because
of a perception that the use of CBAs to identify functionally
equivalent rates would lead to more prevailing wage rates based on
CBAs. At least some of these commenters appeared to misunderstand the
proposal as only allowing for the use of CBAs to make an underlying
determination. IEC, for example, stated that if the intent is to
broaden the set of wage rates that can be used to determine that a
certain wage rate is prevailing, then there is no reason the Department
could not also find non-CBA wages ``functionally equivalent'' so long
as they have the same acceptable variation proposed for CBA wages
deemed functionally equivalent. The Department agrees. In the NPRM, the
Department intended the functional equivalence analysis to be
applicable to both collectively bargained and non-collectively
bargained rates as appropriate. That is why the proposed text of Sec.
1.3(e) expressly allowed for the determination of equivalence to be
made based on a ``written policy'' maintained by a contractor or
contractors--in addition to a CBA.
The Department also disagrees with the other criticisms related to
the use of collectively bargained rates. The Department disagrees with
the write-in campaign comments stating that any potential for this
proposal to increase the use of collectively bargained rates would mean
that wage determinations would be less accurate. The commenters'
conception of ``accuracy'' is not well explained in the context of the
``functionally equivalent'' analysis, but the Department assumes it is
similar to the way the term was used in the criticisms of the 30-
percent rule--in other words, how closely the ``prevailing wage'' hews
to the average rate, what the market rate would be in the absence of
the law, or whether the percentage of prevailing wage rates based on
CBAs matches the union density in an area. As the Department has
explained, these comparisons may demonstrate the differences between
possible conceptions of the term ``prevailing wage,'' but the
Department disagrees that potential differences between these numbers
necessarily represent differences in accuracy.\91\
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\91\ ABC made a related argument that the proposed functional
equivalence analysis would not improve accuracy because it is just a
``tweak'' of the data that the Department received from its wage
survey, which ABC believes should be replaced by use of BLS data or
augmented through representative sampling. As explained above with
regard to the definition of prevailing wage, the Department
disagrees with ABC that its suggested alternatives to the wage
survey program are either preferable or required. Regardless, the
functional equivalence analysis can be beneficial to the
determination of prevailing wages because the Department can avoid
mistakenly assigning value in a wage determination to apparent
differences in wage rates that a further examination would reveal to
be superficial and not reflecting different pay received for the
same work.
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The Department similarly disagrees with AFP-I4AW's argument that
the proposal should be rejected because it could lead to an increase in
the likelihood of finding collectively bargained rates to be the
prevailing rates and therefore an ``unjustified inflation of labor
costs.'' The Department has addressed variations of this argument above
with respect to the definition of prevailing wage. The cost effects
associated with shifting from the use of an average rate to a modal
prevailing rate are complicated for a variety of reasons--in particular
because there can be significant productivity gains associated with an
increase in required wage rates on projects. Given these countervailing
effects, and the fact that Congress did not specify the potential cost
to the government as a factor in determining prevailing wage rates, the
[[Page 57549]]
Department is not persuaded that the potential cost effects AFP-I4AW
identifies are sufficient reason to reject the proposal.
Several commenters, both supporting and opposing the proposed
language, asked for additional guidance regarding types of wage
differentials that might appropriately be considered functionally
equivalent. The Department believes that the term ``functionally
equivalent'' as described here provides sufficient guidance--the
difference between two wage rates must be explained by something other
than simply different pay for the same work for the wage rates to be
functionally equivalent. Furthermore, as the Foundation for Fair
Contracting (FFC) and the Northern California District Council of
Laborers (NCDCL) stated, the Department's specification that the
functional-equivalence determination must be supported with reference
to CBAs or the written policies represents a ``necessary precaution''
to appropriately limit the scope of the rule. The Department therefore
has not added any additional language in Sec. 1.3(e) delineating
specific categories of wage differentials that may or may not fit the
analysis.
While no amendment to the regulatory text is necessary, certain
examples that commenters provided may be helpful to further illustrate
the concept of functional equivalence. The Department does not mean for
these examples to be an exhaustive list, but a discussion may be
helpful in responding to commenters who asked for further
clarification. For example, the NPRM mentioned the potential for
different wages based on the time of day that hours are worked to be
considered equivalent, but several commenters suggested a broader
phrasing--to include differentials based on ``undesirable'' hours or
shifts. This could include, for example, hours worked on certain
undesirable days of the week or certain times of year. The Department
agrees that where wage differentials are attributable to the timing of
the work, they do not represent different wage rates for the same
classification--and can be reasonably understood to be functionally
equivalent.
Similarly, the UA and several other commenters requested that the
Department identify hazard pay for working in hazardous conditions as a
wage differential that would be considered functionally equivalent as
the base rate. In another example, SMART and SMACNA described working
forepersons who spend most of their time working in a specific
``mechanic'' classification. While their base rate is that of a
journeyperson in that classification, they also get paid a premium to
compensate them for the foreperson duties they perform as well. NABTU
and several other commenters described premiums for call-back work as
another example of a differential wage rate that should not be treated
as a separate wage rate from the worker's underlying base hourly rate.
All these examples are circumstances where two workers may be paid
different amounts for work in the same classification but where the
Department generally would not interpret those different amounts as
representing different wage rates for the same underlying work. These
are appropriate examples of variable rates that could be found to be
functionally equivalent as long as the wage differentials are explained
by CBAs or written policies.
SMART and SMACNA requested clarification regarding whether rates
can be functionally equivalent if one rate is paid pursuant to a CBA
and the other rate is not. This might apply, for example, if a CBA
provided for a base hourly rate of $20 per hour for a classification
and a night premium rate of $25 per hour for the same work, and one
worker consistently earned a night premium rate of $25 per hour under
the CBA while another worker not working at night earned $20 per hour
for a different contractor and was not covered by the CBA. Under those
circumstances, the Department could reasonably count both workers as
earning the $20 per hour base rate for the purposes of determining the
prevailing wage for the classification. The Department does not believe
such a clarification is necessary in the text of Sec. 1.3(e) because
the language of Sec. 1.3(e) already allows for such a determination.
AGC asked whether the wage rates of various groups of workers on a
specific California wage determination would be considered functionally
equivalent. In the example presented, a wage determination lists a
number of different subclassifications for power equipment operators,
and all of the subclassifications have base hourly rates within $5 of
each other. AGC asked whether this differential of approximately 10
percent is an appropriate ``slight variation'' such that all of these
wage rates should be considered functionally equivalent and counted as
the same rate for purposes of determining a prevailing wage rate. The
focus on the words ``slight variation'' in the NPRM is misplaced,
because a slight variation between or among wage rates is not alone
sufficient to render rates functionally equivalent. Rather, there must
be some explanation in a CBA or written policy that explains why the
variation exists and supports a conclusion that the variation does not
represent simply different pay for the same underlying work. Thus,
although some of the individual wage rates AGC describes might
reasonably be considered to be slight variations in terms of the
magnitude of the difference between them, the types of variable wage
rates they represent generally do not fit within the concept of
functionally equivalent. Wage differentials between types of power
equipment operators in the example are associated with sufficiently
different underlying work--for example, as the comment notes, the
different groups include ``Cranes, Piledriving & Hoisting,'' ``Tunnel
Work,'' and ``All Other Work.'' This kind of wage differential is a
distinct concept from functionally equivalent pay rates received for
work within the same labor classification.
As previously discussed, Congress did not intend to create a single
minimum wage rate with the DBA. Rather, generally speaking, the Act
requires prevailing wage rates for different types of construction work
to be calculated separately. The statute explicitly addresses this
concept in two ways--requiring the Secretary to determine the
prevailing wage for ``corresponding classes'' of workers, and for
workers employed on projects of a similar ``character'' in the area. 40
U.S.C. 3142(b). Thus, when the Department gathers wage information to
determine the prevailing wages in an area, it attempts to identify the
appropriate classifications (corresponding class) and construction
types (projects of a similar character) of work. Through this process,
the Department can develop wage determinations that allow for different
prevailing wages to account for the different skills that workers use
or where there are otherwise material differences in the actual work
that workers are doing. The Department does not intend for the
functional equivalence concept to apply to these types of situations
where wage differentials are attributable to fundamentally different
underlying work that requires different skills, or to differences in
construction type.\92\
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\92\ In explaining the limits of this concept of functional
equivalence, the Department does not intend to remove the necessary
discretion that the Department separately exercises in determining
classifications and sub-classifications of work in a particular
area. The Department has long recognized that the appropriate level
and division of craft specificity can be different in different
areas, and that the decisions that the Department must make to
identify the appropriate classifications can be fact specific. See
Fry Bros. Corp., 1977 WL 24823, at *6-7. An area practice survey in
tandem with the wage survey can often be helpful in this process.
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[[Page 57550]]
AGC also questioned how the Department would decide which rate to
identify on a wage determination among a set of multiple rates found in
a survey to be functionally equivalent. AGC stated that the
identification of the middle rate (or any rate that is less than the
CBA rate in a wage determination that would otherwise use the CBA rates
and classifications) could put contractors that are signatories to
those CBAs at a competitive disadvantage in bidding, since the
signatory contractors would be contractually obligated to pay the
higher CBA rate while nonsignatory contractors would be free to pay the
lower rate.
The Department agrees with AGC that WHD may need to be sensitive to
the effects of identifying functionally equivalent wage rates, in
particular where collectively bargained rates prevail. Where there are
functionally equivalent wage rates, and only a single rate is
published, that published wage rate may often be the base hourly rate
(and not the higher rate including the relevant wage premium). This
could lead to disadvantages for bidders bound by CBAs on projects that
may require substantial work at the premium rate, such as substantial
work that would be at a hazard pay rate or at night premiums. Thus,
where collectively bargained rates prevail, an analysis of local area
practice and the wage data received may suggest that WHD should include
certain wage premiums (such as a project size premium or zone rates) as
separate lines on a wage determination instead of counting them all as
the same functionally equivalent underlying base rate.\93\
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\93\ This type of flexibility is consistent with the agency's
current and historical practice. For example, the Department has
periodically identified zone rates on wage determinations. In the
Alaska Statewide wage determination for building and heavy
construction types, the Department recently published separate wage
lines for Laborers North of the 63rd Parallel & East of Longitude
138 Degrees and for those South of the 63rd Parallel & West of
Longitude 138 Degrees. As commenters in favor of the ``functional
equivalence'' proposal noted, CBAs can be helpful in identifying how
relevant differences in the work actually performed or the projects
of a similar ``character'' are divided between classifications of
workers in areas where collectively bargained rates prevail. See Fry
Bros. Corp., 1977 WL 24823, at *4, *6; Manual of Operations at 23.
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AGC also expressed concern that the concept of functionally
equivalent wage rates might create incentives for contractors and
unions to negotiate rates that preserve their competitiveness. As noted
in the NPRM, some variations within the same CBA may clearly amount to
different rates, and one example is when a CBA authorizes the use of
``market recovery rates'' that are lower than the standard rate to win
a bid. It may not be appropriate to combine market recovery rates
together with the CBA's standard rate as ``functionally equivalent'' in
certain circumstances, because frequent use of such a rate could
suggest (though does not necessarily compel) a conclusion that the
CBA's regular rate would not be prevailing in the area.
A few of the commenters in favor of the proposal suggested helpful
changes to the proposed language of Sec. 1.3(e). NABTU highlighted
that the Department used the term ``employee'' in proposed Sec. 1.3(e)
to explain the principle of treating variable rates for ``employees
within the same classification'' as functionally equivalent. NABTU
noted that DBRA applies to workers even in the absence of an employment
relationship, see 40 U.S.C. 3142(c)(1), and suggested revising to refer
instead to ``laborers and mechanics.'' The Department agrees that the
use of the term ``employee'' in the proposed language was imprecise
considering the scope of the Act, and the language of Sec. 1.3(e) in
the final rule is therefore revised to refer to ``workers'' instead of
``employees,'' to be consistent with the language used elsewhere in
Sec. 1.3 and the rule as a whole.
NABTU, the Laborers' International Union of North America (LIUNA),
and the Iron Workers commented that the Department appeared to tether
the ``functional equivalence'' analysis only to single CBAs or to
written policies maintained by contractors. As the commenters noted,
there are circumstances in which it may be appropriate to analyze
multiple CBAs in order to identify whether rates in a survey are
functionally equivalent. They suggested that the Department amend the
text of proposed Sec. 1.3(e) to allow a functional equivalence
determination to be based on ``one or more collective bargaining
agreements'' or ``written policies'' of a contractor or contractors
instead of just ``a collective bargaining agreement'' or a ``written
policy.'' The Department agrees that this change in the language is
warranted because there are circumstances in which a comparison of
multiple CBAs or written policies may be helpful to understanding the
relationship between wage rates. For example, if different locals of
the same union have parallel collective bargaining units with the same
base rate and hazard pay rate, and the WHD survey captures rates from
workers working at the base rate under one of the CBAs and from workers
working in the same classification but at the hazard pay rate under the
other CBA, it would be reasonable to consider the rates to be
functionally equivalent for the purpose of determining the prevailing
wage. Accordingly, the final rule adopts this change.
A few other commenters that were largely supportive of the proposal
made suggestions that the final rule does not adopt. The Iron Workers
recommended that the Department further codify that combined fringe and
benefit wage rates must be treated as functionally equivalent wherever
two workers have the same total overall compensation. The Iron Workers
provided alternative regulatory text that would reference the statutory
definition for the term ``wages'' in 40 U.S.C. 3141. That definition
includes both the basic hourly rate of pay and fringe benefit rate. As
the Iron Workers noted, the NPRM explained that slightly differing base
hourly rates can be considered functionally equivalent where workers
have the same combined hourly and fringe rate. In other words, where
the combination of hourly and fringe rates are the same, it is
appropriate for the Department to count the base rate as the ``same
wage'' for the purpose of determining the prevailing wage. In light of
this clarification, the Department does not believe it is necessary to
add the additional text to Sec. 1.3(e) that the Iron Workers
suggested.
Finally, LIUNA and NABTU, while supporting the Department's
proposal, urged that the language of proposed Sec. 1.3(e) be changed
from allowing the Department to treat functionally equivalent rates the
same, to requiring it. These commenters noted that in the proposed
language, the Administrator ``may'' treat variable wage rates as the
same wage in appropriate circumstances, and they suggested that the
language be revised to use the term ``shall'' instead. The Department
declines to adopt this suggestion. During the survey process,
respondents can assist the Department by identifying when wage
differentials are due to elements of a CBA or written policy that are
unrelated to the underlying work. However, as the Department has
explained in this rulemaking, the wage survey and wage determination
process can be resource-intensive and time-consuming for WHD, and the
need for timely completion of surveys and wage determinations has been
the subject of criticism levied against the current process.
Thus, while the identification of wage differentials that may be
functionally
[[Page 57551]]
equivalent can be an important tool for WHD in increasing the use of
predominant modal wage rates as prevailing in wage determinations,
LIUNA and NABTU's proposal would not be reasonable or administratively
feasible, because it would require WHD to review individual CBA wage
rates as well as request that contractors provide written policies
about every wage rate submitted during a survey--even where the
successful identification of wage rates that are functionally
equivalent might have limited or no effect on the outcome of the wage
determination.
The final rule therefore adopts the language at Sec. 1.3(e) as
proposed, with the limited changes identified above.
(B) Area
The Department also proposed changes to the definition of the term
``area'' in Sec. 1.2. The regulations use the term ``area'' to
describe the relevant geographic units that the Department may use to
determine the prevailing wage rates that laborers and mechanics must,
at a minimum, receive on covered projects. See 29 CFR 1.2, 1.3. The
definition of area therefore has consequences for how the Department
gathers wage rate information and how the Department calculates
prevailing wages.
The core definition of ``area'' in Sec. 1.2 states that the term
``means the city, town, village, county or other civil subdivision of
the State in which the work is to be performed.'' This definition
largely reproduces the specification in the Davis-Bacon Act statute,
prior to its 2002 re-codification, that the prevailing wage should be
based on projects of a similar character in the ``city, town, village,
or other civil subdivision of the State in which the work is to be
performed.'' See 40 U.S.C. 276a(a) (2002).
The geography-based definition of ``area'' in Sec. 1.2 applies to
federally assisted projects covered by the Davis-Bacon Related Acts as
well as projects covered by the DBA itself. Some of the Related Acts
have used different terminology to identify the appropriate ``area''
for a wage determination, including the terms ``locality'' and
``immediate locality.'' \94\ However, the Department has long concluded
that these terms are best interpreted and applied consistent with the
methodology for determining the area under the original DBA. See
Virginia Segment C-7, METRO, WAB No. 71-4, 1971 WL 17609, at *3-4 (Dec.
7, 1971).
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\94\ See, e.g., National Housing Act, 12 U.S.C. 1715c(a)
(locality); Housing and Community Development Act of 1974, 42 U.S.C.
secs. 1440(g), 5310(a) (locality); Federal Water Pollution Control
Act, 33 U.S.C. 1372 (immediate locality); Federal-Aid Highway Acts,
23 U.S.C. sec 113(a) (immediate locality).
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While the definition of ``area'' provides for the use of various
possible geographic units, the Department has, for several decades now,
identified the county as the default unit for this purpose. See 29 CFR
1.7(a). This has a corollary for contracting agencies. In order to
determine what wages apply to a given construction project, the
contracting agency will generally need to identify the county (or
counties) in which the project will be constructed and obtain the
general wage determination for the correct type of construction for
that county (or counties) from the System for Award Management (SAM).
The Department's choice of a geographic ``area'' to use for a wage
determination has consequences for how the prevailing wage will be
determined. The regulations, as amended in this rulemaking, explain
that the Department will carry out a voluntary wage survey to seek wage
data for a type of construction in an ``area.'' They will then apply
the three-step process to that data to determine what wage rate in an
``area'' prevails for a specific labor classification. See III.B.1.ii.A
and III.B.1.iii.
Because the Department uses the county as the default area for a
wage determination, it will normally gather wage survey data for each
county and carry out the three-step process for each classification of
worker and construction type in that county. If there is sufficient
current wage data for a classification of workers in a county, this
process will result in the prevailing wage that will appear on a wage
determination. The regulations at Sec. 1.7(b) and (c) describe the
Department's procedures for making the determination if there is not
sufficient wage data in a county for a given classification of workers.
In the NPRM, the Department proposed to maintain the core
definition of ``area'' in Sec. 1.2 as currently written, with its list
of possible geographic units that the Administrator may use. As
discussed in section III.B.1.vii regarding Sec. 1.7 and geographic
aggregation practices, the Department similarly proposed to maintain
the use of the county as the default area for most wage determinations.
The Department also, however, proposed two limited additions to the
definition of ``area'' in Sec. 1.2 to address projects that span
multiple counties and to address highway projects specifically.
(1) Multi-County Project Wage Determinations
Under WHD's current methodology, if a project spans more than one
county, the contracting officer is instructed to attach wage
determinations for each county to the contract for the project and
contractors may be required to pay differing wage rates to the same
employees when their work crosses county lines. This policy was
reinforced in 1971 when the Wage Appeals Board (WAB) found that, under
the terms of the then-applicable regulations, there was no basis to
provide a single prevailing wage rate for a project occurring in
Virginia, the District of Columbia, and Maryland. See Virginia Segment
C-7, METRO, WAB No. 71-4, 1971 WL 17609.
Critics of this policy have pointed out that this can be
inconsistent with how workers are paid on projects outside of the
Davis-Bacon context. In any given non-DBRA project that might be
completed in multiple counties, workers are very often hired and paid a
single wage rate for all of their work on the project, and--unless
there are different city or county minimum wage laws, or zone pay under
a CBA--workers' pay rates often would not change as they move between
tasks in different counties. The 2011 report by the GAO, for example,
quoted a statement from a contractor association representative that
the requirement of different wage rates for the same workers on the
same multi-county project is ``illogical.'' See 2011 GAO Report, at
24.\95\
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\95\ See note 10, supra.
---------------------------------------------------------------------------
To address the concerns of these critics, the Department proposed
adding language in the definition of ``area'' in Sec. 1.2 to expressly
authorize WHD to issue project wage determinations with a single rate
for each classification, using data from all of the relevant counties
in which a project will occur. Under the proposal, the definition of
``area'' would provide that where a project requires work in multiple
counties, the ``area'' may include all the counties in which the work
will be performed. The NPRM also included related language at Sec.
1.5(b)(i) that authorized contracting agencies to request a project
wage determination where the project involves work in more than one
county and will employ workers who may work in more than one county.
The Department solicited comments on whether this procedure should be
mandatory for multi-jurisdictional projects or available at the request
of the contracting agency or an interested party, if WHD determines
that
[[Page 57552]]
such a project wage determination would be appropriate.
Several commenters, including three contractor associations, a
union, the Minnesota Department of Transportation (MnDOT), and the
Council of State Community Development Agencies (COSCDA), generally
supported the Department's proposal as written. COSCDA noted that the
proposal could be helpful for broadband projects and AGC noted that it
would be helpful for highway projects. According to AGC, the current
practice can be particularly burdensome where the different county wage
determinations that are applicable to the same project have differing
craft classifications and job duties. AGC stated that the Department's
proposal to allow a single wage determination to apply to an entire
project is a proposal that ``provides logical relief'' and is ``true
modernization.'' A Professor of Economics who commented on the proposal
stated that combining contiguous counties together on ``horizontal
projects'' such as heavy and highway projects is a ``conceptually
appropriate way of designing a local labor market'' because all of the
counties in which the project occurs are counties from which the
workers are likely to be drawn.
One commenter, Montana Lines Inc., supported making these single-
rate project wage determinations mandatory for multi-county projects.
Montana Lines Inc. stated that in Montana, construction workers are
available across the state and travel to all parts of the state and,
therefore, the prevailing wage for the whole state should be the same.
Conversely, NFIB strongly opposed the proposal. NFIB asserted that
the statutory language referencing ``civil subdivision of a state'' in
40 U.S.C. 3142(b) requires the establishment of prevailing wages on a
``subdivision by subdivision'' basis and thus requires a separate
prevailing wage for each subdivision in which work under the contract
occurs. NFIB thus recommended regulatory language that would instead
codify the current practice that, in multi-county projects, ``each such
civil subdivision in which work will be performed is a separate area.''
Two commenters, LIUNA and Indiana-Illinois-Iowa Foundation for Fair
Contracting (III-FFC) supported the Department's proposal, but strongly
advocated that it be discretionary as opposed to mandatory and that the
Department ensure that it is used only where appropriate. They
advocated that the Department should only adopt the proposal if it is
limited to circumstances where the resulting wage determinations
reflect local labor markets and do not undermine the highest rates paid
in any included county under the governing general wage determination.
LIUNA stated that the Department can maintain deference to established
labor markets by analyzing available wage data, the jurisdictional
coverage of CBAs, contractor bidding practices, geography, and/or
administratively established areas under State law. The two commenters
explained that these precautions are necessary to ensure that the
procedure is consistent with the Davis-Bacon Act's purpose of
preserving a wage floor in each local labor market.
The Florida Transportation Builder's Association, Inc. (FTBA)
stated it supported the proposed change along with the proposal for
using State highway districts as ``areas'' for highway projects. FTBA
requested clarification regarding the methodology the Department would
use in setting single rates for each job classification on project wage
determinations for work that spans multiple counties. They proposed
that the Department set rates based on the wage determination rates for
the county where the majority of the work would occur on a covered
project.
The Department considered these comments regarding the proposal to
authorize multi-county ``areas.'' The proposal does not provide, as
FTBA suggested, for the opportunity to identify the county in which
most of the construction will occur and then use the wage rates in that
county for all other counties in which the project would take place.
Rather, the proposal intersects with the definition of ``prevailing
wage'' in Sec. 1.2 and the Department's guidelines for obtaining and
compiling wage rate information in Sec. 1.3. Those regulations, as
amended in this rulemaking, explain that the Department will carry out
the three-step process to determine whether any wage rate prevails in a
given ``area.'' See section III.B.1.iii. Thus, if a multi-county area
is used, then the wage data from all counties where the project will
take place would be combined together before the Department determines
whether there is a modal wage rate that prevails for each
classification and construction type.
The Department disagrees with NFIB's argument that this procedure
is not permissible. Using a project wage determination with a single
``area'' for multi-county projects is not inconsistent with the text of
the DBA. The DBA and Related Act statutes themselves do not address
multi-jurisdictional projects, and ``Congress anticipated that the
general authorization to the Secretary to set the prevailing wage would
encompass the power to find a way to do so in the interstitial areas
not specifically provided for in the statute.'' Donovan, 712 F.2d at
618. As other commenters noted, providing contractors with the ability
to pay a single wage rate to workers within the same classification on
a multi-county project is responsive to concerns that have been raised
about administrative burdens of the program.
In addition, as a general matter, the creation of multi-county
areas for projects covering multiple counties is consistent with the
purpose of the DBA, which is to protect against the depression of local
wage rates caused by competition from low-bid contractors from outside
of the locality. Allowing the use of data from all counties in which
the project is being carried out means incorporating wage data from
workers who will generally have been working in the vicinity of some
portion of the project and thus cannot reasonably be characterized as
imported labor from outside of the project locality.
The Department, however, is sensitive to the concerns raised by
LIUNA and III- FFC. In many circumstances, multi-county projects will
satisfy these commenters' concerns that the counties involved are
effectively within the same labor market. But it is certainly possible
that a multi-county project could take place in counties that are
particularly dissimilar and represent entirely different labor markets,
such as may be the case if the project were to span a long string of
counties across an entire state. In such circumstances, while a multi-
county project wage determination could still be requested, it may not
be appropriate to combine the county data by using a multi-county area.
Instead, it could be more appropriate to use general wage
determinations with separate county wage rates for counties that are in
wholly different labor markets, or to create a project wage
determination for certain counties that are part of the same labor
market and use available general wage determinations for any other
counties that are not.
Accordingly, the Department is disinclined to make multi-county
areas mandatory for any multi-county project wage determination or to
make them available as a matter of course at the request of interested
parties other than the contracting agency. Instead, the final rule
adopts the language as proposed, which allows the Department to use
multi-county areas for multi-county
[[Page 57553]]
project wage determinations but does not require their use. The
Department agrees with LIUNA that it will be important for the
Department to ensure that the multi-county areas do not undermine the
two important purposes of the statute of identifying actual prevailing
wage rates where they exist and guarding against the depression of
local wage standards. See 5 Op. O.L.C. at 176. Thus, as LIUNA noted, a
multi-county area may be inappropriate for a classification of workers
on a project wage determination if it would result in the use of an
average rate where existing individual county wage determinations would
otherwise identify prevailing wage rates under the Department's
preferred modal methodology. Similarly, a single multi-county area for
certain classifications of workers on a project wage determination
might be inconsistent with the purpose of the statute if the procedure
results in average wage rates that are substantially lower than the
prevailing wage rate would be in one of the included counties under the
default general wage determination.
(2) State Highway Districts
The Department's other proposed change to the definition of
``area'' in Sec. 1.2 was to allow the use of State highway districts
or similar transportation subdivisions as the relevant wage
determination area for highway projects, where appropriate. Although
there is significant variation between states, most states maintain
civil subdivisions responsible for certain aspects of transportation
planning, financing, and maintenance.\96\ These districts tend to be
organized within State departments of transportation or otherwise
through State and County governments.
---------------------------------------------------------------------------
\96\ See generally Am. Assoc. of State Highway and Transp.
Offs., ``Transportation Governance and Financing: A 50-State Review
of State Legislatures and Departments of Transportation'' (2016),
available at: https://www.financingtransportation.org/pdf/50_state_review_nov16.pdf.
---------------------------------------------------------------------------
In the NPRM, the Department explained that using State highway
districts as a geographic unit for wage determinations would be
consistent with the Davis-Bacon Act's specification that wage
determinations should be tied to a ``civil subdivision of a State.''
State highway districts were considered to be ``subdivisions of a
State'' at the time the term was used in the original Davis-Bacon Act.
See Wight v. Police Jury of Par. of Avoyelles, La., 264 F. 705, 709
(5th Cir. 1919) (describing the creation of highway districts as
``governmental subdivisions of the [S]tate''). The Department further
explained that State highway or transportation districts often plan,
develop, and oversee federally financed highway projects. Accordingly,
the provision of a single wage determination for each district would
simplify the procedure for incorporating Federal financing into these
projects.
Several commenters that supported the proposal for multi-county
project wage determinations, such as MnDOT and FTBA, also supported the
proposal to authorize WHD to adopt State highway districts as areas for
highway projects. The New Jersey Heavy & Highway Construction Laborers
District Council (NJHHCL) called the proposal a ``common-sense
revision'' that will simplify how projects are structured and planned,
allowing more resources to be devoted to the projects themselves
instead of their administration. The American Road & Transportation
Builders Association (ARTBA) supported the proposal because highway
construction projects often span more than one county, and the use of a
single area would ensure workers on the project are paid at the same
rate regardless of the county in which they are working. As noted, AGC
strongly supported the use of multi-county wage project wage
determinations for highway projects. Although AGC did not specifically
mention the use of state Highway districts as ``areas,'' the two
proposals would work in similar ways and have similar effects. NFIB
recommended that the Department adopt the proposal, revised slightly to
apply to highway districts and ``other similar State agency
geographical units'' instead of the language the Department proposed
referring to highway districts and ``other similar State
subdivisions.''
LIUNA expressed a similar position regarding the State highway
district proposal as it did for multi-county project wage
determinations. They advocated that the Department should only adopt
the proposal if the use is limited to circumstances where the resulting
wage determinations reflect local labor markets and do not undermine
the highest rates paid in any individual county under a general wage
determination. III-FFC stated that they were ``neutral'' on the
Department's proposal. They stated that the existence of State highway
districts may be an appropriate consideration when establishing a
project wage determination on a highway project but that this
consideration should be secondary to ``local labor market
considerations.''
The group of U.S. Senators submitted a comment strongly opposing
the proposal. They argued that the Department lacks statutory authority
to interpret the term ``civil subdivision of the State'' in the DBA
statute as including State highway districts. The comment asserted that
the separate reference in the statutory text at 42 U.S.C. 3142(b) to
the District of Columbia should limit the meaning of ``other
subdivision of the State'' to subdivisions that the District of
Columbia does not have. The comment also asserted that the Department's
proposal runs counter to decades of agency practice, faulted it for
failing to cite any legislative history to support its interpretation,
and found the Department's citation to the 1919 Wight decision to be
unconvincing. The Senators stated that not all State highway districts
are the same, because not all States grant taxing and bonding authority
or formal subdivision status to their highway districts. They also
suggested that stakeholders had ``come to rely upon'' the current and
prior regulations, which did not expressly provide for the use of State
highway districts.
The Department generally agrees with the commenters that supported
the highway districts proposal. The use of State highway districts or
similar subdivisions as the areas for highway project wage
determinations has the potential to reduce burdens and streamline
highway projects that may cross county lines. These projects otherwise
will require the use of multiple wage determinations for the same
classification of workers and may often require the same individual
workers to be paid different rates for doing the same work on different
parts of the project.
The Department disagrees with the Senators that asserted the
proposal is not permitted by the statute. The plain text of the Davis-
Bacon statute supports the Department's interpretation. Congress has
used the terms political subdivision and civil subdivision
interchangeably, including with regard to the DBA's ``civil subdivision
requirement.'' See 1963 Subcommittee Report, at 5 (``There may be
isolated areas where no rate can be found for the particular kind of
project in the political subdivision of the State in which the project
is located.''); see also Political Subdivision, Black's Law Dictionary
(11th ed. 2019) (defining political subdivision as a ``division of a
state that exists primarily to discharge some function of a local
government.''). As the Wight decision explained, during the time period
leading up to the passage of the DBA, the funding and maintenance of
roads was a function of subdivisions of State government, and
[[Page 57554]]
``many States'' created subdivisions to exercise those functions. 264
F. at 709.
The Senators did not provide any authority to support their
statement that at the time of the DBA's passage ``there was a widely
accepted distinction between state highway districts and civil
subdivisions'' and that ``Congress has always differentiated between
the two.'' If anything, the history of Federal highway funding statutes
supports the opposite conclusion. In the Federal-Aid Road Act of 1916,
Congress directly linked highway funding to ``civil subdivisions'' that
were required to maintain the funded roads or else forfeit future
Federal funding. Public Law 64-156, Sec. 7, 39 Stat. 355, 358 (1916).
The current version of the Federal highway aid statute reinforces this
understanding, as it ties funding to State highway districts or
``other'' political or administrative subdivisions of a State. 23
U.S.C. 116.\97\
---------------------------------------------------------------------------
\97\ Similarly, in 1927 Congress enacted the Longshore and
Harbor Workers Compensation Act (LHWCA), where it limited the
workers compensation liability under the Act for ``political
subdivisions'' of a State. See Public Law 69-803, Sec. 3, 44 Stat.
1424, 1426 (1927). As used in the LHWCA, ``political subdivision''
includes State-authorized transportation districts such as the
Golden Gate Bridge, Highway & Transportation District. See Wheaton
v. Golden Gate Bridge, Highway & Transp. Dist., 559 F.3d 979, 984-85
(9th Cir. 2009).
---------------------------------------------------------------------------
The Department also disagrees that the meaning of the term
``subdivision'' in the DBA is constrained by the subsequent statutory
reference to the District of Columbia. See 40 U.S.C. 3142(b). The Act
provides for the determination of rates for the various potential
``civil subdivisions of a State in which the work is to be performed,''
followed by ``or in the District of Columbia if the work is to be
performed there.'' The Department interprets this language as
suggesting only that the District of Columbia may be the appropriate
``area'' to use for projects occurring there, and that for such
projects it should not be necessary to further subdivide the District
of Columbia into smaller areas.
The Department disagrees with the U.S. Senators' suggestion that
the final rule should not adopt the revised definition of ``area''
because stakeholders have come to rely on the prior definition. Any
such reliance interests would not weigh strongly against adopting the
multi-county and State highway district area proposals, because these
area subdefinitions would only factor into the development of wage
determinations that are finalized after this rule becomes effective.
Any resulting new wage determinations would themselves generally have
effect once they have been incorporated into future contracts, allowing
contractors to take any new rates into consideration as they develop
their bids or negotiate contract pricing.\98\
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\98\ As explained in Sec. 1.6(c), whenever a new wage
determination is issued (either after the completion of a new wage
survey or through the new periodic adjustment mechanism), that
revision as a general matter does not and will not apply to
contracts which have already been awarded, with three exceptions.
These exceptions are explained in Sec. 1.6(c)(2)(iii), and they
include where a contract or order is changed to include substantial
covered work that was not within the original scope of work, where
an option is exercised, and also certain ongoing contracts that are
not for specific construction, for which new wage determinations
must be incorporated on an annual basis under Sec.
1.6(c)(2)(iii)(B) of the final rule. The final rule instructs
contracting agencies to apply the terms of Sec. 1.6(c)(2)(iii) to
all existing contracts, without regard to the date of contract
award, if practicable and consistent with applicable law. The
Department does not anticipate that the application of the amended
wage determination methodologies in these situations will result in
unfair harm to reliance interests in a manner sufficient to outweigh
the benefits of the final rule implementation as planned. See also
section III.C. (``Applicability Date'') below.
---------------------------------------------------------------------------
The legislative history of the DBA, while it does not expressly
address highway districts, is helpful because the text of the statute
should be interpreted in a manner consistent with its purpose. Given
that the purpose of the Act is to protect locally prevailing wage
rates, the term ``civil subdivision'' necessarily must have a
geographical component. Cf. Jones v. Conway Cnty, 143 F.3d 417, 418-19
(8th Cir. 1998) (noting that the enumerated examples of ``political
subdivisions,'' such as counties, municipal corporations, and school
districts, can help to interpret that the term is meant to be limited
to subdivisions that involve a ``physical division of the state'').\99\
The Department agrees with NFIB's comment that a slight revision to the
proposed language would be appropriate to communicate this
understanding. The final rule therefore provides that, for highway
projects, the ``area'' for wage determinations may be State department
of transportation highway districts or other similar State
``geographic'' subdivisions.
---------------------------------------------------------------------------
\99\ For the same reason, there is no particular reason to
interpret the term as requiring some element of exercise of
particular State powers such as taxing and bonding authority. These
factors may be helpful where the use of the term ``political
subdivision'' implicates questions regarding the rights or duties of
the governmental entity in charge of such a subdivision, but those
characteristics are not particularly relevant to the economic and
geographical context in which the term is used in the DBA.
---------------------------------------------------------------------------
The Department also agrees with LIUNA and III-FFC that while the
use of State highway districts may at times be consistent with the
purpose of the DBRA, they will not necessarily always be so. For this
reason, the proposed language does not make it mandatory for the
Department to use State highway districts as ``areas'' for highway
projects, and instead gives the Department discretion to use them where
they are appropriate. Relevant here, the Federal-Aid Highway Act of
1956 (FAHA), one of the Related Acts, uses the term ``immediate
locality'' instead of ``civil subdivision'' for identifying the
appropriate geographic area of a wage determination. 23 U.S.C. 113. The
FAHA requires the application of prevailing wage rates in the immediate
locality to be ``in accordance with'' the DBA, id., and, as noted
above, WHD has long applied these alternative definitions of area in
the Related Acts in a manner consistent with the ``civil subdivision''
language in the original Act. The FAHA ``locality'' language, however,
is helpful guidance for determining whether certain State highway
districts, while within the broadest meaning of ``civil subdivision of
a State,'' may be too large to be used as the default areas for general
wage determinations.
Similarly, it would not be consistent with the purpose of the DBRA
to use State highway districts as ``areas'' in a State where doing so
would result in a significant increase in the use of average rates
instead of modal prevailing wage rates on wage determinations. The
Department therefore will need to take similar precautions with regard
to the use of State highway districts as with multi-county project wage
determinations.
Having considered the comments regarding the State highway district
proposal, the final rule adopts the proposal with the addition of the
word ``geographic'' to better describe the type of State agency
transportation subdivisions that may be used.
(C) Type of Construction (or Construction Type)
The Department proposed to define ``type of construction'' or
``construction type'' to mean the general category of construction as
established by the Administrator for the publication of general wage
determinations. The proposed language also provided examples of types
of construction, including building, residential, heavy, and highway,
consistent with the four construction types the Department currently
uses in general wage determinations, but did not exclude the
possibility of other types. The terms ``type of construction'' or
``construction type'' are already used elsewhere in part 1 to refer to
these general categories of construction, as well as in wage
[[Page 57555]]
determinations themselves. As used in this part, the terms ``type of
construction'' and ``construction type'' are synonymous and
interchangeable. The Department believes that including this definition
will provide additional clarity for these references, particularly for
members of the regulated community who might be less familiar with the
terms.
The Department received no comments specifically addressing this
proposal. However, the Department received several comments relating to
the definitions provided in AAM 130 (Mar. 17, 1978) for the residential
and building construction categories. AAM 130 provides a description of
the four types of construction with an illustrative listing of the
kinds of projects that are generally included within each type for DBRA
purposes. Under AAM 130, apartment buildings of no more than four
stories in height are classified as residential and apartment buildings
of five or more stories are classified as building construction.
MBA, AWHA, and NAHB urged the Department to adopt in the final rule
an expanded definition of residential construction that would include
all multifamily structures regardless of their story level. On the
other hand, SMART and SMACNA argued AAM 130's categorization of
apartment buildings based on the story level has resulted in the
misclassification of ``mixed-use'' buildings as residential and called
for the reexamination of the classifications.
The Department believes the definition of what falls under each
type of construction is best addressed through subregulatory guidance
and intends to continue with that approach. The final rule therefore
adopts the proposal without any changes.
(D) Other Definitions
The Department proposed additional conforming edits to 29 CFR 1.2
in light of proposed changes to 29 CFR 5.2. As part of these conforming
edits, the Department proposed to revise the definition of ``agency''
(and add a sub-definition of ``Federal agency'') to mirror the
definition proposed and discussed in the preamble regarding Sec. 5.2.
The Department also proposed to add new defined terms to Sec. 1.2 that
were proposed in parts 3 and 5, including ``employed,'' ``type of
construction (or construction type),'' and ``United States or the
District of Columbia.'' As discussed in the preamble regarding Sec.
5.2, the Department did not receive any comments on the proposed
changes to the definition of ``agency'' or the addition of the
definition of ``United States or the District of Columbia,'' and
therefore the final rule adopts these changes as proposed. The proposed
addition of the terms ``employed'' and ``type of construction (or
construction type),'' and comments associated with them, are discussed
in the preamble sections III.B.1.ii.C (Sec. 1.2) and III.B.3.xxii
(Sec. 5.2).
(E) Paragraph Designations
The Department also proposed to amend Sec. Sec. 1.2, 3.2, and 5.2
to remove paragraph designations of defined terms and instead to list
defined terms in alphabetical order. The Department proposed to make
conforming edits throughout parts 1, 3, and 5 in any provisions that
currently reference lettered paragraph definitions.
The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed.
iii. Section 1.3 Obtaining and Compiling Wage Rate Information
(A) 29 CFR 1.3(b)
The Department proposed to switch the order of Sec. 1.3(b)(4) and
(5) for clarity. This non-substantive change would simply group
together the paragraphs in Sec. 1.3(b) that apply to wage
determinations generally and follow those paragraphs with one that
applies only to Federal-aid highway projects under 23 U.S.C. 113.
The Department received no comments on this specific proposal. The
final rule therefore adopts this change as proposed.
However, the Department received one comment in response to its
proposed revision to Sec. 1.3(b). Although the Department only
proposed revisions to Sec. 1.3(b)(4) and (5), the Iron Workers noted
that Sec. 1.3(b) provides guidelines concerning the types of
information that WHD may consider when making prevailing wage
determinations and suggested that the Department also amend Sec.
1.3(b)(2) to further safeguard against the fragmentation of job
classifications. Specifically, this commenter suggested the Department
codify Fry Brothers in Sec. 1.3(b)(2).
The Department appreciates the recommendation and notes that
classification decisions are made in accordance with relevant legal
precedent and subregulatory guidance, including the decision in Fry
Brothers and subregulatory guidance such as AAM 213 (Mar. 22, 2013).
Because the Department did not propose changes to Sec. 1.3(b)(2), it
declines to adopt the Iron Workers' recommendation.
(B) 29 CFR 1.3(d)
The Department noted in the NPRM that it was considering whether to
revise Sec. 1.3(d), which addresses when survey data from Federal or
federally assisted projects subject to Davis-Bacon prevailing wage
requirements (hereinafter ``Federal project data'') may be used in
determining prevailing wages for building and residential construction
wage determinations. The Department did not propose any specific
revisions to Sec. 1.3(d) in the NPRM, but rather sought comment on
whether Sec. 1.3(d)--particularly its limitation on the use of Federal
project data in determining wage rates for building and residential
construction projects--should be revised.
As the Department observed in the NPRM, for approximately 50 years
(beginning shortly after the DBA was enacted in 1931 and continuing
until the 1981-1982 rulemaking), the Department used Federal project
data in determining prevailing wage rates for all categories of
construction, including building and residential construction. The
final rule promulgated in May 1982 codified this practice with respect
to heavy and highway construction, providing in new Sec. 1.3(d) that
``[d]ata from Federal or federally assisted projects will be used in
compiling wage rate data for heavy and highway wage determinations.''
\100\ The Department explained that ``it would not be practical to
determine prevailing wages for `heavy' and `highway' construction
projects if Davis-Bacon covered projects are excluded in making wage
surveys because such a large portion of those types of construction
receive Federal financing.'' \101\
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\100\ 47 FR 23652.
\101\ Id. at 23645.
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With respect to building and residential construction, however, the
1982 final rule concluded that such construction often occurred without
Federal financial assistance subject to Davis-Bacon prevailing wage
requirements, and that to invariably include Federal project data in
calculating prevailing wage rates applicable to building and
residential construction projects therefore would ``skew[] the results
upward,'' contrary to congressional intent.\102\ The final rule
therefore provided in Sec. 1.3(d) that ``in compiling wage rate data
for building and residential wage determinations, the Administrator
will not use data from Federal or federally assisted projects subject
to Davis-Bacon prevailing wage requirements unless it is determined
that there is insufficient wage data to
[[Page 57556]]
determine the prevailing wages in the absence of such data.'' 29 CFR
1.3(d). In subsequent litigation, the D.C. Circuit upheld Sec.
1.3(d)'s limitation on the use of Federal project data as consistent
with the DBA's purpose and legislative history--if not necessarily its
plain text--and therefore a valid exercise of the Administrator's broad
discretion to administer the Act.\103\
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\102\ See Donovan, 712 F.2d at 620.
\103\ Id. at 621-22.
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As a result of Sec. 1.3(d)'s limitation on the use of Federal
project data in calculating prevailing wage rates applicable to
building and residential construction, WHD first attempts to calculate
a prevailing wage based on non-Federal project survey data at the
county level--i.e., survey data that includes data from private
projects or projects funded by State and local governments without
assistance under the DBRA, but that excludes data from Federal or
federally assisted projects subject to Davis-Bacon prevailing wage
requirements. See 29 CFR 1.3(d), 1.7(a); Manual of Operations at 38;
Coal. for Chesapeake Hous. Dev., ARB No. 12-010, 2013 WL 5872049, at *4
(Sept. 25, 2013) (Chesapeake Housing). If there is insufficient non-
Federal project survey data for a particular classification in that
county, then WHD considers survey data from Federal projects in the
county if such data is available.
Under the current regulations, WHD expands the geographic scope of
the data that it considers when it is making a county wage
determination when data is insufficient at the county level. This
procedure is described below in the discussion of the ``scope of
consideration'' regulation at Sec. 1.7. For wage determinations for
building and residential construction projects, WHD currently
integrates Federal project data into this procedure at each level of
geographic aggregation in the same manner it is integrated at the
county level: If the combined Federal and non-Federal survey data
received from a particular county is insufficient to establish a
prevailing wage rate for a classification in a county, then WHD
attempts to calculate a prevailing wage rate for that county based on
non-Federal wage data from a group of surrounding counties. See 29 CFR
1.7(a), (b). If non-Federal project survey data from the surrounding-
counties group is insufficient, then WHD includes Federal project data
from all the counties in that group. If both non-Federal project and
Federal project data for a surrounding-counties group is still
insufficient to determine a prevailing wage rate, then WHD may expand
to a ``super group'' of counties or even to the statewide level. See
Chesapeake Housing, ARB No. 12-010, 2013 WL 5872049, at *6; PWRB,
Davis-Bacon Surveys, at 6.\104\ At each stage of data expansion for
building and residential wage determinations, WHD first attempts to
determine prevailing wages based on non-Federal project data; however,
if there is insufficient non-Federal data, WHD will consider Federal
project data.
---------------------------------------------------------------------------
\104\ See note 19, supra.
---------------------------------------------------------------------------
As reflected in the plain language of Sec. 1.3(d) as well as WHD's
implementation of that regulatory provision, the current formulation of
Sec. 1.3(d) does not prohibit the use of Federal project data in
establishing prevailing wage rates for building and residential
construction projects subject to Davis-Bacon requirements; rather, it
limits the use of such data to circumstances in which ``there is
insufficient wage data to determine the prevailing wages in the absence
of such data.'' 29 CFR 1.3(d). As the Department explained in the NPRM,
WHD often uses Federal project data in calculating prevailing wage
rates applicable to residential construction due to insufficient non-
Federal data. By contrast, because WHD's surveys of building
construction typically have a higher participation rate than
residential surveys, WHD uses Federal project data less frequently in
calculating prevailing wage rates applicable to building construction
projects covered by the DBRA. For example, the 2011 GAO Report analyzed
4 DBA surveys and found that over two-thirds of the residential rates
for 16 key job classifications (such as carpenter and common laborer)
included Federal project data because there was insufficient non-
Federal project data, while only about one-quarter of the building wage
rates for key classifications included Federal project data. 2011 GAO
Report, at 26.\105\
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\105\ See note 10, supra.
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Notwithstanding the use of Federal project data in calculating
prevailing wage rates for building and residential construction, the
Department noted in the NPRM that some interested parties may believe
that Sec. 1.3(d) imposes an absolute barrier to the use of Federal
project data in determining prevailing wage rates. As a result, survey
participants may not submit Federal project data in connection with
WHD's surveys of building and residential construction, thereby
reducing the amount of data that WHD receives in response to its
building and residential surveys. The Department therefore strongly
encouraged robust participation in Davis-Bacon prevailing wage surveys,
including building and residential surveys, and it urged interested
parties to submit Federal project data in connection with building and
residential surveys with the understanding that such data will be used
in calculating prevailing wage rates if insufficient non-Federal
project data is received. The Department specifically observed that in
the absence of such Federal project data, for example, a prevailing
wage rate may be calculated at the surrounding-counties group or even
statewide level when it would have been calculated based on a smaller
geographic area if more Federal project data had been submitted.
Although increased submission of such Federal project data thus
could be expected to contribute to more robust wage determinations even
without any change to Sec. 1.3(d), the Department recognized in the
NPRM that revisions to Sec. 1.3(d) might nonetheless be warranted. The
Department therefore solicited comments regarding whether to revise
Sec. 1.3(d) in a way that would permit WHD to use Federal project data
more frequently when it calculates building and residential prevailing
wages. For example, particularly given the challenges that WHD has
faced in achieving high levels of participation in residential wage
surveys--and given the number of residential projects that are subject
to Davis-Bacon labor standards under Related Acts administered by HUD--
the Department noted in the NPRM that it might be appropriate to expand
the amount of Federal project data that is available to use in setting
prevailing wage rates for residential construction.
The Department also observed that there might be other specific
circumstances that particularly warrant greater use of Federal project
data and that, more generally, if the existing limitation on the use of
Federal project data were removed from Sec. 1.3(d), WHD could in all
circumstances establish Davis-Bacon prevailing wage rates for building
and residential construction based on all usable wage data in the
relevant county or other geographic area, without regard to whether
particular wage data was ``Federal'' and whether there was
``insufficient'' non-Federal project data. The Department also noted in
the alternative that Sec. 1.3(d) could be revised in order to provide
a definition of ``insufficient wage data,'' thereby providing increased
clarity regarding when Federal project data may and may not be used in
establishing prevailing wage rates for building or residential
construction. The Department specifically invited
[[Page 57557]]
comments on these and any other issues regarding the use of Federal
project data in developing building and residential wage
determinations.
Numerous commenters expressed support for a regulatory change that
would result in increased use of Federal project data to establish
prevailing wage rates for building and residential construction. LIUNA,
the International Union of Operating Engineers (IUOE), UBC, CEA,
SMACNA, NABTU, and III-FFC expressed support for returning to the
Department's approach prior to the 1981-1982 rulemaking, when the
Department used Federal project data in all instances in determining
prevailing wage rates for building and residential construction. MCAA
similarly supported allowing and perhaps even routinely using Federal
project data in building and residential wage determinations. LIUNA,
NABTU, and UBC, in particular, criticized the limitation on the use of
Federal project data that was imposed by the 1981-1982 rulemaking and
contended that the limitation has resulted in the exclusion of a
significant amount of data on worker compensation in Davis-Bacon wage
surveys. LIUNA and other commenters recognized that Sec. 1.3(d)
permits use of Federal project data in determining prevailing wage
rates for building and residential construction when private project
data is insufficient, but contended that the WHD Administrator's
reliance on various sufficiency standards over the years to determine
when Federal project data may be used has often caused large swaths of
local wage data to be excluded based solely on a disproportionately de
minimis amount of private data. LIUNA, NABTU, and III-FFC posited that
using Federal project data in all circumstances would increase the
amount of usable data and thereby increase the likelihood that wage
rates could be calculated based on a substantial amount of wage data
and/or at the county level.
The IUOE and III-FFC similarly commented that allowing greater use
of Federal project data would promote clarity and efficiency and
resolve some of the challenges associated with insufficient data.
Relatedly, LIUNA and III-FFC observed that the current exclusion of
Federal project data discourages the submission of such data in the
first place, particularly since some interested parties believe that
Sec. 1.3(d) imposes an absolute barrier to the consideration of
Federal project data, and that removing the limitation set forth in
Sec. 1.3(d) therefore would promote greater survey participation. The
UBC, the IUOE, and MCAA further commented that revising Sec. 1.3(d) to
provide for broader use of Federal project data would be consistent
with the purpose of the DBA. The IUOE and III-FFC also commented that
building projects that are likely to be subject to DBRA requirements
include detention facilities, institutional buildings, museums, post
offices, and schools, and that it is essential that data from such
projects are included in Davis-Bacon wage surveys as such data reflects
the wages paid by skilled and experienced contractors on these types of
projects.
Finally, NABTU encouraged the Department, should it decide to
retain the current restriction on the use of Federal project data in
residential and building construction wage determinations, to expressly
state in Sec. 1.3(d) that when the Department receives insufficient
data for an individual county, it will first look to Federal and
federally assisted projects before expanding its search to nearby
counties. In proposing this regulatory revision, NABTU recognized that
this has been a longstanding policy of WHD, but that it is not codified
in the regulations and therefore, NABTU asserted, is not always
uniformly applied in Davis-Bacon wage surveys.
SMART and SMACNA included a lengthy discussion of Sec. 1.3(d) and
noted that they support unrestricted use of Federal project data in
building surveys but that, to be responsive to the NPRM's requests for
specific information, they were also identifying ``specific
circumstances that particularly warrant greater use of Federal project
data'' and discussed the possibility of including a definition of
``insufficient wage data'' in Sec. 1.3(d). They noted that the Federal
government plays a significant role in building and residential
construction in local labor markets and that ``[s]ince the goal of the
DBA is to prevent use of the federal government's purchasing power to
depress labor standards, it makes little sense to ignore the federal
government's impact on local markets in determining prevailing rates.''
SMART and SMACNA further commented that if the Department ``decides not
to rescind Sec. 1.3(d),'' the Department should, at minimum, define
the term ``insufficient wage data'' in the regulation so that it takes
into account the total value of Davis-Bacon projects in a county
relative to the total value of the private projects in the county.''
SMART and SMACNA also noted that ``a dearth of private data in two-
thirds of residential surveys and in building surveys in isolated,
sparsely-populated rural counties necessitates the use of federal and
federally funded data in these surveys.''
In contrast to these comments in favor of revising Sec. 1.3(d),
numerous commenters opposed any change to Sec. 1.3(d). Citing the
DBA's legislative history, IEC contended that the DBA was intended to
reflect prevailing rates established by private industry, and that to
revise Sec. 1.3(d) to allow for broader use of Federal project data in
establishing prevailing wage rates for building and residential
construction would violate the DBA's purpose and established case law.
MBA (in comments submitted jointly with 10 other organizations) and
NAHRO posited that the use of Federal project data in establishing
prevailing wage rates for building and residential construction in all
instances would skew prevailing wages upward and result in rates that
would not reflect actual prevailing wages for residential and/or
building construction. The NAHB, in addition to joining the comment
submitted by the MBA, recommended that the Department maintain its
policy of not factoring Davis-Bacon wages from covered projects in its
initial calculation of prevailing wages. AGC similarly commented that
they were not aware of any significant deficiencies in the sources of
private data for building and residential construction that would
necessitate a change in the current practice or regulation. Finally,
the Small Business Administration (SBA) Office of Advocacy expressed
opposition to greater use of Federal project data, though they (like
certain other commenters) misinterpreted the NPRM as expressly
proposing a regulatory change, when in fact the Department simply
solicited comments in the NPRM as to whether a regulatory change was
warranted.
After considering the comments supporting and opposing a regulatory
change, the Department has decided not to revise Sec. 1.3(d) and to
continue to consider submitted Federal project data in all instances
when calculating prevailing wage rates for heavy and highway
construction and, in calculating prevailing wage rates for building and
residential construction, to consider Federal project data whenever
``it is determined that there is insufficient wage data to determine
the prevailing wages in the absence of such data.'' 29 CFR 1.3(d). As
the current regulatory text reflects, Sec. 1.3(d) does not erect an
absolute barrier to considering Federal project data when determining
prevailing wage rates for building and residential construction, but
rather provides that Federal project data will be used whenever the
Department has
[[Page 57558]]
determined that there is insufficient private data to determine such
prevailing rates. The Department therefore will continue to solicit and
receive Federal project data in all Davis-Bacon wage surveys of
building and residential construction, and, consistent with Sec.
1.3(d) and existing practice, will use such data in determining
prevailing wage rates for those categories of construction whenever
insufficient private data has been received. Moreover, in light of
certain comments confirming that some stakeholders apparently believe
that Sec. 1.3(d) imposes an absolute barrier to the consideration of
Federal project data, the Department will ensure that guidance
materials and communications specific to Davis-Bacon wage surveys
properly emphasize that the Department seeks the submission of Federal
project data in all instances and that it will use such data to
determine prevailing wage rates whenever appropriate under Sec.
1.3(d).
In deciding not to revise Sec. 1.3(d) to permit the use of Federal
project data in all instances, the Department considers it significant
that current Sec. 1.3(d) does not prohibit in all circumstances the
use of Federal project data in calculating prevailing wage rates for
building and residential construction, but rather requires the use of
such data whenever there is insufficient private data. In interpreting
Sec. 1.3(d), the Department's ARB has held repeatedly that the
determination of whether or not there is ``insufficient'' private
project data for purposes of Sec. 1.3(d) depends on the circumstances,
and that Federal project data should not be disregarded simply because
the quantum of private data received minimally satisfied WHD's
subregulatory sufficiency threshold for determining a prevailing wage
rate (currently wage data for six workers employed on three projects).
See Road Sprinkler Fitters Local Union No. 669, ARB No. 10-123, 2012 WL
2588591, at *7 (June 20, 2012) (``[I]it seems illogical to conclude
that data from merely three workers in a metropolitan county for a
common job is `sufficient data' to eliminate the need to . . . include
data from federal jobs, as permitted by the DBA and its implementing
regulations.''); Plumbers Local Union No. 27, ARB No. 97-106, 1998 WL
440909, at *5 (July 30, 1998) (under Sec. 1.3(d), WHD could not
establish a prevailing wage for the plumber classification by solely
considering data reflecting the wages paid to six plumbers on private
projects when the record indicated that WHD had received wage data for
hundreds of plumbers on federally funded projects). The Department
agrees with this interpretation and believes that this precedent
supports retaining Sec. 1.3(d) as presently drafted rather than
revising the provision to mandate the use of Federal project data in
determining all prevailing wage rates.
The Department likewise has concluded that it is unnecessary to
adopt the specific proposals, short of a complete rescission of the
limitation on the use of Federal project data in determining prevailing
wage rates for building and residential conduction, that commenters
identified. In response to NABTU's alternative recommendation that
Sec. 1.3(d) be revised to codify WHD's longstanding policy of looking
to Federal project data before expanding its search to nearby counties
when the Department receives insufficient data for an individual
county, the Department believes that codifying the order of operations
in determining prevailing wage rates for building and residential
construction at this level of detail is not necessary. The existing
text of Sec. 1.3(d), which directs the use of Federal project data
whenever there is insufficient private data, already provides for the
consideration of Federal project data at the county level whenever
there is insufficient county-level private data. Moreover, established
WHD policies and procedures expressly provide that if there is
insufficient non-Federal project survey data for a particular
classification in a county, then WHD will consider available survey
data from Federal projects in the county and will likewise integrate
Federal project data at each level of geographic aggregation to the
same extent and in the same manner it is integrated at the county
level. Manual of Operations at 38; Chesapeake Housing, ARB No. 12-010,
2013 WL 5872049, at *4. The Department appreciates the importance of
adhering to this order of operations in all circumstances, however, and
it will therefore continue to emphasize, through subregulatory guidance
such as the Manual of Operations and internal and external
communications, that, for building and residential construction wage
surveys, Federal project data must always be considered when there is
insufficient private data at the county level, and that a similar
process of considering Federal project data must be followed each time
the geographic area is expanded in accordance with the governing
regulations and WHD's policies and procedures.
The Department also declines to adopt SMART and SMACNA's
alternative proposal that the Department define the term ``insufficient
wage data'' in the regulation so that it takes into account the total
value of Davis-Bacon projects in a county relative to the total value
of the private projects in the county. WHD has long determined
prevailing wages based on the wage data for workers on ``projects of a
character similar'' that WHD receives through its wage survey program
40 U.S.C. 3142(b). As a general matter, projects of significantly
greater value will employ more workers than smaller projects, and the
size or value of a particular project for which wage data is submitted
thus can be expected to influence the calculation of prevailing wages.
To determine sufficiency based on general data regarding aggregate
project values in a county without regard to the specific wage data
received in a particular Davis-Bacon wage survey would represent a
significant and complex shift away from WHD's current method of
determining prevailing wage rates. The Department therefore believes
that the sufficiency or insufficiency of private project data should
continue to be determined based on WHD's ``compiling of wage data,''
Sec. 1.3(d), rather than on distinct, extra-survey information
regarding relative project values. The current regulatory text,
particularly as interpreted by the ARB, thus provides sufficient and
appropriate direction to the Department in determining when Federal
project data may be used to determine prevailing wage rates on building
and residential construction. See Road Sprinkler Fitters, ARB No. 10-
123, 2012 WL 2588591, at *7; Plumbers Local Union No. 27, ARB No. 97-
106, 1998 WL 440909, at *5.
(C) 29 CFR 1.3(f)--Frequently Conformed Rates
The Department is also proposing changes relating to the
publication of rates for labor classifications for which conformance
requests are regularly submitted when such classifications are missing
from wage determinations. The Department's proposed changes to this
paragraph are discussed below in section III.B.1.xii (``Frequently
conformed rates''), together with proposed changes to Sec. 5.5(a)(1).
(D) 29 CFR 1.3(g)-(j)--Adoption of State/Local Prevailing Wage Rates
In the NPRM, the Department proposed to add new paragraphs (g),
(h), (i), and (j) to Sec. 1.3 to permit the Administrator, under
specified circumstances, to determine Davis-Bacon wage rates by
adopting prevailing wage rates set by State and local governments. The
Department explained that this proposal was intended to reduce reliance
on outdated
[[Page 57559]]
Davis-Bacon wage rates while enabling the WHD to avoid performing
costly and duplicative prevailing wage surveys when a State or locality
has already performed similar work.
About half of the States, as well as many localities, have their
own prevailing wage laws (sometimes called ``little'' Davis-Bacon
laws).\106\ Additionally, a few states have processes for determining
prevailing wages in public construction even in the absence of such
State laws.\107\ Accordingly, the Administrator has long taken
prevailing wage rates set by States and localities into account when
making wage determinations. Under the current regulations, one type of
information that the Administrator may ``consider[ ]'' in determining
wage rates is ``[w]age rates determined for public construction by
State and local officials pursuant to State and local prevailing wage
legislation.'' 29 CFR 1.3(b)(3). Additionally, for wage determinations
on federally funded highway construction projects, the Administrator is
required by the FAHA statute to ``consult'' with ``the highway
department of the State'' in which the work is to be performed, and to
``giv[e] due regard to the information thus obtained.'' 23 U.S.C.
113(b); see 29 CFR 1.3(b)(4).
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\106\ A list of such states, and the thresholds for coverage,
can be found here: ``Dollar Threshold Amount for Contract
Coverage,'' U.S. Dep't of Lab., Wage and Hour Div., https://www.dol.gov/agencies/whd/state/prevailing-wages.
\107\ These states include Iowa, North Dakota, and South Dakota.
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In reliance on these provisions, WHD has sometimes adopted and
published certain states' highway wage determinations in lieu of
conducting wage surveys in certain areas. According to a 2019 report by
the OIG, WHD used highway wage determinations from 15 states between
fiscal years 2013 and 2017. See 2019 OIG Report, at 10.
This same OIG report expressed concern about the high number of
out-of-date Davis-Bacon wage rates, particularly non-union rates,
noting, for example, that some published wage rates were as many as 40
years old. Id. at 5. The OIG report further noted that at the time, 26
states and the District of Columbia had their own prevailing wage laws,
and it recommended that WHD ``should determine whether it would be
statutorily permissible and programmatically appropriate to adopt
[S]tate or local wage rates other than those for highway
construction.'' Id. at 10-11. WHD indicated to OIG that in the absence
of a regulatory revision, it viewed adoption of State rates for non-
highway construction as in tension with the definition of prevailing
wage in Sec. 1.2(a) and the ARB's Mistick decision. Id. at 10.
In the NPRM, the Department explained that it shared OIG's concerns
regarding out-of-date rates, and that a regulatory revision would best
ensure that WHD can incorporate State and local wage determinations
when doing so would further the purposes of the Davis-Bacon labor
standards. As noted above, the current regulations permit WHD to
``consider'' State or local prevailing wage rates among a variety of
sources of information used to make wage determinations and require WHD
to give ``due regard'' to information obtained from State highway
departments for highway wage determinations. See 29 CFR 1.3(b)(3)-(4).
However, they also provide that any information WHD considers when
making wage determinations must ``be evaluated in the light of [the
prevailing wage definition set forth in] Sec. 1.2(a).'' 29 CFR 1.3(c).
While some States and localities' definitions of prevailing wage mirror
the Department's regulatory definition, many others' do not. Likewise,
because the current regulations at Sec. Sec. 1.2(a) and 1.3(c), as
well as the ARB's decision in Mistick, suggest that any information
(such as State or local wage rates) that WHD obtains and
``consider[s]'' under Sec. 1.3(b) must be filtered through the
definition of ``prevailing wage'' in Sec. 1.2, the Department proposed
a regulatory change to clarify that WHD may adopt State or local
prevailing wage determinations under certain circumstances even where
the State or locality's definition of prevailing wage differs from the
Department's.
Under the Department's proposal, WHD would only be permitted to
adopt State or local prevailing wage rates if the Administrator, after
reviewing the rate and the processes used to derive the rate, concludes
that they meet certain listed criteria. The criteria the Department
proposed, which were included in proposed new Sec. 1.3(h), were as
follows:
First, the Department proposed that the State or local government
must set prevailing wage rates, and collect relevant data, using a
survey or other process that generally is open to full participation by
all interested parties. This proposed requirement was intended to
ensure that WHD will not adopt a prevailing wage rate where the process
to set the rate unduly favors certain entities, such as union or non-
union contractors. Rather, the State or local process must reflect a
good-faith effort to derive a wage that prevails for similar workers on
similar projects within the relevant geographic area within the meaning
of the Davis-Bacon Act statutory provisions. The phrase ``survey or
other process'' in the proposed regulatory text was intended to permit
the Administrator to incorporate wage determinations from States or
localities that do not necessarily engage in surveys but instead use a
different process for gathering information and setting prevailing wage
rates, provided that this process meets the required criteria.
Second, the Department proposed requiring that a State or local
wage rate must reflect both a basic hourly rate of pay as well as any
locally prevailing bona fide fringe benefits, and that each of these
can be calculated separately. Thus, the Department explained that WHD
must be able to confirm during its review process that both figures are
prevailing for the relevant classification(s) and list each figure
separately on its wage determinations. This reflects the statutory
requirement that a prevailing wage rate under the Davis-Bacon Act must
include fringe benefits, 40 U.S.C. 3141(2)(B); 29 CFR 5.20, and that
``the Secretary is obligated to make a separate finding of the rate of
contribution or cost of fringe benefits.'' 29 CFR 5.25(a). This
requirement also would ensure that WHD could determine the basic or
regular rate of pay to determine compliance with the CWHSSA and the
Fair Labor Standards Act (FLSA).
Third, the Department proposed that the State or local government
must classify laborers and mechanics in a manner that is recognized
within the field of construction.\108\ The proposed rule explained that
this standard is intended to ensure that the classification system does
not result in lower wages than are appropriate by, for example,
assigning duties associated with skilled classifications to a
classification for a general laborer.
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\108\ In the NPRM, the Department explained that it recognizes
that differences in industry practices mean that the precise types
of work done and tools used by workers in particular classifications
may not be uniform across states and localities. For example, in
some areas, a significant portion of work involving the installation
of heating, ventilation, and air conditioning (HVAC) duct work may
be done by an HVAC Technician, whereas in other areas such work may
be more typically performed by a Sheet Metal Worker. Unlike in the
case of the SCA, WHD does not maintain a directory of occupations
for the Davis-Bacon Act. However, under this proposed rule, in order
for WHD to adopt a State or locality's wage rate, the State or
locality's classification system must be in a manner recognized
within the field of construction.
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Finally, the Department proposed that the State or local
government's criteria for setting prevailing wage rates must be
[[Page 57560]]
substantially similar to those the Administrator uses in making wage
determinations under 29 CFR part 1. The proposed regulation provided a
non-exclusive list of factors to guide this determination, including,
but not limited to, the State or local government's definition of
prevailing wage; the types of fringe benefits it accepts; the
information it solicits from interested parties; its classification of
construction projects, laborers, and mechanics; and its method for
determining the appropriate geographic area(s). Thus, the more similar
a State or local government's methods are to those used by WHD, the
greater likelihood that its corresponding wage rate(s) will be adopted.
While the proposed regulation listed the above factors as guidelines,
it ultimately directed that the Administrator's determination in this
regard will be based on the totality of the circumstances. The
reservation of such discretion in the Administrator was intended to
preserve the Administrator's ability to make an overall determination
regarding whether adoption of a State or local wage rate is consistent
with both the language and purpose of the DBA, and thereby is
consistent with the statutory directive for the Secretary (in this
case, via delegation to the Administrator), to determine the prevailing
wage. See 40 U.S.C. 3142(b).
The Department proposed in Sec. 1.3(g) to permit the Administrator
to adopt State or local wage rates with or without modification. The
Department explained that this was intended to encompass situations
where the Administrator reviews a State or local wage determination and
determines that although the State or local wage determination might
not satisfy the above criteria as initially submitted, it would satisfy
those criteria with certain modifications. For example, the
Administrator may obtain from the State or local government the State
or locality's wage determinations and the wage data underlying those
determinations, and, provided the data was collected in accordance with
the criteria set forth earlier (such as that the survey was fully open
to all participants), may determine, after review and analysis, that it
would be appropriate to use the underlying data to adjust or modify
certain classifications or construction types, or to adjust the wage
rate for certain classifications. Consistent with the Secretary's
authority to make wage determinations, the regulation permits the
Administrator to modify a State or local wage rate as appropriate while
still generally relying on it as the primary source for a wage
determination. For instance, before using State or local government
wage data to calculate prevailing wage rates under the DBA, the
Administrator could regroup counties, apply the definition of
``prevailing wage'' set forth in Sec. 1.2, disregard data for workers
who do not qualify as laborers or mechanics under the DBA, and/or
segregate data based on the type of construction involved. The
Department explained that the Administrator would cooperate with the
State or locality to make the appropriate modifications to any wage
rates.
In proposed Sec. 1.3(i), the Department proposed requiring the
Administrator to obtain the wage rates and any relevant supporting
documentation and data from the State or local entity before adopting a
State or local government prevailing wage rate.
Finally, Sec. 1.3(j) of the proposed rule explained that nothing
in proposed Sec. 1.3(g), (h), or (i) precludes the Administrator from
considering State or local prevailing wage rates in a more holistic
fashion, consistent with Sec. 1.3(b)(3), or from giving due regard to
information obtained from State highway departments, consistent with
Sec. 1.3(b)(4), as part of the Administrator's process of making
prevailing wage determinations under 29 CFR part 1. For example, under
the proposed rule, as under the current regulations, if a State or
locality were to provide the Department with the underlying data that
it uses to determine wage rates, even if the Administrator determines
not to adopt the wage rates themselves, the Administrator may consider
or use the data as part of the process to determine the prevailing wage
within the meaning of 29 CFR 1.2, provided that the data is timely
received and otherwise appropriate. The purpose of proposed Sec.
1.3(j) was to clarify that the Administrator may, under certain
circumstances, adopt State or local wage rates, and use them in wage
determinations, even if the process and rules for State or local wage
determinations differs from the Administrator's.
A diverse array of commenters--including labor unions, worker
advocacy organizations, contractors, contractor associations, State
government officials, and various members of Congress--expressed
support for the Department's proposals to expand WHD's authority to
adopt State or local prevailing wage rates. The most common reason
offered for such support was that the adoption of State or local rates
could help ensure that Davis-Bacon rates remain up to date. For
example, FFC and NCDCL stated in their comments that wage
determinations by the State of California are updated with
``significantly greater frequency'' than WHD's. These commenters and
others, such as NABTU, asserted that incorporation of more current
State and local wage rates would help attract workers to the
construction industry, which they viewed as an important policy
priority in light of the increased number of construction projects
financed by IIJA.
Other commenters expressed support for an expanded incorporation of
State and local prevailing wage rates for efficiency reasons. For
example, COSCDA said that the proposals may ``avoid delays in
identifying certain federal prevailing wages,'' \109\ while
Pennsylvania government officials commented that ``the proposal would
streamline the wage determination process . . . and align DBRA wages
with State and local rates for projects covered by both sets of laws.''
CEA, NECA, and SMACNA identified this proposal as among those from the
Department's proposed rule that would greatly improve the overall
efficiency of the Act. IUOE, MCAA, and UBC asserted that the proposals
would allow WHD to conserve its resources for improved administration
and enforcement of the DBA, with MCAA characterizing the proposals as
``sound good-government policy.'' MBA remarked that ``[t]he added
flexibility afforded to the Administrator in the proposed rule is a
positive step in getting a deeper understanding of the relevant
wages,'' and urged the Department to ``go a step further'' by
``[e]xpanding the use of the data, not just when WHD does not have
sufficient data to determine a wage, but in all circumstances . . .
[to] provide a comparative wage and help gain a greater understanding
whenever there are material discrepancies or when the overall
respondent rate is low for a wage determined through the Davis-Bacon
survey.''
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\109\ While opposing the Department's proposals for other
reasons, FTBA acknowledged that ``[the] adoption of prevailing rates
set by state or local officials has some appeal given the time
intensive survey process which has resulted in delays in surveys and
consequently delays in the issuance of new wage determinations based
on updated wages and benefits data.''
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Several commenters expressed more qualified support for the
Department's proposals regarding the incorporation of State and local
prevailing wage rates. For example, the UA acknowledged that it ``makes
sense to use state and local rates . . . as a fall-back option for
combatting stale rates,'' but
[[Page 57561]]
``encourage[d] [the Department] to continue to prioritize its own wage
surveys as the first and best option.'' Similarly, Contractor
Compliance & Monitoring, Inc. (CC&M) ``agree[d] with using state or
local prevailing wage rate for wage rates, but only where there is
otherwise insufficient information from BLS.'' AGC stated that
``[a]dopting state and local wage rates could improve the accuracy and
timeliness of rates if done properly,'' but opined that ``[t]he
viability and practicality of this proposal depends almost entirely on
how much confidence one has in state procedures for collecting wage
rate data and calculating prevailing wages.'' NABTU cautioned that
``[the Department] must . . . conduct meaningful independent review of
local rates to avoid engaging in an impermissible delegation of
authority,'' \110\ and ``[a]bove all . . . retain the final decision-
making authority over rates.''
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\110\ III-FFC similarly cautioned that ``DOL . . . must include
an independent review process that ensures these [State and local]
wage determination programs are methodologically sound and
consistent with the requirements of Davis-Bacon labor standards,''
but expressed its view that the NPRM ``contain[s] a solid framework
with relevant criteria to help DOL review state and local processes
for setting prevailing wage rates.''
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While some commenters specifically approved of the limiting
criteria specified in proposed Sec. 1.3(h), see, e.g., Fair
Contracting Foundation of Minnesota and MCAA, others asked the
Department to codify additional limitations on WHD's discretion to
adopt State or local prevailing wage rates. For example, several labor
unions and worker advocacy organizations, including III-FFC, LCCHR, and
UBC, requested the final rule to prohibit the use of State or local
rates lower than an alternative Federal rate.\111\ In support of this
proposal, III-FFC asserted that ``[a]dopting rates that are lower than
those derived from the Department's own methodology would run counter
to the purpose of the Davis-Bacon Act to establish rates `for the
benefit of construction workers.' Binghamton Constr. Co., 347 U.S. at
178.'' Other commenters expressed concern about the risks of low State
or local prevailing wage rates but stopped short of requesting the
Department to categorically reject the adoption of lower State or local
rates. For example, IUOE requested the Department to ``add a clause to
the final rule that the Administrator shall closely scrutinize a
state's submissions if the state cannot demonstrate a 5-year history of
successfully administering such a prevailing wage program,'' explaining
that such scrutiny would ``allow the Administrator to not accept such
wages if they significantly lower the wages already listed on the WD.''
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\111\ LIUNA supported this proposed restriction, and
additionally requested the Department to prohibit ``replac[ing] a
federal wage determination based on a collective bargaining
agreement subject to annual updating with one that cannot be so
escalated.''
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Other commenters suggested methodological modifications. NABTU and
the UA requested the Department to limit its adoption of State or local
rates to communities where WHD has not completed a wage survey in the
area for the applicable type of construction in more than 3 years.\112\
NAHB urged the Department not to adopt wage rates from State and local
governments that use a methodology that permits the cross-consideration
of rural and metropolitan wage rates, asserting that wages resulting
from such a methodology are not appropriately representative of a given
area. And ABC requested that the Department modify proposed Sec.
1.3(h)(1) to require that the State or local government ``use
appropriate statistical methods, such as sampling, weighting, or
imputation, to obtain statistically representative results,'' or, in
the alternative, ``clarify that statistically representative sampling,
where all respondents have a proportionate likelihood of inclusion in
the sample, qualifies as `full participation by all interested parties'
within the meaning of the regulation.''
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\112\ NABTU specifically requested the Department to ``limit its
adoption of local rates to communities where the SU rates are more
than three years old and where such local rates are established
through a data collection process that: (1) prioritizes the modal
wage rate and utilizes weighed averages, means or medians as a last
resort; (2) is carried out no less frequently than every three
years; (3) is open to participation by, at least, those interested
parties listed in 29 CFR 1.3(a); and (4) accepts the types of fringe
benefits that DOL accepts.''
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The Department identified at least five comments which opposed an
expanded use of State or local prevailing wage rates, submitted by
AWHA, FTBA, IEC, NAHB, and the group of U.S. Senators, respectively.
Unlike some of the commenters that voiced concern about the potential
adoption of lower State or local wage rates, FTBA, IEC, and the group
of U.S. Senators were chiefly concerned that the proposal could result
in the adoption of State or local wage rates that are inappropriately
high. For example, the group of U.S. Senators cited research asserting
that New York's prevailing wage law has inflated state and local
construction costs by 13 to 25 percent, depending on the region. The
group of U.S. Senators elaborated that ``[m]any state prevailing wage
laws, such as New York's, base their definition of prevailing rate of
wage directly on compensation levels set in [a] CBA, rather than
voluntary surveys, allowing contract administrative costs and union
work rules to further inflate wages, at great detriment to the
taxpayer.''
AWHA and FTBA expressed a different concern that expanding the use
of State and local prevailing wage rates might inappropriately reduce
WHD's need or desire to regularly perform Federal wage surveys.\113\
AWHA asserted that State and local governments ``face similar, if not
more pronounced, capacity and outreach challenges in conducting
methodologically rigorous wage and hour surveys,'' and further objected
that the Department's proposal to use local prevailing wage rates even
in cases where the definitions and methods are different than the
Federal standard was ``at odds with the given rationale to return to
the three-step process.'' Highlighting the requirement in proposed
Sec. 1.3(h)(4) that State or local rates must be derived from
``substantially similar'' criteria to those the Administrator uses in
making wage determinations under part 1, IEC asserted that ``the
ability to merely adopt--rather than consider--state and local wage
determinations converts key provisions of the regulations governing
wage determinations into mere suggestions.'' And, as previously
discussed, NAHB relayed concerns about incorporation of State or local
rates to the extent that those rates are derived from methodologies
that permit cross-consideration of rural and metropolitan areas.
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\113\ FTBA additionally asserted that the proposal might reduce
WHD's need to consult with the highway department of the State in
which a project in the Federal-aid highway system is to be
performed.
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Having considered the feedback in response to the proposed
expansion of the use of State and local prevailing wage rates, the
Department agrees with the 2019 OIG report and the overwhelming
majority of the commenters that addressed these proposals that
expanding WHD's ability to incorporate State and local wage rates would
be a significant improvement to the current regulations. Specifically,
the Department believes that the provisions in proposed Sec. 1.3(g)-
(j) will give the Department an important tool to keep DBRA prevailing
wage rates accurate and up to date, with appropriate safeguards to
guard against the adoption of excessively high or low State or local
rates. Accordingly, the final rule adopts new paragraphs (g), (h), (i),
and (j) in Sec. 1.3 as proposed in the NPRM.
[[Page 57562]]
The Department declines to adopt additional limitations on its
discretion to adopt State or local prevailing wage rates beyond those
specified in the proposed rule. The final rule provides the
Administrator with the ultimate responsibility to make an affirmative
determination to adopt a State or local wage rate. This contemplates
that WHD will engage in a careful and individualized review of State
and local prevailing wages, and the criteria specified in proposed
Sec. 1.3(h) accomplish that objective while also providing appropriate
safeguards. For example, the Department disagrees with NABTU and the
UA's suggestion to prohibit the adoption of State or local prevailing
wage rates where an applicable Federal rate exists that was determined
from the prior 3 years. Although the Department agrees that in general,
it will be less likely to adopt a State or local rate if the applicable
wage determination is derived from more recent data, the Department
believes that individual decisions whether or not to adopt particular
rates are best left to the Administrator to determine on a case-by-case
basis.
Similarly, the Department declines to adopt a categorical
prohibition on the adoption of State or local prevailing wage rates
that are lower than those provided in the most recent Federal wage
determination. First, the Department expects that this outcome will be
exceedingly rare, because one of the primary purposes of the new
adoption provision is to fill in gaps in areas where WHD is unable to
conduct regular surveys due to resource constraints. Thus, in most or
all cases in which a State or local wage determination is adopted, WHD
will not have a recent wage rate to use for comparison. Moreover, the
purpose of a wage determination is to accurately reflect wages that
prevail in the locality. As such, if the Administrator determines that
a State or local rate is the most appropriate or accurate rate to use,
it would not be appropriate to reject the State or local rate simply
because it happens to be lower than the analogous rate in the most
recent (and potentially outdated) WHD survey. In any event, as noted
above, the Department anticipates that the regulatory criteria for
adoption will prevent the adoption of rates that would deviate
significantly from those that would apply if the Department were to
conduct a wage survey itself.
The Department declines ABC's request to restrict the pool of State
and local prevailing wages eligible for incorporation to those that
``use appropriate statistical methods, such as sampling, weighting, or
imputation, to obtain statistically representative results.'' This
restriction does not apply to WHD's own wage determination process, and
the Department declines to impose it on State and local wage
determinations. In response to ABC's concern that the language in
proposed Sec. 1.3(h)(1) referring to ``full participation by all
interested parties'' could be read to only permit a process in which
participants self-select into a survey, as noted above, the phrase
``survey or other process'' is specifically intended to permit the
Administrator, where otherwise appropriate, to adopt not only wage
rates that are set using surveys, but also rates set using a different
process. The Department reaffirms that the intent of Sec. 1.3(h)(1) is
to ensure that WHD will not adopt a State or local rate where the
process that the State or locality uses to determine the rate unduly
favors certain entities.
The Department declines NAHB's request to require that State and
local governments bar the cross-consideration of rural and metropolitan
wage data. As explained in greater detail in section III.B.1.vii.A, the
Department is eliminating this prohibition in connection with its own
wage determination process, and likewise does not believe that imposing
such a ban in new Sec. 1.3(h) to limit the pool of State and local
rates eligible for adoption would be necessary or helpful. As explained
in section III.B.1.vii, the removal of the prohibition on cross-
consideration of rural and metropolitan data in the context of WHD's
own Davis-Bacon surveys provides for such cross-consideration in
limited and appropriate circumstances, as described in that section,
and will not lead to the widespread mixing of metropolitan and rural
data in determining prevailing wages. Similarly, the extent to which
State or local prevailing wage rates reflect the combining of
metropolitan and rural data in limited circumstances of the type
contemplated in Sec. 1.7(b), as opposed to a significantly broader
combining of metropolitan and rural data, would be a factor that the
Administrator could consider in determining whether it would be
appropriate to adopt or not adopt the State or local rates, or,
alternatively, to obtain the underlying State or local data and
reconfigure the data based on county groupings that are similar or
identical to those used by the Administrator in analogous contexts. The
Department also notes that consistent with Sec. 1.3(d), the
Administrator will also review the extent to which a State or local
building or residential prevailing rate is derived using Federal
project data, but that a State or locality's use of such data to a
greater or lesser extent than WHD uses such data in its own wage
determinations will not categorically preclude adoption of the State or
locality's rates. The Department also declines CC&M's suggestion to
adopt State or local rates only when there is insufficient data from
BLS. For the reasons explained at length above, the Department does not
believe that the use of BLS data to set DBRA wage rates is generally
appropriate. The Department notes that to the extent that a State or
locality's system for making wage determinations raises similar
concerns, such concerns would weigh significantly against the
Department's adoption of such rates.
The Department appreciates commenter concerns about the adoption of
inappropriately high State or local prevailing wage rates but believes
that the criteria specified in new Sec. 1.3(h) will serve as a
safeguard against such outcomes. Moreover, WHD's expanded authority to
adopt State and local rates under new Sec. 1.3(g) is wholly
discretionary, and may be done ``with or without modification'' of an
underlying rate. While the Department acknowledges that the adoption of
State or local rates will in many cases result in increases to the
applicable Davis-Bacon prevailing wage rates due to the replacement of
outdated and artificially low rates with more current State or local
rates, such increases are entirely appropriate and result in rates that
better reflect wages that actually prevail in the relevant locality. As
a general matter, states and localities that conduct wage surveys more
frequently than WHD may have stronger relationships with local
stakeholders, enabling those bodies to determine prevailing wage rates
with greater participation.\114\ A wide swath of commenters--including
contractors, contractor associations, and contracting agencies--agreed
that with that reasoning, and asserted that the proposals would benefit
the construction industry as a whole.
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\114\ The Department explained this in the NPRM, see 87 FR
15699-700, and several comments, including from III-FFC and the
LCCHR and other civil rights and worker advocacy organizations, made
similar arguments in support of the Department's proposals.
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The Department disagrees that expanding WHD's ability to adopt
State or local prevailing wage rates will hamper its ability or
willingness to conduct Federal wage surveys. To the contrary,
empowering WHD to adopt State and local rates in appropriate cases will
give WHD the flexibility to better allocate its limited resources to
[[Page 57563]]
the classifications and localities most in need of attention.\115\ As
other commenters noted, an expanded use of State and local prevailing
wages may achieve efficiencies that improve WHD's overall
administration and enforcement of the DBRA.
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\115\ Fair Contracting Foundation of Minnesota opined that the
Department's proposals would ``free[ ] up precious agency resources
to focus on states that lack the requisite public infrastructure to
conduct their own surveys.''
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The Department also disagrees that increased flexibility to adopt
State and local rates is inconsistent with the final rule's restoration
of the ``three-step process'' when WHD conducts its own wage surveys.
Both regulatory revisions seek to further the same goal: the adoption
of prevailing wage determinations that better reflect wages that are
currently prevailing in a locality. Moreover, the final rule requires
WHD to consider the extent to which a state's methodology is similar
to, or deviates from, WHD's when determining whether to adopt a State
or local rate, and whether to do so with or without modification. As
the Department emphasized in the NPRM, the new provisions require the
Administrator to make an affirmative determination that the criteria
enumerated in Sec. 1.3(h) have been met in order to adopt a State or
local wage rate, and to do so only after careful review of both the
rate and the process used to derive the rate. The criteria are intended
to allow WHD to adopt State and local prevailing wage rates where
appropriate while also ensuring that adoption of such rates is
consistent with the statutory requirements of the Davis-Bacon Act and
does not create arbitrary distinctions between jurisdictions where WHD
makes wage determinations by using its own surveys and jurisdictions
where WHD makes wage determinations by adopting State or local
rates.\116\ Thus, under the final rule, the Department may not simply
accept State or local data with little or no review. Such actions would
be inconsistent with the Secretary's statutory responsibility to
``determine[ ]'' the wages that are prevailing. 40 U.S.C. 3142(b).
Adoption of State or local rates after appropriate review, however, is
consistent with the authority Congress granted to the Department in the
Davis-Bacon Act. The DBA ``does not prescribe a method for determining
prevailing wages.'' Chesapeake Housing, ARB No. 12-010, 2013 WL
5872049, at *4. Rather, the statute ``delegates to the Secretary, in
the broadest terms imaginable, the authority to determine which wages
are prevailing.'' Donovan, 712 F.2d at 616. The D.C. Circuit has
explained that the DBA's legislative history reflects that Congress
``envisioned that the Secretary could establish the method to be used''
to determine DBA prevailing wage rates. Id. (citing 74 Cong. Rec. 6516
(1931) (remarks of Rep. Kopp) (``A method for determining the
prevailing wage rate might have been incorporated in the bill, but the
Secretary of Labor can establish the method and make it known to the
bidders.'')).
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\116\ For example, in response to AWHA's expressed concern about
the adoption of ``wage rates that have substantively different
methods than those mandated at the federal level,'' the Department
notes that Sec. 1.3(h) requires that a State or local government's
criteria for setting prevailing wage rates must be ``substantially
similar'' to that used by the Administrator in order for the State
or local wage rate to be adopted.
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Reliance on prevailing wage rates calculated by State or local
authorities for similar purposes is a permissible exercise of this
broad statutory discretion. In areas where states or localities are
already gathering reliable information about prevailing wages in
construction, it may be inefficient for the Department to use its
limited resources to perform the same tasks. As a result, the
Department is finalizing its proposal to use State and local wage
determinations under specified circumstances where, based on a review
and analysis of the processes used in those wage determinations, the
Administrator determines that such use would be appropriate and
consistent with the DBA. Such resource-driven decisions by Federal
agencies are permissible. See, e.g., Hisp. Affs. Project v. Acosta, 901
F.3d 378, 392 (D.C. Cir. 2018) (upholding Department's decision not to
collect its own data but instead to rely on a ``necessarily . . .
imprecise'' estimate given that data collection under the circumstances
would have been ``very difficult and resource-intensive''); Dist. Hosp.
Partners, L.P. v. Burwell, 786 F.3d 46, 61-62 (D.C. Cir. 2015)
(concluding that an agency's use of an ``imperfect[ ]'' data set was
permissible under the Administrative Procedure Act).\117\
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\117\ The Federal Highway Administration's (FHWA) independent
statutory obligation for the Department to consider and give ``due
regard'' to information obtained from State highway agencies for
highway wage determinations does not prohibit WHD from adopting
State or local determinations, either for highway construction or
for other types of construction, where appropriate. Rather, this
language imposes a minimum requirement for the Secretary to consult
with states and consider their wage determinations for highway
construction. See Virginia, ex rel., Comm'r, Virginia Dep't of
Highways and Transp. v. Marshall, 599 F.2d 588, 594 (4th Cir. 1979)
(``Section 113(b) requires that the Secretary `consult' and give
`due regard' to the information thus obtained.'').
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For the above reasons, the final rule adopts these revisions as
proposed.
iv. Section 1.4 Report of Agency Construction Programs
Section 1.4 currently provides that, to the extent practicable,
agencies that use wage determinations under the DBRA shall submit an
annual report to the Department outlining proposed construction
programs for the coming year. The reports described in Sec. 1.4 assist
WHD in its multiyear planning efforts by providing information that may
guide WHD's decisions regarding when to survey wages for particular
types of construction in a particular locality. These reports are an
effective way for the Department to know where Federal and federally
assisted construction will be taking place, and therefore where updated
wage determinations will be of most use.
Notwithstanding the importance of these reports to the program,
contracting agencies have not regularly provided them to the
Department. As a result, after consideration, the Department proposed
to remove the language in the regulation that currently allows agencies
to submit reports only ``to the extent practicable.'' Instead, proposed
Sec. 1.4 would require Federal agencies to submit the construction
reports.
The Department also proposed to adopt certain elements of two prior
AAMs addressing these reports. In 1985, WHD updated its guidance
regarding the agency construction reports, including by directing that
Federal agencies submit the annual report by April 10 each year and
providing a recommended format for such agencies to submit the report.
See AAM 144 (Dec. 27, 1985). In 2017, WHD requested that Federal
agencies include in the reports proposed construction programs for an
additional 2 fiscal years beyond the upcoming year. See AAM 224 (Jan.
17, 2017). The proposed changes to Sec. 1.4 would codify these
guidelines in the regulations.
The Department also proposed new language requiring Federal
agencies to include notification of any expected options to extend the
terms of current construction contracts. The Department proposed this
change because--like a new contract--the exercise of an option requires
the incorporation of the most current wage determination. See AAM 157
(Dec. 9, 1992); see also 48 CFR 22.404-12(a). Receiving information
concerning expected options to extend the terms of current construction
contracts therefore will help the Department assess where updated wage
determinations are needed for Federal and federally assisted
construction,
[[Page 57564]]
which will in turn contribute to the effectiveness of the Davis-Bacon
wage survey program. The Department also proposed that Federal agencies
include the estimated cost of construction in their reports, as this
information also will help the Department prioritize areas where
updated wage determinations will have the broadest effects.
In addition, the Department proposed to require that Federal
agencies include in the annual report a notification of any significant
changes to previously reported construction programs. In turn, the
Department proposed eliminating the current directive that agencies
notify the Administrator mid-year of any significant changes in their
proposed construction programs. Such notification would instead be
provided in Federal agencies' annual reports.
Finally, the Department proposed deleting the reference to the
Interagency Reports Management Program because the requirements of that
program were terminated by the General Services Administration (GSA) in
2005. See 70 FR 3132 (Jan. 19, 2005).
The Department explained that these proposed changes would not
result in significant burdens on contracting agencies, as the proposed
provisions request only information already on hand. Furthermore, any
burden resulting from the new proposal should be offset by the proposed
elimination of the current directive that agencies notify the
Administrator of any significant changes in a separate mid-year report.
The Department also sought comment on any alternative methods through
which the Department may obtain the information and eliminate the need
to require the agency reports.
A number of contractors, unions, and industry associations that
submitted comments expressed general support for the Department's
proposed change to require that reports include construction program
information for an additional 2 fiscal years beyond the upcoming year
and include notification of options to extend terms of current
construction contracts or any significant changes to construction
programs. See, e.g., Minnesota State Building and Construction Trades
Council; SMACNA; and Smith-Boughan, Inc. NECA supported the changes as
necessary for ensuring that the Department is informed of where Federal
and federally assisted construction will take place.
The UA supported the proposed change and further suggested that the
reports be posted online to improve transparency or that the Department
``provide a streamlined mechanism for interested parties to request the
reports.'' While appreciating the UA's interest in transparency, the
Department does not believe codification of such a procedure is
necessary, particularly given the amount of information regarding
agency construction programs that is already in the public domain and
available through resources such as USAspending.gov and agency
operating plans.
The Department of the Army's Labor Advisor supported the proposal
to change agency construction reports' due date to April 10, stating
that the April date is ``considerably more practicable than October
1,'' as contracting agency activity ``is especially busy at the start
of each fiscal year.'' This commenter, however, noted that the proposed
language is confusing because it characterizes the requirement as one
that is ``[a]t the beginning of each fiscal year,'' even though fiscal
years for the Federal government run from October 1 through September
30. The Department agrees that the proposed language may lead to
confusion and has changed the description to require the reports ``[o]n
an annual basis.''
The Department received a few comments expressing concerns about
additional burdens from the proposal to remove the language in the
regulation that currently allows agencies to submit reports only ``to
the extent practicable.'' NAHRO expressed concern that if agencies are
required to submit reports, additional burdens will be placed on public
housing authorities and other housing and community development
organizations that provide information to HUD. The National Community
Development Association was also concerned that the Department's
proposal would result in HUD needing to impose additional information
collection requirements on grantees and recommended that agencies only
be required to report on projects ``of such a scale as to be relevant
to the stated goal of assisting [the Department] decide where updated
wage determinations are needed or would be of most use.'' The
Department of the Army's Labor Advisor recommended the Department add
clarifying language that construction reports be ``based on information
already on hand.'' In response to comments received, and specifically
in order to address the stated concerns about imposing potentially
burdensome information collection requirements on recipients of Federal
financial assistance, the Department has added language at the end of
the opening sentence in Sec. 1.4 of the regulatory text to clarify
that a Federal agency's report should be based on information in the
Federal agency's possession at the time it furnishes its report. This
language is intended to clarify that a Federal agency is not required
to impose additional information collection requirements on grantees in
order to fulfill the Federal agency's duty to submit construction
program reports to the Department.\118\
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\118\ While this rule change does not require Federal agencies
to impose additional information collection requirements on grantees
or other recipients of federal assistance, this language does not
prevent them from doing so to the extent that additional or modified
information requests may be helpful. The details of such information
collection requests, however, are outside of the scope of this
rulemaking.
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Having considered the comments both supporting and opposing the
proposed changes to the agency construction reporting requirements, the
Department continues to believe it is appropriate to remove the
language allowing the reporting to occur only ``to the extent
practicable.'' Accordingly, the final rule adopts the proposed
revisions to Sec. 1.4, with the limited changes specified above.
v. Section 1.5 Publication of General Wage Determinations and Procedure
for Requesting Project Wage Determinations
The Department proposed a number of revisions to Sec. 1.5 to
clarify the applicability of general wage determinations and project
wage determinations. Except as noted below, these revisions are
consistent with longstanding Department practice and subregulatory
guidance.
First, the Department proposed to re-title Sec. 1.5, currently
titled ``Procedure for requesting wage determinations,'' as
``Publication of general wage determinations and procedure for
requesting project wage determinations.'' The proposed revision better
reflects the content of the section as well as the distinction between
general wage determinations, which the Department publishes for broad
use, and project wage determinations, which are requested by
contracting agencies on a project-specific basis. The Department also
proposed to add titles to each paragraph in Sec. 1.5 to improve
readability.
Additionally, the Department proposed to add language to Sec.
1.5(a) to explain that a general wage determination contains, among
other information, a list of wage rates determined to be prevailing for
various classifications of laborers and mechanics for specified type(s)
of construction in a given area. Likewise, the Department proposed to
add language to Sec. 1.5(b) to explain circumstances under which an
agency
[[Page 57565]]
may request a project wage determination, namely, where (1) the project
involves work in more than one county and will employ workers who may
work in more than one county; (2) there is no general wage
determination in effect for the relevant area and type of construction
for an upcoming project; or (3) all or virtually all of the work on a
contract will be performed by one or more classifications that are not
listed in the general wage determination that would otherwise apply,
and contract award or bid opening has not yet taken place. The first of
these three circumstances conforms to the proposed revision to the
definition of ``area'' in Sec. 1.2 that would permit the issuance of
project wage determinations for multicounty projects where appropriate.
The latter two circumstances reflect the Department's existing
practice. See PWRB, Davis-Bacon Wage Determinations, at 4-5.
The Department also proposed to add language to Sec. 1.5(b)
clarifying that requests for project wage determinations may be sent by
means other than the mail, such as email or online submission, as
directed by the Administrator. Additionally, consistent with the
Department's current practice, the Department proposed to add language
to Sec. 1.5(b) requiring that when requesting a project wage
determination for a project that involves multiple types of
construction, the requesting agency must attach information indicating
the expected cost breakdown by type of construction. See PWRB, Davis-
Bacon Wage Determinations, at 5. The Department also proposed to
clarify that in addition to submitting the information specified in the
regulation, a party requesting a project wage determination must submit
all other information requested in the Standard Form (SF) 308. The
Department proposed to discuss the time required for processing
requests for project wage determinations in Sec. 1.5(b)(5).
Finally, the Department proposed to clarify the term ``agency'' in
Sec. 1.5. In proposed Sec. 1.5(b)(2) (renumbered, currently Sec.
1.5(b)(1)), which describes the process for requesting a project wage
determination, the Department proposed to delete the word ``Federal''
that precedes ``agency.'' This proposed deletion, and the resulting
incorporation of the definition of ``agency'' from Sec. 1.2, clarifies
that, as already implied elsewhere in Sec. 1.5, non-Federal agencies
may request project wage determinations. See, e.g., Sec. 1.5(b)(3)
(proposed Sec. 1.5(b)(4)) (explaining that a State highway department
under the Federal-Aid Highway Acts may be a requesting agency).
The Department received no substantive comments on these proposals
other than comments regarding the availability of project wage
determinations for multicounty projects; these comments were discussed
above in the review of comments on the definition of ``area'' in Sec.
1.2. The final rule adopts these changes as proposed, with one non-
substantive change. The proposed language in Sec. 1.5(b)(5), to
address processing times for requests for project wage determinations,
inadvertently duplicated language already found in Sec. 1.5(c).
Therefore, the final rule removes existing Sec. 1.5(c) to avoid
duplication.
vi. Section 1.6 Use and Effectiveness of Wage Determinations
(A) Organizational, Technical and Clarifying Revisions
(1) Terminology and Organization
The Department proposed to reorganize, rephrase, and/or renumber
several regulatory provisions and text in Sec. 1.6. These proposed
revisions included adding headings to paragraphs for clarity; changing
the order of some of the paragraphs so that discussions of general wage
determinations precede discussions of project wage determinations,
reflecting the fact that general wage determinations are (and have been
for many years) the norm, whereas project wage determinations are the
exception; adding the word ``project'' before ``wage determinations''
in locations where the text refers to project wage determinations but
could otherwise be read as referring to both general and project wage
determinations; using the term ``revised'' wage determination to refer
both to cases where a wage determination is modified, such as due to
updated CBA rates, and cases where a wage determination is reissued
entirely (referred to in the current regulatory text as a
``supersedeas'' wage determination), such as after a new wage survey;
consolidating certain paragraphs that discuss revisions to wage
determinations to eliminate redundancy and improve clarity; revising
the regulation so that it references the publication of a general wage
determination (consistent with the Department's current practice of
publishing wage determinations online), rather than publication of
notice of the wage determination (which the Department previously did
in the Federal Register); and using the term ``issued'' to refer,
collectively, to the publication of a general wage determination or
WHD's provision of a project wage determination.
The Department did not receive any comments on these proposed
changes to terminology and the organization of the section. The final
rule therefore adopts these changes as proposed.
(2) Use of Inactive Wage Determinations
The Department also proposed minor revisions regarding wage
determinations that are no longer current, referred to in current
regulatory text as ``archived'' wage determinations. First, the
Department proposed to revise the regulatory text to instead refer to
such wage determinations as ``inactive'' to conform to the terminology
currently used on SAM. Second, the Department proposed to clarify that
there is only one appropriate use for inactive wage determinations,
namely, when the contracting agency initially failed to incorporate the
correct wage determination into the contract and subsequently must
incorporate the correct wage determination after contract award or the
start of construction (a procedure that is discussed in Sec. 1.6(f)).
In that circumstance, even if the wage determination that should have
been incorporated at the time of the contract award has since become
inactive, it is still the correct wage determination to incorporate
into the contract. Third, the Department also proposed that agencies
should notify WHD prior to engaging in incorporation of an inactive
wage determination, and that agencies may not incorporate the inactive
wage determination if WHD instructs otherwise. While the existing
regulation requires the Department to ``approv[e]'' the use of an
inactive wage determination, the proposed change would permit the
contracting agency to use an inactive wage determination under these
limited circumstances as long as it has notified the Administrator and
has not been instructed otherwise. The proposed change was intended to
ensure that contracting agencies incorporate omitted wage
determinations promptly rather than waiting for approval.
The Department did not receive any comments on the proposed
revisions relating to inactive wage determinations. Accordingly, the
final rule adopts these changes as proposed.
(3) Incorporation of Multiple Wage Determinations Into a Contract
The Department also proposed revisions to Sec. 1.6(b) to clarify
when contracting agencies must incorporate multiple wage determinations
into a contract. The proposed language stated
[[Page 57566]]
that when a construction contract includes work in more than one
``area'' (as the term is defined in Sec. 1.2), and no multi-county
project wage determination has been obtained (as contemplated by the
proposed revisions to Sec. 1.2), the applicable wage determination for
each area must be incorporated into the contract so that all workers on
the project are paid the wages that prevail in their respective areas,
consistent with the DBA. The Department also proposed language stating
that when a construction contract includes work in more than one ``type
of construction'' (as the Department has proposed to define the term in
Sec. 1.2), the contracting agency must incorporate the applicable wage
determination for each type of construction where the total work in
that type of construction is substantial. This corresponds with the
Department's longstanding guidance published in AAM 130 (Mar. 17, 1978)
and AAM 131 (July 14, 1978).\119\ The Department also proposed to
continue interpreting the meaning of ``substantial'' in subregulatory
guidance.\120\ The Department requested comments on the above
proposals, including potential ways to improve the standards for when
and how to incorporate multiple wage determinations into a contract.
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\119\ AAM 130 states that where a project ``includes
construction items that in themselves would be otherwise classified,
a multiple classification may be justified if such construction
items are a substantial part of the project . . . . [But] a separate
classification would not apply if such construction items are merely
incidental to the total project to which they are closely related in
function,'' and construction is incidental to the overall project.
AAM 130, at 2 n.1. AAM 131 similarly states that multiple schedules
are issued if ``the construction items are substantial in relation
to project cost[s].'' However, it further explains that ``[o]nly one
schedule is issued if construction items are `incidental' in
function to the overall character of a project . . . and if there is
not a substantial amount of construction in the second category.''
AAM 131, at 2 (emphasis omitted).
\120\ Most recently, on Dec. 14, 2020, the Administrator issued
AAM 236 (Dec. 14, 2020), which states that ``[w]hen a project has
construction items in a different category of construction,
contracting agencies should generally apply multiple wage
determinations when the cost of the construction exceeds either $2.5
million or 20% of the total project costs,'' but that WHD will
consider ``exceptional situations'' on a case-by-case basis. AAM
236, at 1-2.
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The Department did not receive any comments on the proposed
language relating to the incorporation of multiple general wage
determinations when the construction contract includes work in more
than one area, other than those comments regarding the use of multi-
county areas that are addressed above in the discussion of the
definition of area in Sec. 1.2, and therefore the final rule adopts
that language as proposed.
In contrast, the Department received comments related to the
proposed language on the incorporation of multiple wage determinations
when a construction contract includes work in more than one type of
construction. CC&M expressed support for the Department's position
reflected in AAM 236 (Dec. 14, 2020) that work in another category of
construction is generally considered substantial when it exceeds either
$2.5 million or 20 percent of total project costs. See supra note 118.
While not explicitly taking a position on the proposed language or the
existing subregulatory guidance, the UA recommended that the Department
provide either regulatory or subregulatory guidance clarifying when it
is appropriate for work to be classified as heavy or building in
multiple wage determination situations.
MBA and National Council of State Housing Agencies (NCSHA)
expressed opposition to the proposed language's application to
multifamily housing projects, recommending that the regulations instead
specify that only a single residential wage determination should apply
to such projects. These commenters asserted that HUD policy has long
been that only a single residential wage determination need be applied
to residential projects and that application of multiple wage
determinations would be unnecessarily complex because it would require
contractors to track when workers are performing work in different
categories of construction and pay different rates accordingly. MBA
further asserted that the use of a single residential rate in these
scenarios would also be consistent with the Department's own guidance
and that work in other categories of construction on residential
projects is actually of a character similar to residential work because
wage rates for such work are more similar to residential wage rates,
and are therefore more likely to be included in residential wage
determinations. In the alternative, MBA argued that if multiple wage
determinations are applied to multifamily housing projects, the
threshold for substantiality should be increased to $15 million,
because current HUD standards consider Federal Housing Administration-
insured loans to be large loans when the loan exceeds $75 million ($15
million is 20 percent of $75 million). MBA also suggested $5 million as
a potential threshold. Finally, MBA requested that the Department
provide more details as to the process that will be used to re-evaluate
annually whether an update to the substantiality threshold is
warranted, as provided for in AAM 236.
The final rule adopts the language relating to the application of
multiple categories of wage determinations as proposed. As an initial
matter, the Department has decided to continue to interpret the meaning
of ``substantial'' in its subregulatory guidance in accordance with its
longstanding practice. With respect to the monetary threshold in
particular, WHD anticipates issuing an AAM or other guidance containing
additional information regarding both the methodology and frequency of
updates to the threshold.
The Department appreciates the UA's suggestion that the
distinctions between building and heavy construction should be more
precisely delineated and MBA's suggestion that the Department should
more precisely describe the methods used to update the dollar
threshold, and will consider these suggestions when developing further
guidance on this issue and when updating the threshold in the future.
The Department also notes that stakeholders are always welcome to
provide input as to data and methods that should be used in
interpreting the meaning of ``substantial'' and updating the dollar
threshold.
While the Department appreciates MBA's and NCSHA's goal of
encouraging the development of multifamily housing projects, the
Department declines the suggestion to exempt such projects from the
requirement to incorporate wage determinations from multiple categories
when a project has a substantial amount of work in another category of
construction. Although HUD previously suggested that a single
residential wage determination could be used in such circumstances, it
has since issued guidance clarifying that multiple wage determinations
should be incorporated into construction contracts for multifamily
housing when there is a substantial amount of work in another category
of construction, consistent with longstanding Department policy and
this rulemaking. See U.S. Dep't of Hous. & Urb. Dev., Labor Relations
Letter on Applicability of Department of Labor Guidance Concerning
`Projects of a Similar Character' (Jan. 15, 2021).\121\
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\121\ https://www.hud.gov/sites/dfiles/OCHCO/documents/LR_21-01.pdf.
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Moreover, the Department's existing guidance does not support an
exception; rather, AAM 130 and 131 apply the substantiality standard to
residential projects to the same extent as other types of projects.
While MBA contends in its comment that language in AAM
[[Page 57567]]
130 stating that residential construction includes ``all incidental
items, such as site work, parking areas, utilities, streets and
sidewalks'' indicates that a single residential wage determination may
be applied to any such work related to a residential project, AAM 130
similarly describes ``incidental grading, utilities, and paving'' in
building construction projects and states that highway construction
excludes projects ``incidental to residential or building
construction.'' These references to ``incidental'' work in AAM 130 (and
similar references in AAM 131 and the Manual of Operations) reflect the
policy explained in those documents that a single wage determination
for a project involving more than one type of construction is only
appropriate when construction items in the non-primary category are ``
`incidental' in function,'' ``and . . . there is not a substantial
amount of construction in the second category.'' AAM 131, at 2; see
also AAM 130, at 2 n.1; Manual of Operations, at 29. Thus, although, as
AAM 130 and the Manual of Operations suggest, site work and the
construction of parking areas, utilities, streets, and sidewalks are
often incidental in function to residential construction, these
construction items may or may not be substantial in relation to a
particular project's overall cost. Nothing in those guidance documents
suggests that residential projects are to be treated any differently
from other types of projects in this regard or that substantial work in
other categories should be assigned a residential wage
determination.\122\
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\122\ Similarly, the absence of a specific example of a
residential project in the examples of projects with multiple wage
determinations in AAM 130 and AAM 131 in no way indicates that
residential construction projects cannot have a substantial amount
of work in another category of construction. The examples listed in
AAM 130 and 131 were not intended to be an exclusive list of all
possible situations in which a project might require the application
of multiple wage determinations. AAM 131 plainly states that beyond
the listed examples, ``the same principles are applied to other
categories.''
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The Department also does not agree with MBA's contention that the
data on the rates paid to workers who perform work in another category
of construction, where work in that other category of construction is
substantial, are likely to be included in the applicable residential
wage determination. To the contrary, when wage data submitted to the
Department in connection with a Davis-Bacon wage survey reflects that a
project in one category includes substantial construction in another
category, the Department excludes the wage data for the work in the
second category from the dataset that will be used to establish
prevailing wage rates for the primary category of construction,
including in surveys for residential construction. Moreover, MBA has
not provided any data to support its assertion that workers who perform
the types of work in other categories of construction commonly found on
residential projects are typically paid residential wage rates rather
than the wage rates generally applicable to those categories of
construction. Similarly, MBA has not provided any data suggesting that
the local wages in other categories of construction are somehow more
shielded from the potential impact on wages of a substantial amount of
work in that category of construction on residential projects than on
other types of projects.
Finally, the Department disagrees that any added complexity from
the application of multiple wage determinations to multifamily housing
projects justifies an exception. Davis-Bacon contractors across all
types of projects are required to track the hours worked and to pay the
corresponding prevailing wage rates due. These rates necessarily vary
depending on the work performed, because workers work in different
classifications and sometimes in different construction categories. The
``substantiality'' threshold for work in a second category of
construction seeks to balance the benefits of applying the appropriate
wage determinations--including the preservation of locally prevailing
wages--against any associated administrative burden, by requiring that
additional wage determinations be incorporated only where the work in
the non-primary category is of a sufficient magnitude. There is no
indication that this balance should be any different for multifamily
housing projects.
For these reasons, the final rule adopts the language relating to
the application of multiple categories of wage determinations as
proposed and declines to create an exception for multifamily housing
contractors.
(4) Clarification of Responsibilities of Contracting Agencies,
Contractors, and Subcontractors
The Department also proposed to add language to Sec. 1.6(b)
clarifying and reinforcing the responsibilities of contracting
agencies, contractors, and subcontractors with regard to wage
determinations. Specifically, the Department proposed to clarify in
Sec. 1.6(b)(1) that contracting agencies are responsible for making
the initial determination of the appropriate wage determination(s) for
a project. In Sec. 1.6(b)(2), the Department proposed to clarify that
contractors and subcontractors have an affirmative obligation to ensure
that wages are paid to laborers and mechanics in compliance with the
DBRA labor standards.
The Department did not receive any comments on these proposed
revisions, and therefore the final rule adopts these changes as
proposed.
(5) Consideration of Area Practice
The Department also proposed to revise language in Sec. 1.6(b)
that currently states that the Administrator ``shall give foremost
consideration to area practice'' in resolving questions about ``wage
rate schedules.'' In the Department's experience, this language has
created unnecessary confusion because stakeholders have at times
interpreted it as precluding the Administrator from considering factors
other than area practice when resolving questions about wage
determinations. Specifically, the Department has long recognized that
when ``it is clear from the nature of the project itself in a
construction sense that it is to be categorized'' as either building,
residential, heavy, or highway construction, ``it is not necessary to
resort to an area practice survey'' to determine the proper category of
construction. AAM 130, at 2; see also AAM 131, at 1 (``[A]rea practice
regarding wages paid will be taken into consideration together with
other factors,'' when ``the nature of the project in a construction
sense is not clear.''); Chastleton Apartments, WAB No. 84-09, 1984 WL
161751, at *4 (Dec. 11, 1984) (because the ``character of the structure
in a construction sense dictates its characterization for Davis-Bacon
wage purposes,'' where there was a substantial amount of rehabilitation
work being done on a project similar to a commercial building in a
construction sense, it was ``not necessary to determine whether there
[was] an industry practice to recognize'' the work as residential
construction). The proposed rule explained that the regulatory
directive to give ``foremost consideration to area practice'' in
determining which wage determination to apply to a project arguably is
in tension with the Department's longstanding position and has resulted
in stakeholders contending on occasion that WHD or a contracting agency
must in every instance conduct an exhaustive review of local area
practice as to how work is classified, even if the nature of the
project in a construction sense is clear. The proposed language would
resolve this perceived inconsistency and would streamline
determinations
[[Page 57568]]
regarding construction types by making clear that while the
Administrator should continue considering area practice, the
Administrator may consider other relevant factors, particularly the
nature of the project in a construction sense. This proposed regulatory
revision also would better align the Department's regulations with the
FAR, which does not call for ``foremost consideration'' to be given to
area practice in all circumstances, but rather provides, consistent
with AAMs 130 and 131, that ``[w]hen the nature of a project is not
clear, it is necessary to look at additional factors, with primary
consideration given to locally established area practices.'' 48 CFR
22.404-2(c)(5).
The Department received one comment on this proposal. VDOT
recommended that the Department retain the language in the existing
regulation, expressing concern that if area practice is not the primary
factor to be considered when determining what wage determinations are
to be applied to a project, the Department could determine that a
project is one type of construction even if area practice is to pay
wage rates from another category of construction. VDOT opined that this
would be contrary to the purpose of the DBA, which is to establish
prevailing wage rates based on actual wage rates that contractors pay
for a type of construction project.
While the Department recognizes VDOT's concerns, it does not
believe they warrant deviating from the proposed rule. The Davis-Bacon
labor standards require that covered workers receive at least the
locally prevailing wages that are paid on projects of a similar
character. As explained above, where the character of a project in a
construction sense is clear, it is not necessary or appropriate to
survey area practice to determine what category of construction
applies; the applicable category is based on the nature of construction
even if area practice is to pay wage rates associated with a different
category. See 2900 Van Ness Street, WAB No. 76-11, 1977 WL 24827, at *2
(Jan. 27, 1977) (``The test of whether a project is of a character
similar to another project refers to the nature of the project itself
in a construction sense, not to whether union or non-union wages are
paid or whether union or non-union workers are employed.''); Lower
Potomac Pollution Control Plant, WAB No. 77-20, 1977 WL 24840, at *1
(Sept. 30, 1977) (``When it is clear from the nature of the project
itself in a construction sense that it is to be categorized as either
building, heavy or highway construction . . . [t]he area practice with
respect to wages could not convert what is clearly one category of
construction into another category.''). A highway cannot be a building,
for example, regardless of how similar the wages paid on highway
projects in a locality may be to the wages paid on building projects.
The Department believes that the revision to the ``area practice''
language better reflects that principle by eliminating any implication
that area practice could somehow outweigh the clear character of a
project.
In contrast, the revision reflects that when it is unclear how a
project should be categorized, while the Department considers area
practice as to wage rates to assist in determining that project's
category, area practice is not the only relevant information. As
indicated in AAM 131, ``area practice regarding wages paid will be
taken into consideration together with other factors'' when there is a
genuine question as to the correct category of construction for a
project (emphasis added). See also Tex. Heavy-Highway Branch, WAB No.
77-23, 1977 WL 24841, at *4 (Dec. 30, 1977) (``Wages, however, are only
one indication. It is also necessary to look at other characteristics
of the project, including the construction techniques, the material and
equipment being used on the project, the type of skills called for on
the project work and other similar factors which would indicate the
proper category of construction.''). The proposed language is
consistent with these principles and simply clarifies that area
practice information is relevant to determining the type of
construction project involved only when there is a genuine question as
to the applicable category of construction, and that other relevant
information is not excluded from consideration when making such a
determination. The final rule therefore adopts the language as
proposed.
(6) Section 1.6(e) and (g)
In Sec. 1.6(e), the Department proposed to clarify that if, prior
to contract award (or, as appropriate, prior to the start of
construction), the Administrator provides written notice that the
bidding documents or solicitation included the wrong wage determination
or schedule, or that an included wage determination was withdrawn by
the Department as a result of an ARB decision, the wage determination
may not be used for the contract, regardless of whether bid opening (or
initial endorsement or the signing of a housing assistance payments
contract) has occurred. Current regulatory text states that under such
circumstances, notice of such errors is ``effective immediately'' but
does not explain the consequences of such effect. The proposed language
is consistent with the Department's current practice and guidance. See
Manual of Operations, at 35.
The Department did not receive any comments on these proposed
revisions, and therefore the final rule adopts the changes as proposed,
except that in a technical correction, the Department has moved certain
language from Sec. 1.6(e)(2) into Sec. 1.6(e), as the language was
intended to encompass the entire paragraph.
In Sec. 1.6(g), the Department proposed a number of additional
clarifying revisions. It proposed to clarify that under the Related
Acts, if Federal funding or assistance is not approved prior to
contract award (or the beginning of construction where there is no
contract award), the applicable wage determination must be incorporated
retroactive to the date of the contract award or the beginning of
construction. The Department also proposed to delete language
indicating that a wage determination must be ``requested,'' as such
language appears to contemplate a project wage determination, which in
most situations will not be necessary as a general wage determination
will apply. The Department also proposed to revise Sec. 1.6(g) to
clarify that it is the head of the applicable Federal agency who must
request any waiver of the requirement that a wage determination
provided under such circumstances be retroactive to the date of the
contract award or the beginning of construction. The current version of
Sec. 1.6(g) uses the term ``agency'' and is therefore ambiguous as to
whether it refers to the Federal agency providing the funding or
assistance or the state or local agency receiving it. The proposed
clarification that this term refers to Federal agencies was intended to
reflect both the Department's current practice and its belief that it
is most appropriate for the relevant Federal agency, rather than a
State or local agency, to bear these responsibilities, including
assessing, as part of the waiver request, whether non-retroactivity
would be necessary and proper in the public interest based on all
relevant considerations.
The Department did not receive any comments on these proposed
revisions, and therefore the final rule adopts these changes as
proposed.
(B) Requirement To Incorporate Most Recent Wage Determinations Into
Certain Ongoing Contracts
The Department's longstanding position has been to require that
[[Page 57569]]
contracts and bid solicitations contain the most recently issued
revision to the applicable wage determination(s) to the extent that
such a requirement does not cause undue disruption to the contracting
process. See 47 FR 23644, 23646 (May 28, 1982); U.S. Army, ARB No. 96-
133, 1997 WL 399373, at *6 (July 17, 1997) (``The only legitimate
reason for not including the most recently issued wage determination in
a contract is based upon disruption of the procurement process.'').
Under the current regulations, a wage determination is generally
applicable for the duration of a contract once incorporated. See 29 CFR
1.6(c)(2)(ii), 1.6(c)(3)(vi). For clarity, the NPRM proposed to add
language to Sec. 1.6(a) to state this affirmative principle.
The Department also proposed to add a new paragraph, Sec.
1.6(c)(2)(iii), to clarify two circumstances where the principle that
an incorporated wage determination remains applicable for the life of a
contract does not apply. First, the Department proposed to explain that
the most recent version of any applicable wage determination(s) must be
incorporated when a contract or order is changed to include additional,
substantial construction, alteration, and/or repair work not within the
scope of work of the original contract or order or to require the
contractor to perform work for an additional time period not originally
obligated, including where an agency exercises an option provision to
unilaterally extend the term of a contract. The proposed change was
consistent with the Department's guidance, case law, and historical
practice, under which such modifications are considered new contracts.
See U.S. Army, 1997 WL 399373, at *6 (noting that the Department has
consistently ``required that new DBA wage determinations be
incorporated . . . when contracts are modified beyond the obligations
of the original contract''); Iowa Dep't of Transp., WAB No. 94-11, 1994
WL 764106, at *5 (Oct. 7, 1994) (``A contract that has been
`substantially' modified must be treated as a `new' contract in which
the most recently issued wage determination is applied.''); AAM 157
(explaining that exercising an option ``requires a contractor to
perform work for a period of time for which it would not have been
obligated . . . under the terms of the original contract,'' and as
such, ``once the option . . . is exercised, the additional period of
performance becomes a new contract''). The Department proposed that
under these circumstances, the most recent version of any wage
determination(s) must be incorporated as of the date of the change or,
where applicable, the date the agency exercises its option to extend
the contract's term. These circumstances do not include situations
where the contractor is simply given additional time to complete its
original commitment or where the additional construction, alteration,
and/or repair work in the modification is merely incidental.
Additionally, the Department proposed a revision to address modern
contracting methods that frequently involve a contractor agreeing to
perform construction as the need arises over an extended time period,
with the quantity and timing of the construction not known when the
contract is awarded.\123\ Examples of such contracts would include, but
are not limited to: a multiyear indefinite-delivery-indefinite-quantity
(IDIQ) contract to perform repairs to a Federal facility when needed; a
long-term contract to operate and maintain part or all of a facility,
including repairs and renovations as needed; \124\ or a schedule
contract or BPA whereby a contractor enters into an agreement with a
Federal agency to provide certain products or services (either of which
may involve work subject to Davis-Bacon coverage, such as installation)
or construction at agreed-upon prices to various agencies or other
government entities, who can order from the schedule at any time during
the contract. The extent of the required construction, the time, and
even the place where the work will be performed may be unclear at the
time such contracts are awarded.
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\123\ Depending on the circumstances, these types of contracts
may be principally for services and therefore are subject to the
SCA, but contain substantial segregable work that is covered by the
DBA. See 29 CFR 4.116(c)(2).
\124\ The Department of Defense, for example, enters into such
arrangements pursuant to the Military Housing Privatization
Initiative, 10 U.S.C. 2871 et seq.
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Particularly when such contracts are lengthy, using an outdated
wage determination from the time of the underlying contract award
instead of the most current wage determination is a departure from the
intent of the Davis-Bacon labor standards because it does not
sufficiently ensure that workers are paid prevailing wages.
Additionally, in the Department's experience, agencies are sometimes
inconsistent as to how they incorporate wage determination revisions
into these types of contracts. Some agencies do so every time
additional Davis-Bacon work is obligated, others do so annually, others
only incorporate applicable wage determinations at the time the
original, underlying contract is awarded, and sometimes no wage
determination is incorporated at all. This inconsistency can prevent
the payment of prevailing wages to workers and can disrupt the
contracting process.
Accordingly, the Department proposed to require, for these types of
contracts, that contracting agencies incorporate the most up-to-date
applicable wage determination(s) annually on each anniversary date of a
contract award or, where there is no contract, on each anniversary date
of the start of construction, or another similar anniversary date where
the agency has sought and received prior approval from the Department
for the alternative date. This proposal was consistent with the rules
governing wage determinations under the SCA, which require that the
contracting agency obtain a wage determination prior to the ``[a]nnual
anniversary date of a multiyear contract subject to annual fiscal
appropriations of the Congress.'' See 29 CFR 4.4(a)(1)(v). The
Department further proposed that when any construction work under such
a contract is obligated, the most up-to-date wage determination(s)
incorporated into the underlying contract be included in each task
order, purchase order, or any other method used to direct performance.
Once the applicable wage determination revision is included in such an
order, that revision would generally apply to the order until the
construction items called for by that order are completed. With this
proposal, the Department intended that a wage determination correctly
incorporated into such an order would not need to be updated even if
the duration of the order extends past the next anniversary date of the
master contract (when the wage determination in the master contract is
updated), unless the order itself involves the exercise of an option or
is changed to include additional, substantial construction, alteration,
and/or repair work not within the original scope of work, in accordance
with proposed Sec. 1.6(c)(2)(iii)(A). The NPRM explained that
consistent with this discussion, if an option is exercised for one of
these types of contracts, the most recent version of any wage
determination(s) would still need to be incorporated as of the date the
agency exercises its option to extend the contract's term (subject to
the exceptions set forth in proposed Sec. 1.6(c)(2)(ii)), even if that
date did not coincide with the anniversary date of the contract.
By proposing these revisions, the Department sought to ensure that
workers are being paid prevailing wages
[[Page 57570]]
within the meaning of the Act; provide certainty and predictability to
agencies and contractors as to when, and how frequently, wage rates in
these types of contracts can be expected to change; and bring
consistency to agencies' application of the Davis-Bacon labor
standards. The Department also proposed to include language noting that
contracting and ordering agencies remain responsible for ensuring that
the applicable updated wage determination(s) are included in task
orders, purchase orders, or other similar contract instruments issued
under the master contract.
After consideration of the comments received, for the reasons
detailed below, the final rule adopts these revisions as proposed with
minor revisions and clarifications. The Department received several
comments generally supporting the proposed changes. The Minnesota State
Building and Construction Trades Council stated that these changes
would improve the efficiency of enforcement and help make sure that
prevailing wages paid to workers remain current. III-FFC stated that
the proposed changes reflected existing guidance, case law, and
historical practice, were consistent with the SCA requirements, and
would better ensure workers are paid current prevailing wage rates on
Davis-Bacon projects, consistent with the statutory purpose. The UA
indicated that it strongly supported regulatory language that would
ensure that wage determinations in such contracts remain up-to-date,
but suggested a slight change to the proposed language to clarify that
the requirement applies to both the unilateral exercise of options and
the mutual exercise of options. The Department appreciates the UA
raising this issue, as the intent was not to exclude mutually exercised
options from the obligation to update wage determinations, but rather
to make clear that the obligation applies even when the contracting
agency exercises a unilateral option. The proposed language has
therefore been adjusted to clarify that the requirement applies
whenever an option is exercised generally.
A few commenters opposed the proposed change or alternatively
suggested revisions. FTBA stated that contracting agencies and
contractors generally cannot know at the bidding stage whether a
contract is going to be extended or amended or what the prevailing wage
rates will be when and if the contract is amended, further noting that
many contracts are now being extended due to global supply issues
beyond either the contracting agency or the contractor's control. FTBA
stated that if the proposed change is retained, the Department should
add a price adjustment clause to require that contractors are
reimbursed for additional costs resulting from the incorporation of
updated wage determinations into their contracts or funding agreements.
CC&M suggested that the price adjustment should be a 150 percent
increase change order. MnDOT argued that the proposed changes would
place an additional administrative burden on contracting agencies,
requiring change orders, changes to contract terms, and increases or
decreases in contract funding, and would probably impact contractors'
bids. MnDOT suggested that rather than requiring an annual update of
wage determinations for multiyear IDIQ contracts, the Department
instead require contracting agencies to annually increase the
applicable prevailing wage rates for each classification by a
percentage (e.g., 2 percent of base and fringe rates) to allow
contractors and contracting agencies to predict the potential increases
at the time of bidding.
As an initial matter, the Department does not believe that these
changes will affect contracts that are simply extended due to supply
chain issues or other circumstances that interfere with the timely
completion of a contract. Such circumstances expressly fall within the
events described in the rule that do not require the incorporation of a
new wage determination, namely, situations where the contractor is
simply given additional time to complete the construction that the
contractor committed to perform at the time of the initial award.
Regarding the comments on how the proposed changes will affect
pricing and cost, the Department recognizes that contracting agencies
and contractors may not know at the bidding stage or even at initial
contract award whether that contract will be extended or amended, or,
in the case of IDIQ and other similar contracts, how much work will
ultimately be requested by the agency and performed by the contractor.
However, the Department believes that issues related to budgeting,
pricing, and costs associated with these types of contracts can be
addressed between the contractor and the agency as part of the
contracting process. For example, where a contract is amended to
require the contractor to perform additional construction work or to
perform work for an additional time period not originally obligated,
agencies and contractors can come to an agreement about what additional
compensation the contractor will receive for this additional work and
will be able to take the updated wage determination into account during
such negotiations. Where a contract includes option clauses or involves
construction of an unknown amount and at unknown times over an extended
period, this will be clear when the contract is solicited and at the
time of contract award, allowing for the inclusion of contractual
provisions for any increases to the compensation due to the contractor
to reflect updated wage determinations. See, e.g., 48 CFR 52.222-32
(price adjustment clause applicable to FAR-based DBA-covered contracts,
providing that the contracting officer will ``adjust the contract price
or contract unit price labor rates to reflect'' the contractor's
``actual increase . . . in wages and fringe benefits to the extent that
the increase is made to comply with . . . [i]ncorporation of the
Department of Labor's Construction Wage Rate Requirements wage
determination applicable at the exercise of an option to extend the
term of the contract'').\125\
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\125\ While the Department does not have information as to the
universe of existing contracts to which this revision will apply,
many such contracts may well have mechanisms requiring the
contracting agency to compensate the contractor for increases in
labor costs over time generally. See, e.g., id. Where outdated wage
determination rates have been applied, it is similarly difficult to
quantify the cost differential between updated prevailing wage wages
and wage rate increases that contractors have already made due to
labor market factors.
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The Department similarly appreciates MnDOT's concern about the
logistics of inserting wage determinations in multiyear IDIQ contracts
annually. However, the Department declines to adopt MnDOT's alternative
approach of an across-the-board percentage increase. While the
Department has provided in this rule for the periodic adjustment of
out-of-date non-collectively bargained wage rates during the interval
between wage surveys, the Department does not believe that creating a
separate mechanism for wage rate increases of the type proposed by
MnDOT would be necessary or appropriate given that the Department will
have already published revised wage determinations that are available
to be incorporated into such contracts. Additionally, the Department's
position is that contracting agencies can include language in agency
procurement policies, bid documents, and contract specifications that
would give both contractors and contracting agencies notice, and an
expectation from the time of bid solicitation planning, about the
anticipated timing of updated wage determinations in multiyear IDIQ
contracts and the likely potential for DBRA prevailing wage increases,
even
[[Page 57571]]
though the precise amount of those increases will not be known at the
outset. Finally, contracting agencies have long administered a similar
requirement for SCA contracts, see 29 CFR 4.4(c)(5), and the Department
believes that it will be similarly feasible to do so for DBRA-covered
construction contracts.
Naval Facilities Engineering Command Southwest (NAVFAC SW) did not
comment on the proposed changes to Sec. 1.6(c)(2)(iii) but proposed an
additional related change to Sec. 1.6(c)(2)(ii). Specifically, NAVFAC
SW suggested that the provision applicable to sealed \126\ bidding
procedures, Sec. 1.6(c)(2)(ii)(D) --which permits contracting agencies
to decline to incorporate modifications published fewer than 10
calendar days before the opening of bids when there is not sufficient
time available before bid opening to notify bidders of the
modification--should be expanded to include negotiated contracts, which
do not involve sealed bidding. While negotiated contracts are currently
required to include the most recent applicable wage determination
modifications up to the date of contract award, NAVFAC SW proposed
permitting agencies to not include a wage determination modification
issued fewer than 10 days prior to award date, where the agency finds
that there is not a reasonable time still available before contract
award to notify all offerors that have not been eliminated from the
competition and provide them a reasonable opportunity to amend their
proposals. NAVFAC SW argued that incorporating wage determination
modifications shortly before the award date is administratively
difficult, takes additional time and resources, and may delay award of
the contract, and that these costs outweigh the benefits of what may be
only minimal changes to wage rates in the updated wage determination.
An individual commenter also made a similar request.
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\126\ The current regulation refers to ``competitive'' bidding
procedures in this provision; in a non-substantive change, this rule
changes the term to ``sealed.''
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The Department appreciates that the incorporation of an updated
wage determination within a few days of contract award may be
challenging. However, as the Department did not propose a change to the
provisions relating to the required timeline for the pre-award
incorporation of applicable wage determinations into contracts, the
Department believes that such a change would be beyond the scope of
this rulemaking. The Department will, however, consider these comments
in future rulemakings, and welcomes the opportunity to discuss the
points raised by NAVFAC SW with other stakeholders.
MBA proposed a different change to Sec. 1.6(c)(2)(ii). This
provision currently located at Sec. 1.6(c)(3)(ii), states that for
projects assisted under the National Housing Act, a revised wage
determination must be applied to the project if it is issued prior to
the beginning of construction or the date the mortgage is initially
endorsed, whichever occurs first. MBA suggested that this provision
should be changed to instead only require the incorporation of a
revised wage determination when it is published before the date that
the developer submits an application for a firm commitment, or the
start of construction, whichever comes first. MBA stated that such
updates can trigger a need to revisit previously completed procedural
steps, both for the developer and for HUD, resulting in potential
disruption for the affected multifamily housing project. MBA stated
that this proposed change would reduce the risk that the need to
incorporate a revised wage determination would inhibit the successful
completion of multifamily housing projects, though it also acknowledged
that changes in the applicable wage determination would still be
disruptive prior to the submission of an application. NAHB and NCHSA
also critiqued what they described as disruptive cost changes due to
revised wage determinations that are assigned late in the application
process.
The Department finds that a change to the provisions in Sec.
1.6(c)(2)(ii) for the initial incorporation of wage determinations into
contracts would be beyond the scope of this rulemaking and does not
believe such a change would be appropriate. It is well established that
a prevailing wage should be a current wage. As a result, the
regulations specifying the circumstances under which the most current
wage determination need not be applied generally reflect the principle
that only disruption of the contracting process justifies a failure to
include the most recent prevailing wages as of, typically, the date of
contract award or bid opening. See, e.g., Modernization of the John F.
Kennedy Fed. Bldg, WAB No. 94-09, 1994 WL 574115 (Aug. 19, 1994); Iowa
Dep't of Transp., WAB No. 94-11, 1994 WL 764106. As such, in both the
current and proposed regulations, the Department has sought to strike a
balance between requiring the payment of current, prevailing wages to
the extent feasible while also minimizing disruption in the contracting
process. To that end, the regulations' use of the initial endorsement
date for certain housing contracts already reflects an earlier lock-in
date for the application of wage determination modifications than the
date of contract award or the bid opening date, which are the lock-in
dates that apply to most other types of contracts. Pushing this date
back even further to the time when the housing developer first applies
for Related Act funding would undermine worker protections by using
even more outdated wage rates for DBRA-covered laborers and mechanics
on these projects. In addition, it would not be administratively
practical to use so early a date. Initial endorsement occurs when all
parties have agreed upon the design and costs. Prior to initial
endorsement, and certainly at so early a point as the developer's
application for a firm commitment to funding, the project design and
costs may undergo significant alterations, resulting in changes to the
classifications and potentially even to the categories of wage
determinations that may be applicable.
It would be impractical to lock in the modification of a wage
determination at a time when the applicable wage determination itself
may yet be subject to change. It would also be inappropriate to lock in
a particular wage determination before it is even clear whether the
project will entail substantial construction in multiple categories of
construction, and hence require the application of multiple wage
determinations.
The Department also made additional minor revisions to the proposed
regulatory text. After further consideration, the Department has
decided to revise the scope of the potential exceptions to this process
that contracting agencies may request. As proposed, the regulatory
language would only permit agencies to request the Department's
approval for an alternative anniversary date for the updating of wage
determinations. However, the requirement that wage determinations be
updated annually for certain contracts applies to a wide variety of
contracting mechanisms, and input from Federal contracting agencies
suggests that it would be helpful to allow the updating process to be
tailored in appropriate circumstances to the specific contracting
mechanisms. Accordingly, the Department has revised this language to
permit agencies to request the Department's prior written approval for
alternative updating processes, where such an
[[Page 57572]]
exception is necessary and proper in the public interest or to prevent
injustice and undue hardship. After further consideration, the
Department also clarified the language stating that the contracting and
ordering agencies must include the updated wage determination revision
into any task orders, purchase orders, or other similar contract
instruments issued under these master contracts. To prevent any
confusion, the revised language now clearly states that the contracting
agency is responsible for ensuring that the master contract directs the
ordering agency to include the applicable updated wage determination in
such task orders, purchase orders, or other similar contract instrument
while the ordering agency must accordingly incorporate the applicable
update wage determinations into such orders.
In addition, the Department added language further clarifying
whether wage determination revisions, once properly incorporated into a
task order, purchase order, or similar contract instrument from the
master contract, must be further updated. Once a wage determination
revision has been properly incorporated into such an order, it will
generally remain applicable for the duration of the order without
requiring further updates, in accordance with the proposed language
stating that the annually updated wage determination revision will
apply to any construction work that begins or is obligated under such a
contract during the 12 months following that anniversary date until
such construction work is completed, even if the completion of that
work extends beyond the 12-month period. The revised language notes
this general principle, as well as two exceptions. The first exception
notes that if such an order is changed to include additional,
substantial construction, alteration, and/or repair work not within the
scope of work, the wage determination must be updated as set forth in
paragraph (c)(2)(iii)(A). The second exception states that if the task
order, purchase order, or similar contract instrument itself includes
the exercise of options, the updated applicable wage determination
revision, as incorporated into the master contract, must be included
when an option is exercised on such an order.
The Department also provided additional clarification regarding
master contracts that both call for construction, alteration, and/or
repair work over a period of time that is not tied to the completion of
any particular project and also include the exercise of options. As
explained in the NPRM and discussed above in this section, contracts
calling for construction, alteration, and/or repair work over a period
of time that is not tied to the completion of any particular project
may also include the exercise of options, and if so, the wage
determination must be updated when the option is exercised. The
Department revised the regulatory text to also include this
requirement, while also clarifying that where this type of contract has
extended base or option periods, wage determinations must still be
incorporated on an annual basis in years where an option is not
exercised.
Accordingly, for the foregoing reasons, the final rule adopts the
changes to Sec. 1.6(c)(2) as proposed with the two minor
clarifications discussed.
(C) 29 CFR 1.6(c)(1)--Periodic Adjustments
The Department proposed to add a provision to 29 CFR 1.6(c)(1) to
expressly provide a mechanism to regularly update certain non-
collectively bargained prevailing wage rates. The Department proposed
that such rates (both base hourly wages and fringe benefits) would be
updated between surveys so that they do not become out-of-date and fall
behind wage rates in the area.
(1) Background
Based on the data that it receives through its prevailing wage
survey program, WHD generally publishes two types of prevailing wage
rates in the Davis-Bacon wage determinations that it issues: (1) modal
rates, which under the current regulations must be paid to a majority
of workers in a particular classification, and (2) weighted average
rates, which under the current regulations are published whenever the
wage data received by WHD reflects that no single wage rate was paid to
a majority of workers in the classification. See 29 CFR 1.2(a)(1).
Under the current regulations, modal wage rates often reflect
collectively bargained wage rates. When a CBA rate prevails on a
general wage determination, WHD updates that prevailing wage rate based
on periodic wage and fringe benefit increases in the CBA. Manual of
Operations at 74-75; see also Mistick Constr., ARB No. 04-051, 2006 WL
861357, at *7 n.4.\127\ However, when the prevailing wage is set
through the weighted average method based on non-collectively bargained
rates or a mix of collectively bargained rates and non-collectively
bargained rates, or when a non-collectively bargained rate prevails,
such wage rates (currently designated as ``SU'' rates) on general wage
determinations are not updated between surveys and therefore can become
out-of-date. The Department's proposal would expand WHD's current
practice of updating collectively bargained prevailing wage rates
between surveys to include updating non-collectively bargained
prevailing wage rates.
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\127\ WHD similarly updates weighted average rates based
entirely on collectively bargained rates (currently designated as
``UAVG'' rates) using periodic wage and fringe benefit increases in
the CBAs.
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In the NPRM, the Department emphasized that WHD's goal is to
conduct surveys in each area every 3 years in order to avoid prevailing
wage rates becoming out-of-date. WHD also noted that because of the
resource-intensive nature of the wage survey process and the vast
number of survey areas, many years can pass between surveys conducted
in any particular area. The 2011 GAO Report found that, as of 2010,
while 36 percent of ``nonunion-prevailing rates'' \128\ were 3 years
old or less, almost 46 percent of these rates were 10 or more years
old. 2011 GAO Report, at 18.\129\ As a result of lengthy intervals
between Davis-Bacon surveys, the real value of the effectively frozen
rates erodes as compensation in the construction industry and the cost-
of-living rise. The resulting decline in the real value of prevailing
wage rates may adversely affect construction workers whom the DBA was
intended to protect. See Coutu, 450 U.S. at 771 (``The Court's previous
opinions have recognized that `[o]n its face, the Act is a minimum wage
law designed for the benefit of construction workers.' '' (citations
omitted)).
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\128\ ``Nonunion-prevailing rates,'' as used in the GAO report,
is a misnomer, as it refers to weighted average rates that, as
noted, are published whenever the same wage rate is not paid to a
majority of workers in the classification, including when much or
even most of the data reflects union wages, just not that the same
union wage was paid to a majority of workers in the classification.
\129\ See note 10, supra.
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Program stakeholders have previously raised this issue with the
GAO. According to several union and contractor officials interviewed in
connection with the GAO's 2011 report, the age of the Davis-Bacon
``nonunion-prevailing rates'' means they often do not reflect actual
prevailing wages in a particular area. 2011 GAO Report, at 18.\130\ As
a result, the stakeholders said it is ``more difficult for both union
and nonunion contractors to successfully bid on federal projects
because they cannot recruit workers with artificially low wages but
risk losing contracts if their bids reflect more realistic wages.''
[[Page 57573]]
Id. Regularly updating these rates would alleviate this situation and
better protect workers' wage rates. The Department anticipates that
updated rates would also better reflect construction industry
compensation in communities where federally funded construction is
occurring.
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\130\ See note 10, supra.
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The Department explained in the NPRM that the proposal to update
non-collectively bargained rates is consistent with, and builds upon,
the current regulatory text at 29 CFR 1.6(c)(1), which provides that
wage determinations ``may be modified from time to time to keep them
current.'' This regulatory provision provides legal authority for
updating wage rates, and has been used as a basis for updating
collectively bargained prevailing wage rates based on CBA submissions
between surveys. See Manual of Operations at 74-75. The Department
proposed to extend the practice of updating prevailing wage rates to
include non-collectively bargained rates based on ECI data. The
Department stated its belief that ``chang[ed] circumstances''--
including an increase in the use of weighted average rates--and the
lack of an express mechanism to update non-collectively bargained rates
between surveys under the existing regulations support this proposed
``extension of current regulation[s]'' to better effectuate the DBRA's
purpose. State Farm, 463 U.S. at 42; see also In re Permian Basin Area
Rate Cases, 390 U.S. 747, 780 (1968) (explaining the Court was
``unwilling to prohibit administrative action imperative for the
achievement of an agency's ultimate purposes'' absent ``compelling
evidence that such was Congress' intention'').
The proposal also is consistent with the Department's broad
authority under the Act to ``establish the method to be used'' to
determine DBA prevailing wage rates. Donovan, 712 F.2d at 616. The
Department stated its belief that the new periodic adjustment proposal
will ``on balance result in a closer approximation of the prevailing
wage'' for these rates and therefore is an appropriate extension of the
current regulation. Id. at 630 (citing Am. Trucking Ass'ns v. Atchison,
T. & S.F. Ry., 387 U.S. 397, 416 (1967)).
The Department emphasized that this proposed new provision is
particularly appropriate because it seeks to curb a practice the DBA
and Related Acts were enacted to prevent: payment of ``substandard''
wages (here, out-of-date non-collectively bargained prevailing wage
rates) on covered construction projects that are less than current
wages paid for similar work in the locality. Regularly increasing non-
collectively bargained prevailing wage rates that are more than 3 years
old would be consistent with the DBA's purpose of protecting local wage
standards by updating significantly out-of-date non-collectively
bargained prevailing wage rates that have fallen behind currently
prevailing local rates. The Department emphasized that updating such
out-of-date construction wages would better align with the DBRA's main
objective.
The Department further explained that periodically updating
existing non-collectively bargained prevailing wage rates is intended
to keep such rates more current in the interim period between surveys.
The Department asserted that it is reasonable to assume that non-
collectively bargained rates, like other rates that the Secretary has
determined to prevail, generally increase over time like other
construction compensation measures. See, e.g., Table A (showing recent
annual rates of union and non-union construction wage increases in the
United States); Table B (showing ECI changes from 2001 to 2020).
Table A--Current Population Survey (CPS) Wage Growth by Union Status--Construction
----------------------------------------------------------------------------------------------------------------
Median weekly earnings Percentage of differential
---------------------------------------------------------------
Year Members of Members of
unions Non-union unions (%) Non-Union (%)
----------------------------------------------------------------------------------------------------------------
2015............................................ $1,099 $743 .............. ..............
2016............................................ 1,168 780 6 5
2017............................................ 1,163 797 0 2
2018............................................ 1,220 819 5 3
2019............................................ 1,257 868 3 6
2020............................................ 1,254 920 0 6
2021............................................ 1,344 922 7 0
---------------------------------------------------------------
Average..................................... .............. .............. 3 4
----------------------------------------------------------------------------------------------------------------
Source: Current Population Survey, Table 43: Median weekly earnings of full-time wage and salary workers by
union affiliation, occupation, and industry, BLS, https://www.bls.gov/cps/cpsaat43.htm (last modified Jan. 20,
2022).
Note: Limited to workers in the construction industry.
Table B--ECI, 2001-2020, Total Compensation of Private Workers in
Construction, and Extraction, Farming, Fishing, and Forestry Occupations
[Average 12-month percent changes (rounded to the nearest tenth)]
------------------------------------------------------------------------
Average annual total
Year compensation, 12-
month % change
------------------------------------------------------------------------
2001............................................. 4.5
2002............................................. 3.5
2003............................................. 3.9
2004............................................. 4.5
2005............................................. 3.1
2006............................................. 3.5
2007............................................. 3.5
2008............................................. 3.6
2009............................................. 1.7
[[Page 57574]]
2010............................................. 1.9
2011............................................. 1.6
2012............................................. 1.4
2013............................................. 1.8
2014............................................. 2.0
2015............................................. 2.0
2016............................................. 2.4
2017............................................. 2.7
2018............................................. 2.2
2019............................................. 2.8
2020............................................. 2.4
2021............................................. 3.0
------------------------------------------------------------------------
Source: ECI Historical Listing Volume III, Table 5: ECI for total
compensation, for private industry workers, by occupational group and
industry, BLS, https://www.bls.gov/web/eci/eci-current-nominal-dollar.pdf (updated Mar. 2022).
(2) Periodic Adjustment Proposal
In the NPRM, the Department noted that the proposal sought to
update non-collectively bargained prevailing wage rates that are 3 or
more years old by adjusting them regularly based on total compensation
data to keep pace with current construction wages and fringe benefits.
Specifically, the Department proposed to add language to Sec.
1.6(c)(1) to expressly permit adjustments to non-collectively bargained
prevailing rates on general wage determinations based on BLS ECI data
or its successor data. The Department's proposal provided that non-
collectively bargained rates may be adjusted based on ECI data no more
frequently than once every 3 years, and no sooner than 3 years after
the date of the rate's publication, continuing until the next survey
results in a new general wage determination. This proposed interval
would be consistent with WHD's goal to increase the percentage of
Davis-Bacon wage rates that are 3 years old or less. Under the
proposal, non-collectively bargained prevailing wage rates (wages and
fringe benefits) would be adjusted from the date the rate was
originally published and brought up to their present value. Going
forward, any non-collectively bargained prevailing wage rates published
after this rule becomes effective may be updated if they are not re-
surveyed within 3 years after publication. The Department anticipates
implementing this new regulatory provision by issuing modifications to
general wage determinations.
The Department stated its belief that ECI data is appropriate for
these rate adjustments because the ECI tracks both wages and fringe
benefits and may be used as a proxy for changes in construction
compensation over time. Therefore, the Department proposed to use a
compensation growth rate based on the change in the ECI total
compensation index for construction, extraction, farming, fishing, and
forestry occupations to adjust non-collectively bargained prevailing
wage rates (both base hourly and fringe benefit rates) published in
2001 or after.\131\
---------------------------------------------------------------------------
\131\ Because this particular index is unavailable prior to
2001, the Department proposed to use the compensation growth rate
based on the change in the ECI total compensation index for the
goods-producing industries (which includes the construction
industry) to bring the relatively small percentage of non-
collectively bargained prevailing wage rates published before 2001
up to their 2000 value. The Department would then adjust the rates
up to the present value using the ECI total compensation index for
construction, extraction, farming, fishing, and forestry
occupations.
---------------------------------------------------------------------------
In addition, because updating non-collectively bargained prevailing
wage rates would be resource-intensive, the Department did not
anticipate making all initial adjustments to such rates that are 3 or
more years old simultaneously, but rather considered it more likely
that such adjustments would be made over a period of time (though as
quickly as is reasonably possible). Similarly, the Department stated
that particularly due to the effort involved, the process of adjusting
non-collectively bargained rates that are 3 or more years old was
unlikely to begin until approximately 6-12 months after a final rule
implementing the proposal became effective.
The Department sought comments on the proposal and invited comments
on alternative data sources to adjust non-collectively bargained
prevailing wage rates. The Department considered proposing to use the
Consumer Price Index (CPI) but noted that the CPI is less appropriate
to use to update non-collectively bargained prevailing wage rates
because the CPI measures movement of consumer prices as experienced by
day-to-day living expenses, unlike the ECI, which measures changes in
the costs of labor in particular. The CPI does not track changes in
wages or benefits, nor does it reflect the costs of construction
workers nationwide. The Department nonetheless invited comments on use
of the CPI to adjust non-collectively bargained rates.
The Department received many comments about the proposal. Most of
the commenters expressed general support for the proposal, and many of
them supported the proposal in its entirety. Other commenters
recommended modifications to the Department's proposal, and several
commenters opposed the proposal entirely. In general, there was an
overarching consensus about the need to regularly update out-of-date
non-collectively bargained prevailing wage rates. For example, NABTU
and WA BCTC gave examples of outdated non-collectively bargained wage
rates, including some that reflected amounts less than the local
minimum wage. AGC noted that periodic adjustments can improve the
accuracy of ``woefully out-of-date open shop rates.'' FTBA stated that
updating non-collectively bargained rates would help eliminate the
widening compensation gap between collectively bargained prevailing
wage rates that are updated at least annually, and non-collectively
bargained rates that are frozen in time, sometimes for a decade or
longer.
The Economic Policy Institute (EPI) noted that this proposal is
critical to ensure that DBRA prevailing wage rates
[[Page 57575]]
contribute to stabilizing rather than eroding workers' wages, which EPI
stated have been lower in inflation-adjusted terms than they were in
1970 despite decades of economic growth and a higher national income.
LIUNA stated that weighted averages are susceptible to annual wage
erosion as inflation eats away at worker earnings. The IUOE made a
similar point, noting that the lengthy stagnation and lack of
escalation of non-collectively bargained prevailing wage rates dilute
the value of such rates. IUOE pointed to the 2019 OIG Report's
identification of decades-old rates that were applicable to particular
DBRA projects, highlighted the OIG's recommendation that WHD use a wage
escalator (like the CPI) to bring non-collectively bargained rates
current, and applauded the Department for proposing to do so.
A number of supporting commenters concurred that periodic updates
would appropriately implement the Department's broad authority to curb
a practice the DBA and Related Acts were enacted to prevent: payment of
``substandard'' wages (here, out-of-date non-collectively bargained
rates). Such commenters noted that while it is preferable for Davis-
Bacon prevailing wage rates to reflect actual wages paid to workers in
their communities and not weighted averages, where the Department's
wage determination is based on weighted averages it is critical that
the Department not allow those rates to become stagnant. See Brick and
Allied Craftworkers Local4 INKY, Building and Construction Trades
Council of Northern Nevada (BAC NNV), III-FFC, and WA BCTC. DMCA
commented that prevailing rates in North and South Dakota are often
very old and not reflective of actual wages being paid--a problem that
the updates should help fix by providing rates more reflective of the
marketplace. Similarly, the North Dakota State Building and
Construction Trade Union supported this ``critical'' proposal so rates
do not become stagnant and gave examples of North Dakota non-
collectively bargained rates that are over 22 years old. The joint
SMART and SMACNA comment identified some non-collectively bargained
rates that were roughly equivalent to collectively bargained rates that
prevailed for similar classifications at the time these rates were
published. SMART and SMACNA then observed that whereas the non-
collectively bargained rates became stale during the long intervals
between Davis-Bacon surveys, the collectively bargained rates increased
during that time, resulting in a growing disparity between the two
types of prevailing wage rates.
Various commenters provided additional justification for the
proposal, including benefits for the regulated community. COSCDA
asserted that workers, contractors, and program administrators would
all benefit from the proposal. LIUNA similarly noted that the proposal
should reduce uncertainty for contracting agencies and contractors who
rely upon published wage determinations for bidding and awarding
contracts under DBRA. UBC likewise supported the proposal's anticipated
relief for workers and improved competitiveness for contractor-bidders
who had already been granting increases in wages and benefits. MCAA
remarked that among member mechanical contractor firms that do not
currently compete for prevailing wage work, low and out-of-date wage
determinations were part of the reason they did not bid on these
projects.
Supporters and opponents agreed about the need to address the
construction labor shortage, particularly in light of the IIJA, which
is expected to further increase demand for construction workers. See,
e.g., BAC NNV, NABTU, ABC. Supporters asserted that updating non-
collectively bargained rates under the proposal would reflect labor
market changes and improve contractors' ability to attract, develop,
and retain skilled workers. See, e.g., III-FFC. Brick and Allied
Craftworkers Local #15 MO-KS-NE commented that it is critical that
survey rates are not allowed to become stagnant because stagnant rates
both undermine the purpose of the DBA to protect local area wages and
discourage new workers from considering a career in the trades. Several
other union commenters likewise emphasized the importance of keeping
non-collectively bargained prevailing wage rates up-to-date because
outdated and artificially low wages could discourage workers from
entering the construction workforce. These organizations commented that
this circumstance is particularly problematic in an industry in which
workers' average age, 61, is approaching retirement age.
Various union, labor-management, and contractor group commenters
such as LIUNA, III-FFC, and IEC supported using BLS ECI to update non-
collectively bargained rates. LIUNA noted the ECI's suitability because
it captures both wage and benefit data. AGC observed that the ECI has a
large sample size, is calculated using ``scientifically sound
principles,'' and is publicly released quarterly.
In response to the Department's NPRM request for comments about
using data sources other than the ECI, such as the CPI, MCAA opposed
using the CPI and III-FFC preferred ECI to the CPI for urban consumers
because the ECI reflects labor market trends and includes fringe
benefits. LIUNA also preferred the ECI instead of a consumer-based
index. The MBA, et al., on the other hand, opposed the Department's
proposal to adopt the ECI, stating that the ECI's participation rate
over the past 10 years had dropped. They also noted that it is unclear
whether the ECI's Construction industry category covers residential
construction and whether the index includes both CBA and non-CBA wages.
Several commenters that supported the proposal also recommended
additional regulatory provisions. NABTU and LIUNA recommended that the
ECI should be used only to increase, not decrease, non-collectively
bargained rates, and III-FFC and UBC suggested changing the proposed
regulation to require more frequent periodic updates--at least every 3
years, instead of no sooner than every 3 years. These two commenters
explained that more frequent adjustments would help ensure that DBA
rates do not stagnate.
Other commenters recommended using ECI data to update non-
collectively bargained rates only as a method of last resort, noting
that the ECI does not capture actual wages paid to workers in their
home communities. See NABTU, NCDCL, and UA. These commenters instead
recommended replacing out-of-date non-collectively bargained prevailing
wage rates with existing state and local prevailing wage rates derived
through methods that closely resemble the Department's method. The UA
also emphasized that the Department's proposal is no substitute for
greater efforts to conduct surveys within 3 years and encouraged the
Department to continue to prioritize its own wage surveys as the first
and best option. The UA recognized the Department's improvements in the
survey process--citing the 2019 OIG report's finding that the
Department's ``time to complete a wage survey decreased from an average
of five-to-seven years in 2002 to 2.6 years in 2015''--but also
welcomed the fallback option of using ECI data to update rates when
necessary since surveys are time consuming and the Department's
resources are limited.
A number of commenters--both that supported and opposed the
proposal--expressed concerns about using ECI data. NABTU, AGC, FTBA,
and ABC took exception to using nationwide data
[[Page 57576]]
such as the ECI data the Department anticipated using. FTBA preferred
that the Department use county-specific data that is the ``legal
lynchpin for the setting of prevailing wages under the [DBA].'' FTBA
and AGC expressed concern that the ECI includes certain payments that
are statutorily excluded from Davis-Bacon fringe benefits, such as
disability insurance, unemployment insurance, employer taxes, workers
compensation, overtime, and non-production bonuses. The group of U.S.
Senators criticized the ECI for merely accounting for the net increase
or decrease in the cost of labor, but for not ``as the DBRA commands,
account[ing] for prevailing wages paid to `corresponding classes of
laborers and mechanics.' '' The MBA, et al. cautioned that ``indexing a
wage rate that is potentially forty years old is problematic as the
validity of that wage is unknown.''
Several commenters, some of whom did not expressly oppose the
proposal, asserted that it was inconsistent or arbitrary of the
Department to update certain non-collectively bargained prevailing wage
rates with ECI data from BLS while not also using BLS data to determine
the underlying prevailing wages. For example, while NAHB did not
endorse using BLS data to set prevailing wages, NAHB stated that it
would be inconsistent to use BLS data for periodic updates but not to
calculate the underlying prevailing wage rates using BLS data. NAHB
also criticized the Department's Davis-Bacon wage methodology as being
greatly flawed and argued that the proposed periodic updates would only
allow WHD's flawed survey methodology to persist. AFP-I4AW opposed the
proposal, which they asserted would mix two different methodologies for
determining prevailing wages and use an unrelated BLS escalator to
unjustifiably inflate what they claimed to be unreliable and inaccurate
rates.
Among the commenters opposing the proposal in its entirety, AFP-
I4AW, ABC, the group of U.S. Senators, a group of members of the U.S.
House of Representatives Committee on Labor & Employment, and a few
individuals objected to the proposal in the context of an overall
criticism of WHD's survey method, which they recommended replacing with
BLS data to determine prevailing wages. ABC, for example, suggested
using BLS data to determine prevailing wages because it asserted BLS
data is more timely and accurate. ABC stated that BLS surveys are
conducted scientifically, have high response rates from large sample
sizes, and therefore are superior to WHD's wage survey process. By
comparison, ABC contended the Department's proposal to adjust certain
non-collectively bargained prevailing wage rates on a rolling basis no
more frequently than every 3 years would be less effective and less
accurate than using BLS data to determine prevailing wages in the first
place. ABC also argued, along with the group of U.S. Senators and the
group of members of the U.S. House of Representatives Committee on
Labor & Employment, that this periodic adjustment proposal would only
serve to perpetuate the status quo with inaccurate wage determinations
remaining after the updates. See section III.B.1.ii.A.(1) for a
discussion of why the Department has declined to replace WHD's Davis-
Bacon wage survey program with data from the BLS.
Commenters raised other general concerns about the proposal. While
NAHB agreed that a mechanism is needed to update ``grossly outdated
wage rates,'' they thought the proposal implied less incentive for WHD
to conduct wage surveys more often moving forward. The Construction
Industry Roundtable (CIRT) said that the proposal could work but would
``require constant updates across dozens if not hundreds of individual
salary scales'' to keep up with the proposed cycles.
After considering the comments received on the proposed new
periodic updates to certain non-collectively bargained prevailing
rates, the Department adopts without modification the proposed new
language in Sec. 1.6(c)(1). By expressly authorizing the Department to
periodically adjust non-collectively bargained prevailing wage rates
between surveys under specified circumstances in order to maintain the
currency of those rates, this section plays an important role in WHD's
efforts to improve the Davis-Bacon prevailing wage program. As the
Department emphasized in the NPRM, this new provision advances the
DBA's purpose of maintaining local wage standards and protecting
construction workers--in this case by safeguarding against a decline in
the real value of prevailing wage rates over time. This periodic
adjustment rule implements a concrete and incremental mechanism to
address the criticism, noted by various commenters, that as non-
collectively bargained prevailing rates become out-of-date, they
decreasingly reflect the prevailing rates currently paid. The periodic
adjustment of non-collectively bargained wage rates is particularly
important given that the change to the definition of ``prevailing
wage'' in the 1981-1982 rulemaking has resulted in the increasing
overuse of weighted average wage rates, most of which are the very type
of rates that are not adjusted under the Department's current
procedures. This change warrants extending the express regulatory
authority under which WHD updates collectively bargained prevailing
wage rates between surveys based on CBA submissions to non-collectively
bargained rates updated based on ECI data. The Department anticipates
that periodic adjustments will occur less often over time, as it
conducts surveys more frequently and adopts more state or local
prevailing wage rates.
While the Department has considered the suggested changes to its
proposal, the Department declines to adopt the suggestions.
Specifically, the Department declines to adopt the recommendation to
limit periodic updates to increases only. The ECI historically has
increased over time, and it appears unlikely that the compensation
growth index would result in a decrease over a 3-year interval.
Moreover, the purpose of this provision is to periodically adjust
otherwise out-of-date non-collectively bargained prevailing wage rates.
In the unlikely event that a downward adjustment of an otherwise
stagnant rate were warranted based on a 3-year period of ECI data on
which the Department would be relying, making such an adjustment would
be appropriate and consistent with wage rate changes resulting from an
entirely new prevailing wage survey, which can result in both increases
and decreases in published prevailing wage rates.
The Department also declines to require that the periodic updates
occur more frequently than every 3 years and maintains that this
provision of the final rule will not reduce WHD's incentive to conduct
Davis-Bacon wage surveys. This provision to periodically update out-of-
date non-collectively bargained prevailing wage rates that are 3 or
more years old enables the Department to adjust such rates between
surveys based on total compensation data, allowing prevailing wage
rates to better keep pace with construction wage and benefit growth and
remain more in line with local prevailing rates. The proposed 3-year
minimum interval is consistent with WHD's goal to increase--primarily
through the wage survey program--the percentage of Davis-Bacon wage
rates that are 3 years old or less and therefore would not need to be
periodically updated. The periodic adjustments will be effectuated in
conjunction with WHD's other efforts to increase the frequency with
which the results of new wage surveys are published, including
[[Page 57577]]
surveys conducted under State or local law and adopted by the
Department under the circumstances specified in section III.B.1.iii.D.
The Department, therefore, has calibrated the frequency of periodic
updates so that they better align with these other changes to the
Davis-Bacon wage survey program. In addition, more frequent updating
might disincentivize stakeholders from participating in the Davis-Bacon
survey process.
The Department agrees with LIUNA that ECI data should only be used
for the narrow purpose specified in this proposed rule. The new
periodic adjustment rule will ``on balance result in a closer
approximation of the prevailing wage,'' Donovan, 712 F.2d at 630, for
these out-of-date non-collectively bargained rates and, therefore, is
an appropriate extension of the authority reflected in current Sec.
1.6(c)(1) to modify wage determinations ``from time to time to keep
them current.'' The periodic adjustments will update certain existing
non-collectively bargained prevailing rates, supplementing, but not
replacing, the Department's survey-based wage determination process
which the Department is committed to continuing and striving to improve
as discussed in this section below and in section III.B.1.ii.A.
The Department notes that various commenters, such as ABC, the
group of U.S. Senators, and the group of members of the U.S. House of
Representatives Committee on Education & Labor, opposed the proposal
and urged the Department to use BLS data instead of WHD's wage survey
program to determine prevailing wages. The Department declines to adopt
the suggestion of such commenters that WHD should have chosen to, or is
required to, use BLS data for its wage survey process in its entirety,
instead of using ECI data for the limited purpose of periodic
adjustments. For the reasons discussed below and in section
III.B.1.ii.A.1, the Department's decision to use the rule's periodic
adjustment mechanism to incrementally improve the quality of certain
underlying prevailing wage rates is reasonable and within its broad
statutory discretion, and it does not require that WHD adopt BLS data
as the sole method of determining prevailing wage rates to begin with.
The DBA authorizes the Administrator to choose the method for
determining prevailing wage rates. As a threshold matter, the DBA does
not prescribe a method that the Administrator must or should use for
determining prevailing wages, but rather ``delegates to the Secretary,
in the broadest terms imaginable, the authority to determine which
wages are prevailing.'' 712 F.2d at 616. The Secretary, thus, has broad
discretion to determine the prevailing wage. Even though there may be
multiple methods of determining prevailing wages under the DBA, WHD may
choose which method to use to do so.
The Department disagrees with the premise underlying the claims of
the group of U.S. Senators, ABC, and the MBA, et al. that it is
inappropriate to adjust an underlying wage rate that is allegedly
flawed, as the Department's wage survey methodology operates
comfortably within the authority granted by the DBA and constitutes a
reasonable method of determining prevailing wage rates for laborers and
mechanics on covered construction projects.
WHD has used and may continue to use various regulatory and
subregulatory tools intended to refine and improve its prevailing wage
survey process. Such tools include this rule's periodic adjustments of
certain non-collectively bargained rates with ECI data. WHD's survey
method for determining prevailing wages is not static. The agency
consistently strives to improve its Davis-Bacon wage survey program and
has made improvements over the years. For example, as of March 2019,
WHD had successfully reduced the amount of time it takes to complete a
wage survey by more than 50 percent since 2002 and was continuing to
implement process improvements to reduce the time it takes to complete
a survey. See 2019 OIG Report, at 34 app. B.
Other efforts to improve WHD's DBRA wage survey program include
this rule's use of a modal prevailing wage rate when 30 percent or more
of the wages are the same, and the provision regarding variable rates
that are functionally equivalent, both of which seek to more closely
reflect the prevailing (i.e., predominant) wages paid to workers in an
area and to decrease the prevalence of weighted average rates. Another
recent endeavor is the June 2022 and March 2023 solicitations of
comments about the proposed revision of the wage survey form (WD-10
form), which WHD uses to solicit information that is used to determine
locally prevailing wages. See 87 FR 36152-53; 88 FR 17629 (Mar. 23,
2023) (Notice of availability; request for comments). Outside this
rulemaking, the Department's proposed changes to the WD-10 form would
improve the overall efficiency of the DBA survey process and aim to
streamline the collection of data required for the survey and make the
collection less burdensome for respondents. 87 FR 36153. The Department
also proposed to add a new WD-10A collection instrument to be used pre-
survey to identify potential respondents that performed construction
work within the survey period in the survey area. Id.; see also 88 FR
17629-30.
The Department acknowledges that the ECI data it has selected
includes wages and fringe benefit information for construction-related
occupations nationwide, and that ECI benefits include some employer
costs that are not bona fide fringe benefits under the DBA.
Nevertheless, these ECI data characteristics, while not identical, are
consistent with the DBA's statutory requirements. As discussed in this
section and section III.B.1.ii.A, the Department has developed its
underlying methodology for determining prevailing wages to be
consistent with the Act's directive to determine prevailing wages for
``corresponding classes'' of workers on ``projects of a character
similar'' within ``civil subdivision[s] of the State'' in which the
work is to be performed. 40 U.S.C. 3142(b). This rule supplements WHD's
methodology. The ECI will be used to adjust prevailing wage rates only
after WHD has determined the underlying rates for specific
classifications of workers on projects of a similar character within
the relevant locality. Moreover, the ECI simply reflects the rate of
change in employer labor costs over time. Given the Department's
statutory and regulatory authority, the Department's use of the ECI is
reasonable even though the ECI may not mirror in every respect changes
to certain labor costs on a classification-by-classification, project-
by-project, and location-by-location basis.
The Department disagrees with the commenters who suggested that the
index used for periodic updates must have the same level of detail that
the Department uses to make its wage determinations in the first place.
The ECI data that the Department has selected, while not perfect, is a
reasonable option for the task. ECI contains data for construction-
related occupations and includes both wages and fringe benefits. While
the data is not delineated by county and the mix of fringe benefits is
different than that required to be considered by the DBRA, the ECI's
general data characteristics are sufficient for the purpose of keeping
certain non-collectively bargained rates better aligned with
compensation changes over time, and better than any other index that
the Department has
[[Page 57578]]
considered or commenters have suggested for periodic adjustments under
the DBRA.
The Department's broad discretion about how to determine prevailing
wages comfortably encompasses this mechanism to periodically update
certain out-of-date survey-based prevailing wages pending completion of
the next wage survey. Further, the DBA's legislative history supports
this manner of trying to keep certain prevailing wage rates more
current. Congress recognized that ``[a] method for determining the
prevailing wage rate might have been incorporated in the bill, but the
Secretary of Labor can establish the method and make it known to the
bidders.'' 74 Cong. Rec. 6516 (Feb. 28, 1931) (remarks of Rep. Kopp).
The Department also disagrees that using ECI or its successor data
to periodically update certain non-collectively bargained wages while
continuing to use the Department's longstanding survey process is
arbitrary. The periodic adjustments are tethered to existing prevailing
wage rates and seek to better approximate current prevailing rates. As
stated in the NPRM, ECI data is appropriate for these proposed rate
adjustments because the ECI tracks both wages and benefits and may be
used to approximate the changes in construction compensation over time.
The Department notes in response to comments that the ECI data to
be used includes private industry union and non-union workers,
residential and non-residential construction, and is not seasonally
adjusted. ECI data is a reasonable proxy for construction compensation
growth to first bring non-collectively bargained rates that are more
than 3 years old up to their present value, and then to update these
rates no more often than every 3 years going forward. For these and the
other reasons explained in this section, the final rule adopts this
proposal without modification.
(D) 29 CFR 1.6(f)
Section 1.6(f) addresses post-award determinations that a wage
determination has been wrongly omitted from a contract. The
Department's proposed changes to this paragraph are discussed below in
section III.B.3.xx (``Post-award determinations and operation-of-
law''), together with proposed changes to Sec. Sec. 5.5 and 5.6.
vii. Section 1.7 Scope of Consideration
The Department's regulations in Sec. 1.7 address two related
concepts. The first is the level of geographic aggregation of wage data
that should be the default ``area'' for making a wage determination.
The second is how the Department should expand that level of geographic
aggregation when it does not have sufficient wage survey data to make a
wage determination at the default level. In the NPRM, the Department
proposed changes to this paragraph to more clearly describe WHD's
process for expanding the geographic scope of survey data and to modify
the regulations by eliminating the current bar on combining wage data
from ``metropolitan'' and ``rural'' counties when the geographic scope
is expanded.
In the 1981-1982 rulemaking, the Department codified its practice
of using the county as the default area for making a wage
determination. 47 FR 23644, 23647 (May 28, 1982). Thus, while the
definition of the term ``area'' in Sec. 1.2 allows the Administrator
to use other civil subdivisions of a State for this purpose, Sec.
1.7(a) specifies that the area for a wage determination will ``normally
be the county.'' 29 CFR 1.7(a).
The use of the county as the default ``area'' means that in making
a wage determination the WHD first considers the wage survey data that
WHD has received from projects of a similar character in a given
county. The Department typically collects the county-level data by
construction type (e.g., building, residential, highway, heavy) to
account for the statutory requirement to determine prevailing wages on
projects of a similar ``character.'' 40 U.S.C. 3142(b); see also AAM
130 (Mar. 17, 1978) (discussing construction types). If there is
sufficient county-level data for a classification of covered workers
(e.g., laborers or painters) working on those projects, WHD then makes
a determination of the prevailing wage rate for that classification on
that construction type in that county. See 40 U.S.C. 3142(b) (requiring
prevailing wages to be determined for ``corresponding classes'' of
laborers or mechanics); 29 CFR 1.7(a). In determining whether there is
sufficient current wage data, WHD can use data on wages paid on current
projects or, where necessary, projects under construction up to one
year before the beginning of the survey. 29 CFR 1.7(a).
The second concept addressed in Sec. 1.7 is the procedure that WHD
follows when it does not receive sufficient current wage data at the
county level to determine a prevailing wage rate for a given
classification of workers in a given construction type. This process is
described in detail in the 2013 Chesapeake Housing ARB decision. ARB
No. 12-010, 2013 WL 5872049. In short, if there is insufficient data to
determine a prevailing wage rate for a classification of workers in a
given county, WHD will determine that county's wage-rate for that
classification by progressively expanding the geographic scope of data
(still for the same classification of workers) that it uses to make the
determination. First, WHD expands to include a group of surrounding
counties at a ``group'' level. See 29 CFR 1.7(b) (discussing
consideration of wage data in ``surrounding counties''); Chesapeake
Housing, ARB No. 12-010, 2013 WL 5872049, at *2-3. If there is still
not sufficient data at the group level, WHD considers a larger grouping
of counties in the State, which has been called a ``super group,'' and
thereafter may use data at a statewide level. Chesapeake Housing, ARB
No. 12-010, 2013 WL 5872049, at *3; see 29 CFR 1.7(c).\132\
---------------------------------------------------------------------------
\132\ For residential and building construction types, this
expansion of the scope of data considered also involves the use of
data from Federal and federally assisted projects subject to Davis-
Bacon labor standards at each county-grouping level when data from
non-Federal projects is not sufficient. See 29 CFR 1.3(d). Data from
Federal and federally assisted projects subject to Davis-Bacon labor
standards is used in all instances to determine prevailing wage
rates for heavy and highway construction. Id.
---------------------------------------------------------------------------
In the 1981-1982 rulemaking, the Department imposed a limitation on
this process. The Department included, in Sec. 1.7(b), a strict bar on
combining data from ``metropolitan'' and ``rural'' counties when there
is insufficient wage data in a given county. See 47 FR 23647. That
proviso stated that projects in ``metropolitan'' counties may not be
used as a source of data for a wage determination in a ``rural''
county, and vice versa. 29 CFR 1.7(b). The regulation did not define
the terms metropolitan and rural.
To be consistent with the prohibition on cross-consideration in
Sec. 1.7(b), WHD developed a practice of using designations from the
Office of Management and Budget (OMB) to identify whether a county is
``metropolitan'' or ``rural.'' The OMB designations WHD has used for
this purpose are called the core based statistical area (CBSA)
standards. See 86 FR 37770 (July 16, 2021). As part of the CBSA
designations, OMB identifies two types of statistical areas:
metropolitan statistical areas (MSAs) and micropolitan statistical
areas. The OMB standards do not specifically identify counties as
``rural.'' However, because OMB identifies counties that have
metropolitan characteristics as part of MSAs, the practice of the WHD
Administrator has been to designate counties as ``metropolitan'' if
they are within an OMB-designated MSA and
[[Page 57579]]
``rural'' if they are not. See Mistick Constr., ARB No. 04-051, 2006 WL
861357, at *8. If OMB designates a county as a micropolitan statistical
area, WHD will identify the county as rural, even if it is contiguous
with a nearby MSA. The ARB has determined that such proxy designations
are reasonable. See id.\133\
---------------------------------------------------------------------------
\133\ The OMB standards are different from the Census Bureau's
classification of urban and rural areas. The OMB standards use
counties or county-equivalents as the basic building blocks of their
MSA designations. The Census Bureau's urban-rural classification
uses smaller ``census blocks'' as the ``analysis unit (or geographic
building block)'' of its classification process. See Urban Area
Criteria for the 2020 Census-Final Criteria, 87 FR 16706, 16709
(Mar. 24, 2022).
---------------------------------------------------------------------------
The ban on combining metropolitan and rural county data that was
implemented in the 1981-1982 rulemaking did not apply explicitly to the
consideration of data above the surrounding-counties level. See 29 CFR
1.7(c). After that rulemaking, however, the Department implemented
procedures that did not mix metropolitan and rural county data at any
level in the expansion of geographic scope, including even at the
statewide level.
(A) ``Metropolitan'' and ``Rural'' Wage Data in Surrounding Counties
In the NPRM, the Department proposed to eliminate the language in
Sec. 1.7(b) barring the cross-consideration of metropolitan and rural
wage data at the surrounding-counties level. In explaining this
proposal, the Department noted prior feedback that the blanket bar had
not adequately considered the heterogeneity of commuting patterns and
local labor markets between and among counties that may be designated
overall as ``rural'' or ``metropolitan.'' In its 2011 report, for
example, the GAO noted criticism of the DBA program for using
``arbitrary geographic divisions,'' given that the relevant regional
labor markets, which are reflective of area wage rates, ``frequently
cross county and state lines.'' 2011 GAO Report, at 24.\134\
---------------------------------------------------------------------------
\134\ See note 8, supra.
---------------------------------------------------------------------------
The NPRM explained that the Department understood the point in the
GAO report to be that actual local labor markets are not constrained by
or defined by county lines, and that the point applies even to those
lines between counties identified (by OMB or otherwise) as
``metropolitan'' or ``rural.'' The Department noted that this is
particularly the case for the construction industry, in which workers
tend to have longer commutes than other professionals, resulting in
geographically larger labor markets. See, e.g., Keren Sun et al.,
``Hierarchy Divisions of the Ability to Endure Commute Costs: An
Analysis based on a Set of Data about Construction Workers,'' J. of
Econ. & Dev. Stud., Dec. 2020, at 4.\135\ Even within the construction
industry, workers in certain trades have greater or lesser tolerance
for longer commutes. Keren Sun, ``Analysis of the Factors Affecting the
Commute Distance/Time of Construction Workers,'' Int'l J. of Arts &
Humanities, June 2020, at 43.\136\
---------------------------------------------------------------------------
\135\ https://jedsnet.com/journals/jeds/Vol_8_No_4_December_2020/1.pdf.
\136\ https://ijah.cgrd.org/images/Vol6No1/3.pdf.
---------------------------------------------------------------------------
By excluding a metropolitan county's wage rates from consideration
in a determination for a bordering rural county, the strict ban
implemented in the 1981-1982 rulemaking disregarded the potential for
projects in neighboring counties to compete for the same supply of
construction workers and be in the same local construction labor
market. In many cases, the workers working on a metropolitan county's
projects may themselves live across the county line in a neighboring
rural county and commute to the metropolitan projects. In such cases,
under the current bar, the Department cannot use the wage rates of
these workers to determine the prevailing wage rate for projects in the
rural county in which they live, even where there is otherwise no data
from that rural county to rely on. Instead, WHD would import wage rates
from other ``rural''-designated counties, potentially somewhere far
across the State. As the Department noted in the NPRM, this practice
can result in Davis-Bacon wage rates that are lower than the wage rates
that actually prevail in a cross-county metropolitan-rural labor
market.
For these reasons, the Department stated in the NPRM that it
believed that limitations based on binary rural and metropolitan
designations at the county level can result in geographic groupings
that at times do not fully account for the realities of relevant
construction labor markets. To address this concern, the Department
considered the possibility of using smaller basic units than the county
as the initial area for a wage determination and expanding to labor
market areas that do not directly track county lines. This could
include cities or their equivalents, or even census blocks, which as
noted above, are the basic units for the Census Bureau's urban-rural
classifications. The Department, however, concluded that continuing the
longstanding practice of using counties as the civil subdivision basis
unit is more administratively feasible.\137\ As a result, the NPRM
instead proposed to eliminate the metropolitan-rural bar in Sec.
1.7(b) and to allow the agency to use metropolitan data in appropriate
circumstances to help set rural county prevailing wage rates where the
survey has not resulted in sufficient current wage data from the rural
county. Eliminating the bar will also allow the Department to use data
from adjacent rural counties to help set a metropolitan county's rates
in circumstances where the survey has not resulted in sufficient
current wage data from the metropolitan county.
---------------------------------------------------------------------------
\137\ The Department also considered this option in the 1981-
1982 rulemaking, but similarly concluded that the proposal to use
the county as the basic unit of a wage determination was the ``most
administratively feasible.'' See 47 FR 23647.
---------------------------------------------------------------------------
The Department explained that eliminating the strict bar could have
other benefits in addition to allowing WHD to account for actual
construction labor market patterns. It could allow WHD to publish more
rates at the surrounding-counties group level rather than having to
rely on data from larger geographic areas, because it could increase
the number of counties that may be available to supply data at that
initial group level. Eliminating the bar could also allow WHD to
publish more rates for more classifications overall by authorizing the
use of both metropolitan and rural county data together when the
Department must rely on statewide data. Combining rural and
metropolitan data at the State level would be a final option for
geographic expansion when otherwise the data could be insufficient to
identify any prevailing wage at all. The Department stated that the
purposes of the Act may be better served by using such combined
statewide data to allow prevailing wages to be determined more often.
The Department also explained that eliminating the strict rural-
metropolitan bar would result in a program that would be more
consistent with the Department's original practice between 1935 and the
1981-1982 rulemaking as well as the text and legislative history of the
DBA. Congressional hearings shortly after the passage of the initial
1931 Act suggest that Congress understood the DBA as allowing the
Secretary to refer to metropolitan rates where rural rates were not
available, including by looking to the nearest city when there was
insufficient construction in a village or ``little town'' to determine
a prevailing wage. See 75 Cong. Rec. at 12366, 12377 (1932) (remarks of
Rep. Connery). Likewise, the Department's original 1935 regulations
directed the Department to ``the nearest large city'' when there had
been no
[[Page 57580]]
similar construction in the locality in recent years. See Labor
Department Regulation No. 503 section 7(2) (1935).\138\
---------------------------------------------------------------------------
\138\ See also 29 CFR 1.8(b) (1982) (if no similar construction
is in area, ``wage rates paid on the nearest similar construction
may be considered''); 21 FR 5801, 5802 (1956) (same).
---------------------------------------------------------------------------
In the NPRM, in addition to eliminating the metropolitan-rural
proviso language in Sec. 1.7(b), the Department also discussed other
potential changes to the methods for describing the surrounding-
counties groupings procedure. Because the term ``surrounding counties''
was not defined in the 1981-1982 rulemaking, it has from time to time
led to confusion about whether a county can be considered
``surrounding'' if it does not share a border with the county for which
more data is needed. As noted, WHD's current method of creating
surrounding-counties groupings is to use OMB-designed MSAs to create
pre-determined county groupings. This method does not require that all
counties in the grouping share a border with (in other words, be a
direct neighbor to) the county in need. Rather, at the surrounding-
counties grouping, WHD will include counties in a group as long as they
are all a part of the same contiguous area of either metropolitan or
rural counties, even though each county included may not be directly
adjacent to every other county in the group.\139\
---------------------------------------------------------------------------
\139\ In addition, in certain limited circumstances, WHD has
allowed the aggregation of counties at the ``surrounding counties''
level that are not part of a contiguous grouping of all-metropolitan
or all-rural counties. This has been considered appropriate where,
for example, two rural counties border an MSA on different sides and
do not themselves share a border with each other or with any other
rural counties. Under WHD's current practice, those two rural
counties could be considered to be a county group at the
``surrounding counties'' level even though they neither share a
border nor are part of a contiguous group of counties.
---------------------------------------------------------------------------
For example, in the Chesapeake Housing case, one group of
``surrounding counties'' that WHD had compiled included the areas of
Portsmouth, Virginia Beach, Norfolk, and Suffolk. ARB No. 12-010, 2013
WL 5872049, at *1 n.1. That was appropriate because those jurisdictions
all were part of the same contiguous OMB-designated MSA, and each
jurisdiction thus shared a border with at least one other in the
group--even if they did not all share a border with every other
jurisdiction in the group. See id. at *5-6. Thus, by using the group,
WHD combined data from Virginia Beach and Suffolk at the surrounding-
counties level, even though Virginia Beach and Suffolk do not
themselves share a border. The ARB concluded that this grouping
strategy--of relying on OMB MSA designations--was consistent with the
term ``surrounding counties.'' See Mistick Constr., ARB No. 04-051,
2006 WL 861357, at *7-8.
In the NPRM, the first option for the surrounding-counties group
level that the Department discussed was to maintain the current group
description without further amendment. The Department noted that the
term ``surrounding counties'' itself is not so ambiguous and devoid of
meaning that it requires additional definition. The Department stated
that the term has been reasonably read to require that such a grouping
be of a contiguous grouping of counties as the Department currently
requires in its use of OMB MSAs (as described above), with limited
exceptions. Thus, while the elimination of the metropolitan-rural
proviso would allow a nearby rural county to be included in a
surrounding-counties grouping with metropolitan counties that it
borders, it would not allow WHD to append a faraway rural county to a
surrounding-counties grouping made up entirely of metropolitan counties
with which the rural county shares no border at all. Conversely, the
term ``surrounding counties'' does not allow the Department to consider
a faraway metropolitan county to be part of a surrounding-counties
grouping of rural counties with which the metropolitan county shares no
border at all.
The second and third options the Department outlined in the NPRM
were to add more precise definitions to the term ``surrounding.'' The
second option was to limit ``surrounding counties'' to solely those
counties that share a border with the county for which additional wage
data is sought. The Department noted that this proposal would generally
ensure that the surrounding-counties grouping would not expand beyond
the commuting range of the construction workers who would work on
projects in the county at issue. However, the Department explained, the
narrowness of such a limitation would also be a drawback, as it could
lead to fewer wage rates being set at the surrounding-counties group
level. It also would have a significant drawback in that it would not
allow for the use of pre-determined county groupings that would be the
same for a number of counties, because each county may have a different
set of counties with which it alone shares a border. This could result
in a substantial burden on WHD in developing far more county-grouping
rates than it currently develops.
The third option was to include language that would define
``surrounding counties'' as a grouping of counties that are all a part
of the same ``contiguous local construction labor market'' or some
comparable definition. The Department noted that, in practice, this
methodology could result in similar (but not identical) groupings as
the current methodology, as the Department could decide to use OMB
designations to assist in determining what counties are part of the
contiguous local labor market. Without the strict metropolitan-rural
proviso, however, this option would allow the Department to use
additional evidence on a case-by-case basis to determine whether the
OMB designations--which do not track construction markets
specifically--are too narrow for a given construction market.
(1) Comments Regarding Metropolitan and Rural Wage Data
A number of union and contractor association commenters generally
agreed with the Department's proposed changes to Sec. 1.7(b).
Commenters such as FTBA, MCAA, and NABTU supported eliminating the
strict prohibition on combining data from rural and metropolitan areas,
because eliminating the prohibition would allow the Department's wage
determinations to better reflect the complexities of the construction
industry. As NCDCL noted, rural areas are frequently economically
interconnected to nearby metropolitan areas. For this reason,
commenters explained, the proposal is common sense because it does not
limit the Department to the use of ``arbitrary geographic
designations.''
Several commenters supporting the proposal emphasized that it is
important that the Department have the flexibility to create groupings
instead of being bound by a rigid rule. SMART and SMACNA, for example,
stated that the task of figuring out how to properly expand geographic
scope is a complicated one ``for which regional and demographic
differences necessitate solutions that reflect the realities of local
markets.'' They agreed that ``county lines do not dictate local labor
markets'' and that there is great diversity on a state-by-state basis
in how county lines are drawn. SMART and SMACNA stated that under the
bar on cross-consideration, the Department has effectively treated all
rural counties as a ``monolith'' instead of as diverse entities with
differing levels of integration with metropolitan counties and a wide
range of populations and economic activity.\140\
[[Page 57581]]
They noted that ``there is no single, universally preferred definition
of rural'' and no ``single rural definition that can serve all policy
purposes.'' That variability makes ``rigid rules banning the use of
metropolitan data in rural counties unreasonable.'' \141\ LIUNA
criticized the Department's current ``absolutist'' approach that
``prevents the Administrator from properly considering labor markets in
instances where discretion is required.''
---------------------------------------------------------------------------
\140\ See, e.g., Haya El Nasser, ``More Than Half of U.S.
Population in 4.6 Percent of Counties,'' Census.gov: Big and Small
America (Oct. 24, 2017), https://www.census.gov/library/stories/2017/10/big-and-small-counties.html.
\141\ SMART and SMACNA cited an Issue Brief prepared for the
Rural Policy Research Institute Health Panel that compared OMB and
Census bureau statistical area designations and noted that 30
million ``Census Bureau-defined rural people live in OMB-defined
metropolitan areas, and 20 million urban people live in
nonmetropolitan areas.'' Andrew F. Coburn, et al., ``Choosing Rural
Definitions: Implications for Health Policy,'' Rural Pol'y Rsch.
Inst. 3 (Mar. 2007).
---------------------------------------------------------------------------
A number of the commenters, including LIUNA and NABTU, agreed with
the Department's reasoning in the NPRM that the strict bar has had a
depressive effect in particular on the prevailing wage rates for rural
counties that border--and have a level of labor-market integration
with--metropolitan areas. The commenters noted that the Department's
rural county groupings have combined data from metropolitan-adjacent
rural counties with other rural counties that may be geographically
remote and have no connection to any metropolitan area. UBC, likewise,
explained that this practice is counterintuitive given that wage rates
are higher in metropolitan-adjacent counties than in remote rural
counties because projects in the metropolitan-adjacent counties have to
compete for the same workers as projects in the neighboring
metropolitan areas. The UA asserted that eliminating the strict bar in
Sec. 1.7(b) should increase the accuracy of wage determinations for
these types of metropolitan-adjacent counties by better reflecting
actual labor markets and commuting patterns.
Several union commenters, including IUOE, West Central Illinois
Building and Construction Trades Council, and others, agreed with the
Department that the current binary approach to categorizing counties
does not account for ``realities of the construction industry, in which
workers tend to commute longer distances than other professionals.''
These commenters explained that this fact is in part related to the
``cyclical nature of construction employment.'' When one project ends,
they explained, workers are forced to follow the next project that will
provide gainful employment, even if it means traveling to surrounding
communities.
A number of commenters, including industry associations such as
ABC, NAHB, and IEC, opposed the Department's proposal to eliminate the
strict bar. These commenters asserted that adoption of higher average
wages reflected in metropolitan county data will likely result in
inflated wages in nearby rural counties that do not reflect local area
prevailing wage rates. Numerous individual commenters, as part of an
organized campaign, stated that the elimination of the bar, in
combination with other aspects of the Department's proposed rule, was
likely to ``further distort the accuracy'' of WHD wage determinations.
ABC issued a survey to its members and stated that only 14.4 percent of
respondents agreed that ``aggregating metropolitan and rural wage
data'' would ``increase the accuracy'' of wage determinations. IEC and
the group of U.S. Senators stated that construction unions tend to be
more heavily concentrated in metropolitan areas than in rural areas, so
the proposal would lead to higher union rates being applied to rural
areas that may not have a high union density. Several commenters
opposing the proposal, including ABC and the group of U.S. Senators,
said that the importation of metropolitan wages that may be higher than
wages actually paid in a rural county would be inconsistent with the
purpose and congressional intent underlying the DBRA.
Commenters opposing the proposal also stated that increased
prevailing wage rates in rural counties would have negative effects.
NAHB stated that increased wage rates would decrease production of
affordable housing. IEC stated that ``by equating rates between
metropolitan and rural areas, the rule would disincentivize workers
from taking on higher-paying jobs in metropolitan areas, which have
numerous additional out-of-pocket expenses for such workers, including
but not limited to commuting, parking, subsistence, and other related
costs.'' IEC further stated this would create a shortage of workers
being willing to incur these expenses for work in metropolitan areas,
thus driving up costs of metropolitan projects even further to attract
workers. IEC also stated that using a metropolitan county's wage rate
for a rural county would inflate rural wage rates above what the local
economy can support and would ``undermine existing methods of
incentivizing rural construction, such as subsistence pay to offset
food and lodging.'' The comment from the Senators argued that the
proposal would ``upset the local wage structure'' and result in small
local contractors being ``excluded from bidding on Federal projects.''
Commenters opposing the Department's proposal also criticized the
Department's reasoning in the NPRM for proposing the change. NAHB
argued that the Department's explanation--that construction workers
travel long distances for work and that nearby counties with different
designations may be competing for the same supply of workers--is one
that ``contradicts'' the system of MSAs set up by OMB. NAHB noted that
OMB already analyzes commuting data in order to capture local labor
markets when it designates MSAs, and that these areas are treated as
``authoritative'' and used by a variety of government agencies for
important programs. They argue that these labor market definitions
should not be ignored or contradicted without substantial evidence.
NAHB also stated that the two academic studies on construction-
worker commuting time that the Department referenced were not
persuasive because they were based on evidence from one city in
California, did not show that construction commutes were substantially
longer than the next longest commutes, and that any lengthier commute
times could be explained by the need for workers to travel to different
construction sites rather than to a single central office, and
therefore do not necessarily mean commute times extend outside of
metropolitan areas. NAHB also noted one of the two papers stated that
construction workers travel long distances to projects in search of
higher wages, and this, NAHB stated, did not support the idea that
workers in metropolitan counties would travel to nearby rural counties
for work.
The comment from the group of U.S. Senators criticized the proposal
as allowing for rural wage determinations to be governed by ``locality-
distinct metropolitan wages'' from metropolitan areas that may be
``lacking both commonality and contiguousness with the rural
locality.'' The comment also argued that the process of geographic
expansion at all--even the current process allowing the use of MSAs at
the group level--inflates prevailing wages compared to the ``actual
prevailing wage BLS calculated.'' ABC argued that ``combining data from
rural and metropolitan counties cannot improve accuracy so long as the
underlying wage data comes from a self-selected, statistically
unrepresentative sample.''
Various commenters supporting and opposing the proposal disagreed
about the extent to which the Department's
[[Page 57582]]
historical practice supports the proposal. On one hand, the comment
from the group of U.S. Senators argued that the Department
mischaracterized in the NPRM that the bar on combining data has existed
only since the 1982 rulemaking. They noted that, as early as 1977, the
Secretary's Operations Manual for the Issuance of the Wage
Determinations Under the DBRA instructed that ``[g]enerally, a
metropolitan county should not be used to obtain data for a rural
county (or visa [sic] versa).'' Donovan, 712 F.2d at 618.\142\ They
cited the Carter Administration regulations that were suspended before
enactment in 1981 as seeking to ``formalize such a prohibition,'' and
they cited a WAB decision from 1977 for the proposition that the WAB
had warned against importing rates from non-contiguous counties.
---------------------------------------------------------------------------
\142\ In their comment, the U.S. Senators left out the word
``generally'' from their recitation of the language from the Manual.
See Donovan, 712 F.2d at 618.
---------------------------------------------------------------------------
On the other hand, a number of commenters supporting the proposal
agreed with the Department that eliminating the strict bar was
consistent with the legislative history of the DBA and the Department's
historical practice from the enactment of the Act until the 1981-1982
rulemaking. NABTU stated that the legislative history ``supports the
proposition that [the Department] should first consider neighboring
communities'' when there is not sufficient wage data in a non-
metropolitan area. The Iron Workers noted in particular the exchange in
the 1932 hearings regarding amending the DBA where Congressman William
Connery, the manager of the bill, used the example of the construction
of the Hoover Dam (then referred to as the Boulder Dam) near the
Arizona-Nevada line. See 75 Cong. Rec. at 12366, 12377 (1932) (remarks
of Rep. Connery). Rep. Connery had explained how at the time there may
have been a need to go 500 miles to find a city large enough to provide
a sufficient amount of wage data to determine what prevailing wage
rates should be for the project. As the Iron Workers explained, Rep.
Connery's statement supports the conclusion that Congress intended to
give the Secretary discretion to determine the necessary scope of
geographic aggregation where there was insufficient wage data--to
aggregate from a geographic scope that is ``large enough to include
wage data from a sufficient number of similar projects.'' SMART and
SMACNA noted that the Department then, until the 1981-1982 rulemaking,
consistently relied on data from more populous areas in deriving
prevailing rates for thinly-populated areas in appropriate
circumstances.\143\
---------------------------------------------------------------------------
\143\ For the Oahe Reservoir constructed in rural South Dakota
in 1954, the Solicitor of Labor explained that ``[t]he labor force
for the project obviously had to be drawn from the entire state and
beyond,'' since there were ``no projects of a character similar in
the civil subdivisions involved.'' Charles Donahue, ``The Davis-
Bacon Act and the Walsh-Healey Public Contracts Act: A Comparison of
Coverage and Minimum Wage Provisions,'' 29 Law & Contemp. Probs.
488, 510 (1964).
---------------------------------------------------------------------------
Commenters supporting and opposing the proposal also disagreed
about whether the D.C. Circuit's decision in Donovan supports the
proposal. The Donovan decision considered the reasons that the
Department had provided in its 1981-1982 rulemaking for enacting the
strict bar on cross-consideration and ultimately upheld the
Department's rule as a permissible exercise of its discretion. 712 F.2d
at 618. The comment by the group of U.S. Senators argued that the
Department's reasons for enacting the bar in the 1981-1982 rulemaking
had been ``compelling,'' and that the D.C. Circuit had validated those
reasons by stating that they ``make sense.'' The Senators asserted that
the Department's reasoning now is similar to the reasoning of the
unions and others who opposed the 1981-1982 rulemaking, and that these
arguments were ``dismissed'' by the D.C. Circuit. ABC stated that the
Department's justifications now are inadequate in light of the Donovan
decision.
The Iron Workers, on the other hand, emphasized that the D.C.
Circuit's decision about the metropolitan-rural bar in Donovan was
based on a deferential standard of review. The import of the decision,
according to the Iron Workers, is that the Department is not bound by
prior practice and can adopt new rules regarding geographic aggregation
as long as they are consistent with the purposes of the DBA and not
arbitrary. The Iron Workers and SMART and SMACNA also noted that the
development of the program after the 1981-1982 rulemaking (and the
Donovan decision) supports revisiting the strict bar. The 2011 GAO
Report analyzed a group of surveys and found that in those surveys, the
Department received increasingly insufficient current wage data at the
county and surrounding-counties levels, which caused the Department to
rely more heavily on super-group and statewide data to calculate
prevailing wage rates. See supra note 10, at 21. This circumstance, the
commenters argued, showed that the Department was too often relying on
far-away county data when the better alternative would be adding
neighboring counties to the surrounding-counties group level and thus
relying on data from within local construction labor markets.
(2) Department's Decision Regarding Metropolitan and Rural Wage Data
The Department generally agrees with the commenters supporting the
proposal. Given the wide variation in counties and construction labor
markets, the current bar on cross-consideration of the binary
categories of ``metropolitan'' and ``rural'' county data unnecessarily
limits the Department's geographic aggregation methodology.
Accordingly, the Department has decided to revert to the prior
approach, pre-dating the 1981-1982 rulemaking, under which the
regulations do not strictly bar the Administrator from using data from
metropolitan counties to help set prevailing wage rates in other
counties in appropriate circumstances. In doing so, the Department will
be able to better distinguish between metropolitan-adjacent counties
that are part of a larger metropolitan construction market and those
rural counties that are not economically integrated with any nearby
metropolitan areas, will be able to set more wage determinations at
smaller levels of geographic aggregation, and will be able to include
more classifications in wage determinations overall.
Some of the criticism of the Department's proposal may reflect
underlying misunderstandings. The geographic aggregation provisions of
Sec. 1.7 apply only when there is not sufficient current wage data in
a county to determine a prevailing wage for a particular classification
for that county. This can happen for a variety of reasons. As one
commenter, a Professor of Economics from the University of Utah,
stated, there may be insufficient wage data in some counties because
they are simply ``too small to provide adequate numbers of survey
responses,'' which is not uncommon given that there are counties in the
United States with populations as low as 64 people. As this commenter
noted, this challenge can also be common regardless of county size for
specialized subclassifications on complex heavy construction projects
(such as dams) because these types of projects ``are often non-
repeating, vast and unique in their design so that obtaining sufficient
comparable wage data in one county is challenging.'' Only where there
is not sufficient current wage data for a particular classification in
a particular county will WHD expand
[[Page 57583]]
its geographic scope of consideration to consider data from other
counties.\144\
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\144\ In addition, as the Department noted in the NPRM, if more
interested parties participate in the wage survey, then there will
be fewer counties without sufficient wage data for which the Sec.
1.7 expansion process becomes relevant.
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The corollary of this structure is that the geographic aggregation
provisions do not apply when there is already sufficient wage data for
a classification at the county level in a WHD survey. It may be helpful
to consider the example of a core metropolitan county, County A, and an
outlier county, County B, that shares a border with County A. If the
Department's wage survey produces sufficient current wage data for a
certain classification in County A and separately produces sufficient
current wage data for that classification in County B, then the
Department's proposal would not result in any combination of data for
the two counties. The proposal would only potentially apply if the wage
survey did not produce sufficient current wage data for a
classification in County A or County B. In that circumstance, the
Department would need to consider how to set the prevailing wage rate
for that classification and would look to wage data from outside of
that county for that purpose.
The Department disagrees with ABC that the proposal to eliminate
the strict bar on cross-consideration is a ``dramatic change'' from the
1981-1982 rulemaking. While eliminating the strict bar, the final rule
does not require fundamental changes to the general underlying
procedure for geographic aggregation described above. Under the final
rule, as under current practice, the geographic aggregation provisions
of Sec. 1.7 apply only when there is not sufficient current wage data
in a county to determine a prevailing wage rate for a particular
classification for that county. See 29 CFR 1.7(b). In these
circumstances, as under the current practice, the Department would
first aggregate data from ``surrounding counties'' to set the
prevailing wage for the county with insufficient data. Id. Further
geographic aggregation would occur only if sufficient data is still not
available at the ``surrounding counties'' group level. In that
circumstance, the Department could aggregate data from other
``comparable counties or groups of counties.'' Id. Sec. 1.7(c).
Finally, and only if there is no sufficient current wage data for the
classification at this intermediate level, the Department could
aggregate statewide data for the classification to set the prevailing
wage rate in that county.
In addition, the elimination of the strict bar does not require WHD
to abandon the use of OMB designations as helpful references in the
aggregation process. As noted above, the Department's current use of
OMB designations to identify appropriate counties for geographic
aggregation has been found to be consistent with the term ``surrounding
counties'' and a reasonable method of addressing circumstances where
there is insufficient wage data for a classification in a given county.
The final rule will allow the Department to continue this practice,
although the rule will not require it. It will also allow the
Department to consider additional information on a case-by-case basis
to avoid artificially or unreasonably depressing prevailing wage rates
in counties that are adjacent to metropolitan areas but not designated
as part of the MSA by OMB and to enable the calculation of more
prevailing wages at the surrounding-counties group level rather than
based on data from larger, more disparate super group or even statewide
areas.
The Department disagrees with NAHB that cross-consideration of data
from outside of the same MSA ``contradicts'' these OMB designations. As
an initial matter, OMB itself notes that ``[c]ounties included in
metropolitan and micropolitan statistical areas may contain both urban
and rural territory and population.'' 86 FR 37772. It also disclaims
that its standards ``produce an urban-rural classification.'' Id. at
37776. OMB requires counties to achieve a relatively high level of
economic integration in order to be included in the same MSA. An
outlying county will only be included in an MSA if 25 percent or more
of the workers living in the county work in the central county or
counties of the MSA or 25 percent or more of the employment in the
county is accounted for by workers who reside in the central or county
or counties. Id. Given that construction workers may generally commute
longer distances than other workers, it is reasonable that counties
that are economically integrated--but to a somewhat lesser extent than
are MSAs--may still be a part of the same local construction labor
market.
One example that would be permissible under the final rule would be
for the Department to take a new approach with counties that OMB
designates as micropolitan statistical areas. As OMB notes,
metropolitan and micropolitan statistical areas are ``conceptually
similar to each other, but a micropolitan area features a smaller
nucleus.'' 86 FR 37771.\145\ The Department, however, has generally
considered counties designated as micropolitan to be ``rural'' and thus
not appropriately included in a metropolitan ``surrounding county''
grouping even where the micropolitan county shares a border with an
MSA. Under the final rule, the Department could analyze micropolitan
counties on a case-by-case basis to determine how to include them in
surrounding-counties groupings.
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\145\ An MSA is ``based on Urban Areas of 50,000 or more
population,'' and a micropolitan statistical area is ``based on
Urban Areas of at least 10,000 population but less than 50,000
population.'' 86 FR 37776.
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Where a micropolitan county is not adjacent to any MSA, and is
surrounded by rural counties with no urban population, the Department
could continue (as it generally does under the existing strict bar) to
include such a county within a surrounding-counties grouping of other
adjacent and contiguous ``rural'' counties. In such circumstances,
there would be no combining of metropolitan and ``rural'' data at the
county or surrounding-counties group level for that county. However,
where a micropolitan county is adjacent to one or more metropolitan
counties, the Department might reasonably consider it to be a part of
the same surrounding-counties grouping as those nearby counties within
the MSA for the purpose of geographic aggregation. OMB's ``combined
statistical areas'' concept could be useful in such a circumstance. OMB
creates combined statistical areas by appending micropolitan counties
to adjacent MSAs where there is a sufficient ``employment interchange''
between the two areas. 86 FR 37777-78. Although the final rule does not
require as much, it would permit the Department to use data from
metropolitan counties to set prevailing wages for micropolitan counties
(for which there is not sufficient current wage data for a
classification at the micropolitan county level) that are within the
same combined statistical area.
Given the wide variety of counties and local construction labor
markets, the Department does not believe it is appropriate to set
overly simplistic rules that apply rigidly throughout the country.
Rather, depending on resource availability, the Department should be
permitted to analyze data and other evidence on a state-by-state basis
to determine appropriate county groupings. For example, Rice County in
Minnesota is a micropolitan county that is adjacent to the Minneapolis-
St. Paul
[[Page 57584]]
MSA. In the most recent DBA wage determination process, the Department
considered Rice County to be rural and therefore did not use any wage
data from Minneapolis-St. Paul to assist in wage determinations.
Because it satisfies the threshold for employment integration, however,
OMB considers Rice County to be part of the Minneapolis-St. Paul
Combined Statistical Area.\146\ Likewise, Rice is also within the same
union jurisdiction for various construction crafts as the metropolitan
counties in the adjacent MSA. In a future survey, if there are
classifications in Rice County for which there is not sufficient
current wage data, it would be reasonable under these circumstances for
the Department to expand to a surrounding-counties grouping that
includes the other counties within the same Minneapolis-St. Paul
Combined Statistical Area.
---------------------------------------------------------------------------
\146\ See U.S. Census Bureau, ``Minnesota: 2020 Core Based
Statistical Areas and Counties,'' https://www2.census.gov/programs-surveys/metro-micro/reference-maps/2020/state-maps/27_Minnesota_2020.pdf.
---------------------------------------------------------------------------
The Department has considered and disagrees with NAHB's criticism
of the two academic papers that the Department used to illustrate that
construction labor markets can be geographically larger than the
average occupation's labor market. NAHB stated that the papers were not
persuasive, but it did not cite to any studies or other data that
contradicted them. NAHB first stated these papers were unconvincing
because the average commute time they cited for construction workers--
while the highest of all occupational groups--was only 1.6 minutes
higher than the next highest occupational group. By comparing the
commute times to the next highest number, however, NAHB ignored that
the average commute times for construction workers in the study are
significantly longer than many other common occupations. For example,
they are 31 percent higher than sales workers, 44.5 percent higher than
education workers, and nearly 52 percent higher than food service
workers. See Sun et al. (Dec. 2020) supra note 135, at 1, 4.
NAHB also stated that any lengthier commute times for construction
workers could be explained by the need for workers to travel to
different construction sites rather than to a single central office,
and therefore do not necessarily mean commute times extend outside of
metropolitan areas. The Department agrees that lengthy construction
worker commutes may in part be a result of commuting to project sites
instead of a central office.\147\ However, the Department is not
persuaded that such a distinction is relevant to whether these longer
commutes cross metropolitan-rural county borders and reflect a larger
construction labor market. The two academic papers, moreover, note a
high percentage of particularly long commutes in the study area: 40
percent of the workers in the study commuted more than 50 miles from
home to the project site, and 12 percent of workers commuted more than
80 miles. See Sun et al. (June 2020), supra note 136, at 40. It is
reasonable to assume that commutes of this length can often extend
across metropolitan-rural county borders.\148\
---------------------------------------------------------------------------
\147\ As another paper noted, it is reasonable to assume that
commute times are higher for construction workers because commute
times will generally be longer for workers (like construction
workers) who have ``greater uncertainty about future job location.''
Randall Crane and Daniel G. Chatman, ``As Jobs Sprawl, Whither the
Commute?,'' ACCESS Mag., Fall 2003, at 14, 17.
\148\ NAHB also criticized the two papers because they were
based only on data from one city in California. The Department,
however, does not find that criticism to be persuasive. The average
commute times discussed in the papers were not local numbers, but
were numbers derived from the nationwide U.S. Census data in the
2014 American Community Survey. See Sun et al. (Dec. 2020) supra
note 135 (citing Dan Kopf, ``Which Professions Have the Longest
Commutes?,'' Priceonomics (Feb. 23, 2016), https://priceonomics.com/which-professions-have-the-longest-commutes/). While the commute
mileage numbers were from a single California city, the Department's
proposal is to increase the Administrator's flexibility to treat
different construction labor markets differently. Thus, the
potential that data from other cities in the country could show
different commuting patterns for construction workers does not
undermine the rationale for the proposal.
---------------------------------------------------------------------------
Finally, NAHB also noted that construction workers travel long
distances to projects in search of higher wages, and this, they stated,
did not support the idea that workers in metropolitan counties would
travel to nearby rural counties for work. The Department agrees that as
a general matter, construction contractors may need to pay a premium to
motivate workers to commute longer distances. This does not, however,
undermine the Department's reasoning. To the contrary, it suggests that
if a rural county is within commuting distance of a metropolitan area
and the rural county does not itself have sufficient construction
workers in a particular classification, workers from the metropolitan
area may need to be paid a premium to be willing to commute to the job.
This is the concept underlying the ``zone pay'' premiums in CBAs, which
are discussed above in section III.B.1.ii.(A)(4).\149\
---------------------------------------------------------------------------
\149\ A comment from The Pacific Companies, an affordable
housing developer and owner of affordable housing, provided another
example of this phenomenon. The comment noted that it prefers to use
modular construction to reduce the need for labor and offset labor
costs in rural areas ``where labor is more scarce and costs can be
higher.''
---------------------------------------------------------------------------
The Department has also considered the comments from opponents of
the proposal that the elimination of the strict bar will likely result
in ``inflated'' wages in the rural counties in which metropolitan data
is newly used. In support of this argument, the comment from the group
of U.S. Senators referenced statements in the 1979 GAO Report and by
then-Comptroller General Staats that criticized the importation of
rates from one county to another. Also supporting this argument, NAHB
cited testimony from an NAHB member asserting that it had constructed
two projects--one in the Philadelphia metropolitan area and the other
``outside of the Philadelphia area'' that was ``described as a more
complex project''--and that the labor costs and cost-per-unit had been
higher on the metropolitan project. NAHB, in addition, pointed to
litigation over certain DBA rates in Nevada, where geographic
aggregation led to the adoption of Las Vegas metropolitan rates in a
smaller metropolitan area in Northern Nevada that included Reno.
The Department does not find the reference to the 1979 GAO Report
to be persuasive. The GAO Report was criticizing the importation of
rates from other counties ``even though an adequate basis generally
existed for issuing prevailing rates based on the labor force and
construction data in the locality.'' 1979 GAO Report, at 50. Later, the
GAO referenced a project where it stated that the Department had not
even attempted to survey a rural county and instead adopted a wage rate
from a metropolitan county that did not even share a border with the
rural county. Id. at 174.\150\ This is not what the Department proposed
in the NPRM. Rather, the proposal would not change the fundamental
threshold for
[[Page 57585]]
geographic expansion in the regulation at Sec. 1.7(b), which only
expands the scope when the Department has surveyed a county and the
survey has not resulted in sufficient current wage data to make a wage
determination.
---------------------------------------------------------------------------
\150\ Similarly, the U.S. Senators cited to the WAB decision in
Texas Paving & Utilities Rates, WAB No. 77-19, 1977 WL 24839 (Dec.
30, 1977), to support the argument that importing wage rates could
violate the plain language of the DBRA by ``establishing new wage
rates rather than reflecting local wages.'' In the Texas Paving
decision, however, the Administrator had not surveyed the area at
issue and set rates notwithstanding the lack of a survey. This would
not be an issue under the proposed scope-of-consideration rule, as
the Department's current methodology requires the use of surveys,
and geographic aggregation only occurs if a survey has resulted in
insufficient current wage data in the county at issue.
---------------------------------------------------------------------------
The Senators also cite language in the GAO Report stating that
``the use of wage rates from another area is not in accord with the
act's intent[.]'' 1979 GAO Report, at 50. The Department interprets
this statement as referencing the practices that the GAO was
criticizing--of using rates from another area without even attempting
to survey the county at issue--and not a broader statement that the use
of wage rates from another area is never permitted. However, to the
extent that the GAO Report intended a broader rejection of the practice
of geographic aggregation, that position was subsequently undermined by
the D.C. Circuit in the Donovan decision upholding the geographic
aggregation provisions in Sec. 1.7. In Donovan, the D.C. Circuit
concluded from the legislative history of the DBA that the practice of
using data from outside the area where necessary was permissible and
consistent with the statute. As the court explained ``if a prevailing
wage could not be set in a given county by looking only to projects in
that county, it was essential to the attainment of the general purpose
of Congress--the predetermination of locally prevailing wages--that
another mechanism be found.'' 712 F.2d at 618.
The Department also does not agree that the proposal will lead to
an impermissible adoption of inaccurate and ``inflated'' wage rates.
The Department agrees that different areas can have different wage
structures; that is the basic concept underlying the Act. However, as
the D.C. Circuit noted, the Department is tasked with finding a way to
make wage determinations even where there is not sufficient current
wage data from a given county to make the determination. Donovan, 712
F.2d at 618. In such circumstances, the Department must consider a
number of factors in determining how to proceed, including consistency
with local area practice, as well as administrative feasibility,
publishing as many wage determinations as possible, and reducing the
need for conformances. As the Department noted in the NPRM, there is no
perfect solution for identifying county groupings in the geographic
aggregation procedure. However, on balance, the Department has
concluded that the better approach is not to constrain the agency with
strict limits based on an overly simplistic binary categorization of
counties.
The Department agrees that there is a possibility that increased
flexibility may lead to higher prevailing wage rates in certain
counties that are adjacent to metropolitan areas. The Department agrees
with the commenters that supported the proposal that the current
geographic aggregation methodology can have a depressive effect on the
prevailing wage rates for rural counties that border--and have a level
of labor-market integration with--metropolitan areas.
Conversely, however, increased flexibility in geographic
aggregation may in other circumstances lead to lower prevailing wage
rates. Under the current ban, where a survey does not result in
sufficient current wage data for a classification in a metropolitan
county, the Department may need to use a super group of metropolitan
counties from different parts of the state to make a wage determination
for that classification. This can result in relying on data from far
away metropolitan areas that may have less in common with the
metropolitan county than neighboring micropolitan counties (that are
currently treated as ``rural''). Without the ban, the Department could
instead look to the adjacent rural county that is within commuting
distance from the metropolitan county for which there is not sufficient
current wage data for the classification at issue. The result in that
instance could be a lower rate in the wage determination, but one that
might better reflect the prevailing wage in the specific local
construction labor market.\151\
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\151\ The same is true for prevailing wage rates based on CBAs.
IEC speculated that the end of the absolute bar could lead to
metropolitan area CBA rates being applied to neighboring rural
counties. However, it is equally as likely that small metropolitan
MSAs that have insufficient data and would be subject to a CBA-based
rate at a metropolitan ``super group'' level under the existing
regulations, will, under the final rule, have the potential to
instead reach sufficiency at the surrounding-counties group level
with a combination of metropolitan and rural county data that may
not be CBA-based.
---------------------------------------------------------------------------
A similar effect can be anticipated for rural areas that are
adjacent to small metropolitan areas. Under the current approach, if
there were insufficient data in a rural metropolitan-adjacent county,
the Department would look to other ``rural'' areas elsewhere in the
state where wage rates might be driven by rates in micropolitan
counties with markedly higher rates. For example, in a recent survey of
Utah, WHD determined that the combined prevailing wage and fringe
benefit rate in a smaller metropolitan county, Weber County, for a
Laborer: Mason Tender/Cement Concrete was $14.93. In neighboring Rich
County, a rural county, there was no sufficient current wage data, and
WHD calculated the prevailing wage for the same classification by
looking to other rural counties statewide, resulting in a determination
of $19.33. If instead WHD had been able to combine the metropolitan
data from neighboring Weber County with the rural Rich County, the
prevailing wage in Rich County would be lower than it has been
calculated under the existing strict bar on cross-consideration of
``metropolitan'' and ``rural'' data.
This same phenomenon can occur even when the metropolitan area is
not a particularly small one. For example, in a recent survey of
Tennessee, WHD determined that the prevailing wage for an Electrician
in a number of counties within the MSA of Nashville-Davidson-
Murfreesboro was $22.53. In neighboring Lawrence County, a micropolitan
county that is part of the larger combined statistical area, but still
considered to be a ``rural'' county under the current rules, there was
not sufficient wage data to make a wage determination for the
Electrician classification. WHD thus calculated the prevailing wage for
Electricians in Lawrence County by looking to other ``rural'' counties
at a super-group level, resulting in a determination of $26.25. If
instead WHD had been able to combine the ``metropolitan'' data from the
neighboring MSA with micropolitan Lawrence County, the prevailing wage
in Lawrence would have been lower.
Overall, while it is reasonable to expect that ending the strict
bar on cross-consideration may in some counties lead to increases in
the published prevailing wage rates, the Department does not agree that
such increases would be unwarranted or inaccurate, or that they would
have significant negative effects that outweigh their benefits. In
addressing these questions, the Department has considered the arguments
that were made during the 1981-1982 rulemaking and subsequent
litigation, as well as the comments received on the current proposal.
Many of these arguments are similar, and many mirror the arguments that
the same commenters made regarding the proposed reversion to the 30-
percent rule, such as NAHB's statement that increased wage rates would
decrease production of affordable housing, and IEC's statement that
using a metropolitan county's wage rate for a rural county would
inflate rural wage rates ``above what the local economy
[[Page 57586]]
can support.'' \152\ The Department does not find these arguments to be
persuasive for the same reason that they are not persuasive with regard
to the 30-percent rule. See section III.B.1.ii.
---------------------------------------------------------------------------
\152\ Similarly, the comment from the group of U.S. Senators
stated that wages would be inflated if they were compared to
``actual prevailing wage[s] BLS calculated,'' and ABC argued that
the proposal regarding metropolitan and rural data cannot improve
accuracy so long as the Department continues to use its current
voluntary survey process.
---------------------------------------------------------------------------
The comments identifying potential negative effects on rural
contractors also do not provide persuasive reasons to reject the
proposal. The Department does not agree with the comment from the
Senators that eliminating the strict bar would result in small local
contractors being ``excluded from bidding on Federal projects.'' In
support of this argument, the Senators cited the 1979 GAO Report in
which the GAO speculated that for certain contracts in rural counties,
the lack of local contractors could be attributed to these contractors
declining to bid on contracts with higher ``metropolitan'' prevailing
wage rates because they did not want to ``disrupt their wage
structures.'' 1979 GAO Report, at 73-74. In addition, the Department's
1981-1982 NPRM noted a comment from the National Utility Contractors
Association that ``in the past'' the ``importation'' of metropolitan
rates into rural areas had ``disrupted labor relations in rural areas,
because employees who received high wages on a Davis-Bacon project were
unwilling to return to their usual pay scales after the project was
completed.'' 47 FR 23647.
The Department is not persuaded by the concerns about ``labor
disruption'' for several reasons. As an initial matter, the comment
assumes a significant discrepancy between the wage that construction
workers are paid in a rural county and the prevailing wage that the
Department would set through the geographic aggregation process. Among
the counties that the Department has identified as potentially affected
by this rule change are metropolitan-adjacent counties--within
commuting distance of the metropolitan core--in which the Department
does not have sufficient current wage data from the county to make a
determination. In many or most such circumstances, it will be
reasonable to assume that the wage rate from a neighboring county is
not significantly different and therefore that there is no reason to
assume labor disruption from setting the same prevailing wage rate.
Moreover, where non-metropolitan counties are next to metropolitan
areas, the workers in these counties generally already live within
commuting range of earning the metropolitan rates that could
potentially be designated as prevailing. Thus, it does not follow that
the potential for additional projects--all within the same commuting
range--to be governed by these rates would result in a disruption of
labor relations.\153\
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\153\ The Department notes that IEC, while generally disagreeing
with the Department's proposal, agreed that the labor disruption
argument is not at issue where the cross-consideration of rates is
occurring within the same commuting area.
---------------------------------------------------------------------------
It also does not follow that the requirement to pay certain higher
base rates would, as the IEC asserts, ``undermine existing methods of
incentivizing rural construction, such as subsistence pay to offset
food and lodging.'' Prevailing wage rates do not operate as a maximum
rate that can be paid; if contractors provide additional pay to cover
food and lodging so as to ensure that metropolitan-based workers are
willing to commute to a rural job, then they are permitted to provide
such additional incentives above and beyond the prevailing wage rate.
Finally, even if using wage rates from a metropolitan county to set
the prevailing wage rate in an adjacent rural area were to result in a
higher prevailing wage rate than under the current policy, such a
result would not ``exclude'' any bidders. As noted above in response to
the Senators' comments on the 30-percent rule proposal, a higher
required prevailing wage rate does not exclude bidders because all
bidders are equally required to pay the same wage rate. See section
III.B.1.ii.A. The potential that some contractors might choose not to
bid on covered contracts is also not a persuasive reason to abandon the
proposal. In any type of county, not just rural counties, it may be
possible that contractors that derive competitive advantage only by
paying the lowest wages might be disincentivized from bidding on
contracts covered by prevailing wage requirements. Studies have shown,
however, that this potential may be generally offset by the incentive
that prevailing wage requirements provide for higher-skilled
contractors to bid where they might not otherwise. See section
V.F.1.\154\ This conclusion is also supported by commenters on the
current proposal. Many comments from contractor associations supporting
the current proposal stated that appropriate enforcement of prevailing
wage requirements provides more contractors with the ability to pay
their workers fairly and bid on contracts on the basis of skill and
quality instead of on which contractor will pay the lowest wage rates.
Accordingly, the Department is not convinced that the elimination of
the strict bar will have net negative effects on local rural
contractors or rural construction workers generally.
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\154\ In 1979, when the GAO sought the Department's comment on
its preliminary findings, the Department criticized GAO's conclusion
that the Department was implementing the Act in a way that harmed
local contractors in rural counties. See 1979 GAO Report, at 224-225
(appending letter from the Department). The Department stated that
the GAO has based its conclusions on a statistically insignificant
sample of projects and on mistaken understandings about the specific
projects.
---------------------------------------------------------------------------
Although commenters did not expressly assert as much, the
Department also considered whether the concerns about ``disruption'' of
rural wage structures (and other comments regarding the scope-of-
consideration regulation at Sec. 1.7) amounted to assertions of
reliance interests in the current regulations that would weigh against
adopting the changes in the final rule. Contractors have not asserted,
and the Department does not believe, that the rural wage rates or
practices that the commenters have mentioned have been set in reliance
on the Davis-Bacon wage determination methodology. However, to the
extent they have been, and required prevailing wage rates may rise as a
result of the rulemaking, the barriers for such contractors to increase
wage rates when working on DBRA-covered projects are not unreasonably
high, given that any new wage rates will apply only to new contracts--
with limited exceptions reflected in Sec. 1.6(c)(2)(iii) and discussed
in section III.C. (``Applicability Date'') below--and contractors can
adjust their bids or future negotiations on contract pricing as
necessary to accommodate them. In instances where required wage rates
may fall instead of rise, and specifically where they may fall from a
CBA rate, the potential for disruption may be greater. In those
circumstances, it is possible that contractors who have agreed to be
bound by a CBA may have done so in part relying on the existence of
CBA-based prevailing rates for work on Federal contracts.
Notwithstanding this possibility, the Department has determined that it
is preferable to eliminate the absolute bar on cross-consideration to
allow the determination of wage rates to more often occur based on
smaller geographic groupings.
The Department has also considered that the concern about labor
disruption was discussed by the D.C. Circuit when it upheld the strict
bar in 1983. See Donovan, 712 F.2d at 618-19. The Donovan decision
noted the Department's apparent reliance on the labor-disruption
argument in the 1981-1982 rulemaking, and the court then
[[Page 57587]]
broadly stated that the Department's reasoning ``makes sense.'' Id. at
619. The underlying holding in Donovan, however, was that situations
``where there is insufficient data from a given civil subdivision to
determine a prevailing wage,'' represent ``interstitial areas'' of the
statute, regarding which Congress had granted the Department broad
authority to ``implement[ ] the Act in the way necessary to achieve its
purposes.'' Id. at 618.
Under these circumstances, a prior holding that a rule was
reasonable does not prohibit the Department from coming to a different
conclusion at a later date. See Home Care Ass'n of Am. v. Weil, 799
F.3d 1084, 1092 (D.C. Cir. 2015) (holding that the Supreme Court's
decision that prior rule was ``reasonable'' did not preclude different
approach in new rule, where the matter was interstitial in nature and
within the agency's discretion). Likewise, two opposing arguments can
both ``make sense.'' Where they do, the Department has to determine
what it believes to be the best course, taking into consideration its
expertise and any new factual circumstances that have arisen after the
earlier decision. As various commenters have correctly observed, the
strict bar in the 1981-1982 rulemaking has led to an increasing
reliance on data from super group and statewide levels to calculate
prevailing wage rates. See 2011 GAO Report, at 21. Considering this
trend, the Department has concluded that the better option is to allow
a more case-by-case analysis of local construction labor markets--and
thus increase the number of wage determinations that can be made with
smaller geographical aggregations of data.
The Department disagrees with the Senators' comment that the
proposal is not permissible or reasonable because the D.C. Circuit in
Donovan ``dismissed'' the arguments that the Department is now making
regarding the need to have flexibility in geographic aggregation
because of heterogeneity in commuting patterns. In the 1981-1982
rulemaking, unions had argued that ``importing'' rates from nearby
metropolitan areas is justified because workers from metropolitan areas
often perform the work in rural areas due to shortages of skilled labor
in rural areas. 47 FR 23647. The Department had responded, stating that
if those commenters were correct that ``large numbers'' of workers from
metropolitan areas typically work at higher metropolitan wage rates on
projects in rural areas, then ``those higher wages would be found and
receive proper weight in surveys of wages paid in such areas.'' Id. The
D.C. Circuit's did not ``dismiss'' the reasonableness of the unions'
argument or suggest that Department would have been prohibited from
agreeing with the unions. To the contrary, the court acknowledged that
``it might be true'' in some cases that looking to far away rural
counties ``would not reveal the higher wages that should be paid in the
project county.'' 712 F.2d at 619. The court held, however that the
unions had not provided a sufficient factual basis to ``overturn the
Secretary's informed exercise of authority.'' Id.
In the years since the Donovan decision, the practical experience
of making wage determinations based on the strict bar has highlighted a
flaw in the Department's prior reasoning. The Department's hypothetical
during the 1981-1982 rulemaking, and the court's analysis of it, did
not grapple with factual circumstances in which the geographical
aggregation rule in fact applies. In practice, the question of cross-
consideration of metropolitan and rural county data only arises when a
wage survey finds that there is not sufficient current wage data in a
county to determine a prevailing wage rate for a particular
classification. Only then does the Department consider looking to
``surrounding counties'' for comparable data. The fact that there may
not have been sufficient similar projects in a county during the most
recent survey period, as measured by the wage survey, however, does not
reflect on what the wage rates are or would be on such projects when
they do occur. In such a circumstance, the relevant question is not
whether ``large numbers'' of workers from the metropolitan county have
been working in the adjacent county during the survey period at
metropolitan rates sufficient to set the prevailing wage. Rather, the
question is whether the metropolitan-adjacent rural county is
sufficiently part of a local construction labor market that it is
reasonable to set the prevailing wage rate closer to the rates in the
nearby metropolitan counties that are also part of that labor market
than to a lower (or higher) rate of a farther-away rural county. As
noted, wage rates in a metropolitan-adjacent rural county may be
similar to a nearby metropolitan county not only because metropolitan-
county workers may routinely travel to the adjacent county to work, but
also because workers who live in the rural county can command a similar
wage rate to the adjacent metropolitan area because the rural county is
sufficiently economically intertwined with it.
At the time this question reached the D.C. Circuit in Donovan, it
was sufficiently abstract that the court reasonably deferred to the
Department's expertise. However, the imposition of the strict bar has
given rise to many examples where the Department has overlooked indicia
of economic integration solely because a county is not a part of an
OMB-designated MSA. As discussed above, one example is where a
micropolitan county is part of a combined statistical area with a
neighboring MSA--thus sharing a certain level of measurable economic
integration--or where there is evidence that a particular contractor
community operates regularly in a geographic area that transcends an
MSA's boundaries. Under such circumstances, there is sufficient reason
to use data from the neighboring MSA to set wage rates where there
otherwise is not sufficient current wage data in the county. The D.C.
Circuit's decision in Donovan does not suggest otherwise.
The Department has also considered IEC's argument that the proposal
would incentivize workers to work on rural projects instead of taking
jobs in metropolitan areas, leading to an increase in the costs of
metropolitan projects to attract workers. The Department agrees with
the principle underlying IEC's comment--that if two projects are in
counties that are within commuting distance, then they will likely be
competing for the labor of many of the same construction workers. This
principle explains why the Department believes it can be appropriate to
consider a metropolitan county's wage rates when there is not
sufficient data in a neighboring rural county instead of relying on a
farther away rural county or counties that may have much more limited
connections to any metropolitan labor market.
The Department, however, does not believe that adopting a
metropolitan county's prevailing wage rates for an adjacent rural
county will have the broad effect IEC anticipates so as to warrant
maintaining the strict bar. The first problem with IEC's argument is
that it begins with the assumption that the ``true'' prevailing rate in
the rural county is significantly different than the rate in the
neighboring metropolitan county, even though the two counties may be
within commuting distance of one another and therefore within the same
local construction labor market. As a related matter, IEC also
necessarily must be assuming that most construction workers in the two-
county market live in the rural county and would therefore be willing
to accept a lower rate in order to avoid commuting. While this may be
true in some labor markets, it will not be true in others. If
[[Page 57588]]
most skilled construction workers reside in populous metropolitan
counties, it may already be necessary for projects in nearby rural
counties to pay wages commensurate with metropolitan rates (or even a
premium above metropolitan rates) to attract sufficient workers from
the metropolitan core, as is exemplified by the structure of many CBA
``zone rates,'' discussed in section III.B.1.ii.(A).(4). Finally, IEC's
hypothetical assumes a finite number of workers, which ignores the
potential that additional significant construction projects (and any
related increase in wage rates) may attract new workers to a labor
market. In sum, there is significant variation in construction labor
markets, and this variation suggests that the Department should have
the flexibility to create county groupings through which it can attempt
to account for these differences.
The D.C. Circuit's decision in Donovan is helpful for addressing
the question that the Senators raised regarding whether the proposal to
relax the strict bar is consistent with the legislative history of the
Act and with the Department's historical practice prior to the 1981-
1982 rulemaking. In Donovan, the district court had struck down the
strict bar, as the D.C. Circuit explained, ``almost exclusively on what
it saw as a longstanding and consistent administrative practice
contrary to the proposed regulations.'' 712 F.2d at 619 (citing the two
district court decisions below). The D.C. Circuit noted that the
Department's administrative practice had not been ``quite as
consistent'' as the district court had stated. Id. (citing the 1977
Manual of Operations and the Carter Administration rule). Nonetheless,
the D.C. Circuit opinion did not turn on this question. Rather, it
stated that ``[m]ore fundamentally'' it was reversing the district
court and upholding the strict bar because ``prior administrative
practice carries much less weight when reviewing an action taken in the
area of discretion,'' such as the interstitial question of how to make
wage determinations in counties that do not have sufficient current
wage data. Id.
In any case, the current proposal to relax the strict bar is
consistent with the Department's prior practice before the 1981-1982
rulemaking. In that rulemaking, the Department acknowledged that the
strict bar was a departure from the prior status quo, stating that the
Department had determined ``that its past practice of allowing the use
of wage data from metropolitan areas in situations where sufficient
data does not exist within the area of a rural project is
inappropriate.'' 47 FR 23647. As both the D.C. Circuit and the Senators
noted, although there was no strict bar on cross-consideration from
1935 until the 1981-1982 rulemaking, the Department's procedures were
not necessarily uniform over that time period. In the late 1970s, while
no strict bar existed in the regulations, the Department's Manual of
Operations document provided that ``generally'' it would not mix such
data. See 712 F.2d at 619 (citing the 1977 Manual of Operations). This
description, however, would be a fair description of the expected
effects of the Department's current proposal.
There are two reasons why, as a practical matter, the Department
will ``generally'' not combine metropolitan and rural data under the
current proposal. First, aside from the exceptions of multi-county
projects and highway projects described above, no cross-consideration
will occur for any county (rural or metropolitan) for which a survey
results in sufficient current wage data to make a wage determination.
Second, even when there is no sufficient current wage data in a rural
county, the Department will generally not need to combine the available
rural wage data with metropolitan data as part of the surrounding-
counties grouping. For rural counties surrounded by other rural
counties, the Department will usually look only to these neighboring
rural counties as part of the surrounding-counties grouping. The only
cross-consideration at the surrounding-counties grouping will generally
be where a ``rural county'' shares a border with a metropolitan county
and reasonably can be considered to be part of the local construction
labor market.
While the Department's proposal may not be exactly the same as
prior administrative practice, Donovan instructs that the Department is
not bound to apply geographic aggregation only in the same way as it
has before as long as the Department has a reasonable basis for a new
proposal that is consistent with the purposes of the Act. The
Department believes that it is more consistent with the purpose of the
Act to maintain sufficient flexibility in the wage determination
process so as to adequately consider the heterogeneity of ``rural
counties'' and avoid unnecessarily depressing (or increasing)
prevailing wage rates in metropolitan-adjacent counties by referring to
faraway rural counties before considering whether neighboring
metropolitan county rates might reasonably be considered to prevail
under the circumstances. It is also more consistent with the Act to
seek to make prevailing wage determinations at smaller levels of
geographic aggregation in order to better track local area practices.
(3) Defining ``Surrounding Counties''
A number of commenters responded to the Department's request for
comment regarding whether there was a need for additional definition
within the regulatory text of the first level of geographic
aggregation, which is currently referred to in the regulations as
``surrounding counties.'' 29 CFR 1.7(b). Of the three options that the
Department presented in the NPRM, commenters favored either Option 1
(to leave the description the same) or Option 3 (to include in the
regulatory text a definition of ``surrounding counties'' as a
``contiguous local construction labor market'').\155\
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\155\ No commenters favored the second option, which would have
relied only on counties sharing a border with the county in need. As
noted, that option would have made predetermined groupings virtually
impossible--even groupings based solely on OMB's statistical area
designations as under current procedures. The Department is not
adopting the second option for that reason. In the NPRM, the
Department also stated that it was considering one more option of
more explicitly tailoring the ban on combining metropolitan and
rural data so that it applies only at the ``surrounding counties''
level, but not at the statewide level or an intermediate level. The
Department received no comments regarding this option. While
limiting the ban to ``surrounding counties'' but allowing cross-
consideration at higher levels would be more beneficial than the
current regulations, it would not allow the Department the
flexibility of identifying metropolitan-adjacent rural counties that
can reasonably be added to metropolitan surrounding-counties
groupings. Accordingly, the final rule does not adopt that option.
---------------------------------------------------------------------------
The III-FFC supported defining ``surrounding counties'' as
contiguous construction labor markets because it would give the
Department the flexibility to use OMB designations, but also allow the
use of additional evidence on a case-by-case basis to determine if OMB
designations are too narrow for a given construction market. III-FFC
also supported this option because, unlike the second option the
Department had proposed, it would allow the Department to make
predetermined county groupings or make determinations on a case-by-case
basis. The NCDCL noted that the California State prevailing wage rules
contain a similar definition, instructing the consideration of rates
``in the nearest labor market area.'' Cal. Lab. Code section
1773.9(b)(1). NCDCL commented that a county grouping methodology based
on the nearest labor market area is the best way to effectuate the
purpose of the DBRA by ``ensur[ing] that prevailing wage rates actually
reflect the wages paid to workers in the labor market they work in.''
The FTBA
[[Page 57589]]
supported this definition as the best for reflecting the most relevant
wage and benefits data ``in areas in which the labor pool is not
limited to a single county.''
Commenters opposed to the Department's proposal stated that none of
the Department's proposed options adequately explained what other
approaches it would be using (instead of relying on OMB
``metropolitan'' designations) to expand geographic aggregation when
necessary. AGC stated generally that ``metro and rural data should not
be mixed''; it clarified, however, that it may be appropriate to
combine county data when counties ``are economically related and part
of the same sphere of influence.'' AGC also asserted that the
Department should ``retain flexibility in this matter instead of
prescriptiveness'' because ``[e]very state, county, city and especially
construction market is unique.'' With regard to the Department's
specific proposals, AGC requested that the Department set specific
definitions and limitations to how it would identify a ``contiguous
local construction labor market'' and recommended the Department
instead use ``defined market approaches.''
The Department has elected to retain the reference to ``surrounding
counties'' without further definition in the regulatory text, given
that the term already has accrued meaning through litigation in the
ARB. See Chesapeake Housing, ARB No. 12-010, 2013 WL 5872049. As noted,
a surrounding-counties grouping generally should be a contiguous group
of counties that approximate a local labor market, either through the
adoption of OMB designations or on the basis of some other appropriate
evidence of economic relationship between the included counties. The
Department agrees with AGC that construction markets can be unique, and
it makes sense to retain flexibility and avoid prescriptiveness.\156\
Accordingly, while the Department has identified certain potentially
appropriate types of surrounding-counties groupings (for example,
following the lines of OMB ``combined statistical areas''), there may
be other methodologies to identify whether counties are reasonably
within the same local construction labor market and thus can be
appropriately grouped together as ``surrounding counties.'' For
example, as the Department noted in the NPRM, the Department could rely
on county groupings in use by State governments for state prevailing
wage laws, as long as they are contiguous county groupings that
reasonably can be characterized as ``surrounding counties.''
Notwithstanding this flexibility, it will generally not be appropriate
to include noncontiguous counties within a surrounding-counties
grouping; all of the counties within a first-level grouping should
border at least one other county in the grouping.
---------------------------------------------------------------------------
\156\ AGC did not explain what it meant by its suggestion to use
``defined market'' approaches. The Department interprets AGC comment
as opposing the second option posed in the NPRM (of using only
neighboring counties to the county with insufficient data), because
such a policy would not allow the use of predetermined county groups
that are the same for all of the counties in the group. The
Department agrees that the second option would have been
administratively infeasible and has not adopted it for that reason.
---------------------------------------------------------------------------
Having considered the comments received regarding the proposal to
eliminate the strict bar and to retain the surrounding-counties
grouping, the Department has decided to adopt the language of Sec.
1.7(a) and (b) as proposed in the NPRM.
(B) Other Proposed Changes to Sec. 1.7
The Department proposed several other changes to Sec. 1.7. These
included non-substantive changes to the wording of each paragraph in
Sec. 1.7 to clarify that the threshold for expansion in each one is
insufficient ``current wage data.'' The Department also sought comment
on whether the existing definition of ``current wage data'' should be
retained or amended to narrow or expand its scope. The existing
regulation now defines ``current wage data'' in Sec. 1.7(a) as ``data
on wages paid on current projects or, where necessary, projects under
construction no more than 1 year prior to the beginning of the survey
or the request for a wage determination, as appropriate.'' The
Department did not receive any comments regarding the definition or
these non-substantive changes, and the final rule has accordingly
adopted the non-substantive changes as proposed and does not modify the
definition of ``current wage data.''
The Department also proposed amendments to Sec. 1.7(c) to better
describe the process for expanding from the surrounding-counties level
to consider data from an intermediary level (such as the current super-
group level) before relying on statewide data. In the proposed
regulatory text, the Department described this second level of county
groupings as ``comparable counties or groups of counties in the
State.'' The Department stated that this proposed ``comparable
counties'' language in Sec. 1.7(c) would allow the Department to
continue to use the procedure described in Chesapeake Housing of
combining various surrounding-counties groups (such as MSAs) or various
non-contiguous groups of rural counties to create super groups. The
proposal also included reference in Sec. 1.7(c) to the use of
statewide data, but only ``if necessary.''
The Department received only a few substantive comments regarding
the proposal for clarifying the use of intermediate and statewide
county groupings in Sec. 1.7(c). The labor organization REBOUND
requested additional information about how intermediate groupings would
be selected and expressed concern that the analysis for determining
comparable counties could involve statistical analyses that could be
the subject of political manipulation. NAHB expressed concern about
eliminating the bar on cross-consideration of rural and urban data at
the super group and statewide level. They stated that the proposal did
not provide sufficient clarity about whether at each level it would
adopt a single rate that combines both metropolitan and rural data. The
comment from the group of U.S. Senators disagreed with the Department's
reasoning that the purposes of the Act are better served by using
combined statewide data to determine the prevailing wage, when the
alternative could be to fail to publish a wage rate at all. Conversely,
NCSHA supported the proposal, stating that it is important in
particular in rural areas to ensure that as much data as possible can
be considered so that there are more classifications published on wage
determinations.
The Department intended the proposed changes to Sec. 1.7(c) to be
clarifying as opposed to substantive. The current regulation does not
specifically mention the intermediate super-group county grouping.
Rather, as the ARB stated in the Chesapeake Housing case, the existing
regulations ``implicitly'' permit their use. ARB No. 12-010, 2013 WL
5872049, at *1. In the Chesapeake Housing case, the ARB explained that
WHD's practice was to create ``super groups'' by using the same OMB
designations that are currently used at the surrounding-counties level
to create super groups of either rural or metropolitan counties. Id. at
*3. If there were still not sufficient data, WHD would expand further
to a statewide level, still divided along metropolitan and rural lines,
combining data for all rural counties or all metropolitan counties in
the state. Id. While the ARB found that the existing regulations
permitted the use of super groups, the Department believes it is
preferable to have regulatory language that expressly notifies parties
of the practice and provides basic guidance regarding how
[[Page 57590]]
these intermediate groupings will be identified.
The Department, however, does not agree with REBOUND that further
specificity is needed regarding the composition of intermediate
groupings. The Department intends the word ``comparable'' in proposed
Sec. 1.7(c) to apply both to ``counties'' and ``groups of counties.''
Thus, in order for counties or groups of counties to be grouped
together in an intermediate grouping for the purposes of Sec. 1.7(c),
WHD will need to identify county characteristics that are similar
between the grouped-together counties and justify grouping them
together as a fallback if there is not sufficient current wage data at
the surrounding-counties group level. As with the surrounding-counties
grouping, it would be consistent with this language to continue to
identify intermediate groupings using OMB designations. Further
specificity in the regulatory text is unwarranted because of the wide
variety in size and composition of the states in which wage
determinations are conducted. For some smaller states, as in the
Virginia survey at issue in Chesapeake Housing, the intermediate
groupings may effectively be statewide groupings of counties that share
an OMB designation.\157\ For others, there may be a sufficient number
of counties and variation among them to justify the creation of
intermediate groupings of counties that do not encompass all of a
certain OMB-designated (or otherwise specified) category of counties in
a state.
---------------------------------------------------------------------------
\157\ In Chesapeake Housing, WHD had used a ``super group''
intermediate grouping that consisted of all metropolitan counties
and independent cities in eastern Virginia including those from the
DC MSA, the Richmond MSA, and the Norfolk-Virginia Beach MSA. ARB
No. 12-010, 2013 WL 5872049, at *3. The ARB noted that this grouping
was in fact the same as it would have been had the Department used
``statewide'' data segregated along metropolitan and rural county
lines, because the ``super group'' included all of the MSAs in the
state. Id. at *5-6.
---------------------------------------------------------------------------
The Department anticipates that the intermediate county groupings
discussed in Sec. 1.7(c) will generally be composed of combinations of
comparable surrounding-counties groupings. Thus, if there are several
surrounding-counties groupings in a state that are each based on an
MSA-anchored combined statistical area, then it may be appropriate to
create intermediate groupings by grouping together all of the counties
that are included within those combined statistical areas. Likewise,
intermediate groupings may be formed out of groups of counties that are
included in multiple surrounding-counties groups that are made up
solely of ``rural'' counties that are not included in any combined MSA.
Depending on the size of the State, number of counties, and complexity
of local construction labor markets, it may also be appropriate to
create multiple levels of intermediate groupings that initially combine
only the most similar surrounding-counties groupings, before making
larger intermediate-grouping combinations.
With regard to the final grouping--statewide data--NAHB requested
clarification regarding whether ``metropolitan'' and ``rural'' counties
will be grouped together statewide before (or instead of) considering a
single rate that combines all counties. The proposal did not require a
particular procedure. Given the flexibility discussed for the
intermediate county groupings, the Department does not believe that
there is need to specify that statewide data must be considered along
binary ``rural'' and ``metropolitan'' lines before it is ultimately
combined as a last fallback before older data can be used. This is
because the highest level of intermediate grouping the Department can
design will effectively be statewide grouping of comparable counties.
The Department would only use fully combined statewide data (combining
all counties in a state, without regard for any designation) if current
wage data at the intermediate grouping level is not sufficient to make
a wage determination.\158\ The Department agrees with NCSHA that the
proposal (and, specifically, the possibility of using fully combined
statewide data) provides a valuable benefit of making it possible for
the Department to publish more classifications on rural wage
determinations in particular.
---------------------------------------------------------------------------
\158\ In addition, the language of Sec. 1.7(c) in the final
rule permits, but does not require, the use of statewide data.
---------------------------------------------------------------------------
Having considered the comments regarding the intermediate and
statewide county groupings procedure in Sec. 1.7(c), the Department
adopts the language of Sec. 1.7(c) as proposed.
viii. Section 1.8 Reconsideration by the Administrator
In the NPRM, the Department proposed to revise Sec. Sec. 1.8 and
5.13 to explicitly provide procedures for reconsideration by the
Administrator of decisions, rulings, or interpretations made by an
authorized representative of the Administrator. Parts 1 and 5 both
define the term ``Administrator'' to mean the WHD Administrator or an
authorized representative of the Administrator. See 29 CFR 1.2(c),
5.2(b). Accordingly, when parties seek rulings, interpretations, or
decisions from the Administrator regarding the Davis-Bacon labor
standards, it is often the practice of the Department to have such
decisions made in the first instance by an authorized representative.
After an authorized representative issues a decision, the party may
request reconsideration by the Administrator. The decision typically
provides a time frame in which a party may request reconsideration by
the Administrator, often within 30 days.
To provide greater clarity and uniformity, the Department proposed
to codify this practice and clarify how and when a reconsideration may
be sought. First, the Department proposed to amend Sec. 1.8, which
concerns reconsideration of wage determinations and related decisions
under part 1. The Department proposed to provide that if a decision for
which reconsideration is sought was made by an authorized
representative of the Administrator, the interested party seeking
reconsideration may send such a request to the WHD Administrator. The
Department proposed that requests for reconsideration must be submitted
within 30 days from the date the decision is issued, and that this time
period may be extended for good cause at the Administrator's discretion
upon a request by the interested party. Second, the Department proposed
to amend Sec. 5.13, which concerns rulings and interpretations under
parts 1, 3, and 5, to similarly provide for the Administrator's
reconsideration of rulings and interpretations issued by an authorized
representative. The Department proposed to apply the same procedures
for such reconsideration requests in Sec. 5.13 as apply to
reconsideration requests under Sec. 1.8. The Department also proposed
to divide Sec. Sec. 1.8 and 5.13 into paragraphs for clarity and
readability, and to add email addresses for parties to submit requests
for reconsideration and requests for rulings or interpretations.
The Department received two comments regarding this proposal, one
from REBOUND, a non-profit organization; and another from a former
director of REBOUND. These comments did not oppose the proposed
changes, but suggested that the regulations also explicitly provide for
a level of review prior to review by the Administrator, and that such
review be conducted by an individual who was not connected in any way
with the original decision. The comments indicated that intermediate
review often occurs under current practice, but rarely results in
reversal of the original decision because the individuals who perform
such review
[[Page 57591]]
are often either the same individuals who rendered the original
decision or their managers. The comments agreed that if done properly,
intermediate review can resolve cases more promptly without the need to
appeal to the Administrator, but suggested that without a requirement
that such review be independent, it will not accomplish this goal
because reviewers will be reluctant to overturn decisions that they
made in the first instance.
After considering the comments above, the Department retains the
language as proposed. The final rule permits an intermediate level of
review without requiring it, and, as the commenters noted, in many
instances an intermediate level of review is provided. The language
similarly allows for reconsideration requests to be considered by
agency personnel who were or were not involved in the original
decision, as the circumstances warrant. The Department believes that it
is important for the regulations to preserve such administrative
flexibility when handling reconsideration requests so that the
Department can properly allocate its resources. Agency staff are able
to consider and help respond to reconsideration requests with
objectivity regardless of whether they played any role in the
underlying decision, and resource constraints make it infeasible to
adopt a blanket rule that intermediate review cannot be handled by
anyone who participated in the original decision. Moreover, as the
commenters note, intermediate decisions are appealable to the
Administrator. The Department therefore declines to codify specific
procedures or requirements for intermediate-level reconsideration and
adopts the change as proposed.
ix. Section 1.10 Severability
The Department proposed to add a new Sec. 1.10, titled
``Severability.'' The proposed severability provision explained that
each provision is capable of operating independently from one another,
and that if any provision of part 1 is held to be invalid or
unenforceable by its terms, or as applied to any person or
circumstance, or stayed pending further agency action, the Department
intended that the remaining provisions remain in effect.
The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed. An expanded discussion
of severability is below in section III.B.5.
x. References to Website for Accessing Wage Determinations
The Department proposed to revise Sec. Sec. 1.2, 1.5, and 1.6 to
reflect, in more general terms, that wage determinations are maintained
online, without a reference to a specific website.
The current regulations reference Wage Determinations OnLine
(WDOL), previously available at https://www.wdol.gov, which was
established following the enactment of the E-Government Act of 2002,
Public Law 107-347, 116 Stat. 2899 (2002). WDOL.gov served as the
source for Federal contracting agencies to use when obtaining wage
determinations. See 70 FR 50887 (Aug. 26, 2005). WDOL.gov was
decommissioned on June 14, 2019, and SAM, specifically https://sam.gov/content/wage-determinations, became the authoritative and single
location for obtaining DBA general wage determinations.\159\ The
transition of wage determinations onto SAM was part of the Integrated
Award Environment (IAE), a government-wide initiative administered by
GSA to manage and integrate multiple online systems used for awarding
and administering Federal financial assistance and contracts.\160\ To
avoid outdated website domain references in the regulations should the
domain name change in the future, the Department proposed to use the
more general term ``Department of Labor-approved website,'' which would
refer to any official government website the Department approves for
posting wage determinations.
---------------------------------------------------------------------------
\159\ ``WDOL.gov Decommissioning Approved by IAE Governance:
System Set to Transition to beta.SAM.gov on June 14, 2019,'' GSA
Interact (May 21, 2019), https://interact.gsa.gov/blog/wdolgov-decommissioning-approved-iae-governance-system-set-transition-betasamgov-june-14-2019.
\160\ About This Site, System for Award Management, https://sam.gov/content/about/this-site.
---------------------------------------------------------------------------
The Department received a question from Montana Lines Inc. asking
how the location of the Department-approved website would be
communicated to contractors. The Department currently publicizes the
online location of wage determinations, SAM, in various resource
materials (fact sheets, frequently asked questions, and WHD's PWRB) and
in multiple prominent locations on the Department's website. Promptly
following publication of this final rule, WHD will update the PWRB and
other resources to refer to the SAM website. Should there be a change
in domain, the Department would announce such change and make changes
to appropriate materials and websites. The Department believes that
such an approach is preferable to codifying the website location in
regulatory text that can become outdated if the location changes.
HarringtonMitova LLC requested that the Department make all DBRA
relevant information, presumably including wage determinations,
accessible from a single website. The Department notes that while this
specific proposal is beyond the scope of this rulemaking, WHD's website
contains extensive, well-organized materials regarding the DBRA,
including information regarding Davis-Bacon wage surveys and compliance
principles, and that general wage determinations are available through
a single, government-wide website (specifically SAM, the official
website of the U.S. Government for the Federal award process) for the
ease and convenience of the contracting community. NFIB commented that
the website for viewing wage determinations should be ``at no cost and
without any condition of access such as registration, a unique
identifier, or submission of any information.'' NFIB also suggested
that such language be added to Sec. 1.5(a). SAM, the current website,
is an improved and streamlined government-wide website administered by
GSA that integrates multiple online systems used for awarding and
administering Federal financial assistance and contracts. Access to
search or obtain wage determinations on this website is free and does
not require registration or the submission of any information other
than the details of the wage determination being requested (project
location and/or construction type). The Department intends to maintain
these features in the future and does not believe it is necessary to
codify them in the regulations.
The UA commented that the proposal does not substantively alter the
practice for publication of wage determinations and suggested that the
Department require the applicable wage determination(s) for a specific
project, as well as any conformances that were granted for the project,
to be published online. Although the Department appreciates this
suggestion, it is beyond the scope of the current rulemaking, which did
not address whether to require the online publication of the specific
wage determinations and conformances applicable to each particular
DBRA-covered project. The Department also notes that interested parties
such as contracting agencies and contractors should be able to identify
the wage determination that applies to a given project, as such wage
determinations are included in the contract documents, and that 29 CFR
[[Page 57592]]
5.5(a)(1)(i) already requires contractors and subcontractors to post
wage determinations, including conformed classifications and wage
rates, in a prominent and accessible place at the site of the work
where it can be easily seen by the workers.
The final rule therefore adopts this change as proposed.
xi. Appendices A and B to Part 1
The Department proposed to remove Appendices A and B to 29 CFR part
1 and make conforming technical edits to sections that reference those
provisions. Appendix A lists statutes related to the Davis-Bacon Act
that require the payment of wages at rates predetermined by the
Secretary of Labor, and Appendix B lists local offices of the WHD. As
the Department explained in the NPRM, these appendices are no longer
current and updated information contained in both appendices can be
found on WHD's website at https://www.dol.gov/agencies/whd/.
Specifically, a listing of statutes requiring the payment of wages at
rates predetermined by the Secretary of Labor under the Davis-Bacon Act
can be found at https://www.dol.gov/agencies/whd/government-contracts,
and a listing of WHD local offices can be found at https://www.dol.gov/agencies/whd/contact/local-offices.
The Department received one comment in response to this proposal.
The UA supported the Department's approach, stating that outdated
information presents problems, such as suggesting a narrower scope of
Davis-Bacon coverage (Appendix A), or directing potential complainants
to incorrect resources (Appendix B). The Department agrees and adopts
this change as proposed.
xii. Frequently Conformed Rates
The Department proposed to revise Sec. Sec. 1.3 and 5.5 to provide
that, where WHD has received insufficient data through its wage survey
process to publish a prevailing wage for a classification for which
conformance requests are regularly submitted, WHD nonetheless may list
the classification and wage and fringe benefit rates for the
classification on the wage determination, provided that the three basic
criteria for conformance of a classification and wage and fringe
benefit rate have been satisfied: (1) the work performed by the
classification is not performed by a classification in the wage
determination; (2) the classification is used in the area by the
construction industry; and (3) the wage rate for the classification
bears a reasonable relationship to the wage rates contained in the wage
determination. The Department specifically proposed that the wage and
fringe benefit rates for these classifications be determined in
accordance with the ``reasonable relationship'' criterion that is
currently used in conforming missing classifications pursuant to
current 29 CFR 5.5(a)(1)(ii)(A). The Department welcomed comments
regarding all aspects of this proposal.
WHD determines DBA prevailing wage rates based on wage survey data
that contractors and other interested parties voluntarily provide. See
29 CFR 1.1-1.7. When WHD receives robust participation in its wage
surveys, it is able to publish wage determinations that list prevailing
wage rates for numerous construction classifications. However, in some
instances survey participation may be limited, particularly in surveys
for residential construction or in rural areas, thereby preventing WHD
from receiving sufficient wage data to publish prevailing wage rates
for various classifications generally necessary for a particular type
of construction.
When a wage determination lacks a wage rate for a classification of
work that is necessary for performance of DBRA-covered construction,
the missing classification and an appropriate wage rate must be added
to the wage determination on a contract-specific basis through the
conformance process. Conformance is the process by which a
classification and wage and fringe benefit rate are added to an
existing wage determination applicable to a specific DBRA-covered
contract. See 29 CFR 5.5(a)(1)(ii)(A). When, for example, a wage
determination lists only certain skilled classifications such as
carpenter, plumber, and electrician (because they are the skilled
classifications for which WHD received sufficient wage data through its
survey process), the conformance process is used at the request of a
contracting agency to provide a contractor that has been awarded a
contract with minimum wage rates for other necessary classifications
(such as, in this example, painters and bricklayers).
``By design, the Davis-Bacon conformance process is an expedited
proceeding created to `fill in the gaps' '' in an existing wage
determination, with the ``narrow goal'' of establishing an appropriate
wage rate for a classification needed for performance of the contract.
Am. Bldg. Automation, Inc., ARB No. 00-067, 2001 WL 328123, at *3 (Mar.
30, 2001). As a general matter, WHD is given ``broad discretion'' in
setting a conformed wage rate, and the Administrator's decisions ``will
be reversed only if inconsistent with the regulations, or if they are
unreasonable in some sense[.]'' Millwright Loc. 1755, ARB No. 98-015,
2000 WL 670307, at *6 (May 11, 2000) (internal quotations and citations
omitted). See, e.g., Constr. Terrebonne Par. Juvenile Justice Complex,
ARB No. 17-0056, 2020 WL 5902440, at *2-4 (Sept. 4, 2020) (reaffirming
the Administrator's ``broad discretion'' in determining appropriate
conformed wage rates); Courtland Constr. Corp., ARB No. 17-074, 2019 WL
5089598, at *2 (Sept. 30, 2019) (same).
The regulations require the following criteria be met for a
proposed classification and wage rate to be conformed to a wage
determination: (1) the work to be performed by the requested
classification is not performed by a classification in the wage
determination; (2) the classification is used in the area by the
construction industry; and (3) the proposed wage rate, including any
bona fide fringe benefits, bears a reasonable relationship to the wage
rates in the wage determination. See 29 CFR 5.5(a)(1)(ii)(A).
Pursuant to the first conformance criterion, WHD may approve a
conformance request only where the work of the proposed classification
is not performed by any classification on the wage determination. WHD
need not ``determine that a classification in the wage determination
actually is the prevailing classification for the tasks in question,
only that there is evidence to establish that the classification
actually performs the disputed tasks in the locality.'' Am. Bldg.
Automation, 2001 WL 328123, at *4. Even if workers perform only a
subset of the duties of a classification, they are still performing
work that is covered by the classification, and conformance of a new
classification thus would be inappropriate. See, e.g., Fry Bros. Corp.,
WAB No. 76-06, 1977 WL 24823, at *6 (June 14, 1977). In instances where
the first and second conformance criteria are satisfied and it has been
determined that the requested classification should be added to the
contract wage determination, WHD will address whether the third
criterion has also been satisfied, i.e., whether ``[t]he proposed wage
rate, including any bona fide fringe benefits, bears a reasonable
relationship to the wage rates'' in the wage determination.
WHD typically receives thousands of conformance requests each year.
In some instances, including instances where contractors are unaware
that the work falls within the scope of work performed by an
established
[[Page 57593]]
classification on the wage determination, WHD receives conformance
requests where conformance plainly is not appropriate because the wage
determination already contains a classification that performs the work
of the proposed classification. In other instances, however,
conformance is necessary because the applicable wage determination does
not contain all of the classifications that are necessary to complete
the project. The need for conformances due to the absence of necessary
classifications on wage determinations reduces certainty for
prospective contractors in the bidding process, who may be unsure of
what wage rate must be paid to laborers and mechanics performing work
on the project, and taxes WHD's resources. Such uncertainty may cause
contractors to underbid on construction projects and subsequently pay
less than the required prevailing wage rates to workers.
To address this issue, the Department proposed to revise 29 CFR 1.3
and 5.5(a)(1) to expressly authorize WHD to list classifications and
corresponding wage and fringe benefit rates on wage determinations even
when WHD has received insufficient data through its wage survey
process. Under this proposal, for key classifications or other
classifications for which conformance requests are regularly
submitted,\161\ the Administrator would be authorized to list the
classification on the wage determination along with wage and fringe
benefit rates that bear a ``reasonable relationship'' to the prevailing
wage and fringe benefit rates contained in the wage determination,
using essentially the same criteria under which such classifications
and rates are currently conformed by WHD pursuant to current Sec.
5.5(a)(1)(ii)(A)(3). In other words, for a classification for which
conformance requests are regularly submitted, and for which WHD
received insufficient data through its wage survey process, WHD would
be expressly authorized to essentially ``pre-approve'' certain
conformed classifications and wage rates, thereby providing contracting
agencies, contractors, and workers with advance notice of the minimum
wage and fringe benefits required to be paid for those classifications
of work. WHD would list such classifications and wage and fringe
benefit rates on wage determinations where: (1) the work performed by
the classification is not performed by a classification in the wage
determination for which a prevailing wage rate has been determined; (2)
the classification is used in the area by the construction industry;
and (3) the wage rate for the classification bears a reasonable
relationship to the prevailing wage rates contained in the wage
determination. The Administrator would establish wage rates for such
classifications in accordance with proposed Sec. 5.5(a)(1)(iii)(A)(3).
Contractors would be required to pay workers performing work within
such classifications at no less than the rates listed on the wage
determination. Such classifications and rates on a wage determination
would be designated with a distinct term, abbreviation, or description
to denote that they essentially reflect pre-approved conformed rates
rather than prevailing wage and fringe benefit rates that have been
determined through the Davis-Bacon wage survey process.
---------------------------------------------------------------------------
\161\ As explained in WHD's PWRB, WHD has identified several
``key classifications'' normally necessary for one of the four types
of construction (building, highway, heavy, and residential) for
which WHD publishes general wage determinations. See supra note 19,
Davis-Bacon Surveys at 6. The PWRB contains a table that lists the
key classifications for each type of construction. The table, which
may be updated periodically as warranted, currently identifies the
key classifications for building construction as heat and frost
insulators, bricklayers, boilermakers, carpenters, cement masons,
electricians, iron workers, laborers (common), painters,
pipefitters, plumbers, power equipment operators (operating
engineers), roofers, sheet metal workers, tile setters, and truck
drivers; the key classifications for residential construction as
bricklayers, carpenters, cement masons, electricians, iron workers,
laborers (common), painters, plumbers, power equipment operators
(operating engineers), roofers, sheet metal workers, and truck
drivers; and the key classifications for heavy and highway
construction as carpenters, cement masons, electricians, iron
workers, laborers (common), painters, power equipment operators
(operating engineers), and truck drivers. Id.
---------------------------------------------------------------------------
These rates would apply to the applicable classification without
the need to submit a conformance request in accordance with current
Sec. 5.5(a)(1)(ii)(A)-(C). However, if a contracting agency,
contractor, union, or other interested party has questions or concerns
about how particular work should be classified--and, specifically,
whether the work at issue is performed by a particular classification
included on a wage determination (including classifications listed
pursuant to this proposal) as a matter of local area practice or
otherwise, the contracting agency should submit a conformance request
in accordance with Sec. 5.5(a)(1) or seek guidance from WHD pursuant
to 29 CFR 5.13. Moreover, under the proposal, contracting agencies
would still be required to submit conformance requests for any needed
classifications not listed on the wage determination, which would be
approved, modified, or disapproved as warranted after award of the
contract, as required by the regulatory provisions applicable to
conformance requests.
The Department also proposed to add language to Sec. 5.5(a)(1) to
state that the conformance process may not be used to split or
subdivide classifications listed in the wage determination, and that
conformance is appropriate only where the work which a laborer or
mechanic performs under the contract is not within the scope of any
classification listed on the wage determination, regardless of job
title. This language reflects the principle that conformance is not
appropriate when the work of the proposed classification is already
performed by a classification on the wage determination. See 29 CFR
5.5(a)(1)(ii)(A)(1). Even if workers perform only some of the duties of
a classification, they are still performing work that is covered by the
classification, and conformance of a new classification thus would be
inappropriate. See, e.g., Fry Bros. Corp., WAB No. 76-06, 1977 WL
24823, at *6 (contractor could not divide carpentry work between
carpenters and carpenter tenders in order to pay a lower wage rate for
a portion of the work; under the DBA, it is not permissible to divide
the work of a classification into several parts according to the
contractor's assessment of each worker's skill and to pay for such
division of the work at less than the specified rate for the
classification). The proposed regulatory language is also in line with
the principle that WHD must base its conformance decisions on the work
to be performed by the proposed classification, not on the contractor's
own classification or perception of the workers' skill. See 29 CFR
5.5(a)(1)(i) (``Such laborers and mechanics shall be paid the
appropriate wage rate and fringe benefits . . . for the classification
of work actually performed, without regard to skill . . . .''); see
also, e.g., Tele-Sentry Sec., Inc., WAB No. 87-43, 1987 WL 247062, at
*7 (Sept. 11, 1987) (workers who performed duties falling within the
electrician classification must be paid the electrician rate regardless
of the employer's classification of workers as laborers). The
Department encouraged comments on this proposal.
The Department also proposed to make non-substantive revisions to
current Sec. 5.5(a)(1)(ii)(B) and (C) to more clearly describe the
conformance request process, including by providing that contracting
officers should submit the required conformance request information to
WHD via email using a specified WHD email address.
The Department also proposed changes relating to the publication of
[[Page 57594]]
rates for frequently conformed classifications. The Department's
proposed changes to this paragraph are discussed in section III.B.1.xii
(``Frequently conformed rates''), together with proposed changes to
Sec. 1.3.
The Department also proposed to add language to the contract
clauses at Sec. 5.5(a)(1)(vi), (a)(6), and (b)(4) requiring the
payment of interest on any underpayment of wages or monetary relief
required by the contract. This language is consistent with and would be
subject to the proposed discussion of interest in 29 CFR 5.10
(Restitution, criminal action), which requires that calculations of
interest be carried out at the rate specified by the Internal Revenue
Code for underpayment of taxes and compounded daily.
(A) Discussion of Comments
A number of contractors, unions, industry trade associations, and
elected officials expressed support for the proposed change. See, e.g.,
Braswell DM; International Brotherhood of Electrical Workers (IBEW);
NABTU; SMACNA; several members of the U.S. House of Representatives
from Illinois. Many unions, associations, and individual commenters
stated that proactively adding ``missing classifications to wage
determinations using existing standards under the conformance process,
will guard against abuses, and enhance predictability in bidding.''
International Union of Bricklayers and Allied Craftworkers; see also
West Central Illinois Building and Construction Trades Council. Many of
these same commenters also stated that the Department's proposal is in
line with Congressional intent to preserve key craft classifications,
quoting the admonition in Fry Brothers that there would be little left
of the Davis-Bacon Act if contractors were permitted to ``classify or
reclassify, grade or subgrade traditional craft work'' as they wished.
WAB No. 76-06, 1977 WL 24823, at *6. Many commenters also voiced
concern that unscrupulous contractors frequently subdivide
classifications listed on wage determinations under the current system
in order to fabricate low wage subclassifications. See, e.g.,
Affiliated Construction Trades Foundation. In expressing support for
the Department's proposal, these commenters stated that proactively
adding missing classifications to wage determinations when survey data
is insufficient will help guard against such abuse.
III-FFC highlighted that ``[p]re-approving frequently conformed
rates will significantly improve a process that otherwise causes
unnecessary delay and is an inefficient use of WHD resources.'' They
also stated that the Department's proposal ``will significantly improve
the conformance process to the benefit of all parties involved with
Davis-Bacon covered projects.'' The Department agrees.
Several commentors agreed with the proposed changes but also
offered suggestions for improvement. The Related Urban Development
Group suggested that classifications for which conformance requests are
regularly submitted ``should more closely reflect industry standards,''
and said, for example, that glazing/windows, when delivered to a
worksite, should be installed by carpenters and not glazers. The
Department notes that all relevant factors, including local area
practice, are considered when resolving questions regarding the type of
work performed by a classification. The Department reiterates that if a
contracting agency, contractor, union, or other interested party has
questions or concerns about how particular work should be classified--
and, specifically, whether the work at issue is performed by a
particular classification included on a wage determination (including
classifications listed pursuant to this regulatory revision) as a
matter of local area practice or otherwise--the contracting agency
should submit a conformance request in accordance with Sec. 5.5(a)(1)
or seek guidance from WHD pursuant to 29 CFR 5.13.
AWHA encouraged the Department to identify in wage determinations
which classifications and wage rates were pre-approved. The Department
stated in the NPRM that such classifications and rates on a wage
determination would be designated with a distinct term, abbreviation,
or description to denote that they essentially reflect pre-approved
conformed rates rather than prevailing wage and fringe benefit rates
that have been determined through the Davis-Bacon wage survey process.
AWHA also urged the Department to ``set a clear timeline for responding
to the contracting entity'' in cases where there is no pre-approved
conformance and the Department still must respond to a conformance
request The Department notes that current 29 CFR 5.5(a)(1)(ii)(C)
(which is being recodified at 29 CFR 5.5(a)(1)(iii)(C)) already states
that the Administrator, or an authorized representative, will issue a
determination within 30 days of receipt or will notify the contracting
officer within the 30-day period if additional time is necessary.
While generally supportive of the Department's proposal, the
International Union of Elevator Constructors (IUEC) misinterpreted the
Department's proposal to apply only to classifications that are
considered a ``key classification,'' i.e., one that is ``normally
necessary for one of the four types of construction.'' Based on this
misinterpretation, IUEC requested the Department acknowledge elevator
mechanic as a ``key classification'' for at least building
construction. As noted in its proposal, adding pre-approved
classifications to wage determinations is not limited to ``key
classifications.'' Rather, the Department's proposal also encompassed
other classifications for which conformance requests are regularly
submitted.
AGC agreed that the proposal to include frequently conformed rates
in wage determinations constituted a ``logical preemptive action by the
Department to provide contractors more information upfront in the
contract bidding and award process.'' AGC, however, encouraged the
Department to revise its wage survey process to increase the
``collection of accurate utilizable wage data'' through increased
survey participation.
Several commentors generally supported the revisions to Sec. Sec.
1.3(f) and 5.5(a)(1)(ii) and requested stakeholder involvement prior to
implementation. LIUNA, for example, requested that pre-approved
conformed rates not be designated unless stakeholders have an
opportunity in advance to provide input to WHD. COSCDA similarly
encouraged WHD to involve stakeholders and suggested a pilot or trial
development on a smaller scale to help address any issues ahead of a
wider launch. Other commenters requested additional clarification on
the precise methodology that would be employed for pre-approving
certain conformed classifications and wage rates. The FTBA asked
whether the Department would set rates based on previously conformed
rates and ``whether or how conformed rates would be updated on wage
determinations.'' SMART and SMACNA suggested adopting safeguards to
ensure that the pre-approval process does not result in the
``deskilling'' of highly skilled trades. SMART and SMACNA proposed to
include a prohibition (similar to proposed Sec. 5.5(a)(1)(B)) against
using the pre-approval process to split or subdivide classifications in
Sec. 1.3(f). SMART and SMACNA, while noting that AAM 213 was an
improvement in WHD's administration of conformances, cautioned that
WHD's use of an ``overly broad `skilled crafts' category advantages
some trades and disadvantages others depending upon the relative skill
levels of individual
[[Page 57595]]
trades.'' Concerned that AAM 213 does not accurately address the
disparity in skill sets among skilled crafts, SMART and SMACNA
recommended the regulatory text be revised to explicitly require WHD to
determine which classification already listed in the wage determination
is ``most comparable in terms of skill'' to the class of employee being
conformed.
As stated in the NPRM, the Department will ensure that (1) the work
performed by the classification is not performed by a classification in
the wage determination for which a prevailing wage rate has been
determined; (2) the classification is used in the area by the
construction industry; and (3) the wage rate for the classification
bears a reasonable relationship to the prevailing wage rates contained
in the wage determination. The Administrator would establish wage rates
for such classifications in accordance with proposed Sec.
5.5(a)(1)(iii)(A)(3).
The Department believes that the conformance process, including the
reasonable relationship process already discussed in detail in AAM 213
and in other publicly available resource materials, is responsive to
the concerns commenters raised. AAM 213 states that ``to determine a
`reasonable relationship,' the requested additional classification is
compared to the classifications on the applicable wage determination
within the same category.'' AAM 213 illustrates that a ``proposed
skilled craft classification is compared to skilled classifications in
the wage determination; a proposed laborer classification is compared
to existing laborer classifications; a proposed power equipment
operator classification is compared to existing power equipment
operator classifications; and a proposed truck driver classification is
compared to existing truck driver classifications.'' AAM 213 further
clarifies that when considering a conformance request for a skilled
classification, WHD generally considers the entirety of the rates for
the skilled classifications on the applicable wage determination and
looks to where the proposed wage rate falls within the rates listed on
the wage determination. AAM 213 notes that whether the wage rates in
the applicable category (skilled craft, laborer, power equipment
operator, truck driver, etc.) in the wage determination are
predominantly union prevailing wage rates or predominantly weighted
average wage rates should be considered when proposing rates for an
additional classification. For example, if a wage determination
contains predominantly union prevailing wage rates for skilled
classifications, it typically would be appropriate to look to the union
sector skilled classifications in the wage determination and the rates
for those classifications when proposing a wage rate for the additional
classification. Conversely, if a wage determination contains
predominantly weighted average wage rates for skilled classifications,
it typically would be appropriate to look to the weighted average/non-
union sector skilled classifications in the wage determination and the
rates for those classifications when proposing a wage rate for the
additional classification. The Department believes that the process for
determining reasonable relationship is sufficiently explained in
existing materials and does not need to be expanded in the regulation,
particularly since the ARB has repeatedly affirmed WHD's application of
AAM 213. See System Tech, Inc., ARB No. 2020-0029, at *4 (ARB May 25,
2021); Constr. Terrebonne Par. Juvenile Justice Complex, ARB No. 2017-
0056, 2020 WL 5902440, at *2; Courtland Construction Corp., ARB No. 17-
074, 2019 WL 5089598, at *2; Velocity Steel, Inc., ARB No. 16-060 (ARB
May 29, 2018). Additional clarification, if needed, will be through
subregulatory guidance.
Similarly, although the Department does not plan to implement this
regulatory change on a pilot or trial basis, or to provide for
stakeholder review of pre-approved conformed wage rates before they are
issued, the Department will be available to respond to questions and
concerns regarding particular rates, and interested parties may also
challenge particular classifications pursuant to 29 CFR 1.8 and/or seek
a formal response to questions or concerns regarding conformed wage
rates pursuant to 29 CFR 5.13. In response to SMART and SMACNA's
specific concerns about the potential subdivision of classifications,
the Department notes that classification decisions will be made in
accordance with relevant legal precedent and subregulatory guidance,
including the decision in Fry Brothers and other precedent regarding
classification and subregulatory guidance such as AAM 213. The
Department thus declines SMART and SMACNA's proposal to revise the
regulatory text to explicitly require WHD to determine which
classification already listed in the wage determination is ``most
comparable in terms of skill'' to the class of employee being
conformed; rather, determinations of the appropriate wage rate will be
made in accordance with currently established principles, including
those reflected in the existing conformance regulations, as revised by
this rule, and AAM 213 and similar guidance.
The IEC opposed the proposal, contending that ``this change
eliminates contractors' rights to dispute a proposed classification and
wage rate, currently found at 29 CFR 5.5(a)(1)(ii)(C).'' Although the
dispute mechanism cited by the IEC will not apply to pre-approved
classifications and wage rates, the Department notes that, as reflected
above, interested parties have the right to dispute these
classifications and wage rates prior to contract award pursuant to 29
CFR 1.8.
CC&M did not state whether they supported or opposed adding
conformed rates to wage determinations, but they provided suggestions
on how to improve the conformance process and related matters. In
particular, this commenter proposed that contractors seeking a
conformance be required to submit scopes of work and backup
documentation relating to wage and fringe benefits proposed; that
contractors should be allowed to apply a wage classification and rate
from one wage determination to another type of work without submitting
a conformance when multiple wage determinations are applicable to a
project; and that contractors should be allowed to adopt conformed wage
rates from the same county that are contained in a different
determination, presumably including from wage determinations that are
not included in the DBRA-covered contract. The Department is not
adopting such suggestions, which could be viewed as beyond the scope of
this rulemaking, as they would require regulatory changes that were not
proposed, and which are contrary to established procedures and
requirements applicable to conformed classifications and wage rates,
including the settled principle that a contractor ``may not rely on a
wage determination granted to another party regardless of the
similarity of the work in question'' and also may not prospectively
rely on WHD's prior approval of conformed classifications and rates for
application to a different contract performed at the same location. E&M
Sales, Inc., WAB No. 91-17, 1991 WL 523855, at *2-3 (Oct. 4, 1991); see
also Inland Waters Pollution Control, Inc., WAB No. 94-12, 1994 WL
596585, at *5 (Sept. 30, 1994). As for CC&M's separate proposal that
``once a conformance is granted, it could be included in the next
update for the prevailing wage determination in that particular
jurisdictional area,'' the Department notes that the conformance-
related regulatory change it is adopting concerns only classifications
for which
[[Page 57596]]
conformance requests are frequently occurring, not all conformance
requests. In certain instances, where conformance requests pertaining
to a classification are sufficiently recurring, WHD may in fact publish
a pre-approved conformed wage rate on the next modification of a
particular wage determination.
In opposition to the Department's proposal, ABC stated that the
Department can better meet its objectives in Sec. Sec. 1.3 and
5.5(a)(1) by calculating missing prevailing wage rates using BLS data
and using statistical modeling. The Department has explained in section
III.B.1.ii.A.1 why the Department declines to use BLS data to determine
prevailing wages. For the same reasons, using BLS data to determine a
reasonable relationship to rates on the wage determination is
inappropriate.
The Department does not believe additional language or further
changes are necessary and the final rule adopts Sec. 5.5(a)(1)(ii) and
new Sec. 1.3(f) as proposed.
2. 29 CFR Part 3
``Anti-kickback'' and payroll submission regulations under section
2 of the Act of June 13, 1934, as amended, 40 U.S.C. 3145, commonly
known as the Copeland Act, are set forth in 29 CFR part 3. This part
details the obligations of contractors and subcontractors relative to
the weekly submission of statements regarding the wages paid on work
covered by the Davis-Bacon labor standards; sets forth the
circumstances and procedures governing the making of payroll deductions
from the wages of those employed on such work; and delineates the
methods of payment permissible on such work.
i. Corresponding Edits to Part 3
The Department proposed multiple revisions to various sections in
part 3 to update language and ensure that terms are used in a manner
consistent with the terminology used in 29 CFR parts 1 and 5, update
websites and contact information, and make other similar, non-
substantive changes. The Department also proposed conforming edits to
part 3 to reflect proposed changes to part 5, such as revising Sec.
3.2 to clarify existing definitions or to add new defined terms also
found in parts 1 and 5. The Department similarly proposed to change
certain requirements associated with the submission of certified
payrolls to conform to changes made to the recordkeeping requirements
in Sec. 5.5(a)(3).
To the extent that those proposed changes were substantive, the
changes, and any comments associated with them, are discussed below in
Sec. Sec. 5.2 and 5.5. The Department did not receive any comments
regarding the incorporation of conforming changes to part 3.
Accordingly, the Department adopts these changes as proposed, along
with additional conforming changes to reflect revisions to
corresponding language in part 5 in the final rule.
The Department requested comment on whether it should further
consolidate and/or harmonize the definitions in Sec. Sec. 1.2, 3.2,
and 5.2 in a final rule, such as by placing all definitions in a single
regulatory section applicable to all three parts. The Department
received one comment in support of such a change. UBC noted that many
of the same words and phrases are defined similarly across the
different parts and supported consolidating the sections. UBC further
noted in their comment that harmonizing the definitions will ``benefit
understanding and application of the rule by the regulated community
and will thus decrease implementation costs.'' The Department
appreciates UBC's input on this issue but declines to make this change
at this time. While the Department received many comments specifically
in response to proposed revisions to defined terms, no other commenters
expressed support for consolidating all definitions in a single
regulatory section. Particularly in the absence of any indication from
other commenters that consolidating all definitions in a single section
would be preferable to setting forth the relevant definitions at the
beginning of each of the key parts of the DBRA's implementing
regulations, the Department believes that the regulated community will
find it helpful to have the relevant definitions set forth at the
beginning of parts 1, 3, and 5. Accordingly, the Department will
maintain definitions in Sec. Sec. 1.2, 3.2, and 5.2.
The Department also proposed to remove Sec. 3.5(e) regarding
deductions for the purchase of United States Defense Stamps and Bonds,
as the Defense Stamps and Bonds are no longer available for purchase.
Similarly, the Department proposed to simplify the language regarding
deductions for charitable donations at Sec. 3.5(g) by eliminating
references to specific charitable organizations and instead permitting
voluntary deductions to charitable organizations as defined by 26
U.S.C. 501(c)(3). The Department received no comments on these
proposals. The final rule therefore adopts these changes as proposed.
Finally, the Department proposed to add language to Sec. 3.11
explaining that the requirements set forth in part 3 are considered to
be effective as a matter of law, whether or not these requirements are
physically incorporated into a covered contract, and cross-referencing
the proposed new language discussing incorporation by operation of law
at Sec. 5.5(e). These proposed changes, and the comments related to
them, are discussed further in the sections on operation-of-law.
3. 29 CFR Part 5
The regulations at 29 CFR part 5 establish rules providing for the
payment of minimum wages, including fringe benefits, to covered workers
engaged in construction activity covered by the Davis-Bacon and Related
Acts, as well as establishing rules for the enforcement of these
prevailing wage obligations. The regulations at this part also set
forth contract clauses to be included in all covered contracts that
specify contractors' prevailing wage and other obligations on such
contracts.
i. Section 5.1 Purpose and Scope
The Department proposed minor technical revisions to Sec. 5.1 to
update statutory references and delete the listing of laws requiring
Davis-Bacon labor standards provisions, given that any such list
inevitably becomes out-of-date due to statutory revisions and the
enactment of new Related Acts. In lieu of this listing in the
regulation, the Department proposed to add new paragraph (a)(1) to
refer to the current WHD website (https://www.dol.gov/agencies/whd/government-contracts) or its successor website on which a listing of
laws requiring Davis-Bacon labor standards provisions is currently
found and regularly updated.
The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed.
ii. Section 5.2 Definitions
(C) Agency, Agency Head, Contracting Officer, Secretary, and Davis-
Bacon Labor Standards
The Department proposed to revise the definitions of ``agency
head'' and ``contracting officer'' and to add a definition of
``agency'' to reflect more clearly that State and local agencies enter
into contracts for projects that are subject to the Davis-Bacon labor
standards and that they allocate Federal assistance they have received
under a Davis-Bacon Related Act to sub-recipients. These proposed
definition changes also were intended to reflect that, for some funding
programs, the responsible Federal agency has delegated administrative
and
[[Page 57597]]
enforcement authority to states or local agencies. When the existing
regulations referred to the obligations or authority of agencies,
agency heads, and contracting officers, they were referring to Federal
agencies and Federal contracting officers. However, as noted above,
State or local agencies and their agency heads and contracting officers
exercise similar authority in the administration and enforcement of
Davis-Bacon labor standards. Because the existing definitions defined
``agency head'' and ``contracting officer'' as particular ``Federal''
officials or persons authorized to act on their behalf, which did not
clearly reflect the role of State and local agencies in effectuating
Davis-Bacon requirements, including by entering into contracts for
projects subject to the Davis-Bacon labor standards and inserting the
Davis-Bacon contract clauses in such contracts, the Department proposed
to revise these definitions to reflect the role of State and local
agencies. The proposed revisions also enabled the regulations to
specify the obligations and authority held by both State or local and
Federal agencies, as opposed to obligations that are specific to one or
the other.
The Department received no comments on this proposal. The final
rule therefore adopts these changes as proposed.
The Department also proposed to define the term ``Federal agency''
as a sub-definition of ``agency'' to distinguish those situations where
the regulations refer specifically to an obligation or authority that
is limited solely to a Federal agency that enters into contracts for
projects subject to the Davis-Bacon labor standards or allocates
Federal assistance under a Davis-Bacon Related Act.
The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed.
The Department also proposed to add the District of Columbia to the
definition of ``Federal agency.'' The DBA states in part that it
applies to every contract in excess of $2,000, to which the Federal
Government ``or the District of Columbia'' is a party. See 40 U.S.C.
3142(a). As described above, Reorganization Plan No. 14 of 1950
authorizes the Department to prescribe regulations to ensure that the
Act is implemented in a consistent manner by all agencies subject to
the Act. See 15 FR 3176, 5 U.S.C. app. 1. Accordingly, the proposed
change to the definition of ``Federal agency'' in Sec. 5.2 clarified
that the District of Columbia is subject to the DBA and the regulations
implemented by the Department pursuant to Reorganization Plan No. 14 of
1950.\162\ The proposed change was also consistent with the definition
of ``Federal agency'' in part 3 of this title, which specifically
includes the District of Columbia. See 29 CFR 3.2(g). The proposed
change simply reflected the DBA's applicability to the District of
Columbia and was not intended to reflect a broader or more general
characterization of the District of Columbia as a Federal Government
entity.
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\162\ The 1973 Home Rule Act, Public Law 93-198, transferred
from the President to the District of Columbia the authority to
organize and reorganize specific governmental functions of the
District of Columbia, but does not contain any language removing the
District of Columbia from the Department's authority to prescribe
DBA regulations pursuant to Reorganization Plan No. 14 of 1950.
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The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed.
The Department also proposed a change to the definition of
``Secretary'' to delete a reference to the Deputy Under Secretary for
Employment Standards. As noted, the Employment Standards Administration
was eliminated in a reorganization in 2009, and its authorities and
responsibilities were devolved into its constituent components,
including WHD.
The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed.
Lastly, the Department proposed a minor technical edit to the
definition of ``Davis-Bacon labor standards'' that reflected proposed
changes to Sec. 5.1, discussed above. The Department also made a
clarifying, non-substantive change to the term ``labor standards'' by
calling that term ``Davis-Bacon labor standards.''
The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed.
(B) Building or Work
(1) Energy Infrastructure and Related Activities
The Department proposed to modernize the definition of the terms
``building or work'' by including solar panels, wind turbines,
broadband installation, and installation of electric car chargers to
the non-exclusive list of construction activities encompassed by the
definition. These proposed additions to the definition were
clarifications intended to reflect the significance of energy
infrastructure and related projects to modern-day construction
activities subject to the Davis-Bacon and Related Acts, as well as to
illustrate the types of energy-infrastructure and related activities
that are encompassed by the definition of ``building or work.''
The Department received multiple comments on these proposed
additions, several of which favored the proposed language. III-FFC
strongly supported the proposal, stating that the inclusion of energy
infrastructure projects on the non-exclusive list of examples of
buildings or works ensures that Davis-Bacon definitions more accurately
reflect the modern construction industry and will help ensure that
workers on such projects will receive Davis-Bacon prevailing wages when
applicable. SMART noted that the proposed additions will make it clear
to the regulated community that such projects are considered buildings
or work, thereby preventing potential litigation. LIUNA stated that
this clarification will be helpful as Federal funding for such
construction, generally performed by construction workers, has been
increasing in recent years. Three LIUNA local chapters also commented
that the proposed language was a useful clarification of coverage, as
did the Alaska District Council of Laborers. The NCDCL also noted that
the proposed clarifications were consistent with long-standing policy
and that such projects were clearly construction work.
In contrast, other commenters opposed the proposed additions. ABC
stated that the proposed language expanded coverage to green energy
projects, creating a large administrative burden for developers and
small contractors that would in turn inhibit the construction of such
projects. In support of their claim, they cited to a 2010 GAO report
and a 2010 U.S. Department of Energy (DOE) OIG report, stating that
both reports indicated that the expansion of Davis-Bacon coverage to
green energy and weatherization projects due to American Reinvestment
and Recovery Act of 2009 (ARRA) funding delayed construction of such
projects and increased costs.\163\ An ABC
[[Page 57598]]
member write-in campaign similarly mentioned the proposed language as
one of several changes that they asserted would increase the
inflationary effects of prevailing wage requirements and increase the
regulatory burden on contractors, as did two individual commenters.
CIRT stated that the inclusion of green energy projects within the
scope of Davis-Bacon coverage would be beyond the scope of the statute.
A comment by the group of members of the U.S. House Committee on
Education & Labor also stated that including green energy projects
within the definition of building or work would increase the number of
small businesses subject to the Davis-Bacon requirements, subjecting
such small businesses to additional costs and uncertainty.
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\163\ The GAO report stated that four Federal funding agencies
and several State and local funding recipients indicated that
because their programs had not previously received any Related Act
funding prior to receiving funding to ARRA, they had to establish
internal infrastructure and procedures to allow them to handle the
large increase in funding and manage the accompanying Davis-Bacon
requirements. GAO report ``Project Selection and Starts Are
Influenced by Certain Federal Requirements and Other Factors.'' Feb.
2010. The DOE OIG report indicated that the need to determine
prevailing wages for weatherization work and develop guidance for
funding sub-recipients on Davis-Bacon requirements delayed states'
use of ARRA weatherization funding.
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After considering these comments, the final rule adopts the
revisions as proposed. As noted in the proposed rule, the inclusion of
these energy infrastructure projects in the non-exclusive list of
examples of a building or work simply provides clarification that such
projects are among the types of buildings or works that may be covered
by the DBRA, and therefore that Federal or federally assisted
construction of these projects will be subject to Davis-Bacon
prevailing wage requirements when all other requirements are met,
including that the work is pursuant to a Federal contract under the DBA
or federally funded under a Related Act, that the project is for
construction, prosecution, completion, and/or repair, and that the work
is performed by laborers and mechanics and, if required under the
relevant statute, is done at the site of the work.
Opposing comments appear to be based on the assumption that such
projects were not previously considered to be buildings or works that
could be subject to Davis-Bacon coverage, and that the inclusion of
these projects as examples of a building or work would expand this
definition to previously uncovered energy projects. However, this is an
inaccurate presumption, as such projects already clearly fit within the
existing definition of a building or work, which includes ``without
limitation, buildings, structures, and improvements of all types.'' The
GAO and DOE OIG reports cited by ABC clearly show that energy
infrastructure projects are already understood to be within the
existing definition of building or work. For example, ARRA did not
change the definition of building or work; rather, it was a Related Act
that provided that projects funded under its provisions, including
various improvements to energy infrastructure, are covered by the
Davis-Bacon labor standards. See ARRA sec. 406, 1606. Likewise, a
number of other Related Acts cover government-funded energy
projects,\164\ and the existing regulation's inclusion of projects such
as dams, plants, power lines, and heavy generators makes clear that
``building or work'' has long included the construction of energy
infrastructure projects. Because those energy infrastructure projects
already were buildings or works under the existing definition, the
additional Related Act funding triggered Davis-Bacon prevailing wage
requirements for these energy infrastructure projects. Had such
projects not already fit within the definition of building or work,
however, Davis-Bacon prevailing wage requirements would not have
applied. Therefore, pursuant to its authority under Reorganization Plan
No. 14 of 1950 ``to prescribe appropriate standards, regulations, and
procedures'' for the DBRA and to eliminate any potential confusion as
to whether energy infrastructure projects should be considered
buildings or works, and to provide some examples of those types of
projects in the non-exhaustive list, the final rule retains the
proposed language.
---------------------------------------------------------------------------
\164\ See https://www.dol.gov/agencies/whd/government-contracts
(List of Current Davis-Bacon and Related Acts).
---------------------------------------------------------------------------
(2) Coverage of a Portion of a Building or Work
The Department proposed to add language to the definitions of
``building or work'' and ``public building or public work'' to clarify
that these definitions can be met even when the construction activity
involves only a portion of an overall building, structure, or
improvement. The definition of ``building or work'' already states that
the terms ``building'' and ``work'' ``generally include construction
activity as distinguished from manufacturing, furnishing of materials,
or servicing and maintenance work,'' and includes ``without limitation,
buildings, structures, and improvements of all types.'' 29 CFR 5.2(i).
In addition, the regulation already provides several examples of
construction activity included within the term ``building or work''
that do not constitute an entire building, structure, or improvement,
such as ``dredging, shoring, . . . scaffolding, drilling, blasting,
excavating, clearing, and landscaping.'' Id. Moreover, the current
regulations define the term ``construction, prosecution, completion, or
repair'' to mean ``all types of work done on a particular building or
work at the site thereof . . . including, without limitation . . .
[a]ltering, remodeling, installation . . . ; [p]ainting and
decorating.'' Id. Sec. 5.2(j).
However, to further make plain that ``building or work'' includes
not only construction activity involving an entire building, structure,
or improvement, but also construction activity involving a portion of a
building, structure, or improvement, or the installation of equipment
or components into a building, structure, or improvement, the
Department proposed to add a sentence to this definition stating that
``[t]he term building or work also includes a portion of a building or
work, or the installation (where appropriate) of equipment or
components into a building or work.'' The Department also proposed to
include additional language in the definition of ``public building or
public work'' to clarify that a ``public building'' or ``public work''
includes the construction, prosecution, completion, or repair of a
portion of a building or work that is carried on directly by authority
of or with funds of a Federal agency to serve the interest of the
general public, even where construction of the entire building or work
does not fit within this definition.
The Department explained that these proposed revisions are
consistent with the Davis-Bacon Act. The concepts of alteration or
repair presuppose that only a portion of a building, structure, or
improvement will be affected. By specifically including the alteration
or repair of public buildings or works within its scope of coverage,
the Davis-Bacon Act itself necessitates that construction activity
involving merely a portion of a building or work may be subject to
coverage.
The Department also noted that these proposed revisions are
consistent with the Department's longstanding policy that a ``public
building'' or ``public work'' includes construction activity involving
a portion of a building or work, or the installation of equipment or
components into a building or work when the other requirements for
Davis-Bacon coverage are satisfied. See, e.g., AAM 52 (July 9, 1963)
(holding that the upgrade of communications systems at a military base,
including the installation of improved cabling, constituted the
construction, alteration or repair of a public work); Letter from
Sylvester L. Green, Dir., Div. of Cont. Standards Operations, to Robert
Olsen, Bureau of Reclamation (Mar. 18, 1985) (finding that the removal
and
[[Page 57599]]
replacement of stator cores in a hydroelectric generator was covered
under the Davis-Bacon Act as the alteration or repair of a public
work); Letter from Samuel D. Walker, Acting Adm'r, to Edward Murphy
(Aug. 29, 1990) (stating that ``[t]he Department has ruled on numerous
occasions that repair or alteration of boilers, generators, furnaces,
etc. constitutes repair or alteration of a `public work' ''); Letter
from Nancy Leppink, Deputy Adm'r, to Armin J. Moeller (Dec. 12, 2012)
(finding that the installation of equipment such as generators or
turbines into a hydroelectric plant is considered to be the improvement
or alteration of a public work).
The Department further explained that the proposed revisions are
consistent with the Department's longstanding position that a ``public
building'' or ``public work'' may include structures, buildings, or
improvements that will not be owned by the Federal government when
construction is completed, so long as the construction is carried on
directly by authority of or with funds of a Federal agency to serve the
interest of the general public. Accordingly, the Department has long
held that the Davis-Bacon labor standards provisions may apply to
construction undertaken when the government is merely going to have the
use of the building or work, such as in lease-construction contracts,
depending upon the facts and circumstances surrounding the contract.
See Reconsideration of Applicability of the Davis-Bacon Act to the
Veteran Admin.'s Lease of Med. Facilities, 18 Op. O.L.C. 109, 119 n.10
(May 23, 1994) (``1994 OLC Memorandum'') (``[T]he determination whether
a lease-construction contract calls for construction of a public
building or public work likely will depend on the details of the
particular arrangement.''); FOH 15b07. In AAM 176 (June 22, 1994), WHD
provided guidance to the contracting community regarding the DBA's
application to lease-construction contracts, and specifically advised
that the following non-exclusive list of factors from the 1994 OLC
Memorandum should be considered in determining the scope of DBA
coverage: (1) the length of the lease; (2) the extent of Government
involvement in the construction project (such as whether the building
is being built to Government requirements and whether the Government
has the right to inspect the progress of the work); (3) the extent to
which the construction will be used for private rather than public
purposes; (4) the extent to which the costs of construction will be
fully paid for by the lease payments; and (5) whether the contract is
written as a lease solely to evade the requirements of the DBA.
In sum, as noted above, the term ``building or work'' has long been
interpreted to include construction activity involving only a portion
of a building, structure, or improvement. As also noted above, a public
building or public work is not limited to buildings or works that will
be owned by the Federal Government, but may include buildings or works
that serve the general public interest, including spaces to be leased
or used by the Federal Government. Accordingly, it necessarily follows
that a contract for the construction, alteration, or repair of a
portion of a building, structure, or improvement may be a DBA-covered
contract for construction of a ``public building'' or ``public work''
where the other requirements for coverage are met, even if the Federal
Government is not going to own, lease, use, or otherwise be involved
with the construction of the remaining portions of the building or
work. For example, as WHD has repeatedly explained in connection with
one contracting agency's lease-construction contracts, where the
Federal Government enters into a lease for a portion of an otherwise
private building--and, as a condition of the lease, requires and pays
for specific tenant improvements requiring alterations and repairs to
that portion to prepare the space for government occupancy in
accordance with government specifications--Davis-Bacon labor standards
may apply to the tenant improvements or other specific construction
activity called for by such a contract. In such circumstances, the
factors discussed in AAM 176 must be considered to determine if
coverage is appropriate, but the factors would be applied specifically
with reference to the leased portion of the building and the
construction required by the lease.
Finally, the Department noted that these proposed revisions would
further the remedial purpose of the DBA by ensuring that the Act's
protections apply to contracts for construction activity for which the
government is responsible. Walsh v. Schlecht, 429 U.S. 401, 411 (1977)
(reiterating that the DBA ``was not enacted to benefit contractors, but
rather to protect their employees from substandard earnings by fixing a
floor under wages on Government projects'') (citation and internal
quotation marks omitted); 1994 OLC Memorandum, 18 Op. O.L.C. at 121
(``[W]here the government is financially responsible for construction
costs, the purposes of the Davis-Bacon Act may be implicated.''). If
the Davis-Bacon Act were only applied in situations where the Federal
Government is involved in the construction of the entire (or even the
majority of the) building or work, coverage of contracts would be
dependent on the size of the building or work, even if two otherwise
equivalent contracts involved the same square footage and the
government was paying for the same amount of construction. Such an
application of coverage would undermine the statute's remedial purpose
by permitting publicly funded construction contracts for millions of
dollars of construction activity to evade coverage merely based on the
size of the overall structure or building.
Accordingly, and as noted above, the Department proposed revisions
to the definitions of ``building or work'' and ``public building or
public work'' that served to clarify rather than change existing
coverage requirements. However, the Department recognized that in the
absence of such clarity under the existing regulations, contracting
agencies have differed in their implementation of Davis-Bacon labor
standards where construction activity involves only a portion of a
building, structure, or improvement, particularly in the context of
lease-construction contracts. Thus, as a practical matter, the proposed
revisions would result in broader application of Davis-Bacon labor
standards. The Department therefore invited comment on the benefits and
costs of these proposed revisions to private business owners, workers,
and the Federal Government, particularly in the context of leasing.
After consideration of the comments received, for the reasons detailed
below, the Department is adopting these proposed revisions in this
final rule, with one additional clarification.
Several commenters expressed their general support for the proposed
changes, indicating that they agreed that the proposed changes would
provide additional clarification of Davis-Bacon coverage. More
specifically, IUOE stated that this was an important change that helps
bring Davis-Bacon coverage into the 21st century, allowing Davis-Bacon
labor standards to continue to apply to public buildings and public
works despite the increase in non-traditional funding and contracting
methods such as public-private partnerships, complex bond finance
schemes, leasing agreements, and other sorts of private involvement in
public buildings and works. III-FFC and the UA both noted that the
proposed changes would result in Davis-Bacon coverage being more
consistently applied to contracts for construction activity for which
the
[[Page 57600]]
government is responsible. UBC also commented favorably on the proposed
changes, noting that they clarify that Davis-Bacon coverage can exist
even when the building or work will not be owned by the Federal
Government, while also suggesting revising the proposed language in the
definition of ``public building or public work'' to include ``the
construction, prosecution, completion, installation of equipment (where
appropriate) of components, or repair. . . .'' [proposed addition in
italics], to harmonize the proposed definition of ``public building or
public work'' with the proposed language for ``building or work.''
\165\
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\165\ In suggesting this additional regulatory language, UBC
indicated that this language was already contained in the
Department's proposed definition of ``building or work.'' However,
the Department's proposed definition of ``building or work''--
specifically, the language ``installation (where appropriate) of
equipment or components''--is slightly different than the language
proposed by UBC. The Department interprets UBC's comment as
intending to propose that the Department include ``installation
(where appropriate) of equipment or components'' in the definition
of ``public building or public work.''
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SMART agreed with the Department that Davis-Bacon coverage should
not be determined by the size of the building or work, or portion of
the building or work, and stated that the proposed changes would ensure
that the entire regulated community would have consistent information
as to Davis-Bacon applicability when bidding for government contracts
and meeting prevailing wage obligations. SMART also found the legal
authority cited in support of the proposed change persuasive, noting
that not only did the authority involve the application of Davis-Bacon
coverage to portions of a building or work or the installation of
equipment, but also that none of the cases considered the fact that the
construction only involved a portion of a building or work to be in any
way worthy of comment when applying coverage. SMART further agreed that
the concept of alteration or repair, included in the DBA itself, pre-
supposes that coverage is applicable to a portion of a building or
work, pointing out that this position is ``fully consistent with
decades of interpretations of dozens of work functions and construction
activities.'' SMART further recommended that the Department amend the
proposed definition of building or work to state that ``[t]he term
building or work also includes a portion of a building or work, or the
installation (where appropriate) of equipment or components into a
building or work at a primary construction site or a secondary
construction site'' [proposed addition in italics]. SMART stated that
this proposed addition would clarify that the installation of equipment
or components into a building or work being constructed at another site
should be included in determining whether a ``significant portion'' of
the building or work is being constructed at that other site, such that
it should be considered a secondary site of work. SMART also requested
that the Department add language stating that the proposed definition
of ``portion'' in ``building or work,'' with no size parameter or
limitation, has the same meaning in the definition of the ``site of the
work,'' such that the construction of a ``portion,'' regardless of
size, is covered work whether it takes place on the primary or
secondary site.
The Department agrees with the above comments that the changes
proposed by the Department codify long-standing principles of Davis-
Bacon coverage, will result in a more consistent application of Davis-
Bacon coverage, and will support the remedial purpose of the DBA. The
Department analyzes the additional regulatory changes proposed by these
commenters at the end of this section.
Some commenters disagreed with the Department's proposal based on
assertions that the proposed change conflicts with the decision of the
U.S. Court of Appeals for the District of Columbia Circuit (D.C.
Circuit) in District of Columbia v. Dep't of Labor, 819 F.3d 444 (D.C.
Cir. 2016) (CityCenterDC). In particular, ABC stated that the court in
CityCenterDC ``found that lease agreements similar to agreements
described in the NPRM did not qualify as 'contracts for construction'
even though construction was contemplated on portions of buildings
pursuant to the lease(s)'' and that imposing Davis-Bacon ``coverage in
the absence of federal funding was unlawful.'' AGC similarly asserted
that CityCenterDC held that the ``DBA cannot reasonably be read to
cover construction contracts to which the [Federal government] is not a
party,'' and claimed that the proposed changes would unlawfully
eliminate the coverage requirement that the Federal Government must be
a party to a contract for construction. NAHB expressed the view that
the portion of the existing definition of ``public building or public
work,'' which provides that a public building or work must be ``carried
on directly by authority of or with funds of a Federal agency to serve
the interest of the general public'' (emphasis added), was inconsistent
with CityCenterDC, on the grounds that CityCenterDC made clear that DBA
coverage applies to publicly-funded construction projects and/or those
which are owned or operated by the government, and not to projects that
merely serve the ``public interest.''
The Department does not find the comments relating to CityCenterDC
persuasive. In that case, private developers leased land from the
District of Columbia and entered into development agreements under
which the land would be used as the site of a new mixed-use
development, to include shops, restaurants, a hotel, other private
retail business, and private residential units. CityCenterDC, 819 F.3d
at 447. The developers paid the District of Columbia for the lease of
the land, so that money flowed from the developers to the government
rather than from the government to the developers. Id. The District of
Columbia (1) did not provide any funding for the construction of the
project, through a lease or any other contractual arrangement, as the
developers were leasing from and paying money to the government, (2)
would not own or operate any portion of the project upon its
completion, and (3) did not propose to occupy any portion of the space
or offer any services there. Id. On these unusual facts, the D.C.
Circuit held that the District did not enter into a contract for
construction of the project. Id. at 450-51 (explaining that the
District entered into contracts that ``refer[red] to the eventual
construction that the Developers would pay for'' (emphasis added)); id.
at 453 (``DC did not expend funds for the construction of CityCenterDC.
Quite the opposite. The Developers make substantial rental payment to
DC''). In reaching this conclusion, the court observed that a finding
of Davis-Bacon coverage would constitute a ``sudden[] exten[sion]'' of
the Act. Id. at 450. The court therefore explicitly distinguished the
CityCenterDC situation from various other cases where, over the course
of decades, the DBA had been held applicable to leases, because those
other cases involved situations where, ``unlike [CityCenterDC], the
Government was the lessee not the lessor, and the leases required
construction for which the Government would pay de facto through its
rental payments.'' \166\ Id. at 450 n.3.
[[Page 57601]]
Separately from its conclusion that the District did not enter into a
contract for construction, the D.C. Circuit determined that
CityCenterDC was not a covered project for the independent reason that
CityCenterDC was not a public building or work, stating that a project
must at least have either public funding or government ownership or
operation to be considered a public building or public work, and that
CityCenterDC had neither. Id. at 451-54.
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\166\ In distinguishing these cases, the court did not express
disagreement with the Department's longstanding interpretation that
a contract is for construction if ``more than an incidental amount
of construction-type activity is involved in the performance of a
government contract.'' Mil. Hous., Fort Drum, WAB No. 85-16, 1985 WL
167239, at *4 (Aug. 23, 1985) (determining that contracts to lease
housing units for military families that were to be built on private
land to the specifications of the Department of the Army were
contracts for construction for purposes of the DBA). See, e.g., Phx.
Field Off., Bureau of Land Mgmt., ARB No. 01-010, 2001 WL 767573, at
*8-9 (June 29, 2001) (concluding that the DBA applied to a lease by
the Bureau of Land Management of a building and storage facility to
be built for the Bureau's use); Crown Point, Ind. Outpatient Clinic,
WAB No. 86-33, 1987 WL 247049, at *2-3 (June 26, 1987) (holding that
Davis-Bacon coverage applied to the Veteran Administration's lease
of an outpatient clinic to be constructed under the terms of the
lease), enforced sub nom., Bldg. & Constr. Trades Dep't, AFL-CIO v.
Turnage, 705 F. Supp. 5, 6 (D.D.C. 1988). See also, e.g.,
Choctawhatchee Elec. Coop., Inc., ARB Case No. 2017-0032, 2019 WL
3293926, at *6 (June 14, 2019) (CHELCO) (distinguishing CityCenterDC
based on its ``controversial facts'' and affirming WHD
Administrator's determination that an electric utility privatization
contract was a ``contract for construction'' under the DBA where the
privatization contract called for significant construction that was
at least heavily funded by the Federal government).
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The proposed changes to the definition of a public building or
work, adopted in this final rule, do not eliminate the requirement that
the Federal Government enter into a contract for construction for the
DBA to be applicable. As reflected not only in the CityCenterDC
decision but also in the statute itself, coverage under the DBA applies
to ``every contract in excess of $2,000, to which the Federal
Government or the District of Columbia is a party, for construction,
alteration, or repair, including painting and decorating, of public
buildings and public works.'' 40 U.S.C. 3142(a). The requirement that
the Federal Government enter into a contract for construction and the
requirement that such a contract for construction must be for a public
building or public work are two distinct requirements, both of which
must be satisfied for the DBA to apply to a contract. The changes to
the definitions of ``building or work'' and ``public building or public
work'' described here simply provide that the construction of a portion
of a building or work may still be considered a public building or
work, even where the entire building or work is not owned, leased by,
or to be used by a Federal agency. These revisions do not eliminate or
affect the separate requirement under the DBA that the Federal
government enter into a ``contract . . . for construction.''
Moreover, contrary to commenters' contentions, CityCenterDC did not
hold that lease-construction contracts like those discussed in the NPRM
are not contracts for construction. As mentioned, the D.C. Circuit
explicitly distinguished the CityCenterDC development from contracts in
which the Federal Government or District of Columbia pays a third party
to lease land and requires construction, alteration, or repair as a
condition of the lease. CityCenterDC, 819 F.3d at 450 & n.3; AAM 222
(Jan. 11, 2017), at 7. Specifically, in CityCenterDC, the District of
Columbia was leasing land to a private developer that was paying the
government to use the land to build a new mixed-use development
entirely for private use. There was no agreement that the District of
Columbia would own, operate, lease, or even use any portion of the
development once completed, and therefore there was no agreement
requiring construction of a government-owned, operated or leased
portion. In contrast, in the NPRM's lease-construction agreement
example, the Federal Government leases a portion of a building from a
private developer or owner--and, as a condition of the lease, requires
and pays for specific tenant improvements requiring alterations and
repairs to the leased portion to ensure that the space meets the
requirements for government occupancy or use.
The Department similarly does not agree that the proposed revisions
extend Davis-Bacon coverage to any project involving a portion of a
building or work that is in the general public interest. The revised
definitions still require the construction, prosecution, completion, or
repair of that portion of the building or work to be carried on
directly by authority of or with funds of a Federal agency and that the
construction of the portion of the building or work serve the interest
of the general public.
Nor does the Department agree that maintaining the requirement that
construction projects must serve the public interest contradicts the
holding in CityCenterDC. The D.C. Circuit held that, at minimum, a
public building or work must have either public funding or government
ownership or operation, consistent with the existing definition and the
proposed changes. See CityCenterDC, 819 F.3d at 452 n.5, 453 n.6
(suggesting that 29 CFR 5.2(k) requires public funding for construction
but not government ownership or operation but explicitly noting that
the court was not resolving the question of whether either one of the
two characteristics was alone sufficient for a project to be a public
work). By stating that the construction of the building or work must
serve the general public interest, the definition recognizes that while
government ownership or operation is one indication that the building
or work serves the public interest sufficiently to be considered a
public building or work, a project that receives Federal funding
without government ownership or operation may still fulfill a
significant need or goal of the relevant Federal agency and serve the
general public interest. See AAM 222, at 8; see also United States ex
rel. Noland Co. v. Irwin, 316 U.S. 23, 28 (1942) (holding that a
privately-owned library building at Howard University was a public work
for purposes of the Miller Act, relying on the definition of ``public
works'' in the National Industrial Recovery Act, Public Law 73-90, 48
Stat. 201 (June 16, 1933)--from which the Department's regulatory
definition is derived--because the project received Federal funding and
because the ``education of youth in the liberal arts and sciences''
fulfills a public interest).
Some commenters also expressed concerns with the proposed changes
on grounds that were unrelated to the CityCenterDC decision. NAHB noted
that the proposed language does not include a threshold for the amount
of or degree of work that must be performed to trigger Davis-Bacon
requirements for buildings where the construction of a portion of the
building is ``carried on by authority of . . . a Federal agency to
serve the interest of the general public.'' NAHB recommended that such
a limitation, similar to the ``significant portion'' language in the
existing and proposed ``site of the work'' definition, be incorporated
into the proposed ``building or work'' definition, or alternatively
that the Department should adopt a monetary threshold. NAHB noted that
although the proposed changes might be intended to clarify coverage,
confusion among contracting agencies may still arise if agencies are
inconsistent in their interpretation of the added language regarding
Davis-Bacon coverage of portions of a building or work, or
misunderstand the other elements of the definition, and that
subregulatory interagency guidance therefore may also be needed to
address such potential confusion. Commenters participating in a write-
in campaign also expressed concern about the applicability of Davis-
Bacon requirements to improvements to private buildings or works, with
governmental leasing as one of multiple listed items that the
commenters
[[Page 57602]]
contended would increase regulatory burdens and costs for contractors
on projects that have not typically been subject to Davis-Bacon
coverage. Such commenters, however, did not express any specific
concerns regarding the definitions of ``building or work'' or ``public
building or public work.''
The Department also does not agree with NAHB's assertion that the
inclusion of an additional size or dollar threshold in the definition
of ``public building or public work'' is necessary, because the DBA
already imposes a dollar threshold for coverage. The revised definition
does not alter this threshold, but instead merely clarifies that where
the construction of a portion of a building or work is carried on
directly by authority of or with funds of a Federal agency to serve the
interest of the general public, that portion of a building or work is a
public building or public work to which DBA coverage applies if the
Act's $2,000 dollar threshold is satisfied. The revised definition does
not automatically extend DBA coverage in this scenario to construction
not called for in the contract, i.e., of the entire building or work.
Nor does it alter the long-standing requirements and analysis needed to
determine whether an entire building or work is a public building or
public work. In other words, where the government has entered into a
contract in excess of $2,000 for the construction, alteration, or
repair of a public building or public work, the contract will be
subject to DBA requirements regardless of whether the contract applies
only to a portion of a building or work or to an entire building or
work. To apply an additional threshold beyond the statutory $2,000
threshold to contracts for construction of a portion of a building or
work would result in the arbitrary exclusion of otherwise-covered
contracts from Davis-Bacon coverage.
The Department does not agree with SMART's suggestion to add
language to the regulation stating that the proposed definition of
``portion'' in ``building or work'', without any size parameter or
other threshold, has the same meaning as the word ``portion'' in the
term ``significant portion'' in the existing definition of ``site of
the work.'' The term ``portion'' is not defined, and the Department
simply intends that it be given its ordinary meaning, that is, a part
of a whole. However, the final rule specifically defines the term
``significant portion'' for purposes of the definition of a ``secondary
construction site.'' The final rule explains that ``significant
portion'' is limited to instances where an entire portion or module of
a building or work, such as a completed room or structure, is
constructed offsite with minimal construction work remaining. This term
is necessarily more limiting than ``portion,'' and is used in a
specific context, and therefore Department does not believe it would be
helpful to insert any language that could be read to suggest that the
two terms are equivalent.
The Department also declines to adopt SMART's suggestion to amend
the proposed definition of building or work to state that ``[t]he term
building or work also includes a portion of a building or work, or the
installation (where appropriate) of equipment or components into a
building or work at a primary construction site or a secondary
construction site'' [proposed addition in italics]. Although the
Department agrees, as explained above, that the installation of
components and equipment into a building or work or portion thereof is
construction work, the Department does not believe that it would be
appropriate to incorporate references to ``site of the work'' elements
into the definition of ``building or work.'' This is because the
``building or work'' requirement applies even under statutes whose
application is not limited to the site of the work and so applies to
all work performed by laborers and mechanics in the development of a
project, as discussed further below.
Finally, the Department agrees with UBC's suggestion to revise the
proposed definition of ``public building or public work'' to include
the installation (where appropriate) of equipment or components in
order to harmonize the revised definition of ``public building or
public work'' with the revised definition of ``building or work.'' As
the examples discussed in the NPRM and earlier in this section clearly
indicate, installation of equipment or components has long been
considered to be covered construction activity, and the Department
agrees that including corresponding language in both definitions may
clarify that such installation may similarly be considered a public
building or work when the other requirements are met. In such
circumstances, the installation may be considered a public building or
work even where the equipment or components are being installed in a
larger structure that may not be a public building or work. For
example, where the installation of equipment such as wind turbines or
electric car chargers is carried on directly by authority of or with
funds of a Federal agency to serve the interest of the general public,
such installation would be considered a public building or work even
where such installation takes place at a private facility. Similarly,
when a Federal agency enters into a long-term lease of office space in
an otherwise privately owned and occupied building, and the lease
provides for the installation of equipment, at government expense and
in accordance with government specifications, in the portion of the
building that the Federal Government is leasing and occupying in order
to provide public services, the installation of such equipment would be
the construction of a public building or public work subject to Davis-
Bacon labor standards.
Accordingly, for the reasons discussed, the Department is adopting
the proposed definitions of ``building or work'' and ``public building
or public work'' in this final rule, with one clarification to the
definition of ``public building or public work,'' as explained.
(C) Construction, Prosecution, Completion, or Repair
The final rule also adds a new sub-definition to the term
``construction, prosecution, completion, or repair'' in Sec. 5.2, to
better clarify when demolition and similar activities are covered by
the Davis-Bacon labor standards.
As explained in the proposed rule, in general, the Davis-Bacon
labor standards apply to contracts ``for construction, alteration or
repair . . . of public buildings and public works.'' 40 U.S.C. 3142(a).
Early in the DBA's history, the Attorney General examined whether
demolition fits within these terms and concluded that ``[t]he statute
is restricted by its terms to `construction, alteration, and/or
repair,''' and that this language ``does not include the demolition of
existing structures'' alone. 38 Op. Atty. Gen. 229 (1935). However, the
Attorney General expressly distinguished, and declined to decide the
question of whether the Davis-Bacon labor standards apply to ``a razing
or clearing operation provided for in a building contract, to be
performed by the contractor as an incident of the building project.''
Id.
Consistent with the Attorney General's opinion, the Department has
long maintained that standalone demolition work is generally not
covered by the Davis-Bacon labor standards. See AAM 190 (Aug. 29,
1998); WHD Opinion Letter SCA-78 (Nov. 27, 1991); WHD Opinion Letter
DBRA-40 (Jan. 24, 1986); WHD Opinion Letter DBRA-48 (Apr. 13, 1973);
AAM 54 (July 29, 1963); FOH 15d03(a). However, the Department has
understood the Davis-Bacon labor standards to cover demolition and
removal under certain circumstances.
[[Page 57603]]
First, demolition and removal activities are covered by Davis-Bacon
labor standards when such activities in and of themselves constitute
construction, alteration, or repair of a public building or work. For
example, the Department has explained that removal of asbestos or paint
from a facility that will not be demolished--even if subsequent
reinsulating or repainting is not considered--is covered by Davis-Bacon
because the asbestos or paint removal is an ``alteration'' of the
facility. See AAM 153 (Aug. 6, 1990). Likewise, the Department has
explained that Davis-Bacon labor standards can apply to certain
hazardous waste removal contracts, because ``[s]ubstantial excavation
of contaminated soils followed by restoration of the environment'' is
``construction work'' under the DBA and because the term
``landscaping'' as used in the DBA regulations includes ``elaborate
landscaping activities such as substantial earth moving and the
rearrangement or reclamation of the terrain that, standing alone, are
properly characterized as the construction, restoration, or repair of a
public work.'' AAM 155 (Mar. 25, 1991); see also AAM 190 (noting that
``hazardous waste removal contracts that involve substantial earth
moving to remove contaminated soil and recontour the surface'' can be
considered DBA-covered construction activities).
Second, the Department has consistently maintained that if future
construction that will be subject to the Davis-Bacon labor standards is
contemplated at the location where the demolition occurs--either
because the demolition is part of a contract for such construction or
because such construction is contemplated as part of a future contract,
then the demolition of the previously existing structure is considered
part of the construction of the subsequent building or work and
therefore within the scope of the Davis-Bacon labor standards. See AAM
190. This position is also articulated in the Department's SCA
regulations at 29 CFR 4.116(b). Likewise, the Department has explained
that certain activities under hazardous waste removal and remediation
contracts, including ``the dismantling or demolition of buildings,
ground improvements and other real property structures and . . . the
removal of such structures or portions of them'' are covered by Davis-
Bacon labor standards ``if this work will result in the construction,
alteration, or repair of a public building or public work at that
location.'' AAM 187, attach., at 1-2 (Nov. 18, 1996).
As noted in the proposed rule, while the Department has addressed
these distinctions to a degree in the SCA regulations and in
subregulatory guidance, the Department believes that clear standards
for the coverage of demolition and removal and related activities in
the DBA regulations will assist agencies, contractors, workers, and
other stakeholders in identifying whether contracts for demolition are
covered by the DBA. This, in turn, will ensure that Davis-Bacon
contract clauses and wage determinations are incorporated into
contracts where warranted, thereby providing contractors with the
correct wage determinations prior to bidding and requiring the payment
of Davis-Bacon prevailing wages where appropriate.\167\
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\167\ The Department notes that under Federal contracts and
subcontracts, demolition contracts that do not fall within the DBA's
scope are instead service contracts covered by the SCA, and the
Department uses DBA prevailing wage rates as a basis for the SCA
wage determination. See AAM 190. However, federally funded
demolition work carried out by State or local governments that does
not meet the criteria for coverage under a Davis-Bacon Related Act
would generally not be subject to Federal prevailing wage
protections.
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Accordingly, the Department proposed to add a new paragraph (2)(v)
to the definition of ``construction, prosecution, completion, or
repair'' to assist agencies, contractors, workers, and other
stakeholders in identifying when demolition and related activities fall
within the scope of the DBRA. Specifically, the Department proposed to
clarify that demolition work is covered under Davis-Bacon in any of
three circumstances: (1) Where the demolition and/or removal activities
themselves constitute construction, alteration, and/or repair of an
existing public building or work; (2) where subsequent construction
covered in whole or in part by Davis-Bacon labor standards is planned
or contemplated at the site of the demolition or removal, either as
part of the same contract or as part of a future contract; or (3) where
otherwise required by statute.\168\
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\168\ [thinsp]This third option accounts for Related Acts when
broader language may provide greater coverage of demolition work.
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While a determination of whether demolition is performed in
contemplation of a future construction project is a fact-specific
question, the proposed rule also included a non-exclusive list of
factors that can inform this determination, including the existence of
engineering or architectural plans or surveys; the allocation of, or an
application for, Federal funds; contract negotiations or bid
solicitations; the stated intent of the relevant government officials;
the disposition of the site after demolition (e.g., whether it is to be
sealed and abandoned or left in a state that is prepared for future
construction); and other factors. Based on these guidelines, Davis-
Bacon coverage may apply, for example, to the removal and disposal of
contaminated soil in preparation for construction of a building, or the
demolition of a parking lot to prepare the site for a future public
park. In contrast, Davis-Bacon likely would not apply to the demolition
of an abandoned, dilapidated, or condemned building to eliminate it as
a public hazard, to reduce likelihood of squatters or trespassers, or
to make the land more desirable for sale to private parties for purely
private construction.
The Department received several comments supporting the proposed
revisions regarding demolition. LIUNA, for example, noted that
providing clear guidance on when demolition is covered by the DBRA will
ensure workers on covered projects receive the protections of the DBRA.
LIUNA noted its ongoing concern that contracting agencies incorrectly
classify demolition activities as not covered by the DBRA because of
insufficient or conflicting guidance from the contracting agency and
the Department. Other commenters, including the III-FFC, the IUOE, and
Public Employees Local 71, Alaska, echoed these concerns and supported
the proposed language as a means of clarifying the circumstances under
which demolition work is covered, ensuring workers receive the
protections of the Davis-Bacon labor standards when appropriate.
Conversely, the National Demolition Association (NDA) opposed the
proposed revision and expressed concern that it would ``expand the
scope of demolition activities that could be subject to the Davis-Bacon
Act requirements.'' NDA also stated that the proposed change would add
complexity to the implementation of the DBRA and pose an undue burden
on small contractors. Other commenters, including ABC member campaign
comments, also voiced opposition and termed the proposed revisions an
``expansion'' of coverage.
In the final rule, the Department adopts the language regarding
demolition as proposed. As explained in the proposed rule, the revised
language is not an expansion of Davis-Bacon coverage, but rather a
codification and clarification of current Department policy that is
already reflected in current DBRA subregulatory guidance and in SCA
regulations. Thus, the revisions will not expand coverage or increase
burdens or complexity. To the contrary, they will simplify and
[[Page 57604]]
streamline compliance efforts by explicitly setting these principles
out in the DBRA regulations themselves so that contractors and
contracting agencies can look to those regulations to determine whether
or not the Davis-Bacon labor standards apply to particular demolition
activities. This will improve the accuracy and consistency of coverage
determinations prior to the submission of bids or the commencement of
work, thus mitigating the need for investigations and costly corrective
actions after work has started on a project. The change will also help
ensure that all contractors have a better understanding of the
circumstances under which demolition work is covered when bidding on
federally funded or assisted construction projects.
(D) Contract, Contractor, Prime Contractor, and Subcontractor
The Department proposed non-substantive revisions to the definition
of ``contract'' and also proposed new definitions in Sec. 5.2 for the
terms ``contractor,'' ``subcontractor'' and ``prime contractor.'' The
definitions would apply to 29 CFR part 5, including the DBRA contract
clauses in Sec. 5.5(a) and (b) of this part.
(1) Definition of ``Contract''
While neither the DBA nor CWHSSA contains a definition of the word
``contract,'' the language of the Davis-Bacon and Related Acts makes
clear that Congress intended the prevailing wage and overtime
requirements to apply broadly, to both prime contracts executed
directly with Federal agencies as well as any subcontracts through
which the prime contractors carry out the work on the prime contract.
See 40 U.S.C. 3142(c); 40 U.S.C. 3702(b), (d). Thus, the Department's
existing regulations define the term ``contract'' as including ``any
prime contract . . . and any subcontract of any tier thereunder.'' 29
CFR 5.2(h). The current definition of ``contract'' also states that it
applies to prime contracts which are subject wholly or in part to the
labor standards of any of the acts listed in Sec. 5.1. This definition
reinforces that it is intended to apply equally to direct Federal
contracts covered by the DBA and also to contracts between Federal,
State, or local government entities administering Federal assistance
and the direct recipients or beneficiaries of that assistance, where
such assistance is covered by one of the Related Acts--as well as the
construction contracts and subcontracts of any tier financed by or
facilitated by such a contract for assistance. See id.
In the NPRM, the Department stated that it was considering the
creation of an expanded definition for the term ``contract'' in Sec.
5.2, similar to the way that the term is defined in other Department
regulations applying to Federal contracting statutes and Executive
orders. In the regulations implementing Executive Order 13658
(Establishing a Minimum Wage for Contractors), for example, the
Department defined contract as ``an agreement between two or more
parties creating obligations that are enforceable or otherwise
recognizable at law'' and listed many types of specific instruments
that fall within that definition. 29 CFR 10.2. The Department's SCA
regulations, while containing a definition of ``contract'' that is
similar to the current Davis-Bacon regulatory definition at 29 CFR
5.2(h), separately specify that ``the nomenclature, type, or particular
form of contract used . . . is not determinative of coverage'' at 29
CFR 4.111(a).
In the NPRM, the Department noted that the term ``contract'' in the
Davis-Bacon and Related Acts has been interpreted in a similarly broad
manner, with the common law of contract as the touchstone. For example,
in its 1994 memorandum, the OLC cited the basic common-law
understanding of the term to explain that, for the purposes of the DBA,
``[t]here can be no question that a lease is a contract, obliging each
party to take certain actions.'' 1994 OLC Memorandum, 18 Op. O.L.C. at
113 n.3 (citing 1 Arthur Linton Corbin, Corbin on Contracts Sec. Sec.
1.2-1.3 (rev. ed. 1993)); see also Bldg. & Const. Trades Dep't, AFL-CIO
v. Turnage, 705 F. Supp. 5, 6 (D.D.C. 1988) (``The Court finds that it
is reasonable to conclude, as the WAB has done, that the nature of the
contract is not controlling so long as construction work is part of
it.''). The Davis-Bacon and Related Acts thus have been routinely
applied to various types of agreements that meet the common-law
definition of a ``contract''--such as, for example, leases, utility
privatization agreements, individual job orders or task letters issued
under basic ordering agreements, and loans or agreements in which the
only consideration from the agency is a loan guarantee--as long as the
other elements of DBRA coverage are satisfied.
In the NPRM, the Department also stated that it intends the use of
the term ``contract'' in the DBRA regulations to apply also to any
agreement in which the parties intend for a contract to be formed, even
if (as a matter of the common law) the contract may later be considered
to be void ab initio or otherwise fail to satisfy the elements of the
traditional definition of a contract. Such usage, the Department
explained, follows from the statutory requirement that the relevant
labor standards clauses must be included not just in ``contracts'' but
also in the advertised specifications that may (or may not) become a
covered contract. See 40 U.S.C. 3142(a).
In light of this discussion, the Department sought comments on
whether it is necessary to include in the regulatory text itself a
similarly detailed recitation of the types of agreements that may be
considered to be contracts. The Department also proposed, in a non-
substantive change, to move a sentence addressing whether governmental
entities are ``contractors'' from the current definition of
``contract'' to the new definition of ``contractor.''
Several commenters, including CEA, SMACNA, and the National
Alliance for Fair Contracting (NAFC), expressed general support for the
proposed definition of ``contract'' in the NPRM. No comments were
submitted expressing a position regarding whether the proposed
definition of contract should include the detailed list of agreements
or legal instruments that could be considered to be ``contracts'' under
the definition. As the Department noted in the NPRM, inclusion of a
detailed list of types of contracts should not be necessary, given that
such a list would follow directly from the use of the term ``contract''
in the statute.\169\ Thus, the final rule adopts the definition of
``contract'' as proposed, with one conforming edit to ensure that the
definition and the contract clauses that apply the defined term reflect
the principle that employers meeting the definition of ``material
supplier'' are not covered.\170\ See section III.B.3.ii.(G).(1).c
(``Material supplier exception''). While the Department has not
included a list in the regulatory text of all of the various types of
agreements that may be considered to be ``contracts'' under the
definition, it continues to interpret the DBRA as applying broadly to
any contract that fits within the common law definition, as well as to
contracts-implied-in-law where the parties intended to enter into such
a contract, as long as the contract satisfies the other
[[Page 57605]]
statutory and regulatory elements of coverage.
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\169\ The Restatement (First) of Contracts, published in 1932,
defined a ``contract'' as ``a promise or a set of promises for the
breach of which the law gives a remedy, or the performance of which
the law in some way recognizes as a duty.'' Restatement (First) of
Contracts section 1 (Am. L. Inst. 1932).
\170\ This conforming edit mirrors the language that the
Department proposed, and adopts in the final rule, to similarly
limit the definition of ``contractor.''
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(2) Definition of ``Contractor''
The Department proposed to include a new definition of the term
``contractor'' in Sec. 5.2. The word ``contractor'' is not defined in
the DBA or CWHSSA, and the existing DBRA regulations use the term
``contractor'' but do not define it. Paralleling the definition of
``contract,'' the Department proposed a definition of ``contractor'' to
clarify that, where used in the regulations, it applies to both prime
contractors and subcontractors. In addition, the proposed definition
sought to clarify that sureties may also--under appropriate
circumstances--be considered ``contractors'' under the regulations. As
noted in the NPRM, this is consistent with the Department's
longstanding interpretation. See Liberty Mut. Ins., ARB No. 00-018,
2003 WL 21499861, at *6 (June 30, 2003) (finding that the term
``contractor'' included sureties completing a contract pursuant to a
performance bond). As the ARB explained in the Liberty Mutual case, the
term ``contractor'' in the DBA should be interpreted broadly in light
of Congress's ``overarching . . . concern'' in the 1935 amendments to
the Act that the new withholding authority included in those amendments
would ensure workers received the pay they were due. Id. (citing S.
Rep. No. 74-1155, at 3 (1935)).
The proposed definition of ``contractor'' contained additional
clarifications. It contained language reflecting the long-held
interpretation that bona fide ``material suppliers'' are generally not
considered to be contractors under the DBRA, subject to certain
exceptions. As noted above, the Department also moved two sentences
from the existing definition of ``contract'' to the new definition of
``contractor.'' This language clarifies that State and local
governments generally are not regarded as contractors or subcontractors
under the Related Acts in situations where construction is performed by
their own employees. The exception is the subset of Related Act
statutes that more broadly require payment of Davis-Bacon prevailing
wages to all laborers and mechanics employed in the project's
development regardless of their employment by a contractor or
subcontractor.\171\ The Department proposed to supplement the language
regarding State and local governments to explain (as the Department has
similarly clarified in the SCA regulations) that the U.S. Government,
its agencies, and instrumentalities are also not contractors or
subcontractors for the purposes of the Davis-Bacon and Related Acts.
Cf. 29 CFR 4.1a(f).\172\
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\171\ As discussed in section III.B.3.ii.G.2.e, the Department
is including a new defined term, ``development statute,'' in the
final rule, which refers to the Related Acts that have this broader
scope of coverage.
\172\ The Department has also considered work by Tribal
governments using their own employees to be excluded from DBRA
coverage in a similar manner and for the same reasons as work by the
Federal agencies and instrumentalities and by State or local
recipients of Federal assistance. Under the final rule, the
Department will continue to interpret DBRA coverage in this manner.
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Several commenters, including CEA, SMACNA, and NAFC, expressed
general support for the proposed definition of ``contractor'' in the
NPRM. The Department did not receive any comments opposing the
inclusion of sureties within the definition of ``contractor'' or
opposing any of the other specific elements of the definition.\173\ AGC
did not oppose the proposed definition of contractor, but they sought
clarification on the status of ``business owners'' in the definition of
``contractor,'' ``prime contractor,'' and ``subcontractor.'' Citing to
FOH 15f06, AGC asserted that individuals who meet the definition of a
``business owner'' in the FLSA regulation at 29 CFR 541.101 are
``exempt from DBA coverage'' and should therefore not be included in
the definition of contractor.
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\173\ Several commenters opposed the Department's definition of
``material supplier'' (which is incorporated into the definitions of
contractor and subcontractor) as too narrow and therefore expanding
the types of companies treated as DBRA-covered ``contractors'' or
``subcontractors.'' The Department has addressed these comments in
the discussion of the definition of material supplier.
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AGC's comment appears to conflate two concepts: ``contractors'' and
``laborers or mechanics.'' If a person or business is a ``contractor,''
they have responsibilities under the DBRA contract clauses and
regulations to ensure that any workers they employ (or whose labor they
contract for by subcontract) are paid the required prevailing wage. If
a person is a ``laborer or mechanic,'' then they must be paid a
prevailing wage by the contractor or subcontractor for whom they work.
FOH 15f06 addresses whether an individual is a ``laborer or mechanic,''
not whether they are a ``contractor.''
Under the current DBRA regulations, the FLSA exemption from the
minimum wage and overtime requirements for a ``business owner'' is
relevant to whether an individual is a ``laborer or mechanic'' under
the DBRA who therefore must receive the prevailing wage. The DBRA
regulations define ``laborer or mechanic'' in part with a reference to
the part 541 FLSA regulations that provide tests for the
administrative, professional, and executive exemptions from the minimum
wage and overtime requirements under the FLSA. 29 CFR 5.2(m); 29 CFR
541.0. The ``business owner'' regulation at Sec. 541.101 is a method
of identifying employees who may be exempt under the FLSA exemption for
executive employees.
Unlike the definition of ``laborer or mechanic,'' the DBRA
definition of ``contractor'' does not involve the consideration of
whether an individual or entity is a business owner under 29 CFR
541.101. The Department defines the term ``contractor'' as a person
that ``enters into or is awarded a contract'' covered by the DBRA. If a
person enters into a covered prime contract or subcontract, that person
is a ``contractor'' to whom the DBRA requirements for contractors
apply--requiring that they ensure that any laborers or mechanics they
employ (or contract for) on the project are paid a prevailing wage.
Accordingly, the Department has not amended the definition of
``contractor'' to discuss the FLSA ``business owner'' exemption, and
the final rule adopts the definition of ``contractor'' as proposed.
(3) Definition of ``Prime Contractor''
The Department also proposed to add a definition for the term
``prime contractor'' as it is used in part 5 of the regulations.
Consistent with the ARB's decision in Liberty Mutual, ARB No. 00-018,
2003 WL 21499861, at *6, the Department proposed a broad definition of
prime contractor that would prioritize the appropriate allocation of
responsibility for contract compliance and enhance the effectiveness of
the withholding remedy. The proposed definition would clarify that the
label an entity gives itself is not controlling; rather, an entity is
considered to be a ``prime contractor'' based on its contractual
relationship with the Government, its control over the entity holding
the prime contract, or the duties it has been delegated.
The proposed definition began by identifying as a prime contractor
any person or entity that enters into a covered contract with an
agency. This would include, under appropriate circumstances, entities
that may not be understood in lay terms to be ``construction
contractors.'' For example, where a non-profit organization, owner/
developer, borrower or recipient, project manager, or single-purpose
entity contracts with a State or local government agency for covered
financing or assistance with the construction of housing--and the other
required elements of the relevant
[[Page 57606]]
Related Act statute are satisfied--that owner/developer or recipient
entity is considered to be the ``prime contractor'' under the
regulations. This is so even if the entity does not consider itself to
be a ``construction contractor'' and itself does not employ laborers
and mechanics and instead subcontracts with a general contractor to
complete the construction. See, e.g., Phoenix Dev. Co., WAB No. 90-09,
1991 WL 494725, at *1 (Mar. 29, 1991) (``It is well settled that prime
contractors (`owners-developers' under the HUD contract at hand) are
responsible for the Davis-Bacon compliance of their subcontractors.'');
Werzalit of Am., Inc., WAB No. 85-19, 1986 WL 193106, at *3 (Apr. 7,
1986) (rejecting petitioner's argument that it was a loan ``recipient''
standing in the shoes of a State or local government and not a prime
``contractor'').
The proposed definition of ``prime contractor'' also included the
controlling shareholder or member of any entity holding a prime
contract, the joint venturers or partners in any joint venture or
partnership holding a prime contract, any contractor (e.g., a general
contractor) that has been delegated all or substantially all of the
responsibilities for overseeing and/or performing the construction
anticipated by the prime contract, and any other person or entity that
has been delegated all or substantially all of the responsibility for
overseeing Davis-Bacon labor standards compliance on a prime contract.
Under this definition, more than one entity on a contract--for example,
both the owner/developer and the general contractor--could be
considered to be ``prime contractors'' on the same contract.
Accordingly, the proposal also explained that any of these related
legal entities would be considered to be the ``same prime contractor''
for the purposes of cross-withholding.
Although the Department had not previously included a definition of
prime contractor in the implementing regulations, the proposed
definition was consistent with the Department's prior enforcement of
the DBRA. In appropriate circumstances, for example, the Department has
considered a general contractor to be a ``prime contractor'' that is
therefore responsible for the violations of its subcontractors under
the regulations--even where that general contractor does not directly
hold the contract with the Government (or is not the direct recipient
of Federal assistance), but instead has been hired by the private
developer that holds the overall construction contract. See Palisades
Urb. Renewal Enters. LLP., ALJ No. 2006-DBA-00001, slip op. at 16 (Aug.
3, 2007), aff'd, ARB No. 07-124, 2009 WL 2371237 (July 30, 2009);
Milnor Constr. Corp., WAB No. 91-21, 1991 WL 494763, at *1, *3 (Sept.
12, 1991); cf. Vulcan Arbor Hill Corp. v. Reich, 81 F.3d 1110, 1116
(D.C. Cir. 1996) (referencing agreement by developer that ``its prime''
contractor would comply with Davis-Bacon standards). Likewise, where a
joint venture holds the contract with the government, the Department
has characterized the actions of the parties to that joint venture as
the actions of ``prime contractors.'' See Big Six, Inc., WAB No. 75-03,
1975 WL 22569, at *2, *4 (July 21, 1975).
The proposed definition of prime contractor was also similar to the
broad definition of the term ``contractor'' in the FAR part 9
regulations that govern suspension and debarment across a broad swath
of Federal procurement contracts. In that context, where the Federal
Government seeks to protect its interest in effectively and efficiently
completing procurement contracts, the FAR Council has adopted an
expansive definition of contractor that includes affiliates or
principals that functionally control the prime contract with the
government. See 48 CFR 9.403. Under the FAR part 9 definition,
``Contractor'' means any individual or entity that ``[d]irectly or
indirectly (e.g., through an affiliate)'' is awarded a Government
contract or ``[c]onducts business . . . with the Government as an agent
or representative of another contractor.'' Id.\174\ The Department has
a similar interest here in protecting against the use of the corporate
form to avoid responsibility for the Davis-Bacon labor standards.
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\174\ The definition section in 48 CFR 9.403 specifies that it
applies only ``as used in this subpart''--referring to subpart 9.4
of the FAR. It thus applies only to the general suspension and
debarment provisions of the FAR and does not apply to the
regulations within the FAR that implement the Davis-Bacon labor
standards, which are located in FAR part 22 and the contract clauses
in FAR part 52. The DBRA-specific provisions of the FAR are based on
the Department's regulations in parts 1, 3, and 5 of subtitle 29 of
the CFR, which are the subject of this rulemaking. The Department
does not anticipate that this rulemaking will affect FAR subpart
9.4.
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The Department sought comment on the proposed definition of ``prime
contractor,'' in particular, as it would affect the withholding
contract clauses at Sec. 5.5(a)(2) and (b)(3), the prime contractor
responsibility provisions at Sec. 5.5(a)(6) and (b)(4), and the
proposed provisions in Sec. 5.9 regarding the authority and
responsibility of contracting agencies for satisfying requests for
cross-withholding.
Several commenters, including LIUNA, UBC, and UA, expressed support
for the proposed definition of ``prime contractor.'' These commenters
supported the proposed definition of ``prime contractor'' because they
believe the definition--in tandem with the modifications to the
withholding contract clause--will help address violations on DBRA
contracts by expanding the Department's ability to recover back wages.
Commenters emphasized that there has been documentation of widespread
labor violations in the construction industry in recent decades, and
that this problem has been exacerbated by various enforcement
shortcomings.\175\ As the UBC noted, the lack of meaningful enforcement
in the industry has in turn led to ``a breakdown of industry self-
policing.'' Commenters also stated that there has been an increase in
recent
[[Page 57607]]
decades in the use of ``contracting vehicles,'' such as single-purpose
limited liability companies (LLCs). NCDCL and FFC stated that they had
witnessed the use of these vehicles by contractors to avoid liability
for wage violations. According to the UA, it is ``vital'' that the
Department clarify liability for back wages for those contractors that
``jump from one project to the next under various names.''
---------------------------------------------------------------------------
\175\ WA BCTC and LIUNA, for example, pointed to the
Department's recent data showing that the construction industry is
consistently one of the top two low-wage, high violation industries.
See https://www.dol.gov/agencies/whd/data/charts/low-wage-high-violation-industries. The comment from the Leadership Conference on
Civil & Human Rights and other civil rights and worker advocacy
organizations pointed to various studies showing that a significant
number of construction employers misclassified workers as
independent contractors or otherwise working ``off-the-books.'' See,
e.g., Mark Erlich, ``Misclassification in Construction: The Original
Gig Economy,'' 74 Indus. & Lab. Rel. Rev. 1202 (2021); Nat'l Emp. L.
Project, ``Independent Contractor Misclassification Imposes Huge
Costs on Workers and Federal and State Treasuries '' (Oct. 2020),
https://www.nelp.org/publication/independent-contractor-misclassification-imposes-huge-costs-workers-federal-state-treasuries-update-october-2020; Nathaniel Goodell & Frank Manzo IV,
``The Costs of Wage Theft and Payroll Fraud in the Construction
Industries of Wisconsin, Minnesota, and Illinois: Impacts on Workers
and Taxpayers '' (Jan. 2021), https://midwestepi.files.wordpress.com/2020/10/mepi-ilepi-costs-of-payroll-fraud-in-wi-mn-il-final.pdf; Mandy Locke, et. al., ``Taxpayers and
Workers Gouged by Labor-Law Dodge,'' Miami Herald (Sept. 4, 2014),
https://www.miamiherald.com/latest-news/article1988206.html; Russell
Ormiston et al., supra note 70, at 75-113 (summarizing widespread
labor violations in the residential construction industry). A
comment from two Professors of Economics noted that the research
documenting worker misclassification and wage theft in the U.S.
construction industry is ``extensive.'' They noted one estimate
using government data found between 12.4 percent and 20.5 percent of
the U.S. construction workforce is misclassified, while other
studies imply the proportion exceeds 30 percent in some locations.
See Russell Ormiston et. al., ``An Empirical Methodology to Estimate
the Incidence and Costs of Payroll Fraud in the Construction
Industry'' (2020) at 37, https://iceres.org/wp-content/uploads/2020/06/ICERES-Methodology-for-Wage-and-Tax-Fraud.pdf; Workers Defense
Project, ``Building a Better Texas: Construction Conditions in the
Lone Star State'' (2013) at 2, https://workersdefense.org/wpcontent/uploads/2020/10/research/Build%20a%20Better%20Texas.pdf; Clayton
Sinai et al., ``The Underground Economy and Wage Theft,'' Catholic
Labor Network (2021) at 7,https://catholiclabor.org/wpcontent/uploads/2021/04/Underground-Economy-and-Wage-Theft-Report-4.14.pdf.
---------------------------------------------------------------------------
As the comment from the LCCHR and other civil rights and worker
advocacy organizations stated, the expanded definition of ``prime
contractor'' will ensure that any person or entity that is entirely or
mostly responsible for overseeing the contract will be accountable for
following the law. Referencing the proposal, COSCDA stated that they
concurred generally with the Department's efforts to recover back
wages. III-FFC stated that the prime contractor definition, as
incorporated into the proposed cross-withholding provision, would help
to protect workers against wage theft and will help to achieve the
fundamental purpose of the Davis-Bacon Act.
Other commenters opposed the proposed definition. The Illinois Road
& Transportation Builders Association (IRTBA), the Ohio Contractors
Association (OCA), the Southern Illinois Builders Association (SIBA),
and the American Pipeline Contractors Association (APCA) submitted
comments arguing that the proposed definition would place an undue
burden on contractors, increase their risk, and discourage them from
bidding on work covered by the DBRA, thus making it harder for the
government to find qualified contractors. These commenters, along with
the FTBA, also argued that the new definition would not improve
enforcement of the Davis-Bacon Act, and that the Department had not
presented any evidence that the current standards for imposing
liability are either ineffective or unworkable. The FTBA asserted that
the Department's sole justification was to create a ``broader pot of
funds if needed for withholding purposes.''
Other commenters did not directly oppose the definition of ``prime
contractor,'' but they expressed concerns or requested additional
clarification. NAHB expressed concern that the proposed definition of
``prime contractor'' (among other proposals) would introduce
uncertainty as to liability for homebuilders, particularly multifamily
builders that are highly dependent on subcontractors. In their comment,
NAHB suggested that the definitions of ``prime contractor'' and
``subcontractor'' seem to remove the ``defining line'' between general
contractor and subcontractor liability. NAHB stated that the Department
should clarify that the apportionment of liability between multiple
entities should be governed by the ``joint employer'' standard under
the FLSA. Likewise, AGC, in a manner similar to its comment regarding
the definition of ``contractor,'' did not specifically oppose the
proposed definition of ``prime contractor,'' but requested
clarification that a ``business owner'' under the FLSA regulations is
not included in the definition. Several other commenters opposed the
Department's cross-withholding provisions but did not expressly oppose
the definition of ``prime contractor.''
The Department agrees with the commenters that supported the
proposed definition of ``prime contractor'' because it will promote
compliance with the DBRA by specifying which entities are properly
defined as prime contractors. As these commenters explained, recent
studies have shown that there is widespread noncompliance with basic
wage and hour laws in the construction industry as a whole, and in the
residential construction industry in particular.\176\ Under these
circumstances, and given the very large number of DBRA-covered
contracts for which the Department is in charge of enforcement, it is
important that the regulations and contract clauses appropriately
incentivize compliance.\177\ By codifying a definition of ``prime
contractor,'' the Department clarifies which entities may be held
liable for noncompliance of subcontractors. Doing so puts these
entities on notice that they will be held liable for violations of
subcontractors on the contract under the liability and flow-down
provisions of the contract clauses at Sec. 5.5(a)(6) and (b)(4), which
create an incentive for the prime contractors to ensure that
subcontractors on the project will be in compliance with the DBRA
before work commences.
---------------------------------------------------------------------------
\176\ See supra note 175.
\177\ The Department also addresses these arguments in its
discussion of the cross-withholding provision in the DBRA contract
clause, in section III.B.3.xxiii.
---------------------------------------------------------------------------
The Department disagrees with commenters that opposed the proposed
definition on the basis that the Department lacked sufficient evidence
or analysis showing that the new definition is necessary. As noted
above, the widespread compliance problems in the construction industry
are well documented, see supra note 175, and, as explained in the NPRM,
the Department has noted that the use of single-purpose LLC entities
and similar joint ventures and teaming agreements has been increasing
in recent decades. See, e.g., John W. Chierichella & Anne Bluth Perry,
``Teaming Agreements and Advanced Subcontracting Issues,'' TAASI GLASS-
CLE A, at *1-6 (Fed. Publ'ns LLC, 2007); A. Paul Ingrao, ``Joint
Ventures: Their Use in Federal Government Contracting,'' 20 Pub. Cont.
L.J. 399 (1991). This confluence of trends in construction contracting
has created significant enforcement challenges for the Department, at
times requiring exhaustive investigations and litigation to pierce the
corporate veil.\178\ One of the key reforms that experts analyzing
these types of problems in the construction industry have recommended
is a clarification of liability among upper-level entities that have
control over the workplace.\179\
---------------------------------------------------------------------------
\178\ See, e.g., Letter from Cheryl M. Stanton, Adm'r to Hal J.
Perloff (Sept. 17, 2020) (piercing the veil in DBRA matter involving
a Military Housing Privatization Initiative project).
\179\ See, e.g., Ormiston et al. (2020), supra note 70 at 100-
101.
---------------------------------------------------------------------------
The Department also does not agree that the proposed definition
would cause undue burdens or introduce uncertainty for contracting
entities. The regulations in Sec. [thinsp]5.5(a)(6) and (b)(4) have
long held prime contractors responsible for compliance by their
subcontractors, and the Department has long interpreted the Act as
allowing for piercing the corporate veil in appropriate circumstances.
Codifying the proposed definition of prime contractor does not change
the obligations of a prime contractor on a DBRA project; rather, it
provides clarity on which entity or entities are properly identified as
the prime contractor. The definition uses well understood terms,
including ``controlling shareholders or members'' and ``joint venturers
or partners.'' It also states that contractors have been delegated
``all or substantially all of the responsibilities for overseeing any
construction'' will be considered prime contractors. This language
provides clarity so that entities can recognize ahead of time whether
they may bear potential liability for violations on a DBRA-covered
contract and can protect themselves by using care in the choice of
subcontractors and using indemnification agreements and similar
instruments that will adequately address any increased risk.
The Department disagrees with NAHB that the liability of prime
contractors should be limited to any liability as ``joint employers''
under the FLSA. Such a limitation on liability would be inconsistent
with the longstanding interpretation of the DBRA of holding
[[Page 57608]]
prime contractors responsible for any back wages that are owed to the
employees of subcontractors regardless of whether there is any
employment relationship or even any knowledge of the violations that
have taken place. See 29 CFR 5.5(a)(6); M.A. Bongiovanni, Inc., WAB No.
91-08, 1991 WL 494751, at *1 (Apr. 19, 1991). This longstanding
interpretation follows from the Congressional intent in the DBRA that
the Act ensure that laborers and mechanics that are employed on the
site of the work are paid the required prevailing wage. Bongiovanni,
1991 WL 494751, at *1.
The Department also does not agree with AGC that a person who may
be a ``business owner'' under the FLSA regulations cannot be a ``prime
contractor'' under the DBRA definition. As noted above with regard to
the definition of ``contractor,'' AGC's comment appears to conflate two
concepts: first, whether an individual or business is a ``prime
contractor'' and therefore must ensure that covered workers on the
project are paid the required prevailing wage; and second, whether an
individual is a ``laborer or mechanic'' to whom a prevailing wage must
be paid. The provision of the FOH referenced by the AGC in its comment
(FOH 15f06) addresses the latter question, not the former.
While the Department declines to limit the definition of prime
contractor with reference to the FLSA regulations, the Department has
decided that the definition should be amended to limit ambiguity in one
respect. In the proposal, the definition included ``any other person or
entity that has been delegated all or substantially all of the
responsibility for overseeing Davis-Bacon labor standards compliance on
a prime contract.'' This language could have extended the definition to
cover individual employees of a contractor regardless of their
ownership interests, which was beyond the scope that the Department
intended for the definition. This language has been removed from the
definition in the final rule.
Other than the modification noted above, the final rule adopts the
definition of prime contractor in Sec. 5.2 as proposed.
(4) Definition of ``Subcontractor''
In addition to new definitions of ``contractor'' and ``prime
contractor,'' the Department also proposed a new definition of the term
``subcontractor.'' The definition, as proposed, affirmatively stated
that a ``subcontractor'' is ``any contractor that agrees to perform or
be responsible for the performance of any part of a contract that is
subject wholly or in part to the labor standards provisions of any of
the laws referenced in Sec. 5.1.'' Like the current definition of
``contract,'' the proposed definition of ``subcontractor'' also
reflects that the Act covers subcontracts of any tier--and thus the
proposed definition of ``subcontractor'' stated that the term includes
subcontractors of any tier. See 40 U.S.C. 3412; Castro v. Fid. &
Deposit Co. of Md., 39 F. Supp. 3d 1, 6-7 (D.D.C. 2014). The proposed
definition of ``subcontractor'' necessarily excluded material suppliers
(except for narrow exceptions), because such material suppliers are
excluded from the definition of ``contractor,'' as proposed, and that
definition applies to both prime contractors and subcontractors.
Finally, the proposed definition of ``subcontractor'' stated that the
term did not include laborers or mechanics for whom a prevailing wage
must be paid.
Several commenters expressed general support for the Department's
definition of ``subcontractor.'' The Department did not receive any
comments expressly opposed to the definition. NAHB and AGC, however,
expressed similar concerns about the definition as their concerns about
the definitions of ``contractor'' and ``prime contractor.'' NAHB
suggested that the definition removed defining lines around traditional
concepts of subcontractor liability. AGC sought to clarify that
``business owners'' are ``exempt'' from being considered covered
subcontractors.
In light of the comments from NAHB and AGC, the Department has
reconsidered one aspect of the definition of subcontractor. The
proposed definition excluded from inclusion as ``subcontractors'' those
``ordinary laborers or mechanics to whom a prevailing wage must be paid
regardless of any contractual relationship which may be alleged to
exist between the contractor or subcontractor and the laborers and
mechanics.'' This language was borrowed from the 1935 amendment to the
DBA, which requires the payment of a prevailing wage ``regardless of
any contractual relationship which may be alleged to exist between the
contractor or subcontractor and the laborers and mechanics.'' 40 U.S.C.
3142(c)(1). This language has been interpreted to ensure that the
requirement to pay a prevailing wage extends beyond the traditional
common-law employment relationship. See section III.B.3.xxii
(discussing the definition of ``Employed'').
Upon further consideration, the Department's recitation of this
statutory language in the proposed definition of ``subcontractor''
could have been misconstrued as having the opposite of the intended
effect. By including that language in the 1935 amendment to the DBA,
Congress intended to emphasize that an individual could be a laborer or
mechanic--and therefore be due a prevailing wage--regardless of whether
they might be called a subcontractor or independent contractor. See
Bldg. & Const. Trades Dep't, AFL-CIO v. Reich, 40 F.3d 1275, 1288 (D.C.
Cir. 1994) (analyzing House and Senate reports for the 1935 DBA
amendments). In other words, an individual can both be referred to as a
``subcontractor'' who contracts for a portion of the work on the prime
contract and also be a laborer who must be paid a prevailing wage by
the prime contractor or upper-tier subcontractor that has brought them
onto the project.
The conclusion that an individual can have dual roles as
``subcontractor'' and ``laborer or mechanic'' is consistent with the
Department's guidance on this issue. See DBRA-185 (July 28, 1993);
DBRA-178 (July 31, 1992). In those letters, the Department responded to
a request concerning the payment of prevailing wages to ``independent
contractors who are owners or working foremen.'' After analyzing the
statutory text of the DBA, the Department concluded that ``individuals
[or partners] who subcontract to perform a portion of a Davis-Bacon
contract and who simultaneously meet the regulatory definition of a
laborer or mechanic must be compensated at the prevailing wage rate by
the prime contractor for any work so performed.'' Id.\180\
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\180\ The Department's guidance regarding ``working
subcontractors'' has not been a model of clarity. In the 1950's, the
Department concluded that the statutory language of the 1935
amendments clearly indicated that individuals could be both owner-
operators and also ``laborers or mechanics'' owed a prevailing
wage--a position with which the Attorney General agreed. See Federal
Aid Highway Program-Prevailing Wage Determination, 41 U.S. Op. Atty.
Gen. 488, 489-503 (1960). Subsequently, after issuing several
letters with similar positions, the Department then issued an AAM
regarding ``working subcontractors'' in 1976, see AAM 123 (May 19,
1976), only to immediately revoke it, see AAM 125 (Aug. 30, 1976).
The Department promised subsequent guidance, but in the meantime
reminded contracting agencies of the statutory language that the
DBRA requirements must be met ``regardless of any contractual
relationship[.]'' AAM 125. The Department did not issue a new AAM,
but instead issued the 1981-1982 rulemaking, and then the subsequent
ruling letters that clarified that individuals can be both
``subcontractors'' and ``laborers or mechanics.'' DBRA-185 (July 28,
1993); DBRA-178 (July 31, 1992). See also Griffin v. Sec'y of Lab.,
ARB Nos. 00-032, 00-033, 2003 WL 21269140, at *4, *7 (May 30, 2003)
(noting that the Department ``considers even bona fide owner-
operators performing DBA-covered work on a DBA-covered project to be
due the prevailing rate.''), aff'd sub nom Phoenix-Griffin Grp. II,
Ltd. v. Chao, 376 F. Supp. 2d 234, 242 (D.R.I. 2005). The
Department, however, has also stated that ``as a matter of
administrative policy'' the requirements of the DBRA and CWHSSA are
not applied to the wages of truck owner-operators who are bona fide
independent contractors, even though they are laborers or mechanics
within the meaning of the Acts. DBRA-54 (Nov. 1, 1977). The
Department has explained in FOH 15e17 that this policy does not
apply to owners of other equipment such as bulldozers, and that, as
part of the policy, any employees hired by truck owner-operators are
subject to the DBRA in the usual manner.
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[[Page 57609]]
AGC's comment regarding the ``business owners'' exemption in Sec.
541.101 of the FLSA regulations throws this hypothetical circumstance
into sharper relief. The Department's DBRA regulations explain that
individuals ``employed in a bona fide executive, administrative, or
professional capacity as defined in part 541 of this title are not
deemed to be laborers or mechanics.'' 29 CFR 5.2(h). The FLSA
``business owner'' regulation at Sec. 541.101 is one method under part
541 of identifying an employee that fits within the FLSA's exemption
from minimum wage and overtime pay requirements for ``executive
employees.'' Id. Sec. 541.101(a). That FLSA regulation language
provides that an ``employee'' falls under the executive exemption if
the employee ``owns at least a bona fide 20-percent equity interest in
the enterprise in which the employee is employed, regardless of whether
the business is a corporate or other type of organization, and who is
actively engaged in its management.'' Id. The subsequent section of the
FLSA regulations, Sec. 541.102, defines ``management'' as
``[g]enerally'' including a variety of different duties, largely
(though not solely) related to hiring and supervising employees.
The DBA statute itself provides important context for responding to
AGC's question regarding ``business owners.'' As the Department
highlighted in the NPRM, the DBA contains express language conveying
Congress's concern that the payment of prevailing wages to workers on
covered projects should not be evaded by characterizing workers as
owner operators or subcontractors. See BCTD v. Reich, 40 F.3d at 1288;
DBRA-185; DBRA-178. The statute requires the payment of prevailing wage
``regardless of any contractual relationship which may be alleged to
exist between the contractor or subcontractor and the laborers and
mechanics.'' 40 U.S.C. 3142(c)(1). This language was intended to
``eliminat[e] an evasive device whereby individual laborers formed
partnerships under which the member partners received less than the
prevailing wage.'' BCTD, 40 F.3d at 1280 (citing the 1935 House and
Senate reports).
Accordingly, to find that an individual is not a ``laborer or
mechanic'' and is not due the prevailing wage, it is not sufficient to
simply assert that an individual has an ownership interest in a
business. Rather, to be excepted from coverage under the DBRA, an
individual must be employed in a ``bona fide'' executive capacity under
the FLSA part 541 regulations. 29 CFR 5.2(h). In carrying out this
analysis, the Department is mindful of the Congressional intent
regarding the use of corporate entities and partnerships underpinning
the 1935 amendments to the DBA.\181\
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\181\ The FOH provision that AGC cites emphasizes the narrowness
of the exemption. It states that regardless of ownership interest,
an individual ``who is required to work long hours, makes no
management decisions, supervises no one and has no authority over
personnel does not qualify for the executive exemption.'' FOH 15f06.
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In any case, as with the definitions of ``contractor'' and ``prime
contractor,'' AGC has conflated the question of whether an individual
may be exempt from being paid the prevailing wage as a ``laborer or
mechanic'' with the question of whether an individual may be a
``subcontractor.'' The FLSA definition of ``business owner'' is
relevant to the ``laborer or mechanic'' definition under the DBRA, but
is wholly distinct from whether an individual or entity is a
``subcontractor'' with associated duties under the DBRA, its
regulations, and its contract clauses.\182\
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\182\ Although not for the reason AGC asserted, it may be
unlikely that an individual may be both a ``subcontractor'' under
the DBRA and a ``business owner'' under the FLSA regulations. This
is because the definition of ``business owner'' in the FLSA
regulations includes any ``employee'' who owns a bona fide interest
of at least 20 percent in ``the enterprise in which the employee is
employed, regardless of whether the business is a corporate or other
type of organization[.]'' 29 CFR 541.101. Under this language, an
individual must actually be an employee of an enterprise or
organization for which the individual has an ownership interest for
the exemption to apply. This is so because of the terms of the
regulation and because the FLSA's minimum wage and overtime pay
requirements (the requirements from which part 541 provides
exemptions) apply only to employees and not to bona fide independent
contractors. The ``business owner'' exemption thus does not apply to
an individual who is in business only as a bona fide sole proprietor
or is not otherwise an employee of the enterprise or organization in
which the individual has the ownership interest. Thus, to the extent
such a sole proprietor (as opposed to an LLC or corporation) may
subcontract for a portion of the prime contract, the individual
would not meet the requirements for exemption as a ``business
owner'' under Sec. 541.101.
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Accordingly, the final rule adopts the proposed definition of
``subcontractor,'' amended as discussed above to eliminate the
reference to the statutory language from 40 U.S.C. 3142(c)(1).
(E) Apprentice and Helper
The Department proposed to amend the current regulatory definition
in Sec. 5.2(n) of ``apprentice, trainee, and helper'' to remove
references to trainees. A trainee is currently defined as a person
registered and receiving on-the-job training in a construction
occupation under a program approved and certified in advance by the
Employment and Training Administration (ETA) as meeting its standards
for on-the-job training programs, but ETA no longer reviews or approves
on-the-job training programs, so this definition is unnecessary. See
section III.B.3.iii.(C) (``29 CFR 5.5(a)(4) Apprentices''). The
Department also proposed to modify the definition of ``apprentice and
helper'' to reflect the current name of the office designated by the
Secretary of Labor, within the Department, to register apprenticeship
programs.
The Department received three comments in response to this
proposal. CEA and SMACNA both agreed that ETA no longer reviews or
approves on-the-job training programs and supported the Department's
proposal to remove references to trainees. The Illinois Asphalt
Pavement Association (IAPA) opposed the Department's proposal and
stated that ``eliminating trainees from the Davis[-]Bacon Act may have
unintended consequences.'' IAPA noted that the Illinois Department of
Transportation has a ``Highway Construction Careers Training Program''
with the U.S. Department of Transportation's (USDOT) Federal Highway
Administration (FHWA), in which individuals receive intensive training
in highway construction-related skills.\183\ IAPA cautioned that these
student trainees may not be able to work on Davis-Bacon projects if the
trainee language is removed.
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\183\ See Ill. Dep't of Transp., ``Highway Construction Careers
Training Program,'' https://idot.illinois.gov/Assets/uploads/files/About-IDOT/Pamphlets-&-Brochures/PA%20HCCTP%20story%201%20kg.pdf
(including ``job site readiness, carpentry, concrete flatwork,
blueprint reading orientation, introduction to tools, forklift
operation and Occupational Safety and Health Administration 10
certification'').
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The Department notes that the proposed regulatory definition in
Sec. 5.2 retains the text currently found in Sec. 5.2(n)(3), which
states that the regulatory provisions do not apply to trainees employed
on projects subject to 23 U.S.C. 113 who are enrolled in programs which
have been certified by the Secretary of Transportation in accordance
with 23 U.S.C. 113(c). The Department believes that retention of this
language makes clear that student
[[Page 57610]]
trainees who are enrolled in such programs may continue to work on
Davis-Bacon projects as a recognized category of workers at wage rates
determined by the Secretary of Transportation in accordance with 23
U.S.C. 113(c). Accordingly, the Department adopts the change to Sec.
5.2 as proposed.
(F) Laborer or Mechanic
(1) Gender-Neutral Terminology
The Department proposed to amend the regulatory definition of
``laborer or mechanic'' to remove the reference to trainees and to
replace the term ``foremen'' with the gender-neutral term ``working
supervisors.'' \184\ The Department received several comments on this
proposal.
---------------------------------------------------------------------------
\184\ The proposal addressing trainees is discussed in greater
detail below in section III.B.3.iii.(C) (``29 CFR 5.5(a)(4)
Apprentices.'').
---------------------------------------------------------------------------
The General Contractors Association of New York (GCA), while
appreciative of efforts to introduce gender-neutral terminology,
recommended using the term ``foreperson'' instead of ``working
supervisor'' as the latter term may be confused with managerial
positions. ARTBA also recommended the term ``foreperson'' instead, as
the term ``working supervisor'' is ``nebulous and could apply to
multiple people on a construction site.'' Several commenters objected
to the term ``working supervisor,'' noting that the term ``working
supervisor'' does not appropriately describe the years of training and
skill attainment necessary to achieve the stature of ``journeyperson.''
See, e.g., SMART and SMACNA. This commenter also noted that the word
``supervisor'' has a specific meaning under the National Labor
Relations Act (NLRA) and cautioned against importing the word into
Davis-Bacon regulations.
Having considered the comments, the final rule adopts the proposed
revision with modification. Rather than replacing the term ``foremen''
with ``working supervisor,'' the Department adopts the gender-neutral
term ``foreperson.''
(2) Survey Crews
The Department did not propose any additional substantive changes
to this definition, but because it frequently receives questions
pertaining to the application of the definition of ``laborer or
mechanic''--and thus the application of the Davis-Bacon labor
standards--to members of survey crews, the Department provided
information in the preamble of the NPRM to clarify when survey crew
members are laborers or mechanics under the existing definition of that
term. The Department adopts that guidance in the preamble to this final
rule, with an additional clarification in response to comments
received.
Specifically, the NPRM stated that the Department has historically
recognized that members of survey crews who perform primarily physical
and/or manual work on a DBA or Related Acts covered project on the site
of the work immediately prior to or during construction in direct
support of construction crews may be laborers or mechanics subject to
the Davis-Bacon labor standards.\185\ Whether or not a specific survey
crew member is covered by these standards is a question of fact, which
takes into account the actual duties performed and whether these duties
are ``manual or physical in nature,'' including the ``use of tools or .
. . work of a trade.'' When considering whether a survey crew member
performs primarily physical and/or manual duties, it is appropriate to
consider the relative importance of the worker's different duties,
including (but not solely) the time spent performing these duties.
Thus, survey crew members who spend most of their time on a covered
project taking or assisting in taking measurements would likely be
deemed laborers or mechanics (provided that they are not exempt as
professional, executive, or administrative employees under part 541).
If their work meets other required criteria (i.e., it is performed on
the site of the work, where required, and immediately prior to or
during construction in direct support of construction crews), it would
be covered by the Davis-Bacon labor standards.
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\185\ 87 FR 15729 (citing AAM 212 (Mar. 22, 2013)).
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The Department sought comment on issues relevant to the application
of the current definition to survey crew members, especially the range
of duties performed by, and training required of, survey crew members
who perform work on construction projects and whether the range of
duties or required training varies for different roles within a survey
crew based on the licensure status of the crew members, or for
different types of construction projects.
The Department received a number of comments in response to the
clarifying information provided in the NPRM despite proposing no
changes to the definition of ``laborer or mechanic'' that would impact
the application of this term to members of survey crews. Many
commenters misunderstood the information provided to mean that the
Department was proposing to categorically deem members of survey crews
to be ``laborers or mechanics'' subject to the Davis-Bacon labor
standards and wrote to support or oppose such a change. The Department
did not make such a proposal and reiterates that whether a specific
survey crew member is covered by the Davis-Bacon labor standards is a
question of fact based largely on the actual duties performed.
Similarly, some commenters opined that the work performed by survey
crew members is ``manual or physical in nature,'' and thus within the
definition of ``laborer or mechanic,'' or that such work is ``mental''
or ``intellectual'' in nature, and thus not within the definition,
without addressing the range of duties performed by, and training
required of, survey crew members who perform work on construction
projects. However, the Department has long recognized that work
performed by survey crew members ``immediately prior to or during
construction in direct support of construction crews'' involves a range
of duties, which are evaluated to determine whether a specific survey
crew member or category of survey crew members are ``laborers or
mechanics.'' AAM 16 (July 25, 1960); AAM 39 (Aug. 6, 1962); AAM 212
(Mar. 22, 2013).\186\
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\186\ Commenters that characterize the Department's position as
``flipflopping'' on the issue of survey crew coverage fail to
recognize the fact-specific nature of this coverage question. For
example, AGC contended that the Department extended coverage to
survey crew members in AAM 212 and ``confirmed that surveying work
is not covered'' when it rescinded AAM 212. While AAM 212 was
rescinded to allow the Department to seek a broader appreciation of
the coverage issue and due to its incomplete implementation, see AAM
235 (Dec. 14, 2020), its rescission did not change the applicable
standard, which is the definition of ``laborer or mechanic'' as
currently set forth in 29 CFR 5.2(m), or the Department's position
that coverage depends on the range of duties performed.
---------------------------------------------------------------------------
The duties of survey crew members described by commenters varied
widely. As a preliminary matter, several commenters distinguished
between the surveying work that typically occurs in direct support of
construction crews and other work that survey crews may perform. The
California Land Surveyors Association (CLSA) noted that ``construction
and construction-related land surveying work is a very small fraction
of any land surveyor[']s work.'' It further noted that ``[c]onstruction
land surveying field work is comprised of an ability to read
engineering and architecture plans and convey this information to
construction contractor's tradesman so they may self-perform their land
surveying work,'' explaining that ``[c]ontractors have the full
capacity, due to technology, to perform
[[Page 57611]]
any prospective land surveying work limited to manual or physical
duties related to construction.'' This was echoed by III-FFC, which
explained that ``survey work on a construction project is distinct from
professional land surveying activities such as marking land boundaries
or preparing a description for title or real property rights,'' and by
ARTBA, which described the need to ``distinguish between the survey
work performed by design professionals and the essential surveying
tasks that take place as part of construction activities.'' GCA
similarly ``distinguish[ed] between the survey work performed by
licensed professionals who often work for design or consulting firms,
and the survey work performed by construction crews that are essential
to any construction project,'' opining that the latter should
``continue to be covered by prevailing wage requirements.'' An
individual commenter noted that as the technology has become more
readily available, ``construction companies have been able to purchase
equipment and train individuals in their rudimentary measurements
functions.'' Another noted that many construction companies now have
surveyors on staff.
The Department recognizes that survey work performed ``immediately
prior to or during construction in direct support of construction
crews'' may differ from survey work performed in other contexts and may
vary in complexity. The Department has kept this in mind while
reviewing the duties described by commenters, focusing on the duties
performed by survey crew members on Davis-Bacon covered contracts. For
instance, several commenters described work performed off the site of
the work, including preliminary office work, such as preparing design
information for use in the field; uploading design information to the
total station, GPS device, or data collector; research; and
postliminary office work, such as downloading and reviewing information
from that day's field work. IAPA; Illinois Professional Land Surveyors
Association (IPLSA); IRTBA; OCA. Because such duties would not
generally be performed on the site of the work, and thus would not be
subject to the Davis-Bacon labor standards, the Department did not
consider such duties to be an integral part of the work performed for
the purposes of determining whether survey crew members are ``laborers
or mechanics'' for the purposes of 29 CFR 5.2(m). Conversely, IAPA
pointed out that the Department did not include in the clarifying
information in the NPRM its previous determination from AAM 212 that
only survey crew members employed by contractors or subcontractors on a
project may be covered laborers or mechanics. The Department agrees
that only survey crew members employed by contractors or subcontractors
on a project may be covered laborers or mechanics.
A number of commenters described the survey work performed on
construction sites immediately prior to or during construction in
direct support of construction crews. For instance, several commenters
explained that this includes reestablishing land boundary monuments and
control points, doing construction layout, and placing wooden stakes
(known as lath and hubs) that mark the contours of the construction
project. IAPA, IPLSA, IRTBA, Michigan Department of Transportation
(MDOT), OCA, SIBA. ``A general description of survey work on horizontal
construction (e.g., a highway, road, or runway project) begins with
laying out the control points provided on the engineer's plans. Next, a
survey crew or worker locates, marks, and installs lath and hub with a
hammer and/or sledgehammer at certain points across the jobsite (e.g.,
every 25, 50, or 100 feet) for the initial excavation. A worker may
initially use a GPS unit to measure for a `rough grade.' Then, after
initial excavation, the worker may use a robotic instrument for more
accurate positioning and elevation and continue to mark various layers
of subgrade, including utilization of robotics and GPS positioning for
machine control (e.g., excavation, paving, drilling, and pile driving).
Throughout the day the worker is physically driving lath and hubs into
the earth or carrying, setting up and using equipment around the
construction site. From start to finish on a construction project,
survey crew members work in direct support of construction crews.''
III-FFC. Of these duties, GCA explained that construction crews can
perform duties ``essential to any construction project,'' including
``layout for neat lines, rough excavation, footings, piers, piles,
caissons anchor bolts, base plates, walls, major imbedded items, slurry
walls, and other procedures that require layout of all lines and grades
for vertical and horizonal control.''
Some commenters emphasized aspects of the work requiring the
exercise of professional judgment, such as the need to ``observe the
progress of the project, read and interpret design data and methods on
the construction plans, calculate and determine if the current site
conditions meet the intent of the design, and recalculate and/or design
a solution in the field that satisfies the plans.'' Michigan Society of
Professional Surveyors (MSPS); see also MDOT. These commenters also
emphasized the need to complete forms, perform calculations and
technical and mentals tasks, and the need to use complex electronic
devices. MDOT; MSPS.
Other commenters emphasized physical and manual aspects of
surveying work, including the use of tools. III-FFC explained: ``To
perform their job, survey crew members use data collectors, GPS units,
robotic instruments (i.e., robotic total stations), total stations,
transits, drones, scanners, and ground penetrating radar. This
equipment is used for construction purposes such as: survey control;
building control including grid line layout, electrical, plumbing,
communications, foundations, and heating, ventilation, and air
conditioning (HVAC) systems; clearing; slope staking; rough grade;
final/finish grade; drainage and utility layout; curb, sidewalk and
other hardscape surface improvements; subdrains; structures; walks;
channels' culverts; and stakes or measurements for other related items
. . . . Workers on a survey crew also use a variety of tools commonly
associated with construction work, including sledgehammers to drive
lath and hubs into the ground, hammers, nails, shovel, folding rule,
scribe, tool belt, spray paint and ribbon . . . . While some methods
have changed with technical advances, the physical nature of survey
work has not.'' Similarly, IUOE explained that ``members of Surveyor
Crews are on their feet most of the workday, often walking several
miles a shift up and down slope. Crew members are often expected to
carry 30-40 lbs. worth of equipment with them to perform their task
including but not limited to: GPS receivers [and] staff, lathe rub and
hack bag, sledgehammer, and shovel. Additionally, Survey Crew members
are expected to carry manual tools on utility belts including a 16 oz
hammer, gloves, goggles, hand tape and knives. Surveyors are often
tasked with navigating rough terrain and working with a GPS to sink
stakes, lathes, and hubs with a sledgehammer into the ground for
equipment operators to use as a guide for excavating or grading.''
Additionally, they noted that surveyors ``are often tasked with
chiseling into concrete with steel hammers to mark where other trades
are to locate walls and put-up machinery.'' A professional land
surveyor and small business owner opined that ``[c]onstruction survey
personnel's duties are considerably
[[Page 57612]]
more physically demanding and dangerous than those of power equipment
operators who have always been considered labor. While providing
construction surveying services does involve significant mental
calculations in the interpretation of engineering plans, setting 100 to
1000 stakes per day on an active construction site is nothing but
laborious.''
Commenters were also divided as to the impact that technological
developments have had on survey crew members duties. IAPA, Professional
Land Surveyors of Ohio, and several individual commenters stated that
the use of sophisticated technology and field computers has reduced the
amount of physical labor required and increased the intellectual
requirements. One individual commenter noted that ``such manual labor
is now uncommon for our crews, who by the virtue of technology spend
nearly all their time in intellectual labor with extremely complex,
delicate and very expensive equipment.'' CLSA explained that
``technology has allowed contractors to perform their construction work
with less involvement of a land surveyor. Machine guidance--GPS mounted
to construction equipment for the purposes of determining precise
grading--has eliminated the mass grading work and underground utilities
staking work previously performed by land surveyors. Contractors rely
on a land surveyor's expertise in the limited capacities of
establishment of three-dimension project control, development of
digital design models, specialized training and certifications of the
contractors' work, such as building pad elevation and foundation form
certifications.''
The wide range of duties described, as well as the differences
between the scope of work performed by survey crews employed by
surveying or design firms versus survey crews employed by construction
companies, highlights the need to evaluate the specific duties
performed by the survey crew members on a project. The Department
reiterates its view set forth in the NPRM that whether a specific
survey crew member is covered by these standards is a question of fact,
which takes into account the actual duties performed and whether these
duties are ``manual or physical in nature,'' including the ``use of
tools or . . . work of a trade.'' Consideration of tool use is
particularly important given the technological developments in
surveying. The Department notes that while the computerized equipment
used in surveying today is more sophisticated than the hand tools of
the past, certain uses of this new technology have made it easier for
those with less training and academic background to perform surveying
tasks required on construction jobsites. See ARTBA, CLSA, GCA. In light
of these developments, the Department continues to believe that survey
crew members who spend most of their time on a covered project taking
or assisting in taking measurements would likely be deemed laborers or
mechanics (provided that they are not exempt as professional,
executive, or administrative employees under part 541, as discussed).
If their work meets other required criteria--i.e., it is performed on
the site of the work (where required) and immediately prior to or
during construction in direct support of construction crews--it would
be likely covered by the Davis-Bacon labor standards. Similarly, the
Department considers duties such as walking and carrying equipment and
setting stakes to be physical or manual for the purposes of determining
whether a survey crew member is a ``laborer or mechanic.''
A number of commenters, particularly those associated with
professional surveying organizations, expressed strong disagreement
with the Department's view that survey crew members who spend most of
their time on a covered project taking or assisting in taking
measurements would likely be deemed laborers or mechanics. See, e.g.,
CLSA, IPLSA, National Society of Professional Surveyors (NSPS). In
support of their position, they cite AAM 39 (which they refer to as the
``Goldberg Standard''), characterizing it as ruling that members of
survey crews were exempt from Davis-Bacon, and that such workers are
covered only to the extent to which they ``perform manual work, such as
clearing brush and sharpening stakes.'' NSPS. They further asserted
that ``[s]taking by survey crews on a job site is 1% the physical and
manual task of putting a stake in the group and 99% collecting and
analyzing data and making judgments for determining where to set a
stake.'' NSPS. IPLSA contends that the NPRM was ``the first time that
the Department has ever referenced taking measurements as a physical or
manual task.'' IPLSA.
These characterizations of the Department's proposal are somewhat
overstated. Two years prior to issuing AAM 39, the Department issued
AAM 16, in which it concluded that survey crew members who acted as
``chainmen,'' ``rodmen,'' and ``instrument men'' were laborers or
mechanics for the purposes of applying the Davis-Bacon labor standards
(in contrast, the party chief was considered a bona fide supervisor
excluded from the definition of ``laborer or mechanic''). In reaching
its decision, the Department evaluated the duties performed by these
survey crew members. In addition to clearing brush and sharpening
stakes, the determination noted that ``chainmen and rodmen'' also set
stakes, handled the rod and tape, and performed other comparable
duties. In evaluating the ``instrument men'' role, the Department
considered that it involved, among other physical tasks, ``occasionally
perform[ing] the physical work of rodmen or chainmen,'' ``carry[ing]
and plac[ing] the instruments . . . [and] operat[ing] them,''
``mak[ing] the sighting and tak[ing] and record[ing] the readings,'' as
well as being required ``to exercise discretion, judgment, and skill
involving problems encountered in the field.'' Notably, these physical
tasks include several examples of using surveying tools.
While AAM 39 appears to take a narrower view of the duties
performed by laborers and mechanics, reliance on this AAM is misplaced.
As demonstrated by the numerous comments received, the duties performed
by survey crew members are far different from those described in AAM 39
(even the earlier AAM 16 described a wider array of duties). Moreover,
as several commenters indicated, the more sophisticated equipment
available today actually makes them easier for survey crew members with
less training and academic background to use. Finally, it is not clear
that the narrow reading of ``laborer or mechanic'' in AAM 39 is
consistent with the common meaning of those terms when the Davis-Bacon
Act was enacted. While it distinguished the term ``laborer'' as ``one
who performs manual laborer or labors at a toilsome occupation
requiring physical strength'' from the term ``mechanic,'' a ``skilled
worker with tools, who has learned a trade,'' it failed to articulate
why the latter would not apply to a wider range of survey crew members
who use tools or even to address other types of physical work performed
by survey crew members, such as walking and carrying equipment.\187\
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\187\ The statutory term ``laborer or mechanic'' incorporates
the meanings of the terms ``laborer'' and ``mechanic'' as these were
commonly understood in 1931. See SMART and cases cited therein.
Thus, any interpretation of ``laborer or mechanic'' that focuses
solely on the meaning of ``laborer'' is inconsistent with the
statute. For this reason, the Department finds unpersuasive the
point raised by several commenters, e.g., IRTBA, NSPS, that, because
the BLS separately defines the terms ``surveyor'' and ``laborer,''
members of survey crews cannot be laborers or mechanics. In response
to such narrow interpretations, including the Department's
interpretation in AAM 39, SMART opined that the Department should
modify the definition of ``laborer or mechanic'' to inter alia give
effect to each of its component terms. The Department notes that it
did not propose any substantive changes to the definition of
``laborer or mechanic.'' Moreover, it believes that the current
definition adequately reflects the separate characteristics of
``laborers'' and ``mechanics.'' The Department also notes that to
the extent SMART referred to the Department's position about
flaggers being laborers or mechanics, as reflected in AAM 141 (Aug.
16, 1985) since 1985, the revisions in this rule regarding flaggers
do not address their status as laborers or mechanics, but rather
clarify coverage of flaggers in connection with the site of the
work.
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[[Page 57613]]
Several commenters asserted that surveyors, or survey crew members
more generally, should be treated as ``learned professionals'' under 29
CFR part 541, and therefore excluded from the definition of ``laborer
or mechanic,'' 29 CFR 5.2(m) (``Persons employed in a bona fide
executive, administrative, or professional capacity as defined in part
541 of this title are not deemed to be laborers or mechanics.''),
because surveying is recognized as a ``professional service'' akin to
architecture or engineering under the Brooks Act, 40 U.S.C. 1101 et
seq. American Council of Engineering Companies; IAPA; IRTBA; NSPS; OCA;
SIBA. Commenters also highlighted the training and licensure
requirements for surveyors and expressed the view that survey crew
members ``are either professional land surveyors or overseen by
professional land supervisors'' and should therefore not be considered
``laborers or mechanics.'' IAPA; IPLSA; IRTBA; OCA; SIBA. Specifically,
NSPS noted that all 50 states license individuals to engage in the
professional practice of surveying, and an individual commenter stated
that most states require a 4-year college degree. CLSA explained that
while ``[e]very state recognizes a bachelor's degree in land surveying
as a qualification to becoming a licensed land surveyor,'' 12 states
require a 4-year degree in land surveying or an associated field and 38
require at least some formal education as a minimum qualification to
becoming a licensed land surveyor. It further noted that a surveyor
working in the field has training in engineering and that a
construction surveyor has ``a high level of technical training anchored
in math, related professions, construction management, and electronic
data management.'' IAPA, IPLSA, IRTBA, OCA, and SIBA explained that
Professional Land Surveyors licensed in Illinois must have a
baccalaureate degree in land surveying or a related science field with
24 credits of land surveying course from an accredited college, pass
two licensing exams, and serve as a surveyor in training for 4 years,
and then continue to take continuing education to remain licensed.
Similarly, MSPS stated that survey crew members working on construction
projects operate as ``highly knowledgeable, specially trained,
technicians and paraprofessionals'' whose education and certificates of
achievement ``provide advanced knowledge in the surveying profession
necessary for taking or assisting in taking measurements and exceed the
classification of `laborers or mechanics.' '' An individual commenter
noted that survey crews often employ individuals with associate's or
bachelor's degrees, while another referred to such survey technicians
as ``future professionals.''
III-FFC noted that licensure status is not determinative as
``[o]ther trades have licensing requirements . . . including plumbers,
electricians, roofing contractors, water well contractors, and water
pump installation contractors'' and contended that ``[e]ven if work
under a particular classification must be performed by, or under
supervision of, a licensed individual, this requirement does not
exclude workers from coverage, including survey crew members.''
To the extent that licensed professional surveyors meet the
definition of ``learned professionals'' in 29 CFR part 541, they are
not ``laborers or mechanics'' subject to the Davis-Bacon labor
standards. 29 CFR 5.2(m) (``Persons employed in a bona fide executive,
administrative, or professional capacity as defined in part 541 of this
title are not deemed to be laborers or mechanics.''); AAM 16. To
qualify as a ``learned professional,'' for the purposes of part 541 and
Sec. 5.2(m), one's primary duty ``must be the performance of work
requiring advanced knowledge in a field of science or learning
customarily acquired by a prolonged course of specialized intellectual
instruction.'' 29 CFR 541.301(a). Work requiring ``advanced knowledge''
means work which is ``predominantly intellectual in character, and
which includes work requiring the consistent exercise of discretion and
judgment, as distinguished from performance of routine, manual,
mechanical or physical work.'' 29 CFR 541.301(b). Thus, an employee who
performs work requiring advanced knowledge ``generally uses the
advanced knowledge to analyze, interpret or make deductions from
varying facts or circumstances.'' Id. A ``field of science or
learning'' includes ``occupations that have a recognized professional
status as distinguished from the mechanical arts or skilled trades
where in some instances the knowledge is of a fairly advanced type, but
is not in a field of science or learning.'' 29 CFR 541.301(c).
Specialized academic training must be a standard prerequisite for
entrance into the profession (though this does not exclude the
occasional professional who has ``substantially the same knowledge
level and perform[s] substantially the same work as the degreed
employees, but who obtained the advanced knowledge through a
combination of work experience and intellectual instruction''). 29 CFR
541.301(d). However, practitioners of occupations that customarily may
be performed with only the general knowledge acquired by an academic
degree in any field, with knowledge acquired through apprenticeship or
training, will generally not be deemed ``learned professionals.'' Id.
While state requirements vary, based on the information received
from commenters, the Department believes licensed surveyors may in some
cases be ``learned professionals'' and thus excluded from the
definition of ``laborers or mechanics.'' However, this conclusion may
vary, particularly where state licensing requirements do not
customarily require a prolonged course of specialized intellectual
instruction. See Goebel v. Colorado, No. 93-K-1227, 1999 WL 35141269,
at *7 (D. Co. 1999) (concluding at summary judgment that, under state
licensing requirements involving a combination of surveying courses and
land surveying experience, but no college degree, that surveying did
``not require the `advanced type of knowledge' gained through `a
prolonged course of specialized intellectual instruction and study'''
necessary to fall into the category of ``learned professionals'').
However, other members of survey crews, even if working under the
supervision of a licensed surveyor, cannot be excluded from the
definition of ``laborer or mechanic'' on this basis. Unlicensed survey
crew members have not completed specialized academic training or
demonstrated ``substantially the same knowledge level'' to state
licensing authorities to secure a professional license. See 29 CFR
541.301(d). Because they must work under the supervision of a licensed
surveyor, rather than independently, on any work requiring a license,
they are generally not ``perform[ing] substantially the same work'' as
licensed surveyors. See id. Unlicensed paraprofessionals are generally
not considered ``learned professionals.'' See 29 CFR 541.301(e)(7)
(paralegals are not
[[Page 57614]]
learned professionals) and (e)(2) (practical nurses and other similar
heath care employees, even if licensed, are not learned professionals
because ``possession of a specialized advanced academic degree is not a
standard prerequisite for entry into such occupations''). Nor does the
inclusion of surveying as a professional service under the Brooks Act
suggest that unlicensed survey crew members should be deemed ``learned
professionals'' excluded from the protections of the Davis-Bacon labor
standards. As discussed above, whether unlicensed survey crew members
are deemed ``laborers or mechanics'' will depend, not on the
application of the part 541 ``learned professional'' exclusion in Sec.
5.2(m), but on whether the specific range of duties they perform are
``manual or physical in nature (including . . . [the] use [of] tools or
. . . the work of a trade), as distinguished from mental or
managerial.'' See 29 CFR 5.2(m).\188\
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\188\ MnDOT would have the Department simplify its analysis
under 29 CFR 5.2(m), by considering survey crew members `` `laborers
or mechanics' subject to prevailing wage rates when performing work
under the contract unless they are licensed surveyors.'' Given the
range of duties performed by survey crew members on Davis-Bacon
covered contracts, the Department does not believe it could
implement such an approach without modifying Sec. 5.2(m), which it
did not propose doing in the NPRM.
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After considering the comments received, the Department adopts as
guidance the clarifying language set forth in the NPRM with one
modification: The Department has historically recognized that members
of survey crews who perform primarily physical and/or manual work while
employed by contractors or subcontractors on a DBA or Related Acts
covered project on the site of the work immediately prior to or during
construction in direct support of construction crews may be laborers or
mechanics subject to the Davis-Bacon labor standards. Whether or not a
specific survey crew member is covered by these standards is a question
of fact, which takes into account the actual duties performed and
whether these duties are ``manual or physical in nature'' including the
``use of tools or . . . work of a trade.'' When considering whether a
survey crew member performs primarily physical and/or manual duties, it
is appropriate to consider the relative importance of the worker's
different duties, including (but not solely) the time spent performing
these duties. Thus, survey crew members who spend most of their time on
a covered project taking or assisting in taking measurements would
likely be deemed laborers or mechanics (provided that they do not meet
the tests for exemption as professional, executive, or administrative
employees under part 541). If their work meets other required criteria
(i.e., it is performed on the site of the work, where required, and
immediately prior to or during construction in direct support of
construction crews), it would be covered by the Davis-Bacon labor
standards.
(G) Site of the Work and Related Provisions
In the proposed rule, the Department proposed the following
revisions related to the DBRA's ``site of the work'' requirement: (1)
revising the definition of ``site of the work'' to further encompass
certain construction of significant portions of a building or work at
secondary worksites, (2) clarifying the application of the ``site of
the work'' principle to flaggers, (3) revising the regulations to
better delineate and clarify the ``material supplier'' exemption, and
(4) revising the regulations to set clear standards for DBA coverage of
truck drivers.
As discussed further below, having reviewed and considered the
comments received, the Department is making certain revisions to these
proposals in the final rule. Specifically, the final rule limits
coverage of secondary worksites to locations where specific portions of
a building or work are constructed and were either established
specifically for contract performance or are dedicated exclusively or
nearly so to the contract or project; further clarifies the material
supplier exemption; and clarifies coverage of truck drivers employed by
contractors or subcontractors by codifying the Department's current de
minimis standard rather than using an analogous standard from the FLSA.
(1) Statutory and Regulatory Background
a. Site of the Work
The DBA and Related Acts generally apply to ``mechanics and
laborers employed directly on the site of the work'' by
``contractor[s]'' and ``subcontractor[s]'' on contracts for
``construction, alteration, or repair, including painting and
decorating, of [covered] public buildings and public works.'' 40 U.S.C.
3142(a), (c)(1). The Department's current regulations define ``site of
the work'' as encompassing three types of locations: (1) ``the physical
place or places where the building or work called for in the contract
will remain,'' (2) ``any other site where a significant portion of the
building or work is constructed, provided that such site is established
specifically for the performance of the contract or project,'' and (3)
``job headquarters, tool yards, batch plants, borrow pits, etc.'' that
are both ``dedicated exclusively, or nearly so, to performance of the
contract or project'' and ``adjacent or virtually adjacent to the site
of the work'' itself. 29 CFR 5.2(l)(1), (2). The ``site of the work''
requirement does not apply to Related Acts that extend Davis-Bacon
coverage to all laborers and mechanics employed in the ``development''
of a project; such statutes include the United States Housing Act of
1937; the Housing Act of 1949; and the Native American Housing
Assistance and Self-Determination Act of 1996. See id. Sec. 5.2(j)(1);
42 U.S.C. 1437j(a); 25 U.S.C. 4114(b)(1), 4225(b)(1)(B); 42 U.S.C.
12836(a). As the Department has previously noted, ``the language and/or
clear legislative history'' of these statutes ``reflected clear
congressional intent that a different coverage standard be applied.''
65 FR 80267, 80275 (Dec. 20, 2000) (2000 final rule); see Griffin v.
Sec'y of Lab., ARB Nos. 00-032, 00-033, 2003 WL 21269140, at *13 n.5
(May 30, 2003) (noting that the United States Housing Act of 1937
``provides that all construction activity funded or assisted under its
auspices is subject to DBA requirements if that work is performed `in
the development' of a covered project'' and therefore ``has no `site of
the work' restriction''); L.T.G. Constr. Co., WAB No. 93-15, 1994 WL
764105, at *4 (Dec. 30, 1994) (noting that ``the Housing Act [of 1937]
contains no `site of work' limitation similar to that found in the
Davis-Bacon Act'').
b. Offsite Transportation
The ``site of the work'' requirement is also referenced in the
current regulation's definition of ``construction, prosecution,
completion, or repair,'' which provides that ``the transportation of
materials or supplies to or from the site of the work'' is not covered
by the DBRA, except for such transportation under the statutes to which
the ``site of the work'' requirement does not apply, as described above
in paragraph (a). 29 CFR 5.2(j)(2). However, the regulation explains
that transportation to or from the site of the work is covered where a
covered laborer or mechanic employed by a contractor or subcontractor
transports materials between an ``adjacent or virtually adjacent''
dedicated support site that is part of the site of the work pursuant to
29 CFR 5.2(l)(2), or transports portions of the building or work
between a site where a significant portion of the building or
[[Page 57615]]
work is constructed and that is established specifically for contract
or job performance, which is part of the site of the work pursuant to
29 CFR 5.2(l)(1), and the physical place or places where the building
or work will remain.\189\ 29 CFR 5.2(j)(1)(iv)-(l)(2).
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\189\ For more detail on this topic, see the section titled
``Coverage of Construction Work at Secondary Construction Sites.''
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c. Material Supplier Exception
While not explicitly set out in the statute, the DBA has long been
understood to exclude from coverage employees of bona fide ``material
suppliers'' or ``materialmen.'' See AAM 45 (Nov. 9, 1962) (enclosing
WHD Opinion Letter DB-30 (Oct. 15, 1962)); AAM 36 (Mar. 16, 1962)
(enclosing WHD Opinion Letter DB-22 (Mar. 12, 1962)); H.B. Zachry Co.
v. United States, 344 F.2d 352, 359 (Ct. Cl. 1965); FOH 15e16. This
principle has generally been understood to derive from the limitation
of the DBA's statutory coverage to ``contractor[s]'' and
``subcontractor[s].'' See AAM 36, WHD Opinion Letter DB-22, at 2
(discussing ``the application of the term subcontractor, as
distinguished from materialman or submaterialman''); cf. MacEvoy v.
United States, 322 U.S. 102, 108-09 (1944) (distinguishing a
``subcontractor'' from ``ordinary laborers and materialmen'' under the
Miller Act); FOH 15e16 (``[B]ona fide material suppliers are not
considered contractors under DBRA.''). Typically, these are companies
whose sole responsibility under the contract or project is to furnish
materials, such as sand, gravel, and ready-mixed concrete, rather than
to perform construction work.
Like the ``site of the work'' restriction, the material supplier
exception does not apply to work under statutes that extend Davis-Bacon
coverage to all laborers and mechanics employed in the ``development''
of a project, regardless of whether they are employed by
``contractors'' or ``subcontractors.'' See 29 CFR 5.2(j)(1) (defining
``construction, prosecution, completion, or repair'' as including
``[a]ll types of work done on a particular building or work at the site
thereof . . . by laborers and mechanics employed by a construction
contractor or construction subcontractor (or, under the United States
Housing Act of 1937; the Housing Act of 1949; and the Native American
Housing Assistance and Self-Determination Act of 1996, all work done in
the construction or development of the project)''); 29 CFR 5.2(i)
(``The manufacture or furnishing of materials, articles, supplies or
equipment . . . is not a building or work within the meaning of the
regulations in this part unless conducted in connection with and at the
site of such a building or work as is described in the foregoing
sentence, or under the United States Housing Act of 1937 and the
Housing Act of 1949 in the construction or development of the
project.'').
d. Relevant Regulatory History and Case Law
The regulatory provisions regarding the site of the work were
revised in 1992 and 2000 in two distinct fashions.
First, in response to a series of appellate court decisions in the
1990s, the provisions were revised to narrow the geographic scope of
the site of the work and to preclude coverage of offsite transportation
in most circumstances. Specifically, the language in Sec. 5.2(l) that
deems dedicated sites such as batch plants and borrow pits part of the
site of the work only if they are ``adjacent or virtually adjacent'' to
the construction site was adopted in 2000 in response to Ball, Ball &
Brosamer, Inc. v. Reich, 24 F. 3d 1447 (D.C. Cir. 1994) and L.P. Cavett
Company v. U.S. Department of Labor, 101 F.3d 1111 (6th Cir. 1996),
which concluded that batch plants located only a few miles from the
construction site (2 miles in Ball, 3 miles in L.P. Cavett) were not
part of the ``site of the work.'' See 65 FR 80269-71.\190\ The
``adjacent or virtually adjacent'' requirement in the current
regulatory text is one that the courts in Ball and L.P. Cavett
suggested, and which the ARB later concluded, to be consistent with the
statutory ``site of the work'' requirement. See L.P. Cavett, 101 F.3d
at 1115; Ball, Ball & Brosamer, 24 F.3d at 1452; Bechtel Constructors
Corp., ARB No. 97-149, 1998 WL 168939, at *4 (Mar. 25, 1998).
Similarly, the provision in Sec. 5.2(j)(2) that excludes, with narrow
exceptions, ``the transportation of materials or supplies to or from
the site of the work'' from coverage stems from a 1992 interim final
rule, see 57 FR 19204 (May 4, 1992) (1992 IFR), and was adopted in
response to Building & Construction Trades Dep't, AFL-CIO v. U.S. Dep't
of Labor Wage Appeals Bd. (Midway), in which the D.C. Circuit held that
drivers of a prime contractor's subsidiary who picked up supplies and
transported them to the job site were not covered by the DBA for their
time spent going to and from the site because ``the Act applies only to
employees working directly on the physical site of the public building
or public work under construction.'' 932 F.2d 985, 990 (D.C. Cir.
1991).\191\
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\190\ Prior to 2000, the Department had interpreted ``site of
the work'' more broadly to include, in addition to the site where
the work or building would remain, ``adjacent or nearby property
used by the contractor or subcontractor in such construction which
can reasonably be said to be included in the `site.' '' 29 CFR
5.2(l) (1990); see 65 FR 80269; AAM 86 (Feb. 11, 1970). This
interpretation encompassed the offsite batch plants in Ball and L.P.
Cavett that the courts in those cases concluded were too far from
the primary worksite. Accordingly, the Department revised the
regulation in the 2000 final rule to adopt the ``adjacent or
virtually adjacent'' standard.
\191\ Prior to 1992, the Department had interpreted the DBA as
covering the transportation of materials and supplies to or from the
site of the work by workers employed by a contractor or
subcontractor. See 29 CFR 5.2(j) (1990).
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Second, as discussed in more detail below in the discussion of
``Coverage of construction work at secondary construction sites,'' in
response to developments in construction that had enabled companies in
some cases to construct entire portions of public buildings or works
offsite, the Department broadened the ``site of the work'' in the 2000
final rule by adding the provision in Sec. 5.2(l)(1) that encompasses
offsite locations ``where a significant portion of the building or work
is constructed, provided that such site is established specifically for
the performance of the contract or project.'' 65 FR 80278.
(2) Regulatory Revisions
In the NPRM, the Department proposed the following regulatory
changes related to the ``site of the work'' requirement: (1) revising
the definition of ``site of the work'' to further encompass certain
construction of significant portions of a building or work at secondary
worksites, (2) clarifying the application of the ``site of the work''
principle to flaggers, (3) revising the regulations to better delineate
and clarify the ``material supplier'' exemption, and (4) revising the
regulations to set clear standards for DBA coverage of truck drivers.
The following discussion explains, with regard to each issue, the
proposal, the comments received, and the Department's decisions in the
final rule.
a. Coverage of Construction Work at Secondary Construction Sites
The current regulatory definition of ``site of the work'' includes
a site away from the location where the building or work will remain
where a ``significant portion'' of a building or work is constructed at
the site, provided that the site is established specifically for the
performance of the contract or project. Sec. 5.2(l)(1). In the 2000
final rule in which this language was added, the Department explained
that it was intended to respond to technological
[[Page 57616]]
developments that had enabled companies in some cases to construct
entire portions of public buildings or works offsite, leaving only
assembly or placement of the building or work remaining. See 65 FR
80273 (describing ``the innovative construction techniques developed
and currently in use, which allow significant portions of public
buildings and public works to be constructed at locations other than
the final resting place of the building or work''). The Department
cited examples, including a dam project where ``two massive floating
structures, each about the length of a football field'' were
constructed upriver and then floated downriver and submerged; the
construction and assembly of military housing units in Portland for
final placement in Alaska; and the construction of modular units to be
assembled into a mobile service tower for Titan missiles. See id.
(citing ATCO Constr., Inc., WAB No. 86-1, 1986 WL 193113 (Aug. 22,
1986), and Titan IV Mobile Serv. Tower, WAB No. 89-14, 1991 WL 494710
(May 10, 1991)).
The Department stressed that this new provision was a narrow one,
intended to apply only to the ``rare'' situations where ``such a large
amount of construction is taking place that it is fair and reasonable
to view such location as a site where the public building or work is
being constructed.'' 65 FR 80274, 80276. It further stated that the
limit of such coverage to facilities that are established specifically
for the performance of a particular contract or project was necessary
to exclude ``[o]rdinary commercial fabrication plants, such as plants
that manufacture prefabricated housing components,'' which have long
been understood to be outside the DBA. Id. at 80274. The Department
explained that ``[i]t [was] the Department's intention in [that]
rulemaking to require in the future that workers who construct
significant portions of a federal or federally assisted project at a
location other than where the project will finally remain, will receive
prevailing wages as Congress intended when it enacted the Davis-Bacon
and related Acts.'' Id. Consistent with this amendment, the Department
also revised Sec. 5.2(j) to cover transportation of portion(s) of the
building or work between such a site and the location where the
building or work would ultimately remain, explaining that ``under these
circumstances[,] the site of the work is literally moving between the
two work sites,'' 65 FR 57269, 57273 (Sept. 21, 2000), and as such,
``workers who are engaged in transporting a significant portion of the
building or work between covered sites . . . are `employed directly
upon the site of the work.' '' 65 FR 80276.
In the NPRM, the Department proposed to expand this aspect of the
definition of ``site of the work'' to include ``any . . . site(s) where
a significant portion of the building or work is constructed, provided
that such construction is for specific use in that building or work and
does not simply reflect the manufacture or construction of a product
made available to the general public.'' The NPRM explained that since
2000, technological developments have continued to facilitate offsite
construction that replaces onsite construction to an even greater
degree and that the Department expects such trends to continue in the
future, including in Federal and federally assisted construction. 87 FR
15731 (citing Dodge Data and Analytics, ``Prefabrication and Modular
Construction 2020'' (2020), at 4, and GSA, Sched. 56--``Building and
Building Materials, Industrial Service and Supplies, Pre-Engineered/
Prefabricated Buildings Customer Ordering Guide'' (GSA Sched. 56), at
5-7).\192\ The Department further stated that ``when `significant
portions' of a building or work that historically would have been built
where the building or work will ultimately remain are instead
constructed elsewhere, the exclusion from the DBA of laborers and
mechanics engaged in such construction is inconsistent with the DBA.''
Id. at 15732. Therefore, the Department proposed to eliminate the
current regulation's requirement that an offsite facility at which such
``significant portions'' are constructed must also be ``established
specifically for the performance of a particular contract or project''
in order to be considered part of the ``site of the work.'' The
Department explained that the goal of excluding ``[o]rdinary commercial
fabrication plants'' and similar material supply facilities and
factories could be better accomplished by elaborating on the definition
of ``significant portion,'' which the Department proposed to define as
``one or more entire portion(s) or module(s) of the building or work,
as opposed to smaller prefabricated components, with minimal
construction work remaining other than the installation and/or
assembly.''
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\192\ See https://proddrupalcontent.construction.com/s3fs-public/SMR1219_Prefab_2020_small-compressed.pdf; https://www.gsa.gov/cdnstatic/SCHEDULE_56_-_ORDERING_GUIDE.pdf.
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The Department received numerous comments regarding the proposal
concerning secondary construction sites.
Most labor unions and groups representing union-affiliated
employers supported the proposal, agreeing that the extension of
coverage was consistent with the intent of the DBA and would prevent
businesses from paying non-prevailing rates for work that historically
had been performed by DBA-covered workers at the primary worksite.
Examples of such comments included those from NABTU, LIUNA, SMART, The
Association of Union Contractors (TAUC), UA, and MCAA.\193\
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\193\ MCAA, a group of union-affiliated contractors, noted in
its comment that while its support of the proposal reflected the
view of most of its member employers, some of its members dissented
from that view.
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Some commenters, such as NABTU, IBEW, LIUNA, and UA, urged the
Department to expand coverage even further, contending that the NPRM's
limitation of coverage to locations where ``entire portions or
modules'' of a public work are constructed, ``as opposed to smaller
prefabricated components,'' was unwarranted, and that the proposed
definition of ``significant portion'' should be changed to mean ``one
or more portion(s), module(s) and/or individualized fabricated
component(s) that are integral to the building or public work,'' to
include even smaller custom components like custom pipe bends. NABTU
and several other commenters that incorporated NABTU's comments by
reference further argued that Midway, L.P. Cavett, and Ball were
wrongly decided and encouraged the Department to abandon the
distinction between work performed at ``primary'' or ``secondary''
sites, suggesting the term ``work'' in the phrase ``site of the work''
does not refer to the public work or building being constructed, but to
any work that is specific to, and customized for, a DBA project. The UA
made similar arguments. SMART urged the Department to consider the
impact of building information modelling (BIM), a software modeling
process that enables ``virtual construction of a building's
superstructure and mechanical, electrical, and plumbing systems before
the off-site or on-site construction of the physical buildings,
portions, modules, or components begins,'' and to integrate a reference
to BIM and similar technologies into the definitions of ``secondary
construction site(s).'' Some commenters supporting the proposal
provided examples of the use of offsite construction in Federal or
federally funded projects; LIUNA, for example, cited the FHWA's seeking
to develop innovations in offsite bridge
[[Page 57617]]
construction, modular construction in airport expansion projects,
prefabricated chemical storage buildings at DOE's national
laboratories, and the use of prefabricated structures in Army Corps of
Engineers navigation projects.
A few commenters recommended clarifications to the proposed
definition of ``significant portion.'' For example, the NECA and the
New York State Metropolitan Transportation Authority (MTA) requested
that the Department ensure the definition of ``significant portions''
not include smaller prefabricated components such as electrical racks,
temporary power distribution centers, prefabricated tiled wall units,
elevators and escalators, and bus and train wash units. NECA further
stated that the Department should ``consider when determining
'significant portion' that the prefabrication materials are specific
and/or unique to the project itself and are not readily available to
the general public or commercial market.'' The MTA also recommended
that the Department clarify that, where required, the prevailing wage
for offsite work should reflect the area where the offsite work is
performed, as opposed to the area of the primary work site, and that no
prevailing wage requirements apply to offsite fabrication that takes
place in a foreign country. American Clean Power (ACP), while opposing
the expansion in general, asserting that it was inconsistent with
congressional intent, suggested in the alternative that ``significant
portion'' be changed to eliminate any reference to size or modularity
and instead to tie coverage or the lack thereof to a secondary site's
``permanence, independence, and distance'' from the primary worksite.
Except for groups representing union-affiliated employers,
commenters representing employers generally opposed the proposed
expansion of coverage of offsite work. Many of these commenters,
including ABC and its member campaign comments, MBI, AGC, NAHB, OCA,
and IRTBA, argued that the Department's proposal impermissibly exceeded
the statutory restriction of coverage to ``site of the work'' as the
term has been interpreted in Midway, Ball, and L.P. Cavett. Several
commenters focused specifically on the proposal's potential impact on
modular construction, arguing that proposed expansion would increase
the cost of modular construction projects and imperil the modular
industry and its workers. These commenters, including, for example, SG
Echo, Parkline, Inc., Clark Pacific, Modular Solutions, Ltd., and IEC,
described the modular industry as highly competitive and relatively
low-margin, and argued that prevailing wage rates would cause modular
companies to become less competitive in the marketplace, leading to
increased costs to taxpayers on public buildings and works. Some
commenters pointed to what they asserted are advantages of modular
construction in arguing against the proposed expansion. For example,
MBI, California Housing Consortium (CHC), and others argued that in
addition to being more predictable and efficient, construction in a
factory-controlled environment is safer for workers and more
environmentally friendly than traditional construction, and that those
priorities would be adversely affected if the industry were impacted by
the proposed coverage expansion. Enterprise Electrical, LLC asserted
that offsite operations provide an entry point for less experienced
workers to be introduced to a trade that will enable them to graduate
to onsite locations where they can earn higher wages.
Several of these commenters, including Conscious Communities, the
CHC, Cloud Apartments, Optimum Modular Solutions, Southeast Modular,
The Pacific Companies, and Manufactured Housing Institute, commented
that the ``site of the work'' expansion would negatively impact the
affordable housing sector, noting that the efficiencies and cost
savings of modular construction can increase the availability of
affordable housing. They argued that by effectively removing the cost
advantages of modular construction, the proposal will deter modular
housing firms from working on DBRA-covered projects. One such
commenter, The Pacific Companies, stated that if the proposed changes
are implemented, it would cease using Federal funding that triggers
Davis-Bacon coverage for the construction of affordable housing, and
would shift its business to producing market-based housing or
commercial developments.
Some commenters opposing the proposal cited a lack of clarity with
regard to coverage scope and impact. For example, MBI and ACP argued
that the Department's proposed definition of ``significant portion''
was unclear and would cause tremendous uncertainty, and that employers
would have to guess whether or not certain work is covered and could
face significant liability if their interpretation is later determined
to be incorrect. ACP specifically expressed concern that the new
definition of ``significant portion'' would be a deviation from the
current one on which stakeholders are relying to seek Federal funding
under the IIJA. The SBA Office of Advocacy argued that the extent of
the economic impact of the proposed expansion, including the number of
small businesses that will be newly DBA-covered under the proposal, was
unclear and that the Department should undertake further analysis of
these issues.
Some commenters also raised concerns regarding whether it would be
feasible or appropriate to apply Davis-Bacon rates for onsite
construction to an offsite environment. For example, Quartz Properties
and Phoenix Modular Elevator argued that the tasks and skills of
offsite factory workers differ substantially from those of onsite
workers, and Blazer Industries contended that paying factory workers
different rates for government contract or federally funded work that
is otherwise identical to non-covered work would be administratively
difficult, since such workers typically work on multiple projects in a
given day, and could hurt employee morale if some workers earn more
than others doing the same kind of work. FTBA similarly argued that
construction activity will be difficult to segregate from commercial,
non-DBA work, including work manufacturing materials covered by the
Walsh-Healey Public Contracts Act, and that this will lead to confusion
and inadvertent violations of law. ACP, GCA, and ARTBA noted that
offsite work often occurs at locations far away from the public work's
intended location and contended the Department's proposal could impose
liability on parties who have no control over the manufacturing
process. Two union-affiliated commenters, UBC and Signatory Wall and
Ceiling Contractors Alliance, while not expressly opposing the
proposal, raised concerns that it could interfere with existing
collective-bargaining agreements that cover workers at offsite
factories, and proposed that the site of the work not include
facilities where in the normal course of business products are
manufactured or fabricated for non-Federal or non-federally assisted
projects.
After consideration of the comments received, the Department is
modifying its proposal to narrow the scope of coverage at secondary
construction sites. Specifically, the final rule provides that for a
secondary construction site to be considered part of the site of the
work, in addition to being a location where a significant portion of a
building or work is constructed for specific use in the designated
building or work, the site must be either established specifically for
the performance of the covered contract or project or dedicated
[[Page 57618]]
exclusively, or nearly so, to the covered contract or project.
While the Department remains concerned that the trend toward
offsite construction of portions of buildings or works that are
otherwise covered by the DBA and its Related Acts may result in fewer
workers earning Davis-Bacon wages, in derogation of Congress's intent
in enacting these statutes, the Department believes that commenters
have raised valid concerns regarding the specific proposal in the NPRM.
Specifically, the Department agrees that further analysis of the
potential economic impact of such a proposal is warranted, particularly
given the concerns raised about potential adverse effects on CBAs and
affordable housing.\194\ Additionally, while the Department maintains
that the interpretation of the term ``site of the work'' advanced in
the proposed rule would be a permissible construction of the language
of the Davis-Bacon Act, the Department is cognizant that a reviewing
court could reach a contrary conclusion based on existing circuit court
precedent and the Department does not wish to create unnecessary legal
uncertainty surrounding this issue at this time without further
analysis or information about potential impacts. Finally, the
Department recognizes that it could be challenging and resource-
intensive for companies operating what are essentially factory
environments creating products potentially for multiple clients and
projects to pay workers different rates depending on the particular
project for which they are creating products at any given point in a
day.
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\194\ Although the Department noted above that it anticipates
that this rule's revisions to the definition of prevailing wage will
at most result in a limited potential increase in construction costs
for a small percentage of the market and will not significantly
affect overall housing prices or rents, the Department is cognizant
that the definition of ``site of the work'' impacts the scope of
covered employers and workers, rather than the amount of the
prevailing wage for those already covered. The Department agrees
that it is advisable to more closely examine the potential effects
of a regulatory revision that could expand coverage to a category of
employers that have generally not previously been covered by the
Davis-Bacon labor standards. The Department also believes that such
closer examination will inform the extent to which Davis-Bacon
classifications can easily be applied to an offsite environment in a
broader fashion.
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Instead, the Department is revising this component of the
regulation to reflect a more incremental expansion of coverage of
secondary construction sites where significant portions of public works
are constructed for specific use in a particular building or work.
Specifically, whereas the current regulation includes such sites only
if they are established specifically for a DBRA-covered project or
contract, the revised regulation also includes any sites that are
dedicated exclusively or nearly so to the performance of a single DBRA-
covered project or contract--i.e., sites that for a specific period of
time are dedicated entirely, or nearly entirely, to the construction of
one or more ``significant portions'' of a particular public building or
work. The final rule further explains that a ``specific period of
time'' in this context means a period of weeks, months, or more, and
does not include circumstances where a site at which multiple projects
are in progress is shifted exclusively or nearly so to a single project
for a few hours or days in order to meet a deadline.
The Department believes that this more limited approach will
address the most significant concerns voiced by commenters.
Specifically, as noted above, many commenters contended that tracking
time and wage rates at facilities engaged in work on multiple projects
at once would be infeasible and that the potential administrative costs
would especially deter small businesses, which work on multiple
projects at a time, from working on Federal or federally funded
projects. MBI, for example, asserted that ``the administrative costs of
tracking multiple rates of pay and fringe benefits based on the type of
project'' would be ``prohibitive.'' One small business owner stated
that ``[w]e always have multiple projects being constructed in our
facility at any given time with man power bouncing back and forth
between projects as needed.'' Another voiced concerns about the
potentially ``astronomical'' ``administrative costs of tracking
multiple rates of pay based on the type of project.'' Another noted
that ``[i]n the plant our staff are multi-tasking all day long,'' that
``small manufacturers everywhere . . . have cross trained employees
that do multiple functions during the day on multiple projects,'' and
that ``documentation of which project they worked on and which project
is federal would be a huge undertaking that may cause our small
minority firm to take a second look at doing any federal work.'' Along
similar lines, UBC and Signatory Wall and Ceiling Contractors Alliance
predicted difficulties with implementing the proposed rule at
facilities at which workers are employed on both DBRA-covered and non-
DBRA-covered projects. These issues will no longer be significant under
the final rule, which will only cover secondary sites established
specifically for a particular project or that are dedicated
exclusively, or nearly so, to a single DBRA-covered project. Thus,
sites at which work is being performed on more than one project at a
time--whether DBRA-covered or not--will not be considered secondary
construction sites (except for circumstances where work on a second
project is merely token work, in which case the site would be deemed
``nearly'' exclusively dedicated to the main project and therefore
covered).
Additionally, with a narrower scope of coverage, the Department
expects that the impact of the final rule will be in line with the more
limited impact of the 2000 final rule that provided for coverage of
offsite locations where ``significant portions'' of public works were
constructed only if those locations were established specifically for
contract performance. In that rule, the Department stated that it
anticipated that the number of instances in which the expansion would
be implicated would be ``rare'' and that ``the prevailing wage
implications would not be substantial.'' 65 FR 80277. While this final
rule expands coverage beyond the 2000 rule to include dedicated
secondary construction sites even if they were not established for
contract performance, the Department believes that the impact will be
of a similarly limited order of magnitude and not of the type that will
cause significant disruption, particularly given the numerous comments
stating that modular construction facilities typically work on multiple
projects at a time and would therefore be beyond the scope of this
provision. Similarly, the Department believes that narrowing the scope
of the rule's change largely addresses concerns noted above regarding
stakeholders' reliance on the current definition in seeking Federal
funding, and that any remaining such interests are outweighed by the
benefits of ensuring that construction workers on DBRA projects are
paid Davis-Bacon wages for time spent on the site of the work.
The Department believes that the more limited scope of the final
rule also addresses concerns about the potential ambiguity of the term
``significant portion.'' While the Department recognizes that there
will be borderline cases, the Department anticipates, as it did in the
2000 final rule, that the distinction between a significant portion or
module and a prefabricated component will be clear in the vast majority
of cases. See 65 FR 80275 (stating that ``where projects are
constructed in this manner, application of this provision should
normally be obvious''). The Department similarly
[[Page 57619]]
agrees with its assessment in the 2000 final rule that ``a precise
definition would be unwise because the size and nature of the project
will dictate what constitutes a `significant portion.''' Id. However,
the final rule adds some additional clarifying language, and now states
that a ``significant portion'' ``means one or more entire portion(s) or
module(s) of the building or work, such as a completed room or
structure, with minimal construction work remaining other than the
installation and/or final assembly of the portions or modules at the
place where the building or work will remain.'' Given the final rule's
more limited scope, the Department anticipates that contractors and
subcontractors can refer close questions to the Administrator and will
be able to do so at an early stage in the contracting process. To the
extent that questions arise frequently, the Department will consider
elaborating on the definition of ``significant portion'' in
subregulatory guidance.\195\ The Department will also continue to
solicit and review information regarding offsite construction and other
developing trends in construction with Davis-Bacon implications.
---------------------------------------------------------------------------
\195\ The Department notes that commenters raised similar
concerns in the 2000 rulemaking regarding the ambiguity of the term
``significant portions,'' and that those concerns have not, to the
Department's knowledge, resulted in significant compliance issues in
the 2 decades since.
---------------------------------------------------------------------------
The final rule further states explicitly that ``[a] `significant
portion' does not include materials or prefabricated component parts
such as prefabricated housing components.'' The Department reiterates
that the manufacture of such items has long been understood to be
outside the scope of the DBA since the law's inception, and the final
rule does not alter this well-established principle. See Midway, 932
F.2d at 991 n.12 (citing 1932 House debate on the DBA as evidence that
its drafters understood that offsite prefabrication sites would
generally not be considered part of the site of the work). Such
prefabrication, however, is distinguishable from ``pre-engineering'' or
``modular'' construction, in which significant, often-self-contained
portions of a building or work are constructed and then simply
assembled onsite ``similar to a child's building block kit.'' GSA
Sched. 56 at 5.
Under the latter circumstances, as the Department noted in 2000,
``such a large amount of construction is taking place [at an offsite
location] that it is fair and reasonable to view such location as a
site where the public building or work is being constructed.'' 65 FR
80274; see also id. at 80272 (stating that ``the Department views such
[secondary construction] locations as the actual physical site of the
public building or work being constructed''). The Department reached
this conclusion in 2000 with respect to offsite locations established
specifically for contract performance, and the Department concludes
that it is equally consistent with the DBA, and with Midway, Ball, and
L.P. Cavett, to apply this principle to locations dedicated exclusively
or nearly so to contract performance. While the Department agrees that
these appellate decisions generally place the primary focus of the
``site of the work'' inquiry on the physical proximity of a location to
the intended location of the building or work, throughout the DBA's
long history the Department has recognized that under certain
circumstances, the term can also encompass other locations with a
sufficient nexus to a particular project based on the nature of the
work performed there. See AAM 7 (July 18, 1958) (concluding that DBRA
applied to sheet metal workers who alternated between the installation
site and an off-site shop); Titan IV Mobile Serv. Tower, 1991 WL
494710, at *7 (Rothman, J., writing separately) (opining that the
removal of construction work from the final location ``does not by the
fact of removal alone lose . . . Davis-Bacon Act coverage'').
The final rule is consistent with the overarching principle,
reflected in both the site of the work principle and the material
supplier exemption, that Davis-Bacon coverage does not apply to
activities that are independent of the particular contract or project.
See United Constr. Co., Inc., WAB No. 82-10, 1983 WL 144675, at *3
(Jan. 14, 1983) (examining, as part of an inquiry into whether support
activities are on the ``site of the work,'' ``whether the activities
are sufficiently independent of the primary project to determine that
the function of the support activities may be viewed as similar to that
of materialman''). As noted above, the Department continues to maintain
that as a legal matter, it would be permissible for the Department to
interpret the term ``site of the work'' to include any location where
custom-made ``significant portions'' of a public building or work are
constructed. However, the final rule's restriction of coverage of such
facilities to those that are either established for, or dedicated
exclusively or nearly exclusively to, a particular project reflects a
reasonable balance that the Department believes is supportable as a
matter of law and policy in light of the countervailing concerns raised
by commenters. In particular, when an offsite location becomes
dedicated exclusively, or nearly so, to actual construction of either
the entirety or significant portions (as defined in the rule) of a
single public building or public work, the character of the offsite
location is such that it is ``fair and reasonable'' to view it as a
construction site (and not simply a factory) and as a ``site of the
work'' for purposes of the project to which it is exclusively (or
nearly so) dedicated.
While some commenters voiced concerns that it will be challenging
to apply Davis-Bacon classifications in an offsite environment, the
Department notes that if the classification of a worker based on the
set of the worker's job duties is not straightforward, contractors,
agencies, and other interested parties can bring questions to WHD and,
if necessary, can submit conformance requests. The Department believes
that the consultation and conformance processes, together with the
final rule's new procedures for publishing supplemental wage rates
under certain circumstances, will adequately address these concerns.
The Department fully intends to work with contractors, contracting
agencies, and other interested parties to resolve those questions as
early in the contracting process as possible. Additionally, to the
extent that some of these concerns are grounded in the fact that
workers at secondary sites may work in different capacities at
different times, this situation is not unique to offsite facilities. To
the contrary, the Department's regulations and longstanding
interpretation recognize that workers may perform work in more than one
classification, and that employers may pay them at the rate for each
classification based on the time worked therein, provided that the
employer accurately tracks such time. See 29 CFR 5.5(a)(1)(i);
Pythagoras Gen. Contracting Corp., ARB Nos. 08-107, 09-007, 2011 WL
1247207, at *7 (Mar. 1, 2011), aff'd sub nom. Pythagoras Gen.
Contracting Corp. v. U.S. Dep't of Lab., 926 F. Supp. 2d 490 (S.D.N.Y.
2013).
For the reasons discussed above regarding the narrowing of the
proposed rule, the Department declines commenters' suggestions to
expand coverage of offsite construction even further to include smaller
custom-made components, or to reject the holdings in Midway, Ball, and
L.P. Cavett. The principles announced by the courts in those decisions
are now well-established, including in the Department's own case law.
Moreover, an even broader expansion of coverage than proposed in the
NPRM would raise
[[Page 57620]]
the concerns regarding costs and impact discussed above, but to an even
greater degree. The Department also believes that it is reasonable to
distinguish between exclusively-dedicated support sites like batch
plants, borrow pits, and prefabrication sites--which under case law and
the Department's regulations are part of the site of the work only if
adjacent or nearly adjacent to a primary or secondary worksite--and
exclusively-dedicated sites at which significant portions are
constructed, which under the final rule are covered regardless of
proximity to the primary worksite. Under the latter circumstances, the
magnitude of construction activity taking place at the secondary
location, and the near-completeness of the modules or portions, weigh
much more heavily in favor of a conclusion that the secondary location
is a ``site of the work'' and distinguish such circumstances from those
in Midway, Ball, and L.P. Cavett.
Finally, in response to MTA's questions, the Department agrees that
the appropriate geographic area for the application of prevailing wages
to secondary construction sites is the location of the secondary
construction site, not the location of the primary worksite. The
purpose of the Davis-Bacon labor standards is to ensure that laborers
and mechanics are paid wages that prevail where they work; thus, it
would not be appropriate to apply wage rates from a different area when
there is sufficient wage data in the area in which they work. A
contract involving both a primary and secondary construction site
should include wage determinations for both areas. Regarding whether
work performed outside the United States is covered, the language of
the specific statute providing for application of the Davis-Bacon labor
standards controls. For example, the DBA applies only within the
geographical limits of the 50 states and the District of Columbia, as
well as in the Commonwealth of the Northern Mariana Islands.
Conversely, some Related Acts apply to construction in U.S. territories
such as Guam, Puerto Rico, and the U.S. Virgin Islands.
b. Clarification of Application of ``Site of the Work'' Principle to
Flaggers
The Department proposed to clarify that workers engaged in traffic
control and related activities adjacent or virtually adjacent to the
primary construction site are working on the site of the work. Often,
particularly for heavy and highway projects, it is necessary to direct
pedestrian or vehicular traffic around or away from the primary
construction site. Certain workers of contractors or subcontractors,
typically called ``flaggers'' or ``traffic directors,'' may therefore
engage in activities such as setting up barriers and traffic cones,
using a flag and/or stop sign to control and direct traffic, and
related activities such as helping heavy equipment move in and out of
construction zones. Although some flaggers work within the confines of
the primary construction site, others work outside of that area and do
not enter the construction zone itself.
The Department has previously explained that flaggers are laborers
or mechanics within the meaning of the DBA. See AAM 141 (Aug. 16,
1985); FOH 15e10(a); Superior Paving Materials, Inc., ARB No. 99-065,
1999 WL 708177 (June 12, 2002). The Department proposed to clarify, in
the definition of ``nearby dedicated support sites,'' that such
workers, even if they are not working precisely on the site where the
building or work would remain, are working on the site of the work if
they work at a location adjacent or virtually adjacent to the primary
construction site, such as a few blocks away or a short distance down a
highway. Although the Department believes that any adjacent or
virtually adjacent locations at which such work is performed are
included within the current regulatory ``site of the work'' definition,
given that questions have arisen regarding this coverage issue, the
Department proposed to make this principle explicit.
As the Department has previously noted, such work by flaggers and
traffic operators is integrally related to other construction work at
the worksite and construction at the site would not be possible
otherwise. See AAM 141; FOH 15e10(a). Additionally, as noted above in
section III.B.3.ii.(G).(1).(d) and as the ARB has previously explained,
the principle of adjacency or virtual adjacency in this context is
consistent with the statutory ``site of the work'' limitation on DBA-
covered work as interpreted by courts. See Bechtel Constructors Corp.,
ARB No. 97-149, 1998 WL 168939, at *5 (explaining that ``it is not
uncommon or atypical for construction work related to a project to be
performed outside the boundaries defined by the structure that remains
upon completion of the work,'' such as where a crane in an urban
environment is positioned adjacent to the future building site). This
proposed change therefore is consistent with the DBA and would
eliminate any ambiguity regarding these workers' coverage.
The Department received a number of comments about the coverage of
flaggers under the proposed revision of the definition of site of work.
Some of the commenters supported the proposal in its entirety, others
opposed the proposal (including through comments submitted as part of
an organized ABC member campaign), and a few commenters sought
clarification on the proposal.
Supporting commenters agreed with the proposal's intent to codify
the Department's interpretation of adjacency to the site of the work
and ensure that flaggers receive Davis-Bacon protections. For example,
LIUNA stated this clarification reflects existing practice and
therefore will ensure that laborers employed as flaggers receive the
benefits and protections of the DBRA. LIUNA emphasized that this
clarification is not only consistent with the original purpose of the
DBA, but it also furthers the Secretary's 1985 coverage decision
reflected in AAM 141.
Both LIUNA and the NCDCL stated the work of flaggers is integrally
related to the other construction work at the worksite, with NCDCL
emphasizing that this is especially true on heavy and highway projects.
LIUNA noted that construction at the site would not be possible without
such integrally related flaggers' work and pointed to LIUNA
apprenticeship program curricula that demonstrate the integral nature
of traffic control to construction work. Such apprenticeship training
encompasses safety on construction sites related to protection of
flaggers themselves, as well as of other workers and the driving and
pedestrian public near the site. A number of commenters including LIUNA
noted that a flagger may need to perform work outside the precise
confines of the work site in order for them to effectively perform
their duties, which are integrally related to the other work at the
construction site.
LIUNA and NJHHCL noted that the dangerous nature of flagger work
underscores the importance of clarifying, and thus ensuring, Davis-
Bacon coverage for flaggers. Flagger work includes keeping laborers and
mechanics working on or near the worksite safe, as well as keeping the
public safe and out of the work site. LIUNA cited FHWA and State
department of transportation best practices and flagging instruction
materials that noted that flagger stations must be located in places
where the traveling public has sufficient distance to stop at an
intended stopping point before entering the work space. They also noted
that flagger stations should be preceded by advance warning signs and
be at points of maximum visibility, such as on the shoulder of a
highway and opposite active work areas. Another commenter echoed the
importance of flagger work performed adjacent or
[[Page 57621]]
nearly adjacent to the construction site because flaggers are keeping
those in and around the jobsite safe.
NJHHCL expressed approval of the Department's recognition that
``workers handling the traffic control near the primary construction
site are essential personnel to these projects.'' LIUNA similarly
emphasized that over 60 percent of all fatal injuries at road
construction sites are a result of vehicles striking workers who are on
foot.
Commenters such as ABC and ARTBA opposed the proposal,
characterizing it as an expansion of DBA coverage to flaggers whom they
contend are not on the site of the work. In its comment, ABC argued
that the proposed revision's ``expansion of coverage to include . . .
flaggers who do not perform work at the site of construction'' violates
the plain language of the DBA. ABC member campaign comments similarly
claimed that the proposed rule would expand DBA regulations to work
such as flaggers. These commenters also asserted that the Department's
flagger and other proposals would increase the regulatory burden and
costs on new industries and types of construction projects typically
not subject to DBA regulations.
Likewise, ARTBA claimed the Department's flagger proposal extended
DBA coverage to ``off-site'' flaggers. ARTBA opposed the proposal,
claiming that it failed to recognize that flaggers working onsite
directing personnel and equipment have special training. In contrast,
according to ARTBA, ``off-site'' flaggers do not have special training
and their primary responsibility is pedestrian management and directing
people away from the worksite and they ``are not physically present on
the worksite.'' ARTBA argued that onsite flaggers are properly covered
by the DBA while offsite flaggers should not be covered by the DBA
because of their duties, location, and lack of specialized training.
Various individual commenters also claimed that the proposal was an
``expansion of DBA regulations to . . . flaggers'' who do not perform
work on the construction sites,\196\ and voiced concerns that it would
increase the regulatory burden and costs for industries and types of
construction projects that these commenters claimed were not typically
subject to DBA regulations.
---------------------------------------------------------------------------
\196\ The Department understands that the ABC member campaign
comments, which were ambiguous, opposed the flagger proposal on this
basis, as did ABC.
---------------------------------------------------------------------------
The Department reiterates that the rule does not change the meaning
of adjacent or nearly adjacent dedicated support sites or expand
coverage to previously non-covered workers, but rather codifies the
Department's interpretation that the site of the work encompasses
flagger activities performed adjacent or virtually adjacent to the
construction site. Codifying this policy is intended to assist
contractors and other stakeholders with accurately assessing when
flaggers are working on the site of the work and, therefore, covered by
the DBA.
The Department thus disagrees with commenters who claimed the rule
expands DBA coverage and would increase administrative burdens and
costs on the regulated community. As explained in the NPRM, workers
performing flagger activities adjacent or nearly adjacent to worksites
are working on the site of the work under the DBA. Such work ensures
that construction work in and around the active worksite proceeds in a
safe and efficient manner, in part by protecting the laborers and
mechanics doing the work, the flaggers themselves, and the public
around the worksite. The Department notes that a worker's title is not
determinative of whether the person performing flagger activities is on
the site of the work, especially since, as LIUNA pointed out, there are
numerous titles for people performing activities associated with
directing vehicular or pedestrian traffic both on and around or away
from the primary construction site.
Furthermore, the Department disagrees with ARTBA that only flaggers
working ``on-site directing personnel and equipment'' and who have
received specialized training should be covered by the DBA. Such a
position is contrary to the Department's recognition that flaggers are
laborers, see, e.g., AAM 141, whose work, like the work of crane
operators on building projects or of laborers setting up cones or
cleaning up around heavy or highway projects, is ``performed outside
the boundaries defined by the structure that remains upon completion of
the work.'' Bechtel, ARB No. 97-149, 1998 WL 168939, at *5. These
laborers work adjacent or virtually adjacent to the site of the work
and are covered by the DBA. Additionally, ARTBA's emphasis on
specialized training about directing personnel around work vehicles and
operations that ``on-site'' flaggers receive is not relevant to whether
a worker is performing flagger activities adjacent or virtually
adjacent to the worksite.
AGC did not disagree with the proposal but emphasized that the
Department should maintain the distinction between flaggers and
employees of traffic service companies that rent equipment to the prime
contractor and perform only incidental functions at the site in
connection with delivery of equipment. AGC noted that the Department's
current guidance in FOH 15e10 and 15e16 draws this distinction, with
15e16 further providing that traffic service company workers are not
covered by the DBA unless they spend a substantial amount of time (20
percent or more) in a workweek on the site.
The Department acknowledges the distinction between flaggers and
workers of traffic service companies. As described in section c
(``Clarification of `material supplier' distinction''), the final rule
codifies the distinction between contractors and subcontractors and
material suppliers. Under the final rule, if a traffic service
company's only contractual responsibility is to deliver equipment and
to perform activities incidental to such delivery, such as loading and
unloading, then assuming it meets the other enumerated criteria, it is
considered a material supplier and its workers therefore are not
subject to the Davis-Bacon labor standards unless the work is performed
under a statute that applies to all work performed by laborers and
mechanics in the development of a project. On the other hand, if the
company's workers are engaged in construction work on the site that is
not incidental to delivery, such as acting as flaggers, the company
would be considered a subcontractor, and therefore, as discussed below,
see infra section d (``Coverage of time for truck drivers''), its
workers would be covered for any time spent in non-delivery-related
construction work, as well as any onsite time essential or incidental
to delivery that is not de minimis.
Finally, the SBA commented that the proposed rule may result in
more small businesses covered by the DBRA. The SBA recommended that the
Department quantify the number of small businesses potentially affected
by this and other proposals in the NPRM. The number of potentially
affected small businesses is estimated in section VI (``Final
Regulatory Flexibility (FRFA) Analysis'').
For the foregoing reasons, the final rule adopts the language
regarding flaggers as proposed.
c. Clarification of ``Material Supplier'' Distinction
The Department also proposed to clarify the distinction between
subcontractors and ``material suppliers'' and to make explicit that
employees of material suppliers are not covered by
[[Page 57622]]
the DBA and most of the Related Acts. Although this distinction has
existed since the DBA's inception, the precise line between ``material
supplier'' and ``subcontractor'' is not always clear and is sometimes
the subject of dispute.
While the Davis-Bacon regulations have not previously included
definitions of ``contractor'' or ``subcontractor,'' this rule, as
discussed, adds such definitions into Sec. 5.2. The Department
proposed to incorporate the material supplier exception into the
proposed new definition of ``contractor,'' which was incorporated into
the proposed definition of ``subcontractor.'' Specifically, the
Department proposed to exclude material suppliers from the regulatory
definition of ``contractor,'' with the exception of entities performing
work under ``development statutes''--certain Related Acts that apply
the Davis-Bacon labor standards to all laborers and mechanics employed
in a project's development and thus are not limited to ``contractors''
or ``subcontractors.''
The Department proposed three criteria for the material supplier
exception to apply to an employer. First, that the employer's only
obligations for work on the contract or project are the delivery of
materials, articles, supplies, or equipment, which may include pickup
in addition to, but not exclusive of, delivery. Second, that the
employer also supplies materials to the general public. Third, that the
employer's facility manufacturing the materials, articles, supplies, or
equipment is neither established specifically for the contract or
project nor located at the site of the work. The proposed language
further clarified that if an employer, in addition to being engaged in
material supply and pickup, also engages in other construction,
prosecution, completion, or repair work at the site of the work, it is
not a material supplier but a subcontractor. The Department explained
that these criteria were intended to reflect case law and the
Department's guidance. See 87 FR 15732 (citing H.B. Zachry, 344 F.2d at
359, AAM 5 (Dec. 26, 1957), AAM 31 (Dec. 11, 1961), AAM 36, AAM 45, and
AAM 53 (July 22, 1963)); PWRB, DBA/DBRA Compliance Principles, at 7-8;
FOH 15e16(c)).
The Department received comments both supporting and opposing this
proposed change. Supportive comments generally agreed with the
Department that a codification of the definition of material supplier
would be helpful. III-FFC, for example, characterized the Department's
clarification as ``commonsense,'' and SMART stated that the revisions
would ``ensure that workers who perform construction activities on a
primary or secondary site are not deprived of coverage simply because
one of their employer's functions is delivery.''
In contrast, many of the comments in opposition contended that the
Department was proposing to significantly expand coverage to material
suppliers. IRTBA, for example, argued that the proposed rule would
``essentially determin[e] that material suppliers are covered by the
Act unless'' they meet certain criteria. Several comments, including
the Illinois Association of Aggregate Producers (IAAP), Virginia
Asphalt Association, ABC, and a joint comment from NAPA, NRMPCA, and
NSSGA, voiced concern that the proposed rule would cover workers at
temporary material supply facilities that are established and located
on the site of the work and that recycle materials onsite to produce
materials that can then be used onsite, asserting that such locations
are not currently covered. The SBA Office of Advocacy commented that
small businesses at its roundtable expressed similar concerns. Other
comments also appeared to presume that the proposal regarding material
suppliers represented a significant expansion. See, e.g., the group of
U.S. Senators. These commenters generally asserted that the proposed
changes would significantly increase costs and would make it more
difficult for small companies to compete on DBA projects.
Some commenters' objections were more limited or specific. For
example, FTBA and AGC requested that any regulatory clarification more
closely align with the Department's existing guidance, including the
20-percent threshold and the de minimis rule. IEC specifically opposed
the proposed rule's requirement that to be a material supplier, an
employer must supply products to ``the general public,'' contending
that the term was ambiguous and that a supplier's ability to service
only a few clients should not transform it into a subcontractor.
After considering the comments received, the final rule adopts a
regulatory definition of material supplier with certain modifications
from the proposed rule. As an initial matter, the comments reinforced
the Department's belief that it is necessary to codify and clarify the
definition of ``material supplier'' in the Davis-Bacon regulations.
Many of the comments received appeared to be premised on an overbroad
understanding of the existing material supplier exemption, and
therefore perceived the proposed revisions as making significant
substantive changes when they were largely intended to clarify and
reflect existing coverage principles. As such, explicitly delineating
the differences between subcontractors and material suppliers in the
regulation will ensure that workers who are employed by contractors or
subcontractors and work on the site of the work receive Davis-Bacon
wages as appropriate.
Most notably, several comments contended that the proposed
definitions would newly cover mobile or temporary materials
manufacturing facilities located on the site of the work. These
comments reflect a misconception that manufacturing or recycling of
materials on the site of the work is outside the scope of the DBRA. To
the contrary, the regulations have long covered such activities because
the definition of ``construction, prosecution, completion, or repair''
explicitly includes ``[m]anufacturing or furnishing of materials,
articles, supplies or equipment on the site of the building or work.''
29 CFR 5.2(j)(1)(iii) (emphasis added); see also Sec. 5.2(i) (stating
that ``[t]he manufacture or furnishing of materials, articles, supplies
or equipment . . . is not a building or work within the meaning of the
regulations in this part unless conducted in connection with and at the
site of such a building or work'') (emphasis added). The Department's
case law is consistent with this principle. See, e.g., Forrest M.
Sanders, ARB No. 05-107, 2007 WL 4248530, at *4 (Nov. 30, 2007)
(``[C]ontractors who furnish materials do engage in construction, and
thus must pay DBA wages, when their activities occur on the site of the
building or work.''). Thus, while the commenters are correct that under
the proposed rule, such facilities will be covered, this does not
reflect a change from the existing framework. The Department believes
it is important to clarify that companies supplying materials under
such circumstances are subcontractors, not material suppliers.
In recognition of commenters' concerns, however, the Department is
making certain revisions to the proposed criteria for material
suppliers.
First, the Department is clarifying that to qualify as a material
supplier, an employer's obligations for work on a contract must be
limited to the supply of materials, articles, supplies, or equipment,
which may include pickup in addition to, but not exclusive of,
delivery,\197\ and which may also include
[[Page 57623]]
activities incidental to such delivery and/or pickup, such as delivery,
drop off, and waiting time.\198\ This is intended to clarify that
activities that are incidental to material supply, such as loading,
unloading, and pickup, would not constitute construction activity that
would render the material supply exemption inapplicable.
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\197\ As noted in the NPRM, an employer that contracts only for
pickup of materials from the site of the work is not a material
supplier but a subcontractor, and that this would be consistent with
the plain meaning of the term ``material supplier'' and with the
Department's case law. See Kiewit-Shea, ALJ Case No. 84-DBA-34, 1985
WL 167240, at *2 (Sept. 6, 1985), (concluding that companies whose
contractual duties ``called for hauling away material and not for
its supply'' were subcontractors, not material suppliers''), aff'd,
Md. Equip., Inc., WAB No. 85-24, 1986 WL 193110 (June 13, 1986).
\198\ The Department notes that unloading of materials is
considered incidental to delivery even if the materials are unloaded
directly into a contractor's mixing facilities at the work site. See
FOH 15e16(a). Employers and contracting agencies are encouraged to
submit any questions regarding whether onsite construction work
qualifies as incidental to delivery to the Administrator.
---------------------------------------------------------------------------
Second, the Department is eliminating the criterion that the
employer must supply materials to the ``general public'' in order to be
a material supplier. The Department agrees with the IEC that this term
lends itself to ambiguity. In place of this criterion, the final rule
clarifies that for the material supplier exception to apply, the
employer's facility or facilities being used for material supply of the
contract either must have been established before opening of bids or,
if it was established after bid opening, may not be dedicated
exclusively, or nearly so, to the performance of a covered contract.
The Department's existing regulations, guidance, and case law show that
either of these two options is indicative of a sufficient degree of
independence from the contract for the facility to be deemed an
operation of a material supplier. See United Constr. Co., Inc., 1983 WL
144675, at *3; 29 CFR 5.2(l) (describing material supplier facilities
that were established before opening of bids, even where such
operations for a period of time may be dedicated exclusively, or nearly
so, to the performance of a contract); FOH 15e16(d) (same); FOH
15e16(b) (explaining that even if a facility is set up for the purpose
of fulfilling a contract and therefore was not established before bid
opening, it ``may undergo a change in its character to such an extent
that it becomes the operation of a supplier,'' such as ``if it makes a
sufficient quantity of sales from its producing facility to the general
public'').
Finally, to harmonize the definition with other regulatory
provisions, the final rule states that a material supplier's facility
manufacturing the materials, articles, supplies, or equipment may not
be located on the primary or secondary construction site, rather than,
as the proposed rule stated, on the site of the work, a term that also
encompasses adjacent or virtually adjacent dedicated support sites. The
current regulation states that the site of the work does not include a
material supplier's facilities that are not on the primary or secondary
worksite, even if the operations for a period of time may be dedicated
exclusively or nearly so to the performance of a contract. Sec.
5.2(l). This implies two additional principles: first, that a material
supplier may have a facility on an adjacent or virtually adjacent
support site without losing its status as a material supplier provided
that the other conditions of independence from the project are met, and
second, that on the other hand, when an employer operates a
manufacturing or supply facility on the primary or secondary worksite
itself, it is considered a subcontractor rather than a material
supplier. Put differently, the existence of such a facility on the
primary or secondary worksite itself demonstrates that it is not
sufficiently independent of the project or contract to be deemed a
material supply facility whose workers are outside the DBRA's scope.
The Department emphasizes that contrary to commenters' concerns,
the only aspect of the ``material supplier'' definition in the final
rule that arguably reflects a change from current practice is that the
definition in the final rule strictly limits applicability of the
exemption to companies whose only contractual responsibilities are
material supply or activities incidental to material supply. It
therefore excludes from the exemption companies that also perform any
other onsite construction, alteration, or repair; such companies are
instead deemed contractors or subcontractors even if they also engage
in material supply. This principle is consistent with numerous
statements in the Department's current guidance. See PWRB, DBA/DBRA
Compliance Principles, at 7 (material suppliers are companies ``whose
only contractual obligations for on-site work are to deliver materials
and/or pick up materials'') (emphasis added); id. at 7-8 (``[I]f a
material supplier, manufacturer, or carrier undertakes to perform a
part of a construction contract as a subcontractor, its laborers and
mechanics employed at the site of the work would be subject to Davis-
Bacon labor standards in the same manner as those employed by any other
contractor or subcontractor.''); FOH 15e16(c) (same). However, in
tension with this principle, the current guidance also provides that a
company may be considered a material supplier even if its workers
engage in some amount of non-delivery construction work onsite, such as
a precast concrete item supplier that also repairs and cleans such
items at the worksite or an equipment rental dealer that also repairs
its leased equipment onsite. See FOH 15e16(c). The guidance provides
that in such cases, the supplier's workers are covered by the Davis-
Bacon labor standards for all onsite time engaged in such non-delivery
construction work, and that if they spend at least 20 percent of their
workweek engaged in such work, then all of their onsite time during the
workweek is covered. See id.; PWRB, DBA/DBRA Compliance Principles at
7-8.
While the Department recognizes that many stakeholders are familiar
with the 20-percent threshold, it believes that eliminating the 20-
percent threshold for purposes of the material supplier/subcontractor
distinction is appropriate for a number of reasons. First, the
Department believes that by creating a bright-line rule that ties this
determination to a company's obligations under a contract, rather than
the amount of time its workers spend onsite engaged in particular
activities in a given workweek, this change will reduce uncertainty
about coverage and assist both bidders and agencies in predicting labor
costs before bidding. Second, as noted in the proposed rule, the
Department has observed that under its current guidance, there is
considerable confusion regarding the 20-percent threshold and its
application. Some employers, for example, believe that 20 percent is
the de minimis threshold for coverage of onsite delivery work by truck
drivers employed by contractors or subcontractors; however, the 20-
percent threshold in the Department's current guidance actually applies
to material suppliers. Similarly, others incorrectly read the existing
guidance as only requiring compensation for onsite non-delivery
construction time if such time exceeds 20 percent of a workweek;
however, the existing guidance actually requires compensation for all
such time regardless of the amount, and additionally requires that if
such time exceeds 20 percent of a workweek, all of a worker's onsite
time is covered. Such confusion can deprive workers of Davis-Bacon
wages to which they are entitled. In contrast, the clarity in the final
rule will facilitate compliance and is more consistent with both the
language and purpose of the Davis-
[[Page 57624]]
Bacon labor standards, as it ensures that all laborers and mechanics
performing any non-delivery construction work on the site of the work
will receive prevailing wages for such work. The Department therefore
concludes that the need for clarity and predictability outweighs any
reliance interests implicated by the final rule's change from the
subregulatory 20-percent threshold, particularly given that in many
cases, such reliance appears to be premised on contractors' incorrect
application of the threshold.
Accordingly, the Department declines to retain the 20-percent
threshold. Rather, under the final rule, an entity is a material
supplier if: (a) its only obligations for work on the contract or
project are the delivery of materials, articles, supplies, or
equipment, which may include pickup of the same in addition to, but not
exclusive of, delivery, and which may also include activities
incidental to such delivery and pickup; and (b) its facility or
facilities that manufactures the materials, articles, supplies, or
equipment used for the contract or project (1) is not located on, or
does not itself constitute, the project or contract's primary or
secondary construction site, and (2) either was established before
opening of bids on the contract or project, or is not dedicated
exclusively, or nearly so, to the performance of the contract or
project. All other entities engaged in work on the site of the work are
contractors or subcontractors.
The Department also notes that the material supplier exemption
operates in tandem with the ``site of the work'' requirement, except
for ``development statutes'' to which neither limitation applies. Thus,
under the final rule, a worker employed by an employer meeting the
criteria for the material supplier exemption is not employed by a
contractor or subcontractor, and therefore is not entitled to
prevailing wages and fringe benefits under the Davis-Bacon labor
standards at all even for time spent on the site of the work. In
contrast, workers employed by contractors or subcontractors are
entitled to Davis-Bacon wages, but only for time spent on the site of
the work. Thus, for example, if a company establishes a facility near,
but not on, the site of the work for the exclusive or nearly-exclusive
purpose of furnishing materials to a particular project, even though
the company is considered a subcontractor rather than a material
supplier, its workers are only subject to the Davis-Bacon labor
standards for time they spend on the site of the work as defined in
this final rule.
Finally, in addition to the changes described above, the Department
is making a conforming edit to ensure that the regulation as written
reflects the principle that employers meeting the material supplier
exemption are not covered, with the exception of employers performing
work under development statutes to which the exemption does not apply.
Specifically, the Department is amending the definition of ``contract''
in Sec. 5.2 by adding language stating explicitly that with the
exception of work performed under a development statute, the terms
contract and subcontract do not include agreements with employers that
meet the definition of a material supplier under Sec. 5.2.
d. Coverage of Time for Truck Drivers
The Department also proposed to revise the regulations to clarify
coverage of truck drivers under the DBRA. As explained in the proposed
rule, the Department's current guidance differs depending on whether
truck drivers are employed by material suppliers or contractors or
subcontractors. As noted above, employees of material suppliers are
only covered for onsite time engaged in non-delivery construction work,
or for all of their time onsite if such construction work constitutes
20 percent or more of their workweek. FOH 15e16. In contrast, truck
drivers employed by contractors or subcontractors are covered under a
broader range of circumstances, including: (1) performing work on the
site of the work that is not related to offsite hauling, including
hauling materials or supplies from one location on the site of the work
to another location on the site of the work, see 65 FR 80275; FOH
15e22(a)(1) (stating that drivers are covered ``for time spent working
on the site of the work''); (2) hauling materials or supplies from a
dedicated facility that is ``adjacent or virtually adjacent to the site
of the work,'' 65 FR 80275-76; see also 29 CFR 5.2(j)(1)(iv)(A); FOH
15e22(a)(3); (3) transporting ``significant portion(s)'' of the
building or work between a secondary worksite established for contract
performance and the primary worksite, 65 FR 80276; see also 29 CFR
5.2(j)(1)(iv)(B); FOH 15e22(a)(4); and, finally, (4) time spent on the
site of the work that is related to hauling materials to or from the
site, such as loading or unloading materials, provided that such time
is more than de minimis--a standard that as currently applied excludes
drivers ``who come onto the site of the work for only a few minutes at
a time merely to drop off construction materials.'' 65 FR 80276; see
also FOH 15e22(a)(2); PWRB, DBA/DBRA Compliance Principles, at 6-7.
As noted in the NPRM, there is significant uncertainty regarding
this topic, including, for example: the distinction between drivers for
material supply companies versus drivers for construction contractors
or subcontractors; what constitutes de minimis; and whether the 20-
percent threshold for construction work performed onsite by material
supply drivers is also applicable to delivery time spent on site by
drivers employed by a contractor or subcontractor. Moreover, the
Department's Administrative Law Judges (ALJs) have come to different
conclusions on similar facts. Compare Rogers Group, ALJ No. 2012-DBA-
00005 (May 28, 2013) (concluding that a subcontractor was not required
to pay its drivers prevailing wages for sometimes-substantial amounts
of onsite time, as much as 7 hours 30 minutes in a day, making
deliveries of gravel, sand, and asphalt from offsite), with E.T.
Simonds Constr. Co., ALJ No. 2021-DBA-00001, 2022 WL 1997485 (May 25,
2021), aff'd, ARB No. 21-054, 2022 WL 1997485 (May 13, 2022)
(concluding that drivers employed by a subcontractor who hauled
materials from the site of the work and spent at least 15 minutes per
hour--25 percent of the workday--on site were covered for their onsite
time).
Taking this into account, the Department proposed to clarify
coverage of truck drivers. First, as discussed above, the Department
proposed to codify a definition of ``material supplier'' in a manner
that would reduce ambiguity regarding the subcontractor/material
supplier distinction by restricting the material supplier exemption to
employers whose sole contractual responsibility is material supply and,
in so doing, eliminate the subregulatory 20-percent threshold
pertaining to material suppliers' drivers who engage in onsite
construction work. Second, the Department proposed to amend its
regulations concerning the coverage of transportation by truck drivers
who are included within the DBA's scope generally (i.e., truck drivers
employed by contractors and subcontractors, as well as any truck
drivers employed in project construction or development under
development statutes) by amending the definition of ``construction,
prosecution, completion, or repair'' in Sec. 5.2 to include
``transportation'' under five specific circumstances: (1)
transportation that takes place entirely within a location meeting the
definition of site of the work (for example, hauling materials
[[Page 57625]]
from one side of a construction site to the other side of the same
site); (2) transportation of portion(s) of the building or work between
a ``secondary construction site'' and a ``primary construction site'';
(3) transportation between a ``nearby dedicated support site'' and
either a primary or secondary construction site; (4) a driver or
driver's assistant's ``onsite activities essential or incidental to
offsite transportation'' where the driver or driver's assistant's time
spent on the site of the work is not so insubstantial or insignificant
that it cannot as a practical administrative matter be precisely
recorded; and (5) any transportation and related activities, whether on
or off the site of the work, by laborers and mechanics under a
development statute. The Department explained that proposals (1), (2),
(3), and (5) set forth principles reflected in the current regulations,
but in a clearer and more transparent fashion, whereas proposal (4)
sought to resolve the ambiguities discussed above regarding the
coverage of onsite time related to offsite transportation.
The Department received comments expressing support for these
proposals and the ``site of the work'' proposals in general, including
from III-FFC, REBOUND, and an individual commenter. III-FFC
specifically emphasized that most of the proposed revisions regarding
truck drivers reflect principles that are in the current regulations,
interpreted in case law, and explained in WHD regulatory guidance, but
that clarity would nonetheless be helpful given stakeholder
uncertainty. It cited onsite loading and unloading of equipment, which
is a several-step, time-consuming process, as one fact pattern that can
prompt coverage disputes, and indicated that it was hopeful that
regulatory revisions would reduce such disputes and increase
compliance.
The Department also received several comments opposing these
proposals. Some appeared to argue that any coverage of material
delivery truck drivers for onsite time is inconsistent with the D.C.
Circuit's decision in Midway. OCA, IRTBA, SIBA, and IAPA also argued
that case law under the NLRA supports the exclusion of delivery drivers
from coverage even if they spend time on the site of the work. Some
commenters similarly contended that the proposed rule's mere
specification of ``transportation'' as a type of ``construction,
prosecution, completion, or repair'' was itself outside the
Department's statutory authority, whereas others suggested that while
the DBRA covers wholly onsite transportation, such as hauling materials
from one location on the site of the work to another, it does not cover
any time spent onsite that is associated with delivery from offsite.
Other commenters specifically took issue with the proposal to cover
truck drivers employed by contractors or subcontractors for any onsite
delivery-related time that is ``practically ascertainable,'' arguing
that it would effectively eliminate the current de minimis principle
and impose burdensome recordkeeping requirements. IAAP argued that the
Department's proposed standard could compromise safety by creating
pressure on truck drivers to perform any onsite activities as quickly
as possible. AGC argued that the Department should instead codify its
current guidance, including the de minimis and 20 percent principles.
AGC also argued that the Department should expand application of the de
minimis principles to include all covered workers and activities, not
only truck drivers. And FTBA suggested that the proposal would in some
cases impose burdens without benefits since many truck drivers are
owner-operators to whom the Department, as a matter of administrative
policy, has not applied the DBRA. See supra n. 180.\199\
---------------------------------------------------------------------------
\199\ AGC also suggested that the final rule codify the
Department's policy in FOH 15e17 regarding truck driver owner-
operators. Because the Department did not make any proposals along
these lines in the NPRM, it declines to do so in the final rule.
---------------------------------------------------------------------------
As an initial matter, the Department maintains that it is important
to clarify the application of the DBRA to truck drivers, and to do so
in the regulatory text. As noted above and in the discussion regarding
the material supplier exemption, there remains considerable confusion
about these principles, including conflation of the de minimis standard
with the current 20-percent threshold related to material suppliers.
Additionally, for the reasons discussed above in section
III.B.3.ii.(G).(2).(b), the Department is retaining, with some
clarification, its proposal to codify a definition of material supplier
that is restricted to employers whose sole contractual responsibility
is material supply. As such, any employer whose truck drivers engage in
other construction activities will be considered contractors or
subcontractors who are subject to the regulations' new provisions
concerning transportation. This renders moot the subregulatory 20-
percent threshold pertaining to onsite time for material suppliers'
drivers who also engage in onsite construction work.
The Department disagrees that Midway, Ball, or L.P. Cavett preclude
coverage of onsite time for delivery drivers employed by contractors or
subcontractors. None of those cases speak to this precise issue;
rather, these cases concerned the geographic scope of the ``site of the
work'' and the coverage for time driving on locations outside the site
of the work. As noted in the NPRM, Midway expressly declined to decide
whether the DBA covers work that a driver performs onsite if the amount
of such work is more than de minimis--because no party had raised it.
Midway, 932 F.2d at 989 n.5 (``No one has argued in this appeal that
the truckdrivers were covered because they were on the construction
site for this brief period of the workday.''). If anything, Midway is
best read to show that the DBA does cover non-``determinative of the
[DBA's] coverage.'' 932 F.2d at 991.\200\ Accordingly, the Department
has consistently maintained since Midway that truck drivers, and their
assistants, employed by contractors or subcontractors, are covered for
onsite work associated with offsite delivery, provided that such onsite
time exceeds a certain threshold. See 65 FR 80276; 57 FR 19205-06; FOH
15e22(a)(2); PWRB, DBA/DBRA Compliance Principles, at 6-7; ET Simonds,
ALJ No. 2021-DBA-00001, 2022 WL 1997485, at *3-4.
---------------------------------------------------------------------------
\200\ To the extent that some language in Midway could be read
to support the notion that even onsite time of delivery drivers
employed by contractors and subcontractors is not covered, see,
e.g., Midway, 932 F.2d at 992 (``Material delivery truck drivers who
come onto the site of the work merely to drop off construction
materials are not covered by the Act.''), such language is dicta
given the D.C. Circuit's express statement that it was not deciding
whether the DBA covers a more than de minimis amount of work that a
driver performs onsite, id. at 989 n.5. See Cooper Indus., Inc. v.
Aviall Servs., Inc., 543 U.S. 157, 170 (2004) (``Questions which
merely lurk in the record, neither brought to the attention of the
court nor ruled upon, are not to be considered as having been so
decided as to constitute precedents.'').
---------------------------------------------------------------------------
The Department similarly disagrees that cases construing the NLRA
preclude such coverage. Section 8(e) of the NLRA prohibits certain
``contract[s] or agreement[s]'' between employers and unions but does
not prohibit ``an agreement . . . relating to . . . work to be done at
the site of the . . . work''). 29 U.S.C. 158(e). Some commenters
contended that judicial and National Labor Relations Board decisions
construing this language support a conclusion that truck drivers
transporting materials to or from construction sites are not considered
to be performing work on the site of construction, even if they spend
time onsite, and that the DBA should be construed similarly. These
cases,
[[Page 57626]]
however, hold only that a rule similar to the DBA's de minimis
principle applies under section 8(e) of the NLRA, which excludes
``small'' amounts of onsite work that are ``necessarily'' performed in
delivering materials and merely ``incidental'' to a driver's primarily
offsite work. See In re Techno Constr. Corp., 333 NLRB 75, 82 (2001)
(``[T]hese incidental tasks do not bring the Respondent within the
building and construction industry as contemplated by [the NLRA].'');
Teamsters Loc. 957, 298 N.L.R.B. 395, 399 (1990) (ALJ Op.)
(``[E]mployees involved in such work have only `incidental contact with
the site.' . . . With rare exception, the haulage of [material] by the
[drivers] in the instant case involves such `incidental contact' with
job sites.''), aff'd, Gen. Truck Drivers, Chauffeurs, Warehousemen &
Helpers of Am., Loc. No. 957 v. NLRB, 934 F.2d 732, 737 (6th Cir. 1991)
(quoting ALJ with approval); Joint Council of Teamsters No. 42, 248
NLRB 808, 816 (1980) (``[T]he Board has repeatedly held that the
proviso does not apply to jobsite deliveries (or, by logical inference,
pickups) which are only a small part of basically offsite
transportation activity.''); Drivers, Salesmen, Warehousemen, Milk
Processors, Cannery, Dairy Emp. & Helpers Loc. Union No. 695 v. NLRB,
361 F.2d 547, 552 (D.C. Cir. 1966) (Section 8(e) does not cover work a
delivery driver ``necessarily'' performs onsite). Thus, these cases
stand only for the idea that section 8(e) of the NLRA apparently does
not cover de minimis onsite work, the same principle that the
Department has applied under the DBRA.\201\ None of these cases held
that the NLRA excludes work that a driver performs onsite that is more
than de minimis.\202\
---------------------------------------------------------------------------
\201\ In Local No. 957, the Sixth Circuit emphasized that the
drivers performed only 10 percent of their work onsite--the same
amount as in Midway. Loc. No. 957, 934 F.2d at 737; see also Midway,
932 F.2d at 989 n.5.
\202\ The Department also notes that even if section 8(e) of the
NLRA were construed to have a narrower scope, the DBA's ``site of
the work'' language would nonetheless be consistent with the
Department's interpretation here. Section 8(e) concerns an
``agreement'' for work done onsite, a term the DBA does not use. 29
U.S.C. 158(e). Even if an ``agreement'' which is primarily for
offsite delivery work, which necessarily entails some incidental
onsite work, does not necessarily ``relat[e] to'' onsite work under
the NLRA, id., any onsite work performed is still done at the ``site
of the work'' under the DBA. Accord Smith v. Berryhill, 139 S. Ct.
1765, 1776 (2019) (``[they] are different statutes, and courts must
remain sensitive to their differences'').
---------------------------------------------------------------------------
The Department also rejects the notion that it is improper to
include ``transportation'' as a covered activity under the specific
circumstances listed in the regulation. It has never been in serious
dispute that the transportation of materials, equipment, and the like
is within the scope of the types of activities covered by the DBRA.
Rather, in cases where workers performing these activities have been
determined not to be covered, the basis for such determinations has
been either because they were deemed employees of bona fide material
suppliers or because they were not working on the site of the work. The
current regulations expressly recognize that transportation and the
furnishing of materials are covered construction activities, either if
they take place on the site of the work or if they are performed as
part of work under a development statute. See Sec. 5.2(j)(1)(iii),
(iv), 5.2(j)(2). The proposed rule did not reflect any expansion of
coverage in this regard.
However, after considering the comments received, the Department is
not adopting the NPRM's proposal to require compensation for onsite
time related to offsite delivery as long as it is not ``so
insubstantial or insignificant that it cannot as a practical
administrative matter be precisely recorded.'' While the Department
maintains that such a standard would be consistent with the DBA's
``site of the work'' principle, see 65 FR 80275-76 (explaining that the
Department does not understand Midway as precluding coverage of any
time that drivers spend on the site of the work, ``no matter how
brief''), the Department also recognizes that it could impose
unnecessary burdens on contractors for comparatively marginal benefits.
Instead, the final rule codifies the Department's current guidance
by requiring contractors and subcontractors to pay Davis-Bacon wages to
delivery drivers for onsite time related to offsite delivery if such
time is not de minimis. The Department believes it is important to
codify this principle, as commenters agreed that depending on the
circumstances, including what is being delivered, traffic, and other
factors, such drivers can spend significant portions of their day on
the site of the work. Consistent with its pronouncements since Midway,
the Department believes that such time is compensable under the DBRA.
However, whereas the proposed rule sought to borrow language from
the Department's regulatory definition of de minimis under the FLSA,
see 29 CFR 785.47, the final rule is not defining de minimis in the
regulation for several reasons. First, the Department did not propose a
definition for the term in the NPRM. Second, the Department's
historical practice has been to evaluate de minimis under the DBRA on a
case-by-case basis, and a recent decision by the ARB suggests that such
an approach is reasonable. See ET Simonds, ARB No. 2021-0054, 2022 WL
1997485, at *8 (concluding that ``the analysis of whether a material
transportation driver is covered is contextual in nature and should
include a discussion of the totality of the circumstances''). To the
extent warranted, the Department will consider whether to further
elaborate on the definition of de minimis in subregulatory guidance.
However, the Department notes two general principles here.
First, the de minimis standard under the DBRA is independent of the
de minimis standard under the FLSA. As noted in the NPRM, the FLSA de
minimis rule ``applies only where there are uncertain and indefinite
periods of time involved of a few seconds or minutes duration, and
where the failure to count such time is due to considerations justified
by industrial realities.'' 29 CFR 785.47. Moreover, under the FLSA,
``an employer may not arbitrarily fail to count as hours worked any
part, however small, of the employee's fixed or regular working time or
practically ascertainable period of time he is regularly required to
spend on duties assigned to him.'' Id. This strict standard is suitable
for the FLSA, a statute that requires payment of a minimum wage for
every hour worked. The DBRA's de minimis principle, on the other hand,
informs the different inquiry of whether a worker is ``employed
directly on the site of the work.'' Thus, the Department has generally
held that it excludes periods of ``a few minutes'' onsite just to drop
off materials, even though such time generally is considered hours
worked under the FLSA.
Second, the Department intends that under circumstances where
workers spend a significant portion of their day or week onsite, short
periods of time that in isolation might be considered de minimis may be
aggregated. For example, in its recent decision in ET Simonds, the ARB
concluded that it was reasonable for the Administrator to aggregate
such periods throughout a workday where the record showed that workers
spent a total of 15 minutes per hour on the website. Thus, the
Department's position is that the total amount of time a driver spends
on the site of the work during a typical day or workweek--not just the
amount of time that each delivery takes--is relevant to a determination
of whether the onsite time is de minimis.
The Department declines AGC's suggestion to expand the de minimis
principle beyond the context of truck
[[Page 57627]]
drivers. First, such a change would be beyond the scope of the proposed
rule. Second, the Department developed the de minimis principle for
truck drivers given that such workers frequently alternate between time
spent on and off the worksite. The Department does not believe it is
necessary to extend the principle to other types of workers.
Additionally, while FTBA expressed concern that truck drivers that are
owner-operators might have to be added to certified payrolls even
though DOL policy does not require that they be compensated at DBRA
rates, this is not a consequence of the final rule; as discussed above,
even under the guidance in place prior to this rule, truck drivers
employed by contractors or subcontractors have been subject to the DBRA
for time spent on the site of the work that is not de minimis.
e. Non-Substantive Changes for Conformance and Clarity
The Department proposed to amend Sec. 5.2 to use the term
``secondary construction sites'' to describe the covered locations at
which ``significant portions'' of public buildings and works are
covered provided all of the conditions discussed above are met and to
use the term ``primary construction sites'' to describe the place where
the building or work will remain. Although, as discussed above in
``Coverage of Construction Work at Secondary Construction Sites,'' the
Department received numerous comments on the substance of these
proposals, the Department did not receive comments on this conforming
change, and the final rule retains these descriptive terms.
The Department additionally proposed to use the term ``nearby
dedicated support site'' to describe locations such as flagger sites
and batch plants that are part of the site of the work because they are
dedicated exclusively, or nearly so, to the project, and are adjacent
or nearly adjacent to a primary or secondary construction site. AGC
voiced concern that the term ``nearby'' was confusing and could be read
to indicate a broader geographic scope of coverage than the ``adjacent
or nearly adjacent'' standard permits. As such, the final rule instead
adopts the term ``adjacent or nearly adjacent dedicated support site.''
The Department also proposed to define the term ``development
statute'' to mean a statute that requires payment of prevailing wages
under the Davis-Bacon labor standards to all laborers and mechanics
employed in the development of a project, and to make conforming
changes to Sec. 5.5 to incorporate this new term. The Department noted
that the current regulations reference three specific statutes--the
United States Housing Act of 1937; the Housing Act of 1949; and the
Native American Housing Assistance and Self-Determination Act of 1996--
that fit this description, but do not consistently reference all three,
and that replacing those references with the defined term ``development
statute'' would improve regulatory clarity and ensure that the
regulations would not become obsolete if existing statutes meeting this
description are revised or if new statutes meeting this description are
added.
Regarding this proposal, AGC commented that the Sixth Circuit in
L.P. Cavett concluded that coverage principles such as site of the work
applicable to the Davis-Bacon Act apply to the Related Acts even if the
Related Acts may contain different wording. See 101 F.3d at 1116. It
stated that if the Department nonetheless wishes to apply a different
coverage standard to Related Acts, it should engage in separate
rulemaking. However, while the Department has previously voiced
agreement with the general conclusion in L.P. Cavett regarding coverage
principles under the vast majority of the Related Acts, it has
explained that the three housing statutes noted above are
distinguishable because their ``language and/or clear legislative
history'' ``reflected clear congressional intent that a different
coverage standard be applied.'' 65 FR 80275. The current regulations
reflect this conclusion, as its references to both the site of the work
and the material supplier exemption specifically exempt these statutes
(though, as noted above, the regulations do not do so consistently in
every instance). See Sec. Sec. 5.2(i), (j)(1), (j)(1)(iii), (j)(2);
5.5(a)(1)(i), (a)(2), (a)(3)(i). Thus, the proposed rule's use of the
defined term ``development statute'' does not make any substantive
change from the current regulations with respect to these three
statutes. However, to ensure that the revision is faithful to the
Department's previous statements agreeing that identical coverage
principles apply to all of the Related Acts except the above three, the
final rule specifically names the three housing statutes in the
definition of ``development statute,'' and requires that for any other
statute to be deemed a development statute, the Administrator must make
an affirmative determination that the statute's language and/or
legislative history reflected clear congressional intent to apply a
coverage standard different from the Davis-Bacon Act itself.
In addition to the above changes, the Department proposed a number
of revisions to the regulatory definitions related to the ``site of the
work'' and ``material supplier'' principle to conform to the above
substantive revisions and for general clarity. The Department proposed
to delete from the definition of ``building or work'' the language
explaining that, in general, ``[t]he manufacture or furnishing of
materials, articles, supplies or equipment . . . is not a building or
work,'' and proposed instead to clarify in the definition of the term
``construction (or prosecution, completion, or repair)'' that
``construction, prosecution, completion, or repair'' only includes
``manufacturing or furnishing of materials, articles, supplies or
equipment'' under certain limited circumstances, namely, either on the
site of the work or under development statutes. Along the lines of its
comments noted above, FTBA expressed concern that this change could
expand coverage to include material suppliers. While no substantive
change was intended, in recognition of this concern, the Department is
clarifying the definition of ``construction, prosecution, completion,
or repair'' to read that such activities are only covered if done by
laborers or mechanics who are employed by a contractor or subcontractor
(i.e., not a material supplier) on the site of the work, or who are
working in the construction or development of a project under a
development statute.
Additionally, the Department proposed to remove the citation to
Midway from the definition of the term ``construction (or prosecution,
completion, or repair).'' Finally, the Department proposed several
linguistic changes to defined terms in Sec. 5.2 to improve clarity and
readability. Apart from the numerous substantive comments regarding
these terms discussed at length above, the Department did not receive
comments on these proposed conforming and clarifying changes and the
final rule therefore adopts them as proposed.
(H) Paragraph Designations
The Department also proposed to amend Sec. 5.2 to remove paragraph
designations of defined terms and instead to list defined terms in
alphabetical order. The Department proposed to make conforming edits
throughout parts 1, 3, and 5 in any provisions that currently reference
lettered paragraphs of Sec. 5.2.
The Department received no comments on this proposal. The final
[[Page 57628]]
rule therefore adopts this change as proposed.
iii. Section 5.5 Contract Provisions and Related Matters
The Department proposed to remove the table at the end of Sec. 5.5
related to the display of OMB control numbers. The Department maintains
an inventory of OMB control numbers on https://www.reginfo.gov under
``Information Collection Review,'' and this table is no longer
necessary to fulfill the requirements of the Paperwork Reduction Act.
This website is updated regularly and interested persons are encouraged
to consult this website for the most up-to-date information.
The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed.
The final rule includes a number of technical changes and other
minor revisions to Sec. 5.5, including to the proposed regulatory text
of the DBRA and CWHSSA contract clauses, that were not in the proposed
rule. The final rule adds a parenthetical to Sec. 5.5(a) that
clarifies that the requirement in the FAR is to incorporate contract
clauses by reference, as distinguished from the non-FAR-covered
contracts into which the contract clauses must be inserted ``in full.''
The final rule also updates the Sec. 5.5(b) contract clauses by
adding a reference to the new anti-retaliation provision at Sec.
5.5(b)(5) and using gender neutral terminology (``watchpersons''). The
term ``watchpersons'' has been substituted for ``watchmen'' in this and
various other regulations. This change in terminology is not a
substantive change.
Additional minor changes to Sec. 5.5 include that Sec. 5.5(b)(2)
has been updated to reflect the Department's Civil Penalties Inflation
Adjustment Act Annual Adjustment for 2023, which was published in the
January 13, 2023 Federal Register. This adjustment is required by the
Federal Civil Penalties Inflation Adjustment Act Improvements Act of
2015. Section 5.5(c) has also been revised so that the CWHSSA-required
records are referred to in terms that conform with the new terminology
for different types of records in Sec. 5.5(a)(3). That section refers
to basic records (including regular payroll) and certified payroll. See
also Sec. 3.3. Finally, ``CWHSSA'' has been added to the heading in
Sec. 5.5(b) to identify the acronym for the Contract Work Hours and
Safety Standards Act.
(A) 29 CFR 5.5(a)(1)
The Department's proposed changes to this section are discussed
above in section III.B.1.xii (``Frequently conformed rates'').
(B) 29 CFR 5.5(a)(3)
The Department proposed a number of revisions to Sec. 5.5(a)(3) to
enhance Davis-Bacon compliance and enforcement by clarifying and
supplementing existing recordkeeping requirements. Conforming changes
to Sec. 5.5(c) are also discussed here.\203\
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\203\ As an initial matter, the Department proposed to replace
all references to employment (e.g., employee, employed, employing,
etc.) in Sec. 5.5(a)(3) and (c), as well as in Sec. 5.6 and
various other sections, with references to ``workers'' or ``laborers
and mechanics.'' These proposed changes are discussed in greater
detail in section III.B.3.xxii (``Employment Relationship Not
Required'').
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The Department received many comments supporting the proposed
changes to Sec. 5.5(a)(3) and the corresponding changes to Sec.
5.5(c). These comments generally expressed the view that the proposed
changes would enhance transparency and improve enforcement of Davis-
Bacon labor standards requirements. Conversely, the Department received
comments from the group of U.S. Senators and a few contractor
associations expressing the view that the proposed changes were unduly
burdensome to contractors. Specifics of these comments are addressed in
the discussion below.
(1) 29 CFR 5.5(a)(3)(i)
The Department proposed to amend Sec. 5.5(a)(3)(i) to clarify this
recordkeeping regulation, consistent with its longstanding
interpretation and enforcement, as requiring contractors to maintain
and preserve basic records and information, as well as certified
payrolls. The Department explained that required basic records include,
but are not limited to, regular payroll (sometimes referred to as ``in-
house'' payroll) and additional records relating to fringe benefits and
apprenticeship. The Department similarly explained that the term
``regular payroll'' refers to any written or electronic records that
the contractor uses to document workers' days and hours worked, rate
and method of payment, compensation, contact information, and other
similar information that provides the basis for the contractor's
subsequent submission of certified payroll.
The Department also proposed changes to Sec. 5.5(a)(3)(i) to
clarify that regular payrolls and other basic records required by this
section must be preserved for a period of at least 3 years after all
the work on the prime contract is completed. The proposed change was
intended to make it clear that even if a project takes more than 3
years to complete, contractors and subcontractors must keep payroll and
basic records for work on the project for at least 3 years after all
the work on the prime contract has been completed. For example, a
subcontractor that performed work during the second year of a 5-year
project would need to keep their payroll and basic records for at least
3 years after all work on the project had been completed, even though
that may be 6 years after the subcontractor completed their own work on
the project. This revision expressly stated the Department's
longstanding interpretation and practice concerning the period of time
that contractors and subcontractors must keep payroll and basic records
required by Sec. 5.5(a)(3).
The Department also proposed a new requirement that records
required by Sec. 5.5(a)(3) and (c) must include last known worker
telephone numbers and email addresses, reflecting more modern and
efficient methods of communication between workers and contractors,
subcontractors, contracting agencies, and the Department's authorized
representatives.
Another proposed revision in this section, as well as in Sec.
5.5(c), clarified the Department's longstanding interpretation that
these recordkeeping provisions require contractors and subcontractors
to maintain records of each worker's correct classification or
classifications of work actually performed and the hours worked in each
classification. See, e.g., Pythagoras Gen. Contracting Corp., ARB Nos.
08-107, 09-007, 2011 WL 1247207, at *7 (``If workers perform labor in
more than one job classification, they are entitled to compensation at
the appropriate wage rate for each classification according to the time
spent in that classification, which time the employer's payroll records
must accurately reflect.''). Current regulations permit contractors and
subcontractors to pay ``[l]aborers or mechanics performing work in more
than one classification . . . at the rate specified for each
classification for the time actually worked therein,'' but only if
``the employer's payroll records accurately set forth the time spent in
each classification in which work is performed.'' 29 CFR 5.5(a)(1)(i).
The proposed revisions similarly recognized that laborers or mechanics
may perform work in more than one classification and more expressly
provided that, in such cases, it is the obligation of contractors and
subcontractors to accurately record information required by this
section for each separate classification of work performed.
By proposing these revisions to the language in Sec. 5.5(a)(3)(i)
and (c) to
[[Page 57629]]
explicitly require records of the ``correct classification(s) of work
actually performed,'' the Department intended to clarify the
requirements consistent with its longstanding interpretation of the
current recordkeeping regulations that contractors and subcontractors
must keep records of (and include on certified payrolls) hours worked
segregated by each separate classification of work performed. The
Department noted that it would continue to be the case that if a
contractor or subcontractor fails to maintain such records of actual
daily and weekly hours worked and correct classifications, then it must
pay workers the rates of the classification of work performed with the
highest prevailing wage and fringe benefits due.
Current Sec. 5.5 expressly states that records that contractors
and subcontractors are required to maintain must be accurate and
complete. See also 40 U.S.C. 3145(b). The Department proposed to put
contractors and subcontractors on further notice of their statutory,
regulatory, and contractual obligations to keep accurate, correct, and
complete records by adding the term ``actually'' in Sec. 5.5(a)(3)(i)
and (c) to modify ``hours worked'' and ``work performed.'' The current
regulations require maintenance of records containing ``correct
classifications'' and ``actual wages paid,'' and this proposed revision
did not make any substantive change to the longstanding requirement
that contractors and subcontractors keep accurate, correct, and
complete records of all the information required in these sections.
Several commenters specifically noted that the clarification that
contractors are required to maintain the required records for at least
3 years after work on the prime contract has been completed will reduce
wage underpayment and enable more efficient enforcement of Davis-Bacon
labor standards. See LIUNA, Electrical Training Alliance (Alliance),
NCDCL, TAUC. LIUNA further noted that requiring all contractors to
maintain required records for 3 years past the completion of work on
the prime contract is particularly important in enforcing compliance
standards when some or all of the workers may no longer be onsite,
while NCDCL expressed the view that the proposed requirement would
reduce the likelihood that records would be created or even falsified
after the work has been performed. NECA similarly generally supported
the proposed changes, though they also requested that the Department
establish a cutoff time period for subcontractors to maintain the
required records, as some projects may continue for several years after
a subcontractor has performed any work on the project, thereby making
it potentially burdensome for subcontractors to maintain the required
records for such an extended period.
III-FFC and Alliance also specifically expressed support for the
clarification that contractors must maintain accurate records of
workers' classifications and the number of hours worked in each
classification, indicating that misclassification of workers is a
serious problem that would be reduced by the proposed clarification.
III-FFC also commented favorably on the proposal to require contractors
to maintain a record of workers' last known telephone numbers and email
addresses, noting that this information is particularly important when
the Department must interview workers as part of the enforcement
process. Another commenter suggested that the Department should add to
Sec. 5.5(a)(3) a requirement that contractors maintain contact
information for workers. The Department notes that such a requirement
was part of its proposal and that the current regulations require that
contractor records contain worker addresses. UBC also noted that
contractors do not always maintain the required records for workers who
have been classified, correctly or not, as independent contractors, and
requested that language be added to the regulations requiring
contractors to maintain time records for workers, jobsite orientation
information, contact information for workers, names, contact
information of subcontractors, and records of payments to independent
contractors and/or subcontractors.
The Department also received two comments from contractor
associations opposing the proposed requirement that contractors
maintain a record of workers' last known telephone numbers and email
addresses. ABC expressed the view that such a requirement would be an
invasion of privacy and would increase the risk of identity theft and
that the regulations should at least require that the phone numbers and
email addresses be redacted, a position that appears to reflect the
misimpression that the proposed change would require the worker phone
numbers and email addresses to be included on the certified payrolls
submitted to contracting agencies. IEC stated that ``it is one thing to
maintain this contact information so that a contractor can contact its
employees, and yet quite another to make this a regulatory
requirement.'' IEC also noted that workers may not want to provide
telephone numbers or email addresses or even might not have them. IEC
further stated that the proposed requirement conflicts with the Privacy
Act of 1974, as the information would not be relevant or necessary to
accomplish the DBA's statutory purposes.
After consideration of the comments on this topic, the Department
is adopting the changes to Sec. 5.5(a)(3)(i) as proposed. As the
various comments in support indicate, the proposed changes will clarify
the recordkeeping requirements for contractors, discourage
misclassification of workers, and increase the efficiency of the
Department's enforcement. While the Department appreciates ABC's
concerns for workers' privacy and the need to protect workers from the
risk of identity theft, the change will not require contractors to
provide workers' telephone numbers or emails on certified payrolls or
post them on a publicly available database. The contractor will merely
have to maintain records of the workers' last known telephone numbers
and email addresses in the contractor's own internal records in the
workers' personnel files or other suitable location, and to make that
information available to the Department or the contracting agency upon
request. Contractors will typically already have contact information,
including phone numbers and email addresses, stored in their records in
whatever manner the contractor has deemed appropriate in light of
privacy concerns. The proposed requirement to maintain such a record
for those workers who perform work on Davis-Bacon contracts for at
least 3 years after work has concluded on the project and allow
authorized representatives of the Department or the contracting agency
access to that information on request, should not pose a material
increased risk of identity theft for workers.
The Department acknowledges IEC's point that on occasion there may
be workers who do not have telephone numbers or email addresses or who
would prefer not to provide them to the contractor. However, workers
also may prefer not to provide their home address, or may not have a
permanent home address, but contractors have nevertheless been required
to maintain a record of workers' last known home address and have
generally done so without issue. Moreover, on the rare occasions when
the contractor is unable to obtain a worker's telephone number or email
address despite diligent efforts to do so, and has noted that fact in
their records, the contractor will have satisfied this requirement by,
in effect, documenting the worker's ``last known''
[[Page 57630]]
telephone number and email address. As discussed below, having a record
of workers' telephone numbers and email addresses is extremely useful
for enforcement purposes. The Department believes that these benefits
outweigh any slight additional administrative or privacy burden that
this requirement may impose.
The Department does not agree with IEC's claim that this
information is not necessary or relevant to the DBA's statutory
purposes. The Department, as well as the contracting agencies, is
responsible for enforcing the Davis-Bacon prevailing wage requirements
on covered contracts. Enforcement of prevailing wage requirements for a
Davis-Bacon project requires the Department to obtain accurate and
detailed information as to workers' classifications, hours of work, and
wages paid at all stages of a project. Interviews are necessary to,
among other reasons, confirm that the information provided on certified
payrolls and basic records is correct and to fill in any gaps in a
contractor's records. However, worksite interviews may not be possible
(or suitable) for a variety of reasons: some workers may not be onsite
at the time an investigation is conducted; some subcontractors may have
already completed their portion of the work; certain work crews may not
be necessary at that stage of construction; some contractors may
attempt to interfere with WHD's investigation by, for example, telling
workers to leave the worksite or lie to investigators; or some workers
may have voluntarily separated from employment or been terminated.
Information that can be obtained from such workers may be valuable or
even necessary to determine whether contractors are in compliance with
the Davis-Bacon labor standards. The requirement to maintain a record
of workers' telephone numbers and email addresses should make it
considerably easier and more efficient for the Department--and
contracting agencies--to reach workers who are not on the worksite at
the time of the Department's investigation and will therefore increase
the effectiveness of the Department's enforcement efforts.
The Department also understands NECA's concern that the requirement
to maintain the required records for at least 3 years after all the
work on the prime contract is completed may be more burdensome for
subcontractors that may complete work on their subcontract well before
all work on the prime contract has been completed. However, allowing
subcontractors to maintain the required records for a shorter period of
time would be inconsistent with the Department's longstanding
interpretation and practice concerning the period of time that
contractors and subcontractors must keep payroll and basic records
required by Sec. 5.5(a)(3), and could impede enforcement of the Davis-
Bacon labor standards. The obligation to ensure that the Davis-Bacon
labor standards have been met and workers have received the applicable
prevailing wage rates does not end when a subcontractor completes their
portion of work on the project, and the Department may investigate
compliance with the Davis-Bacon labor standards after a subcontractor
is no longer working onsite. The required records are a key component
in the Department's enforcement efforts. Such records are particularly
helpful when workers are no longer working on the project, as other
commenters noted. Accordingly, the Department does not believe it is
appropriate to only require subcontractors to maintain records for a
more limited period of time. The Department notes that nothing in the
regulations prohibits a prime contractor from requesting, or requiring,
its subcontractors provide a copy of the required records to the prime
contractor, so that the prime contractor can ensure that these records
are available for the required timeframe, as the prime contractor is
responsible for ensuring subcontractor compliance under Sec.
5.5(a)(6). Such an approach does not relieve subcontractors of their
obligations to maintain the required records. If they also provide
those records to the prime contractor, however, required records may be
more readily available when needed by the Department or the contracting
agency.
The Department also appreciates UBC's concerns that contractors may
not maintain adequate records for workers when the contractor considers
the workers to be independent contractors or subcontractors, making it
more difficult to determine whether such workers were paid the
applicable prevailing wage rates for their hours worked. Contractors
are required to pay applicable prevailing wage rates for hours worked
by laborers and mechanics on the site of work, regardless of any
contractual relationship which may be alleged to exist between the
contractor and those workers. A worker's classification as an
independent contractor, even where such a classification is correct,
does not relieve a contractor of the obligation to pay prevailing wages
to that worker. Therefore, the regulatory language as proposed already
requires that contractors keep all of the required records described in
Sec. 5.5(a)(3) for such workers, unless such workers meet the
requirements for the executive, administrative, or professional
exemption as defined in 29 CFR 541. These required records therefore
already include time records for all workers (including workers'
attendance at jobsite orientation, as this would be considered hours
worked), contact information for all workers, and a record of payments
made to all workers, including individuals classified as independent
contractors.
(2) 29 CFR 5.5(a)(3)(ii)
The Department proposed to revise the language in Sec.
5.5(a)(3)(ii) to expressly apply to all entities that might be
responsible for maintaining the payrolls a contractor is required to
submit weekly when a Federal agency is not a party to the contract.
Currently, the specified records must be submitted to the ``applicant,
sponsor, or owner'' if a Federal agency is not a party to the contract.
The proposed revision added the language ``or other entity, as the case
may be, that maintains such records'' to clarify that this requirement
applies regardless of the role or title of the recipient of Federal
assistance (through grants, loans, loan guarantees or insurance, or
otherwise) under any of the statutes referenced by Sec. 5.1.
The Department also proposed to revise Sec. 5.5(a)(3)(ii) by
replacing the phrase ``or audit of compliance with prevailing wage
requirements'' with ``or other compliance action.'' This proposed
revision clarified that compliance actions may be accomplished by
various means, not solely by an investigation or audit of compliance. A
similar change was proposed in Sec. 5.6. Compliance actions include,
without limitation, full investigations, limited investigations, office
audits, self-audits, and conciliations. The proposed revision expressly
set forth the Department's longstanding practice and interpretation of
this current regulatory language to encompass all types of Davis-Bacon
compliance actions currently used by the Department, as well as
additional compliance tools the Department may use in the future. The
proposed revision did not impose any new or additional requirements
upon Federal agencies, applicants, sponsors, owners, or other entities,
or on the Department, contractors, or subcontractors.
The Department also proposed to add language to Sec.
5.5(a)(3)(ii)(A) to codify the Department's longstanding policy that
contracting agencies and prime contractors can permit or require
contractors to submit their certified
[[Page 57631]]
payrolls through an electronic system, provided that the electronic
submission system requires a legally valid electronic signature, as
discussed below, and the contracting agency or prime contractor permits
other methods of payroll submission in situations where the contractor
is unable or limited in its ability to use or access the electronic
system. See generally PWRB, DBA/DBRA Compliance Principles, at 26. As
noted in the proposal, the Department encourages all contracting
agencies to permit submission of certified payrolls electronically, so
long as all of the required information and certification requirements
are met. Nevertheless, contracting agencies determine which, if any,
electronic submissions systems they will use, as certified payrolls are
submitted directly to the contracting agencies. The Department
explained that electronic submission systems can reduce the
recordkeeping burden and costs of record maintenance, and many such
systems include compliance monitoring tools that may streamline the
review of such payrolls.\204\
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\204\ The Department explained that it does not endorse or
approve the use of any electronic submission system or monitoring
tool(s). Although electronic monitoring tools can be a useful aid to
compliance, successful submission of certified payrolls to an
electronic submission system with such tools does not guarantee that
a contractor is in compliance, particularly since not all violations
can be detected through electronic monitoring tools. Contractors
that use electronic submission systems remain responsible for
ensuring compliance with Davis-Bacon labor standards provisions.
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However, under the proposed revisions, agencies that require the
use of an electronic submission system would be required to allow
contractors to submit certified payrolls by alternative methods when
contractors are not able to use the agency's electronic submission
system due to limitations on the contractor's ability to access or use
the system. For example, if a contractor does not have internet access
or is unable to access or use the electronic submission system due to a
disability, the contracting agency would be required to allow such a
contractor to submit certified payrolls in a manner that accommodates
these circumstances.
The Department also proposed a new paragraph, Sec.
5.5(a)(3)(ii)(E), to reiterate the Department's longstanding policy
that, to be valid, the contractor's signature on the certified payroll
must either be an original handwritten signature or a legally valid
electronic signature. Both of these methods are sufficient for
compliance with the Copeland Act. See WHD Ruling Letter (Nov. 12, 2004)
(``Current law establishes that the proper use of electronic signatures
on certified payrolls . . . satisfies the requirements of the Copeland
Act and its implementing regulations.'').\205\ The proposal specified
that valid electronic signatures include any electronic process that
indicates acceptance of the certified payroll record and includes an
electronic method of verifying the signer's identity. Valid electronic
signatures do not include a scan or photocopy of a written signature.
The Department recognized that electronic submission of certified
payroll expands the ability of contractors and contracting agencies to
comply with the requirements of the Davis-Bacon and Copeland Acts. The
proposal noted that as a matter of longstanding policy, the Department
has considered an original signature to be legally binding evidence of
the intention of a person with regard to a document, record, or
transaction. In its proposal, the Department acknowledged that modern
technologies and evolving business practices are rendering the
distinction between original paper and electronic signatures nearly
obsolete.
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\205\ https://www.fhwa.dot.gov/construction/cqit/111204dol.cfm.
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Several commenters expressed support for the proposed language
clarifying that agencies may permit or require electronic submission of
certified payrolls, indicating that this method would result in more
streamlined and efficient submission and maintenance of certified
payrolls. See, e.g., COSCDA, MnDOT, UBC, REBOUND. MnDOT also requested
that the Department provide a process by which wage determination data
could be incorporated into an electronic payroll system to more
effectively ensure compliance with prevailing wage requirements.
Although MnDOT's request is outside the scope of this rulemaking, as
the NPRM did not refer to or otherwise address the possibility of
incorporating wage determination data into electronic payroll systems,
the Department appreciates MnDOT's request and will consider as a
separate, subregulatory matter whether wage determination data can be
provided in a format that would enable it to be readily incorporated
into electronic payroll systems.
Although comments on the proposed revisions were generally
supportive, several commenters suggested further additions or
revisions. Smith, Summerset & Associates pointed out that contractors
rarely print out or electronically save copies of certified payrolls
that they have entered into an electronic submission system, generally
assuming that they will always be able to obtain their certified
payrolls from the system itself, but that certified payrolls are often
archived when a project is complete and may therefore not be readily
accessible to the contractor after that point. They therefore suggested
adding language to the regulation to require any electronic certified
payroll software provider to provide access to archived certified
payrolls to the contractor, the contracting agency, and the Department
upon request for at least 3 years after the work on the prime contract
has been completed. The Department agrees that where a contracting
agency encourages or requires contractors to submit their certified
payroll through a particular electronic submission system, it is
important that the contracting agency, the Department, and the
contractors are easily able to access the certified payrolls in that
system for the entire time period that such records must be maintained.
The Department has therefore added language to Sec. 5.5(a)(3)(ii)(A)
of the final rule clarifying that where a contracting agency encourages
or requires contractors to submit their certified payroll through a
particular electronic submission system, the contracting agency must
also ensure that the system allows the contractor, the contracting
agency, and the Department to access the certified payrolls upon
request for at least 3 years after the work on the prime contract has
been completed.
Smith, Summerset & Associates also recommended that the Department
add language to the regulations specifically authorizing contracting
agencies to provide copies of certified payrolls to other labor or tax
enforcement agencies, noting that in their review of certified
payrolls, contracting agencies may frequently find issues, such as
violations of state or local wage and hour laws or misclassification of
employees as independent contractors, that should be reported to the
relevant enforcement agency. They indicated that including such
language would encourage contracting agencies to provide certified
payrolls to other enforcement agencies while putting contractors on
notice that the agencies might choose to do so. The Department
recognizes that contracting agencies may frequently be in a position to
identify potential violations of laws enforced by other agencies as the
result of their certified payroll reviews and agrees that reporting
such potential violations to the appropriate enforcement agencies can
positively impact enforcement in these other areas and enhance workers'
welfare. As the
[[Page 57632]]
certified payrolls are records submitted to and maintained by the
contracting agencies, contracting agencies are free to provide
certified payrolls to other enforcement agencies without the
Department's authorization or permission, where the contracting agency
has determined that such a submission is appropriate and is in
accordance with all relevant legal obligations. Therefore, the
Department does not believe that regulatory language expressly
directing such submissions or providing a blanket authorization for
such submissions is currently necessary. However, the Department
strongly encourages contracting agencies to provide certified payrolls
and other related information to other law enforcement agencies when
they determine they can and should appropriately do so.
MnDOT stated that contractors should be required to include
addresses and Social Security numbers on electronically submitted
certified payrolls, as the electronic submissions would be very secure,
protecting workers' personally identifiable information while still
allowing workers to be more easily identified and traced. Two other
commenters requested adding a requirement to include an identifying
number or similar identifier on certified payrolls that would not need
to be redacted when certified payrolls are requested and obtained by
third parties, apparently unaware that the current regulations already
contain a requirement (which this rulemaking does not alter) that the
contractor include an individual identifying number for each worker on
the certified payrolls. As the proposed language maintains the current
requirement that contractors include an individually identifying number
for each worker, the Department believes that this is sufficient to
allow workers to be identified and tracked across multiple certified
payrolls. Although the Department acknowledges that electronic
certified payroll submission systems will generally use secure online
portals, the Department's experience has shown that the potential risk
of unauthorized disclosure of workers' personally identifiable
information outweighs any additional benefit that might be incurred by
requiring the addition of an address and full Social Security number,
instead of the current requirement for an individual identifying
number, on certified payrolls.
One commenter objected to the proposed language explicitly
permitting contracting agencies to permit or require the submission of
certified payrolls through an electronic system, so long as the
electronic system requires a legally valid signature, on the grounds
that the Department prohibits submission of certified payrolls by
email, even though having to use an electronic submission system is
just as burdensome to small contractors as submitting certified
payrolls by email. However, the Department does not in fact prohibit
submission of certified payrolls by email. Contracting agencies may
permit submission of certified payrolls by email so long as the
certified payrolls submitted in such a manner have a legally valid
electronic signature, as required for all forms of electronic
submission. Certified payrolls that do not have an original or a
legally valid electronic signature, but rather are unsigned or merely
have a scan or copy of a signature, do not meet the requirements of the
Copeland Act regardless of the method of submission. Many payroll
software options provide a method of adding a valid electronic
signature to payroll documents; even a widely used Portable Document
Format (PDF) platform has a digital signature option that can meet this
requirement. Accordingly, the Department declines to adopt this
suggestion because the Department does not believe that the requirement
to append a legally valid electronic signature to any certified
payrolls submitted electronically will be burdensome to contractors,
even where such signatures must be added to certified payrolls that are
submitted by email.
COSCDA and NCSHA also indicated that the requirement to submit
weekly certified payrolls imposes significant administrative costs on
contractors, particularly as many contractors have to adjust their
usual biweekly or bimonthly payroll to meet the weekly submission
requirement. These commenters requested that the Department revise the
regulations to permit greater flexibility in the frequency of certified
payroll submissions. While the Department appreciates these commenters'
concerns regarding the weekly payment of prevailing wages and weekly
submission of certified payroll, both requirements are statutory, not
regulatory. The DBA itself states that contracts must include
stipulations requiring contractors and subcontractors to pay applicable
prevailing wages ``unconditionally and at least once per week.'' 40
U.S.C. 3142(c)(1) (emphasis added). The Copeland Act similarly states
that the Department's implementing regulations ``shall include a
provision that each contractor and subcontractor each week must furnish
a statement on the wages paid to each employee during the prior week.''
40 U.S.C. 3145(a) (emphasis added). Therefore, the Department cannot
promulgate regulations allowing contractors to pay required prevailing
wages or submit certified payrolls on any basis less frequent than
weekly.
Smith, Summerset & Associates noted that the language at 29 CFR
5.5(a)(3)(ii)(A) stating that ``[t]he prime contractor is responsible
for the submission of copies of certified payrolls by all
subcontractors'' is unnecessarily confusing, as prime contractors are
responsible for ensuring that subcontractors submit all required
certified payrolls, and recommended that the words ``copies of'' be
replaced with ``all'' to eliminate this confusion. They also noted a
citation error in the proposed regulatory text. The Department agrees
with these suggestions and has made these non-substantive changes in
the final rule.
After consideration of these comments and for the reasons discussed
above, the Department is adopting the changes to this paragraph as
proposed, except that the Department is also adding language regarding
access to electronic certified payroll submission systems and the minor
non-substantive edits described above. In addition, the Department has
added a new paragraph (a)(3)(ii)(G) to Sec. 5.5 that expressly states
that contractors and subcontractors must preserve all certified
payrolls during the course of the work and for a period of 3 years
after all the work on the prime contract is completed. This length-of-
record-retention requirement, which is the same as for other required
records in Sec. 5.5(a)(3), was implicit in the proposed regulatory
text and is explicit in the existing regulatory text, but the express
inclusion in the regulation will provide clarity for the regulated
community.
(3) 29 CFR 5.5(a)(3)(iii)-(iv)
The Department proposed to add paragraph (a)(3)(iii) to Sec. 5.5
to require all contractors, subcontractors, and recipients of Federal
assistance to maintain and preserve Davis-Bacon contracts,
subcontracts, and related documents for 3 years after all the work on
the prime contract is completed. The Department explained that these
related documents include, without limitation, contractors' and
subcontractors' bids and proposals, as well as amendments,
modifications, and extensions to contracts, subcontracts, or
agreements.
The proposal explained that WHD routinely requests these contract
documents in its DBRA investigations.
[[Page 57633]]
In the Department's experience, contractors and subcontractors that
comply with the Davis-Bacon labor standards requirements usually, as a
good business practice, maintain these contracts and related documents.
The Department noted that adding an express regulatory requirement that
contractors and subcontractors maintain and provide these records to
WHD would bolster enforcement of the labor standards provisions of the
statutes referenced by Sec. 5.1. This requirement would not relieve
contractors or subcontractors from complying with any more stringent
record retention requirements (e.g., longer record retention periods)
imposed by contracting agencies or other Federal, State, or local law
or regulation.
The Department also indicated that this proposed revision could
help ensure uniform compliance with Davis-Bacon labor standards and
prevent non-compliant contractors from underbidding law-abiding
contractors. Like the current recordkeeping requirements, non-
compliance with this new proposed requirement may result in the
suspension of any further payment, advance, or guarantee of funds and
may also be grounds for debarment action pursuant to 29 CFR 5.12.
The Department proposed to renumber current Sec. 5.5(a)(3)(iii) as
Sec. 5.5(a)(3)(iv). In addition, the Department proposed to revise
this re-numbered paragraph to clarify the records contractors and
subcontractors are required to make available to the Federal agency (or
applicant, sponsor, owner, or other entity, as the case may be) or the
Department upon request. Specifically, the proposed revisions to Sec.
5.5(a)(3)(ii) and (iv), and the proposed new Sec. 5.5(a)(3)(iii),
expanded and clarified the records contractors and subcontractors are
required to make available for inspection, copying, or transcription by
authorized representatives specified in this section. The Department
also proposed an additional requirement that contractors and
subcontractors must make available any other documents deemed necessary
to determine compliance with the labor standards provisions of any of
the statutes referenced by Sec. 5.1.
Current Sec. 5.5(a)(3)(iii) requires contractors and
subcontractors to make available the records set forth in Sec.
5.5(a)(3)(i) (Payrolls and basic records). The proposed revisions to
re-numbered Sec. 5.5(a)(3)(iv) would ensure that contractors and
subcontractors are aware that they are required to make available not
only payrolls and basic records, but also the payrolls actually
submitted to the contracting agency (or applicant, sponsor, owner, or
other entity, as the case may be) pursuant to Sec. 5.5(a)(3)(ii),
including the Statement of Compliance, as well as any contracts and
related documents required by proposed Sec. 5.5(a)(3)(iii). The
Department explained that these records help WHD determine whether
contractors are in compliance with the labor standards provisions of
the statutes referenced by Sec. 5.1, and what the appropriate back
wages and other remedies, if any, should be. The Department believed
that these clarifications would remove doubt or uncertainty as to
whether contractors are required to make such records available to the
Federal agency (or applicant, sponsor, owner, or other entity, as the
case may be) or the Department upon request. The proposed revisions
made explicit the Department's longstanding practice and did not impose
any new or additional requirements upon a Federal agency (or applicant,
sponsor, owner, or other entity, as the case may be).
The proposal stated that the new or additional recordkeeping
requirements in the proposed revisions to Sec. 5.5(a)(3) should not
impose an undue burden on contractors or subcontractors, as they likely
already maintain worker telephone numbers and email addresses and may
already be required by contracting agencies to keep contracts and
related documents. These proposed revisions also enhance the
Department's ability to provide education, outreach, and compliance
assistance to contractors and subcontractors awarded contracts subject
to the Davis-Bacon labor standards provisions.
Finally, the Department proposed to add a sanction in re-numbered
Sec. 5.5(a)(3)(iv)(B) for contractors and other persons that fail to
submit the required records in Sec. 5.5(a)(3) or make those records
available to WHD within the timeframe requested. Specifically, the
Department proposed that contractors that fail to comply with WHD
record requests would be precluded from introducing as evidence in an
administrative proceeding under 29 CFR part 6 any of the required
records that were not provided or made available to WHD despite WHD's
request for such records. The Department proposed this sanction to
enhance enforcement of recordkeeping requirements and encourage
cooperation with its investigations and other compliance actions. The
proposal provided that WHD would take into consideration a reasonable
request from the contractor or person for an extension of the time for
submission of records. WHD would determine the reasonableness of the
request and may consider, among other things, the location of the
records and the volume of production.
In addition to the general support for the proposed recordkeeping
changes mentioned above, III-FFC, LIUNA, and TAUC specifically
mentioned the proposal to require the maintenance of Davis-Bacon
contracts, subcontracts, and related documents for 3 years after all
the work on the prime contract is completed, noting that it would help
ensure that contractors are acting responsibly and would improve and
strengthen enforcement, particularly when workers or contractors have
already completed their work on a project. In contrast, FTBA, ABC, and
the group of U.S. Senators objected to those proposed changes. FTBA
also argued that the proposed requirement that contractors and
subcontractors must make available ``any other documents deemed
necessary to determine compliance with the labor standards provisions
of any of the statutes referenced by Sec. 5.1'' was overly broad and
would require contractors to comply with potentially burdensome,
varied, and unreasonable requests. FTBA also stated that the Department
did not provide justification or state a need for adding this
requirement, and that the Department should instead have proposed
specific additional records, which would have provided an opportunity
to comment on each specific additional record. ABC and the group of
U.S. Senators stated that the proposed requirement that all
contractors, subcontractors, and recipients of Federal assistance
maintain and preserve Davis-Bacon contracts, subcontracts, and related
documents for 3 years after all the work on the prime contract is
completed is unduly burdensome, further stating that the Department did
not provide sufficient justification for the requirement. ABC also
objected to the proposed language prohibiting contractors that fail to
comply with record requests from later introducing the specified
records during administrative proceedings as arbitrary, coercive, and
likely to violate contractors' due process rights, particularly since
contractors may have many legitimate reasons for being unable or
unwilling to comply immediately with the Department's record requests.
The Department agrees with commenters' statements that requiring
contractors, subcontractors, and funding recipients to maintain Davis-
Bacon contracts, subcontracts, and related documents will help ensure
that
[[Page 57634]]
contractors are aware of their obligations and will strengthen
enforcement. While the Department appreciates some commenters' concerns
that maintaining copies of Davis-Bacon contracts, subcontracts, and
related documents might be burdensome, particularly to small or mid-
sized contractors, this requirement is not likely to result in any
significant administrative burden or costs to contractors that
contractors are not already incurring. Contractors would only be
required to maintain contracts that they have been awarded or that they
in turn have awarded to others. As the Department indicated in the
NPRM, contractors will already have many sound business reasons for
maintaining these contracts. The contracts awarded to the contractor
(and subcontracts awarded to subcontractors) typically set forth the
work that the contractor is obligated to perform, the terms and
procedures of payment, and information as to what would be considered a
breach of any of their contract obligations, including the specific
Davis-Bacon obligations contained in their contract clauses. The
subcontracts similarly typically state the subcontractor's scope of
work, the financial terms under which the work will be performed, and
what remedies exist if a subcontractor fails to perform as contracted.
With these and many other sensible business reasons for maintaining a
record of Davis-Bacon contracts and subcontracts, it is not surprising
that, in the Department's experience, most contractors already maintain
records of these contracts and subcontracts. The proposed regulatory
language merely requires such records to be maintained for the same
period of time as other required records, and that such records must
similarly be provided to the Department upon request, as there are also
several reasons why such records are particularly useful for
enforcement purposes. Not only does the Department's experience
indicate that contractors who fail to maintain these records are more
likely to disregard their obligations to workers and subcontractors, as
noted in the NPRM, but these records are critical for enforcement of
the prevailing wage requirements. The information provided by these
records assists the Department to make accurate coverage
determinations, establish the extent of the site(s) of work, determine
whether the contract included the required clauses and all applicable
wage determinations (particularly where there is a dispute between the
contracting agency and the contractor as to what was provided to the
contractor), and verify whether the prime contractor and upper-tier
contractors have met their obligations to lower-tier subcontractors and
their workers. The advantages of ensuring that contractors maintain a
record of the contracts that set out their Davis-Bacon obligations for
a reasonable period of time and enabling the Department to more easily
enforce those obligations clearly outweigh the minor additional
recordkeeping burden, if any, that contractors may incur.
Similarly, the Department does not agree that the proposed
requirement that contractors and subcontractors must make available
``any other documents deemed necessary to determine compliance with the
labor standards provisions of any of the statutes referenced by Sec.
5.1'' is overly broad, or that the Department instead should list all
possible types of records that may be created during the course of a
construction project and may be necessary to determine compliance.
Davis-Bacon labor standards apply to a wide variety of projects,
contractors, and worker classifications, resulting in a correspondingly
wide variety of relevant records, such that it would not be possible to
list every conceivable type of record that may be needed to verify
hours worked, wages rates paid, and fringe benefits provided.
Particularly where a contractor has not maintained an accurate or
complete record of daily and weekly hours worked and wages paid as
required, the Department may need to look at records ranging from daily
construction reports or security sign-in sheets to drivers' trip
tickets or petty cash logs to determine whether laborers and mechanics
received the applicable prevailing wage rates for all hours worked. It
would significantly hamper enforcement if the Department could not
require contractors to provide existing--not create new--relevant
records that would help determine compliance merely because it is not
possible to list every conceivable form of relevant record. Moreover,
to the extent that such records, or the failure to provide them,
results in a determination that a contractor is not in compliance with
the Davis-Bacon labor standards, the contractor will have the
opportunity to raise the issue of the reasonableness of the
Department's request for such records during the enforcement process,
including any administrative proceedings, if the contractor wishes to
do so.
For similar reasons, the Department does not believe that
prohibiting contractors that fail to comply with record requests from
later introducing the specified records during administrative
proceedings is arbitrary, coercive, or likely to violate contractors'
due process rights. While contractors may have valid reasons for being
unable or unwilling to comply immediately with the Department's
request, it is difficult to discern why contractors would be unable to
provide those reasons to the Department in a request for an extension
of time to provide such records, as provided for in the proposed
provision. In addition, if the contractor believes that the requested
records are relevant evidence in administrative proceedings relating to
violations, the records would presumably also be relevant to the
Department's investigation of those potential violations. Moreover, if
a contractor believes that the Department's request for the records was
arbitrary or unreasonable despite the contractor's belief that the
records should be admitted as evidence during administrative
proceedings, the contractor will have the opportunity to raise that
issue during the administrative proceedings themselves.
For these reasons, the Department adopts Sec. 5.5(a)(3)(iii) and
(a)(3)(iv) as proposed.
(C) 29 CFR 5.5(a)(4) Apprentices
The Department proposed to reorganize Sec. 5.5(a)(4)(i) so that
each of the four apprentice-related topics it addresses--rate of pay,
fringe benefits, apprenticeship ratios, and reciprocity--are more
clearly and distinctly addressed. These proposed revisions are not
substantive. In addition, the Department proposed to revise the
paragraph of Sec. 5.5(a)(4)(i) regarding reciprocity to better align
with the purpose of the DBA and the Department's ETA regulation at 29
CFR 29.13(b)(7) regarding the applicable apprenticeship ratios and wage
rates when work is performed by apprentices in a different State than
the State in which the apprenticeship program was originally
registered.
Section 5.5(a)(4)(i) provides that apprentices may be paid less
than the prevailing rate for the work they perform if they are employed
pursuant to, and individually registered in, a bona fide apprenticeship
program registered with ETA's Office of Apprenticeship (OA) or with a
State Apprenticeship Agency (SAA) recognized by the OA. In other words,
in order to employ apprentices on a Davis-Bacon project at lower rates
than the prevailing wage rates applicable to journeyworkers,
contractors must ensure that the apprentices are participants in a
federally registered
[[Page 57635]]
apprenticeship program or a State apprenticeship program registered by
a recognized SAA. Any worker listed on a payroll at an apprentice wage
rate who is not employed pursuant to and individually registered in
such a bona fide apprenticeship program must be paid the full
prevailing wage listed on the applicable wage determination for the
classification of work performed. Additionally, any apprentice
performing work on the site of the work in excess of the ratio
permitted under the registered program must be paid not less than the
full wage rate listed on the applicable wage determination for the
classification of work performed.
In its current form, Sec. 5.5(a)(4)(i) further provides that when
a contractor performs construction on a project in a locality other
than the one in which its program is registered, the ratios and wage
rates (expressed in percentages of the journeyworker's hourly rate)
specified in the contractor's or subcontractor's registered program
will be observed. Under this provision, the ratios and wage rates
specified in a contractor's or subcontractor's registered program are
``portable,'' such that they apply not only when the contractor
performs work in the locality in which the program was originally
registered (sometimes referred to as the contractor's ``home State'')
but also when a contractor performs work on a project located in a
different State (sometimes referred to as the ``host State''). In
contrast, as part of a 1979 NPRM, the Department proposed essentially
the opposite approach, i.e., that apprentice ratios and wage rates
would not be portable and that, instead, when a contractor performs
construction on a project in a locality other than the one in which its
program was originally registered, ``the ratios and wage rates
(expressed in percentages of the journeyman's hourly rate) specified in
plan(s) registered for that locality shall be observed.'' \206\
---------------------------------------------------------------------------
\206\ 44 FR 77085.
---------------------------------------------------------------------------
In a final rule revising 29 CFR part 5, issued in 1981, the
Department noted that several commenters had objected to the 1979
NPRM's proposal to apply the apprentice ratios and wage rates in the
location where construction is performed, rather than the ratios and
wage rates applicable in the location in which the program is
registered.\207\ The Department explained that, in light of these
comments, ``[u]pon reconsideration, we decided that to impose different
plans on contractors, many of which work in several locations where
there could be differing apprenticeship standards, would be adding
needless burdens to their business activities.'' \208\
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\207\ 46 FR 4383.
\208\ Id. The 1981 final rule revising 29 CFR part 5 was
withdrawn, but the apprenticeship portability provision in Sec. 5.5
was ultimately proposed and issued unchanged by a final rule issued
in 1982. See Final Rule, Labor Standards Provisions Applicable to
Contracts Covering Federally Financed and Assisted Construction, 47
FR 23658, 23669 (May 28, 1982).
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In 2008, ETA amended its apprenticeship regulations in a manner
that is seemingly in tension with the approach to Davis-Bacon
apprenticeship ``portability'' reflected in the 1981 final rule
revising 29 CFR part 5. Specifically, in December 2007, ETA issued an
NPRM to revise the agency's regulations governing labor standards for
the registration of apprenticeship programs.\209\ One of the NPRM
proposals was to expand the provisions of then-existing 29 CFR
29.13(b)(8), which at that time provided that in order to be recognized
by ETA, an SAA must grant reciprocal recognition to apprenticeship
programs and standards registered in other States--except for
apprenticeship programs in the building and construction trades.\210\
ETA proposed to move the provision to 29 CFR 29.13(b)(7) and to remove
the exception for the building and construction trades.\211\ In the
preamble to the final rule issued on October 29, 2008, ETA noted that
several commenters had expressed concern that it was ``unfair and
economically disruptive to allow trades from one State to use the pay
scale from their own State to bid on work in other States, particularly
for apprentices employed on projects subject to the Davis-Bacon Act.''
\212\ The preamble explained that ETA ``agree[d] that the application
of a home State's wage and hour and apprentice ratios in a host State
could confer an unfair advantage to an out-of-state contractor bidding
on a Federal public works project.'' \213\ Further, the preamble noted
that, for this reason, ETA's negotiations of memoranda of understanding
with States to arrange for reciprocal approval of apprenticeship
programs in the building and construction trades have consistently
required application of the host State's wage and hour and
apprenticeship ratio requirements. Accordingly, the final rule added a
sentence to 29 CFR 29.13(b)(7) to clarify that the program sponsor
seeking reciprocal approval must comply with the host State's
apprentice wage rate and ratio standards.\214\
---------------------------------------------------------------------------
\209\ See NPRM, Apprenticeship Programs, Labor Standards for
Registration, Amendment of Regulations Notice of Proposed
Rulemaking, 72 FR 71019 (Dec. 13, 2007).
\210\ Id. at 71026.
\211\ Id. at 71029.
\212\ Final Rule, Apprenticeship Programs, Labor Standards for
Registration, Amendment of Regulations, 73 FR 64402, 64419 (Oct. 29,
2008).
\213\ Id.
\214\ Id. at 64420. See 29 CFR 29.13(b)(7).
---------------------------------------------------------------------------
In order to better harmonize the Davis-Bacon regulations and ETA's
apprenticeship regulations, the Department proposed in its NPRM to
revise 29 CFR 5.5(a)(4)(i) to reflect that contractors employing
apprentices to work on a DBRA project in a locality other than the one
in which the apprenticeship program was originally registered must
adhere to the apprentice wage rate and ratio standards of the project
locality. As noted above, the general rule in Sec. 5.5(a)(4)(i) is
that contractors may pay less than the prevailing wage rate for the
work performed by an apprentice employed pursuant to, and individually
registered in, a bona fide apprenticeship program registered with ETA
or an OA-recognized SAA. Under ETA's regulation at 29 CFR 29.13(b)(7),
if a contractor has an apprenticeship program registered in one State
but wishes to employ apprentices to work on a project in a different
State with an SAA, the contractor must seek and obtain reciprocal
approval from the project State SAA and adhere to the wage rate and
ratio standards approved by the project State SAA. Accordingly, upon
receiving reciprocal approval, the apprentices in such a scenario would
be considered to be employed pursuant to and individually registered in
the program in the project State, and the terms of that reciprocal
approval would apply for purposes of the DBRA. The Department's
proposed revision requiring contractors to apply the ratio and wage
rate requirements from the relevant apprenticeship program for the
locality where the laborers and mechanics are working therefore better
aligns with ETA's regulations on recognition of SAAs and is meant to
eliminate potential confusion for Davis-Bacon contractors subject to
both ETA and WHD rules regarding apprentices. The proposed revision
also better comports with the DBA's statutory purpose to eliminate the
unfair competitive advantage conferred on contractors from outside of a
geographic area bidding on a Federal construction contract based on
lower wage rates (and, in the case of apprentices, differing ratios of
apprentices paid a percentage of the journeyworker rate for the work
performed) than those that prevail in the location of the project.
The Department noted that multiple apprenticeship programs may be
[[Page 57636]]
registered in the same State, and that such programs may cover
different localities of that State and require different apprenticeship
wage rates and ratios within those separate localities. If apprentices
registered in a program covering one State locality will be doing
apprentice work in a different locality of the same State, and
different apprentice wage and ratio standards apply to the two
different localities, the proposed rule would require compliance with
the apprentice wage and ratio standards applicable to the locality
where the work will be performed. The Department encouraged comments as
to whether adoption of a consistent rule, applicable regardless of
whether the project work is performed in the same State as the
registered apprenticeship program, best aligns with the statutory
purpose of the DBA and would be less confusing to apply.
Lastly, the Department proposed to remove the regulatory provisions
regarding trainees currently set out in Sec. Sec. 5.2(n)(2) and
5.5(a)(4)(ii), and to remove the references to trainees and training
programs throughout parts 1 and 5. Current Sec. 5.5(a)(4)(ii) permits
``trainees'' to work at less than the predetermined rate for the work
performed, and Sec. 5.2(n)(2) defines a trainee as a person registered
and receiving on-the-job training in a construction occupation under a
program approved and certified in advance by ETA as meeting its
standards for on-the-job training programs. Sections 5.2(n)(2) and
5.5(a)(4)(ii) were originally added to the regulations over 50 years
ago.\215\ However, ETA no longer reviews or approves on-the-job
training programs and, relatedly, WHD has found that Sec.
5.5(a)(4)(ii) is seldom if ever applicable to DBRA contracts. The
Department therefore proposed to remove the language currently in
Sec. Sec. 5.2(n)(2) and 5.5(a)(4)(ii), and to retitle Sec. 5.5(a)(4)
``Apprentices.'' The Department also proposed a minor revision to Sec.
5.5(a)(4)(ii) to align with the gender-neutral term of
``journeyworker'' used by ETA in its apprenticeship regulations. The
Department also proposed to rescind and reserve Sec. Sec. 5.16 and
5.17, as well as delete references to such trainees and training
programs in Sec. Sec. 1.7, 5.2, 5.5, 5.6, and 5.15. The Department
encouraged comments on this proposal, including any relevant
information about the use of training programs in the construction
industry.
---------------------------------------------------------------------------
\215\ See Final Rule, Labor Standards Applicable to Contracts
Covering Federally Financed and Assisted Construction, 36 FR 19304
(Oct. 2, 1971) (defining trainees as individuals working under a
training program certified by ETA's predecessor agency, the Manpower
Administration's Bureau of Apprenticeship and Training).
---------------------------------------------------------------------------
The Department received no comments on its technical, non-
substantive proposal to reorganize Sec. 5.5(a)(4)(i) so that each of
the four apprentice-related topics it addresses are more clearly and
distinctly addressed. The final rule therefore adopts this change as
proposed.
The Department received several comments on its proposal regarding
reciprocity of ratios and wage rates where a contractor performs
construction in a locality other than that in which its apprenticeship
program is registered. The majority of the comments expressed support
for the proposal. Several commenters, such as CEA, NECA, and SMACNA,
supported the proposal, saying that requiring contractors to apply the
apprenticeship ratio and wage rate standards of the locality where the
project is being performed better aligns with ETA's apprenticeship
regulations and eliminates potential confusion. The UA and NCDCL also
stated that the proposal would help prevent non-local contractors from
gaining an unfair economic advantage over local contractors and that it
comports with the purpose of the DBA.
MCAA commended the proposal as constructive and sought
clarification on ``where the apprentice must . . . be registered.'' In
response to the question raised, the Department notes that nothing in
the existing regulation or proposal purports to define where
apprentices should be registered. Section 5.5(a)(4)(i) only provides
that in order for contractors to employ apprentices on a Davis-Bacon
project at lower rates than the prevailing wage rates applicable to
journeyworkers, the apprentices must be participants in a federally
registered apprenticeship program, or a State apprenticeship program
registered by a recognized SAA. The ETA regulation at 29 CFR 29.3
governs the ``[e]ligibility and procedure for registration of an
apprenticeship program'' and Sec. 29.3(c) addresses individual
registration.
CC&M, while supporting the proposal, recommended an additional
change to the regulation to clarify that contractors employing
apprentices outside of the locality in which the apprenticeship program
is registered should apply the wage rate and ratio of the locality of
the project ``or apply the wage rates and ratio of the actual program
in which the apprentice is enrolled, whichever is higher and more
restrictive.'' The Department's intent for the proposed revision, in
part, was to harmonize the Davis-Bacon regulations with ETA's
apprenticeship regulations requiring contractors to adhere to the host
State's apprentice wage and ratio standards when employing apprentices
in a State different from where the apprenticeship program is
registered. In its existing form, Sec. 5.5(a)(4)(i) is in tension with
ETA regulations because it explicitly allows contractors to apply the
apprentice ratio and wage rates under their registered program even
where a different apprentice ratio and/or wage rate may apply pursuant
to ETA's reciprocity rule. CC&M's recommended approach of applying the
more restrictive apprenticeship ratio and wage rate would not
sufficiently alleviate this tension and could cause further confusion
for contractors subject to both ETA and WHD rules regarding
apprentices. Therefore, the Department declines to adopt CC&M's
recommendation.
On the other hand, IEC asserted that the proposed revision would
impose an undue burden on apprenticeship programs by causing them ``to
register in additional localities in order for apprenticeship to
journeyman ratios to be reliable'' and by imposing ``locality-specific
rules.'' While IEC did not elaborate on how the proposal would cause
apprenticeship programs to register in additional localities, the
Department does not agree that it would have that effect. Neither the
proposal nor the existing regulations address where an apprenticeship
program needs to be registered. Rather, the rules establish a framework
for determining the applicable apprentice ratio and wage rate when a
contractor seeks to employ apprentices in a locality different from
that in which the program is registered. The Department also disagrees
with the comment that the proposal would impose an undue burden on
apprenticeship programs by imposing locality specific rules. Rather,
the Department believes the proposal avoids confusion and creates a
consistent framework for ETA registered apprenticeship programs by
requiring, at a minimum, the application of local wage rates and ratios
consistent with ETA's apprenticeship regulations.
IEC further stated that the Department provided no guidance for
situations where localities have no apprenticeship program and asked
what should be done in those circumstances. In response, the Department
recognized the need for clarification and made revisions to the final
rule accordingly. Specifically, the Department revised Sec.
5.5(a)(4)(i)(D) to clarify that the apprenticeship ratio and wage rates
under the contractor's registered program would apply in the
[[Page 57637]]
event there is no program in the project locality establishing the
applicable ratio and rates.
Finally, the Department received a few comments in response to its
proposal to remove the reference to the regulatory provisions regarding
trainees set out in existing Sec. Sec. 5.2(n)(2) and 5.5(a)(4)(ii).
See section III.B.3.ii (``29 CFR 5.2 Definitions''). Two commenters,
CEA and SMACNA, supported the proposal, recognizing that ETA no longer
reviews or approves on-the-job training programs. On the other hand,
IAPA opposed the proposal and stated that ``eliminating trainees from
the Davis[-]Bacon Act may have unintended consequences.'' IAPA
contended that student trainees such as those receiving training under
the Illinois Department of Transportation's program with the USDOT's
FHWA may not be able to work on Davis-Bacon projects if the trainee
language is removed.
IAPA's comment perhaps reflects a misunderstanding of the proposal.
The existing regulation under Sec. 5.5(a)(4)(ii) stated that trainees
must not be paid at less than the predetermined rate for the work
performed unless they are employed pursuant to and individually
registered in a program which has received prior approval from the ETA.
Given that the ETA no longer reviews or approves on-the-job training
programs, the allowance to pay trainees less than the predetermined
rate under the existing Sec. 5.5(a)(4)(ii) also no longer applied. The
proposal to remove the regulatory provisions pertaining to trainees
would not prohibit trainees from working on Davis-Bacon projects.
Rather, the proposal makes it clear that the trainees should be paid
the full prevailing wage listed on the applicable wage determination
for the work performed.
Moreover, as discussed in section III.B.3.ii (``29 CFR 5.2
Definitions''), the proposed regulatory definition in Sec. 5.2 retains
the text currently found in Sec. 5.2(n)(3), which provides an
exception for trainees employed on projects subject to 23 U.S.C. 113
who are enrolled in programs which have been certified by the Secretary
of Transportation in accordance with 23 U.S.C. 113(c). Trainees under
23 U.S.C. 113(c) are subject to wage rates and conditions set by the
USDOT pursuant to 23 CFR 230.111, and thus, may be paid less than the
full prevailing wage for the work performed.
The Department received no specific comments on its proposal to
rescind and reserve Sec. Sec. 5.16 and 5.17, as well as delete
references to such trainees and training programs in Sec. Sec. 1.7,
5.2, 5.5, 5.6, and 5.15. The Department also received no comments
regarding its proposal to revise current Sec. 5.5(a)(4)(ii) to align
with the gender-neutral term of ``journeyworker'' used by ETA in its
apprenticeship regulations.
For the foregoing reasons, the final rule adopts the proposal to
remove the regulatory provisions regarding trainees set out in existing
Sec. Sec. 5.2(n)(2) and 5.5(a)(4)(ii), and to remove the references to
trainees and training programs throughout parts 1 and 5 as proposed.
The final rule also adopts the changes proposed regarding reciprocity
under Sec. 5.5(a)(4)(i)(D) with minor clarifications as discussed in
this section.
(D) Flow-Down Requirements in Sec. 5.5(a)(6) and (b)(4)
The Department proposed to add clarifying language to the DBRA- and
CWHSSA-specific contract clause provisions at Sec. 5.5(a)(6) and
(b)(4), respectively. Currently, these contract clauses contain
explicit contractual requirements for prime contractors and upper-tier
subcontractors to flow down the required contract clauses into their
contracts with lower-tier subcontractors. The clauses also explicitly
state that prime contractors are ``responsible for [the] compliance by
any subcontractor or lower tier subcontractor.'' 29 CFR 5.5(a)(6) and
(b)(4). The Department proposed changes that would affect these
contract clauses in several ways.
(1) Flow-Down of Wage Determinations
The Department proposed adding language to Sec. 5.5(a)(6) to
clarify that the flow-down requirement also requires the inclusion in
such subcontracts of the appropriate wage determination(s).
(2) Application of the Definition of ``Prime Contractor''
As noted in the discussion of Sec. 5.2, the Department is
codifying a definition of ``prime contractor'' in Sec. 5.2 to include
controlling shareholders or members, joint venturers or partners, and
any contractor (e.g., a general contractor) that has been delegated all
or substantially all of the construction anticipated by the prime
contract. These entities, having notice of the definitions, these
regulations, and the contract clauses, would therefore also be
``responsible'' under Sec. 5.5(a)(6) and (b)(4) for the same
violations as the legal entity that signed the prime contract. As the
Department explained, the change is intended to ensure that contractors
do not interpose single-purpose corporate entities as the nominal
``prime contractor'' to escape liability or responsibility for the
contractors' Davis-Bacon labor standards compliance duties.
(3) Responsibility for the Payment of Unpaid Wages
The proposal included new language underscoring that being
``responsible for . . . compliance'' means the prime contractor has the
contractual obligation to cover any unpaid wages or other liability for
contractor or subcontractor violations of the contract clauses. This is
consistent with the Department's longstanding interpretation of this
provision. See M.A. Bongiovanni, Inc., WAB No. 91-08, 1991 WL 494751,
at *1 (Apr. 19, 1991); see also All Phase Elec. Co., WAB No. 85-18,
1986 WL 193105, at *1-2 (June 18, 1986) (withholding contract payments
from the prime contractor for subcontractor employees even though the
labor standards had not been flowed down into the subcontract).\216\
Because such liability for prime contractors is contractual, it
represents strict liability and does not require that the prime
contractor knew of or should have known of the subcontractors'
violations. Bongiovanni, 1991 WL 494751, at *1. As the WAB explained in
Bongiovanni, this rule ``serves two vital functions.'' Id. First, ``it
requires the general contractor to monitor the performance of the
subcontractor and thereby effectuates the Congressional intent embodied
in the Davis-Bacon and Related Acts to an extent unattainable by
Department of Labor compliance efforts.'' Id. Second, ``it requires the
general contractor to exercise a high level of care in the initial
selection of its business associates.'' Id.
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\216\ The new language also clarifies that, consistent with the
language in Sec. 5.10, such responsibility also extends to any
interest assessed on back wages or other monetary relief.
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(4) Potential for Debarment for Disregard of Responsibility
The Department proposed new language to clarify that in certain
circumstances, underpayments of a subcontractor's workers may subject
the prime contractor to debarment for violating the responsibility
provision. Under the existing regulations, there is no reference in the
Sec. 5.5(a)(6) or (b)(4) responsibility clauses to a potential for
debarment. However, the existing Sec. 5.5(a)(7) currently explains
that ``[a] breach of the contract clauses in 29 CFR 5.5''--which thus
includes the responsibility clause at Sec. 5.5(a)(6)--``may be grounds
. . . for debarment[.]'' 29 CFR 5.5(a)(7). The new language provides
more explicit notice (in Sec. 5.5(a)(6) and (b)(4) themselves) that a
prime contractor may be debarred where
[[Page 57638]]
there are violations on the contract (including violations perpetrated
by a subcontractor) and the prime contractor has failed to take
responsibility for compliance.
(5) Responsibility and Liability of Upper-Tier Subcontractors
The Department also proposed language in Sec. 5.5(a)(6) and (b)(4)
to eliminate confusion regarding the responsibility and liability of
upper-tier subcontractors. The existing language in Sec. 5.5(a)(6) and
(b)(4) creates express contractual responsibility of upper-tier
subcontractors to flow down the required contract clauses to bind their
lower-tier subcontractors. See Sec. 5.5(a)(6) (stating that the prime
contractor ``or subcontractor'' must insert the required clauses in
``any subcontracts''); Sec. 5.5(b)(4) (stating that the flow-down
clause must ``requir[e] the subcontractors to include these clauses in
any lower tier subcontracts''). The Department has long recognized that
with this responsibility comes the potential for sanctions against
upper-tier subcontractors that fail to properly flow down the contract
clauses. See AAM 69 (DB-51), at 2 (July 29, 1966).\217\
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\217\ In AAM 69, the Department noted that ``the failure of the
prime contractor or a subcontractor to incorporate the labor
standards provisions in its subcontracts may, under certain
circumstances, be a serious violation of the contract requirements
which would warrant the imposition of sanctions under either the
Davis-Bacon Act or our Regulations.''
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The current contract clauses in Sec. 5.5(a)(6) and (b)(4) do not
expressly identify further contractual responsibility or liability of
upper-tier subcontractors for violations their lower-tier
subcontractors commit. However, although the Department has not had
written guidance to this effect, it has in many circumstances held
upper-tier subcontractors responsible for the failure of their lower-
tier subcontractors to pay required prevailing wages. See, e.g., Ray
Wilson Co., ARB No. 02-086, 2004 WL 384729, at *6 (Feb. 27, 2004); see
also Norsaire Sys., Inc., WAB No. 94-06, 1995 WL 90009, at *1 (Feb. 28,
1995).
In Ray Wilson Co., for example, the ARB upheld the debarment of an
upper-tier subcontractor because its lower-tier subcontractor
misclassified its workers. As the ARB held, the upper-tier
subcontractor had an ``obligation[ ] to be aware of DBA requirements
and to ensure that its lower-tier subcontractor . . . properly complied
with the wage payment and record keeping requirements on the project.''
2004 WL 384729, at *10. The Department sought debarment because the
upper-tier subcontractor discussed the misclassification scheme with
the lower-tier subcontractor and thus ``knowingly countenanced'' the
violations. Id. at *8.
In the NPRM, the Department proposed to clarify that upper-tier
subcontractors (in addition to prime contractors) may be responsible
for the violations committed against the employees of lower-tier
subcontractors. The Department's proposal also clarified that this
responsibility requires upper-tier subcontractors to pay back wages on
behalf of their lower-tier subcontractors and subjects upper-tier
subcontractors to debarment in appropriate circumstances (i.e., where
the lower-tier subcontractor's violation reflects a disregard of
obligations by the upper-tier subcontractor to workers of their
subcontractors). In the contract clauses at Sec. 5.5(a)(6) and (b)(4),
the Department proposed to include language adding that ``any
subcontractor[ ] responsible'' for the violations is also liable for
back wages and potentially subject to debarment. This language is
intended to place liability not only on the lower-tier subcontractor
that is directly employing the worker who did not receive required
wages, but also on the upper-tier subcontractors that may have
disregarded their obligations to be responsible for compliance.
A key principle in enacting regulatory requirements is that
liability should, to the extent possible, be placed on the entity that
can best control whether a violation occurs. See Bongiovanni, 1991 WL
494751, at *1.\218\ For this reason, the Department proposed language
assigning liability to upper-tier subcontractors that can choose the
lower-tier subcontractors they hire, notify lower-tier subcontractors
of the prevailing wage requirements of the contract, and take action if
they have any reason to believe there may be compliance issues. By
clarifying that upper-tier subcontractors may be liable under
appropriate circumstances--but are not strictly liable as are prime
contractors--the Department believes that it has struck an appropriate
balance that is consistent with historical interpretation, the
statutory language of the DBA, and the feasibility and efficiency of
future enforcement.
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\218\ Cf. Am. Soc'y of Mech. Eng'rs, Inc. v. Hydrolevel Corp.,
456 U.S. 556, 572-73 (1982) (``[A] rule that imposes liability on
the standard-setting organization--which is best situated to prevent
antitrust violations through the abuse of its reputation--is most
faithful to the congressional intent that the private right of
action deter antitrust violations.''). The same principle supports
the Department's codification of the definition of ``prime
contractor.'' Where the nominal prime contractor is a single-purpose
entity with few actual workers, and it contracts with a general
contractor for all relevant aspects of construction and monitoring
of subcontractors, the most reasonable enforcement structure would
place liability on both the nominal prime contractor and the general
contractor that actually has the staffing, experience, and mandate
to assure compliance on the job site.
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The Department received many comments from unions, contractor
associations, and worker advocacy groups supporting the proposed
changes to Sec. 5.5(a)(6) and (b)(4). These comments stated generally
that greater clarity and stronger enforcement mechanisms are necessary
to increase compliance by contractors and protect vulnerable workers
who may otherwise have no recourse against unscrupulous practices such
as wage theft. Several contractor associations, including SMACNA, NECA,
and CEA, supported the changes as reasonable clarifications of existing
interpretations.
Several commenters in support of the proposal stated that the new
language would help to ensure workers have a recourse regardless of
which entity is their direct employer. The LCCHR letter, for example,
stated that ``up-the-chain liability'' for DBRA violations is
particularly important in the construction industry because large-scale
construction is an inherently fissured operation, with multiple
specialized subcontractors retained to complete discrete aspects of a
project. Under these circumstances, strengthening and clarifying the
longstanding principles of contractors' liability throughout the
contracting chain reinforces accountability in taxpayer-funded
construction and helps ensure workers will receive the wages they have
earned, consistent with the purpose of the DBRA.\219\
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\219\ A number of commenters supporting the proposal cited to a
publication summarizing the evidence of widespread unlawful labor
practices in the residential construction industry in particular.
See Ormiston et al., supra note 70, at 75-113. The authors of this
meta-analysis noted that one of the most effective methods of
ensuring compliance in such circumstances is the appropriate
allocation of liability on upper-tier subcontractors. Id. at 100.
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Several commenters, including UBC and III-FFC, stated that
appropriate liability is important to promote self-policing by
contractors. These commenters stated that the clarification of
responsibility and potential accountability will further incentivize
prime contractors and upper-tier subcontractors to choose lower-tier
subcontractors wisely and encourage them to police compliance. Several
commenters supporting the proposal, including UA, III-FFC, MCAA, NECA,
and CEA, noted that enhanced oversight, enforcement, and vulnerability
to penalties would close
[[Page 57639]]
loopholes, deter bad actors, and ensure that contractors do not shirk
their responsibilities through subcontracting arrangements. This would
also remove competitive disadvantages for high-road contractors bidding
on covered projects. Several dozen contractors and state-level
contractor associations that are members of SMACNA wrote letters, as
part of a campaign, that expressed general support of the revisions to
Sec. 5.5(a)(6) and (b)(4).
NECA and CEA, while supporting the proposal, urged that the
contract clauses should include compliance language, including
timetables, directing the prime contractor to expedite any new wage
changes and contract modifications so they quickly and appropriately
reach the lower-tier subcontractors and the workforce entitled to them.
The Department also received a few comments opposing the proposed
changes. The SBA Office of Advocacy conveyed comments from small
businesses that it would be especially difficult for subcontractors to
keep track of their lower-tiered subcontractors and material suppliers
because of the lack of clarity and vague definitions in the rulemaking.
Three contractor associations, the OCA, SIBA, and IRTBA, commented that
the current Davis-Bacon enforcement mechanisms are working and should
not be changed. IEC stated that the Department's proposed language was
``overly harsh'' and would greatly increase the compliance costs of
upper-tier contractors that would have to expend significant costs to
audit subcontractors.
NAHB stated that subcontracting is ubiquitous in the residential
construction industry, and in particular for multifamily residential
building. NAHB likened the proposed language in this section and
elsewhere in this rulemaking to a proposed expansion of joint employer
liability. NAHB stated that construction sites are unique examples of
multiemployer worksites and that many of the usual factors for
establishing a joint employer relationship are not applicable in this
setting. But NAHB also urged that WHD should clarify in the final rule
that ``joint employer'' status will be governed by case law under the
FLSA.
IEC stated that the cases the Department cited in support of its
proposal ``do not support a blanket liability provision.'' IEC
specifically pointed to the ARB decision in Ray Wilson Co., in which,
according to IEC, the vice-president of ``a prime [contractor], Aztec''
had prepared the subcontract with a lower-tier subcontractor that had
violated the DBA, and the subcontract did not include DBA
provisions.\220\ IEC stated that in that instance it ``may have been
appropriate'' to hold Aztec responsible, but that these ``specific
issues govern the case'' and should be used to interpret the Board's
finding that Aztec violated the requirement to ensure that its lower-
tier subcontractor properly complied with the Act's requirements. ARB
No. 02-086, 2004 WL 384729, at *6. IEC also emphasized that the ARB in
Ray Wilson Co. and WAB in Norsaire Systems, 1995 WL 90009, at *1, did
not cite any provision of the DBA or regulations to support the
Department's actions.
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\220\ This description misstates the role of the company Aztec
in Ray Wilson Co. Aztec was an upper-tier subcontractor, not the
prime contractor. A lower-tier subcontractor of Aztec misclassified
its workers as ``partners'' allegedly exempt from the Act's wage
requirements. ARB No. 02-086, 2004 WL 384729, at *3, *5.
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IEC recommended that the Department follow the approach of other
regulations applicable to government contractors by explicitly allowing
upper-tier contractors to rely on the certifications of lower-tier
subcontractors with respect to certain compliance obligations. IEC gave
the example of the SBA, which allows upper-tier contractors to rely on
the size certifications of small business with no duty to inquire
unless there was a reason to believe the certification was inaccurate.
Similarly, the ARTBA recommended that the DBA rule should include a
``good faith'' standard for prime contractors that would relieve the
prime contractor of liability for a subcontractor's violation if the
prime contractor has established a compliance program, the
transgression was beyond their reasonable scope of knowledge, and they
did not willfully participate in the violation.
The Department has considered the comments received on this
proposal. Both the comments for and against the proposal emphasize that
subcontracting is a critical aspect of the construction industry and
that the allocation of liability between upper-tiered and lower-tiered
subcontractors is an issue of particular interest to contractors,
subcontractors, and workers. The Department generally agrees with the
commenters that supported the proposal that the failure to
appropriately allocate responsibility has consequences for the
construction workers for whom the Act was enacted. See Binghamton
Constr. Co., 347 U.S. at 178. The LCCHR letter emphasized that one of
the letter's signatory organizations represents a construction
workforce in Texas and pointed to the crucial role ``up-the-chain
liability'' plays in enabling these workers to secure redress from
prime and general contractors for wage theft committed by
subcontractors. The Department agrees with the LCCHR letter that
clarity in the allocation of ``up-the-chain'' responsibility is
consistent with the purpose of the Act to protect prevailing wages for
these and other local construction workers.
The Department agrees with NECA and CEA that the contract clause
language in Sec. 5.5(a)(6) would be strengthened through the inclusion
of a requirement that any DBRA-related contract modifications must also
be flowed down. The Department therefore has amended the Sec.
5.5(a)(6) contract clause language in the final rule to cover, along
with the enumerated contract clauses and applicable wage
determination(s), such other clauses ``or contract modifications'' as
the Federal agency may by appropriate instructions require. The
Department does not believe it is necessary to impose a specific
timetable for such incorporation in Sec. 5.5(a)(6), as the Department
or relevant Federal agency can specify the timetable in the
modification with the prime contractor, and the prime contractor will
already be liable for the effect of any modification on the prevailing
wages of the employees of lower-tier subcontractors during any delay in
the flowing down of the required modification.
The Department has considered, but declines to adopt, the
suggestions from IEC and ARTBA regarding certifications and ``good
faith'' defenses. As the NPRM explained, the Department has long
interpreted the DBRA to place strict liability on prime contractors to
account for all unpaid back wages. This is because prime contractors
are entering into a contract with the government agency that requires
that all workers on the project be paid the prevailing wage in
compliance with the Act. As explained in the Restatement (Second) of
Contracts, ``[c]ontract liability is strict liability'' and ``[t]he
obligor is therefore liable in damages for breach of contract even if
he is without fault[.]'' Restatement, ch. 11, intro. note (Am. Law
Inst. 1981). Allocating liability in this manner is appropriate given
the prime contractor's ability to choose which subcontractors to hire,
provide adequate notice and instruction to subcontractors of their
responsibilities, and inquire into their compliance or audit them as
appropriate. Creating a good faith defense to basic back wage or other
contractual liability in this context is not consistent with common law
of
[[Page 57640]]
contract or with the purpose of the statute.
For the same reason, the Department does not believe that NAHB's
comparison to joint employer liability under the FLSA is helpful. The
DBA and Related Acts, like other statutes and executive orders
governing Federal contracting, are not general regulatory statutes.
Rather, they seek to impose conditions solely on entities involved in
contracts for construction with a Federal agency or construction
contracts receiving Federal assistance. The relevant question is not
whether the common law would consider one entity to be liable for the
other under a vicarious liability theory, or whether other statutes
like the FLSA might impose liability depending on the wording of those
statutes. Rather, the question the Department seeks to address is how
best to ensure that the congressional purpose of the DBRA--the
protection of the prevailing wages of workers on covered contracts--is
satisfied.
Notwithstanding the above, the Department emphasized in the
proposal that it does not intend to place the same strict liability on
upper-tier subcontractors for back wages recoverable by the Department
as it does on prime contractors. The Department also emphasized that it
did not intend for the proposed new language in Sec. 5.5(a)(6) to
impose a new strict liability standard for debarment for either prime
contractors or upper-tier subcontractors for violations involving the
workers of lower-tier contractors. Some of the critical comments that
the Department received overlooked these points in the NPRM. For
example, OCA, SIBA, and IRTBA characterized the proposal as
``[e]ssentially . . . impos[ing] strict, vicarious liability on
contractors, to the point of debarment.'' They opposed this, saying
that it would place an undue burden and risk on contractors and would
discourage contractors from bidding on work covered by the DBA.
OCA, SIBA, and IRTBA's recitation of the proposed changes blurs the
Department's distinction between prime contractors and upper-tier
subcontractors and also suggests confusion regarding the applicable
debarment standard. The strict liability for covering unpaid back wages
only applies to prime contractors, for the reasons articulated above.
The new contract language in Sec. 5.5(a)(6) will only impose back wage
liability on upper-tier subcontractors to the extent they are
``responsible'' for the violations of their lower-tier subcontractors.
As the Department stated in the NPRM, this language should not be read
to place the same strict liability responsibility on all upper-tier
subcontractors that the existing language already places on prime
contractors. Rather, the new language clarifies that, in appropriate
circumstances, such as in Ray Wilson Co., upper-tier subcontractors may
be held responsible for paying back wages jointly and severally with
the prime contractor and the lower-tier subcontractor that directly
failed to pay the prevailing wages. This standard is intended to
provide the potential for back wage liability for an upper-tier
subcontractor that, for example, repeatedly or in a grossly negligent
manner fails to flow down the required contract clause, or has
knowledge of violations by lower-tier subcontractors and does not seek
to remedy them, or is otherwise purposefully inattentive to Davis-Bacon
labor standards obligations of lower-tier subcontractors.
Regarding debarment, OCA, SIBA, and IRTBA's implication that there
could be a strict liability standard requiring the Department to debar
a prime contractor or any upper-tier subcontractor for the violations
of a lower-tier subcontractor is misplaced. In proposing this
additional notice of the potential for debarment, the Department stated
that it did not intend to change the core standard for when a prime
contractor or upper-tier subcontractor may be debarred for the
violations of a lower-tier subcontractor. The potential for debarment
for a violation of the responsibility requirement, unlike the
responsibility for back wages, is not subject to a strict liability
standard--even for prime contractors. Rather, in the cases in which
prime contractors have been debarred for the underpayments of
subcontractors' workers, they were found to have some level of intent
that reflected a disregard of their own obligations. See, e.g., H.P.
Connor & Co., WAB No. 88-12, 1991 WL 494691, at *2 (Feb. 26, 1991)
(affirming ALJ's recommendation to debar prime contractor for
``run[ning] afoul'' of 29 CFR 5.5(a)(6) because of its ``knowing or
grossly negligent participation in the underpayment'' of the workers of
its subcontractors).\221\ The Department does not intend to change this
debarment standard.
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\221\ See also Martell Constr. Co., ALJ No. 86-DBA-32, 1986 WL
193129, at *9 (Aug. 7, 1986), aff'd, WAB No. 86-26, 1987 WL 247045
(July 10, 1987). In Martell, the prime contractor had failed to flow
down the required contract clauses and investigate or question
irregular payroll records submitted by subcontractors. The ALJ
explained that the responsibility clause in Sec. 5.5(a)(6) places a
burden on the prime contractor ``to act on or investigate irregular
or suspicious situations as necessary to assure that its
subcontractors are in compliance with the applicable sections of the
regulations.'' 1986 WL 193129, at *9.
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The Department believes it has appropriately relied on the
precedent reflected in Ray Wilson Co. and Norsaire Systems to explain
these liability principles. The lesson of Ray Wilson Co.--as IEC points
out--is not that an upper-tier subcontractor will be debarred in any
case in which a lower-tier subcontractor violates the DBRA. Rather, it
is an example of a set of factual circumstances in which debarment of
an upper-tier subcontractor was appropriate because it disregarded its
obligations to employees of its own lower-tier subcontractor.
Although the Department declines to adopt IEC's suggestion that
contractors should be allowed to escape liability if they rely on
certifications of compliance by lower-tier subcontractors, this
decision is not intended to limit the ways in which prime contractors,
upper-tier subcontractors, and lower-tier subcontractors may agree
among themselves to allocate liability. For example, a small business
prime contractor or upper-tier subcontractor may wish to limit its
exposure to back wage liability by requiring lower-tier subcontractors
to enter into indemnification agreements with them for any back wage
liability for the workers of lower-tier subcontractors. The Department
believes that these types of agreements can address some of the
concerns conveyed by SBA's Office of Advocacy about the potential
burdens on small business subcontractors.
In general, however, the Department believes that the proposed
changes to Sec. 5.5(a)(6) and (b)(4) are consistent with the governing
case law and represent a balanced compromise by allocating strict
contractual liability only on the prime contractor and not on upper-
tier subcontractors. The Department adopts the changes as proposed,
with the limited addition of the language requiring the flow down of
DBRA-related contract modifications.
(E) 29 CFR 5.5(d)--Incorporation of Contract Clauses and Wage
Determinations by Reference
New paragraph at Sec. 5.5(d) clarifies that, notwithstanding the
continued requirement at Sec. 5.5(a) that agencies incorporate
contract clauses and wage determinations ``in full'' into contracts not
awarded under the FAR, the clauses and wage determinations are equally
effective if they are incorporated by reference. This new paragraph is
discussed further below in section III.B.3.xx (``Post-award
determinations and operation-of-law''), together with
[[Page 57641]]
proposed changes to Sec. Sec. 1.6(f), 3.11, 5.5(e), and 5.6.
(F) 29 CFR 5.5(e)--Operation of Law
In a new paragraph at Sec. 5.5(e), the Department proposed
language making effective by operation of law a contract clause or wage
determination that was wrongly omitted from the contract. This
paragraph is discussed below in section III.B.3.xx (``Post-award
determinations and operation-of-law''), together with changes to
Sec. Sec. 1.6(f), 3.11, 5.5(d), and 5.6(a).
iv. Section 5.6 Enforcement
(A) 29 CFR 5.6(a)(1)
The Department proposed to revise Sec. 5.6(a)(1) by renumbering
the existing regulatory text Sec. 5.6(a)(1)(i), and adding an
additional paragraph, Sec. 5.6(a)(1)(ii), to include a provision
clarifying that where a contract is awarded without the incorporation
of the required Davis-Bacon labor standards clauses required by Sec.
5.5, the Federal agency must incorporate the clauses or require their
incorporation. This paragraph is discussed further below in section
III.B.3.xx (``Post-award determinations and operation-of-law''),
together with changes to Sec. Sec. 1.6(f), 3.11, 5.5(d), and 5.5(e).
(B) 29 CFR 5.6(a)(2)
The Department proposed to amend Sec. 5.6(a)(2) to reflect the
Department's longstanding practice and interpretation that certified
payrolls submitted by the contractor as required in Sec. 5.5(a)(3)(ii)
may be requested--and Federal agencies must produce such certified
payrolls--regardless of whether the Department has initiated an
investigation or other compliance action. The term ``compliance
action'' includes, without limitation, full investigations, limited
investigations, office audits, self-audits, and conciliations.\222\ The
Department further proposed revising this paragraph to clarify that, in
those instances in which a Federal agency does not itself maintain such
certified payrolls, it is the responsibility of the Federal agency to
ensure that those records are provided to the Department upon request,
either by obtaining and providing the certified payrolls to the
Department, or by requiring the entity maintaining those certified
payrolls to provide the records directly to the Department.
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\222\ See 2020 GAO Report, note 14, supra, at 6 tbl.1, for
descriptions of WHD compliance actions.
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The Department also proposed to replace the phrase ``payrolls and
statements of compliance'' with ``certified payrolls'' to continue to
more clearly distinguish between certified payrolls and regular payroll
and other basic records and information that the contractor is also
required to maintain under Sec. 5.5(a)(3), as discussed above.
The proposed revisions were intended to clarify that an
investigation or other compliance action is not a prerequisite to the
Department's ability to obtain from a Federal agency certified payrolls
submitted pursuant to Sec. 5.5(a)(3)(ii). The proposed revisions also
were intended to remove any doubt or uncertainty that each Federal
agency has an obligation to produce or ensure the production of such
certified payrolls, including in those circumstances in which it may
not be the entity maintaining the requested certified payrolls. As the
Department noted in the NPRM, these proposed revisions will make
explicit the Department's longstanding practice and interpretation of
this provision, and do not place any new or additional requirements or
recordkeeping burdens on contracting agencies, as they are already
required to maintain these certified payrolls and provide them to the
Department upon request.
The Department believes that these revisions will enhance the
Department's ability to provide compliance assistance to various
stakeholders, including Federal agencies, contractors, subcontractors,
sponsors, applicants, owners, or other entities awarded contracts
subject to the provisions of the DBRA. Specifically, these revisions
are expected to facilitate the Department's review of certified
payrolls on covered contracts where the Department has not initiated
any specific compliance action. Conducting such reviews promotes the
proper administration of the DBRA because, in the Department's
experience, such reviews often enable the Department to identify
compliance issues and circumstances in which additional outreach and
education would be beneficial.
The Department received no specific comments on these proposed
revisions. III-FFC generally supported clarifying and strengthening the
recordkeeping requirements as a means of ensuring that contractors
remain responsible and that workers are paid the correct prevailing
wage, without specifically discussing Sec. 5.6(a)(2). The final rule
therefore adopts these changes as proposed.
(C) 29 CFR 5.6(a)(3)-(5), 5.6(b)
The Department proposed revisions to Sec. 5.6(a) and (b), similar
to the proposed changes to Sec. 5.6(a)(2), to clarify that an
investigation is only one method of assuring compliance with the labor
standards clauses required by Sec. 5.5 and the applicable statutes
referenced in Sec. 5.1. The Department proposed to supplement the term
``investigation,'' where appropriate, with the phrase ``or other
compliance actions.'' The proposed revisions align with all the types
of compliance actions currently used by the Department, as well as any
additional types that the Department may use in the future. These
proposed revisions made explicit the Department's longstanding practice
and interpretation of these provisions and did not impose any new or
additional requirements upon a Federal agency.
Proposed revisions to Sec. 5.6(a)(3) clarified the records and
information that contracting agencies should include in their DBRA
investigations. These proposed changes conformed to proposed changes in
Sec. 5.5(a)(3).
The Department also proposed renumbering current Sec. 5.6(a)(5) as
a stand-alone new Sec. 5.6(c) and updating that paragraph to reflect
its practice of redacting portions of confidential statements of
workers or other informants that would tend to reveal those informants'
identities. This proposed change was made to emphasize--without making
substantive changes--that this regulatory provision mandating
protection of information that identifies or would tend to identity
confidential sources, applies to both the Department's and other
agencies' confidential statements and other related documents. The
proposed revisions codify the Department's longstanding position that
this provision protects workers and other informants who provide
information or documents to the Department or other agencies from
having their identities disclosed.
The Department received few comments about these proposals. Two
comments supported the proposed revisions. III-FFC generally supported
clarifying and strengthening the recordkeeping requirements. The UA
also supported the safeguards the Department proposed to make it
possible for underpaid or misclassified workers to report violations,
starting with the Department's clear commitment in Sec. 5.6(c) to
expressly protect the identity of workers or other informants who
provide information in connection with a complaint or investigation.
In addition, the Department received a comment from NFIB
recommending two limiting changes to Sec. 5.6(b)(2) and (c). First,
NFIB requested that the Department revise Sec. 5.6(b)(2) by inserting
``consistent with applicable law,'' after ``cooperate.'' NFIB requested
this regulatory change based on its concern that the existing
regulatory
[[Page 57642]]
requirement that private entities or citizens cooperate with Department
investigations creates a legal duty that potentially conflicts with the
legal rights of private entities or citizens to invoke evidentiary
privileges against document production and the privilege against self-
incrimination, and a right to refrain from answering questions absent
service of compulsory process.
Second, NFIB recommended that the Department revise Sec. 5.6(c) by
inserting ``unless otherwise directed by a final and unappealable order
of a federal court'' after ``without the prior consent of the
informant'' and by inserting ``or by the terms of such final and
unappealable order of the court'' at the end of the paragraph. NFIB
asserted that the Department's privilege to withhold the identity of
confidential sources in investigations or other compliance actions is a
qualified, not absolute, privilege, and that the Department should not
``make[] a promise of confidentiality to confidential sources that, in
certain circumstances, the Department cannot keep.'' In support of this
recommendation, NFIB cited a seminal U.S. Supreme Court decision,
Roviaro v. United States, 353 U.S. 53, 60-61 (1957), that addresses the
common law government informer's privilege standard that applies to the
FLSA, among other statutes.
After consideration, the Department declines to adopt NFIB's
proposed limiting changes. First, the Department did not propose any
substantive changes to the language in Sec. 5.6(b)(2) that NFIB
recommended qualifying. Second, the Davis-Bacon regulations have
required cooperation since 29 CFR part 5 was added in 1951. See 16 FR
4432. Specifically, the paragraph then numbered Sec. 5.10(a) provided
that ``the Federal agencies, contractors, subcontractors, sponsors,
applicants or owners, shall cooperate with any authorized
representative of the Department of Labor in the inspection of records,
interviews with workers, and in all other aspects of the
investigation.'' Id. (emphasis added). This duty to cooperate, which
has been reflected in the DBRA's implementing regulations for more than
70 years with only minor, technical changes to the operative language,
has coexisted and will continue to coexist with other legal rights,
such as the Fifth Amendment right against self-incrimination, and other
privileges. The Department is not aware of any instances (and NFIB
points to none) in which the regulatory language of Sec. 5.6(b)(2) and
its predecessor provisions have caused confusion or been interpreted as
compelling contractors or other entities to, in NFIB's words, ``forfeit
their legal rights in case of an investigation as a condition of
working on federal construction projects.'' Particularly in the absence
of any such evidence, and given that the Department did not propose any
substantive changes to Sec. 5.6(b)(2), the Department declines to
adopt NFIB's suggested regulatory change.
Similarly, the Department declines to add NFIB's proposed
qualification to the confidentiality protections codified in current
Sec. 5.6(a)(5) (renumbered as Sec. 5.6(c)) in the case of ``final and
unappealable order[s] of the court'' overriding these protections
because that qualification is implicit and therefore unnecessary. The
Department will continue to defend existing regulatory informant's
privilege provisions which are currently codified in 29 CFR 5.6(a)(5)
and 6.5 \223\ and discussed further in the following paragraphs. The
Department would, however, also abide by a higher court's final and
unappealable order to the contrary.
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\223\ In 1984, the Department added the following sentence to
Sec. 6.5 (previously numbered Sec. 6.33): ``In no event shall a
statement taken in confidence by the Department of Labor or other
Federal agency be ordered to be produced prior to the date of
testimony at trial of the person whose statement is at issue unless
the consent of such person has been obtained.'' 49 FR 10626, 10628
(Mar. 21, 1984) (final rule). The companion regulations in 29 CFR
part 6, subparts A (general) and C (DBRA enforcement proceedings),
are authorized by various sources, including the DBA and
Reorganization Plan No. 14 of 1950.
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The Department has long taken the position that protecting the
identities of confidential informants is essential for enforcement. As
explained in sections II.A (``Statutory and regulatory history'') and
III.B.3.xix (``Anti-Retaliation''), the Department has broad authority
to enact regulations like this one, which enhance enforcement and
administration of the Act's worker protections. Decades ago, the
Department exercised this authority by, among other measures, extending
protections to confidential informants. The first iteration of current
Sec. 5.6(a)(5) was added in 1951 in the then new 29 CFR part 5. See 16
FR 4432 (``Complaints of alleged violations shall be given priority and
statements, written or oral, made by an employee shall be treated as
confidential and shall not be disclosed to his employer without the
consent of the employee.''). The current regulations, 29 CFR 5.6(a)(5)
and 6.5, prohibit disclosing, without the informer's consent, the
identities of such people who have provided information to the
Department in confidence. Specifically, Sec. Sec. 5.6(c) and 6.5
direct that when an informant provides statements or information in
confidence, in no event will the identity of such an informant, or any
portions of their statements, or other information provided that would
tend to reveal their identity, be ordered to be produced before the
date of that person's testimony. In the case of non-testifying
informants, such information may not be disclosed at all, unless the
person has consented to such disclosure. These DBRA regulatory
informant's provisions, currently codified in Sec. Sec. 5.6(a)(5) and
6.5--unlike the common law government informer's privilege discussed in
Roviaro, which is derived from judicial decisions, not regulations--
prohibit disclosure (absent consent) of information that would tend to
identify non-testifying informants and, for testifying informants, does
not permit such disclosure until the date of the informant's testimony
at trial.
Absent these controlling regulations, application of the common law
government informant's privilege alone, which, as NFIB asserts, is a
qualified privilege, would be appropriate. But even if that common law
government informant's privilege alone were applicable, it would be
unnecessary to codify. WHD's current and longstanding practice is to
let workers know that their identities will be kept confidential to the
maximum extent possible under the law.
v. Section 5.10 Restitution, Criminal Action
To correspond with proposed new language in the contract clauses,
the Department proposed to add references to monetary relief and
interest to the description of restitution in Sec. 5.10, as well as an
explanation of the method of computation of interest applicable
generally to any circumstance in which there has been an underpayment
of wages under a covered contract.
The Department also proposed new anti-retaliation contract clauses
at Sec. 5.5(a)(11) and (b)(5), along with a new related section of the
regulations at Sec. 5.18. Those clauses and section provide for
monetary relief that would include, but not be limited to, back wages.
Reference to this relief in Sec. 5.10 was proposed to correspond to
those proposed new clauses and section. For further discussion of those
proposals, see section III.B.3.xix (``Anti-Retaliation'').
The reference to interest in Sec. 5.10 was similarly intended to
correspond to proposed new language requiring the payment of interest
on any underpayment of wages in the contract clauses at Sec.
5.5(a)(1)(vi), (a)(2) and (6), and (b)(2) through (4), and on any other
[[Page 57643]]
monetary relief for violations of the proposed anti-retaliation
clauses. The current Davis-Bacon regulations and contract clauses do
not specifically provide for the payment of interest on back wages. The
ARB and the Department's ALJs, however, have held that interest
calculated to the date of the underpayment or loss is generally
appropriate where back wages are due under other similar remedial
worker protection statutes enforced by the Department. See, e.g., Lawn
Restoration Serv. Corp., ALJ No. 2002-SCA-00006, slip op. at 74 (Dec.
2, 2003) (awarding prejudgment interest under the SCA).\224\ Under the
DBRA, as under the INA and SCA and other similar statutes, an
assessment of interest on back wages and other monetary relief will
ensure that the workers Congress intended to protect from substandard
wages will receive the full compensation that they were owed under the
contract.
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\224\ See also Greater Mo. Med. Pro-care Providers, Inc., ARB
No. 12-015, 2014 WL 469269, at *18 (Jan. 29, 2014) (approving of
pre-judgment and post-judgment interest on back pay award for H-1B
visa cases under the Immigration and Nationality Act (INA)), aff'd
sub nom. Greater Mo. Med. Pro-care Providers, Inc. v. Perez, No.
3:14-CV-05028, 2014 WL 5438293 (W.D. Mo. Oct. 24, 2014), rev`d on
other grounds, 812 F.3d 1132 (8th Cir. 2015).
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The proposed language established that interest would be calculated
from the date of the underpayment or loss, using the interest rate
applicable to underpayment of taxes under 26 U.S.C. 6621, and would be
compounded daily. Various Occupational Safety and Health Administration
(OSHA) whistleblower regulations use the tax underpayment rate and
daily compounding because that accounting best achieves the make-whole
purpose of a back-pay award. See Procedures for the Handling of
Retaliation Complaints Under Section 806 of the Sarbanes-Oxley Act of
2002, as Amended, Final Rule, 80 FR 11865, 11872 (Mar. 5, 2015).
The Department received one comment in opposition to its proposal.
ABC noted that contractors may be unaware of any wage underpayments
until they are notified by the Department at or near the end of a
construction project, and that--absent knowledge and/or willful
underpayment--interest compounding should not begin to be accrue until
after the Department notifies a contractor of an unremedied liability.
However, the majority of commenters on this topic supported the
Department's proposal. The UA stated that the chances of underpaid or
misclassified workers coming forward to report violations--and in turn,
employers paying employees swiftly--are improved by requiring employers
to pay interest if they fail to pay required wages. PAAG and PADLI also
supported the proposal to calculate interest from the date of the
underpayment or loss, and to be compounded daily, which it noted would
ensure that the workers whom Congress intended to protect from
substandard wages would receive the full compensation that they were
owed. UBC stated that such language will improve deterrence and
compliance. CC&M also supported the Department's proposal, noting that
misclassification of workers as independent contractors amounts to wage
theft and that protocols for workers to receive restitution are needed
in the regulations.
Although in some cases the requirement to pay interest may act as
an additional deterrent, the reason why the Department believes the
requirement is necessary is its function in providing make-whole relief
to workers who have not timely received the full prevailing wages that
they were due under the statute and the regulations. The requirement to
pay interest is not intended as a penalty on contractors or
subcontractors that are responsible for violations. Accordingly, the
requirement to provide interest outweighs the expressed concern about
whether contractors and subcontractors have acted knowingly or
willfully. The final rule adopts this change as proposed.
vi. Section 5.11 Disputes Concerning Payment of Wages
The Department proposed minor revisions to Sec. 5.11(b)(1) and
(c)(1), to clarify that where there is a dispute of fact or law
concerning payment of prevailing wage rates, overtime pay, or proper
classification, the Administrator may notify the affected contractors
and subcontractors, if any, of the investigation findings by means
other than registered or certified mail, so long as those other means
would normally assure delivery. Examples of such other means include,
but are not limited to, email to the last known email address, delivery
to the last known address by commercial courier and express delivery
services, or by personal service to the last known address. The
Department explained that while registered or certified mail may
generally be a reliable means of delivery, other delivery methods may
be just as reliable or even more successful at assuring delivery, as
has been demonstrated during the COVID-19 pandemic. The proposed
revisions would therefore allow the Department to choose methods to
ensure that the necessary notifications are delivered to the affected
contractors and subcontractors.
In addition, the Department proposed similar changes to allow
contractors and subcontractors to provide their response, if any, to
the Administrator's notification of the investigative findings by any
means that would normally assure delivery. The Department also proposed
replacing the term ``letter'' with the term ``notification'' in this
section, as the proposed changes would allow the notification of
investigation findings to be delivered by letter or other means, such
as email. Similarly, the Department proposed to replace the term
``postmarked'' with ``sent'' to reflect that various means may be used
to confirm delivery depending upon the method of delivery, such as by
the date stamp on an email or the delivery confirmation provided by a
commercial delivery service.
The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed.
For additional discussion related to Sec. 5.11, see section
III.B.3.xxi (``Debarment'').
vii. Section 5.12 Debarment Proceedings
The Department proposed minor revisions to Sec. 5.12(b)(1) and
(d)(2)(iv) (renumbered as Sec. 5.12(c)(2)(iv)(A)) to clarify that the
Administrator may notify the affected contractors and subcontractors,
if any, of the investigation findings by means other than registered or
certified mail, so long as those other means would normally assure
delivery. As discussed above in reference to identical changes proposed
to Sec. 5.11, these revisions would allow the Department to choose the
most appropriate method to confirm that the necessary notifications
reach their recipients. The Department proposed similar changes to
allow the affected contractors or subcontractors to use any means that
would normally assure delivery when making their response, if any, to
the Administrator's notification.
The Department also proposed a slight change to Sec. 5.12(b)(2),
which stated that the Administrator's findings would be final if no
hearing were requested within 30 days of the date the Administrator's
notification is sent, as opposed to the current language, which states
that the Administrator's findings shall be final if no hearing is
requested within 30 days of receipt of the Administrator's
notification. This proposed change would align the time period
available for requesting a hearing in Sec. 5.12(b)(2) with similar
requirements
[[Page 57644]]
in Sec. 5.11 and other paragraphs in Sec. 5.12, which state that such
requests must be made within 30 days of the date of the Administrator's
notification.
For additional discussion related to Sec. 5.12, see section
III.B.3.xxi (``Debarment'').
The Department received no comments on this proposal. The final
rule therefore adopts these changes as proposed.
viii. Section 5.16 Training Plans Approved or recognized by the
Department of Labor Prior to August 20, 1975
As noted (see III.B.3.ii.(E) ``29 CFR 5.5(a)(4) Apprentices.''),
the Department proposed to rescind and reserve Sec. 5.16. Originally
published along with Sec. 5.5(a)(4)(ii) in a 1975 final rule, Sec.
5.16 is essentially a grandfather clause permitting contractors, in
connection with certain training programs established prior to August
20, 1975, to continue using trainees on Federal and federally assisted
construction projects without seeking additional approval from the
Department pursuant to Sec. 5.5(a)(4)(ii). See 40 FR 30480. Since
Sec. 5.16 appears to be obsolete more than four decades after its
issuance, the Department proposed to rescind and reserve the section.
The Department also proposed several technical edits to Sec.
5.5(a)(4)(ii) to remove references to Sec. 5.16.
The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed.
ix. Section 5.17 Withdrawal of Approval of a Training Program
As already discussed, the Department proposed to remove references
to trainees and training programs throughout parts 1 and 5 (see
III.B.3.ii.(E) ``29 CFR 5.5(a)(4) Apprentices.'') as well as rescind
and reserve Sec. 5.16 (see III.B.3.viii ``Section 5.16 Training plans
approved or recognized by the Department of Labor prior to August 20,
1975.''). Accordingly, the Department also proposed to rescind and
reserve Sec. 5.17.
The Department received no comments on the proposal to rescind and
reserve Sec. 5.17. The final rule therefore adopts this change as
proposed.
x. Section 5.20 Scope and Significance of This Subpart
The Department proposed two technical corrections to Sec. 5.20.
First, the Department proposed to correct a typographical error in the
citation to the Portal-to-Portal Act of 1947 to reflect that the
relevant section of the Portal-to-Portal Act is codified at 29 U.S.C.
259, not 29 U.S.C. 359. Second, the last sentence of Sec. 5.20
currently states, ``Questions on matters not fully covered by this
subpart may be referred to the Secretary for interpretation as provided
in Sec. 5.12.'' However, the regulatory provision titled ``Rulings and
Interpretations,'' which this section is meant to reference, is
currently located at Sec. 5.13. The Department therefore proposed to
replace the incorrect reference to Sec. 5.12 with the correct
reference to Sec. 5.13.
The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed, with minor technical
edits to improve readability, none of which are intended to reflect a
change in the substance of this section.
xi. Section 5.23 The Statutory Provisions
The Department proposed to make technical, non-substantive changes
to Sec. 5.23. The existing text of Sec. 5.23 primarily consists of a
lengthy quotation of a particular fringe benefit provision of the 1964
amendments to the DBA. The Department proposed to replace this text
with a summary of the statutory provision at issue for two reasons.
First, due to a statutory amendment, the quotation set forth in
existing Sec. 5.23 no longer accurately reflects the statutory
language. Specifically, on August 21, 2002, Congress enacted
legislation which made several non-substantive revisions to the
relevant 1964 DBA amendment provisions and recodified those provisions
from 40 U.S.C. 276a(b) to 40 U.S.C. 3141.\225\ The Department proposed
to update Sec. 5.23 to include a citation to 40 U.S.C. 3141(2).
Second, the Office of the Federal Register disfavors lengthy block
quotations of statutory text.\226\ In light of this drafting
convention, and because the existing quotation in Sec. 5.23 no longer
accurately reflects the statutory language, the Department proposed to
revise Sec. 5.23 so that it paraphrases the statutory language set
forth at 40 U.S.C. 3141(2).
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\225\ See Revision of Title 40, U.S.C., ``Public Buildings,
Property, and Works,'' Public Law 107-217, sec. 3141, 116 Stat.
1062, 1150 (Aug. 21, 2002).
\226\ See Off. of the FR, ``Document Drafting Handbook'' section
3.6 (Aug. 2018 ed., rev. Mar. 24, 2021), https://www.archives.gov/files/Federal-register/write/handbook/ddh.pdf.
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The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed.
xii. Section 5.25 Rate of Contribution or Cost for Fringe Benefits
The Department proposed to add new paragraph (c) to existing Sec.
5.25 to codify the principle of annualization used to calculate the
amount of Davis-Bacon credit that a contractor may receive for
contributions to a fringe benefit plan when the contractor's workers
perform work on both DBRA-covered projects (referred to as ``DBRA-
covered'' work or projects) and projects that are not subject to DBRA
requirements (referred to as ``private'' work or projects) in a
particular year or other shorter time period. While existing guidance
generally requires the use of annualization to compute the hourly
equivalent of fringe benefits, annualization is not currently addressed
in the regulations. The Department's proposal provided for
annualization of fringe benefits unless a contractor obtained an
exception with respect to a particular fringe benefit plan and also
addressed how to properly annualize fringe benefits. The proposal also
set forth an administrative process for obtaining approval by the
Administrator for an exception from the annualization requirement.
Consistent with the Secretary's authority to set the prevailing
wage, WHD has long concluded that a contractor generally may not take
Davis-Bacon credit for all its contributions to a fringe benefit plan
based solely upon the workers' hours on a DBRA-covered project when the
workers also work on private projects for the contractor in that same
time period. See, e.g., Miree Constr. Corp. v. Dole, 930 F.2d 1536,
1545-46 (11th Cir. 1991) (adopting the Administrator's contention that
``[i]f an employer chooses to provide a year-long fringe benefit,
rather than cash or some other fringe benefit, the annualization
principle simply ensures that a disproportionate amount of that benefit
is not paid for out of wages earned on Davis-Bacon work''); see also,
e.g., Indep. Roofing Contractors v. Chao, 300 Fed. Appx. 518, 521 (9th
Cir. 2008) (noting the Department's ``long history of applying
annualization,'' including when an ``employer provides a year-long
benefit'' so as to ``ensure `that a disproportionate amount of that
fringe benefit is not paid out of wages earned on . . . Davis-Bacon
work' '') (citation omitted); In re Cody-Zeigler, ARB Nos. 01-014, 01-
015, 2003 WL 23114278, at *13 (Dec. 19, 2003); WHD Opinion Letter DBRA-
72 (June 5, 1978); WHD Opinion Letter DBRA-134 (June 6, 1985); WHD
Opinion Letter DBRA-68 (May 22, 1984); FOH 15f11(b). Contributions made
to a fringe benefit
[[Page 57645]]
plan for DBRA-covered work generally may not be used to fund the plan
for periods of private work. A contractor therefore typically must
convert its total annual contributions to the fringe benefit plan to an
hourly cash equivalent by dividing the cost of the fringe benefit by
the total number of hours worked (DBRA-covered and private work) to
determine the amount creditable towards meeting its obligation to pay
the prevailing wage under the DBRA. See FOH 15f11(b) (``Normally,
contributions made to a fringe benefit plan for government work
generally may not be used to fund the plan for periods of non-
government work.''); see also FOH 15f12(b).
This principle, which is referred to as ``annualization,''
effectively prohibits contractors from using fringe benefit plan
contributions attributable to work on private projects to meet their
prevailing wage obligation for DBRA-covered work. See, e.g., Miree
Constr., 930 F.2d at 1545 (annualization ensures receipt of the
prevailing wage by ``prevent[ing] employers from receiving Davis-Bacon
credit for fringe benefits actually paid to employees during non-Davis-
Bacon work''). Annualization is intended to prevent the use of DBRA-
covered work as the disproportionate or exclusive source of funding for
benefits that are continuous in nature and that constitute compensation
for all the worker's work, both DBRA-covered and private.
For many years, WHD has required contractors to annualize
contributions for most types of fringe benefit plans, including health
insurance plans, apprenticeship training plans, vacation plans, and
sick leave plans. See, e.g., Rembrant, Inc., WAB No. 89-16, 1991 WL
494712, at *1 (Apr. 30, 1991) (noting WHD Deputy Administrator's
position that ``fringe benefit contributions creditable for Davis-Bacon
purposes may not be used to fund a fringe benefit plan for periods of
non-government work''); PWRB, sec. 9, p. 21 (noting that the
Administrator originally applied annualization to health insurance
plans in the 1970s). WHD's rationale for requiring annualization is
that such contributions finance benefits that are continuous in nature
and reflect compensation for all of the work performed by a laborer or
mechanic, including work on both DBRA-covered and private projects. One
exception to this general rule compelling the annualization of fringe
benefit plan contributions has been that annualization is not required
for defined contribution pension plans (DCPPs) that provide for
immediate participation and essentially immediate vesting (e.g., 100
percent vesting after a worker works 500 or fewer hours). See WHD
Opinion Letter DBRA-134 (June 6, 1985); see also FOH 15f14(f)(1).
However, WHD does not currently have public guidance explaining the
extent to which other plans may also warrant an exception from the
annualization principle.
To clarify when an exception to the general annualization principle
may be appropriate, the Department proposed language stating that
contributions to a fringe benefit plan may only qualify for such an
exception when three requirements are satisfied: (1) the benefit
provided is not continuous in nature; (2) the benefit does not provide
compensation for both public and private work; and (3) the plan
provides for immediate participation and essentially immediate vesting.
In accordance with the Department's longstanding guidance, under the
proposal, a plan would generally be considered to have essentially
immediate vesting if the benefits vest after a worker works 500 or
fewer hours. These proposed criteria were not necessarily limited to
DCPPs. However, to ensure that the criteria were applied correctly and
that workers' Davis-Bacon wages were not disproportionately used to
fund benefits during periods of private work, the Department proposed
that such an exception could only apply when the plan in question had
been submitted to the Department for review and approval. As proposed,
such requests could be submitted by plan administrators, contractors,
or their representatives. However, to avoid any disruption to the
provision of worker benefits, the Department also proposed that any
plan that is not subject to annualization under the Department's
existing guidance could continue to use such an exception until the
plan had either requested and received a review of its exception status
under the proposed process, or until 18 months had passed from the
effective date of this rule, whichever came first.
The Department noted that by requiring annualization, the proposal
furthered the policy goal of protecting the fringe benefit component of
workers' Davis-Bacon prevailing wage compensation from dilution by
preventing contractors from taking credit for fringe benefits
attributable to work on private projects against their fringe
obligations on DBRA-covered work. The proposed exception also provided
the flexibility for certain fringe benefit plan contributions to be
excepted from the annualization requirement if they met the proposed
criteria.
The Department received a wide variety of comments on the
Department's proposal to codify the annualization principle. All of the
commenters appeared to recognize that the Department has long required
most fringe benefits to be annualized. They also appeared to accept
that annualization of fringe benefits is at least typically warranted
and that codification of the annualization principle in regulations
would be appropriate. However, some commenters that were generally
supportive of annualization advocated that the Department modify the
proposal to more broadly require annualization, whereas others
(including through comments submitted as part of an organized ABC
member campaign) opposed the proposed exception approval process,
questioned or opposed the criterion that annualization apply to any
fringe benefit that is continuous in nature, and/or proposed that
contributions to specific types of fringe benefit plans such as DCPPs
and supplemental unemployment benefit (SUB) \227\ plans be excepted
from annualization.
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\227\ Under SUB plans, contractors typically make payments to
worker-specific supplemental unemployment insurance accounts. The
terms and conditions of SUB plans vary, but contractors often
contribute an amount equal to the difference between the fringe
benefit amount listed on an applicable Davis-Bacon wage
determination and the fringe benefit amount that the contractor
would have provided in the absence of DBRA requirements.
Participating contractors generally are not required to make
contributions to SUB plans for hours worked on private projects, but
plan benefits may be available to workers when they experience
``involuntary work interruptions'' on both DBRA-covered and private
projects. Under some SUB plans, for example, work interruptions such
as layoffs, inclement weather, illness, or equipment down time can
all render a participant eligible to receive benefits. Under other
SUB plans, a participant may be eligible to receive payouts if the
worker qualifies to receive state unemployment benefits.
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Many commenters, including III-FFC, Alaska District Council of
Laborers, LIUNA Laborers' Local 341, PAAG and PADLI, NABTU, and an
individual commenter, expressed general support for the Department's
proposal to codify the Davis-Bacon annualization principle. These
commenters agreed that annualization prevents the use of DBRA work as
the disproportionate or exclusive source of funding for benefits that
are continuous in nature and that constitute compensation for all the
worker's work, both DBRA-covered and private. Commenters such as PAAG
and PADLI also supported the Department's explanation of the method for
annualizing fringe benefit contributions, commenting that codifying and
explaining annualization would assist
[[Page 57646]]
contractors in complying with the Davis-Bacon annualization and fringe
benefit requirements.
Although NABTU, the III-FFC, and the IUOE expressed strong support
for the annualization principle, they commented that the Department
should revise the proposed regulation to strengthen the annualization
requirement. In particular, NABTU and the III-FFC recommended adopting
an express presumption in favor of annualization, claiming that without
such an express presumption and the other revisions they proposed,
contractors would be free to front-load benefit costs on DBRA projects
instead of spreading them out across DBRA-covered and private work,
thereby effectively paying for fringe benefits used by workers during
periods of private work with Davis-Bacon contributions. NABTU, the III-
FFC, and the IUOE also recommended that the phrase ``essentially
immediate vesting'' in the Department's third proposed criterion for an
exception from annualization be changed to ``immediate vesting.'' In
longstanding subregulatory guidance, as well as in its proposed rule,
the Department has interpreted ``essentially immediate vesting'' to
refer to 100 percent vesting after a worker works 500 or fewer hours.
See, e.g., FOH 15f14(f)(1). An exception from annualization therefore
is available when a worker becomes 100 percent vested in their DCPP
benefit after working 500 or fewer hours, if all other criteria \228\
for the exception are satisfied. Under these commenters' recommended
approach, by contrast, the exception from annualization would not be
available unless a worker's fringe benefit vested beginning with their
first hour of work.\229\
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\228\ In this final rule the Department has made a non-
substantive change by referring to the requirements for the
annualization exception as ``criteria'' instead of ``factors.'' The
NPRM sometimes referred to these requirements as factors, but
criteria is a more appropriate term.
\229\ IEC appeared to interpret the Department's proposal as
already contemplating the type of ``immediate vesting'' that NABTU,
the III-FFC, and the IUOE proposed, thereby prompting IEC to
comment, incorrectly, that the Department's proposal of ``immediate
participation and immediate vesting'' would ``eliminate[ ] fringe
401k plans from DBA creditability.''
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NABTU, the III-FFC, and the IUOE, along with an individual
commenter, further contended that an exception from annualization
should not be available for plan types other than DCPPs, and that the
final rule should expressly state that the narrow exception to
annualization only applies to DCPPs. The III-FFC and the IUOE explained
that no type of fringe benefit plan besides DCPPs satisfies each of the
exception criteria that the Department set forth in proposed Sec.
5.25, since, for example, health and welfare fringe benefit plans are
continuous in nature and cover individuals when working on DBRA-covered
and private projects. Similarly, NABTU urged the Department to
emphasize in the final rule that the criterion that a fringe benefit
not be continuous in nature is a stringent requirement that very few
benefit plans would satisfy. Specifically, NABTU asserted that a year-
round SUB plan that is available to protect against loss of both
private work and DBRA-covered work should be considered continuous in
nature, as the plan is available throughout the year to meet a
contingent event, such as the involuntary loss of employment due to
seasonal or similar conditions prevalent in the construction industry.
NABTU similarly stated that, unlike DCPPs, SUB plans are made available
during an employee's active career, not at retirement, and therefore
are ``continuous in nature'' for this reason as well. By limiting the
annualization exception to certain DCPPs, NABTU contended (as did the
III-FFC and the IUOE) that prevailing wage standards will be preserved,
as contractors will be unable to use DBRA-covered work to pay for
fringe benefits used by employees during periods of private work.
Other commenters, including Fringe Benefit Group, Inc. (FBG), CC&M,
IEC, the Law Office of Martha Hutzelman (Hutzelman), and ABC, objected
to the treatment of particular types of fringe benefits under the
proposed rule and, more generally, the administrative exception process
set forth in the proposed rule. FBG expressed support for the
principles underlying proposed Sec. 5.25(c) ``on a macro level'' but
recommended that, with respect to DCPPs, the Department reconsider
requiring all fringe benefit plans seeking an exception from the
annualization requirement to submit a written request for approval to
WHD. FBG explained that, with respect to DCPPs, such a requirement
would place a significant burden on contractors, plan administrators,
and WHD in connection with plans that ``on their face'' qualify for the
exception. FBG added that this additional administrative complexity
could discourage small businesses or new entrants from pursuing work on
DBRA-covered projects without any offsetting benefits given that ``the
vast number of contractors adopt DCPPs that are already consistent with
the long-held annualization exception.'' Other commenters, including
ABC, expressed similar concerns and opposition to the proposed
administrative exception process.\230\ In light of these stated
concerns, and particularly given their view that the Department has
long successfully applied the exception from annualization to DCPPs
that provide for immediate participation and essentially immediate
vesting, FBG, along with CC&M, proposed amending the proposal to create
a safe-harbor provision that would automatically apply the
annualization exception to DCPPs that meet the proposed requirements
without requiring them to apply for approval.
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\230\ IEC opposed the administrative exception process for
similar reasons, and III-FFC similarly commented that a general
``preclearance process'' would be unnecessary, particularly if
exceptions to annualization are limited to certain DCPPs, and that
the proposed process also raised practical concerns about staff and
resources.
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Hutzelman similarly objected to the creation of a new
administration exception process applicable to all types of fringe
benefit plans and instead called for the Department to clearly define
and describe the criteria for exception from the annualization
requirement in the final rule. Specifically, Hutzelman recommended that
the Department not adopt its administrative exception process or that,
in the alternative, the proposal be revised to provide for an exception
from the annualization process for all DCPPs and SUB plans that provide
for immediate participation and essentially immediate vesting (as
historically defined by the Department) where the benefit provided is
not continuous in nature.\231\ Hutzelman then proposed that the term
``continuous in nature'' be defined in the regulations as ``a benefit
that requires minimum periodic deposits or payments or that has a
stated annual cost associated with the benefit,'' such that a benefit
that is ``continuous in nature'' ``is not a benefit that is
continuously available, but rather is a benefit that is continuously
funded.'' Hutzelman contended that ``essentially cash equivalent
benefits'' such as DCPPs and SUB plans are not ``continuous in nature''
under this proposed definition and should be excepted from the
annualization requirement.\232\ REBOUND and an individual
[[Page 57647]]
commenter expressed support for the annualization of fringe benefits
and for the specific exception criteria proposed by the Department.''
However, they further commented that there has been an increase in the
number of companies that offer contractors the ability to purchase
medical and other types of insurance for their employees during the
hours that they are employed on public works projects in order to
comply with prevailing wage requirements, but that the contractors do
not have to participate in the plans when they work on private
projects. The commenters opposed annualization of such contributions,
as long as the policies provided immediate vesting and coverage of each
individual employee, and further stated that these policies allow
contractors to meet the requirements of prevailing wage laws while
still maintaining their regular operations. These comments thus appear
similar to Hutzelman's to the extent they suggest that whether an
exception to the annualization requirement is warranted should be
determined based on when the contribution is made (i.e., whether
contributions are made solely in connection with DBRA-covered work)
rather than when benefits are available.
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\231\ Hutzelman's proposed formulation did not include the long-
established criterion that, in order to be excepted from
annualization, contributions to a fringe benefit plan must not
provide compensation for both DBRA-covered and private work.
\232\ ABC also address the ``continuous in nature'' criterion,
contending that the criterion does not appear in the FOH or other
guidance materials and therefore appeared to reflect ``a
significant, but unacknowledged, policy change.''
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In considering the comments received, the Department notes at the
threshold that annualization is not a new principle; rather, as
reflected in the directly applicable Federal court and administrative
precedent cited in this section, DBRA contractors have been required to
annualize fringe benefit contributions for decades. As various
commenters stated, including annualization in the regulations will help
ensure that contractors are aware of how to comply with fringe benefit
requirements and are informed about how to properly credit plan
contributions against their fringe benefit obligations.
The Department believes that addressing annualization in the final
rule will increase compliance with Davis-Bacon prevailing wage
obligations by codifying subregulatory guidance and case law about the
requirement to annualize contributions to fringe benefit plans.
Codifying the annualization principle in regulations rather than
continuing to address annualization at the subregulatory level does not
increase costs or make compliance more difficult for experienced
contractors, small contractors, or contractors that are new to DBRA-
covered projects. Rather, codifying the annualization principle will
aid contractors in understanding and fulfilling their obligations when
working on Davis-Bacon projects. By doing so, the regulations will help
contractors that may otherwise have overlooked or misunderstood the
requirements of annualization to correctly satisfy their fringe benefit
obligations under the DBRA and to account for the annualization of
fringe benefits when formulating bids for DBRA-covered projects.
While annualization is not a new requirement, the addition of a
regulatory administrative process requiring approval of all plans for
the exception to annualization would have been new. The Department
appreciates the comments and recommendations regarding this proposed
administrative process to approve plans for exception from
annualization.
Upon review and consideration of the comments, in this final rule
the Department adopts Sec. 5.25(c) as proposed, with two substantive
exceptions and related revisions. First, the formal administrative
process for requesting exceptions from the annualization requirement
will not apply to contributions to DCPPs as long as the DCPP meets each
of the exception criteria. This approach aligns with various
commenters' objections to applying the proposed administrative
exception process to DCPPs and the related requests for a safe harbor
for DCPPs that satisfy the exception criteria. The final rule,
therefore, consistent with existing subregulatory requirements,
generally only requires that administrative approval of an exception to
the annualization requirement be obtained in connection with
contributions to fringe benefit plans other than DCPPs. In accordance
with this change from the proposed provision, a sentence has been added
to Sec. 5.25(c)(2) excepting contributions to DCPPs provided that each
of the requirements of new Sec. 5.25(c)(3) is satisfied, and that the
DCPP provides for immediate participation and essentially immediate
vesting (i.e., the benefit vests within the first 500 hours worked). In
the final rule, proposed Sec. 5.25(c)(3) was replaced with a portion
of proposed Sec. 5.25(c)(2) that was revised as explained in this
section.
The Department made this change to the proposed rule because it
agrees with commenters, including ABC and FBG, that contributions to
DCPPs have a long history of being excepted from the annualization
requirement. The Department believes that excepting contributions to
DCPPs that meet the criteria for exception from the annualization
requirement in the final rule addresses the concern of commenters that
the administrative process could be burdensome on plan administrators,
contractors, and the Department. Not applying the formal administrative
exception process to DCPPs will likely dramatically reduce the number
of requests for an exception from the annualization requirement. The
Department also agrees with commenters that DCPPs will typically if not
invariably satisfy the enumerated exception criteria. To the extent
questions arise regarding whether the exception to annualization may
apply to contributions to a particular DCPP, an exception request
should be submitted in accordance with Sec. 5.25(c)(2).
In further response to the comments about the proposal's perceived
administrative burdens, the Department reiterates that, as revised,
Sec. 5.25 provides that only contributions to non-DCPP fringe benefit
plans that wish to be excepted from the annualization requirement need
to be approved through the administrative process. Thus, as revised,
Sec. 5.25 mirrors existing subregulatory practice, under which
contributions to DCPPs do not need to be annualized if the applicable
criteria are satisfied, and fringe benefit contributions to all other
types of plans must be annualized absent requesting and receiving an
exception from the annualization requirement from WHD. Thus, the
administrative burden for plan administrators, contractors, and the
Department is limited to non-DCPP plans that want to be approved for
the exception to annualization and DCPPs for which there is uncertainty
as to whether they meet all the requirements of the exception. Based on
its extensive experience, the Department believes the number of fringe
benefit plans that fall in this category will be manageable for all
affected parties. The final rule does not impose an unduly burdensome
administrative requirement for the remaining plans that choose to apply
for the exception because exception requests will predominantly be
based on readily available documents such as plan descriptions.
Requiring approval for the exception for non-DCPP fringe benefit plans
will help ensure workers receive their required Davis-Bacon fringe
benefits.
The Department declines to adopt suggestions that the exception
from annualization perhaps should be eliminated altogether, or that it
should apply exclusively to DCPPs. While the Department acknowledges
these commenters' concerns that workers receive all the fringe benefits
they are due under the DBRA, it also recognizes the long-standing
practice of allowing DCPPs to forego annualization if they meet the
enumerated criteria. Moreover, by allowing contributions to bona fide
[[Page 57648]]
fringe benefit plans other than DCPPs to be excepted from the
annualization requirement, the final rule codifies existing practice
and implements a process that allows a broader range of plans to
potentially be excepted from the annualization requirement to the
extent appropriate, but only if they too meet the enumerated criteria
for the exception.
The Department believes that the test for obtaining an exception
from annualization is sufficient to address NABTU's and III-FFC's
concerns about DBRA benefit contributions--particularly SUB plan
benefits--subsidizing benefits that are available throughout the year
on DBRA-covered and private projects. If WHD has not approved an
exception from annualization with respect to a specific non-DCPP plan,
such as a particular SUB plan, then contributions to the plan must be
annualized. Moreover, with respect to such plans, exceptions to
annualization will be approved only when each of the criteria have been
satisfied. This framework reflects an implicit presumption in favor of
annualization. Therefore, the Department declines to add an express
presumption in favor of annualization.
The second change in the final rule from the proposed rule is a
more fulsome recitation in Sec. 5.25(c)(3) of the criteria for an
exception to the annualization requirement. Some commenters, including
NABTU and III-FFC, recommended the regulations include a definition of
``continuous in nature'' and eliminate the use of the word
``essentially'' when discussing immediate vesting, specifically
recommending elimination of the use of the 500-hour criterion and
opting for immediate vesting. The Department agrees that the
regulations should include an explanation of when a fringe benefit is
not ``continuous in nature'' to provide further guidance to the
regulated community and other interested parties. As a result, Sec.
5.25(c)(3)(i) of the final rule includes a new explanation of benefits
that are ``not continuous in nature'' as benefits that are not
available to a participant without penalty throughout the year or other
relevant time period to which the cost of the benefit is attributable.
The Department declines to accept Hutzelman's proposed definition
of ``continuous in nature'' as a benefit that requires minimum periodic
deposits or payments or that has a stated annual cost associated with
the benefit. This proposed definition would appear to undermine the
purpose of annualization, which is to prevent contractors from paying
for benefits that cover hours worked on private projects with
compensation due for hours worked on DBRA-covered projects. Moreover,
the continuous in nature criterion focuses on the circumstances under
which the fringe benefit is available, not the timing of the
contractor's contributions toward the benefit. Under a contrary
approach that focused on the timing of the contractor's contributions
to the benefit, a contractor could annualize contributions to a fringe
benefit plan that were made only in connection with DBRA-covered work,
even though benefits were available to the worker during periods of
private work. Such an approach would contravene the basic premise of
the annualization requirement. See, e.g., Indep. Roofing Contractors,
300 Fed. Appx. at 521 (noting the Department's ``long history of
applying annualization'' so as to ``ensure `that a disproportionate
amount of that fringe benefit is not paid out of wages earned on . . .
Davis-Bacon work''') (citation omitted). For this reason, to the extent
that REBOUND and an individual commenter suggested that whether an
exception to the annualization requirement is warranted should be
determined based on when the contribution is made (i.e., whether
contributions are made solely in connection with DBRA-covered work)
rather than when benefits are available, such a suggestion reflects a
misunderstanding of the annualization principle, as in such a scenario,
contributions during periods of DBRA-covered work would be used to
subsidize benefits provided during periods of private work, thereby
presenting a classic case in which annualization is required.
The Department also disagrees with ABC's contention that the
``continuous in nature'' criterion appears to reflect ``a significant,
but unacknowledged, policy change'' because it does not appear in the
FOH or other guidance materials. This criterion simply expressly
reflects the bedrock principle that where benefits are available on a
continuing basis, and are not, for example, restricted to Davis-Bacon
work, annualization will be warranted. As such, this criterion reflects
the Department's longstanding position, as reflected in Miree
Construction and Independent Roofing Contractors, that it is proper to
annualize benefits that are continuous in nature and constitute
compensation for all of an employee's work. See Miree Constr., 930 F.2d
at 1546 (``If an employer chooses to provide a year-long fringe
benefit, rather than cash or some other fringe benefit, the
annualization principle simply ensures that a disproportionate amount
of that benefit is not paid for out of wages earned on Davis-Bacon
work''); Indep. Roofing Contractors, 300 Fed. Appx. at 521 (concluding
that the ARB had a reasonable basis for requiring annualization of
apprentice training program benefits where ``apprentice training
continued year-round but [the contractor] contributed to the
[apprenticeship training fund] only for DBA projects'').
The Department did not receive comments specifically on the second
criterion that requires a benefit plan to not compensate both DBRA-
covered and private work. However, considering the comments requesting
clarification or recommending changes to the other two criteria, the
Department has clarified in Sec. 5.25(c)(3)(ii) of the final rule that
the second criterion means that a benefit does not compensate both
private and DBRA-covered work if any benefits provided during periods
of private work are wholly paid for by compensation for private work.
Benefits provided during periods of private work that are paid for, in
whole or in part, by compensation earned during hours worked on DBRA-
covered work do not meet this criterion.
While the Department appreciates some commenters' request to
require immediate vesting, the Department declines to adopt this
recommendation. The Department has used the 500-hour criteria for
``essentially immediate vesting'' for decades, and it is the current
standard for DCPPs that are excepted from the annualization
requirement. Moreover, any request to change vesting requirements (as
opposed to identifying a vesting threshold that satisfies the
annualization principle) is beyond the scope of this rule. The
Department has, however, revised the regulatory text to reflect that,
as a matter of historical practice, the requirement of immediate
participation and essentially immediate vesting has been a criterion
generally applied to DCPPs. To the extent that benefit plans or
contractors have concerns regarding the application of this criterion
or wish to seek exception approval whether or not they satisfy the
criterion, they may direct questions or requests for specific exception
to the Department pursuant to Sec. 5.25(c)(3). The Department also
notes that to the extent that IEC interpreted the Department's proposal
as requiring ``immediate vesting'' in a manner that would ``eliminate[
] fringe 401k plans from DBA creditability,'' the commenter
misunderstood the nature of the proposal, which, through its
requirement of ``essentially immediate
[[Page 57649]]
vesting,'' reflected that annualization of contributions to DCPPs will
be permissible (assuming other criteria are satisfied) where the
pension benefit vests within the first 500 hours worked, which is a
criterion that has not interfered with the availability of an exception
from annualization for DCPPs.
In addition to the two substantive changes discussed in this
section, the final rule includes several clarifying changes. In Sec.
5.25(c), the Department has added a one-sentence summary of the
annualization principle as well as language to further clarify that
annualization requirements apply to unfunded as well as funded plans.
The Department also has clarified that, except as provided in Sec.
5.25(c), contractors must annualize all contributions to fringe benefit
plans, not all fringe benefit contributions. As proposed, this
paragraph could have been construed to incorrectly imply that cash
payments in lieu of fringe benefits must be annualized. Similarly, the
beginning of Sec. 5.25(c)(3) in the final rule has been revised to
clarify that the annualization principle, and exceptions to that
principle, apply to contributions to fringe benefit plans, not to the
plans themselves. This concept was clear in the NPRM and was understood
by the regulated community and other stakeholders that submitted
comments on this proposal. The Department has made these changes in the
final rule to be more precise.
xiii. Section 5.26 ``* * * Contribution Irrevocably Made * * * to a
Trustee or to a Third Person''
The Department proposed several non-substantive technical
corrections to Sec. 5.26 to improve clarity and readability. The
Department received no comments on most of the proposed changes to
Sec. 5.26 and therefore adopts those changes as proposed. The
Department, however, received two comments contending that one of the
proposed changes would be substantive and opposing the change.
Specifically, FBG and ABC asserted that the proposed change from
current language stating, ``The trustee [of fringe benefits
contributions] must assume the usual fiduciary responsibilities imposed
upon trustees by applicable law'' to revised language stating, ``the
trustee or third person must adhere to any fiduciary responsibilities
applicable under law'' appeared to impose, for the first time,
fiduciary responsibilities on non-trustee third parties that administer
fringe benefits, and that the scope of such fiduciary responsibilities
was unclear.
As an initial matter, as noted in the proposed rule, this change
was not intended to be substantive. Neither the existing language nor
the proposed language imposes any fiduciary responsibilities; rather,
both simply state that the recipient of fringe benefits contributions
must adhere to whatever fiduciary responsibilities already apply by
virtue of any ``applicable law.'' Thus, whether a non-trustee third
party is considered a fiduciary and subject to fiduciary
responsibilities is determined not by the Davis-Bacon regulations but
by other laws. The proposed rule would not have effected any change in
this regard.
The Department nonetheless recognizes that, as these commenters
noted, the current regulation only includes trustees, not non-trustee
``third persons,'' when referring to applicable fiduciary
responsibilities, whereas the proposed rule included both. Given the
commenters' concerns that this could be construed as a substantive
change, the Department modifies the language in the final rule to state
instead that ``a trustee must adhere to any fiduciary responsibilities
applicable under law.'' The Department notes, however, that whether the
recipient of fringe benefit contributions is a trustee or a third
person, to the extent that the party is deemed a fiduciary under
applicable law, if the party is found to have materially violated its
fiduciary responsibilities with respect to the fringe benefit
contributions, it is likely that such contributions will not be
creditable under the DBRA. The final rule makes this change and
otherwise adopts the language as proposed.
xiv. Section 5.28 Unfunded Plans
Section 5.28 discusses ``unfunded plans,'' i.e., plans in which the
contractor does not make irrevocable contributions to a trustee or
third person pursuant to a fund, plan, or program, but instead provides
fringe benefits pursuant to an enforceable commitment to carry out a
financially responsible plan or program, and receives fringe benefit
credit for the rate of costs which may be reasonably anticipated in
providing benefits under such a commitment. In the NPRM, the Department
proposed a technical correction to the citation to the DBA to reflect
the codification of the relevant provision at 40 U.S.C. 3141(2)(B)(ii),
as well as a number of other non-substantive revisions. The Department
received no comments on these proposals. The final rule therefore
adopts these changes as proposed.
Additionally, the Department proposed adding a new paragraph (b)(5)
to Sec. 5.28, explicitly stating that unfunded benefit plans or
programs must be approved by the Secretary in order to qualify as bona
fide fringe benefits, and to replace the text in current paragraph (c)
with language explaining the process contractors and subcontractors
must use to request such approval. To accommodate these changes, the
Department proposed to add a new paragraph (d) that contains the text
currently located in paragraph (c) with non-substantive edits for
clarity and readability.
As the Department noted in the proposed rule, other regulatory
sections--including the Davis-Bacon contract clause itself in Sec.
5.5--make clear that if a contractor provides its workers with fringe
benefits through an unfunded plan, the contractor may only take credit
for any costs reasonably anticipated in providing such fringe benefits
if it has submitted a request in writing to the Department and the
Secretary has determined that the applicable standards of the DBA have
been met. See 29 CFR 5.5(a)(1)(iv), 5.29(e). However, Sec. 5.28 does
not mention this approval requirement or the process for requesting
approval, even though Sec. 5.28 is the section that most specifically
discusses requirements for unfunded plans. Accordingly, to improve
regulatory clarity and consistency, the Department proposed to revise
Sec. 5.28 to clarify that, for payments under an unfunded plan or
program to be credited as fringe benefits, contractors and
subcontractors must submit a written request for the Secretary to
consider in determining whether the plan or program, and the benefits
proposed to be provided thereunder, are ``bona fide,'' meet the factors
set forth in Sec. 5.28(b)(1)-(4), and are otherwise consistent with
the Act. The Department also proposed to add language to explain that
such requests must be submitted by mail to WHD's Division of Government
Contracts Enforcement, via email to [email protected] or any successor
address, or via any other means directed by the Administrator.
The Department received one comment in support of the proposed
revisions to Sec. 5.28. PAAG and PADLI commented that while ``unfunded
plans may provide workers with meaningful benefits, prevailing wage
violators often . . . claim fringe benefit credits for unfunded plans
that do not meet the standards currently outlined in 29 CFR 5.28.'' As
an example, PAAG and PADLI cited a case in which a contractor claimed
credit for an unfunded paid time off plan under which all but 3 of the
workers' unused vacation days were
[[Page 57650]]
forfeited every year and the workers were not compensated for the
forfeited vacation time. PAAG and PADLI explained that contracting
agencies--especially small, local agencies--often lack the information
and expertise to determine whether or not an unfunded plan is
creditable under the DBRA and therefore need to refer questionable
cases for investigation, whereas the proposed language would ensure
that unfunded plans would be evaluated and preapproved up front. PAAG
and PADLI therefore supported the proposed revisions to Sec. 5.28
explicitly requiring preapproval of unfunded plans as a means of
ensuring that workers actually receive the money they earn and
increasing regulatory clarity.
The Department also received comments in opposition to these
revisions. CC&M commented that requiring the Department's approval of
unfunded plans, especially vacation and holiday plans, is unduly
burdensome to contractors and would disadvantage nonunion contractors
by discounting legitimate holiday and vacation benefits. Similarly,
IUOE commented that over 60 percent of construction workers receive
health care from self-funded plans. They expressed concern that
contractors might not possess the documentation necessary to
substantiate more ``informal'' self-funded benefits such as vacation,
holiday, and sick leave. IUOE also expressed concern that a preapproval
process would be unnecessarily burdensome on WHD and that WHD's
authority to approve benefit plans could conflict with the authority of
the Department's Employee Benefits Security Administration (EBSA) under
the Employment Retirement Income Security Act (ERISA). The IUOE instead
recommended that the final rule establish clear rules for determining
the hourly fringe benefit credit in lieu of cash wages for unfunded
plans, recommending four specific additions to the rule.\233\ III-FFC
expressed concerns and made recommendations similar to those of IUOE.
ABC suggested that the Department address any inconsistency in the
regulations by eliminating the advance approval requirement from both
Sec. Sec. 5.28 and 5.29, stating that such advance approvals should be
voluntary on the part of contractors. Finally, IAPA expressed concern
that under the proposed revisions, underfunded multiemployer pension
plans may be considered unfunded, and contractors would be prohibited
from paying cash in lieu of fringe benefits or using other fringe
benefit plans that are regulated by the Internal Revenue Service (IRS).
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\233\ Specifically, IUOE suggested that (1) all ``rate of cost''
plans must use a yearly period for their fringe benefit credit
calculations; (2) ``rate of cost'' health care plans must use the
IRS COBRA rules for determining the premium costs used for any
fringe benefit credit calculations; (3) all ``rate of contribution''
plans must use the existing annual or monthly time period for
annualizing fringe credit calculation; shorter periods are not
allowed; and (4) the regulations should state that annualization
rule should apply to all types of plans, including Health Savings
Accounts and Health Reimbursement Accounts; except for Defined
Contribution Pension Plans.
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Many of the comments in opposition appear to be premised on a
misconception that the revisions impose new substantive requirements
with respect to unfunded plans. Nothing in these revisions alters the
four substantive conditions for unfunded plans set out in Sec.
5.28(b)(1)-(4) or the overall requirements that an unfunded plan must
be ``bona fide'' and able to ``withstand a test . . . of actuarial
soundness.'' For example, the existing regulations already provide the
Secretary with discretion to require sufficient funds be set aside to
meet the obligations of an unfunded plan, and nothing in the existing
or revised regulations prohibits a contractor from making contributions
to bona fide fringe benefit plans or from paying cash in lieu of fringe
benefits, as appropriate. Nor do the revisions have any effect on
whether a multiemployer pension plan would be considered
``underfunded.'' Consistent with Sec. Sec. 5.5(a)(1)(iv) and 5.29(e),
the Department has long required written approval if a contractor seeks
credit for the reasonably anticipated costs of an unfunded benefit plan
towards its Davis-Bacon prevailing wage obligations, including with
respect to vacation and holiday plans. The revisions to Sec. 5.28
merely clarify this preexisting requirement and detail the process
through which contractors may request such approval from the
Department. Moreover, this existing process is consistent with ERISA;
while EBSA is charged with evaluating a plan's compliance with ERISA,
WHD is responsible for determining whether an employer has complied
with the fringe benefit requirements of the DBRA.
The Department disagrees that the revised regulations will
disadvantage non-union contractors. To the extent any contractor--union
or non-union--wishes to take credit towards its prevailing wage
obligations for the reasonably anticipated costs of unfunded benefit
plans, the contractor must ensure that such plan has been approved by
the Department. The approval process benefits contractors by helping
them avoid potential violations by correcting any issues noted during
the approval process. The approval process also benefits workers by
ensuring that they will receive the full prevailing wage to which they
are entitled when working on Davis-Bacon covered contracts. Only
contractors who wish to claim credit for the reasonably anticipated
costs of an unfunded plan will incur the minimal burden of submitting a
request for approval.
While the Department appreciates the suggestions by IUOE and III-
FFC for specific standards for unfunded plans, the Department believes
that the current regulatory requirements provide greater flexibility to
contractors in fulfilling their prevailing wage obligations on Davis-
Bacon covered contracts. Section 5.28 outlines the process and
requirements for obtaining approval regarding an unfunded benefit plan;
it does not purport to describe the methodology by which contractors
may calculate the appropriate credit for the reasonably anticipated
cost of such plans. Adding the language that IUOE and III-FFC proposed
would significantly alter the purpose and scope of this section and
would be beyond the scope of the proposed rule.
Finally, the proposal provided that a request for approval of an
unfunded plan must include sufficient documentation for the Department
to evaluate whether the plan satisfies the regulatory criteria. To
provide flexibility for contractors, the final rule, like the proposed
rule, does not specify the documentation that must be submitted with
the request. Rather, new paragraph (d) of this section (which, as noted
above, contains the language of former paragraph (c) with non-
substantive edits for clarity and readability) explains that the words
``reasonably anticipated'' contemplate a plan that can ``withstand a
test'' of ``actuarial soundness.'' While WHD's determination whether an
unfunded plan meets the statutory and regulatory requirements will be
based on the totality of the circumstances, the type of information WHD
will require from contractors or subcontractors in order to make such a
determination will typically include identification of the benefit(s)
to be provided; an explanation of the funding/contribution formula; an
explanation of the financial analysis methodology used to estimate the
costs of the plan or program benefits and how the contractor has
budgeted for those costs; a specification of how frequently the
contractor either sets aside funds in accordance with the cost
calculations to meet claims as they arise, or otherwise budgets,
allocates, or tracks such funds to ensure that they will be available
to meet claims; an explanation of whether employer contribution amounts
are different for Davis-Bacon and non-prevailing wage work;
identification of
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the administrator of the plan or program and the source of the funds
the administrator uses to pay the benefits provided by the plan or
program; specification of the ERISA status of the plan or program; and
an explanation of how the plan or program is communicated to laborers
or mechanics.
The final rule accordingly adopts these revisions as proposed.
xv. Section 5.29 Specific Fringe Benefits
In the NPRM, the Department proposed to revise Sec. 5.29 to add a
new paragraph (g) that addresses the circumstances under which a
contractor may take a fringe benefit credit for the costs of an
apprenticeship program. While Sec. 5.29(a) provides that the
defrayment of the costs of apprenticeship programs is a recognized
fringe benefit that Congress considered common in the construction
industry, the regulations do not presently address when a contractor
may take credit for such contributions or how to properly credit such
contributions against a contractor's fringe benefit obligations.
In the NPRM, the Department proposed that for a contractor or
subcontractor to take credit for the costs of an apprenticeship
program, the program, in addition to meeting all other requirements for
fringe benefits, must be registered with OA, or an SAA recognized by
the OA). Additionally, the Department proposed to permit contractors to
take credit for the actual costs of the apprenticeship program, such as
tuition, books, and materials, but not for additional contributions
that are beyond the costs actually incurred for the apprenticeship
program. The proposed rule also reiterated the Department's position
that the contractor may only claim credit towards its prevailing wage
obligations for the workers employed in the classification of laborer
or mechanic that is the subject of the apprenticeship program. For
example, if a contractor has apprentices registered in a bona fide
apprenticeship program for carpenters, the contractor could claim a
credit for the costs of the apprenticeship program towards the
prevailing wages due to the carpenters on a Davis-Bacon project, but
could not apply that credit towards the prevailing wages due to other
classifications, such as electricians or laborers, on the project.
Furthermore, the proposed paragraph explained that, when applying the
annualization principle pursuant to the proposed revisions to Sec.
5.25, the workers whose total working hours are used to calculate the
hourly contribution amount are limited to those workers in the same
classification as the apprentice, and that this hourly amount may only
be applied toward the wage obligations for such workers. The Department
explained that the proposed changes were consistent with its historical
practice and interpretation and relevant case law. See WHD Opinion
Letters DBRA-116 (May 17, 1978), DBRA-18 (Sept. 7, 1983), DBRA-16 (July
28, 1987), DBRA-160 (Mar. 10, 1990); FOH 15f17; Miree Constr. Corp.,
930 F.2d at 1544-45; Miree Constr. Corp. v. Dole, 730 F. Supp. 385
(N.D. Ala. 1990); Miree Constr. Corp., WAB No. 87-13, 1989 WL 407466
(Feb. 17, 1989). The Department also proposed a minor technical
revision to paragraph (e) to include a citation to Sec. 5.28, which
provides additional guidance on unfunded plans.
The comments the Department received regarding these proposals were
generally supportive. The Alliance agreed that limiting creditable
contributions to registered apprenticeship programs will help ensure
that apprentices receive quality instruction and may help prevent
unscrupulous employers from paying a lower wage while providing sub-
standard apprenticeship programs. SMACNA stated that the guidance will
assist contractors to properly compute fringe benefit credit against
their fringe benefit obligation. CEA also expressed support for these
proposals. LIUNA, while generally supportive, suggested that Sec.
5.29(g)(2) be revised so that permissible contributions include, in
addition to actual costs incurred by an apprenticeship program,
contributions negotiated as part of a collectively bargained agreement.
LIUNA expressed concern that the proposed language might not
necessarily encompass such programs.
After reviewing the comments received, the Department has largely
retained the language as proposed but has modified Sec. 5.29(g)(2) to
allow for greater flexibility in determining whether contributions to
apprenticeship plans are creditable. Specifically, the final rule
requires that a contractor's apprenticeship contributions must bear a
``reasonable relationship'' to the cost of apprenticeship benefits
provided to the contractor's employees. This standard more accurately
reflects the Department's position noted and upheld in Miree and
subsequent decisions. See Indep. Roofing Contractors, 300 F. App'x at
521; Tom Mistick & Sons, Inc. v. Reich, 54 F.3d 900, 903 (D.C. Cir.
1995); Miree Constr. Corp., 930 F.2d at 1543. The final rule further
explains that in the absence of evidence to the contrary, the
Department will presume that amounts the employer is required to
contribute by a CBA or by a bona fide apprenticeship plan (whether or
not the plan is collectively bargained) satisfy this standard, but
reaffirms that voluntary contributions beyond that which is reasonably
related to apprenticeship benefits are not creditable.
While the Department declines to adopt LIUNA's suggestion to
categorically deem collectively bargained contributions creditable,
under this presumption, required contributions to apprenticeship plans
under CBAs will typically be creditable. See Miree Constr. Corp., 930
F.2d at 1543-45 (noting that the Department ``gives full credit for the
amounts required to be contributed under a [collectively bargained]
plan, based on the assumption that there exists a reasonable
relationship between the amount of contributions on the one hand and
the cost of providing training and administering the plan on the other
hand,'' and agreeing that such an assumption is reasonable) (quoting
Letter of Administrator of Feb. 20, 1987).
xvi. Section 5.30 Types of Wage Determinations
The Department proposed several non-substantive revisions to Sec.
5.30. In particular, the Department proposed to update the examples in
Sec. 5.30(c) to more closely resemble the current format of wage
determinations issued under the DBA. The current illustrations in Sec.
5.30(c) list separate rates for various categories of fringe benefits,
including ``Health and welfare,'' ``Pensions,'' ``Vacations,''
``Apprenticeship program,'' and ``Others.'' However, current Davis-
Bacon wage determinations typically contain a single combined fringe
benefit rate per classification, rather than separately listing rates
for different categories of fringe benefits. To avoid confusion, the
Department proposed to update the illustrations to reflect the way in
which fringe benefits are typically listed on wage determinations. The
Department also proposed several non-substantive revisions to Sec.
5.30(a) and (b), including revisions pertaining to the updated
illustrations in Sec. 5.30(c).
The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed.
xvii. Section 5.31 Meeting Wage Determination Obligations
The Department proposed to update the examples in Sec. 5.30(c) to
more closely resemble the current format of wage determinations under
the DBRA. The
[[Page 57652]]
Department therefore proposed to make technical, non-substantive
changes to Sec. 5.31 to reflect the updated illustration in Sec.
5.30(c).
The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed.
xviii. Section 5.33 Administrative Expenses of a Contractor or
Subcontractor
The Department proposed to add a new Sec. 5.33 to codify existing
WHD policy under which a contractor or subcontractor may not take
Davis-Bacon credit for its own administrative expenses incurred in
connection with fringe benefit plans. 87 FR 15745 (citing WHD Opinion
Letter DBRA-72 (June 5, 1978); FOH 15f18). This policy is consistent
with Department case law under the DBA, under which such costs are
viewed as ``part of [an employer's] general overhead expenses of doing
business and should not serve to decrease the direct benefit going to
the employee.'' Collinson Constr. Co., WAB No. 76-09, 1977 WL 24826, at
*2 (also noting that the DBA's inclusion of ``costs'' in the provision
currently codified at 40 U.S.C. 3141(2)(B)(ii) refers to ``the costs of
benefits under an unfunded plan''); see also Cody-Zeigler, Inc., ARB
Nos. 01-014, 01-015, 2003 WL 23114278, at *20 (applying Collinson and
concluding that a contractor improperly claimed its administrative
costs for ``bank fees, payments to clerical workers for preparing
paperwork and dealing with insurance companies'' as a fringe benefit).
This policy is also consistent with the Department's regulations and
guidance under the SCA. See 29 CFR 4.172; FOH 14j00(a)(1).
The Department also sought public comment regarding whether it
should clarify this principle further with respect to administrative
functions performed by third parties. 87 FR 15745. Under both the DBA
and SCA, fringe benefits include items like health insurance, which
necessarily involves both the payment of medical benefits and
administration of those benefits through activities such as evaluating
benefit claims, deciding whether they should be paid, and approving
referrals to specialists. 40 U.S.C. 3141(2)(B); 41 U.S.C. 6703(2).
Accordingly, reasonable costs incurred by a third-party fiduciary in
its administration and delivery of fringe benefits to employees are
creditable under the SCA. See WHD Opinion Letter SCA-93 (Jan. 27, 1994)
(noting that an SCA contractor could take credit for its contribution
to a pension plan on behalf of its employees, including the portion of
its contribution that was used by the pension plan for ``administrative
costs'' ``incurred'' by ``the plan itself''); FOH 14j00(a)(2). WHD
applies a similar standard under the DBA.
However, as explained in the NPRM, WHD has received a number of
inquiries in recent years regarding the extent to which contractors may
take credit for fees charged by third parties for performing such
administrative tasks as tracking the amount of the contractor's fringe
benefit contributions; making sure those contributions cover the fringe
benefit credit claimed by the contractor; tracking and paying invoices
from third-party plan administrators; and sending lists of new hires to
the plan administrators. Since a contractor's own administrative costs
incurred in connection with the provision of fringe benefits are non-
creditable business expenses, see Collinson, 1977 WL 24826, at *2; cf.
29 CFR 4.172, WHD has advised that if a third party is merely
performing these types of administrative functions on the contractor's
behalf, the contractor's payments to the third party are not
creditable.
While not proposing specific regulatory text, the Department sought
comment on whether and how to address this issue in a final rule. The
Department sought comment on whether it should incorporate the above-
described policies, or other policies regarding third-party entities,
into its regulations. In addition, the Department sought comment on
examples of the administrative duties performed by third parties that
do not themselves pay benefits or administer benefit claims. The
Department also sought comment on the extent to which third-party
entities both (1) perform administrative functions associated with
providing fringe benefits to employees, such as tracking a contractor's
fringe benefit contributions, and (2) actually administer and deliver
benefits, such as evaluating and paying out medical claims, and on how
the Department should treat payments to any such entities. The
Department asked for comments on whether, for instance, it should
consider the cost of the administrative functions in the first category
to be non-creditable business expenses, and the cost of actual benefits
administration and payment in the second category to be creditable as
fringe benefit contributions. It also asked whether the creditability
of payments to such an entity depends on the third-party entity's
primary function or whether the third-party entity is an employee
welfare plan within the meaning of ERISA, 29 U.S.C. 1002(1).
The Department received several comments in response to proposed
Sec. 5.33 and its request for comments regarding administrative
functions performed by third parties.
Commenters either generally agreed with or did not specifically
address the Department's proposal to codify the longstanding principle
that a contractor or subcontractor may not take credit for its own
administrative expenses which it incurs directly, like the cost of an
office employee who fills out medical insurance claim forms for
submission to an insurance carrier.\234\ For example, Duane Morris
noted that the statement that ``a contractor may not take DBRA credit
for its own administrative expenses incurred in connection with the
administration of a fringe benefit plan'' expresses a longstanding
principle, reflected in Collinson, WAB No. 76-09, 1977 WL 24826, and
Cody-Zeigler, ARB Nos. 01-014, 015, 2003 WL 23114278, that, in Duane
Morris's words, ``a contractor may not take fringe credit for expenses
it pays directly for delivering DBRA-required fringe benefits.'' FBG
similarly stated that the language of FOH 15f18 regarding a
contractor's own administrative expenses, which the Department proposed
to codify in Sec. 5.33, ``directly aligns'' with its preferred
approach to the issue of administrative costs generally.
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\234\ East Coast Wall Systems stated they would find it
beneficial to use fringe benefit contributions to pay for the cost
of providing fringe benefits but did not specifically explain this
statement or how it related to the proposed revisions.
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However, a number of commenters expressed concerns in response to
the Department's request for comments regarding the potential
creditability of administrative expenses paid by third parties. While
they generally agreed, as noted above, that contractors should not
receive credit against DBRA fringe benefits for their own direct costs,
they expressed concern that the Department appeared to be considering
classifying as non-creditable any expenses incurred by a third party
other than those associated with claims payment or benefits
administration. These commenters, including ABC, Duane Morris, and FBG,
advocated that the Department instead permit any reasonable fees paid
by a contractor to a third party that are directly related to the
provision of fringe benefits to be creditable, and suggested that the
standard for such an inquiry be that a third-party expense should be
creditable as long as it would not have been incurred ``but for'' the
provision of the fringe benefit. Duane Morris and FBG argued that such
a standard would be
[[Page 57653]]
consistent with their own interpretation of ERISA's standard for the
permissible use of plan assets, with Duane Morris contending that a
separate DBRA creditability standard would make the distinction between
creditable and noncreditable expenses ambiguous and would unnecessarily
complicate compliance.\235\ These commenters argued that necessary
expenses associated with plan administration go beyond mere claims
administration, that administrative functions and the delivery of
benefits are inherently interrelated, and therefore that the costs of
both should be creditable toward DBRA obligations.\236\
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\235\ Under ERISA, plan fiduciaries must act prudently and
solely in the interest of the plan's participants and beneficiaries
and for the exclusive purpose of providing benefits and defraying
reasonable expenses of administering the plan. While ERISA section
406(a) prohibits the provision of services between plans and service
providers and plan payments to service providers, ERISA section
408(b)(2) sets forth an exemption from section 406(a) which permits
a plan fiduciary to contract or make reasonable arrangements for
services necessary for the establishment or operation of the plan if
no more than reasonable compensation is paid therefore, among other
requirements. See 29 U.S.C. secs. 1106(a), 1108(b)(2); see also 29
CFR 2550.408b-2. However, the exemption under section 408(b)(2) does
not provide relief for transactions described in section 406(b) of
ERISA, including fiduciary self-dealing, conflicts of interest, and
kickbacks in connection with transactions involving plan assets.
\236\ Duane Morris also submitted a set of proposals ``to
improve the scheme for benefiting contractor employees'' subject to
a fixed-cost contract, under which, among other elements, a
contractor apparently would be required to request competitive bids
for fringe benefits at least every 3 years in order to satisfy a
requirement, for purposes of receiving fringe benefit credit, to
evaluate whether the value of the benefit ``is market competitive
with comparable alternatives available to the contractor.'' Under
these proposals, contributions to a trust that ``can be expected to
provide'' ``market competitive'' benefits would be presumptively
creditable, ``without regard to the specific application of plan
assets to the trust.'' Although the Department has reviewed and
appreciates the proposals, it considers them to be outside the scope
of this rulemaking. To the extent Duane Morris is proposing that,
under certain conditions, a contractor should be permitted to take
credit for payments to a third party to perform the contractor's own
administrative tasks, the Department disagrees, for the reasons
discussed below.
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Some of these commenters also argued that the Department's proposal
would also unfairly advantage contractors that make direct payments to
insurers as opposed to contractors who either self-insure, participate
in multiemployer plans, or pay third parties to administer their Davis-
Bacon fringe benefit obligations. Duane Morris, for example, stated
that the Department had ``conflate[d]'' ``employers and their plans
when the plans are funded in trust'' and inappropriately contemplated
``regulat[ing] the internal operations of the plan.'' \237\ Similarly,
FBG said that the distinction between creditable expenses incurred by a
third party for administration of a plan versus noncreditable expenses
that substitute for a contractor's own administrative costs is
impracticable because third parties usually bundle their services and
fees together. It also commented that making certain third-party
administrative costs noncreditable would make it more expensive for
contractors to use ``third-party benefit administrators,'' thereby
incentivizing contractors to, for instance, ``spend[ ] less on
administrative services'' or ``bring[ ] administration `in-house' to be
performed by individuals who lack . . . specialized knowledge[.]'' ABC
likewise argued that contractors should be permitted to take credit for
any reasonable fees paid to third parties, whether related to the
administration and delivery of benefits or to the administrative costs
relating to the provision of fringe benefits to employees, as
contractors ``use qualified third parties to assist with the
administration of benefits'' because they ``ensure that the highest
quality benefits are provided in an efficient manner to covered
employees.'' Clark Pacific commented that the rule would prohibit
taking credit for administrative costs entirely and, as a result,
reduce the number of contractors willing to provide fringe benefits.
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\237\ Duane Morris claimed that multiemployer plans maintained
through CBAs often use plan assets to hire third-party
administrators to perform tasks which the Department ``propose[d] to
make non-creditable,'' such as ``reconcil[ing] covered hours [and]
employer contributions[.]'' The Department did not receive any
comments from unions indicating that its proposal would make
noncreditable the cost of tasks regularly performed by plans
maintained under CBAs between unions and contractors. In WHD's
enforcement experience, such plans do not perform administrative
tasks on behalf on the contractor such as keeping track of whether a
particular contractor's contributions were sufficient to cover its
fringe benefit credit on its various projects.
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III-FFC and IUOE recommended that the Department continue to
analyze when contributions are creditable against fringe benefits on a
case-by-case basis, particularly relating to fees charged by plan
administrators and other plan service providers. IUOE stated that it
would be difficult to determine whether a plan administrative expense
is ``reasonable'' because there are too many factors to be considered,
such as ``the size of the plan, the nature of the benefits provided by
the plan, the nature of the administrative services provided to the
plan, the availability of the administrative services in the
marketplace, the precise scope of the administrative services provided,
the qualifications, expertise and reputation of the service provider,
differences in regional costs, and so forth.'' After reviewing the
comments received, the Department has adopted Sec. 5.33 with several
revisions to clarify the Department's intent and address commenter
concerns.
As an initial matter, the Department did not propose to make all
third-party expenses, or even all expenses except for the direct
expense of evaluating and paying out benefit claims, noncreditable; nor
did the Department propose to incentivize any particular method by
which contractors provide bona fide fringe benefits. As multiple
commenters noted, third-party administrators may fulfill a vital role
in the provision of fringe benefits. As WHD has expressly noted in
guidance under the analogous fringe benefit requirements under the SCA,
contractors may take credit for third-party expenses which are directly
related to the administration and delivery of fringe benefits to their
workers under a bona fide plan. See FOH 14j00(a)(2). The Department
agrees that credit for such expenses is appropriate whether the entity
performing such activities is an insurance carrier, a third-party trust
fund, or a third-party administrator under a contractor's bona fide
unfunded plan.
To clarify this, the Department has added paragraph (a) to Sec.
5.33, which explicitly states that a contractor may take credit for
costs incurred by a contractor's insurance carrier, third-party trust
fund, or other third-party administrator that are directly related to
the administration and delivery of bona fide fringe benefits to the
contractor's laborers and mechanics. Section 5.33(a) includes
illustrative examples of creditable expenses directly related to the
administration and delivery of benefits, stating that a contractor may
take credit for payments to an insurance carrier or trust fund that are
used to pay for both benefits and the administration and delivery of
benefits, such as evaluating benefit claims, deciding whether they
should be paid, approving referrals to specialists, and other
reasonable costs of administering the plan. Additional examples of such
creditable expenses include the reasonable costs of administering the
plan, such as the cost of recordkeeping related to benefit processing
and payment in the case of a healthcare plan, or expenses associated
with managing plan investments in the case of a 401(k) plan.
Additionally, to clarify that these expenses are also creditable
[[Page 57654]]
in the case of an unfunded plan, Sec. 5.33(a) states that a contractor
may take credit for the fees paid to a third-party administrator to
perform similar tasks directly related to the administration and
delivery of benefits, including under an unfunded plan.
As noted above, commenters did not oppose the Department's proposal
to codify its policy that a contractor may not take credit for its own
administrative costs where it incurs them directly, and accordingly, in
new Sec. 5.33(b), the final rule adopts that proposal. In addition,
section 5.33(b) of the final rule states that a contractor may not take
credit for its own administrative expenses even when the contractor
pays a third party to perform its administrative tasks rather than
incurring the expenses internally. The final rule includes illustrative
examples of such noncreditable administrative expenses, including the
cost of filling out medical insurance claim forms for submission to an
insurance carrier, paying and tracking invoices from insurance carriers
or plan administrators, updating the contractor's personnel records
when laborers or mechanics are hired or separate from employment,
sending lists of new hires to insurance carriers or plan
administrators, or sending out tax documents to the contractor's
laborers or mechanics. The Department is hopeful that these examples
will be helpful in identifying expenses that would be considered
employer expenses not directly related to the administration and
delivery of bona fide fringe benefits. The Department agrees with the
commenters who contended that its regulations should not incentivize
any particular benefit model, and as such, the final rule clarifies
that these types of costs are non-creditable regardless of whether the
employer performs them itself or pays a third party a fee to perform
them. Section 5.33(b) also clarifies that recordkeeping costs
associated with ensuring the contractor's compliance with the Davis-
Bacon fringe benefit requirements, such as the cost associated with
tracking the amount of its fringe benefit contributions or making sure
contributions cover the fringe benefit credit claimed, are considered a
contractor's own administrative expenses and therefore are not
creditable whether the contractor performs those tasks itself or
whether it pays a third party a fee to perform those tasks.
Section 5.33(b) is in accordance with the analogous SCA
regulations, which preclude SCA contractors from taking credit for any
costs that are ``primarily for the benefit or convenience of the
contractor.'' 29 CFR 4.171(e); see also 29 CFR 4.172. Under the FLSA--
upon which the SCA prohibition against taking credit for contractor
business expenses is based, see 48 FR 49757--an expense is primarily
for the benefit of the employer if, among other reasons, it is
``imposed on the employer by law.'' See Br. of the Sec'y of Labor, 2010
WL 5622173, at *10-11, Ramos-Barrientos v. Bland Farms, No. 10-13412-C
(11th Cir. 2011), ECF No. 47 (citing 29 CFR 531.3(d)(2), 531.32(c),
531.38). Given that contractors may satisfy their DBRA prevailing wage
obligations by making contributions to or incurring reasonably
anticipated costs in providing bona fide fringe benefits under a plan
or program, see 29 CFR 5.5(a)(1)(i), and given that contractors are
required to keep records of the hours worked by their laborers and
mechanics and any contributions made or costs reasonably incurred under
a bona fide fringe benefit plan, id. at (3)(i), it would be anomalous
to permit a contractor to take credit towards its prevailing wage
obligation for the cost of, for instance, tracking the hours worked by
its laborers and mechanics on DBRA-covered projects costs, tracking the
contractor's fringe benefit contributions on behalf of these workers,
and reconciling workers' hours worked with the contractor's
contributions.
This rationale applies equally to a contractor that uses its own
employees to perform such tasks as to a contractor that pays a third
party to perform such tasks. If a contractor were permitted to claim a
credit for these expenses, it could effectively outsource its own
administrative and compliance costs to third parties and have the cost
paid for from the prevailing wages due to its workers. Similarly, if it
is not permissible for a contractor to take credit for the cost of an
office employee who submits claim forms to an insurance carrier--which
none of the commenters specifically disputed--then it should not be
permissible for a contractor to take credit for payments it makes to a
third party to perform similar tasks on its behalf.
The Department declines the recommendation from some commenters to
adopt a standard under which third-party expenses are considered
directly related to the administration and delivery of fringe benefits,
and therefore creditable, as long as they would not have been incurred
but for the provision of the fringe benefit. The Department
acknowledges those comments that claimed that such a ``but for''
standard would be consistent with what they assert are ERISA standards
governing the permissible use of plan assets. Regardless of the
accuracy of those claims, the DBRA requires a different analysis for
whether a contractor may take credit against the payment of prevailing
wages for such expenses. Under the DBRA, the question is not whether a
plan's assets may be used for a particular expense, but whether a
contribution or cost may be considered a part of a worker's wage. A
contractor's own administrative costs, even if related in some fashion
to the fringe benefits provided to workers, are not part of its
workers' wages since, as explained above, such costs primarily benefit
the contractor. It is therefore not sufficient, for purposes of DBRA
credit, that an administrative cost would not have been incurred ``but
for'' the fringe benefit plan(s).
The Department has observed an increase in the number of third-
party businesses that promise to reduce contractors' costs if
contractors hire them to perform the contractors' own administrative
tasks and then claim a fringe benefit credit for the costs of those
outsourced tasks. Existing regulations have not been sufficient to
curtail this practice, and for the reasons discussed above, the
payments of fees to third parties to perform such tasks is inconsistent
with the requirements of the DBRA. Thus, the final rule adopts an
approach, consistent with the guidance the Department has previously
provided, that distinguishes more precisely between creditable and
noncreditable expenses based on whether the expenses are properly
viewed as business expenses of the contractor. The Department believes
that codifying this standard in the regulations will help the
contracting community and third-party administrators understand which
types of expenses are creditable and which types are not.
By making creditability depend on the type and purpose of the
expense, rather than on whether it is paid by the contractor directly
or through a third party, the Department believes that the final rule
addresses commenters' concerns that the proposed rule might have
discouraged the use of bona fide third-party plan administrators or
provided an advantage to contractors that make payments directly to
insurers and other benefit providers. The final rule does not preclude
contractors from taking credit for reasonable costs incurred or charged
by these entities to administer bona fide fringe benefit plans. Rather,
Sec. 5.33(b) merely precludes contractors from taking credit for their
own administrative costs
[[Page 57655]]
associated with providing fringe benefit plans and which are properly
considered business expenses of the contractor, whether the contractor
incurs such costs directly or in the form of payments to a third party.
While the Department appreciates some commenters' recommendation to
continue to analyze administrative expenses on a case-by-case basis,
given that, as discussed above, the Department has observed an increase
in business models under which contractors may be taking credit for
noncreditable expenses, the Department believes that it is necessarily
to codify these basic principles to help contractors and plan
administrators recognize and comply with the requirements and their
obligations under the DBRA. The Department recognizes that there will,
of course, be close cases, and will continue to conduct fact-specific
analyses in individual cases when questions of creditability arise. To
that end, the Department has added Sec. 5.33(c) to clarify that if
contractors, plan administrators, or others have questions as to
whether certain expenses are creditable, such questions should be
submitted to the Department for review.
Finally, the Department disagrees with FBG's comment that third
parties' practice of bundling creditable and noncreditable expenses
together will makes it difficult to comply with the proposed rule. In
its investigations under the DBRA and SCA, WHD has found that when
third parties both perform plan administration and help contractors
fulfill their own administrative obligations, they frequently impose
separate charges for the different types of services. Even in instances
where such services are so intertwined that it is not possible to
determine whether payments to a third party are for creditable plan
administration or noncreditable administrative activities, WHD will
consider the facts to determine whether the third party is primarily
performing creditable services. Finally, if questions arise, Sec.
5.33(c) will allow contractors to receive input from the Department as
to the creditability of any questionable expenses, whether bundled or
not.
xix. Anti-Retaliation
The Department proposed to add anti-retaliation provisions to
enhance enforcement of the DBRA and their implementing regulations in
29 CFR parts 1, 3, and 5. The proposed anti-retaliation provisions were
intended to discourage contractors, responsible officers, and any other
persons from engaging in--or causing others to engage in--unscrupulous
business practices that may chill worker participation in WHD
investigations or other compliance actions and enable prevailing wage
violations to go undetected. The proposed anti-retaliation provisions
were also intended to provide make-whole relief for any worker who has
been discriminated against in any manner for taking, or being perceived
to have taken, certain actions concerning the labor standards
provisions of the DBA, CWHSSA, and other Related Acts, and the
regulations in parts 1, 3, and 5.
In most WHD DBRA investigations or other compliance actions,
effective enforcement requires worker cooperation. Information from
workers about their actual hours worked, wages paid, and work performed
is often essential to uncover violations such as falsification of
certified payrolls or wage underpayments, including underpayments due
to craft misclassification, by contractors or subcontractors that fail
to keep pay or time records or have inaccurate or incomplete records.
Workers are often reluctant to come forward with information about
potential violations of the laws WHD enforces because they fear losing
their jobs or suffering other adverse consequences. Workers are
similarly reluctant to raise these issues with their supervisors. Such
reluctance to inquire or complain internally may result in lost
opportunities for early correction of violations by contractors.
The current Davis-Bacon regulations protect the identity of
confidential worker-informants in large part to prevent retribution by
the contractors for whom they work. See 29 CFR 5.6(a)(5); see also 29
CFR 6.5. This protection helps combat the ``possibility of reprisals''
by ``vindictive employers'' against workers who speak out about wage
and hour violations, but does not eliminate it. Cosmic Constr. Co., WAB
No. 79-19, 1980 WL 95656, at *5 (Sept. 2, 1980).
When contractors retaliate against workers who cooperate or are
suspected of cooperating with WHD or who make internal complaints or
otherwise assert rights under the DBRA, neither worker confidentiality
nor the DBRA remedial measures of back wages or debarment can make
workers whole. The Department's proposed anti-retaliation provisions
aimed to remedy such situations by providing make-whole relief to
workers who are retaliated against, as well as by deterring or
correcting interference with DBRA worker protections.
The Department's authority to promulgate the anti-retaliation
provisions stems from 40 U.S.C. 3145 and Reorganization Plan No. 14 of
1950. In transmitting the Reorganization Plan to Congress, President
Truman noted that ``the principal objective of the plan is more
effective enforcement of labor standards,'' and that the plan ``will
provide more uniform and more adequate protection for workers through
the expenditures made for the enforcement of the existing
legislation.'' Special Message to the Congress Transmitting
Reorganization Plan No. 14 of 1950, reprinted in 5 U.S.C. app. 1 (Mar.
13, 1950) (1950 Special Message to Congress).
It is well settled that the Department has regulatory authority to
debar Related Act contractors even though Related Acts do not expressly
provide for debarment. See Janik Paving & Constr., Inc. v. Brock, 828
F.2d 84, 90, 91 (2d Cir. 1987) (upholding debarment for CWHSSA
violations even though that statute ``specifically provided civil and
criminal sanctions for violations of overtime work requirements but
failed to mention debarment''). In 1951, the Department added a new
part 5 to the DBRA regulations, including the Related Act debarment
regulation. See 16 FR 4430. The Department explained that it was doing
so in compliance with the directive of Reorganization Plan No. 14 of
1950 to ``assure coordination of administration and consistency of
enforcement of the labor standards provisions'' of the DBRA. Id. Just
as regulatory debarment is a permissible exercise of the Department's
``implied powers of administrative enforcement,'' Janik Paving &
Constr., 828 F.2d at 91, so, too, are the proposed anti-retaliation
provisions and the revised Related Act debarment provisions discussed
in section III.B.3.xxi (``Debarment''). The Department stated its
position that it would be both efficient and consistent with the
remedial purpose of the DBRA to investigate and adjudicate complaints
of retaliation as part of WHD's enforcement of the DBRA. These measures
will help achieve more effective enforcement of the Davis-Bacon labor
standards.
Currently, debarment is the primary mechanism under the DBRA civil
enforcement scheme for remedying retribution against workers who assert
their right to prevailing wages. Debarment is also the main tool for
addressing less tangible discrimination such as interfering with
investigations by intimidating or threatening workers. Such
unscrupulous behavior may be both a disregard of obligations to workers
under the DBA and ``aggravated or willful'' violations under the
current Related Act regulations that warrant debarment. See 40 U.S.C.
3144(b)(1); 29 CFR 5.12(a)(1), (a)(2), (b)(1).
[[Page 57656]]
Both the ARB and ALJs have debarred contractors in part because of
their retaliatory conduct or interference with WHD investigations. See,
e.g., Pythagoras Gen. Contracting Corp., ARB Nos. 08-107, 09-007, 2011
WL 1247207, at *13 (affirming debarment of contractor and its principal
in a DBRA case in part because of the ``attempt [by principal and other
officials of the contractor] at witness coercion or intimidation'' when
they visited former employees to talk about their upcoming hearing
testimony); R.J. Sanders, Inc., WAB No. 90-25, 1991 WL 494734, at *1-2
(Jan. 31, 1991) (affirming ALJ's finding that employer's retaliatory
firing of an employee who reported to a Navy inspector being paid less
than the prevailing wage was ``persuasive evidence of a willful
violation of the [DBA]''); Early & Sons, Inc., ALJ No. 85-DBA-140, 1986
WL 193128, at *8 (Aug. 5, 1986) (willful and aggravated DBRA violations
evidenced in part where worker who ``insisted on [receiving the
mandated wage] . . . was told, in effect, to be quiet or risk losing
his job''), rev'd on other grounds, WAB No. 86-25, 1987 WL 247044, at
*2 (Jan. 29, 1987); Enviro & Demo Masters, Inc., ALJ No. 2011-DBA-
00002, Decision and Order, slip op. at 9-10, 15, 59, 62-64 (Apr. 23,
2014) (Enviro D&O) (debarring subcontractor, its owner, and a
supervisor because of ``aggravated and willful avoidance of paying the
required prevailing wages,'' which included firing an employee who
refused to sign a declaration repudiating his DBRA rights, and
instructing workers to lie about their pay and underreport their hours
if questioned by investigators).
There are also criminal sanctions for certain coercive conduct by
DBRA contractors. The Copeland Anti-Kickback Act makes it a crime to
induce DBRA-covered construction workers to give up any part of
compensation due ``by force, intimidation, or threat of procuring
dismissal from employment, or by any other manner whatsoever.'' 18
U.S.C. 874; cf. 29 CFR 5.10(b) (discussing criminal referrals for DBRA
violations). Such prevailing wage kickback schemes are also willful or
aggravated violations of the civil Copeland Act (a Related Act) that
warrant debarment. See 40 U.S.C. 3145; see, e.g., Killeen Elec. Co.,
WAB No. 87-49, 1991 WL 494685, at *5 (Mar. 21, 1991).
Interference with WHD investigations or other compliance actions
may also warrant criminal prosecution. For example, in addition to
owing 37 workers $656,646 in back wages in the DBRA civil
administrative proceeding, see Enviro D&O at 66, both the owner of
Enviro & Demo Masters and his father, the supervisor, were convicted of
Federal crimes including witness tampering and conspiracy to commit
witness tampering. These company officials instructed workers at the
jobsite to hide from and ``lie to investigators about their working
hours and wages,'' and they fired workers who spoke to investigators or
refused to sign false documents. Naranjo v. United States, No. 17-CV-
9573, 2021 WL 1063442, at *1-2 (S.D.N.Y. Feb. 26, 2021), report and
recommendation adopted by 2021 WL 1317232 (S.D.N.Y. Apr. 8, 2021); see
also Naranjo, Sr. v. United States, No. 16 Civ. 7386, 2019 WL 7568186,
at *1 (S.D.N.Y. Dec. 16, 2019), report and recommendation adopted by
2020 WL 174072, at *1 (S.D.N.Y. Jan. 13, 2020).
Contractors, subcontractors, and their responsible officers may be
debarred and even criminally prosecuted for retaliatory conduct.
Laborers and mechanics who have been discriminated against for speaking
up, or for having been perceived as speaking up, however, currently
have no redress under the Department's regulations implementing the DBA
or Related Acts to the extent that back wages do not make them whole or
that such discriminatory conduct is not prohibited under a separate
anti-retaliation provision such as the FLSA, 29 U.S.C. 215(a)(3).\238\
For example, the Department currently may not order reinstatement of
workers fired for their cooperation with investigators or as a result
of an internal complaint to their supervisor. Nor may the Department
award compensation for the period after a worker is fired. Similarly,
the Department cannot require contractors to compensate workers for the
difference in pay resulting from retaliatory demotions or reductions in
hours. The addition of anti-retaliation provisions is a logical
extension of the DBA and Related Acts debarment remedial measure. It
would supplement debarment as an enforcement tool to more effectively
prevent retaliation, interference, or any other such discriminatory
behavior. An anti-retaliation mechanism would also build on existing
back-wage remedies by extending compensation to a fuller range of
harms.
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\238\ One exception is ARRA, a Related Act, that included a
whistleblower protection provision which provided that complaints
were to be investigated by agency inspectors general, not WHD. See
section 1553, Public Law 111-5, 123 Stat 115 (Feb. 17, 2009).
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The Department therefore proposed to add two new regulatory
provisions concerning anti-retaliation, as well as to update several
other regulations, to reflect the new anti-retaliation provisions.
(A) Proposed New Sec. 5.5(a)(11) and (b)(5)
The Department proposed to implement anti-retaliation in part by
adding a new anti-retaliation provision to all contracts subject to the
DBA or Related Acts. The proposed contract clauses provided for in
Sec. 5.5(a)(11) and (b)(5) stated that it is unlawful for any person
to discharge, demote, intimidate, threaten, restrain, coerce,
blacklist, harass, or in any other manner discriminate, or to cause any
person to do the same, against any worker for engaging in a number of
protected activities. The proposed protected activities included
notifying any contractor of any conduct which the worker reasonably
believes constitutes a violation; filing any complaints, initiating or
causing to be initiated any proceeding, or otherwise asserting or
seeking to assert any right or protection; cooperating in an
investigation or other compliance action, or testifying in any
proceeding; or informing any other person about their rights under the
DBA, Related Acts, or the regulations in 29 CFR parts 1, 3, or 5, for
proposed Sec. 5.5(a)(11), or the CWHSSA or its implementing
regulations in 29 CFR part 5, for proposed Sec. 5.5(b)(5).
The scope of these anti-retaliation provisions was intended to be
broad to better effectuate the remedial purpose of the DBRA, to protect
workers, and to ensure that they are not paid substandard wages.
Workers must feel free to speak openly--with contractors for whom they
work and contractors' responsible officers and agents, with the
Department, with co-workers, and others--about conduct that they
reasonably believe to be a violation of the prevailing wage
requirements or other DBRA labor standards requirements. The proposed
anti-retaliation provisions recognized that worker cooperation is
critical to enforcement of the DBRA. They would also incentivize
compliance and seek to eliminate any competitive disadvantage borne by
government contractors and subcontractors that follow the rules.
In line with those remedial goals, the Department intended the
proposed anti-retaliation provisions to protect workers who make
internal complaints to supervisors or who otherwise assert or seek to
assert Davis-Bacon or CWHSSA labor standards protections set forth in
Sec. 5.5(a)(11) and (b)(5), as well as to remedy interference with
Davis-Bacon worker protections or WHD investigations that may not have
a direct adverse monetary impact on the affected workers. Similarly,
the Department
[[Page 57657]]
intended the anti-retaliation provisions to also apply in situations
where there is no current work or employment relationship between the
parties. For example, it would prohibit retaliation by a prospective or
former employer or contractor (or both). Finally, the Department's
proposed rule sought to protect workers who make oral as well as
written complaints, notifications, or other assertions of their rights
protected under Sec. 5.5(a)(11) and (b)(5).
(B) Proposed New Sec. 5.18
The Department proposed remedies to assist in enforcement of the
DBRA labor standards provisions. Section 5.18 set forth the proposed
remedies for violations of the new anti-retaliation provisions. This
proposed section also included the process for notifying contractors
and other persons found to have violated the anti-retaliation
provisions of the Administrator's investigative findings, as well as
for Administrator directives to remedy such violations and provide
make-whole relief.
Make-whole relief and remedial actions under this proposed
provision were intended to restore the worker subjected to the
violation to the position, both economically and in terms of work or
employment status (e.g., seniority, leave balances, health insurance
coverage, 401(k) contributions, etc.), that the worker would have
occupied had the violation never taken place. Proposed available
remedies included, but were not limited to, any back pay and benefits
denied or lost by reason of the violation; other actual monetary losses
or compensatory damages sustained as a result of the violation;
interest on back pay or other monetary relief from the date of the
loss; and appropriate equitable or other relief such as reinstatement
or promotion; expungement of warnings, reprimands, or derogatory
references; the provision of a neutral employment reference; and
posting of notices that the contractor or subcontractor agrees to
comply with the DBRA anti-retaliation requirements.
In addition, proposed Sec. 5.18 specified that when contractors,
subcontractors, responsible officers, or other persons dispute findings
of violations of Sec. 5.5(a)(11) or (b)(5), the procedures in 29 CFR
5.11 or 5.12 would apply.
Conforming revisions were proposed to the withholding provisions at
Sec. Sec. 5.5(a)(2) and (b)(3) and 5.9 to indicate that withholding
includes monetary relief for violations of the anti-retaliation
provisions at Sec. 5.5(a)(11) and (b)(5), in addition to withholding
of back wages for DBRA prevailing wage violations and CWHSSA overtime
violations.
Similarly, conforming changes were proposed to Sec. Sec. 5.6(a)(4)
and 5.10(a). Computations of monetary relief for violations of the
anti-retaliation provisions were added to the limited investigatory
material that may be disclosed without the permission and views of the
Department under Sec. 5.6(a)(4). In proposed Sec. 5.10(a), monetary
compensation for violations of anti-retaliation provisions were added
as a type of restitution.
As explained, contractors, subcontractors, and their responsible
officers have long been subject to debarment for their retaliatory
actions. The NPRM proposed to update DBRA enforcement mechanisms by
attempting to ensure that workers can cooperate with WHD or complain
internally about perceived prevailing wage violations without fear of
reprisal. The proposal reflected a reasonable extension of the
Department's broad regulatory authority to enforce and administer the
DBRA. Further, the Department stated its belief that adding anti-
retaliation provisions would amplify existing back wage and debarment
remedies by making workers whole who suffer the effects of retaliatory
firings, demotions, and other actions that reduce their earnings. The
Department explained that this important new tool would help carry out
the DBRA's remedial purposes by bolstering WHD's enforcement.
The Department received many comments about this proposal. All but
a few of the comments expressed support for the anti-retaliation
proposal. Most of the supporting comments were from individuals,
including as part of an organized LIUNA member campaign. The remaining
supporting comments were from many non-profit and workers' rights
organizations, unions, labor-management groups, contractors (including
an organized SMACNA member campaign), and various appointed and elected
government officials. Most of the commenters expressed general support
for this proposal in its entirety and a few commenters recommended
measures to strengthen the proposal. The comments opposing the proposal
were submitted by the group of U.S. Senators and several contractor
organizations, all of whom opposed the proposal in its entirety.
Commenters that supported the proposed anti-retaliation provisions
in their entirety overwhelmingly agreed that the proposed provisions
would both strengthen enforcement of the Davis-Bacon and Related Acts
and better protect workers who speak out about potential DBRA
violations. See, e.g., LCCHR, several members of the U.S. House of
Representatives from Illinois, International Union of Operating
Engineers Local 77 (IUOE Local 77), and individual commenters. UBC
noted that the proposed anti-retaliation provisions--both the contract
clauses and remedies--would also assist in deterring retaliatory
conduct. NABTU emphasized that the anti-retaliation proposal is
consistent with the Department's broad enforcement authority under
Reorganization Plan No. 14 of 1950, which Congress has consistently
affirmed throughout the years.
Various commenters provided empirical support for the need to
strengthen worker protections, including through the proposed anti-
retaliation provisions. WA BCTC and LIUNA, for example, pointed to the
Department's recent data showing that the construction industry is
consistently one of the top two low-wage, high violation
industries.\239\ LCCHR highlighted various reports and articles
documenting the widespread problem of wage theft, workers' fear of
retaliation which leads workers to not report serious workplace
problems, and retaliation against workers who did so report. Similarly,
EPI referred to reports that underscored the particular importance of
strengthening anti-retaliation protections for low-wage and immigrant
workers who are disproportionately affected by wage theft in the
construction industry, where many wage payment violations go unreported
due to workers' well-founded fears of retaliation.
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\239\ See https://www.dol.gov/agencies/whd/data/charts/low-wage-high-violation-industries.
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A number of commenters provided anecdotal support for the proposed
anti-retaliation provisions as an effective mechanism to enhance
enforcement through worker cooperation. PAAG and PADLI stated that they
have received feedback from many workers that fear of retaliation
stopped them from coming forward and reporting prevailing wage
violations. FFC noted their experience with ``how reluctant workers can
be to report misconduct,'' explaining the disincentive to come forward
to report violations when there is no possibility that the workers will
be made whole if they are retaliated against. Affiliated Construction
Trades Foundation of Ohio (ACT Ohio) and NCDCL commented that they have
witnessed workers' reluctance to report misconduct for fear of losing
their jobs, thereby compromising their ability to support themselves
and their families
[[Page 57658]]
financially. LCCHR explained that the risk of retaliation tends to be
greater for workers who are already in relatively vulnerable positions
and who are least likely to be able to withstand the consequences of
retaliation, which can quickly escalate as lost pay leads to serious
financial, emotional, and legal issues.
A number of commenters, including several members of the U.S. House
of Representatives from Illinois, lauded this proposal, as well as the
timing of the Department's proposed rulemaking, which they asserted
would help maximize the economic benefits of the bipartisan IIJA for
workers, their families, and their communities. SMACNA members who
supported the proposed anti-retaliation protections, among other
proposals in the NPRM, also supported providing substantial resources
to WHD. See, e.g., Mechanical & Sheet Metal Contractors of Kansas.
A few commenters recommended additional provisions to strengthen
the anti-retaliation proposal. PAAG and PADLI recommended adding a
requirement to add the anti-retaliation contract provisions to existing
DBRA mandatory postings. LCCHR described the Department's proposed
make-whole relief as a ``good start,'' but recommended going further to
account for financial losses that are more difficult to quantify, such
as fees and penalties for missed payments due to loss of income, and
non-financial harms such as harassment. An individual commenter
asserted that the proposed uniform and less stringent debarment
standard could also have a chilling effect on workers' willingness to
report violations since their hours could be cut if the contractor for
whom they work is less profitable as a result of being debarred. They
noted that whether the threat of a reduction in wages and harm to
career prospects comes from retaliation or from the employer's loss of
Federal contracting opportunities, the fact that the economic
consequence was a result of speaking up remains the same. This
commenter, therefore, recommended adding ``predicted lost pay'' as an
additional quasi-anti-retaliation remedy to compensate workers for
reduced hours resulting from possible debarment. UBC suggested that the
Department also require notice posting in the first step of the
proposed administrative process in Sec. 5.18(a), include interest on
lost wages, and include information in WHD case-handling manuals about
how investigators can assist immigrant workers in obtaining deferred
action from the Department of Homeland Security (DHS), as well as
applications for T and U visas.
None of the commenters that opposed the proposal rejected the
proposed anti-retaliation provisions squarely on their merits. Rather,
in opposing the proposal, IEC claimed that it was duplicative of
another whistleblower protection law for Federal contractor employees,
41 U.S.C. 4712, as well as various anti-retaliation provisions issued
under other statutes or regulatory schemes, Executive Orders, and a
trade agreement. APCA claimed that the anti-retaliation provisions,
combined with other proposals, would subject many--particularly small--
firms to significant cost increases. And the group of U.S. Senators and
ABC claimed that the proposed anti-retaliation provisions were
overbroad remedial measures that exceeded the Department's statutory
authority and should be withdrawn. The group of U.S. Senators argued
that forcing private actors to reinstate workers or pay them back wages
implicated unspecified constitutional rights and, therefore, the broad
whistleblower enforcement scheme envisioned by the Department ``is
reserved for Congress to impose as subject matter experts and elected
representatives.''
After considering the comments, the Department adopts the anti-
retaliation provisions as proposed, with one minor addition to the
anti-retaliation contract clauses and one minor addition to the
remedies in Sec. 5.18. The vast majority of commenters expressed
strong support for this proposal in its entirety. The Department echoes
the support of the many commenters that emphasized the importance of
worker cooperation to effective enforcement of the DBRA and reiterates
the reasons for adding these provisions that the Department enumerated
in the NPRM preamble--primarily that the Department anticipates that
the anti-retaliation provisions will significantly enhance enforcement,
compliance, and deterrence, while making workers whole who suffer
reprisals in violation of these provisions. In Sec. 5.5(a)(11)(ii) and
(b)(5)(ii) the Department added protection for otherwise asserting ``or
seeking to assert'' the enumerated DBRA or CWHSSA labor standards
protections. This provision would prohibit a contractor's retaliation
after, for example, learning that a worker has consulted with a third
party about the possibility of asserting such rights or protections. In
Sec. 5.18, the Department added to the illustrative list of remedies
front pay in lieu of reinstatement. This type of relief is appropriate
in situations where either the contractor or worker does not want
reinstatement and front pay is provided instead.
While the Department appreciates the recommendations of several
commenters to strengthen the anti-retaliation provisions in particular
respects, the Department believes that the anti-retaliation provisions
as proposed contain appropriate and sufficient safeguards against
retaliation. The Department agrees, however, that PAAG and PADLI's
recommendation to require posting of the new anti-retaliation contract
provisions would further enhance DBRA enforcement and compliance as
well as worker protections. Therefore, the Department will add anti-
retaliation information to the Davis-Bacon poster \240\ (WH-1321) that
is currently required by Sec. 5.5(a)(1)(i).
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\240\ See https://www.dol.gov/agencies/whd/posters/dbra and
https://www.dol.gov/agencies/whd/posters/dbra/espanol.
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Concerning anti-retaliation remedies, the Department agrees with
LCCHR that it is important to account for financial losses that are
difficult to quantify, like fees and penalties for missed payments due
to loss of income, as well as non-financial harms such as harassment.
Nevertheless, the Department believes that the regulatory remedies in
the final rule adequately encompass such relief. If a worker or job
applicant provides sufficient justification of financial and non-
financial harms resulting from a violation of Sec. 5.5(a)(11) or
(b)(5), such as those that LCCHR identified, Sec. 5.18(b) as adopted
contemplates relief for those types of harms to remedy the violation.
Moreover, the examples in Sec. 5.18(c) are illustrative, not
exclusive.
The Department also appreciates an individual commenter's concern
that speaking up could lead to debarment with attendant adverse
financial and/or career impacts similar to those that workers may
experience as a result of retaliation. But the Department declines to
adopt this commenter's accompanying recommendation for predicted lost
pay resulting from debarment for several reasons. The final rule's
anti-retaliation provisions are intended to encourage more workers to
report potential DBRA violations and to provide make-whole relief for
workers who have suffered specific incidents of reprisals or
interference as a result of such reporting. In contrast, the individual
commenter's proposal seeks highly speculative damages based on a
possible future event--debarment--that may not occur and, even if it
did, might not happen for years if the contractor disputes the
underlying violations and/or debarment remedy through an
[[Page 57659]]
administrative hearing and any subsequent administrative or Federal
court appeals. This commenter's proposed predicted lost pay remedy is
far-reaching: it goes beyond financial make-whole relief for the
particular workers who spoke up and could extend to the whole workforce
if they were adversely impacted by the debarment. The Department's
anti-retaliation provisions are more narrowly tailored to address
specific harms. For example, if a worker were given a bad reference by
a debarred DBRA contractor for whom they had worked, or if a contractor
refused to hire a worker who had spoken up about DBRA violations and
was then ``blacklisted,'' that worker could seek relief under the final
rule's anti-retaliation provisions.
While the Department also appreciates UBC's recommendation to
require the posting of a notice to workers that the contractor or
subcontractor agrees to comply with the DBRA anti-retaliation
requirements in the first step of the proposed administrative process
in Sec. 5.18(a), the Department declines to adopt this recommendation
because at that stage of proceedings, the contractor or subcontractor
would still be able to dispute the findings in an administrative
hearing. The Department notes that the examples of make-whole relief
listed in Sec. 5.18(c)--an illustrative, not exhaustive list--include
notice posting as well as back pay and interest among other types of
make-whole relief. Similarly, UBC's suggestion to include interest on
lost wages is encompassed in the final rule's remedies under Sec.
5.18. Finally, the Department appreciates UBC's recommendation to
include information in WHD case-handling manuals about assisting
immigrant workers in obtaining deferred action from DHS, as well as
applications for T and U visas, and notes that WHD currently has
publicly available guidance about these topics.\241\
---------------------------------------------------------------------------
\241\ See, e.g., U and T Visa Certifications, Wage & Hour Div.,
Dep't of Lab., https://www.dol.gov/agencies/whd/immigration/u-t-visa; Dep't of Lab., ``FAQ: Process for Requesting Department of
Labor Support for Requests to the Department of Homeland Security
for Immigration-Related Prosecutorial Discretion During Labor
Disputes'' (2022), https://www.dol.gov/sites/dolgov/files/OASP/files/Process-For-Requesting-Department-Of-Labor-Support-FAQ.pdf;
Department of Labor U and T Visa Process & Protocols Question--
Answer, Wage & Hour Div., Dep't of Lab., https://www.dol.gov/agencies/whd/immigration/u-t-visa/faq.
---------------------------------------------------------------------------
The Department disagrees with IEC that the proposed anti-
retaliation provisions are duplicative of other whistleblower
protections for contractor employees and could unnecessarily expand the
number of claims against contractors. There are Federal laws, including
one that IEC identified, that provide protections from reprisal for
employees of Federal contractors and grantees who disclose, among other
things, ``information that [they] reasonably believe[ ] is a . . .
violation of law, rule, or regulation related to a Federal contract.''
41 U.S.C. 4712 (covering certain civilian contracts); see 10 U.S.C.
4701(a)(1) (covering certain defense contracts).\242\ But these
statutory whistleblower protections are not duplicative because they
may not apply to the same subsets of workers, and they are not as
specifically tailored to protected activities under the DBRA. Nor are
they mutually exclusive.
---------------------------------------------------------------------------
\242\ Formerly cited as 10 U.S.C. 2409(a)(1).
---------------------------------------------------------------------------
In addition, enforcement under these existing statutory
whistleblower protections appears to have been uncommon. Specifically,
the Department is not aware of any Federal courts deciding cases on the
merits in which DBRA or SCA workers have availed themselves of section
4712, and the Department is only aware of one such case under 10 U.S.C.
2409. See Rogers v. U.S. Army, 2007 WL 1217964, at *3, *6-8 (S.D. Tex.
Apr. 23, 2007) (dismissing, among other claims, employee's claim under
10 U.S.C. 2409).\243\
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\243\ Similarly, the Department is aware of only one Federal
court decision about ARRA's whistleblower protection provisions in
which the underlying protected activity related to alleged
prevailing wage violations. See Business Commc'ns, Inc. v. U.S.
Dept. of Educ., 739 F.3d 374, 376, 383 (8th Cir. 2013) (worker filed
complaint with the Department of Education's OIG alleging that cable
installation contractor had terminated his employment after he
complained about not being paid prevailing wages as required by
ARRA). In any event, most ARRA funding has been spent by now or is
no longer available due to sunset provisions, so the protections
that flowed from that funding no longer apply and ARRA's anti-
retaliation provisions will soon be, if they are not already,
inapplicable to any existing or future DBRA-covered projects.
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The new DBRA anti-retaliation provisions will coexist with these
other whistleblower statutory protections and supplement them with
additional worker protections to further effectuate the DBRA statutory
and regulatory scheme. For example, the final rule's anti-retaliation
provisions cover disclosures to a wider range of people than in the
above-mentioned two whistleblower-protection laws. The final rule
protects worker disclosure of information not only to law enforcement
entities, courts, and contractors, but also to any other person (e.g.,
co-workers or advocates for workers' rights) about their Davis-Bacon
rights and assertions of any right or protection under the DBRA.
The Department believes that it is both efficient and consistent
with the remedial purpose of the DBRA as well as the directive in
Reorganization Plan No. 14 of 1950 ``to assure coordination of
administration and consistency of enforcement'' for WHD--not only
contracting agency inspectors general--to investigate and adjudicate
complaints of retaliation or interference as part of the Department's
Davis-Bacon labor standards enforcement, particularly given WHD's
expertise in interpreting and enforcing DBRA labor standards
requirements. Potential retaliation and interference with DBRA worker
protections are relevant to WHD's investigations of whether debarment
is warranted. Under the final rule, WHD's investigations will encompass
the new anti-retaliation remedies provisions as part of the
Department's overarching enforcement authority.
Finally, the Department declines to withdraw its proposed anti-
retaliation provisions because, contrary to assertions of ABC and the
group of U.S. Senators that this proposal exceeds the Department's
statutory authority,\244\ the proposed provisions fit within the
Department's broad enforcement authority under the DBA and
Reorganization Plan No. 14 of 1950. See 5 U.S.C. app. 1. The comments
submitted by the group of U.S. Senators and ABC overlook the fact that
Reorganization Plan No. 14 of 1950 was a Congressional delegation of
rulemaking authority to the Department. The Plan was prepared by
President Truman and submitted to Congress in March 1950 pursuant to
the Reorganization Act of 1949, Public Law 81-109, 63 Stat. 203 (1949).
The Reorganization Act, as passed in 1949, provided that a plan
submitted by the President would become effective after 60 days unless
disapproved by Congress. See 63 Stat. at 205. Although not required,
the Senate Committee on Expenditures in the Executive Department
reviewed the Reorganization Plan and reported favorably before the Plan
became
[[Page 57660]]
effective on May 24, 1950. See 95 Cong. Rep. 6792 (daily ed. May 10,
1950).
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\244\ The group of U.S. Senators' apparent suggestion that DBRA
remedial purpose and remedies are limited to those Congress
expressly provided for in the 1935 amendment to the DBA
(withholding, debarment, and affording laborers a private right of
action against a contractor) is inconsistent with subsequent
legislative, regulatory, and judicial actions discussed in this
section. Furthermore, these commenters' suggestion that DBRA is not
remedial as that term is defined overlooks another meaning of
``remedial statute,'' which is ``[one] that is designed to . . .
introduce regulations conducive to the public good.'' Remedial
statute, Black's Law Dictionary Deluxe 4th Ed. (1951) & 6th Ed.
(1990).
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Since that time, as NABTU noted, Congress has repeatedly recognized
the Secretary's authority and functions under Reorganization Plan No.
14 of 1950 with respect to the DBA's prevailing wage provisions in
subsequent legislation. See, e.g., 42 U.S.C. 18851(b), 42 U.S.C.
1440(g), 42 U.S.C. 3212, 20 U.S.C. 954(n), 42 U.S.C. 300j-9(e), 42
U.S.C. 5046. Additionally, in 1984, Congress ratified and affirmed as
law each reorganization plan that was implemented pursuant to the
provision of a prior reorganization act. Public Law 98-532, 98 Stat.
2705 (1984). The 1984 ratification went on to declare that ``[a]ny
actions taken prior to the date of enactment of this Act pursuant to a
reorganization plan ratified [herein] shall be considered to have been
taken pursuant to a reorganization expressly approved by Act of
Congress.'' Id. (emphasis added). Such prior actions include the
Department's various rulemakings for 29 CFR parts 1, 3, and 5. For
example, the 1964 final rule amending part 5 in turn had extended the
Department's regulatory enforcement and administration authority to
future Related Acts that the Department anticipated Congress would
continue to enact from time to time. See 29 FR 95, 99 (Jan. 4, 1964)
(adding the following italicized language to Sec. 5.1(a), ``The
regulations contained in this part are promulgated in order to
coordinate the administration and enforcement of the labor standards
provisions of each of the following acts by the Federal agencies
responsible for their administration and such additional statutes as
may from time to time confer upon the Secretary of Labor additional
duties and responsibilities similar to those conferred upon him under
Reorganization Plan No. 14 of 1950.''). That regulation implemented by
another Department final rule in 1983 added to the statutory sources of
the Department's authority to promulgate such regulations to include
the Copeland Act as well as Reorganization Plan No. 14 of 1950. See 48
FR 19540-41 (implementing provisions of final rule that had not been
enjoined by a Federal district court and on appeal by the Department).
Federal courts, the ARB, and the ARB's predecessor tribunals have
all explained that Reorganization Plan No. 14 of 1950 authorizes the
Department ``to issue regulations designed to `assure coordination of
administration and consistency of enforcement' of the Davis-Bacon Act
and all Davis-Bacon related statutes.'' Vulcan Arbor Hill Corp. v.
Reich, No. 87-3540, 1995 WL 774603, at *2 (D.D.C. Mar. 31, 1995)
(emphasis added), aff'd, 81 F.3d 1110, 1112 (D.C. Cir. 1996) (``[The
Reorganization Plan No. 14 of 1950] confers on the Department of Labor
the authority and responsibility to coordinate the enforcement not only
of the Davis-Bacon Act itself, but also Davis-Bacon related
statutes.''); see also Coutu, 450 U.S. at 759 (``Pursuant to
Reorganization Plan No. 14 of 1950 the Secretary of Labor . . . issued
regulations designed to `assure coordination of administration and
consistency of enforcement' of the Act and some 60 related statutes.''
(internal citations omitted)); Quincy Hous. Auth. LaClair Corp., WAB
No. 87-32, 1989 WL 407468, at *2 (Feb. 17, 1989) (``Pursuant to [the]
mandate [of Reorganization Plan No. 14], the Secretary has promulgated
regulations to enforce the labor standards provisions of the Davis-
Bacon Act and the related acts.''); cf. Coleman Constr. Co., ARB No.
15-002, 2016 WL 4238468, at *2, *9-11 (June 8, 2016) (stating that
``the National Housing Act and CWHSSA, the two Davis-Bacon Related Acts
under which this case is being brought, do not include a debarment
provision,'' but that ``it is the Department of Labor regulations, duly
promulgated pursuant to Reorganization Plan No. 14 of 1950 that provide
for debarment for violations of a Related Act'').
The Department reiterates that like regulatory debarment, the anti-
retaliation provisions adopted in the final rule--as well as the
revised Related Act debarment provisions discussed in section
III.B.3.xxi (``Debarment'')--are all permissible exercises of the
Department's ``implied powers of administrative enforcement.'' Janik
Paving & Constr., 828 F.2d at 91. Like the revised debarment
provisions, the anti-retaliation provisions will also help achieve more
effective enforcement of DBRA labor standards requirements.
The Department does not agree with ABC or the group of U.S.
Senators that Congress's omission of express statutory anti-retaliation
provisions or authority in the DBA and most Related Acts prohibits the
Secretary from regulating such behavior. The new anti-retaliation
regulations are consistent with and a permissible extension of current
remedies for retaliatory conduct. Courts have recognized the
Department's broad regulatory authority to enforce and administer the
DBRA, including the appropriateness of measures such as debarment under
the Related Acts, which was initially implemented without explicit
statutory authority. See Janik Paving & Constr., 828 F.2d at 92
(holding that Congressional silence on debarment when it enacted the
CWHSSA did not preclude the Department from enforcing its regulatory
debarment provision under that statute and noting ``[t]hat a later
Congress seeks to grant expressly a power which an earlier Congress has
granted by implication does not negate the existence of the power prior
to the express grant'' (internal quotations omitted)); Copper Plumbing
& Heating Co. v. Campbell, 290 F.2d 368, 372-73 (D.C. Cir. 1961)
(holding that Reorganization Plan No. 14 of 1950 authorized debarment
under a Related Act as ``a means for securing compliance with the wage
and hour standards and . . . obtaining responsible bidding,''
notwithstanding that the Related Act was silent on debarment but
provided for other sanctions and that Congress had expressly authorized
debarment in similar statutes, like the DBA.).
The anti-retaliation provisions will further Reorganization Plan
No. 14 of 1950's mandate by helping to ensure workers are paid the
prevailing wages they are owed and to coordinate effective
administration of Davis-Bacon labor standards on Federal and federally
assisted construction projects. As with debarment, anti-retaliation is
``integral to the Secretary's effective enforcement of labor standards
provisions.'' Janik Paving & Constr., 828 F.2d at 93. Prohibiting
retaliation against workers for asserting their rights under the DBRA
and requiring contractors to remedy such retaliation gives DOL and
contracting agencies a tool to help ensure effective administration and
enforcement of the DBRA and to protect the prevailing wage statutory
scheme ``from those who would abuse it.'' Jacquet v. Westerfield, 569
F.2d 1339, 1345 (5th Cir. 1978). The final rule's anti-retaliation
provisions will further the DBA's purposes of protecting workers and
preventing substandard wages on Federal construction projects. By
further shielding workers who speak out about violations that might not
be discovered otherwise, this final rule will enhance the incentive to
comply with the law, foster construction worker cooperation with the
Department's (and contracting agencies') enforcement efforts, and
improve the ability of WHD investigators to respond to and discover
violations.
The final rule's regulatory anti-retaliation provisions are not
novel. The Department has promulgated anti-retaliation regulations with
make-whole remedies to aid enforcement and worker protection in other
program areas where the underlying statutes do not expressly
[[Page 57661]]
provide for anti-retaliation. For example, both the Department's H-2A
and H-2B regulations include anti-retaliation provisions. See 29 CFR
501.4 (H-2A); 29 CFR 503.20(a) (H-2B); Temporary Non-Agricultural
Employment of H-2B Aliens in the United States, 80 FR 24042, 24069
(Apr. 29, 2015) (Interim final rule; request for comments) (``Worker
rights cannot be secured unless there is protection from all forms of
intimidation or discrimination resulting from any person's attempt to
report or correct perceived violations of the H-2B provisions.''). In
addition, OSHA added an anti-retaliation regulation to provide an
enforcement tool for the long-standing injury and illness recordkeeping
regulations despite also having a statutory anti-retaliation provision,
section 11(c), 29 U.S.C. 660(c)--both of which had been in place for
over 40 years. See 29 CFR 1904.35(b)(1)(iv); Improve Tracking of
Workplace Injuries and Illnesses, 81 FR 29624, 29627 (May 12, 2016)
(Final rule) (``Where retaliation threatens to undermine a program that
Congress required the Secretary to adopt, the Secretary may proscribe
that retaliation through a regulatory provision unrelated to section
11(c).''); cf. 57 FR 7533, 7535 (Mar. 3, 1992) (Final Rule) (stating
that the DOE's regulatory anti-retaliation DOE Contractor Employee
Protection Program found at 10 CFR part 708 was ``issued pursuant to
the broad authority granted [DOE]'' by various statutes ``to prescribe
such rules and regulations as necessary or appropriate to protect
health, life, and property and the otherwise administer and manage the
responsibilities and functions of the agency''). The Department's
adoption of anti-retaliation provisions in the final rule similarly
implements this additional enforcement tool.
xx. Post-Award Determinations and Operation-of-Law
The Department proposed several revisions in parts 1, 3, and 5 to
update and codify the administrative procedure for enforcing Davis-
Bacon labor standards requirements when the contract clauses and/or
appropriate wage determination(s) have been wrongly omitted from a
covered contract.
(A) Current Regulations
The current regulations require the insertion of the relevant
contract clauses and wage determination(s) in covered contracts. 29 CFR
5.5. Section 5.5(a) requires the appropriate contract clauses to be
inserted ``in full'' into any covered contracts, though the FAR only
requires the DBA contract clauses to be incorporated by reference in
FAR-covered contracts. The contract clause language at Sec. 5.5(a)(1)
currently states that applicable wage determinations are ``attached''
to the contract.
The existing regulations at Sec. 1.6(f) provide instruction for
how the Department and contracting agencies must act when a wage
determination has been wrongly omitted from a contract. Those
regulations provide a procedure through which the Administrator makes a
finding that a wage determination should have been included in the
contract. After the finding by the Administrator, the contracting
agency must either terminate and resolicit the contract with the valid
wage determination or incorporate the wage determination retroactively
by supplemental agreement or change order. The same procedure applies
where the Administrator finds that the wrong wage determination was
incorporated into the contract. The existing regulations at Sec.
1.6(f) specify that the contractor must be compensated for any
increases in wages resulting from any supplemental agreement or change
order issued in accordance with the procedure.
As the Department explained in the NPRM, WHD has faced multiple
longstanding enforcement challenges under the current regulations.
First, the language of Sec. 1.6(f) explicitly refers only to omitted
wage determinations and does not expressly address the situation where
a contracting agency has mistakenly omitted the contract clauses from
the contract. Although WHD has historically relied on Sec. 1.6(f) to
address this situation, the ambiguity in the regulations has caused
confusion in communications between WHD and contracting agencies and
delay in resolving conflicts. See, e.g., WHD Opinion Letters DBRA-167
(Aug. 29, 1990); DBRA-131 (Apr. 18, 1985).
Second, under the existing regulations, affected workers have
suffered from significant delays while contracting agencies determine
the appropriate course of action. At a minimum, such delays cause
problems for workers who must endure long waits to receive their back
wages. At worst, the delay can result in no back wages recovered at all
where witnesses become unavailable or there are no longer any contract
payments to withhold when a contract is finally modified or terminated.
In all cases, the identification of the appropriate mechanism for
contract termination or modification can be difficult and burdensome on
Federal agencies--in particular during later stages of a contract or
after a contract has ended.
The process provided in the current Sec. 1.6(f) is particularly
problematic where a contracting agency has questions about whether an
existing contract can be modified without violating another non-DBRA
statute or regulation. This problem has arisen in particular in the
context of MAS contracts, BPAs, and other similar schedule contracts
negotiated by GSA.\245\ Contracting agencies that have issued task
orders under GSA schedule contracts have been reluctant to modify those
task orders to include labor standards provisions where the governing
Federal schedule contract does not contain the provisions. Under those
circumstances, contracting agencies have argued that such a
modification could render that task order ``out of scope'' and
therefore arguably unlawful.
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\245\ Sales on the GSA MAS, for example, have increased
dramatically in recent decades--from $4 billion in 1992 to $36.6
billion in 2020. Gov't Accountability Office, ``High Risk Series: An
Update,'' GAO-05-207 (Jan. 2005), at 25 (Figure 1) (noting these
types of contracting vehicles ``contribute to a much more complex
environment in which accountability has not always been clearly
established''), available at: https://www.gao.gov/assets/gao-05-207.pdf; Gen. Servs. Admin., ``GSA FY 2020 Annual Performance
Report,'' at 11, available at: https://www.gsa.gov/cdnstatic/GSA%20FY%202020%20Annual%20Performance%20Report%20v2.pdf.
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Although the Department believes it is incorrect that a contract
modification to incorporate required labor standards clauses or wage
determinations could render a contract or task order out of scope,\246\
concerns about this issue have interfered with the Department's
enforcement of the labor standards. If a contracting agency believes it
cannot modify a contract consistent with applicable procurement law, it
may instead decide to terminate the contract without retroactively
including the required clauses or wage determinations. In those
circumstances, the regulations currently provide no express mechanism
that explains how the Department or contracting agencies should seek to
recover the back wages that the workers should have been paid on the
terminated contract. While in many cases, the authority does exist, the
[[Page 57662]]
lack of an express mechanism can lead to unnecessary delay and
confusion.
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\246\ This argument tends to conflate the change associated with
incorporating a missing contract clause or wage determination with
any unexpected changes by the contracting agency to the actual work
to be performed under the task order or contract. As a general
matter, a Competition in Contracting Act challenge based solely on
the incorporation of missing labor standards clauses or appropriate
wage determinations would be without merit. See Booz Allen Hamilton
Eng'g Servs., LLC, B-411065 (May 1, 2015), available at: https://www.gao.gov/products/b-411065.
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The Department also engages in various compliance assistance
efforts to decrease the risk that contract clauses will be omitted from
covered contracts in the first place. The Department routinely conducts
trainings for contracting agencies and other stakeholders about Davis-
Bacon coverage principles, issues and maintains guidance documents
(such as the PWRB and FOH), and responds to requests for advice and
rulings about coverage matters. In tandem with this rulemaking, the
Department intends to continue these efforts to reduce the likelihood
of erroneous omission of contract clauses and wage determinations.
However, after decades of experience with this problem, the Department
has determined that additional measures are necessary.
To address these longstanding enforcement challenges, the
Department proposed to exercise its authority under Reorganization Plan
No. 14 of 1950 and 40 U.S.C. 3145 to adopt several changes to
Sec. Sec. 1.6, 5.5, and 5.6.
(B) Proposed Regulatory Revisions
In the NPRM, the Department proposed to include language in a new
paragraph at Sec. 5.5(e) to provide that the labor standards contract
clauses and appropriate wage determinations will be effective ``by
operation of law'' in circumstances where they have been wrongly
omitted from a covered contract. The Department explained that the
purpose of the proposal was to ensure that, in all cases, a mechanism
exists to enforce Congress's mandate that workers on covered contracts
receive prevailing wages--notwithstanding any mistake by an executive
branch official in an initial coverage decision or in an accidental
omission of the labor standards contract clauses. The proposal would
also ensure that workers receive the correct prevailing wages in
circumstances where the correct wage determination has not been
attached to the original contract or has not been incorporated during
the exercise of an option.
Under the proposal, erroneously omitted contract clauses and
appropriate wage determinations would be effective by operation of law
and therefore enforceable retroactive to the beginning of the contract
or construction. The proposed language provided that all of the
contract clauses set forth in Sec. 5.5--the contract clauses at Sec.
5.5(a) and the CWHSSA contract clauses at Sec. 5.5(b)--are considered
to be a part of every covered contract, whether or not they are
physically incorporated into the contract. This includes the contract
clauses requiring the payment of prevailing wages and overtime at Sec.
5.5(a)(1) and (b)(1), respectively; the withholding clauses at Sec.
5.5(a)(2) and (b)(3); and the labor-standards disputes clause at Sec.
5.5(a)(9).
In the NPRM, the Department explained that the operation-of-law
provision is intended to complement the existing requirements in Sec.
1.6(f) and would not entirely replace them. Thus, the contracting
agency will still be required to take action as appropriate to
terminate or modify the contract. Under the new proposed procedure,
however, WHD would not need to await a contract modification to assess
back wages and seek withholding, because the wage requirements and
withholding clauses would be read into the contract as a matter of
law.\247\ The application of the clauses and the correct wage
determination as a matter of law would also provide WHD with an
important tool to enforce the labor standards on a contract that a
contracting agency decides it must terminate instead of modify.
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\247\ The Department proposed parallel language in 29 CFR 5.9
(Suspension of funds) to clarify that funds may be withheld under
the contract clauses and appropriate wage determinations whether
they have been incorporated into the contract physically, by
reference, or by operation of law.
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The proposal included two important provisions to protect both
contractors and contracting agencies. First, the proposal included a
provision requiring that contracting agencies compensate prime
contractors for any increases in wages resulting from a post-award
incorporation of a contract clause or wage determination by operation
of law under Sec. 5.5(e). This proposed language was modeled after
similar language that has been included in Sec. 1.6(f) since
1983.\248\ Under the proposal, when the contract clause or wage
determination is incorporated into the prime contract by operation of
law, the prime contractor would be responsible for the payment of
applicable prevailing wages to all workers under the contract--
including the workers of its subcontractors--retroactive to the
contract award or beginning of construction, whichever occurs first.
This is consistent with the current Davis-Bacon regulations and case
law. See 29 CFR 5.5(a)(6); All Phase Elec. Co., WAB No. 85-18 (June 18,
1986) (withholding contract payments from the prime for subcontractor
employees even though the labor standards had not been flowed down into
the subcontract). This responsibility, however, would be offset by the
compensation provision in Sec. 5.5(e), which would require that the
prime contractor be compensated for any increases in wages resulting
from any post-award incorporation by operation of law.
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\248\ See 46 FR 4306, 4313 (Jan. 16, 1981); 47 FR 23644, 23654
(May 28, 1982) (implemented by 48 FR 19532 (Apr. 29, 1983)).
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The second important provision in the proposed operation-of-law
paragraph was language that provides protection for contracting
agencies by continuing to allow requests that the Administrator grant a
variance, tolerance, or exemption from application of the regulations.
As noted in the NPRM, this includes an exemption from retroactive
enforcement of wage determinations and contract clauses (or, where
permissible, an exemption from prospective application) under the same
conditions currently applicable to post-award determinations. See 29
CFR 1.6(f); 29 CFR 5.14; City of Ellsworth, ARB No. 14-042, 2016 WL
4238460, at *6-8 (June 6, 2016).\249\ In addition, as the Department
noted in the NPRM, contracting agencies avoid difficulties associated
with post-award incorporations by proactively incorporating the Davis-
Bacon labor standards clauses and applicable wage determinations into
contracts or using the existing process for requesting a coverage
ruling or interpretation from the Administrator prior to contract
award. See 29 CFR 5.13.\250\
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\249\ Factors that the Administrator considers in making a
determination regarding retroactive application are discussed in the
ARB's ruling in City of Ellsworth, ARB No. 14-042, 2016 WL 4238460,
at *6-10. Among the non-exclusive list of potential factors are
``the reasonableness or good faith of the contracting agency's
coverage decision'' and ``the status of the procurement (i.e., to
what extent the construction work has been completed).'' Id. at *10.
In considering the status of the procurement, the Administrator will
consider the status of construction at the time that the coverage or
correction issue is first raised with the Administrator.
\250\ Contracting agencies can also contest a determination by
the Administrator that a contract is covered (either an initial
determination or a post-award determination) or the Administrator's
denial of a tolerance, variance, or exemption, by seeking review of
the determination with the ARB. 29 CFR 7.1, 7.9. A decision of the
ARB on a coverage question is a final agency action that in turn may
be reviewable under the APA in Federal district court. See 5 U.S.C.
702, 704.
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The operation-of-law provision in proposed Sec. 5.5(e) is similar
to the Department's existing regulations enacting Executive Order
11246--Equal Employment Opportunity. See 41 CFR 60-1.4(e); United
States v. Miss. Power & Light Co., 638 F.2d 899, 905-06 (5th Cir. 1981)
(finding 41 CFR 60-1.4(e) to be valid and have force of law). The
operation-of-law provision at 41 CFR 60-1.4(e), like the proposed
language in
[[Page 57663]]
Sec. 5.5(e), operates in addition to and complements the other
provisions in the Executive Order's regulations that require the equal
opportunity contract clause to be included in the contract. See 41 CFR
60-1.4(a).
Unlike 41 CFR 60-1.4(e), the Department's proposed language in the
new Sec. 5.5(e) would apply the ``operation of law'' provision only to
prime contracts and not to subcontracts. The reason for this difference
is that, as noted above, the Davis-Bacon regulations and case law
provide that the prime contractor is responsible for the payment of
applicable wages on all subcontracts. If the prime contract contains
the labor standards as a matter of law, then the prime contractor is
required to ensure that all employees on the contract--including
subcontractors' employees--receive all applicable prevailing wages.
Accordingly, as the Department explained in the NPRM, extending the
operation-of-law provision itself to subcontracts is not necessary to
enforce the Congressional mandate that all covered workers under the
contract are paid the applicable prevailing wages.
The proposed operation-of-law provision at Sec. 5.5(e) is also
similar in many, but not all, respects to the judicially-developed
Christian doctrine, named for the 1963 Court of Claims decision G.L.
Christian & Assocs. v. United States, 312 F.2d 418 (Ct. Cl.), reh'g
denied, 320 F.2d 345 (Ct. Cl. 1963). Under the doctrine, courts and
administrative tribunals have held that required contractual provisions
may be effective by operation of law in Federal government contracts,
even if they were not in fact included in the contract. The doctrine
applies even when there is no specific ``operation of law'' regulation
as proposed here.
The Christian doctrine flows from the basic concept in all contract
law that ``the parties to a contract . . . are presumed or deemed to
have contracted with reference to existing principles of law.'' 11
Williston on Contracts Sec. 30:19 (4th ed. 2021); see Ogden v.
Saunders, 25 U.S. 213, 231 (1827). Thus, those who contract with the
government are charged with having ``knowledge of published
regulations.'' PCA Health Plans of Texas, Inc. v. LaChance, 191 F.3d
1353, 1356 (Fed. Cir. 1999) (citation omitted).
Under the Christian doctrine, a court can find a contract clause
effective by operation of law if that clause ``is required under
applicable [F]ederal administrative regulations'' and ``it expresses a
significant or deeply ingrained strand of public procurement policy.''
K-Con, Inc. v. Sec'y of Army, 908 F.3d 719, 724 (Fed. Cir. 2018). Where
these prerequisites are satisfied, it does not matter if the contract
clause at issue was wrongly omitted from a contract. A court will find
that a Federal contractor had constructive knowledge of the regulation
and that the required contract clause applies regardless of whether it
was included in the contract.
The recent decision of the Federal Circuit in K-Con is helpful to
understanding why it is appropriate to provide that the DBA labor
standards clauses are effective by operation of law. In K-Con, the
Federal Circuit held that the Christian doctrine applies to the 1935
Miller Act. 908 F.3d at 724-26. The Miller Act contains mandatory
coverage provisions that are similar to those in the DBA, though with
different threshold contract amounts. The Miller Act requires that
contractors furnish payment and performance bonds before a contract is
awarded for ``the construction, alteration, or repair of any public
building or public work.'' 40 U.S.C. 3131(b). The DBA, as amended,
requires that the prevailing wage stipulations be included in bid
specifications ``for construction, alteration, or repair, including
painting and decorating, of public buildings and public works.'' 40
U.S.C. 3142(a).
Like the Miller Act, the 90-year-old Davis-Bacon Act also expresses
a significant and deeply ingrained strand of public procurement policy.
The Miller Act and the Davis-Bacon Act are of similar vintage. The DBA
was enacted in 1931. The DBA amendments were enacted in 1935, almost
simultaneously with the Miller Act. Through both statutes, Congress
aimed to protect participants on government contracts from nonpayment
by prime contractors and subcontractors. Thus, the same factors that
the Federal Circuit found sufficient to apply the Christian doctrine to
the Miller Act also apply to the DBA and suggest that the proposed
operation-of-law regulation would be appropriate.\251\
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\251\ The Federal Circuit has also noted that the Christian
doctrine applies to in the context of the SCA, which has a similar
purpose as the DBA and dates only to 1965. See Call Henry, Inc. v.
United States, 855 F.3d 1348, 1351 & n.1 (Fed. Cir. 2017). Because
the DBA and SCA are similar statutes with the same basic purpose,
the Department has long noted that court decisions relating to one
of these acts may have a direct bearing on the other. See WHD
Opinion Letter SCA-3 (Dec. 7, 1973).
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The Department's proposal, however, offers more consideration for
contractor equities than the Christian doctrine in two critical
respects. First, as noted above, the proposed language at Sec. 5.5(e)
would be paired with a contractor compensation provision similar to the
existing provision in Sec. 1.6(f). The Christian doctrine does not
incorporate such protection for contractors, and as a result, can have
the effect of shifting cost burdens from the government to the
contractor. In K-Con, for example, the doctrine supported the
government's defense against a claim for equitable adjustment by the
contractor. 908 F.3d at 724-28.
Second, the Christian doctrine is effectively self-executing and
renders contract clauses applicable by operation of law solely on the
basis of the underlying requirement that they be inserted into covered
contracts. The doctrine contains no specific mechanism through which
the government can limit its application to avoid any unexpected or
unjust results--other than simply deciding not to raise it as a defense
or affirmative argument in litigation. The proposed provision here at
Sec. 5.5(e), on the other hand, would pair the enactment of the
operation-of-law language with the traditional authority of the
Administrator to waive retroactive enforcement or grant a variance,
tolerance, or exemption from the regulatory requirement under 29 CFR
1.6(f) and 5.14, which the Department believes will foster a more
orderly and predictable process and reduce the likelihood of any
unintended consequences.
In the NPRM, the Department also discussed whether it was necessary
or advisable to create a different procedure in which the operation-of-
law rule would only become effective after a determination by the
Administrator or a contracting agency that a contract was in fact
covered. While the Department stated that it did not believe that such
an approach was necessary, it nonetheless sought comment regarding this
potential alternative.
(C) Discussion of Comments
(1) Sec. 5.5(e) and Operation of Law
Many commenters expressed support for the operation-of-law proposal
at Sec. 5.5(e) on the basis that it would be protective of workers.
The LCCHR and other civil rights and employee advocacy organizations
supported the proposal, stating that under the status quo, workers on
covered projects too often do not receive DBRA-required prevailing
wages ``on time or at all.'' Several unions strongly supported the
proposal because it would ensure that, as UBC commented, the burden of
``intentional or mistaken omissions'' would not be placed ``on the
backs of construction workers.'' The FFC and the NCDCL wrote that
technicalities or accidental omissions should not prevent
[[Page 57664]]
workers from ``receiving the protection of the DBRA and being paid the
prevailing wage.''
Various commenters emphasized other positive aspects of the
proposal. The III-FFC stated that the approach will streamline
enforcement. SMACNA noted that the compensation provision allows a
contractor to rely on an initial determination that the DBA does not
apply or a wage determination with lower rates applies. Similarly,
LCCHR noted that the provision is more favorable to contractors than
traditional operation-of-law doctrine because it provides reimbursement
to prime contractors for any increase of wages that results from its
invocation. Furthermore, LCCHR added that the provision's application
only to prime contracts, and not subcontracts, reflects a targeted
approach. This is appropriate, they stated, because prime contractors
``are frequently repeat recipients of federal funds, engage directly
with the contracting agency, and may reasonably be expected to be aware
of generally applicable legal requirements, such as the DBRA.''
Several commenters, including AFP-I4AW, ABC, CC&M, IEC, the SBA
Office of Advocacy, and the group of U.S. Senators, opposed the
operation-of-law proposal, arguing that it does not give contractors
sufficient notice of the applicability of DBA requirements. IEC and the
group of U.S. Senators asserted that a lack of notice is not consistent
with basic contract and procedural due process principles. AFP-I4AW
claimed that ``without direct contractual notice to contractors, the
risk of unknowing violations will abound,'' and stressed the ``risk of
inadvertent and completely avoidable noncompliance.'' And CC&M asserted
that sometimes a local agency does not inform a contractor that Federal
funds are being used on a particular project.
Some commenters expressed concern that the operation-of-law
provision would increase costs to contractors, and that those costs in
turn could be passed on to the government. IEC, for example, asserted
that the provision would lead to higher costs through two routes:
first, uncertainty could result in contractors opting out of DBA-
covered work, resulting in less competition and thus, higher prices;
and second, through contractors ``hedging'' about DBA coverage by
``submitting bids that account for the DBA, when it is in fact not
covered, but still placing these added costs onto the taxpayer.'' IEC
also contended that ``contractors would have to track all the different
regulatory changes (wage rates) from location,'' which would increase
their cost of compliance. AFP-I4AW and two partners from the law firm
Wiley Rein LLP expressed concern that the proposal could lead to
increased litigation, with associated costs for contractors.\252\ ABC
and the SBA Office of Advocacy expressed concern about costs and
burdens on subcontractors.
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\252\ The Wiley Rein partners also expressed concern about how
the operation-of-law provision would function in contracts that may
be jointly covered by both the DBA and the SCA.
---------------------------------------------------------------------------
The Wiley Rein partners and the group of U.S. Senators expressed
concern that the provision requiring compensation for contractors would
not work as proposed. The Wiley Rein partners stated that contracting
officers might simply refuse to provide an equitable adjustment,
notwithstanding the express requirement in Sec. 5.5(e). The result
could be unreimbursed cost increases ``and related adverse effects.''
The Senators suggested that agencies might ``use the threat of refusing
to award contract bids in the future'' in order to pressure contractors
not to seek compensation. CC&M stated that it is unfair for a
contracting agency to transfer liability to a contractor when it is the
agency that failed to meet its obligations.
A few commenters expressed concern that the Department lacks the
authority to implement the proposed rule. The FTBA noted that the text
of the DBA explicitly requires contracting agencies to insert the
contract clauses in covered contracts. Given this statutory language,
the comment asserted, ``it is within the sole power and domain of the
federal courts, not the DOL as a regulatory agency, to make any
determination that the DBA requirements are applicable by operation of
law.'' AFP-I4AW argued that the there is no ``legal justification'' for
the proposal because the statute requires the government to include the
proper clauses in the contract. The comment from the group of U.S.
Senators stated that the statute meant to place the burden on procuring
agencies, not contractors.
Commenters disagreed about the effect of the Supreme Court's
decision in University Research Ass'n v. Coutu, 450 U.S. 754 (1981),
and the state of the law on the Christian doctrine. The WileyRein
partners noted the Court's statement in the Coutu decision that the DBA
is ``not self-executing.'' See also id. at 784 n.38. Accordingly, the
partners expressed doubt that the Department can ``give away'' its
interpretive authority by allowing arbitrators, courts, or other
administrative agencies to make determinations about whether the DBA
should be found to be incorporated by operation of law in a given
contract.
The FTBA and the Wiley Rein partners argued that the Department had
read too much into Federal Circuit decisions discussing the Christian
doctrine. The Wiley Rein partners suggested that Coutu and Bellsouth
Communications Systems, ASBCA No. 45955, 94-3 BCA ] 27231, a subsequent
decision issued by the Armed Services Board of Contract Appeals,
undermine the significance of the Federal Circuit's decision about the
Miller Act in K-Con, 908 F.3d at 724-26. In addition, both the FTBA and
the Wiley Rein partners stated the Department had overread the Federal
Circuit's decision in Call Henry, 855 F.3d at 1351 n.1, because, among
other reasons, that decision involved a situation in which the core SCA
clauses had in fact been incorporated into the contract.
On the other hand, the LCCHR and other civil rights and worker
advocacy groups noted that multiple decisions after Coutu have stated
that the DBA contract clauses may be effective by operation of law.
See, e.g., United States ex rel. D.L.I. Inc. v. Allegheny Jefferson
Millwork, LLC, 540 F. Supp. 2d 165, 176 (D.D.C. 2008) (``When such
provisions are omitted from a prime contract, they do become part of
the contract by operation of law, and the prime contractor is charged
with constructive knowledge of Davis-Bacon's requirements.''); BUI
Constr. Co. & Bldg. Supply, ASBCA No. 28707, 84-1 B.C.A. ] 17183
(citing G.L. Christian, 312 F.2d at 418). LCCHR noted that these
decisions were issued after Coutu, which suggests that Coutu imposes no
bar to the proposed rule.
The Wiley Rein partners made several recommendations in their
comment. They recommended that instead of the Department's current
proposal, the Department should adapt the SCA regulation codified at 29
CFR 4.5(c) for use in the DBRA rule. Section 4.5(c) instructs
contracting agencies to add omitted SCA requirements to contracts after
award by modification but does not make them effective by operation of
law. The partners stated that this approach would reduce the risk that
contractors would not be made whole for increased costs, while still
addressing the Department's enforcement concerns. They suggested that
the SCA post-award modification provision has been time-tested because
it was implemented many years ago. See 48 FR 49736, 49766 (Oct. 27,
1983).
The Wiley Rein partners also made two suggestions in the
alternative. First, if their recommendation to adapt the SCA regulation
is declined, the
[[Page 57665]]
Department should instead finalize the alternative option discussed in
the NPRM to require that the operation-of-law provision at Sec. 5.5(e)
be effective only after a determination by the contracting agency or
the Department that the DBRA applies to the contract at issue. The
partners stated that this option is consistent with the Christian
doctrine, ``comports with existing caselaw,'' and offers certain
practical benefits as well.\253\ The Wiley Rein partners also suggested
that the Department should defer the effective date for the operation-
of-law provision until the FAR is updated to expressly require
equitable adjustments in these circumstances.
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\253\ Conversely, two other commenters, UBC and the III-FFC,
stated that the Department's proposed rule as written was superior
to the alternative option in which the DBA provisions would only be
added by operation of law after a determination by the
Administrator.
---------------------------------------------------------------------------
A few other commenters requested clarifications or made
suggestions. AGC stated that the Department ``has always maintained
that the DBA clauses required by the regulation are applicable by
operation of law.'' They asserted, however, that this has never been
``official,'' and they noted that the Department's practice is to
require retroactive incorporation of contract clauses and appropriate
wage determinations into a contract before enforcement. AGC
acknowledged the language in the proposal that would require
compensation for contractors where the operation-of-law provision is
invoked but asked for ``further clarifications'' because ``[i]t is
absolutely necessary that prime contractors be compensated for any
increased costs caused by a contracting agency failure.'' The COSCDA
similarly agreed that the Department should take actions to secure
adequate compensation for workers in a timely manner, but it stated
that proposals to do so should not impose additional costs on
contractors or program administrators. CC&M suggested that when
compensation is provided under the proposal, agencies should be
required to pay the contractor ``150% of the delta between what the
contractor paid and the amount that should have been paid,'' to
penalize the agency for its error, and that withholding or cross-
withholding for violations based on operation of law should not be
permitted unless such a rule is implemented.
Lastly, a number of union and contractor association commenters
expressed general support for the provision ensuring that DBA
provisions are incorporated by ``operation of law.'' Those commenters
included the Alaska District Council of Laborers, Bricklayers & Allied
Craftworkers Local #1, LIUNA, LIUNA Local 341, LIUNA Local 942, the
Massachusetts Building Trades Unions, NABTU, the Southern Nevada
Building Trades Unions (SNBTU), the WA BCTC, SMACNA, and CEA.
The Department considered the comments submitted regarding the
operation-of-law provision at Sec. 5.5(e) and agrees with those
commenters that supported the implementation of the provision as
proposed in the NPRM. Commenters noted that failures by contracting
agencies to properly incorporate the DBRA contract clauses and wage
determinations have significant consequences for the workers that the
DBA and Related Acts were enacted to protect. For example, the comment
from LCCHR and other civil rights and worker advocacy organizations
cited a news article that discussed similar problems occurring during
the implementation of the 2009 Recovery Act. See Ben Penn, ``Labor's
Infrastructure Wins Depend on Avoiding Problems of 2009,'' Bloomberg L.
(Nov. 9, 2021).\254\ According to the article, during the
implementation of the Recovery Act, the Department ``struggled to
secure commitments on worker pay standards from government agencies
that awarded contracts,'' problems ``fueled interagency breakdowns and
debates over whether prevailing wage standards were applicable on
particular projects,'' and ``[u]ltimately, workers paid the price when
Davis-Bacon wasn't applied, lowering their pay.'' Id. As the Department
noted in the NPRM, it is not appropriate for staff at an executive
agency to effectively nullify Congress's intent that Davis-Bacon
standards apply to certain categories of contracts.
---------------------------------------------------------------------------
\254\ Available at: https://news.bloomberglaw.com/daily-labor-report/labors-infrastructure-wins-depend-on-avoiding-problems-of-2009.
---------------------------------------------------------------------------
While the operation-of-law provision addressed an important subset
of enforcement problems, as a practical matter it should not represent
a broad expansion of application of the DBRA. As COSCDA noted in their
comment, the proposal is an ``extension of the retroactive modification
procedures'' that have been in effect in Sec. 1.6 of the regulations
since the 1981-1982 rulemaking. While the Sec. 1.6(f) procedure in the
existing regulations references only wage determinations, the
Department has long interpreted the procedure to also require the
retroactive modification of contracts to include missing contract
clauses themselves. The operation-of-law provision has the effect of
extending the current status quo only to those situations in which a
contract has not been timely modified through the retroactive
modification procedures in Sec. 1.6(f).
MBI, BCCI, PCCA, and several others asserted the proposal would
function by ``essentially eliminating the requirement to publish
specific Davis-Bacon wage determinations in project bid and contract
documents.'' However, this characterization is not accurate. Under the
current procedures, contracting agencies' responsibility to insert
contract clauses and wage determinations has long co-existed with a
post-award modification procedure that allows the government to remedy
any circumstances when those clauses have been omitted. Since the 1981-
1982 rulemaking, Sec. 5.5(a) has required a contracting agency head to
``cause or require the contracting officer to insert'' the required
contract clauses into any covered contracts. 29 CFR 5.5(a). Likewise,
Sec. 5.6(a)(1)(i) has stated that the Federal agency is responsible
for ``ascertain[ing] whether the clauses required by Sec. 5.5 and the
appropriate wage determination(s) have been incorporated'' into covered
contracts. Id. Sec. 5.6.
The proposed operation-of-law proposal is not significantly
different in this respect from the current incorporation and
enforcement procedures. Contrary to the concerns of MBI and other
commenters, Sec. 5.5(a) in the final rule continues to require
contracting agencies to insert the contract clauses in full into
covered contracts, although the Department has also added language to
Sec. 5.5(a) and (b) to clarify that the FAR permits incorporation by
reference. The contract clause at Sec. 5.5(a)(1) continues to
contemplate that, for non-FAR contracts, the applicable wage
determinations ``will be attached hereto and made a part thereof.''
These requirements are reinforced by practical consequences. The new
provision at Sec. 5.5(e) requires that contracting agencies compensate
contractors for any resulting increases in wages when the agency fails
to incorporate the contract clauses and wage determinations and those
clauses or wage determinations are subsequently incorporated into the
contract through the operation-of-law provision. It is therefore not
the case, as the commenters contended, that this rule eliminates
contracting agencies' obligations to include wage determinations in
covered contracts.
Given current enforcement procedures already require agencies to
incorporate omitted contract clauses and require compensation from
contracting agencies in those
[[Page 57666]]
circumstances, it is unlikely that the operation-of-law provision will
materially increase overall costs to contractors or the government. In
the individual cases in which the provision ultimately must be invoked,
the costs will be borne by the government, and not the contractor,
because the operation-of-law provision at Sec. 5.5(e) requires
agencies to compensate a prime contractor for any increases in wages.
However, in such cases, the operation-of-law provision should increase
efficiency and reduce administrative costs for both contracting
agencies and the Department. It will reduce the need for extended
negotiations about retroactive modification. It also may in some
circumstances reduce litigation costs by reducing or eliminating
disputes about the method and timing of modification. The existence of
the compensation provision significantly reduces the potential that
CC&M identified of contractors being required to pay the price for
errors by contracting agencies.
The Department also is not persuaded by comments from IEC and
others that the operation-of-law provision will increase contractors'
general compliance costs because contractors will have to newly track
coverage provisions or may prophylactically apply Davis-Bacon wages
even where they do not apply. The Department already interprets the
DBRA to require employers to take affirmative steps to ensure that they
are in compliance. See, e.g., Coleman Construction Co., ARB No. 15-002,
2016 WL 4238468, at *6 (holding that ``[t]he law is clear that, if a
contract subject to Davis-Bacon lacks the wage determination, it is the
employer's obligation . . . to get it''). And, the Department's current
application of Sec. 1.6(f) provides similar incentives and
consequences as will the operation-of-law provision. As the comment
from LCCHR and other civil rights and employee advocacy organizations
noted, trade publications already advise contractors to be proactive in
determining whether a project is covered.\255\ Because prime
contractors are already monitoring DBRA coverage, the Department
believes any increased compliance burdens due to this change will be
minimal and are outweighed by the Department's goal of streamlining
coverage determinations, ensuring effective enforcement, and reducing
economic hardship to workers caused by delays in receiving backpay.
---------------------------------------------------------------------------
\255\ See Kim Slowey, ``The Dotted Line: Beefing up Davis-Bacon
compliance,'' Construction Dive (Mar. 30, 2021), https://www.constructiondive.com/news/the-dotted-line-beefing-up-davis-bacon-compliance/597398.
---------------------------------------------------------------------------
The Department has also considered specific concerns raised by ABC
and the SBA Office of Advocacy about the effects on subcontractors of
the operation-of-law provision. ABC stated that the result of the
operation-of-law provision would be to hold subcontractors (as well as
prime contractors) responsible for DBRA violations without notice. The
SBA Office of Advocacy stated that small subcontractors are less
equipped to absorb withholding on a contract. As the Department
explained in the NPRM, however, Sec. 5.5(e) limits the reach of the
operation-of-law provision to prime contractors only, rather than
including subcontractors. Accordingly, if neither a prime contract nor
a subcontract thereunder references the DBA, the Department would not
hold a subcontractor liable for unpaid back wages under Sec. 5.5(e).
The Department recognizes that there may still be residual effects on a
subcontractor where the operation-of-law provision is invoked and funds
are withheld from a prime contractor to ensure that workers of a
subcontractor are paid the required prevailing wages. In such a
situation, it is possible the prime contractor might in turn delay in
paying its subcontractor in full as a result. However, this
circumstance is not materially different than any other enforcement
action that involves withholding, except that there is a provision
requiring compensation that should make the effects of any withholding
temporary. Moreover, because the operation-of-law provision is likely
to be invoked in only a small portion of overall enforcement actions,
the Department believes that the additional impact of such actions on
subcontractors will be minimal. The Department thus has concluded that
the final rule's limited effects on subcontractors are outweighed by
the Department's goal of streamlining and ensuring the effectiveness of
enforcement.
The Department also disagrees with those commenters that argued
that the proposal does not give contractors sufficient notice of the
applicability of DBA requirements. As noted in the NPRM, those that
contract with the government are charged with having ``knowledge of
published regulations.'' PCA Health Plans of Texas, 191 F.3d at 1356
(citing Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384-85
(1947)). ``[T]he appearance of rules and regulations in the Federal
Register gives legal notice of their contents.'' Merrill, 332 U.S. at
384-385. Under the Department's final rule, contractors will be put on
notice, through the language of Sec. 5.5(e), that the DBRA
requirements are effective by operation of law, regardless of whether
they have been wrongly omitted from a contract. Section 1.6(b)(2) also
provides notice that a contractor has an ``affirmative obligation to
ensure that its pay practices are in compliance with the Davis-Bacon
Act labor standards.'' Further, any contractor can seek guidance from
the Department prior to contract award regarding whether the DBA
provisions should apply to a contract. See 29 CFR 5.13. These
regulations provide notice to prime contractors of the potential that
DBRA contract clauses may be effective by operation of law. For similar
reasons, the Department disagrees with the comments from IEC and the
group of U.S. Senators that the proposal does not comport with
procedural due process.\256\
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\256\ In addition to the notice provided by the regulation
itself, contractors are provided due process through the
administrative procedures that allow contractors to challenge a
ruling by the Department that a contract is covered by the DBRA or
that back wages are owed. See generally 29 CFR 5.11.
---------------------------------------------------------------------------
In the NPRM, the Department provided a review of legal
considerations regarding the application of the operation-of-law
provision. The commenters suggesting that the statute does not permit
the provision, or, as the AFP-I4AW argued, that the Department lacked a
``legal justification,'' largely did not engage with that reasoning in
the NPRM. The group of U.S. Senators, for example, stated that the
statute meant to place the burden on procuring agencies, not
contractors. This comment, however, did not acknowledge that the
compensation provision in the operation-of-law proposal does in
practice place the ultimate responsibility on the contracting agency
rather than contractors.
The commenters raising legal questions about the operation-of-law
proposal based their arguments largely on the DBA's express requirement
that contracting agencies incorporate the contract clauses into covered
contracts. The commenters suggested that this language prevents the
Department from enforcing the Act where the clause is not included. The
mandatory nature of this statutory requirement, however, is itself the
basis for the operation-of-law provision. See K-Con, 908 F.3d at 724.
Where Congress has expressly stated that a contract clause must be
included in certain types of contracts, that is precisely where it is
not appropriate to allow a contracting agency to effectively nullify
the statutory command by failing
[[Page 57667]]
to act. See S.J. Amoroso Const. Co. v. United States, 12 F.3d 1072,
1075 (Fed. Cir. 1993) (discussing G.L. Christian & Assocs., 312 F.2d at
426).\257\ As the Court of Federal Claims explained in denying
rehearing on the original decision in G.L. Christian & Assocs., the
animating principle is that ``[o]bligatory Congressional enactments are
held to govern federal contracts because there is a need to guard the
dominant legislative policy against ad hoc encroachment or dispensation
by the executive.'' G.L. Christian & Assocs. v. United States, 320 F.2d
345, 350-51 (Ct. Cl. 1963) (denying reconsideration). Therefore, the
Department does not interpret the Davis-Bacon Act's requirement that
agencies include a mandatory contract clause in covered contracts to
preclude the proposed operation-of-law provision as designed.\258\
---------------------------------------------------------------------------
\257\ Like the K-Con decision, the S.J. Amoroso Construction Co.
matter also involved the application of statutory coverage language
which mirrors the text of the DBA. Compare 41 U.S.C. 8303(a)
(formerly cited as 41 U.S.C. 10b) (requiring, under the 1933 Buy
America Act, that ``[e]very contract for the construction,
alteration, or repair of any public building or public work in the
United States . . . shall contain'' certain contract provisions)
with 40 U.S.C. 3142(a) (requiring, under the DBA, that ``[e]very
contract . . . for construction, alteration, or repair . . . of
public building or public works . . . shall contain a provision''
setting prevailing wages).
\258\ The Department disagrees with the FTBA that this statutory
language gives Federal courts ``sole power and domain'' to determine
whether any DBA requirements are applicable by operation of law.
While the Christian doctrine is a judicially-made rule, the concept
of ``operation of law'' is not limited to judge-made rules. See
Operation of Law, Black's Law Dictionary (11th ed. 2019) (defining
the concept as ``[t]he means by which a right or a liability is
created for a party regardless of the party's actual intent'').
Likewise, the potential for such a judicially imposed outcome does
not bar administrative agencies from identifying specific
circumstances where a rule will be effective by operation of law.
See, e.g., 19 CFR 111.45(b) (prescribing that if a customs broker
fails to pay user fee, permit is revoked by operation of law); 29
CFR 38.25 (prescribing that a grant applicant's nondiscrimination
assurance is considered incorporated by operation of law into grants
and other instruments under the Workforce Innovation and Opportunity
Act); 49 CFR 29.207 (prescribing that if a Tribe submits a final
offer to the Department of Transportation to resolve a dispute and
the Department takes no action with the 45-day review period, the
offer is accepted by operation of law).
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The Department also disagrees with FTBA and the Wiley Rein partners
that the NPRM read too much into Call Henry, Inc. v. United States, 855
F.3d 1348, 1351 n.1 (Fed. Cir. 2017). The FTBA stated that the Call
Henry decision only discussed operation of law with regard to section
4(c) of the SCA, under which a predecessor contractor's CBA is
recognized by operation of law as the contract wage determination. That
observation is not accurate. While the opinion also discusses section
4(c), the Department's citation was to the opinion's separate
discussion of the SCA price adjustment clauses. See Call Henry, 855
F.3d at 1351 n.1 (Fed. Cir. 2017). There, the Federal Circuit noted
that the appropriate SCA price adjustment clause at 48 CFR 52.222-43
had not been included in the contract at issue in that case, but
explained that ``[p]ursuant to the Christian doctrine, the mandatory
SCA clauses applicable to this contract are incorporated by reference,
as those clauses reflect congressionally enacted, deeply ingrained
procurement policy.'' Id. (citing G.L. Christian & Assocs., 312 F.2d at
426). That the Federal Circuit found the SCA price adjustment clauses
satisfy those elements of the Christian doctrine is certainly relevant
to whether it is justifiable to require the DBRA clauses to be
effective by operation of law as well.
The Wiley Rein partners also questioned whether the Supreme Court's
decision in Coutu casts doubt on the Department's reference to K-Con
and the Christian doctrine. As noted in the NPRM, before proposing this
new regulatory provision, the Department considered the implications of
the Supreme Court's decision in Coutu. In that case, the Court held
that there was no implied private right of action for workers to sue
under the Davis-Bacon Act--at least when the contract clauses were not
included in the contract. Coutu, 450 U.S. at 768-69 & nn.17, 19.
Although not the focus of the decision, the Court also stated in dicta
that the workers in that case could not rely on the Christian doctrine
to read the missing DBA contract clause into the contract. Id. at 784 &
n.38.\259\ For the reasons discussed in the NPRM and below, however,
the Department has concluded that the operation-of-law provision in the
final rule is consistent with Coutu and that the distinctions between
the final rule and the Christian doctrine address the concerns that
animated the Coutu Court in that case.
---------------------------------------------------------------------------
\259\ See Steven Feldman, 1 Government Contract Awards:
Negotiation and Sealed Bidding Sec. 1:7 n.16 (rev. Oct. 2022)
(describing the discussion in Coutu as ``infrequently recognized
dictum'').
---------------------------------------------------------------------------
One of the Court's fundamental concerns in Coutu was that an
implied private right of action could allow parties to evade the
Department's review of whether a contract should be covered by the Act.
The Court noted that there was at the time ``no administrative
procedure that expressly provides review of a coverage determination
after the contract has been let.'' 450 U.S. at 761 n.9.\260\ If an
implied private right of action existed under those circumstances,
private parties could effectively avoid raising any questions about
coverage with the Department or with the contracting agency--and
instead bring them directly to a Federal court to second-guess the
administrative determinations. Id. at 783-84.
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\260\ Section 1.6(f) did not go into effect until Apr. 29, 1983,
nearly 2 years after the Coutu decision. See 48 FR 19532. Moreover,
although the Department has used Sec. 1.6(f) to address post-award
coverage determinations, as noted here, the language of that
paragraph references wage determinations and does not explicitly
address the omission of required contract clauses. The Department
now seeks to remedy that ambiguity in Sec. 1.6(f) by adding similar
language to Sec. 5.6, as discussed below, in addition to the
proposed operation-of-law language at Sec. 5.5(e).
---------------------------------------------------------------------------
Another of the Court's concerns was that such an implied private
right of action would undermine Federal contractors' reliance on the
wage determinations that the Federal government had (or had not)
incorporated into bid specifications. The Supreme Court noted that one
of the purposes of the 1935 amendments to the DBA was to ensure that
contractors could rely on the predetermination of wage rates that apply
to each contract. 450 U.S. at 776. If, after a contract had already
been awarded, a court could find that a higher prevailing wage applied
to that contract than had been previously determined, the contractor
could lose money because of its mistaken reliance on the prior rates--
all of which would undermine Congress's intent. Id. at 776-77.
The operation-of-law procedure in this final rule alleviates both
of these concerns. As noted, the procedure differs from the Christian
doctrine because--like under the existing regulation at Sec. 1.6(f)--
contractors will be compensated for any increase in costs caused by the
government's failure to properly incorporate the clauses or wage
determinations. The proposed procedure therefore will not undermine
contractors' reliance on an initial determination by the contracting
agency that the DBRA did not apply or that a wage determination with
lower rates applied.\261\ In light of the clear rule
[[Page 57668]]
requiring compensation, the Department is not persuaded by the concerns
raised by commenters that contracting agencies might simply ignore the
compensation requirement.\262\
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\261\ For the same reason, the BellSouth case cited by the Wiley
Rein partners does not undermine the Department's logic. In that
case, after the government unilaterally modified a contract pursuant
to 29 CFR 1.6(f), the government denied part of a request for
compensation, and attempted to use the Christian doctrine to
circumvent the requirement for compensation in Sec. 1.6(f) and the
applicable FAR provisions. ASBCA No. 45955, Sept. 27, 1994, 94-3 BCA
] 27231. Under the proposed operation-of-law provision in Sec.
5.5(e), to the contrary, the Department is specifying that when the
contract clauses are effective by operation of law, contractors will
be compensated ``for any resulting increase in wages in accordance
with applicable law.''
\262\ The Department is not persuaded by the speculation from
the group of U.S. Senators that contracting agencies might ``use the
threat of refusing to award contracts in the future'' in order to
pressure contractors not to seek compensation. The Department is not
aware of any basis on which a contracting agency would be permitted
to deny future awards because a contractor sought reimbursement
under that regulation that expressly provides for such compensation.
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Nor does the operation-of-law rule risk creating an end-run around
the administrative procedures set up by contracting agencies and the
Department pursuant to Reorganization Plan No. 14. Instead, the
provision will function as part of an administrative structure
implemented by the Administrator and subject to the Administrator's
decision to grant a variance, tolerance, or exemption. Its enactment
should not affect one way or another whether any implied private right
of action exists under the statute. Executive Order 11246 provides a
helpful comparator. In 1968, the Department promulgated the regulation
clarifying that the Executive Order's equal opportunity contract clause
would be effective by ``operation of the Order'' regardless of whether
it is physically incorporated into the contract. 41 CFR 60-1.4(e). That
regulation was upheld, and the Christian doctrine was also found to
apply to the required equal opportunity contract clause. See Miss.
Power & Light, 638 F.2d at 905-06. Nonetheless, courts have widely held
that E.O. 11246 does not convey an implied private right of action.
See, e.g., Utley v. Varian Assocs., Inc., 811 F.2d 1279, 1288 (9th Cir.
1987).
The Department has also considered whether the operation-of-law
provision will lead to an increase in bid protest litigation or expand
the authority of the Court of Federal Claims or other contracting
appeal tribunals to develop their own case law on the application of
the DBRA without the input of the Department. In exploring this
question, the Department considered proposing an alternative procedure
in which the operation-of-law rule would only become effective after a
determination by the Administrator or a contracting agency that a
contract was in fact covered. The Department, however, does not believe
that such an approach is necessary because both the GAO and the Federal
Circuit maintain strict waiver rules that prohibit post-award bid
protests based on errors or ambiguities in the solicitation. See NCS/
EML JV, LLC, B-412277, 2016 WL 335854, at *8 n.10 (Comp. Gen. Jan. 14,
2016) (collecting GAO decisions); Blue & Gold Fleet, L.P. v. United
States, 492 F.3d 1308, 1312-13 (Fed. Cir. 2007).\263\
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\263\ In Blue & Gold, the National Park Service failed to
include the SCA contract clauses in a contract that the Department
of Labor later concluded was covered by the Act. The Federal Circuit
denied the bid protest from a losing bidder because ``a party who
has the opportunity to object to the terms of a government
solicitation containing a patent error and fails to do so prior to
the close of the bidding process waives its ability to raise the
same objection subsequently in a bid protest action in the Court of
Federal Claims.'' 492 F.3d at 1313.
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The operation-of-law provision as enacted in this final rule also
will not affect the well-settled case law in the Court of Federal
Claims--developed after the Coutu decision--that only the Department of
Labor has jurisdiction to resolve disputes arising out of the labor
standards provisions of the contract. As part of the post-Coutu 1982
final rule, the Department enacted a provision at 29 CFR 5.5(a)(9) that
requires a disputes clause with that jurisdictional limitation to be
included in all DBRA-covered contracts. See 47 FR 23660-61 (final rule
addressing comments received on the proposal). The labor standards
disputes clause creates an exception to the Contract Disputes Act of
1974 and effectively bars the Court of Federal Claims from deciding
substantive matters related to the Davis-Bacon Act and Related Acts.
See, e.g., Emerald Maint., Inc. v. United States, 925 F.2d 1425, 1428-
29 (Fed. Cir. 1991). Under the operation-of-law provision, the disputes
clause at Sec. 5.5(a)(9) will continue to be effective even when it
has been omitted from a contract because the language of the operation-
of-law provision applies the principle to all of the required contract
clauses in Sec. 5.5(a)--including Sec. 5.5(a)(9). As a result, under
the operation-of-law provision, disputes regarding DBRA coverage or
other related matters arising under Sec. 5.5(a)(9) should continue to
be heard only through the Department's administrative process instead
of or prior to any judicial review in the Court of Federal Claims, and
there is no reason to believe that the implementation of the operation-
of-law provision would lead to a parallel body of case law in that
venue.
The Department has also considered the Wiley Rein partners' concern
that the operation-of-law provision could result in litigation pursuant
to the False Claims Act (FCA). See 31 U.S.C. 3729 et seq. The FCA,
which applies to claims submitted by contractors for payment under the
DBRA, provides an important avenue for private whistleblowers to assist
the government in recovering funds that have been paid out as a result
of false or fraudulent claims. See, e.g., United States ex rel. Int'l
Bhd. of Elec. Workers Loc. 98 v. Farfield Co., 5 F.4th 315, 343 (3d
Cir. 2021). To be actionable, the FCA requires false claims to be
``material'' to the Government's decision to make payments in response
to the claims. Id. at 342 (citing 31 U.S.C. 3729(a)(1)(B)). Where a DBA
contractor fails to comply with the DBRA contract clauses, the
regulations require contracting agencies to suspend payments to the
contractor. See 29 CFR 5.9 (stating in the event of a contractor's
compliance failure, the government ``shall'' take action if necessary
to suspend payments). And where a contractor knowingly misrepresents
information on the certified payroll it must submit, it subjects itself
to potential criminal penalties for false statements (which are
referenced on the certified payroll forms themselves) and
debarment.\264\
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\264\ The Department pursues recovery (and suspension or
withholding as necessary) regardless of the amount of unpaid wages.
Davis-Bacon enforcement efforts at the Department in the last decade
have resulted in the recovery of more than $229 million in back
wages for over 76,000 workers. see 2020 GAO Report, at 39, supra
note 14. This recovery occurred across 14,639 compliance
determinations, meaning that the average recovery in a compliance
investigation was under $16,000.
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The circumstances may be different, however, where no certified
payroll has been submitted because the contract clause has been omitted
entirely from the contract by the contracting agency. As noted in the
NPRM, debarment requires some degree of intent, so it would generally
not be appropriate to debar a contractor for violations where the
contracting agency omitted the contract clause and the clause was
subsequently incorporated retroactively or found to be effective by
operation of law. The FCA also has a scienter requirement that, like
the DBRA debarment standard, requires a level of culpability beyond
negligence. See United States v. Comstor Corp., 308 F. Supp. 3d 56, 88
(D.D.C. 2018). Whether the FCA scienter requirement can be satisfied
will depend on the facts and circumstances of any individual case. For
example, where a contracting agency omits the contract clauses based on
case law or guidance from the Department that is public or shared with
the contractor, a relator would be unlikely to be able to satisfy the
FCA's scienter requirement for the same reasons that debarment would
generally not be appropriate. For these reasons, there is no certainty
that the operation-of-law provision will lead to a
[[Page 57669]]
significant expansion of FCA disputes.\265\
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\265\ AFP-I4AW also expressed a generalized concern about
increased litigation from the operation-of-law provision. As there
is no certainty that the provision will increase bid protests,
claims in the Court of Federal Claims, or FCA litigation, the
Department does not agree that such generalized concern is a
persuasive reason to decline to adopt the proposal.
---------------------------------------------------------------------------
Finally, the Wiley Rein partners' concern about arbitrators
potentially deciding Davis-Bacon coverage issues does not warrant a
different approach. The Department believes it is unlikely that
arbitrators will be asked to consider Davis-Bacon questions with any
frequency. When a dispute turns on Davis-Bacon determinations that
implicate the Department's technical expertise, arbitration is not
appropriate. See IBEW Local 113 v. T&H Services, 8 F.4th 950, 962-63
(10th Cir. 2021). Moreover, mandatory pre-dispute arbitration
agreements neither prevent workers from alerting agencies to potential
violations of the law nor limit agencies' authority to pursue
appropriate enforcement measures in response to worker complaints. See
EEOC v. Waffle House, Inc., 534 U.S. 279, 287 (2002). To the extent
that any arbitrator considers a Davis-Bacon coverage question, however,
it would not run the risk of creating a separate body of law because
arbitration decisions are generally sealed and non-precedential.
Given all of these continued safeguards and considerations, the
Department believes it is not necessary to expressly limit the proposed
operation-of-law provision to be effective only after the Department or
a contracting agency determines that contract clauses or wage
determinations were erroneously omitted, as the Wiley Rein partners
advocated.
The Department also considered the Wiley Rein partners' suggestion
to replace the operation-of-law provision with post-award procedures
similar to the SCA regulation at 29 CFR 4.5(c). The SCA regulation at
Sec. 4.5(c) is similar to the existing DBRA regulation at Sec.
1.6(f). It covers situations where the Department discovers that a
contracting agency made an erroneous determination that the SCA did not
apply to a particular contract and/or failed to include an appropriate
wage determination in the contract. Id. Sec. 4.5(c). In those
situations, the SCA regulation states that the contracting agency has
30 days from the notification by the Department to incorporate the
missing clauses or wage determinations through the exercise of any all
authority that may be needed, including through its authority to pay
any additional costs. Id. It also states that the Department can
require retroactive application. Id. The Wiley Rein partners wrote that
a primary benefit of this proposal would be to avert FCA litigation or
other disputes. For the reasons discussed above, the Department is not
persuaded that the final rule will lead to a significant increase in
FCA or other litigation.
This language from Sec. 4.5(c), moreover, does not fully address
the underlying problems that the Department is seeking to address with
the operation-of-law provision. Section 4.5(c) still leaves the
Department's enforcement efforts dependent on the willingness or
ability of contracting agencies to pursue modification of a contract at
the Department's direction, and the speed with which they accomplish
the necessary modification. While many agencies timely act in response
to the Department's requests under Sec. 4.5(c), the Department has
also experienced many of the same challenges enforcing the SCA under
Sec. 4.5(c) as it has experienced enforcing the DBRA under Sec.
1.6(f). Thus, modeling the updated DBRA post-award modification
regulations based on Sec. 4.5(c) would be an improvement over the
current status quo, but such a rule would not resolve the contract-
modification issues that have motivated the operation-of-law proposal.
While the Department declines to replace the operation-of-law
provision with a Sec. 4.5(c)-type provision, some of the Wiley Rein
partners' animating concerns are nonetheless addressed in the related
aspects of the final rule. For example, for contracts covered by both
the DBA and SCA, the partners stated that their proposal would simplify
contract administration by allowing contracting agencies to be able to
make both DBA and SCA contract modifications in the same contract
modification. Using similar contract-modification procedures for each
Act would allow this. However, the existence of an operation-of-law
provision in the DBRA regulations is not an obstacle to this sort of
coordination. As described in the NPRM, the operation-of-law provision
is intended to work in tandem with the existing wage-determination
modification procedure at Sec. 1.6(f), as well as the new contract-
modification procedure in Sec. 5.6(a)(1)(ii). Thus, notwithstanding an
operation-of-law provision, the Department could still issue a
direction to a contracting agency to incorporate new terms for
application of both the SCA and DBRA in the same contract.
Similarly, the final rule addresses the Wiley Rein partners'
concern about the need for a clear date marking the dividing line
between prospective and retroactive applicability. The language in
Sec. 5.5(e) specifically subjects such a determination to the
Administrator's authority to grant a variance, tolerance, or exemption.
As noted in the NPRM, this includes the authority to limit retroactive
enforcement traditionally exercised under 29 CFR 1.6(f). Thus, when the
Administrator issues a coverage determination pursuant to the
operation-of-law provision, the Administrator will be authorized to
make a decision about the date back to which the retroactive
application will be enforced and the date from which prospective
application is required. Cf. FlightSafety Def. Corp., ARB No. 2022-
0001, slip op. at 16-19 (Feb. 28, 2022) (affirming the Administrator's
determination, in an SCA matter, that under the circumstances of that
case the prospective application of a missing contract clause should
begin at the start of the subsequent Contract Line Item Number period).
This authority should sufficiently allay the Wiley Rein partners'
concerns.
The Department has considered AGC's request for further
clarification regarding the manner in which the compensation
requirement would work. The language of Sec. 5.5(e) requires that
compensation should be made ``in accordance with applicable law.'' As a
general matter, the FAR will provide the applicable law for direct
Federal procurement contracts. The FAR currently includes price
adjustment clauses applicable to different types of Davis-Bacon
contracts. See, e.g., 48 CFR 52.222-30, 52.222-31 and 52.222-32.
Because the FAR and its price-adjustment contract clauses provide
applicable law, the Department does not believe it is appropriate to
adopt CC&M's suggestion to mandate that contractors be reimbursed 150
percent of the difference between current and required wage rates. The
Department also does not believe that it is necessary to penalize
contracting agencies when the compensation provision alone already
provides sufficient incentive to agencies to ensure that contract
clauses and applicable wage determinations are correctly incorporated
into covered contracts.
Finally, the Wiley Rein partners suggested that the Department
should defer the effective date for the operation-of-law provision
until the FAR is updated to expressly require equitable adjustments in
these circumstances. In the DATES section of this final rule, the
Department discusses
[[Page 57670]]
the applicability date of the rule. See also infra section III.C
(``Applicability Date''). The provisions of parts 3 and 5 of the final
rule (including the operation-of-law provisions at Sec. Sec. 3.11(e)
and 5.5(e)) are generally applicable only to contracts entered into
after the effective date of the final rule.
Once the operation-of-law provision at Sec. 5.5(e) is effective
and applicable to a contract, it will require the incorporation as a
matter of law of any omitted contract clauses and wage determinations
that would have been appropriate and necessary to include in the
contract at the time the contract was entered into. Because Sec.
5.5(e) will generally only apply to contracts newly entered into after
the applicability date, the Department would not interpret Sec. 5.5(e)
to require the contract clause provisions as amended in this final rule
to be incorporated by operation of law to replace the contract clauses
that have already been physically incorporated into contracts entered
into before the applicability date. Similarly, Sec. 5.5(e) would not
incorporate the contract clauses into any contract from which the
clauses have been wrongly omitted, unless that contract has been
entered into after the effective date of the final rule. For any
contracts entered into prior to the effective date of the final rule
that are missing required contract clauses or wage determinations, the
Department will seek to address any omissions solely through the
modification provisions in the existing regulation at Sec. 1.6(f).
The Department declines to defer the effective date of the
operation-of-law provision at Sec. 5.5(e) for contracts governed by
the FAR, but has amended Sec. 5.5(e) to clarify how the provision
interacts with the FAR. The final rule clarifies that for contracts
governed by the FAR, the contract clauses that are made effective by
operation of law are the Davis-Bacon contract clauses in the FAR
itself. Accordingly, for any contracts that are entered into after the
effective date of the final rule but before the effective date of any
amendment to the FAR (including an amendment to the required FAR DBRA
contract clauses), Sec. 5.5(e) would incorporate by operation-of-law
the FAR contract clauses that are mandatory under the FAR regulation in
effect at the time the FAR contract was entered into. As a result, it
is not necessary to defer the effective date of Sec. 5.5(e).
The final rule thus adopts the regulatory text of Sec. 5.5(e) as
proposed, with the limited modification discussed above.
(2) Sec. 3.11 Application of Copeland Act Regulations
The Department also proposed a revision to Sec. 3.11 to conform to
the ``operation of law'' provision in Sec. 5.5(e). Section 3.11
currently requires all covered contracts to ``expressly bind the
contractor or subcontractor to comply'' with the applicable regulations
from part 3. 29 CFR 3.11. The existing regulations then reference Sec.
5.5(a)'s longstanding requirement that agency heads require contracting
officers to insert appropriate contract clauses into all covered
contracts. See id. The contract clause at Sec. 5.5(a)(3)(ii) contains
the certified payroll requirements that are derived from and mirror the
requirements in part 3. See section III.B.3.iii.(B).
The proposed new operation-of-law paragraph in Sec. 5.5(e) makes
all of the contract clauses required by Sec. 5.5(a) effective by
operation of law even when they have been wrongly omitted from a
covered contract. Thus, in accordance with Sec. 5.5(e), the
recordkeeping requirements in the contract clause at Sec.
5.5(a)(3)(ii) are made effective by operation of law where necessary.
The Department proposed the amendment to Sec. 3.11 as a conforming
change to provide notice to contractors that the applicable part 3
regulations, required to be included in every contract by that
provision, are effective by operation of law where necessary.
UBC expressed support for the proposed change to Sec. 3.11,
writing that it would improve application and enforcement of the DBRA
standards. AFPF-I4AW opposed the operation-of-law addition to Sec.
3.11, arguing that the change will lead to greater litigation and
wasted resources. The Department has considered these comments, which
parallel the comments received on Sec. 5.5(e). The Department believes
that the proposed language in Sec. 3.11 provides appropriate
additional notice that the regulations in part 3 govern DBRA-covered
contracts whether or not their requirements have been physically
included through a contract clause or otherwise. For the same reasons
articulated above with regard to Sec. 5.5(e), the Department does not
believe that the operation-of-law provision will significantly increase
litigation or otherwise waste resources. By making required contract
clauses effective by operation of law, the Department will avoid the
enforcement challenges that have arisen in the application of the
current contract-modification provision at Sec. 1.6(f). The final rule
therefore adopts the language of Sec. 3.11 as proposed.
(3) Sec. 5.5(d) Incorporation of Contract Clauses and Wage
Determinations by Reference
The Department proposed a new provision at Sec. 5.5(d) to clarify
that the clauses and wage determinations are equally effective if they
are incorporated by reference, notwithstanding the requirement in Sec.
5.5(a) that contracting agencies insert contract clauses ``in full''
into non-FAR contracts and the language of the contract clause at Sec.
5.5(a)(1)(i) that specifies that the applicable wage determination ``is
attached'' to such contracts. As the Department noted in the NPRM, this
follows from the FAR and the common law of contract. Under the FAR, a
contract that contains a provision expressly incorporating the clauses
and the applicable wage determination by reference may be tantamount to
insertion in full. See 48 CFR 52.107, 52.252-2. And, as a general
matter, the terms of a document appropriately incorporated by reference
into a contract effectively bind the parties to that contract. See 11
Williston on Contracts section 30:25 (4th ed.) (``Interpretation of
several connected writings'').
Only one commenter, CC&M, referenced this proposed language. In the
comment, CC&M stated general opposition to the idea that incorporation
by reference can be just as effective as inserting the full Davis-Bacon
contract section. The comment did not address the common use of
incorporation by reference in the FAR or in the common law. The
Department agrees with CC&M that it is preferable for contracting
agencies to insert contract clauses and wage determinations in full
into covered contracts. That is why the Department maintained
instructions to contracting agencies in Sec. 5.5(a) that they continue
to be required to insert the contract clauses ``in full'' into non-FAR-
covered contracts.\266\ The Department does not agree, however, that
the failure by a contracting agency to do so should result in a
disregard of the statutory command that a contract should be covered
and the workers on the contract paid a prevailing wage. This is
particularly true where the contract includes express language making
compliance with the DBRA a term of the agreement. In such a situation,
it generally would be sufficient under the common law to find the
missing contract clauses and wage determinations to be effective
through incorporation by reference. The same
[[Page 57671]]
should be true under a statute that has the recognized purpose of
protecting workers and ensuring that they are paid prevailing wages.
See Binghamton Constr. Co., 347 U.S. at 178.
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\266\ The Department, however, has revised its instructions in
Sec. 5.5(a) to reflect that it is FAR convention to incorporate
clauses by reference, as opposed to in full text.
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As the Department explained in the NPRM, these various proposed
parallel regulatory provisions are consistent and work together. They
require the best practice of physical insertion or modification of
contract documents (or, where warranted, incorporation by reference),
so as to provide effective notice to all interested parties, such as
contract assignees, subcontractors, sureties, and employees and their
representatives. At the same time, they create a safety net to ensure
that where any mistakes are made in initial determinations, the
prevailing wage required by statute will still be paid to the laborers
and mechanics on covered projects.
Accordingly, the final rule adopts the language of Sec. 5.5(d) as
proposed.
(4) Sec. 1.6(f) Post-Award Correction of Wage Determinations
In addition to the operation-of-law language at Sec. 5.5(e), the
Department proposed to make several changes to the regulation at Sec.
1.6(f) that contains the current post-award procedure requiring
contracting agencies to incorporate an omitted wage determination.
First, as discussed above in section III.B.1.vi. (Sec. 1.6 Use and
effectiveness of wage determinations), the Department proposed adding
titles to Sec. 1.6(a)-(g) in order to improve readability of the
section as a whole. The proposed title for Sec. 1.6(f) was ``Post-
award determinations and procedures.'' The Department also proposed
dividing Sec. 1.6(f) into multiple paragraphs to improve the
organization and readability of the important rules it articulates.
At the beginning of the section, the Department proposed a new
Sec. 1.6(f)(1), which explains generally that if a contract subject to
the labor standards provisions of the Acts referenced by Sec. 5.1 is
entered into without the correct wage determination(s), the relevant
agency must incorporate the correct wage determination into the
contract or require its incorporation. The Department proposed to add
language to Sec. 1.6(f)(1) expressly providing for an agency to
incorporate the correct wage determination post-award ``upon its own
initiative'' as well as upon the request of the Administrator. The
current version of Sec. 1.6(f) explicitly provides only for a
determination by the Administrator that a correction must be made. Some
contracting agencies had interpreted the existing language as
precluding an action by a contracting agency alone--without action by
the Administrator--to modify an existing contract to incorporate a
correct wage determination. The Department proposed the new language to
clarify that the contracting agency can take such action alone. Where a
contracting agency does intend to take such an action, proposed
language at Sec. 1.6(f)(3)(iii) would require it to notify the
Administrator of the proposed action.
In the proposed reorganization of Sec. 1.6(f), the Department
located the discussion of the Administrator's determination that a
correction is necessary in a new Sec. 1.6(f)(2). The only proposed
change to the language of that paragraph was not substantive. The
current text of Sec. 1.6(f) refers to the action that the
Administrator may take as an action to ``issue a wage determination.''
However, in the majority of cases, where a wage determination is not
included in the contract, the proper action by the Administrator will
not be to issue a new or updated wage determination, as that term is
used in Sec. 1.6(c), but to identify the appropriate existing wage
determination that applies to the contract. Thus, to eliminate any
confusion, the Department proposed to amend the language in this
paragraph to describe the Administrator's action as ``requir[ing] the
agency to incorporate'' the appropriate wage determination. To the
extent that, in an exceptional case, the Department would need to
``issue'' a new project wage determination to be incorporated into the
contract, the proposed new language would require the contracting
agency to incorporate or require the incorporation of that newly issued
wage determination.
The Department also proposed to amend the language in Sec. 1.6(f)
that describes the potential corrective actions that an agency may
take. In a non-substantive change, the Department proposed to refer to
the wage determinations that must be newly incorporated as ``correct''
wage determinations instead of ``valid'' wage determinations. This is
because the major problem addressed in Sec. 1.6(f)--in addition to the
failure to include any wage determination at all--is the use of the
wrong wage determinations. Even while wrong for one contract, a wage
determination may be valid if used on a different contract to which it
properly applies. It is therefore more precise to describe a misused
wage determination as incorrect rather than invalid. The proposed
amendment would also add to the reference in the current regulation at
Sec. 1.6(f) to ``supplemental agreements'' or ``change orders'' as the
methods for modifying contracts post-award to incorporate valid wage
determinations. The Department proposed, in a new Sec. 1.6(f)(3), to
instruct that agencies make such modifications additionally through the
exercise of ``any other authority that may be needed.'' This language
parallels the Department's regulation at 29 CFR 4.5 for similar
circumstances under the SCA.
The Department also proposed to make several changes to Sec.
1.6(f) to clarify that the requirements apply equally to projects
carried out with Federal financial assistance as they do to DBA
projects. The proposed initial paragraph at Sec. 1.6(f)(1) contains
new language that states expressly that where an agency is providing
Federal financial assistance, ``the agency must ensure that the
recipient or sub-recipient of the Federal assistance similarly
incorporates the correct wage determination(s) into its contracts.''
Similarly, the reference to agencies' responsibilities in proposed new
Sec. 1.6(f)(3) requires an agency to terminate and resolicit the
contract or to ``ensure'' the incorporation (in the alternative to
``incorporating'' the correct wage determination itself)--in
recognition that this language applies equally to direct procurement
where the agency is a party to a DBA-covered contract and Related Acts
where the agency must ensure that the relevant State or local agency
incorporates the corrected wage determination into the covered
contract. Finally, the Department also proposed to amend the
requirement that the incorporation should be ``in accordance with
applicable procurement law'' to instead reference ``applicable law.''
This change is intended to recognize that the requirements in Sec. 1.6
apply also to projects executed with Federal financial assistance under
the Related Acts, for which the Federal or State agency's authority may
not be subject to Federal procurement law. None of these proposed
changes represent substantive changes, as the Department has
historically applied Sec. 1.6(f) equally to both DBA and Related Act
projects. See, e.g., City of Ellsworth, ARB No. 14-042, 2016 WL
4238460, at *6-8.
In the new Sec. 1.6(f)(3)(iv), the Department proposed to include
the requirements from the existing regulations that contractors must be
compensated for any change and that the incorporation must be
retroactive to the beginning of the construction. That retroactivity
requirement, however, is amended to include the qualification that the
Administrator may direct otherwise. As noted above, the
[[Page 57672]]
Administrator may make determinations of non-retroactivity on a case-
by-case basis. In addition, consistent with the SCA regulation on post-
award incorporation of wage determinations at 29 CFR 4.5(c), the
Department proposed including language in a new Sec. 1.6(f)(3)(ii) to
require that incorporation of the correct wage determination be
accomplished within 30 days of the Administrator's request, unless the
agency has obtained an extension.
The Department also proposed to include new language at Sec.
1.6(f)(3)(v), applying to Related Acts, instructing that the agency
must suspend further payments or guarantees if the recipient refuses to
incorporate the specified wage determination and that the agency must
promptly refer the dispute to the Administrator for further proceedings
under Sec. 5.13. This language is a clarification and restatement of
the existing enforcement regulation at Sec. 5.6(a)(1), which provides
that no such payment or guarantee shall be made ``unless [the agency]
ensures that the clauses required by Sec. 5.5 and the appropriate wage
determination(s) are incorporated into such contracts.''
In proposed new language at Sec. 1.6(f)(3)(vi), the Department
included additional safeguards for the circumstances in which an agency
does not retroactively incorporate the missing clauses or wage
determinations and instead seeks to terminate the contract. The
proposed language provided that before termination, the agency must
withhold or cross-withhold sufficient funds to remedy any back wage
liability or otherwise identify and obligate sufficient funds through a
termination settlement agreement, bond, or other satisfactory
mechanism. This language is consistent with the existing FAR provision
at 48 CFR 49.112-2(c) that requires contracting officers to ascertain
whether there are any outstanding labor violations and withhold
sufficient funds if possible before forwarding the final payment
voucher. It is also consistent with the language of the template
termination settlement agreements at 48 CFR 49.602-1 and 49.603-3 that
seek to ensure that any termination settlement agreement does not
undermine the government's ability to fully satisfy any outstanding
contractor liabilities under the DBRA or other labor clauses.
Finally, the Department included a proposed provision at Sec.
1.6(f)(4) to clarify that the specific requirements of Sec. 1.6(f) to
physically incorporate the correct wage determination operate in
addition to the proposed requirement in Sec. 5.5(e) that makes the
correct wage determination applicable by operation of law. As discussed
above, such amendment and physical incorporation (including
incorporation by reference) is helpful in order to provide notice to
all interested parties, such as contract assignees, subcontractors,
sureties, and employees and their representatives.
Two contractor associations, CEA and SMACNA, generally expressed
support for the Department's proposed amendments to Sec. 1.6(f). They
noted in particular that the proposed amendments would allow
contracting agencies to incorporate correct wage determinations upon
their own initiative as well as at the request of the Administrator.
These two commenters, along with the UBC, supported the proposed
language at Sec. 1.6(f)(4) that states the operation-of-law provision
at Sec. 5.5(e) would operate in tandem with the requirement that
contracting agencies insert wage determinations into contracts where
they have been omitted.
In contrast, ABC opposed the proposed changes to Sec. 1.6(f),
stating that the proposal would allow contracting agencies to make a
change ``without a determination from WHD of special circumstances
justifying such incorporation'' as required by current rules. ABC
argued that this ``threatens contractors with improper changes to their
government contracts post-award.'' ABC also stated that the proposed
new language at Sec. 1.6(f)(3)(vi) that requires withholding before
contract termination ``imposes new withholding and cross-withholding
requirements that violate longstanding understandings of the contract-
based scope of the DBA and FAR contract requirements.''
AGC stated that the proposed language needs additional
clarification. As AGC noted, the proposed rule stated at Sec.
1.6(f)(3)(i) that ``[u]nless the Administrator directs otherwise, the
incorporation of the clauses required by Sec. 5.5 must be
retroactive.'' AGC requested clarification about whether the
Administrator's authority to ``direct[ ] otherwise'' applies only to
the retroactive incorporation or also to the requirement that
contractors must be compensated for any increased costs as a result.
AGC also asked two other questions regarding compensation: first,
whether the proposal would allow the Administrator to deny compensation
to contractors when a wage determination is retroactively included; and
second, what would happen if a missing wage determination were not
retroactively included in a contract. AGC stated that it is absolutely
necessary that prime contractors be compensated for increased costs
that result from a contracting agency failure.
The Department considered the comments received regarding the
proposed revisions to Sec. 1.6(f) and agrees with the commenters
supporting the amendments to this section. Allowing contracting
agencies to take action to correct missing or incorrect wage
determinations will streamline compliance and enforcement. Earlier
action to remedy such problems will be more protective of workers, who
otherwise may need to wait a longer time to receive the prevailing
wages they are due. In response to ABC's comment about ``improper
changes,'' the Department notes that proposed Sec. 1.6(f)(3)(iii)
requires agencies to provide notice to the Administrator of their
proposed action before they require incorporation on their own
initiative. This requirement provides the Department with the
opportunity to help ensure that the contracting agency's proposed
action is appropriate. The Department also considered ABC's comments
about withholding, but those comments appear to be directed toward the
Department's cross-withholding proposals. The Department has addressed
comments regarding these proposals in section III.B.3.xxiii
(``Withholding'').
The proposed language at Sec. 1.6(f)(3)(i) addressed the
Administrator's authority to direct that a newly incorporated wage
determination should not be enforced retroactively to the beginning of
the contract. The Administrator does not have separate authority to
``direct[] otherwise'' with regard to contractor compensation. Rather,
the proposed language of Sec. 1.6(f)(3)(iv) states that the contractor
must be compensated for any increases in wages resulting from
incorporation of a missing wage determination, and the language at
proposed Sec. 1.6(f)(3) states that the method of adjustment in
contract prices ``should be in accordance with applicable law.'' For
direct Federal procurement contracts, the extent to which compensation
is due, if any, is governed by the FAR and any price adjustment clauses
applicable to different types of Davis-Bacon contracts. See, e.g., 48
CFR 52.222-30, 52.222-31 and 52.222-32.
The provisions regarding compensation in Sec. 1.6(f) apply where
the contracting agency incorporates the correct wage determination into
a contract post-award. They do not apply in the hypothetical AGC
provides, in which the contractor believes that a wage determination is
missing and the missing wage determination is not retroactively
included in the contract. While it is important for enforcement
purposes that the Department and
[[Page 57673]]
contracting agencies have the ability to modify an award to correct
errors (with appropriate compensation), the Department has generally
found it to be inappropriate for a contractor to seek to modify wage
determinations post-award to attempt to receive compensation for wage
rates it has been paying already. See Joe E. Woods, Inc., ARB No. 96-
127, 1996 WL 678774 (Nov. 19, 1996).
The Department proposed several of the changes to Sec. 1.6(f) in
order to borrow language from the similar SCA provision at 29 CFR
4.5(c). That provision, as noted in the comment by the Wiley Rein
partners, has been time-tested in the many years it has been in effect
to address post-award modifications under the SCA. The changes proposed
to Sec. 1.6(f) are common-sense changes that provide clarity and
consistency to the process of addressing circumstances where no wage
determination, or the wrong wage determination, was attached to a
covered contract. The changes will benefit construction workers by
ensuring that they receive back wages owed to them in a timely manner.
The final rule therefore adopts the revisions to Sec. 1.6(f) as
proposed.
(6) Sec. 5.6(a)(1) Post-Award Incorporation of Contract Clauses
The Department proposed to revise Sec. 5.6(a)(1) to include
language expressly providing a procedure for determining that the
required contract clauses were wrongly omitted from a contract. As
noted above, the Department has historically sought the retroactive
incorporation of missing contract clauses by reference to the language
regarding wage determinations in Sec. 1.6(f). In the NPRM, the
Department proposed to eliminate any confusion by creating a separate
procedure at Sec. 5.6(a)(1)(ii) that will apply specifically to
missing contract clauses in a similar manner as Sec. 1.6(f) continues
to apply to missing or incorrect wage determinations.
The Department proposed to revise Sec. 5.6(a)(1) by renumbering
the existing regulatory text as Sec. 5.6(a)(1)(i), and adding an
additional paragraph, (a)(1)(ii), to include the provision clarifying
that where a contract is awarded without the incorporation of the
Davis-Bacon labor standards clauses required by Sec. 5.5, the agency
must incorporate the clauses or require their incorporation. This
includes circumstances where the agency does not award a contract
directly but instead provides funding assistance for such a contract.
In such instances, the Federal agency, or other agency where
appropriate, must ensure that the recipient or subrecipient of the
Federal assistance incorporates the required labor standards clauses
retroactive to the date of contract award, or the start of construction
if there is no award.
The proposed paragraph at Sec. 5.6(a)(1)(ii) contained a similar
set of provisions as Sec. 1.6(f), as modified by the amendments to
that paragraph proposed in the NPRM. These included that the
incorporation must be retroactive unless the Administrator directs
otherwise; that retroactive incorporation may be required by the
request of the Administrator or upon the agency's own initiative; that
incorporation must take place within 30 days of a request by the
Administrator, unless an extension is granted; that the agency must
withhold or otherwise obligate sufficient funds to satisfy back wages
before any contract termination; and that the contractor should be
compensated for any increase in costs resulting from any change
required by the paragraph.
The Department also proposed to clarify the application of the
current regulation at Sec. 5.6(a)(1), which states that no payment,
advance, grant, loan, or guarantee of funds will be approved unless the
Federal agency ensures that the funding recipient or sub-recipient has
incorporated the required clauses into any contract receiving the
funding. Similar to the proposed provision in Sec. 1.6(f)(3)(v), a new
proposed provision at Sec. 5.6(a)(1)(ii)(C) explains that such a
required suspension also applies if the funding recipient refuses to
retroactively incorporate the required clauses. In such circumstances,
the issue must be referred promptly to the Administrator for
resolution.
Similar to the proposed provision at Sec. 1.6(f)(4), the
Department also proposed a provision at Sec. 5.6(a)(1)(ii)(E) that
explains that the physical-incorporation requirements of Sec.
5.6(a)(1)(ii) would operate in tandem with the proposed language at
Sec. 5.5(e), making the contract clauses and wage determinations
effective by operation of law.
The proposed changes clarify that the requirement to incorporate
the Davis-Bacon labor standards clauses is an ongoing responsibility
that does not end upon contract award, and the changes expressly state
the Department's longstanding practice of requiring the relevant agency
to retroactively incorporate, or ensure retroactive incorporation of,
the required clauses in such circumstances. As discussed above, such
clarification is warranted because agencies occasionally have expressed
confusion about--and even questioned whether they possess--the
authority to incorporate, or ensure the incorporation of, the required
contract clauses after a contract has been awarded or construction has
started.
The proposed changes similarly make clear that while agencies must
retroactively incorporate the required clauses upon the request of the
Administrator, agencies also have the authority to make such changes on
their own initiative when they discover that an error has been made.
The proposed changes also eliminate any confusion of the recipients of
Federal funding as to the extent of the Federal funding agency's
authority to require such retroactive incorporation in federally funded
contracts subject to the Davis-Bacon labor standards. Finally, the
proposed changes do not alter the provisions of 29 CFR 1.6(g),
including its provisos.
The Department received only one comment, from ABC, regarding the
proposed revisions to Sec. 5.6(a). ABC referenced its concerns about
the Sec. 5.5(e) operation-of-law provision and stated that the
proposal at Sec. 5.6(a) ``again holds contractors responsible without
notice of DBA requirements.'' The comment added that ``[u]ntil now,
contractors have not been held responsible for DBA compliance'' in
these circumstances and continued that ``[c]hanging contract
requirement after award is forbidden unless specific requirements of
the FAR are satisfied.'' ABC also stated that the NPRM is ``unclear or
else fails to justify the apparent expansion in the scope of the DBA's
coverage.''
The Department disagrees with ABC. As explained above, these
revisions merely codify the Department's practice of requiring
contracting agencies to take the necessary steps to correct contracts
which omit required clauses and does not represent an expansion in
``the scope of the DBA's coverage.'' Although Sec. 1.6(f) expressly
references only the authority of the Department to direct the
incorporation of missing wage determinations, the Department has
consistently interpreted that language as including by necessity the
authority to request the incorporation of erroneously omitted contract
clauses. See, e.g., DBRA-131 (Apr. 18, 1985) (requesting the
contracting agency take action ``in accordance with section 1.6(f) of
Regulations, 29 CFR part 1, to include the Davis-Bacon provisions and
an applicable wage decision'' in a contract from which the contract
clauses were erroneously omitted). Accordingly, the rule neither
imposes new DBA responsibilities on contractors nor provides agencies
with new authority to amend contracts which they could not have amended
previously.
[[Page 57674]]
Finally, this proposed revision to Sec. 5.6(a)(ii) does not
``hold[ ] contractors responsible without notice of DBA requirements,''
as ABC states, for the same reason that the new operation-of-law
provision at Sec. 5.5(e) does not. Like the operation-of-law
provision, and like the existing regulation at Sec. 1.6(f), the
revision to Sec. 5.6(a)(ii) contains a compensation provision that
states that the contractor must be compensated for any increases in
wages resulting the incorporation of a missing contract clause.
Contractors will also receive sufficient notice through publication of
the final rule. See Merrill, 332 U.S. at 384-85.
Retroactive incorporation of the required contract clauses ensures
that agencies take every available step to ensure that workers on
covered contracts are paid the prevailing wages that Congress intended.
The final rule therefore adopts the language in Sec. 5.6(a)(ii) as
proposed.
xxi. Debarment
In accordance with the Department's goal of updating and
modernizing the DBA and Related Act regulations, as well as enhancing
the implementation of Reorganization Plan No. 14 of 1950, the
Department proposed a number of revisions to the debarment regulations
that were intended both to promote consistent enforcement of the Davis-
Bacon labor standards provisions and to clarify the debarment standards
and procedures for the regulated community, adjudicators,
investigators, and other stakeholders.
The regulations implementing the DBA and the Related Acts currently
reflect different standards for debarment. Since 1935, the DBA has
mandated 3-year debarment ``of persons . . . found to have disregarded
their obligations to employees and subcontractors.'' 40 U.S.C. 3144(b)
(emphasis added); see also 29 CFR 5.12(a)(2) (setting forth the DBA's
``disregard of obligations'' standard). Although the Related Acts
themselves do not contain debarment provisions, since 1951, their
implementing regulations have imposed a heightened standard for
debarment for violations under the Related Acts, providing that ``any
contractor or subcontractor . . . found . . . to be in aggravated or
willful violation of the labor standards provisions'' of any Related
Act will be debarred ``for a period not to exceed 3 years.'' 29 CFR
5.12(a)(1) (emphasis added). The Department proposed to harmonize the
DBA and the Related Act debarment-related regulations by applying the
longstanding DBA debarment standard and related provisions to the
Related Acts as well. Specifically, in order to create a uniform set of
substantive and procedural requirements for debarment under the DBA and
the Related Acts, the Department proposed five changes to the Related
Act debarment regulations so that they mirror the provisions governing
DBA debarment.
First, the Department proposed to adopt the DBA statutory debarment
standard--disregard of obligations to employees or subcontractors--for
all debarment cases and to eliminate the Related Acts' regulatory
``aggravated or willful'' debarment standard. Second, the Department
proposed to adopt the DBA's mandatory 3-year debarment period for
Related Act cases and to eliminate the process under the Related Acts
regulations for early removal from the ineligible list (also known as
the debarment list).\267\ Third, the Department proposed to expressly
permit debarment of ``responsible officers'' under the Related Acts.
Fourth, the Department proposed to clarify that under the Related Acts
as under the DBA, entities in which debarred entities or individuals
have an ``interest'' may be debarred. Related Acts regulations
currently require a ``substantial interest.'' Finally, the Department
proposed to make the regulatory scope of debarment language under the
Related Acts consistent with the scope of debarment under the DBA by
providing, in accordance with the current scope of debarment under the
DBA, that Related Acts debarred persons and firms may not receive ``any
contract or subcontract of the United States or the District of
Columbia,'' as well as ``any contract or subcontract subject to the
labor standards provisions'' of the DBRA. See 29 CFR 5.12(a)(2).
---------------------------------------------------------------------------
\267\ There are several terms referring to the same list (e.g.,
ineligible list, debarment list, debarred bidders list) and the
terms for this list may continue to change over time.
---------------------------------------------------------------------------
(A) Relevant Legal Authority
The 1935 amendments to the DBA gave the Secretary authority to
enforce--not just set--prevailing wages, including through the remedy
of debarment. See Coutu, 450 U.S. at 758 n.3, 759 n.5, 776-77; see also
S. Rep. No. 74-332, pt. 3, at 11, 14-15 (1935). Since then, the DBA has
required 3-year debarment of persons or firms that have been found to
``have disregarded their obligations to employees and subcontractors.''
40 U.S.C. 3144(b) (formerly 40 U.S.C. 276a-2 and known as section 3(a)
of the DBA). The DBA also mandates debarment of entities in which
debarred persons or firms have an ``interest.'' 40 U.S.C. 3144(b)(2).
Approximately 15 years later, the Truman Administration developed,
and Congress accepted, Reorganization Plan No. 14 of 1950, a
comprehensive plan to improve Davis-Bacon enforcement and
administration. The Reorganization Plan provided that ``[i]n order to
assure coordination of administration and consistency of enforcement''
of the DBRA by the agencies who are responsible for administering them,
the Secretary of Labor was empowered to ``prescribe appropriate
standards, regulations, and procedures, which shall be observed by
these agencies.'' Reorganization Plan No. 14 of 1950, 15 FR 3176. In
transmitting the Reorganization Plan to Congress, President Truman
observed that ``the principal objective of the plan is more effective
enforcement of labor standards'' with ``more uniform and more adequate
protection for workers through the expenditures made for the
enforcement of the existing legislation.'' 1950 Special Message to
Congress.
Shortly after Reorganization Plan No. 14 of 1950 was adopted, the
Department promulgated regulations adding ``a new Part 5,'' effective
July 1, 1951. 16 FR 4430. These regulations added the ``aggravated or
willful'' debarment standard for the Related Acts. Id. at 4431. The
preamble to that final rule explained that adding the new part 5 was to
comply with Reorganization Plan No. 14 of 1950's directive to prescribe
standards, regulations, and procedures ``to assure coordination of
administration and consistency of enforcement.'' Id. at 4430. Since
then, the two debarment standards--disregard of obligations in DBA
cases and willful or aggravated violations in Related Acts cases--have
co-existed, but with challenges along the way that the Department seeks
to resolve through this rulemaking.
(B) Proposed Regulatory Revisions
(1) Debarment Standard
a. Proposed Change to Debarment Standard
As noted previously, the DBA generally requires the payment of
prevailing wages to laborers and mechanics working on contracts with
the Federal Government or the District of Columbia for the construction
of public buildings and public works. 40 U.S.C. 3142(a). In addition,
Congress has included DBA prevailing wage provisions in numerous
Related Acts under which Federal agencies assist construction projects
through grants, loans, guarantees, insurance, and other
[[Page 57675]]
methods. The same contract clauses are incorporated into DBA- and
Related Act- covered contracts, and the laws apply the same labor
standards protections (including the obligation to pay prevailing
wages) to laborers and mechanics without regard to whether they are
performing work on a project subject to the DBA or one of the Related
Acts. Not only are some projects subject to the requirements of both
the DBA and one of the Related Acts due to the nature and source of
Federal funding, but also the great majority of DBA-covered projects
are also subject to CWHSSA, one of the Related Acts.
Against this backdrop, there is no apparent need for a different
level of culpability for Related Acts debarment than for DBA debarment.
The sanction for failing to compensate covered workers in accordance
with applicable prevailing wage requirements should not turn on the
source or form of Federal funding. Nor is there any principled reason
that it should be easier for prime contractors, subcontractors, and
their responsible officials to avoid debarment in Related Acts cases.
Accordingly, the Department proposed to revise the governing
regulations so that conduct that warrants debarment on DBA construction
projects would also warrant debarment on Related Act projects. This
proposal fits within the Department's well-established authority to
adopt regulations governing debarment of Related Act contractors. See,
e.g., Janik Paving & Constr., 828 F.2d at 91; Copper Plumbing & Heating
Co. v. Campbell, 290 F.2d 368, 372-73 (D.C. Cir. 1961).
The Department noted in the NPRM that the potential benefits of
adopting a single, uniform debarment standard outweigh any benefits of
retaining the existing dual-standard framework. Other than debarment,
contractors who violate the DBA and Related Acts run the risk only of
having to pay back wages, often long after violations occurred. Even if
these violations are discovered or disclosed through an investigation
or other compliance action, contractors that violate the DBA or Related
Acts can benefit in the short-term from the use of workers' wages, an
advantage that can enable such contractors to underbid their more law-
abiding competitors. If the violations never come to light, such non-
compliant contractors pocket wages that belong to workers.
Strengthening the debarment remedy encourages unprincipled contractors
to comply with Davis-Bacon prevailing wage requirements by expanding
the reach of this remedy when they do not. Facchiano Constr. Co. v.
U.S. Dep't of Lab., 987 F.2d 206, 214 (3d Cir. 1993) (observing that
debarment ``may in fact `be the only realistic means of deterring
contractors from engaging in willful [labor] violations based on a cold
weighing of the costs and benefits of non-compliance' '' (quoting Janik
Paving & Constr., 828 F.2d at 91)).
In proposing a unitary debarment standard, the Department intended
that well-established case law applying the DBA ``disregard of
obligations'' debarment standard would now also apply to Related Act
debarment determinations. Under this standard, as a 2016 ARB decision
explained, ``DBA violations do not, by themselves, constitute a
disregard of an employer's obligations,'' and, to support debarment,
``evidence must establish a level of culpability beyond negligence''
and involve some degree of intent. Interstate Rock Prods., Inc., ARB
No. 15-024, 2016 WL 5868562, at *4 (Sept. 27, 2016) (footnotes
omitted). For example, the underpayment of prevailing wages, coupled
with the falsification of certified payrolls, constitute a disregard of
a contractor's obligations that establish the requisite level of
``intent'' under the DBA debarment provisions. See id. Bad faith and
gross negligence regarding compliance have also been found to
constitute a disregard of DBA obligations. See id. The Department's
proposal to apply the DBA ``disregard of obligations'' standard as the
sole debarment standard would maintain safeguards for law-abiding
contractors and responsible officers by retaining the bedrock principle
that DBA violations, by themselves, generally do not constitute a
sufficient predicate for debarment. Moreover, the determination of
whether debarment is warranted would continue to be based on a
consideration of the particular facts found in each investigation and
to include the same procedures and review process that are currently in
place to determine whether debarment is to be pursued.
For these reasons and those discussed in more detail in this
section below, the Department's proposal to harmonize debarment
standards included a reorganization of Sec. 5.12. Proposed paragraph
(a)(1) set forth the ``disregard of obligations'' debarment standard,
which would apply to both DBA and Related Acts violations. The proposed
changes accordingly removed the ``willful or aggravated'' language from
Sec. 5.12, with proposed conforming changes in 29 CFR 5.6(b) (included
in renumbered 5.6(b)(4)) and 5.7(a). Proposed paragraph (a)(2) combined
the parts of current Sec. 5.12(a)(1) and (a)(2) concerning the
different procedures for effectuating debarment under the DBA and
Related Acts.
b. Impacts of Proposed Debarment Standard Change
Because behavior that is willful or aggravated is also a disregard
of obligations, in many instances the proposed harmonization of the
debarment standards would apply to conduct that under the current
regulations is already debarrable under both the DBA and Related Acts.
For example, falsification of certified payrolls to simulate compliance
with Davis-Bacon labor standards has long warranted debarment under
both the DBA and Related Acts. See, e.g., R.J. Sanders, Inc., WAB No.
90-25, 1991 WL 494734, at *1-2 (Jan. 31, 1991) (DBA); Coleman Constr.
Co., ARB No. 15-002, 2016 WL 4238468, at *11 (Related Acts). Kickbacks
also warrant debarment under the DBA and Related Acts. See, e.g.,
Killeen Elec. Co., Inc., WAB No. 87-49, 1991 WL 494685, at *5-6 (DBA
and Related Act). In fact, any violation that meets the ``willful or
aggravated'' standard would necessarily also be a disregard of
obligations.
Under the proposed revisions, a subset of violations that would
have been debarrable only under the DBA ``disregard of obligations''
standard now would be potentially subject to debarment under both the
DBA and Related Acts. The ARB recently discussed one example of this
type of violation, stating that intentional disregard of obligations
``may . . . include acts that are not willful attempts to avoid the
requirements of the DBA'' since contractors may not avoid debarment
``by asserting that they did not intentionally violate the DBA because
they were unaware of the Act's requirements.'' Interstate Rock Prods.,
ARB No. 15-024, 2016 WL 5868562, at *4. Similarly, ``failures to set up
adequate procedures to ensure that their employees' labor was properly
classified,'' which might not have been found to be willful or
aggravated Related Act violations, were debarrable under the DBA
``disregard of obligations'' standard. Id. at *8. Under the
Department's proposed revisions to Sec. 5.12, these types of
violations could now result in debarment in Related Acts as well as DBA
cases. Additionally, under the ``disregard of obligations'' standard,
prime contractors and upper-tier subcontractors may be debarred if they
fail to flow down the required contract clauses into their lower-tier
subcontracts as required by Sec. 5.5(a)(6), or if they otherwise fail
to ensure that their subcontractors are in compliance with the Davis-
Bacon labor standards
[[Page 57676]]
provisions. See 29 CFR 5.5(a)(6), (7); Ray Wilson Co., ARB No. 02-086,
2004 WL 384729, at *10 (affirming debarment under DBA of upper-tier
subcontractor and its principals because of subcontractor's
``abdication from--and, thus, its disregard of--its obligations to
employees of . . . its own lower-tier subcontractor''). Such failures
alone, which might not have been found to be a willful or aggravated
violation depending on the totality of the circumstances, would under
the proposed harmonized standard be more likely to satisfy the
requirements for debarment whether the failure had occurred on a DBA or
Related Act project.
c. Benefits of Proposed Debarment Standard Change
i. Improved Compliance and Enforcement
In the NPRM, the Department stated its position that applying the
DBA's ``disregard of obligations'' debarment standard in a uniform,
consistent manner would advance the purpose of the DBA, ```a minimum
wage law designed for the benefit of construction workers.''' Abhe &
Svoboda, Inc. v. Chao, 508 F.3d 1052, 1055 (D.C. Cir. 2007) (quoting
Binghamton Constr. Co., 347 U.S. at 178). Both the DBA statutory and
the Related Acts regulatory debarment provisions are ``intended to
foster compliance with labor standards.'' Howell Constr., Inc., WAB No.
93-12, 1994 WL 269361, at *7 (May 31, 1994); see also Interstate Rock
Prods., ARB No. 15-024, 2016 WL 5868562, at *8 (``Debarment has
consistently been found to be a remedial rather than punitive measure
so as to encourage compliance and discourage employers from adopting
business practices designed to maximize profits by underpaying
employees in violation of the Act.'').
The Department explained that using the ``disregard of
obligations'' debarment standard for all DBA and Related Act work would
enhance enforcement of and compliance with Davis-Bacon labor standards
in multiple ways. First, it would better enlist the regulated community
in Davis-Bacon enforcement by increasing contractors' incentive to
comply with the Davis-Bacon labor standards. See, e.g., Facchiano
Constr., 987 F.2d at 214 (``Both Sec. 5.12(a)(1) and Sec. 5.12(a)(2)
are designed to ensure the cooperation of the employer, largely through
self-enforcement.''); Brite Maint. Corp., WAB No. 87-07, 1989 WL
407462, at *2 (May 12, 1989) (debarment is a ``preventive tool to
discourage violation[s]'').
Second, applying the ``disregard of obligations'' standard to
Related Act cases would serve the important public policy of holding
contractors' responsible officials accountable for noncompliance in a
more consistent manner, regardless of whether they are performing on a
Federal or federally funded project. Responsible officials currently
may be debarred under both the DBA and the Related Acts. See, e.g.,
P.B.M.C., Inc., WAB No. 87-57, 1991 WL 494688, at *7 (Feb. 8, 1991)
(stating that ``Board precedent does not permit a responsible official
to avoid debarment by claiming that the labor standards violations were
committed by agents or employees of the firm'' in Related Act case);
P.J. Stella Constr. Corp., WAB No. 80-13, 1984 WL 161738, at *3 (Mar.
1, 1984) (affirming DBA debarment recommendation because ``an employer
cannot take cover behind actions of his inexperienced agents or
representatives or the employer's own inexperience in fulfilling the
requirements of government construction contracts''); see also Howell
Constr., Inc., WAB No. 93-12, 1994 WL 269361, at *7 (DBA case)
(debarment could not foster compliance if ``corporate officials . . .
are permitted to delegate . . . responsibilities . . . [and] to
delegate away any and all accountability for any wrong doing'').
Applying a unitary debarment standard would further incentivize
compliance by all contractors and responsible officers.
ii. Greater Consistency and Clarity
The Department also stated its view that applying the DBA debarment
and debarment-related standards to all Related Act prevailing wage
cases would eliminate the confusion and attendant litigation that have
resulted from erroneous and inconsistent application of the two
different standards. The incorrect debarment standard has been applied
in various cases over the years, continuing to the present,
notwithstanding the ARB's repeated clarification. See, e.g., J.D.
Eckman, Inc., ARB No. 2017-0023, 2019 WL 3780904, at *3 (July 9, 2019)
(remanding for consideration of debarment under the correct standard as
a result of ALJ's legal error of using inapplicable ``disregard of
obligations'' standard rather than applicable ``aggravated or willful''
standard); Coleman Constr. Co., ARB No. 15-002, 2016 WL 4238468, at *9-
11 (noting that the ALJ had applied the wrong debarment standard but
concluding that the ALJ's ``conflat[ion of the] two different legal
standards'' was harmless error under the circumstances). Most recently,
the ARB vacated and remanded an ALJ's decision to debar a subcontractor
and its principal under the DBA, noting that, even though the
Administrator had not argued that the DBA applied, the ALJ had applied
the incorrect standard because ``the contract was for a construction
project of a non-[F]ederal building that was funded by the U.S.
Government but did not include the United States as a party.'' Jamek
Eng'g Servs., Inc., ARB No. 2020-0043, 2021 WL 2935807, at *8 (June 23,
2021); see also Jamek Eng'g Servs., Inc. (Jamek II), ARB No. 2022-0039,
2022 WL 6732171, at *8-9 (Sept. 22, 2022) (affirming ALJ's decision on
remand, including 3-year debarment for aggravated or willful Related
Acts violations), appeal docketed, Jamek Eng'g Servs., Inc. v. U.S.
Dep't of Lab., No. 22-cv-2656 (D. Minn. Oct. 21, 2022).
Additionally, the ``aggravated or willful'' Related Acts standard
has been interpreted inconsistently over the past decades. In some
cases, the ARB has required actual knowledge or awareness of
violations, while in others it has applied (or at least recited with
approval) a less stringent standard that encompasses intentional
disregard or plain indifference to the statutory requirements but does
not require actual knowledge of violations. Compare J.D. Eckman, Inc.,
ARB No. 2017-0023, 2019 WL 3780904, at *3 (requiring actual knowledge
or awareness of the violation) and A. Vento Constr., WAB No. 87-51,
1990 WL 484312, at *3 (Oct. 17, 1990) (aggravated or willful violations
are ``intentional, deliberate, knowing violations of the [Related
Acts'] labor standards provisions'') with Fontaine Bros., Inc., ARB No.
96-162, 1997 WL 578333, at *3 (Sept. 16, 1997) (stating in Related Act
case that ``mere inadvertent or negligent conduct would not warrant
debarment, [but] conduct which evidences an intent to evade or a
purposeful lack of attention to, a statutory responsibility does'' and
that ``[b]lissful ignorance is no defense to debarment'' (quotation
omitted)); see also Pythagoras Gen. Contracting Corp., ARB Nos. 08-107,
09-007, 2011 WL 1247207, at *12 (``[A] `willful' violation encompasses
intentional disregard or plain indifference to the statutory
requirements.'').
The Department stated its belief that a single debarment standard
would provide consistency for the regulated community. Under the
proposed single ``disregard of obligations'' debarment standard,
purposeful inattention, and gross negligence with regard to Davis-Bacon
labor standards obligations--as well as actual knowledge of or
[[Page 57677]]
participation in violations--could warrant debarment. The Department
explained that it would continue to carefully consider all of the facts
involved in determining whether a particular contractor's actions meet
the proposed single standard.
(2) Length of Debarment Period
The Department also proposed to revise Sec. 5.12(a)(1) and (2) to
make 3-year debarment mandatory under both the DBA and Related Acts and
to eliminate the regulatory provision permitting early removal from the
debarment list under the Related Acts.
As noted above, since 1935, the DBA has mandated a 3-year debarment
of contractors whose conduct has met the relevant standard. In 1964,
the Department added two regulatory provisions that permit Related Acts
debarment for less than 3 years as well as early removal from the
debarment list. According to the 1964 final rule preamble, the
Department added these provisions ``to improve the debarment provisions
under Reorganization Plan No. 14 of 1950 by providing for a flexible
period of debarment up to three years and by providing for removal from
the debarred bidders list upon a demonstration of current
responsibility.'' 29 FR 95.
The Department explained in the proposal that its experience over
the nearly 60 years since then has shown that those Related Act
regulatory provisions that differ from the DBA standard have not
improved the debarment process (i.e., have not assured consistency of
enforcement) for any of its participants. Rather, they have added
another element of confusion and inconsistency to the administration
and enforcement of the DBA and Related Acts. For example, contractors
and subcontractors have been confused about which provision applies.
See, e.g., Bob's Constr. Co., Inc., WAB No. 87-25, 1989 WL 407467, at
*1 (May 11, 1989) (stating that ``[t]he [DBA] does not provide for less
than a 3-year debarment'' in response to contractor's argument that
``if the Board cannot reverse the [ALJ's DBA] debarment order, it
should consider reducing the 3-year debarment'').
Requiring a uniform 3-year debarment period would reduce confusion
and increase consistency. Although the regulations currently provide
for an exception to 3-year debarment, debarment in Related Acts cases
is usually, but not always, for 3 years. In some cases, the WAB treated
a 3-year debarment period as effectively presumptive and therefore has
reversed ALJ decisions imposing debarment for fewer than 3 years. See,
e.g., Brite Maint. Corp., WAB No. 87-07, 1989 WL 407462, at *1, *3
(imposing a 3-year debarment instead of the 2-year debarment ordered by
the ALJ); Early & Sons, Inc., WAB No. 86-25, 1987 WL 247044, at *1-2
(Jan. 29, 1987) (same); Warren E. Manter Co., Inc., WAB No. 84-20, 1985
WL 167228, at *2-3 (June 21, 1985) (same). Under current case law,
``aggravated or willful'' violations of the Related Acts labor
standards provisions warrant a 3-year debarment period ``absent
extraordinary circumstances.'' A. Vento Constr., WAB No. 87-51, 1990 WL
484312, at *6. ALJs have grappled with determining the appropriate
length of debarment in Related Acts cases. Id. In the NPRM, Department
noted its belief that setting a uniform 3-year debarment period would
provide clarity and promote consistency.
Further, the Department remarked that it had concluded that in
instances--usually decades ago--when debarment for a period of less
than 3 years had been found to be warranted, it had not improved the
debarment process or compliance. See, e.g., Rust Constr. Co., Inc., WAB
No. 87-15, 1987 WL 247054, at *2 (Oct. 2, 1987) (1-year debarment),
aff'd sub nom. Rust Constr. Co., Inc. v. Martin, 779 F. Supp. 1030,
1032 (E.D. Mo. 1992) (affirming WAB's imposition of 1-year debarment
instead of no debarment, noting ``plaintiffs could have easily been
debarred for three years''); Progressive Design & Build Inc., WAB No.
87-31, 1990 WL 484308, at *3 (Feb. 21, 1990) (18-month debarment);
Morris Excavating Co., Inc., WAB No. 86-27, 1987 WL 247046, at *1 (Feb.
4, 1987) (6-month, instead of no, debarment).
For the above reasons, the Department proposed to modify the period
of Related Acts debarment to mirror the DBA's mandatory 3-year
debarment when contractors are found to have disregarded their
obligations to workers or subcontractors.
The Department also proposed to eliminate the provision at 29 CFR
5.12(c) that allows for the possibility of early removal from the
debarment list for Related Acts contractors and subcontractors. The
Department stated that in its experience, the possibility of early
removal from the debarment list has not improved the debarment process.
Just as Related Acts debarment for fewer than 3 years has rarely been
permitted, early removal from the debarment list has seldom been
requested, and it has been granted even less often.
Similarly, the ARB and WAB do not appear to have addressed early
removal for decades. When they have, the ARB and WAB affirmed denials
of early removal requests. See Atl. Elec. Servs., Inc., ARB No. 96-191,
1997 WL 303981, at *1-2 (May 28, 1997); Fred A. Nemann, WAB No. 94-08,
1994 WL 574114, at *1, *3 (June 27, 1994). Around the same time, early
removal was affirmed on the merits in only one case. See IBEW Loc. No.
103, ARB No. 96-123, 1996 WL 663205, at *4-6 (Nov. 12, 1996).
Additionally, the early-removal provision has caused confusion among
judges and the regulated community concerning the proper debarment
standard. For example, an ALJ erroneously relied on the regulation for
early relief from Related Acts debarment in recommending that a
contractor not be debarred under the DBA. See Jen-Beck Assocs., Inc.,
WAB No. 87-02, 1987 WL 247051, at *1-2 (July 20, 1987) (remanding case
to ALJ for a decision ``in accordance with the proper standard for
debarment for violations of the [DBA]''). Accordingly, the Department
proposed to amend Sec. 5.12 by deleting paragraph (c) and renumbering
the remaining paragraph to accommodate that revision.
(3) Debarment of Responsible Officers
The Department also proposed to revise 29 CFR 5.12 to expressly
state that responsible officers of both DBA and Related Acts
contractors and subcontractors may be debarred if they disregard
obligations to workers or subcontractors. The purpose of debarring
individuals along with the entities in which they are, for example,
owners, officers, or managers is to close a loophole where such
individuals could otherwise continue to receive Davis-Bacon contracts
by forming or controlling another entity that was not debarred. The
current regulations mention debarment of responsible officers only in
the paragraph addressing the DBA debarment standard. See 29 CFR
5.12(a)(2). But it is well-settled that they can be debarred under both
the DBA and Related Acts. See Facchiano Constr., 987 F.2d at 213-14
(noting that debarment of responsible officers is ``reasonable in
furthering the remedial goals of the Davis-Bacon Act and Related Acts''
and observing that there is ``no rational reason for including
debarment of responsible officers in one regulation, but not the
other''); Hugo Reforestation, Inc., ARB No. 99-003, 2001 WL 487727, at
*12 (Apr. 30, 2001) (CWHSSA; citing Related Acts cases); see also
Coleman Constr. Co., ARB No. 15-002, 2016 WL 4238468, at *12
(``Although the regulations do not explicitly grant authority to debar
individual corporate
[[Page 57678]]
officers in Related Act cases, the regulations have been interpreted to
grant such authority for decades.''). Thus, by expressly stating that
responsible officers may be debarred under both the DBA and Related
Acts, this proposed revision merely codifies current law. The
Department explained that it intended that Related Acts debarment of
individuals would continue to be interpreted in the same way as
debarment of DBA responsible officers has been interpreted.
(4) Debarment of Other Entities
The Department proposed another revision so that the Related Acts
regulations mirror the DBA regulations not only in practice, but also
in letter. Specifically, the Department proposed to revise 29 CFR
5.12(a)(1) (with conforming changes in Sec. 5.12 and elsewhere in part
5) to state that ``any firm, corporation, partnership, or association
in which such contractor, subcontractor, or responsible officer has an
interest'' must be debarred under the Related Acts, as well as the DBA.
The DBA states that ``No contract shall be awarded to persons appearing
on the list or to any firm, corporation, partnership, or association in
which the persons have an interest.'' 40 U.S.C. 3144(b)(2) (emphasis
added); see 29 CFR 5.12(a)(2). In contrast, the current regulations for
Related Acts require debarment of ``any firm, corporation, partnership,
or association in which such contractor or subcontractor has a
substantial interest.'' 29 CFR 5.12(a)(1) (emphasis added); see 29 CFR
5.12(b)(1), (d).
The 1982 final rule preamble for these provisions indicated that
the determination of ``interest'' (DBA) and ``substantial interest''
(Related Acts) was intended to be the same: ``In both cases, the intent
is to prohibit debarred persons or firms from evading the ineligibility
sanctions by using another legal entity to obtain Government
contracts.'' 47 FR 23658, 23661 (May 28, 1982), implemented by 48 FR
19540 (Apr. 29, 1983). It is ``not intended to prohibit bidding by a
potential contractor where a debarred person or firm holds only a
nominal interest in the potential contractor's firm,'' and
``[d]ecisions as to whether `an interest' exists will be made on a
case-by-case basis considering all relevant factors.'' Id. In the NPRM,
the Department proposed to eliminate any confusion by requiring the DBA
``interest'' standard to be the standard for both DBA and Related Acts
debarment.
(5) Debarment Scope
The Department proposed to revise the regulatory language
specifying the scope of Related Acts debarment so that it mirrors the
language specifying the scope of DBA debarment set forth in current 29
CFR 5.12(a)(2). Currently, under the corresponding Related Acts
regulation, Sec. 5.12(a)(1), contractors are not generally debarred
from being awarded all contracts or subcontracts of the United States
or the District of Columbia, but rather are only barred from being
awarded contracts or subcontracts subject to Davis-Bacon and/or CWHSSA
labor standards provisions, i.e., ``subject to any of the statutes
listed in Sec. 5.1.'' As proposed in revised Sec. 5.12(a)(1), in
Related Acts as well as DBA cases, any debarred contractor,
subcontractor, or responsible officer would be barred for 3 years from
``[being] awarded any contract or subcontract of the United States or
the District of Columbia and any contract or subcontract subject to the
labor standards provisions of any of the statutes referenced by Sec.
5.1.''
The Department's belief is that there is no reasoned basis to
prohibit debarred contractors or subcontractors whose violations have
warranted debarment for Related Acts violations from receiving DBRA
contracts or subcontracts, but to permit them to continue to be awarded
other, non-DBRA-covered contracts or subcontracts with the United
States or the District of Columbia that parties debarred under the DBA
are statutorily prohibited from receiving during their debarment
period. The proposed changes to Sec. 5.12(a)(1) would eliminate this
anomalous situation, and apply debarment consistently to contractors,
subcontractors, and their responsible officers who have disregarded
their obligations to workers or subcontractors, regardless of the
nature of the of Federal contract or subcontract for the work.
(C) Discussion
The Department received many comments about its proposed debarment
provisions. Most of the comments, including organized IUOE and SMACNA
member campaign comments, expressed general support for the debarment
proposals in their entirety. A few organizations, including a group of
civil rights and workers' rights organizations, unions, and labor-
management organizations, specified the detailed reasons for their
support. Several commenters opposed the proposals entirely, giving
reasons for their opposition.
As an overarching matter, commenters that supported the debarment
proposals did so because the proposal would promote consistent
enforcement of the DBRA labor standards provisions. Supporting
commenters generally agreed that the proposed uniform debarment
standards and procedures (e.g., mandatory 3-year debarment, no option
for early removal, responsible officer, and/or interest proposals)
would provide clarity for, among others, the regulated community and,
thus, enhance compliance with the DBRA labor standards provisions. See,
e.g., Balance America, Inc., CEA, LCCHR, Fair Contracting Foundation of
Minnesota, UBC, LIUNA.
Commenters like FFC noted that having one debarment standard would
be easier to understand for both workers and contractors. UBC supported
the single debarment standard because it would eliminate confusion for
adjudicators and the regulated community and improve efficiency for the
Department. LCCHR also supported the uniform 3-year debarment period
without early removal to promote clarity as to regulatory obligations
and compliance.
Among supporters, many comments praised the proposal's impact on
worker protection. For example, III-FFC and LCCHR supported the uniform
``disregard of obligation'' debarment standard because it would reach
contractor behavior that is essential for compliance with Davis-Bacon
and CWHSSA labor standards, but that may not have been deemed to rise
to the level of aggravated or willful behavior under the existing
Related Act debarment standard. LCCHR gave as examples of such behavior
a contractor's failure to establish appropriate procedures to classify
laborers or mechanics correctly and to ensure that lower-tier
subcontractors are in compliance with DBRA labor standards
requirements. These and other commenters applauded the proposed
harmonized debarment standards because they would strengthen worker
protections, in part by reducing disincentives to underpay workers--in
some cases repeatedly--as well as by enhancing enforcement. See, e.g.,
FFC, IUOE Local 77, LIUNA.
Several commenters emphasized the importance of uniform, clear
debarment standards to further protect workers and DBRA-compliant
contractors by deterring contractors that treat violations as part of
their business model due in part to the unlikelihood of being debarred.
The Fair Contracting Foundation of Minnesota explained that in their
experience, contractors that show a disregard for labor standards
obligations on one project without significant consequences often go on
to demonstrate a similar disregard on future projects. They, therefore,
supported the single debarment
[[Page 57679]]
standard as well as the mandatory 3-year debarment and interest
provisions to further protect workers and DBRA-compliant contractors,
incentivize compliance, and promote consistent enforcement of labor
standards requirements. ACT Ohio asserted that violators of the DBRA
rarely face debarment from Federal contracts, no matter how egregious
the violation. And LCCHR highlighted watchdog group findings that the
Federal government has awarded contracts to contractors that have
repeatedly violated Federal laws like the DBA, such as a report
asserting that in fiscal year 2017 Federal agencies spent over $425
million on contractors that had been found to have violated the DBA in
2016. UBC noted that applying the lower debarment threshold to Related
Act violations would increase deterrence.
A number of commenters similarly supported the harmonized debarment
standard as a way to hold repeat contractors accountable. See, e.g.,
ACT Ohio, Foundation for Fair Contracting of Connecticut, Inc. (FFC-
CT). They noted that the different debarment standards could allow
violators to remain out of compliance without facing real consequences
beyond just paying back wages. FFC-CT explained that debarment is a
real consequence that sends a message to government contractors that
``we expect them to be responsible stewards of public monies.''
Those commenters that supported the proposed changes also affirmed
the importance of the Department's proposal to codify existing law
regarding debarment of responsible officers. The UA emphasized the need
to debar individuals so that they cannot ``avoid accountability by
setting up shop as another entity.'' LCCHR noted their support for the
responsible officers proposal, which is consistent with existing law.
Some supporting commenters went further and claimed that the
current two debarment standards are inconsistent, see, e.g., FFC, or
even arbitrary and capricious, see, e.g., NABTU. NCDCL claimed that the
heightened Related Act standard ``arbitrarily makes it more difficult
to debar contractors for violations of the DBRA.'' LCCHR asserted that
there is no principled reason for employing two different debarment
standards for contractors that are otherwise subject to the same
contractual requirements. NABTU cited Transactive Corp. v. United
States, 91 F.3d 232, 237 (D.C. Cir. 1996) and Encino Motorcars, LLC v.
Navarro, 136 S. Ct. 2117, 2127 (2016) in support of its claim that the
different DBA and Related Act debarment standards ``are arbitrary and
capricious because they treat identical situations differently without
a reasonable basis.'' LCCHR also objected to the inconsistent
consequences for similar behavior under the current DBRA debarment
framework.
Among commenters who opposed the Department's debarment proposals
in their entirety, several challenged the Department's authority to
change the debarment standard for Related Acts. ABC and IEC questioned
the Department's authority to implement a uniform standard for DBA and
Related Act debarments. ABC argued that since Congress had not adopted
the DBA standard for Related Act debarments, the Department could not
``unilaterally impose a unitary debarment test.'' ABC claimed that if
in the 70 years since the Department established by regulation in 1951
Congress had wanted to impose the DBA's ``inflexible and easier to
prove'' ``disregard of obligations'' debarment standard, it could
easily have done so, and that the Department had provided no specific
justification for this ``radical change.'' IEC objected to applying the
DBA debarment standard to Related Acts, stating without further
explanation that this broadening would likely exceed ``the statutory
authority of several if not all of the `Related Acts.' ''
Next, unlike commenters that noted that a uniform debarment
standard would lead to more consistent enforcement, a few commenters
contended that the Department's proposed changes would not achieve
these results or were too burdensome. The group of U.S. Senators
claimed that the fact-specific nature of the DBA ``disregard of
obligations'' standard is ``ambiguous'' and would lead to ``the same
supposed `inconsistencies' '' the Department sought to address in the
proposed rule. They also claimed that in the NPRM, the Department
failed to explain the ``disregard of obligations'' standard, which
would pose a greater obstacle to small firms bidding on ``federal
contracts covered by the DBRA [that are] in essence nearly the entirety
of federal procurement.'' In addition, the group of U.S. Senators
questioned the Department's claim that the willful or aggravated
standard has been interpreted inconsistently over the decades, alleging
that this claim is ``dubious'' because of ``the volatile manner in
which DOL calculates prevailing wage rates.''
Unlike commenters who lauded the proposal's enhanced enforcement
and worker protection and clarity for the regulated community and other
stakeholders, FTBA and the group of U.S. Senators asserted that the
proposed harmonized debarment provisions would have a negative impact
on contractors, especially small and mid-size contractors. FTBA
asserted that compliance with certain aspects of DBA requirements like
the classification of work and coverage issues such as the site-of-the-
work limitation can be ``extraordinarily difficult even for contractors
with robust compliance processes.'' FTBA and ABC faulted the Department
for not proposing changes such as greater transparency about proper
classification of workers on wage determinations, instead of relying on
``unpublished union scope of work claims'' or ``unpublished union work
rules'' that make it challenging for non-union contractors to properly
determine job classifications.\268\ The group of U.S. Senators asserted
that small and mid-size contractors are at greater vulnerability of
``unintentionally violating incomprehensible prevailing wage
requirements.''
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\268\ The Department did not include the publication of ``union
work rules'' in the proposed rule, and therefore, such an initiative
is outside the scope of this rulemaking. However, the Department
recognizes that it is important that contractors be able to
understand wage determinations and comply with their obligations to
pay laborers and mechanics prevailing wages based on the appropriate
labor classifications in the applicable wage determination.
Therefore, the Department will continue to address the clarity of
wage determinations at the subregulatory level. The Department
believes that the modifications to the enforcement procedures in
part 5 of this rulemaking should be implemented along with continued
efforts to improve compliance.
---------------------------------------------------------------------------
To support its claim that the Department's debarment and other
proposals would be an ``impermissible burden on the private sector,''
the group of U.S. Senators alleged that the Department's proposal to
eliminate the aggravated or willful debarment standard would ``lower[ ]
the burden of persuasion to a `disregard of obligations' [and] ensnare
many small contractors into debarment proceedings.'' According to the
group of U.S. Senators, given the ``non-transparent and wasteful manner
in which prevailing wages are calculated'' and ``less than consistent''
survey methods, small and mid-size contractors who ``lack
administrative resources to keep abreast of DOL's nightmarishly
bureaucratic administration of DBRA'' would be vulnerable to ``an ocean
of legal liability as a result of the new debarment standard.'' FTBA
asserted that there was no compelling reason for the Department to
choose the ``more rigid threshold and longer debarment period'' given
that debarment is a remedial, not punitive measure.
ABC also objected to the Department's proposals to revise Sec.
5.12(a)(2) to
[[Page 57680]]
expressly include responsible officers and entities in which they have
a ``substantial [sic] interest'' for debarment purposes, claiming that
the NPRM offered little guidance as to how responsible officers would
be determined or what constitutes a substantial interest in a debarred
company. ABC requested additional guidance about these provisions.
The Department considered all the comments it received about its
proposals to harmonize the DBA and Related Act debarment standards by
adopting the DBA's debarment provisions for all DBRA debarments. As
explained below, the Department adopts the debarment provisions as
proposed.
As many of the supporting commenters underscored, a primary benefit
of the harmonized debarment provisions, most notably the change to a
single ``disregard of obligations'' debarment standard, will be to
improve consistency of--and, thus, effectiveness of--enforcement and
coordination of administration of the DBRA, as Reorganization Plan No.
14 of 1950 directs the Department to do. The unitary debarment standard
will also advance Reorganization Plan No. 14 of 1950's related
objective of ``more uniform and adequate protection for workers.'' 1950
Special Message to Congress.
Although the Related Act debarment standard adopted in 1951 was
also implemented to try to accomplish Reorganization Plan No. 14 of
1950's directive, it has become evident that more change is needed to
achieve this objective. As explained in the NPRM, the dual debarment
standard and related provisions have not achieved the goals the
Department intended that they would, and, in some instances, have led
to counterproductive results from inconsistent or erroneous application
of the applicable standard(s), as well as from confusion about which
standard applies. For example, in one case, a subcontractor and its
principal claimed that they should not be debarred under the DBA
because their violations were not ``willful or fraudulent,'' an
apparent misunderstanding of the ``disregard of obligation'' standard.
NCC Elec. Servs., Inc., ARB No. 13-097, 2015 WL 5781073, at *6 n.25
(Sept. 30, 2015).\269\
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\269\ While misunderstanding the applicable debarment standard
has led to counterproductive results, contrary to the assertion of
the group of U.S. Senators, for debarment purposes, it is irrelevant
if contractors do not understand how WHD calculated or periodically
adjusted applicable prevailing wages and fringe benefits. Although
contractors are free to challenge the wage rates on a wage
determination prior to contract award, if they do not challenge the
rates prior to that date and instead agree to incorporation of the
wage determination into their contract without modification, they
have thereby accepted the wage rates as a part of their contract and
have agreed to comply with those wage rates. In this context, given
their commitment to pay no less than the wage rates listed in the
wage determination that they have accepted as contractually binding,
contractors do not need to understand how prevailing wage rates are
determined to comply, but merely need to be able to look at the
applicable wage determination and pay required rates listed on that
wage determination, a task well within the capacity of even small
firms.
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As some commenters that supported this change asserted, the current
dual debarment standard could be viewed as arbitrary or inconsistent to
the extent that it treats contractors, subcontractors, and their
responsible officers--who are subject to the same DBRA labor standards
requirements and doing the same types of work--differently based solely
on the source of Federal funding or assistance. The Department,
however, does not agree with NABTU that the current dual debarment
standards are impermissibly arbitrary or capricious. The Department
also disagrees with FTBA that it did not explain why there were
different debarment standards. As explained in the NPRM, the Department
adopted a new part 5 in 1951 to comply with Reorganization Plan No. 14
of 1950's directive and made changes to Related Act debarment in 1964
in an effort to improve debarment provisions under that Reorganization
Plan. The Department posits that the willful or aggravated Related Act
standard may have been chosen in 1951 to lessen the effect on the
regulated community of the expansion of debarment to Related Act
violations by limiting debarment to more egregious violations, in an
acknowledgement of the relative novelty of Related Act work at that
time. This heightened standard may have been intended to accommodate
the regulated community's relative inexperience with Related Act work,
as well as the new part 5 provisions, most of which were new (other
than Copeland Act requirements, which had existed since the mid-1930s).
The Department's 1964 changes to the Related Act 3-year debarment
period may have corresponded with growing criticism in the early 1960s
of Federal agency use of debarment and suspension without sufficient
due process safeguards. See, e.g., Robert F. Meunier & Trevor B. A.
Nelson, ``Is It Time for a Single Federal Suspension and Debarment
Rule?,'' 46 Pub. Cont. L.J. 553, 558-59, 559 n.29 (2017) (discussing
judicial ``due process and fundamental fairness requirements''
developments in debarment and suspension beginning in the 1960s and
extending through the 1990s); see also Copper Plumbing & Heating Co.,
290 F.2d at 371-73 (affirming the Department's regulatory authority to
debar contractors for willful or aggravated violations of Related Acts
such as the Eight Hour Laws, and in dicta mentioning that ``upon a
proper showing [of responsibility] it appears'' the contractor's
petition for removal from the Comptroller General's ineligible list
``would have been granted'').
There are now more than 70 Related Acts, and federally assisted
construction work is prevalent. Since the same Davis-Bacon contractual
obligations apply on Related Act projects as on DBA projects, with a
few exceptions mandated by statute,\270\ the regulated community's
familiarity with their labor standards obligations on Related Acts has
also increased over this time. Due process safeguards include that the
DBRA regulations require notification of violation findings and an
opportunity to request a hearing when WHD finds reasonable cause to
believe that debarment is warranted.
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\270\ Such exceptions include the ``site of the work''
provision, which applies to DBA and most Related Act work, with the
exception of CWHSSA and certain HUD projects under ``development
statutes.'' Another difference is that under the DBA, the Department
recommends debarment to the GAO for implementation, while under the
Related Acts, the Department effectuates debarment.
---------------------------------------------------------------------------
Moreover, in the decades since the Related Act debarment provisions
went into effect, as explained in the NPRM, it has become clear that
having two debarment standards has not always improved consistency of
enforcement and administration and, at times, has had the opposite
effect. It has become evident that the flexibility of a possible
shorter debarment period of under 3 years and the possibility of early
removal from the debarment list, aside from rarely being used over the
past 2 or 3 decades, have not improved the effectiveness of debarment,
and at times, have impaired it. The Department agrees with commenters
that the unitary debarment standard and concomitant related provisions
(mandatory 3-year debarment period with no early removal, interest,
responsible officers, and scope of debarment) will be easier to
understand for the regulated community and adjudicators, and more
consistent in application and result.
The final rule thus adopts a uniform debarment framework comprised
of the longstanding DBA provisions. The DBA debarment provisions will
enhance worker protection by eliminating the heightened Related Act
standards, and the DBA standards are well-known to the regulated
community. The
[[Page 57681]]
Department emphasizes that the ``disregard of obligations'' standard is
not ``new,'' as the group of U.S. Senators asserted. The Department
also disagrees with ABC that this rule is a ``radical change.'' Rather,
it takes the original, longstanding ``disregard of obligations''
debarment standard and applies it to all debarments, not only DBA
debarments. Since 1935, the DBA has required debarment of ``persons or
firms'' who have ``disregarded their obligations to employees and
subcontractors'' as well as debarment of firms and other entities in
which such debarred persons or firms have an ``interest.'' 40 U.S.C.
3144(b). Since willful or aggravated violations are, by definition,
also a disregard of a contractor's obligations to workers or
subcontractors, debarment for such violations will continue.
The Department disagrees with the allegation from the group of U.S.
Senators that the fact-specific nature of the ``disregard of
obligations'' standard is ``ambiguous'' and will lead to
inconsistencies the Department is trying to address. First, aggravated
or willful Related Act violations are also determined on a case-
specific basis. Second, such totality of the circumstances analyses are
common legal approaches, even in criminal law where a person's liberty
is at stake. See, e.g., Florida v. Harris, 568 U.S. 237, 244 (2013)
(describing the ``fluid concept'' of probable cause under the Fourth
Amendment as a ``common-sensical standard'' that should evaluated by
looking at the ``totality of the circumstances . . . a more flexible,
all-things-considered approach'' and ``reject[ing] rigid rules, bright-
line tests, and mechanistic inquiries'' for determining probable cause
in case involving police search of a vehicle during a traffic stop);
see also Monasky v. Taglieri, 140 S. Ct. 719, 723 (2020) (holding that
a child's ``habitual residence'' for purposes of the Hague Convention
``depends on the totality of the circumstances specific to the case'');
Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 553-
54 (2014) (holding that courts may consider the totality of the
circumstances when determining whether a case is ``exceptional'' under
Federal Patent Act provision concerning the award of attorney's fees to
prevailing parties). The Department is confident that its case-by-case
approach in the DBRA debarment context will continue to be fairly
administered and readily understood by the regulated community.
Contractors on DBRA projects are charged with knowing the law,
including the Davis-Bacon and CWHSSA labor standards requirements and
the consequences, such as debarment, for violating them. See, e.g., NCC
Elec. Servs., Inc., ARB No. 13-097, 2015 WL 5781073, at *7 (``[T]here
has to be a presumption that the employer who has the savvy to
understand government bid documents and to bid on a Davis-Bacon Act job
knows what wages the company is paying its employees and what the
company and its competitors must pay when it contracts with the federal
government'' (quotation marks omitted)); cf. Abhe & Svoboda, Inc., 508
F.3d at 1059-60 (``Existing administrative and judicial decisions and
the [DBA] itself put the Company on fair notice of what was required''
regarding classification of employees despite contractor's claim that
``general wage determinations did not indicate the proper method of
classifying employees.'').
Being a government contractor carries with it attendant
responsibilities, not least of which is complying with DBRA labor
standards requirements. These obligations apply to all DBRA
contractors, subcontractors, and responsible officers. Government
contractors may be subject to debarment regardless of size and even if
their disregard of obligations occurs on their first DBRA contract, or
if WHD has not previously found violations. See, e.g., Stop Fire, Inc.,
WAB No. 86-17, 1987 WL 247040, at *2 (June 18, 1987) (``The contention
that this was a company's first Davis-Bacon Act job is not sufficient
to relieve it from being placed on the ineligible list, absent other
additional justification.''); Morris Excavating Co., Inc., WAB No. 86-
27, 1987 WL 247046, at *1 (rejecting ``principle that each contractor''
violating the DBRA ``gets one free shot at underpaying laborers and
mechanics on a Davis-Bacon project until the time of enforcement'' and
finding that 6-month debarment of a small contractor on relatively
small contract doing ``localized specialty work'' was warranted despite
workers' ``agree[ment] that [the firm] would pay them their regular
wages now and the additional Davis-Bacon amount later'').
The Department believes that existing mechanisms are sufficient to
address FTBA's concern about debarment in light of what they allege to
be a lack of ``transparency'' about applicable classifications. If
there is any uncertainty about which classifications apply to
particular work, contractors may request clarification and information
on local area practice, including from the contracting agency or WHD.
If that further guidance indicates that the work in question is not
performed by a classification listed on the wage determination, the
issue may be resolved through the conformance process. Further,
``[c]ontractors who seek to perform work on a federal construction
project subject to the Davis-Bacon Act have an obligation `to
familiarize themselves with the applicable wage standards contained in
the wage determination incorporated into the contract solicitation
documents.' '' Am. Bldg. Automation, Inc., ARB No. 00-067, 2001 WL
328123, at *3-4 (Mar. 30, 2001) (citation omitted) (denying
subcontractor's appeal of denial of conformance request in which
subcontractor claimed it had no reason to believe that building
automation and controls work fell within plumber classification). Firms
of any size may also consult the extensive subregulatory materials that
are available on WHD's website (including FOH chapters and the PWRB),
request informal compliance assistance from WHD, or seek guidance in
accordance with 29 CFR 5.13. More formally, contractors may request
ruling letters from the Administrator.
The Department disagrees with the group of U.S. Senators that the
NPRM did not adequately explain the ``disregard of obligations''
standard such that small firms could understand it. Not only did the
NPRM contain an explanation of the standard, but also the Department
has resources available on its website for those who desire more
information about debarment criteria. Nevertheless, the Department
takes this opportunity to expand upon the explanation in the NPRM about
the types of actions and inactions that could constitute a debarrable
disregard of obligations to workers or subcontractors under the rule.
The additional examples of debarrable actions or omissions in this
section are illustrative, not exhaustive.
As the Department highlighted in the NPRM, it is well settled that
contractors, subcontractors, and responsible officers will be debarred
for certain egregious or deliberate and knowing violations under both
the disregard of obligations and aggravated or willful standards. For
example, falsification of certified payroll combined with underpayment
or misclassification--thus simulating compliance with Davis-Bacon or
CWHSSA obligations--constitute aggravated and willful violations and,
necessarily, a disregard of obligations to workers too. Falsification
of certified payrolls can take various forms including, but not limited
to, overreporting prevailing wages and/or fringe benefits paid;
underreporting
[[Page 57682]]
hours worked; misclassifying workers who performed skilled trade work
as laborers; omitting workers (often because they are paid less that
required wages) from the payroll; and listing managers or principals
who did not perform manual labor as laborers and mechanics.
Making workers ``kick back'' or return any portion of the
prevailing wages is another DBRA violation that has warranted debarment
under both the willful or aggravated and the ``disregard of
obligations'' standards for decades. See, e.g., Killeen Elec. Co., WAB
No. 87-49, 1991 WL 494685, at *5. Such kickbacks have been illegal
since 1934, when the Copeland ``Anti-Kickback'' Act was passed and can
even result in criminal prosecution. See 48 Stat. 948 (June 13, 1934);
see also section III.B.3.xix (``Anti-Retaliation''). When the DBA was
amended in 1935, Congress not only added the debarment sanction, but
also ``the provision that each contract shall contain a stipulation
requiring unconditional weekly payments without subsequent deductions
or rebates'' to try to eliminate the ``illegal practices of exacting
rebates or kick-backs.'' H. Rep. No. 74-1756, at 3 (1935); S. Rep. No.
74-1155, at 3 (1935); 40 U.S.C. 3142(c)(1). Regulations implementing
the Copeland Act's requirement that contractors and subcontractors
submit weekly statements about wages paid each worker--with some
variation and changes over the years--have been in place since 1935,
except for a ``three-year hiatus from 1948 to 1951.'' Donovan, 712 F.2d
at 630; see also 6 FR 1210, 1210-1211 (Mar. 1, 1941) (requiring
contractors and subcontractors to provide weekly sworn affidavits
regarding wages paid during preceding pay roll period); 7 FR 686, 687-
88 (Feb. 4, 1942).
Other categories of willful or aggravated actions that necessarily
warrant debarment under the lower ``disregard of obligations'' standard
include, but are not limited to, contractor efforts to require or
coerce workers to lie to the Department or contracting agencies about
their wages paid and hours worked, or to refuse to cooperate with such
enforcement efforts at all by instructing workers to leave the job site
when investigators are conducting worker interviews. These actions are
akin to falsification of payroll or destruction of records to the
extent that such actions are intended to simulate compliance or, at
least, hide noncompliance.
While disregard of obligations ``need not be the equivalent of
intentional falsification,'' DBA violations alone do not constitute a
disregard of obligations warranting debarment. See NCC Elec. Servs.,
Inc., ARB No. 13-097, 2015 WL 5781073, at *6, *10; Structural Concepts,
Inc., WAB No. 95-02, 1995 WL 732671, at *3 (Nov. 30, 1995) (the strict
liability standard for holding prime contractors liable for back wages
owed to workers has not been extended to debarment under the DBA). For
example, in Structural Concepts, the Board reversed an ALJ's debarment
order because the Board could not conclude from the evidence presented
that the prime contractor's principal knew or should have known of the
subcontractor's falsified certified payrolls, and when the principal
did find out about the subcontractor's DBA violations, they took
reasonable action by cancelling the subcontract. Id.
The Department reiterates, as it explained in the NPRM, that
contractors' bad faith or grossly negligent actions or inactions can be
a disregard of their DBRA obligations warranting 3-year debarment.
While merely inadvertent or negligent conduct or innocuous mistakes
would not warrant debarment, conduct evidencing an intent to evade, or
a purposeful lack of attention to, statutory or regulatory obligations
warrant debarment. ``Blissful ignorance is no[t]'' and will continue
not to be a ``defense to debarment.'' Fontaine Bros., Inc., ARB No. 96-
162, 1997 WL 578333, at *3.
Debarment under the ``disregard of obligations'' standard requires
some element of intent or culpability beyond mere negligence. P&N,
Inc./Thermodyn Mech. Contractors, Inc., ARB No. 96-116, 1996 WL 697838,
at *4, *7 (Oct. 25, 1996); NCC Elec. Servs., Inc., ARB No. 13-097, 2015
WL 5781073, at *6. The Department, thus, disagrees with the claim from
the group of U.S. Senators that small and mid-size contractors are at
greater vulnerability of debarment for ``unintentionally violating''
prevailing wage requirements. Truly unintentional violations that are
merely negligent would not merit debarment as a disregard of
obligations.
The Board has explained the difference between violations that
constitute a disregard of obligations to workers or subcontractors and
those that are willful or aggravated violations. For example, an
``intentional failure to look at what the law requires'' may not rise
to a deliberate, knowing, and intentional action that constitutes a
willful or aggravated violation of the Related Acts. Interstate Rock
Prods., Inc., ARB No. 15-024, 2016 WL 5868562, at *4 (``Intentional
disregard of obligations may therefore include acts that are not
willful attempts to avoid the requirements of the DBA.''). The Board
went on to explain that ``contractors and subcontractors [may not]
ignore the rules and regulations applicable to DBA contracts, pay their
employees less than prevailing wages, and avoid debarment by asserting
that they did not intentionally violate the DBA because they were
unaware of the Act's requirements.'' Id. Similarly, gross negligence
and bad faith can constitute a disregard of obligations. NCC Elec.
Servs., Inc., ARB No. 13-097, 2015 WL 5781073, at *6 & n.22.
For example, a contractor or subcontractor's failure to ``look to
[their] obligations under DBA,'' a failure to read DBA provisions on a
contract, a failure ``to keep proper records tracking the actual work
performed,'' and failing to flow down Davis-Bacon labor standards
provisions to lower-tier subcontractors would be a disregard of
obligations because government contractors are expected to know the
law. Id. at *7. A subcontractor's failure to read DBRA provisions the
prime contractor included in its subcontract and its failure to include
the DBA provision in its own subcontract with a lower-tier contractor
also has been held to constitute a disregard of the debarred
subcontractor's obligations to be aware of the DBA requirements and to
ensure its lower-tier subcontractor complied with wage payment and
record keeping requirements. See Ray Wilson Co., ARB No. 02-086, 2004
WL 384729, at *10.
Recordkeeping violations short of falsification have led to
debarment in various Related Act cases. See, e.g., Fontaine Bros.,
Inc., ARB No. 96-162, 1997 WL 578333, at *3 (affirming debarment of a
contractor that failed to keep records of any payroll deductions or to
keep any records for workers paid in cash); P.B.M.C., Inc., WAB No. 87-
57, 1991 WL 494688, at *7 (debarment appropriate where contractor
failed to record workers' piecework production and hours worked). The
regulations notify contractors that ``failure to submit the required
records upon request or to make such records available may be grounds
for debarment.'' 29 CFR 5.5(a)(3)(iii) (current). Under the final rule,
such required records now also include contracts and related documents.
See 29 CFR 5.5(a)(3)(iii). In one case, a contractor's failure to
submit certified payrolls on a timely basis--it waited 9 weeks before
submitting the first nine certified payrolls--also constituted a
disregard of its obligations warranting debarment. Sealtite Corp., WAB
No. 87-06, 1988 WL 384962, at *4 (Oct. 4 1988).
A disregard of contractors' compliance and oversight
[[Page 57683]]
responsibilities could also result in debarment under the DBA standard.
``[F]ailure to properly instruct [subordinates] in the preparation of
the payrolls'' could result in debarment under the DBA. C.M. Bone, WAB
No. 78-04, 1978 WL 22712, at *1 (Sept. 13, 1978); see also Ray Wilson
Co., ARB No. 02-086, 2004 WL 384729, at *10. Another example of actions
or omissions that could result in debarment under the unitary standard
includes a failure to flow down the applicable wage determination and
Davis-Bacon and/or CWHSSA labor standards provisions to lower-tier
subcontractors.
While there will be a subset of violations that would only have
been debarrable under the DBA ``disregard of obligations'' standard but
now will be potentially subject to debarment under both the DBA and
Related Acts, the Department does not anticipate that this subset of
violations will be particularly large or the violations novel. First,
as explained in the NPRM and reiterated in this section above, many of
the same types of violations have long been debarrable under both the
DBA and Related Acts (e.g., falsification of certified payrolls coupled
with underpayment or misclassification, kickbacks). Second, in some
cases involving projects subject to both DBA and Related Acts, the
Board previously has decided debarment based on the laxer DBA
``disregard of obligations'' standard. See, e.g., Interstate Rock
Prods., ARB No. 15-024, 2016 WL 5868562, at *8 n.36 (affirming
debarment for misclassification under the DBA ``laxer standard'' which
``render[ed] debarment under the [Related Acts] redundant and moot);
P&N, Inc./Thermodyn Mech. Contractors, Inc., ARB No. 96-116, 1996 WL
697838, at *2 & n.7 (distinguishing between the DBA and Related Act
standards and applying the less strict DBA standard because case
involved violations of both DBA and CWHSSA).
The Department expects the change to a single debarment standard--
the current ``disregard of obligations'' standard instead of the
heightened aggravated or willful standard--will further the remedial
goals of the DBRA by more effectively enlisting the regulated community
in compliance with the Davis-Bacon and CWHSSA labor standards
requirements. The Department's decision to change to a single debarment
standard rests in part on its belief that extending the current
``disregard of obligations'' standard to all DBA and Related Act
debarments will promote ``the cooperation of the employer, largely
through self-enforcement,'' in complying with the DBRA requirements.
Facchiano Constr., 987 F.2d at 214. As echoed by various commenters,
this change makes particular sense since DBA and Related Act
construction work is otherwise generally subject to the same Davis-
Bacon labor standards.
The Department agrees with the many commenters who emphasized the
importance of preventing repeat violations by contractors who may not
be debarred the first time they are found to have violated the DBA or
Related Acts. The Department echoes the importance of incentivizing
compliance by contractors and their responsible officers on every
project, particularly in light of limited enforcement resources vis-a-
vis the number of potentially affected workers on DBRA-covered
projects. To the extent some unscrupulous contractors' business models
even rely on the likelihood of their violations going undetected, as
some commenters asserted, strengthening the debarment remedy takes on
an even greater importance for repeat, or potential repeat, violators.
Similar concerns animated the 1935 amendments to the DBA, which
until then had no enforcement provisions. The legislative history
indicates that Congress added debarment, one such enforcement power, in
part to address the problem of repeat violators getting new Davis-Bacon
contracts. See, e.g., S. Rep. No. 74-332, pt. 3, at 11 (1935) (noting
the need to ``speedily remed[y]'' the situation in which the
requirement to award contracts to the lowest responsible bidder
resulted in ``the anomaly . . . where violators of prevailing wage
scales and even contractors who have actually been guilty of dishonest
practices, such as defrauding their workmen . . . were granted
additional contracts by the Government''). Congress in 1935, thus,
implemented a ``[s]ystem of coordination between various Government
Departments to assure that the Government will not be in the position
of continuing to contract with a contractor who disregards his
obligations to his employees and subcontractors.'' H. Rep. No. 74-1756,
at 2 (1935); S. Rep. No. 74-1155, at 2 (1935). The debarment provision
``further penalizes offending contractors and subcontractors by
disqualifying them for 3 years from their privilege of bidding for
Government contracts''--a measure to arm the Department and contracting
agencies with another tool for departments not to have to ``continue to
deal'' with ``bidders [who] had been notorious violators of the Davis-
Bacon Act in the past.'' H. Rep. No. 74-1756, at 3; S. Rep. No. 74-
1155, at 3.
As commenters asserted, it is not uncommon for contractors and
their responsible officers found to have engaged in debarrable conduct
under the DBRA to have committed similar violations on other projects.
The Department expects that adopting the ``disregard of obligations''
debarment standard for Related Act violations may reduce repeat
violations by contractors, subcontractors, and their responsible
officers, since they will face the possibility of debarment on Related
Act-only projects for a broader range of actions and inactions than
under the current dual debarment framework.
The Department is authorized to harmonize the DBRA debarment
standards by substituting the DBA standard for that of the Related
Acts. Contrary to commenters who asserted the Department does not have
the authority to do so, and as discussed in more detail in section
III.B.3.xix (``Anti-Retaliation''), since 1950, Congress has repeatedly
recognized the Secretary's authority and functions under Reorganization
Plan No. 14 of 1950--as recently as November 2021. See IIJA 41101, 42
U.S.C. 18851(b). And in 1984 Congress ratified and affirmed
Reorganization Plan No. 14 of 1950 as law. Reorganization Plan No. 14
of 1950 expressly authorizes the Department to adopt regulations that
promote consistent enforcement and more efficient administration of the
DBRA. The Department anticipates that having one debarment standard
instead of two will do just that. Just as the Department was authorized
to implement regulatory debarment under the willful or aggravated
standard under the Related Acts in 1951, so too may it now adjust that
standard to the ``disregard of obligations'' standard in order to more
effectively promote the remedial goals of the DBRA.
The Department, therefore, disagrees with commenters that claimed
that it lacks authority to adopt the ``disregard of obligations''
standard for debarment under the Related Acts. IEC, for example, did
not cite any specific statutory provision or other law to support their
contention that this rule exceeds the Department's authority under
``several if not all'' of the Related Acts. Reorganization Plan No. 14
of 1950 has consistently been applied to Related Acts even where it is
not specifically referenced in the Related Act.
Regulatory debarment outside the DBRA context as a ``means for
accomplishing [a] congressional purpose,'' Gonzalez v. Freeman, 334
[[Page 57684]]
F.2d 570, 577 (D.C. Cir. 1964), or to support ``the integrity and
effectiveness of federally funded activities,'' Meunier & Nelson,
supra, at 556-57, is not uncommon. In the 1980s, debarment and
suspension from Federal procurement and nonprocurement transactions was
promulgated in the FAR and the Non-procurement Common Rule,
respectively. See FAR Subpart 9.4, 48 CFR 9.400-409 (procurement
debarment, suspension, and ineligibility); 2 CFR part 180 (OMB
guidelines to agencies on governmentwide debarment and suspension
(nonprocurement, e.g., Federal grants, loans, and other forms of
assistance)); see also 48 FR 42102, 42148 (Sept. 19, 1983)
(establishing the FAR); 53 FR 19161 (May 26, 1988) (memorandum about
publication of final government-wide nonprocurement common rule);
Meunier & Nelson, supra, at 554-57. As such, the regulated community is
or should be familiar with the general concept of debarment or
suspension being a consequence for misuse of Federal funding or
assistance.\271\
---------------------------------------------------------------------------
\271\ As with debarment under the DBA and Related Acts, the
policy for debarment, suspension, and ineligibility under the FAR
underscores that ``[t]he serious nature of debarment and suspension
requires that these sanctions be imposed only in the public interest
for the Government's protection and not for purposes of
punishment.'' 48 CFR 9.402(b); see also Gonzalez, 334 F.2d at 576-77
(``Notwithstanding its severe impact upon a contractor, debarment is
not intended to punish but is a necessary `means for accomplishing
the congressional purpose''' at issue in that case).
---------------------------------------------------------------------------
In addition to the decisions upholding regulatory debarment for
Related Act willful or aggravated violations discussed in the NPRM,
courts have upheld regulatory debarment and suspension measures absent
express Congressional authority for such provisions, provided there are
certain minimum fairness safeguards. See, e.g., Gonzalez, 334 F.2d at
576-77 (finding statute that made no explicit provision for debarring
contractors doing business with the agency authorized debarment of
``irresponsible, defaulting or dishonest'' bidders and contractors, a
power ``inherent and necessarily incidental to the effective
administration of the statutory scheme''); cf. Jacquet, 569 F.2d at
1345 (upholding regulation temporarily disqualifying households that
fraudulently acquired food stamps, which was ``appropriate for the
effective and efficient administration of the program'' and ``[gave]
the administrative authorities a tool with which to protect the program
from those who would abuse it'' and was authorized despite the Food
Stamp Act's silence about such disqualification). Such administrative
debarment power comes with ``an obligation to deal with uniform minimum
fairness as to all.'' Gonzalez, 334 F.2d at 577. Specifically,
``[c]onsiderations of basic fairness require administrative regulations
establishing standards for debarment and procedures which will include
notice of specific charges, opportunity to present evidence and to
cross-examine adverse witnesses, all culminating in administrative
findings and conclusions based upon the record so made.'' Id. at 578.
Although the Department's rule eliminates the provisions providing for
the possibility of debarment for fewer than 3 years and early removal
from the debarment list, as mentioned above, the Department's debarment
procedures accord contractors and responsible officers extensive due
process protections to challenge their debarment in the first
instance.\272\
---------------------------------------------------------------------------
\272\ The Department notes that contrary to the comment from the
group of U.S. Senators, the regulations do not change any of the
existing evidentiary burdens (e.g., ``burden of persuasion''). WHD
will continue to have to prove violations in administrative
proceedings by a preponderance of the evidence.
---------------------------------------------------------------------------
The Department also disagrees with FTBA that it should (or could)
make the unitary debarment standard the heightened Related Act standard
with the possibility of a shorter period and early removal. The
Department cannot change the DBA disregard of obligation standard, the
mandatory 3-year period, or the extension of debarment to entities in
which a debarred person or firm has an interest because those
provisions are statutory, not regulatory. The Department may, however,
under its statutory and implied powers of enforcement, bring Related
Act debarments within the DBA debarment framework of a lower standard,
mandatory 3-year period, and no possibility of early removal. The
Department has long had procedures in place that provide contractors,
``responsible officers,'' and other affected parties ample notice of
the findings against them, an opportunity to request a hearing in which
they could contest those findings, and the ability to appeal adverse
decisions. See 29 CFR 5.11, 5.12, pts. 6, 7, 18. These robust
procedures include safeguards for the regulated community if they
choose to challenge--as they have been able to do for decades--3-year
debarment for disregarding their obligations, albeit in all DBRA cases
under the final rule, not just DBA cases. The rule's harmonized
debarment provisions will further the DBRA's remedial goals of
protecting workers, with all the attendant procedural safeguards for
the regulated community.
As part of the revisions to harmonize debarment provisions, the
Department is codifying both existing case law about debarment of
``responsible officers'' in Related Act cases and the Department's
position about debarment of entities in which debarred parties have an
``interest.'' The Department agrees with the UA that absent debarment
of such individuals and entities, debarred parties could avoid
debarment sanctions by setting up shop as a new entity to obtain
government contracts. In response to ABC's request for more guidance
about how responsible officers would be determined or what constitutes
a substantial interest in a debarred company, the Department reiterates
that these changes do not effect a substantive change in the law or how
it is applied, as noted in the NPRM (and restated above). These
determinations--both in the current regulations and final rule--are
made on a case-by-case basis considering all relevant facts, and in the
relatively rare circumstances in which there are issues regarding who
qualifies as a responsible officer or what constitutes an interest in a
debarred company, information regarding those issues is available
through various public Departmental resources. See e.g., 47 FR 23661
(1982 final rule).
In determining whether an individual responsible officer's
debarment is warranted, the Department evaluates factors such as
involvement in and responsibility for running the company; status as an
officer and/or principal of the entity (although status alone is not
determinative); actual or constructive knowledge of or gross negligence
with respect to DBRA obligations (e.g., failure to ensure present or
future compliance with applicable labor standards, failure to correct
ongoing violations, etc.); and/or violations (e.g., underpayments,
misclassification, incomplete, inaccurate, or falsified payroll and
timekeeping, etc.). See, e.g., Facchiano Constr., 987 F.2d at 213-15;
Pythagoras Gen. Contracting Corp., ARB Nos. 08-107, 09-007, 2011 WL
1247207, at *13-14, *13 n.94. Responsible company officials cannot
``avoid debarment by claiming that the labor standards violations were
committed by employees of the firm.'' Superior Masonry, Inc., WAB No.
94-19, 1995 WL 256782, at *5 (Apr. 28, 1995). The Department notes much
of the same analysis to determine whether a firm has disregarded its
obligations and should be debarred will apply to determine whether an
individual is a
[[Page 57685]]
responsible officer of the firm whose debarment is warranted.
To determine whether a debarred firm or person has an ``interest''
in another entity that should also be debarred, the Department will
consider such factors as the debarred party's ownership interest,
extent of control of the related entity's operations, whether the
related entity was formed by a person previously affiliated with or a
relative of the debarred party, and whether there is common management.
See, e.g., R.C. Foss & Son, Inc., WAB No. 87-46, 1990 WL 484311, at *2,
*4 (Dec. 31, 1990) (affirming Related Act debarment of entity owned by
wife of debarred subcontractor's principal owner and for which debarred
owner was performing same functions as he had performed for debarred
subcontractor); see generally Charles Randall, LBSCA No. 87-SCA-32,
1991 WL 733572 (Dec. 9, 1991) (SCA and CWHSSA). Entities in which a
debarred person or firm holds only a ``nominal interest'' will not be
debarred. 47 FR 23661.
Finally, because the Department received no comments specifically
about the scope of the debarment proposal, the final rule therefore
adopts the change as proposed.
For the foregoing reasons, the final rule adopts the harmonized
debarment standards so that--regardless of the source or type of
Federal funding--all DBRA contractors, subcontractors, and responsible
officers (as well as firms in which they have an interest) that
disregard their obligations to workers or subcontractors are subject to
a 3-year debarment during which they may not receive any contract or
subcontract of the United States or the District of Columbia, as well
as any contract or subcontract subject to the labor standards
provisions of the laws referenced in Sec. 5.1. Specifically, the
Department adopts with no modification the proposed changes to Sec.
5.12 as well as the proposed conforming changes to Sec. 5.6(b)
(included in renumbered Sec. Sec. 5.6(b)(4) and 5.7(a)). In addition,
the Department adopts the changes to Sec. 5.5(a)(10) as proposed,
except that an inadvertent error in the proposed regulatory text has
been corrected. That section referred to ineligibility ``by virtue of
40 U.S.C. 3144(b) or Sec. 5.12(a) or (b),'' but it should only have
referred to--and this correction has been made in the final rule--
ineligibility ``by virtue of 40 U.S.C. 3144(b) or Sec. 5.12(a)'' to
conform to the harmonized debarment provisions in revised Sec. 5.12.
Paragraph 5.12(a)(2) has been revised to specify that debarment actions
are reflected on the SAM website.
xxii. Employment Relationship Not Required
The Department proposed a few changes throughout parts 1, 3, and 5
to reinforce the well-established principle that Davis-Bacon labor
standards requirements apply even when there is no employment
relationship between a contractor and worker.
In relevant part, the DBA states that ``the contractor or
subcontractor shall pay all mechanics and laborers employed directly on
the site of the work, unconditionally and at least once a week, and
without subsequent deduction or rebate on any account, the full amounts
accrued at time of payment, computed at wage rates not less than those
stated in the advertised specifications, regardless of any contractual
relationship which may be alleged to exist between the contractor or
subcontractor and the laborers and mechanics.'' 40 U.S.C. 3142(c)(1).
The Department has interpreted this language to cover ``[a]ll laborers
and mechanics employed or working upon the site of the work,'' Sec.
5.5(a)(1)(i), and the definitions of ``employed'' in parts 3 and 5 of
the existing regulations similarly reflect that the term includes all
workers on the project and extends beyond the traditional common-law
employment relationship. See Sec. 3.2(e) (``Every person paid by a
contractor or subcontractor in any manner for his labor . . . is
employed and receiving wages, regardless of any contractual
relationship alleged to exist between him and the real employer.'');
Sec. 5.2(o) (``Every person performing the duties of a laborer or
mechanic [on DBRA work] is employed regardless of any contractual
relationship alleged to exist between the contractor and such
person.''); cf. 41 U.S.C. 6701(3)(B) (defining ``service employee''
under the SCA to ``include[ ] an individual without regard to any
contractual relationship alleged to exist between the individual and a
contractor or subcontractor''); 29 CFR 4.155 (providing that whether a
person is a ``service employee'' does not depend on any alleged
contractual relationship).
The ARB and its predecessors have similarly recognized that the
DBRA apply to workers even in the absence of an employment
relationship. See Star Brite Constr. Co., Inc., ARB No. 98-113, 2000 WL
960260, at *5 (June 30, 2000) (``[T]he fact that the workers [of a
subcontractor] were engaged in construction of the . . . project
triggered their coverage under the prevailing wage provisions of the
[DBA]; lack of a traditional employee/employer relationship between
[the prime contractor] and these workers did not absolve [the prime
contractor] from the responsibility to insure that they were
compensated in accordance with the requirements of the [DBA].''); Labor
Servs., Inc., WAB No. 90-14, 1991 WL 494728, at *2 (May 24, 1991)
(stating that the predecessor to section 3142(c) ``applies a functional
rather than a formalistic test to determine coverage: if someone works
on a project covered by the Act and performs tasks contemplated by the
Act, that person is covered by the Act, regardless of any label or lack
thereof,'' and requiring a contractor to pay DBA prevailing wages to
workers labeled as ``subcontractors''). This broad scope of covered
workers also extends to CWHSSA, the Copeland Act, and other Related
Acts. See 40 U.S.C. 3703(e) (providing that Reorganization Plan No. 14
of 1950 and 40 U.S.C. 3145 apply to CWHSSA); 29 CFR 3.2(e); see also,
e.g., Ray Wilson Co., ARB No. 02-086, 2004 WL 384729, at *6 (finding
that workers met the DBA's ``functional [rather than formalistic] test
of employment'' and affirming an ALJ's order of prevailing wages and
overtime pay due to workers of a second-tier subcontractor); Joseph
Morton Co., WAB No. 80-15, 1984 WL 161739, at *2-3 (July 23, 1984)
(rejecting a contractor's argument that workers were subcontractors not
subject to DBA requirements and affirming an ALJ finding that the
contractor owed the workers prevailing wage and overtime back wages for
work performed on a contract subject to DBA and CWHSSA); cf. Charles
Igwe, ARB No. 07-120, 2009 WL 4324725, at *3-5 (Nov. 25, 2009)
(rejecting contractors' claim that workers were independent contractors
not subject to SCA wage requirements, and affirming an ALJ finding that
contractors ``violated both the SCA and the CWHSSA by failing to pay
required wages, overtime, fringe benefits, and holiday pay, and failing
to keep proper records'').
The Department proposed a few specific changes to the regulations
in recognition of this principle. First, the Department proposed to
amend Sec. 1.2 to add a definition of ``employed'' that is
substantively identical to the definition in Sec. 5.2 and to amend
Sec. 3.2 to clarify the definition of ``employed'' in part 3. These
changes clarify that the DBA's expansive coverage of workers even in
the absence of an employment relationship is also relevant to wage
surveys and wage determinations under part 1 and certified payrolls
under part 3. Second, the Department proposed to change references to
employment (e.g., ``employee,'' ``employed,'' ``employing,''
[[Page 57686]]
etc.) in Sec. 5.5(a)(3) and (c), as well as elsewhere in the
regulations, to refer instead to ``workers,'' ``laborers and
mechanics,'' or ``work.'' Notwithstanding the broad scope of worker
coverage reflected in the existing definitions and in case law, the
Department explained that the additional language proposed,
particularly in the DBRA contract clauses, would further clarify the
scope of worker coverage and eliminate any ambiguity that laborers and
mechanics are covered by the DBRA even in the absence of an employment
relationship. Consistent with the above, however, the words
``employee,'' ``employed,'' or ``employment'' when used in this
preamble or in the regulations (including the existing regulations),
should be interpreted expansively and do not limit coverage to workers
in an employment relationship. Finally, the Department proposed to
clarify in the definition of ``employed'' in parts 1, 3, and 5 that the
broad understanding of that term applies equally in the context of
``public building[s] or public work[s]'' and in the context of
``building[s] or work[s] financed in whole or in part by assistance
from the United States through loan, grant, loan guarantee or
insurance, or otherwise.''
The Department received several dozen comments on this proposal,
most of which supported the proposed changes. Many of these comments
contended that this proposal would help address the widespread
misclassification of employees as independent contractors in the
construction industry by reducing or eliminating the perceived
incentives to misclassify employees as independent contractors. Several
comments cited to numerous misclassification studies substantiating
widespread misclassification of employees as independent contractors.
For example, the National Employment Law Project (NELP) cited to a 2007
study of New York's unemployment insurance audits which concluded that
the misclassification rate in the construction industry is almost 50
percent higher than the overall misclassification rate in the private
sector. LCCHR cited to a study finding 23 percent of Minnesota's, 20
percent of Illinois', and 10 percent of Wisconsin's construction
workers were misclassified or paid off-the-books. LCCHR further noted
that, according to the study, such misclassification or off-the-books
payments cost the three states a combined $360 million in lost tax
revenues per year. LCCHR also cited to an estimate that U.S.
construction workers were denied over $811 million in overtime premium
in 2017 due to misclassification and off-the-books payments.
NELP also stated that the NPRM's proposals to clarify coverage of
laborers and mechanics regardless of their employment status would
increase accountability and improve work standards in multitiered
contracting relationships. TAUC expressed their support for the NPRM's
proposed changes because the misclassification of employees as
independent contractors gives an unfair competitive advantage to
contractors and subcontractors who misclassify and underpay their
workers.
The Department appreciates the commenters' concerns about
misclassification in the construction industry and expects the NPRM's
proposed changes, which are adopted in this final rule, to further
emphasize that the DBRA's labor standards requirements apply to workers
even in the absence of an employment relationship. The changes may also
help to reduce misclassification in the construction industry by
eliminating any misperception that DBRA requirements can be avoided by
classifying workers as independent contractors or by otherwise denying
the existence of an employment relationship.
Smith, Summerset & Associates also supported the proposed changes,
but commented that the ``irrelevancy'' of employee status should be
further amplified by the specific mention of irrelevancy in the
regulations or at least in the preamble. Smith, Summerset & Associates
stated that DBRA contractors are overburdened with contracting agency
requests for additional documentation that workers are self-employed
when workers are listed on certified payrolls without payroll taxes
withheld. However, the Department believes that the proposed changes
adequately explain that employee status is not relevant to worker
coverage under the DBRA, but agencies may still have other relevant
purposes for requesting such documentation. As stated in section
III.B.3.iii.(B) of this preamble, contracting agencies are free to
provide certified payrolls to other enforcement agencies without the
Department's authorization or permission where the contracting agency
has determined that such a submission is appropriate and is in
accordance with relevant legal obligations. In other words, even though
employee status is not relevant to worker coverage under the DBRA,
there may be other legitimate reasons to request documentation
regarding whether a worker has been properly identified as ``self-
employed'' or as an independent contractor, and the revisions discussed
in this section are not intended to discourage such requests.
CC&M expressed concern over the cost shifting of payroll taxes to
workers when they are misclassified as independent contractors. CC&M
also noted that even when contractors pay the correct prevailing wages
to workers who are misclassified as independent contractors, such
workers are excluded from unemployment insurance and other State or
Federal employment benefits. Though the Department acknowledges the
issues raised by CC&M, these concerns are outside the scope of this
rulemaking. The DBA does not address issues related to payroll taxes,
unemployment insurance or Federal, State, or local benefit programs
that are outside the scope of the wage determinations. Contractors on
DBRA-covered projects are required to comply with other applicable
laws. Payroll tax laws and other employment benefit programs often have
statutory definitions of employment that are properly interpreted and
applied by the government agencies with appropriate enforcement and/or
regulatory authority over such laws. The Department may, however, refer
its findings of misclassification of employees as independent
contractors to other tax agencies for further action under their
respective authority and discretion.
On the other hand, NAHB opposed the NPRM's proposed changes to
employment terms in parts 1, 3, and 5, asserting that such changes
would ``seemingly remove[ ] the defining line between general
contractor and subcontractor liability by implying [an employment]
relationship `regardless of any contractual relationship alleged to
exist between the contractor and such person.''' NAHB further asserted
that the Department's proposals would constitute an expansion of joint
employer liability, and thus, in NAHB's view, would place nearly all
the burden for subcontractor compliance on the prime contractor.
Consequently, NAHB requested that the Department clarify in the final
rule that ``joint employer'' status will be governed by FLSA case law.
The Department believes that NAHB's concerns about changes to
employment terms in the existing regulations are misplaced. As
explained in the NPRM, the Department seeks to reinforce the well-
established principle that, as already reflected in the statute and
existing regulations, Davis-Bacon labor standards requirements apply
even when there is no employment
[[Page 57687]]
relationship between a contractor and worker. The existing regulations
at 29 CFR part 3 and part 5 have long stated that workers are
considered to be ``employed'' for the purposes of prevailing wage and
certified payroll requirements, regardless of any contractual
relationship which may be alleged to exist. The definitional changes
adopted in this final rule simply emphasize this fact. Similarly,
defining ``employed'' in part 1 clarifies that, just as workers are
entitled to prevailing wage rates even where there is no employment
relationship, it is appropriate to include wage data for independent
contractors and others who are not ``employed'' by a contractor or
subcontractor within the meaning of the FLSA in determining prevailing
wages under the Davis-Bacon wage survey program. Thus, this final rule
does not change the standard for joint employer liability for
contractors on Davis-Bacon contracts, as the concept of an employment
relationship is simply not relevant to the application of prevailing
wage requirements to workers. The Department specifically rejects
NAHB's suggestion to incorporate or cross-reference the FLSA standard
for joint employer liability in parts 1, 3, and 5, because contractor
obligations under the DBA may exist even in the absence of an
employment relationship with covered laborers and mechanics. Despite
NAHB's assertion that the proposal was contrary to legal precedent, the
ARB has repeatedly affirmed that DBRA requirements apply even in the
absence of an employment relationship as discussed above in this
section.
NAHB's concerns with respect to the proposed changes in Sec.
5.5(a)(6) are more fully discussed in that section of the preamble.
However, the Department notes here that a prime contractor's liability
for subcontractor violations is based primarily on statutory language
of the DBRA and the contract provisions that flow from that language,
rather than based on any concept of joint employment between the prime
contractor and the workers of its subcontractors.
For the foregoing reasons, the final rule adopts the described
changes to reinforce the well-established principle that Davis-Bacon
labor standards apply even when there is no employment relationship
between a contractor and worker in parts 1, 3, and 5 as proposed.
xxiii. Withholding
The DBA, CWHSSA, and the regulations at 29 CFR part 5 authorize
withholding from the contractor accrued payments or advances equal to
the amount of unpaid wages due laborers and mechanics under the DBRA.
See 40 U.S.C. 3142(c)(3), 3144(a)(1) (DBA withholding), 3702(d),
3703(b)(2) (CWHSSA withholding); 29 CFR 5.5(a)(2) and (b)(3) and 5.9.
Withholding helps to realize the goal of protecting workers by ensuring
that money is available to pay them for the work they performed but for
which they were undercompensated. Withholding plays an important role
in the statutory schemes to ensure payment of prevailing wages and
overtime to laborers and mechanics on Federal and federally assisted
construction projects. The regulations currently require, among other
things, that upon a request from the Department, contracting agencies
must withhold so much of the contract funds as may be considered
necessary to pay the full amount of wages required by the contract, and
in the case of CWHSSA, liquidated damages. See 29 CFR 5.5(a)(2) and
(b)(3) and 5.9. The Department proposed a number of regulatory
revisions to reinforce the current withholding provisions.
(A) Cross-Withholding
Cross-withholding is a procedure through which agencies withhold
contract monies due a contractor from contracts other than those on
which the alleged violations occurred. Prior to the 1981-1982
rulemaking, Federal agencies generally refrained from cross-withholding
for DBRA liabilities because neither the DBA nor the CWHSSA regulations
specifically provided for it. In 1982, however, the Department amended
the contract clauses to expressly provide for cross-withholding. See 47
FR 23659-60 \273\ (cross-withholding permitted as stated in Sec.
5.5(a)(2) and (b)(3)); Grp. Dir., Claims Grp./GGD, B-225091, 1987 WL
101454, at *2 (Comp. Gen. Feb. 20, 1987) (the Department's 1983 Davis-
Bacon regulatory revisions, e.g., Sec. 5.5(a)(2), ``now provide that
the contractor must consent to cross-withholding by an explicit clause
in the contract'').
---------------------------------------------------------------------------
\273\ The May 28, 1982, final rule was implemented in part,
including Sec. 5.5(a)(2) and (b)(3), in 1983. 48 FR 19540, 19540,
19545-47 (Apr. 29, 1983).
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In the NPRM, the Department proposed additional amendments to the
cross-withholding contract clause language at Sec. 5.5(a)(2) and
(b)(3) to clarify and strengthen the Department's ability to cross-
withhold when contractors use single-purpose entities, joint ventures
or partnerships, or other similar vehicles to bid on and enter into
DBRA-covered contracts. As noted in the earlier discussion of the
definition of prime contractor in section III.B.3.ii.(D), the
interposition of another entity between the contracting agency and the
general contractor is not a new phenomenon. However, the use of single-
purpose LLC entities and similar joint ventures and teaming agreements
in government contracting generally has been increasing in recent
decades. See, e.g., John W. Chierichella & Anne Bluth Perry, ``Teaming
Agreements and Advanced Subcontracting Issues,'' Fed. Publ'ns LLC,
TAASI GLASS-CLE A, at *1-6 (2007); A. Paul Ingrao, ``Joint Ventures:
Their Use in Federal Government Contracting,'' 20 Pub. Cont. L.J. 399
(1991).
The Department explained in the NPRM that in response to this
increase in the use of such single-purpose legal entities or
arrangements, Federal agencies have often required special provisions
to assure that liability among joint venturers will be joint and
several. See, e.g., Ingrao, supra, at 402-03 (``Joint and several
liability special provisions vary with each procuring agency and range
from a single statement to complex provisions regarding joint and
several liability to the government or third parties.''). While the
corporate form may be a way for joint venturers to attempt to insulate
themselves from liability, commenters have noted that this ``advantage
will rarely be available in a Government contracts context, because the
Government will customarily demand financial and performance guarantees
from the parent companies as a condition of its `responsibility'
determination.'' Chierichella & Perry, supra, at *15-16.
Under the existing regulations, however, the Government is not able
to obtain similar guarantees to secure performance of Davis-Bacon labor
standards and CWHSSA requirements. It is necessary for the cross-
withholding regulations to be amended to ensure that the core DBRA
remedy of cross-withholding is available when single-purpose LLCs and
similar contracting vehicles are used to contract with the Federal
Government. This enforcement gap exists because, as a general matter,
cross-withholding (referred to as ``offset'' under the common law) is
not available unless there is a ``mutuality of debts'' in that the
creditor and debtor involved are exactly the same person or legal
entity. See R.P. Newsom, 39 Comp. Gen. 438, 439 (1959). That general
rule, however, can be waived by agreement of the parties. See Lila
Hannebrink, 48 Comp. Gen. 365, 365 (1968) (allowing cross-withholding
against a joint venture for debt of an individual joint
[[Page 57688]]
venturer on a prior contract, where all parties agreed).
The structure of the Davis-Bacon Act, with its implementation in
part through the mechanism of contract clauses, provides both the
opportunity and the responsibility of the Government to ensure--by
contract--that the use of the corporate form does not interfere with
Congress's mandate that workers be paid the required prevailing wage
and that withholding ensures the availability of funds to pay any back
wages and other monetary relief owed. It is a cardinal rule of law that
``the interposition of a corporation will not be allowed to defeat a
legislative policy, whether that was the aim or only the result of the
arrangement.'' Anderson v. Abbott, 321 U.S. 349, 363 (1944). This
principle is generally applied to allow, in appropriate circumstances,
for corporate forms to be disregarded by ``piercing the corporate
veil.'' \274\ However, where a policy is effectuated through contract
terms, it can be inefficient and unduly limiting to rely on post hoc
veil-piercing to implement that policy. The Government may instead, by
contract, make sure that the use of single-purpose entities,
subsidiaries, or joint ventures interposed as nominal ``prime
contractors'' does not frustrate the Congressional mandate to ensure
back wages are available through withholding.\275\
---------------------------------------------------------------------------
\274\ The Department has long applied corporate veil-piercing
principles under the DBRA. See, e.g., Thomas J. Clements, Inc., ALJ
No. 82-DBA-27, 1984 WL 161753, at *9 (June 14, 1984) (recognizing,
in the context of a Davis-Bacon Act enforcement action, that a court
may ``pierce the corporation veil where failure to do so will
produce an unjust result''), aff'd, WAB No. 84-12, 1985 WL 167223,
at *1 (Jan. 25, 1985) (adopting ALJ's decision as the WAB's own
decision); Griffin v. Sec'y of Lab., ARB Nos. 00-032, 00-033, 2003
WL 21269140, at *8, n.2 (May 30, 2003) (various contractors and
their common owner, who ``made all decisions regarding operations of
all of the companies,'' were one another's ``alter egos'' in a DBRA
debarment action), aff'd sub nom Phoenix-Griffin Grp. II, Ltd. v.
Chao, 376 F. Supp. 2d 234, 247 (D.R.I. 2005).
\275\ Cf. Robert W. Hamilton, The Corporate Entity, 49 Tex. L.
Rev. 979, 984 (1971) (noting the difference in application of
``piercing the veil'' concepts in contract law because ``the
creditor more or less assumed the risk of loss when he dealt with a
`shell'; if he was concerned, he should have insisted that some
solvent third person guarantee the performance by the
corporation'').
---------------------------------------------------------------------------
Accordingly, the Department proposed to amend the withholding
contract clauses at Sec. 5.5(a)(2) and Sec. 5.5(b)(3), as well as to
amend Sec. 5.9, to ensure that any entity that directly enters into a
contract covered by Davis-Bacon labor standards must agree to cross-
withholding against it to cover liabilities for any DBRA violations on
not just that contract, but also on other covered contracts entered
into by the entity that directly entered into the contract or by
specified affiliates. The covered affiliates were those entities
included within the proposed definition of prime contractor in Sec.
5.2, including controlling shareholders or members and joint venturers
or partners. Thus, for example, if a general contractor secures two
prime contracts for two Related Act-covered housing projects through
separate single-purpose entities that it controls, the proposed cross-
withholding language would allow the Department to seek cross-
withholding against either contract even though the contracts are
nominally with separate legal entities.
The Department also proposed to add language to Sec. 5.5(a)(2) and
(b)(3) to clarify that the Government may pursue cross-withholding
regardless of whether the contract on which withholding is sought was
awarded by, or received Federal assistance from, the same agency that
awarded or assisted the prime contract on which the violations
necessitating the withholding occurred. This revision is in accordance
with the Department's longstanding policy, the current language of the
withholding clauses, and case law on the use of setoff procedures in
other contexts dating to 1946. See, e.g., United States v. Maxwell, 157
F.3d 1099, 1102 (7th Cir. 1998) (``[T]he federal government is
considered to be a single-entity that is entitled to set off one
agency's debt to a party against that party's debt to another
agency.''); Cherry Cotton Mills, Inc. v. United States, 327 U.S. 536,
539 (1946) (same). However, because the current Davis-Bacon regulatory
language does not explicitly state that funds may be withheld from
contracts awarded or assisted by other Federal agencies, some agencies
have questioned whether cross-withholding is appropriate in such
circumstances. This proposed addition would expressly dispel any such
uncertainty or confusion. Conforming edits were also proposed to Sec.
5.9.
The Department also proposed certain non-substantive changes to
streamline the withholding clauses. The Department proposed to include
in the withholding clause at Sec. 5.5(a)(2)(i) similar language as in
the CWHSSA withholding clause at Sec. 5.5(b)(3) authorizing
withholding necessary ``to satisfy the liabilities . . . for the full
amount of wages . . . and monetary relief'' of the contractor or
subcontractor under the contract without reference to the specific, and
duplicative, language currently in Sec. 5.5(a)(2) that re-states the
lists of the types of covered workers already listed in Sec.
5.5(a)(1)(i). The Department also proposed using the same phrase ``so
much of the accrued payments or advances'' in both Sec. 5.5(a)(2) and
(b)(3), instead of simply ``sums'' as currently written in Sec.
5.5(b)(3). Finally, the Department proposed to adopt in Sec. 5.5(b)(3)
the use of the term ``considered,'' as used in Sec. 5.5(a)(2), instead
of ``determined'' as currently used in Sec. 5.5(b)(3), to refer to the
determination of the amount of funds to withhold, as this mechanism
applies in the same manner under both clauses.
Conforming edits for each of the above changes to the withholding
clauses at Sec. 5.5(a)(2) and (b)(3) were also proposed for Sec. 5.9.
In addition, the Department proposed clarifying in a new paragraph (c)
of Sec. 5.9 that cross-withholding from a contract held by a different
legal entity is not appropriate unless the withholding provisions in
that different legal entity's contract were incorporated in full or by
reference. Absent exceptional circumstances, cross-withholding would
not be permitted from a contract held by a different legal entity where
Davis-Bacon labor standards were incorporated only by operation of law
into that contract.
The Department received multiple comments in support of the
proposed revisions to the regulatory language for cross-withholding.
Several commenters noted that as the construction industry has evolved
over the years to include an increased use of contracting entities that
are closely related, particularly single-purpose contracting entities,
the Department's regulations must similarly change to ensure that the
use of such contracting vehicles does not undercut the remedial purpose
of the DBA. These commenters noted that the proposed revisions are
necessary both to ensure that workers receive the prevailing wages that
they are entitled to for their work and to prevent law-abiding
contractors from being undercut by contractors taking advantage of
these contracting entities to underpay their workers. They also pointed
out that the provisions would make it more difficult for entities to
move from contract to contract without making their workers whole for
any wage underpayment. See, e.g., ACT Ohio, FFC, III-FFC, LIUNA, NCDCL,
REBOUND, SMACNA, UBC. The Department agrees with such commenters that
it is necessary for the Davis-Bacon regulations to take modern
contracting processes into account, to safeguard the payment of
applicable prevailing wages to workers, and to ensure uniform
compliance across the industry.
ABC and IEC opposed the proposal and stated that cross-withholding
in any circumstances is not authorized by the
[[Page 57689]]
Davis-Bacon Act. They asserted the DBA limits withholding to the
contract on which the violations occurred. A comment from Practus, LLP
claimed that legislative action was required for the ``ambiguous''
cross-withholding policy. An individual commenter argued that the
Davis-Bacon Act does not expressly provide for cross-withholding, and
that cross-withholding could result in violations of the ``Purpose
Statute'' and the Anti-Deficiency Act when the cross-withholding is
effectuated by a contracting agency other than the agency with the
contract on which DBRA violations had been found. This commenter
requested that language be added to the regulation to clarify that
cross-withholding is ``subject to availability of funds in accordance
with law.'' IEC also claimed that the Department's explanation for the
proposed language acknowledged that there is no ``mutuality of debts''
between a contractor and the government when a contractor owes a worker
wages that would justify a cross-withholding. FTBA did not object to
cross-withholding as a whole, but objected to cross-withholding on
contracts held by separate legal entities that merely have some form of
common ownership or control, on the ground that cross-withholding in
such circumstances ignores the separate legal status (for contract
award, tax, payroll, and myriad other purposes) of such contracting
entities.
FTBA and ABC also stated that there is no indication that cross-
withholding is necessary to ensure that workers receive back pay for
prevailing wage violations. ABC suggested that the Department has ample
resources available to enforce findings of violations on a particular
DBA-covered contract without the use of cross-withholding. IEC and the
group of U.S. Senators also expressed general concern that the cross-
withholding process would not provide sufficient due process for
contractors, and IEC proposed that the regulations should prohibit
funds from being withheld until the ARB had reviewed and approved the
proposed withholding. Practus similarly emphasized the need for
specific due process safeguards especially when ``underlying claims
involving a subcontractor are not yet liquidated or ripe for
adjudication.'' Finally, APCA stated that the changes (among others)
would have negative effects on contractors' costs, compliance
responsibilities, enforcement exposure, and penalties.
The Department does not agree with comments that suggest the DBRA
does not permit the use of cross-withholding. The DBA provides that
``there may be withheld from the contractor so much of accrued payments
as the contracting officer considers necessary to pay to laborers and
mechanics employed by the contractor or any subcontractor on the work
the difference between the rates of wages required by the contract to
be paid laborers and mechanics on the work and the rates of wages
received by the laborers and mechanics and not refunded to the
contractor or subcontractors or their agents.'' 40 U.S.C. 3142(c)(3).
The statute does not specify from which contract the funds should be
withheld or state that the funds should be only withheld from the
contract on which the violations occurred or from payments due for work
on that specific contract.\276\ The Department rejects IEC's claim that
the use of the term ``the work'' in section 3142(c)(3) limits the
contracts from which accrued payments may be withheld to the contract
on which ``the work'' occurred for which workers were not properly
paid, and that this statutory provision therefore does not authorize
withholding of funds from a DRBA contract on which no violations were
found. The term ``on the work'' in section 3142(c)(3) specifies which
workers are to benefit from the withholding--those on the DBRA-covered
work on which the violations occurred; ``on the work'' does not limit
the accrued payments from which monies can be withheld. Rather, the
statute directs that funds may be ``withheld from the contractor'' in
an amount considered necessary to pay the difference between the rates
required and the rates paid to laborers and mechanics on the work.\277\
The regulations have expressly provided for cross-withholding for the
past 40 years, as previously explained. And, contrary to commenters'
assertions that cross-withholding is unnecessary to make workers whole,
the Department has repeatedly used the cross-withholding process to
obtain back wages for workers where there would otherwise be
insufficient contract funds available to ensure that workers are paid
the applicable prevailing wages. Cf. Silverton Constr. Co., Inc., WAB
No. 92-09, 1992 WL 515939, at *2-3 (Sept. 29, 1992) (reversing ALJ's
decision that prime contractor was not liable for its subcontractor's
underpayments because no money had been withheld under the contract on
which violations were found because this decision was inconsistent with
the Department's regulations in effect since 1983 that permit cross-
withholding if necessary to satisfy Davis-Bacon and CWHSSA
obligations).
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\276\ Similarly, CWHSSA does not specify the contract from which
funds should be withheld for the payment of unpaid wages, as it
states that ``the governmental agency . . . may withhold, or have
withheld, from money payable because of work performed by a
contractor or subcontractor, amounts administratively determined to
be necessary to satisfy the liabilities of the contractor or
subcontractor for unpaid wages and liquidated damages as provided in
this section.'' 40 U.S.C. 3702(d).
\277\ One commenter indicated that by stating that withholding
should be for the difference between wages paid and the prevailing
wage due to laborers or mechanics on the work, Congress intended to
say that funds could only be withheld from the contract on which the
violations occurred. However, this language merely addresses the
amount of funds that may be withheld, and hence does not identify or
limit the contracts from which such withholding may occur.
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Moreover, as noted in this section above, cross-withholding is
related to the common-law right of ``offset.'' It is well settled that
no statutory authority at all is necessary for the Federal government
to assert the right of offset. ``Like private creditors, the federal
government has long possessed the right of offset at common law.''
Amoco Prod. Co. v. Fry, 118 F.3d 812, 817 (D.C. Cir. 1997) (citing,
among other cases, Gratiot v. United States, 40 U.S. 336, 370
(1841)).\278\ To accept the commenters' assertion that the DBA does not
permit cross-withholding would mean that, by enacting the withholding
provisions in the Act, Congress had limited--and not expanded--the
government's authority. There is no basis for such a conclusion. To the
contrary, the legislative history of the 1935 amendments to the Act
reflects Congress's intent that withholding operate to ensure that
workers would be made whole. See Liberty Mut. Ins. Co., ARB No. 00-018,
2003 WL 21499861, at *6 (citing S. Rep. No. 74-1155 (1935)). As the ARB
noted in the Liberty Mutual decision, ``neither the DBA's terms nor the
legislative history indicate Congress's intention to limit the
Administrator's withholding authority to the detriment of the laborers
and mechanics that are the intended beneficiaries of the Act.'' Id.
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\278\ In Gratiot, the Supreme Court explained that ``[t]he
United States possess[es] the general right to apply all sums due
for such pay and emoluments, to the extinguishment of any balances
due to them by the defendant, on any other account, whether owed by
him as a private individual, or as chief engineer. It is but the
exercise of the common right, which belongs to every creditor, to
apply the unappropriated moneys of his debtor, in his hands, in
extinguishment of the debts due to him.'' Gratiot, 40 U.S. at 370.
---------------------------------------------------------------------------
The Department also disagrees with the individual commenter that
cross-withholding contravenes the Anti-Deficiency Act, the Purpose
Statute, or other statutes governing the use of appropriated funds, and
declines to revise the regulatory text as they
[[Page 57690]]
requested. The Anti-Deficiency Act prohibits, in relevant part, an
officer or employee of the United States from ``mak[ing] or
authoriz[ing] an expenditure or obligation exceeding an amount
available in an appropriation or fund for the expenditure or
obligation.'' 31 U.S.C. 1341(a)(1)(A). The commenter appears to have
conflated the Anti-Deficiency Act with another general prohibition on
unauthorized transfers of funds between appropriations accounts. See
U.S. Gov't Accountability Off., 1 Principles of Federal Appropriations
Law ch. 2, at 2-38-39 (3d ed. 2015) (GAO Red Book). Specifically, 31
U.S.C. 1532 provides that ``[a]n amount available under law may be
withdrawn from one appropriation account and credited to another or to
a working fund only when authorized by law.'' An unauthorized transfer
could lead to a violation of the Anti-Deficiency Act or Purpose Statute
if the transfer ``led to overobligating the receiving appropriation''
or ``the use of appropriations for other than their intended purpose,''
respectively. GAO Red Book ch. 2 at 38-40. The commenter also
apparently relies on ``a general rule that an agency may not augment
its appropriations from outside sources without specific statutory
authority.'' NRC Authority to Collect Annual Charges From Federal
Agencies, 15 Op. O.L.C. 74, 78 (1991) (referring to the ``anti-
augmentation principle''). The commenter's concerns are misplaced
because cross-withholding does not involve any impermissible transfer
or augmentation, and because cross-withholding and disbursement of
cross-withheld funds are authorized by law.
Contrary to this individual commenter's concerns, cross-withholding
does not involve an impermissible augmentation of any agency's
appropriation. Nor, relatedly, is the cross-withholding agency making
payments on the other agency's contract (i.e., augmenting that agency's
appropriation) as the individual commenter also appeared to suggest.
First, when funds are cross-withheld, they remain in the account of the
contracting agency from whose contract the funds are being withheld,
typically before being disbursed to workers by the Department, as
discussed below. The contracting agency implementing an inter-agency
cross-withholding does not actually or effectively transfer the cross-
withheld funds to the contracting agency on whose contract DBRA
violations occurred. The contracting agency on whose contract DBRA
violations were found has no remaining payment obligations to the
contractor, thereby creating the need for cross-withholding in the
first place, which underscores why cross-withholding does not implicate
the purpose of, or impermissibly augment, that agency's appropriation.
Second, in the context of inter-agency cross-withholding, contracting
agencies neither make payments on another agency's contract nor could
be required to do so, as the DBA imposes liability for paying back
wages on contractors, not contracting agencies. See 40 U.S.C.
3142(c)(1) (``[T]he contractor or subcontractor shall pay all mechanics
and laborers employed directly on the site of the work . . . the full
amounts accrued at time of payment.'' (emphasis added)); see also 40
U.S.C. 3702(b)(2) (``[T]he contractor and any subcontractor responsible
for the [CWHSSA overtime] violation are liable''). Rather, the cross-
withholding agency is ensuring, at the Department's request, that the
contractor is not overpaid given the contractor's (or its
subcontractor(s)'s) failure to satisfy their statutory and contractual
obligation to workers. As such, inter-agency cross-withholding
functions as a mechanism to satisfy the contractor's DBRA underpayment
liability. The cross-withholding contracting agency thus is not
augmenting (by transfer or otherwise) appropriated funds of the
contracting agency on whose contract the DBRA violations occurred.
Consistent with the DBA's directive that the Department pay
withheld monies ``directly to laborers and mechanics,'' 40 U.S.C.
3144(a), see also 40 U.S.C. 3703(b)(3), the cross-withholding
contracting agency may eventually transfer the cross-withheld funds to
WHD--in its capacity as enforcement agency--for distribution directly
to workers to whom the contractor owes DBRA back wages. WHD in turn may
only distribute cross-withheld funds to such workers after any
challenge to the finding of violations has been resolved. Until then,
the withheld funds are effectively held in trust for the benefit of the
underpaid workers and cannot be used by DOL for purposes other than
disbursement to workers. Cf. In re Quinta Contractors, Inc., 34 B.R.
129, 131 (Bankr. M.D. Pa. 1983) (invoking statutory trust principles in
concluding that funds withheld under the DBA were not property of an
estate in bankruptcy except to the extent that the amount withheld
exceeded the amount of the debtor's liability under the DBA).\279\ If
there are any unclaimed funds after 3 years, WHD is required to send
such funds to the U.S. Treasury.\280\ Cf. B-256568 (Comp. Gen. Mar. 18,
1994) (finding that, under predecessor provision of DBA under which
Comptroller General, not the Department, disbursed withheld funds to
workers, 3 years was a suitable period of time for GAO to wait before
transferring unclaimed withheld funds to the Treasury). The
Department's cross-withholding and distribution process is thus an
enforcement mechanism authorized by statute under which WHD acts as an
intermediary to return funds to the workers to whom they are owed. Cf.
Grp. Dir., Claims Grp./GGD, B-225091, 1987 WL 101454, at *2 (stating
that under CWHSSA, disbursement of withheld funds is ``purely
ministerial''); Glaude d/b/a Nationwide Indus. Svcs., ARB No. 98-081,
1999 WL 1257839, at *1-2, *4 (Nov. 24, 1999) (affirming pre-hearing
withholding and cross-withholding from contractor under contracts with
two Federal agencies for SCA back wages ALJ found due to contractor's
workers on one of those contracts); Nissi Corp., BSCA No. SCA-1233,
1990 WL 656138 (Sept. 25, 1990) (finding it was proper to cross-
withhold funds on a contract with one agency for SCA underpayments that
an ALJ had found due on another agency's contract with the same
contractor).
---------------------------------------------------------------------------
\279\ Similarly, when an SCA-covered contractor fails to pay
required prevailing wages and fringe benefits, the underpaid funds
are ``impressed with a trust, either constructive or statutory, for
the benefit of the undercompensated employees.'' Brock v. Career
Consultants, Inc. (In re Career Consultants, Inc.), 84 B.R. 419, 424
(Bankr. E.D. Va. 1988); see also, e.g., In re Frank Mossa Trucking,
Inc., 65 B.R. 715, 718 (Bankr. D. Mass. 1985).
\280\ See, e.g., ``Workers Owed Wages,'' Wage & Hour Div., Dep't
of Lab., https://www.dol.gov/agencies/whd/wow.
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In any event, the Anti-Deficiency Act permits transfers,
expenditures, and obligations where ``specified in . . . any other
provision of law.'' 31 U.S.C. 1341(a)(1). The ``other provision of
law'' exception applies here because the DBA and CWHSSA authorize
contracting agencies to withhold accrued payments needed to pay back
wages, see 40 U.S.C. secs. 3142(c)(3) & 3702(d), respectively, and
require the Department to distribute back wages to underpaid workers,
see 40 U.S.C. 3144(a)(1) (``The Secretary of Labor shall pay directly
to laborers and mechanics from any accrued payments withheld under the
terms of a contract any wages found due to laborers and mechanics under
this subchapter.''); 40 U.S.C. 3703(b)(3) (``The Secretary of Labor
shall pay the amount administratively determined to be due directly to
the laborers and mechanics from amounts withheld on account of
[[Page 57691]]
underpayments of wages if the amount withheld is adequate. If the
amount withheld is not adequate, the Secretary of Labor shall pay an
equitable proportion of the amount due.''). Thus, these statutes
expressly contemplate that the funds withheld will be transferred to
the custody of the Department of Labor so that it can distribute those
withheld funds to remedy violations of the DBRA. The Department's
authority to disburse withheld funds to underpaid workers would be
meaningless if contracting agencies could not transfer cross-withheld
(and withheld) funds to DOL--or withhold accrued payments to begin
with.
For similar reasons, cross-withholding does not violate the Purpose
Statute. The Purpose Statute states that appropriations ``shall be
applied only to the objects for which the appropriations were made
except as otherwise provided by law.'' See 31 U.S.C. 1301(a). As with
the Anti-Deficiency Act, the DBA and CWHSSA satisfy the ``otherwise
provided by law'' element. Specifically, contrary to the individual
commenter's assertion, both the DBA and CWHSSA authorize contracting
agencies to withhold accrued payments needed to pay back wages and
expressly authorize the Department to pay such funds directly to
underpaid workers. To the extent such withholding and payments could be
construed as outside ``the objects for which'' the appropriation
underlying the withheld funds was made, the withholding and payment
nonetheless are consistent with the Purpose Statute because Congress
expressly authorized such actions through the DBA and CWHSSA.
The fact that Congress in the SCA expressly stated that withholding
may be from ``the contract or any other contract between the same
contractor and the Federal government,'' as this individual commenter
noted, does not mean that Congress did not authorize the same practice
in the DBA or any Related Acts. As noted above, the DBA authorizes the
withholding of funds ``from the contractor,'' without limiting such
withholding to the contract on which Davis-Bacon violations occurred.
That the SCA and DBA contain differently worded withholding provisions
does not establish that cross-withholding is not also authorized under
the DBA, or that the DBA should be interpreted as prohibiting cross-
withholding. Indeed, Congressional hearings shortly before the SCA's
enactment reflect Congressional awareness that both the SCA and DBA
provided for withholding, without suggesting that withholding under the
SCA was broader than under the DBA. Service Contract Act of 1965:
Hearing before the Subcomm. on Lab. of the S. Comm. on Lab. & Pub.
Welfare, 89th Cong. 11, 15-16 (1965). Moreover, as detailed further in
sections II.A (``Statutory and regulatory history'') and III.B.3.xix
(``Anti-Retaliation''), in 1984, Congress ratified and affirmed as law
Reorganization Plan No. 14 of 1950 and declared that previous actions
taken pursuant to such reorganization plans were considered to have
been taken pursuant to a reorganization expressly approved by Congress.
The 1983 cross-withholding regulation is one such prior action.
It is also not accurate to state that the Department's explanation
of the proposed language in the NPRM acknowledged that there is no
``mutuality of debts'' between a contractor and the government when a
contractor owes back wages that would justify a cross-withholding. As
explained above, under the common law, cross-withholding is generally
not available unless there is a ``mutuality of debts'' in that the
creditor and debtor involved are exactly the same person or legal
entity. Under the DBA, however, Congress specifically implemented a
withholding provision with the goal of ensuring that workers receive
the prevailing wages they are owed, and the provision contemplated that
the withholding would be made effective through the use of a contract
clause. As the Department noted in the NPRM, any question about
mutuality of debts does not prohibit offset or withholding where the
parties have expressly contracted to provide for such withholding. For
these same reasons, the Department does not agree that the proposed
language ignores the separate legal status of such contracting entities
for a variety of other purposes; it merely recognizes that while this
separate legal status may be valid in other situations, it should not
be permitted to undermine one of the DBA's key enforcement mechanisms.
The Department appreciates commenters' suggestion that the
Department should be able to obtain back wages for workers in all
instances where there has been a finding of violations even without the
use of cross-withholding. In WHD's experience in Davis-Bacon
enforcement, withholding is the remedy of first resort when Davis-Bacon
violations are identified and funds remain to be paid on the contract.
However, cross-withholding is necessary and appropriate to satisfy the
contractor's potential DBRA liability when there are insufficient funds
remaining to be paid under the contract on which violations have been
found. In some instances, the Department does not learn of, and does
not have the opportunity to fully investigate, potential violations
until contract performance is well underway, nearing completion, or
even completed. In such circumstances, it is not realistic that the
Department or the relevant contracting agency will be able to determine
whether violations have occurred, and determine the back wage amount
from such violations, in sufficient time to ensure that 100 percent of
the back wage liability can be satisfied by straight withholding on the
contract. Resource constraints also contribute to the need for cross-
withholding as a remedy. As discussed in section V.A.2, approximately
61,200 firms currently hold DBA contracts or subcontracts and
approximately 91,700 firms perform on Related Act contracts. While
there is probably some overlap in those numbers, many of these
contractors hold multiple contracts or subcontracts, resulting in
hundreds of thousands of DBRA contracts or subcontracts each year. In
contrast, the Department had only 757 Wage and Hour investigators as of
December 31, 2021, each of whom is also responsible for enforcing
multiple other employment laws. In these circumstances, it is clearly
not possible that the Department will be able to determine the nature
and extent of any Davis-Bacon violations on every contract before all
funds due on the prime contract have been disbursed. Where all funds
have been disbursed on such a prime contract, cross-withholding is
critical to obtaining the wages that workers are owed.
Similarly, while the Department appreciates commenters' concerns as
to whether the cross-withholding procedure provides sufficient due
process to contractors, the Department believes that the withholding
process, which is the same for both withholding and cross-withholding,
provides ample due process. Contractors and subcontractors that choose
to dispute WHD's violation findings are afforded an opportunity to
request an administrative hearing and appellate process before any
withheld funds are disbursed to workers. If the appeal process results
in a final determination in favor of the contractor or subcontractor,
WHD requests that the contracting agency release withheld funds in
accordance with applicable law and contract documents. Moreover,
contractors do not have a present entitlement to contract funds, as the
contractor is only entitled to payment under the contract to the extent
that the contractor has complied with the
[[Page 57692]]
contract terms, including the requirement to pay laborers and mechanics
the applicable prevailing wage rate. See Ray Wilson Co., ARB No. 02-
086, 2004 WL 384729, at * 3-4 (citing Lujan v. G & G Fire Sprinklers,
Inc., 532 U.S. 189, 195-97 (2001)).
For the foregoing reasons, the final rule adopts these changes as
proposed, except for the following additional clarifying edits to the
proposed withholding contract clauses in Sec. Sec. 5.5(a)(2), (b)(3),
and 5.9(b).
First, the Department deletes the references to Sec. 5.5(a)(1),
(a)(11), (b)(2), and (b)(5) to make clear that the scope of withholding
has been and continues to be broad. The final rule therefore states
that withholding for the full amount of unpaid wages and monetary
relief, including interest, and liquidated damages required by the
clauses in Sec. 5.5(a) or (b) is appropriate. The references to
paragraphs Sec. 5.5(a)(1) and (11) and (b)(2) and (5) are deleted so
as not to unintentionally exclude from the scope of withholding any
monies determined to be due under other paragraphs of Sec. 5.5, such
as Sec. 5.5(a)(6) or (b)(4) for lower-tier subcontractor violations.
Similarly, the final rule in Sec. 5.5(a)(2) replaces the current
reference to ``Davis-Bacon prevailing wage requirements'' with ``Davis-
Bacon labor standards requirements'' to be consistent with the
definition of Davis-Bacon labor standards in Sec. 5.2.
Second, the Department deleted ``under this contract'' from the
first paragraph of Sec. 5.5(a)(2) to clarify (consistent with current
Sec. 5.5(a)(2)) that withholding may be from the prime contract, as
well as from other contracts or federally assisted contracts with the
same prime contractor as defined in Sec. 5.2.
Third, the Department added clauses to Sec. 5.5(a)(2)(i) and
5.5(b)(3)(i) to emphasize that withheld and cross-withheld funds ``may
be used to satisfy the contractor liability for which the funds were
withheld,'' as well as a similar clause in Sec. 5.9(b). These
additions were made in response to questions about the source of the
DBRA liability, to clarify that the back wage liability is the
contractor's and not the contracting agency's.
Fourth, the Department changed ``loan or grant recipient'' to
``recipient of Federal assistance'' in the first sentences of Sec.
5.5(a)(2) and (b)(3) to encompass Related Act assistance other than
loans and grants.
Fifth, the Department revised Sec. 5.5(b)(3) to refer to contracts
subject to CWHSSA (consistent with current Sec. 5.5(b)(3)) instead of
subject to ``Davis-Bacon prevailing wage requirements'' as proposed in
the NPRM.
Sixth, the Department clarified in Sec. Sec. 5.5(a)(2)(i),
5.5(b)(3)(i), and 5.9(a) that Federal and other agencies may withhold
on their own initiative and must withhold at the Department's request.
The Department also added language to Sec. 5.9(a) to specify that,
as in the withholding contract clause provisions, the suspension of
funds must occur until funds are withheld ``as may be considered
necessary''--like the similar language in current Sec. 5.5(a)(2) and
(b)(3)--to compensate workers, even though there may not yet be a final
administrative determination of the back wages and other monetary
relief which workers are owed, or of liquidated damages, at the time of
the withholding.
(B) Suspension of Funds for Recordkeeping Violations
The Department also proposed to add language in Sec. 5.5(a)(3)(iv)
to clarify that funds may be suspended when a contractor has failed to
submit certified payroll or provide the required records as set forth
at Sec. 5.5(a)(3). Comments relating to this proposal are discussed in
the preamble regarding Sec. 5.5(a)(3). In accordance with that
discussion, the final rule adopts this change as proposed.
(C) The Department's Priority to Withheld Funds
The Department proposed to revise Sec. Sec. 5.5(a)(2), 5.5(b)(3),
and 5.9 to codify the Department's longstanding position that,
consistent with the DBRA's remedial purpose to ensure that prevailing
wages are fully paid to covered workers, the Department has priority to
funds withheld (including funds that have been cross-withheld) for
violations of Davis-Bacon prevailing wage requirements and CWHSSA
overtime requirements. See also PWRB,\281\ DBA/DBRA/CWHSSA Withholding
and Disbursement, at 4. To ensure that underpaid workers receive the
monies to which they are entitled, contract funds that are withheld to
reimburse workers owed Davis-Bacon or CWHSSA wages, or both, must be
reserved for that purpose and may not be used or set aside for other
purposes until such time as the prevailing wage and overtime issues are
resolved.
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\281\ See note 19, supra.
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Affording the Department first priority to withheld funds, above
competing claims, ``effectuate[s] the plain purpose of these federal
labor standards laws . . . [to] insure that every laborer and mechanic
is paid the wages and fringe benefits to which [the DBA and DBRA]
entitle them.'' Quincy Hous. Auth. LaClair Corp., WAB No. 87-32, 1989
WL 407468, at *3 (Feb. 17, 1989) (holding that ``the Department of
Labor has priority rights to all funds remaining to be paid on a
federal or federally-assisted contract, to the extent necessary to pay
laborers and mechanics employed by contractors and subcontractors under
such contract the full amount of wages required by federal labor
standards laws and the contract''). Withholding priority serves an
important public policy of providing restitution for work that laborers
and mechanics have already performed, but for which they were not paid
the full DBA or Related Act wages they were owed.
Specifically, the Department proposed to set forth expressly that
it has priority to funds withheld for DBA, CWHSSA, and other Related
Act wage underpayments over competing claims to such withheld funds by:
(1) A contractor's surety(ies), including without limitation
performance bond sureties, and payment bond sureties;
(2) A contracting agency for its reprocurement costs;
(3) A trustee(s) (either a court-appointed trustee or a U.S.
trustee, or both) in bankruptcy of a contractor, or a contractor's
bankruptcy estate;
(4) A contractor's assignee(s);
(5) A contractor's successor(s); or
(6) A claim asserted under the Prompt Payment Act, 31 U.S.C. 3901-
07.
To the extent that a contractor did not have rights to funds
withheld for Davis-Bacon wage underpayments, its sureties, assignees,
successors, creditors (e.g., IRS), or bankruptcy estate likewise do not
have such rights, as it is well established that such entities do not
have greater rights to contract funds than the contractor does. See,
e.g., Liberty Mut. Ins. Co., ARB No. 00-018, 2003 WL 21499861, at *7-9
(The Department's priority to DBA withheld funds where surety ``ha[d]
not satisfied all of the bonded [and defaulted prime] contractor's
obligations, including the obligation to ensure the payment of
prevailing wages''); Unity Bank & Tr. Co. v. United States, 5 Cl. Ct.
380, 384 (1984) (assignees acquire no greater rights than their
assignors); Richard T. D'Ambrosia, 55 Comp. Gen. 744, 746 (1976) (IRS
tax levy cannot attach to money withheld for DBA underpayments in which
contractor has no interest).
Withheld funds always should, for example, be used to satisfy DBA
and Related Act wage claims before any
[[Page 57693]]
reprocurement costs (e.g., following a contractor's default or
termination from all or part of the covered work) are collected by the
Government. See WHD Opinion Letter DBRA-132 (May 8, 1985). The
Department has explained that ``[t]o hold otherwise . . . would be
inequitable and contrary to public policy since the affected employees
already have performed work from which the Government has received the
benefit and that to give contracting agency reprocurement claims
priority in such instances would essentially require the employees to
unfairly pay for the breach of contract between their employer and the
Government.'' Id.; see also PWRB, DBA/DBRA/CWHSSA Withholding and
Disbursement, at 4.\282\ This rationale applies with equal force in
support of the Department's priority to withheld funds over the other
types of competing claims listed in this proposed regulation.
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\282\ See note 19, supra.
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The Department's rights to withheld funds for unpaid earnings also
are superior to performance and payment bond sureties of a DBA or DBRA
contractor. See Westchester Fire Ins. Co. v. United States, 52 Fed. Cl.
567, 581-82 (2002) (surety did not acquire rights that contractor
itself did not have); Liberty Mut. Ins. Co., ARB No. 00-018, 2003 WL
21499861, at *7-9 (ARB found that Administrator's claim to withheld
contract funds for DBA wages took priority over performance (and
payment) bond surety's claim); Quincy Hous. Auth. LaClair Corp., WAB
No. 87-32, 1989 WL 407468, at *3-4. The Department can withhold
unaccrued funds such as advances until ``sufficient funds are withheld
to compensate employees for the wages to which they are entitled''
under the DBA. Liberty Mut. Ins. Co., ARB No. 00-018, 2003 WL 21499861,
at *6 (quoting 29 CFR 5.9).
Similarly, the Department also explained that it has priority over
assignees (e.g., assignees under the Assignment of Claims Act, see 31
U.S.C. 3727, 41 U.S.C. 6305) to DBRA withheld funds. For example, in
Unity Bank & Trust Co., 5 Cl. Ct. at 383, the employees' claim to
withheld funds for a subcontractor's DBA wage underpayments had
priority over a claim to those funds by the assignee--a bank that had
lent money to the subcontractor to finance the work.
Nor are funds withheld pursuant to the DBRA for prevailing wage
underpayments property of a contractor's (debtor's) bankruptcy estate.
See In re Quinta Contractors, Inc., 34 B.R. 129; cf. Pearlman v.
Reliance Ins. Co., 371 U.S. 132, 135-36 (1962) (concluding, in a case
under the Miller Act, that ``[t]he Bankruptcy Act simply does not
authorize a trustee to distribute other people's property among a
bankrupt's creditors''). When a contractor has violated its contract
with the government--as well as the DBA or DBRA--by failing to pay
required wages and fringe benefits, it has not earned its contractual
payment. Therefore, withheld funds are not property of the contractor-
debtor's bankruptcy estate. Cf. Pro. Tech. Servs., Inc. v. IRS, No. 87-
780C(2), 1987 WL 47833, at *2 (E.D. Mo. Oct. 15, 1987) (when the
Department finds [an SCA] violation and issues a withholding letter,
that act ``extinguishe[s]'' whatever property right the debtor
(contractor) might otherwise have had to the withheld funds, subject to
administrative review if the contractor chooses to pursue it); In re
Frank Mossa Trucking, Inc., 65 B.R. 715, 718-19 (Bankr. D. Mass. 1985)
(pre-petition and post-petition SCA withholding was not property of the
contractor-debtor's bankruptcy estate).
Various Comptroller General decisions further underscore these
principles. See, e.g., Carlson Plumbing & Heating, B-216549, 1984 WL
47039 (Comp. Gen. Dec. 5, 1984) (DBA and CWHSSA withholding has first
priority over IRS tax levy, payment bond surety, and trustee in
bankruptcy); Watervliet Arsenal, B-214905, 1984 WL 44226, at *2 (Comp.
Gen. May 15, 1984) (DBA and CWHSSA wage claims for the benefit of
unpaid workers had first priority to retained contract funds, over IRS
tax claim and claim of payment bond surety), aff'd on reconsideration
sub nom. Int'l Fid. Ins. Co., B-214905, 1984 WL 46318 (Comp. Gen. July
10, 1984); Forest Serv. Request for Advance Decision, B-211539, 1983 WL
27408, at *1 (Comp. Gen. Sept. 26, 1983) (The Department's withholding
claim for unpaid DBA wages prevailed over claims of payment bond surety
and trustee in bankruptcy).
The Department proposed codifying its position that DBRA
withholding has priority over claims under the Prompt Payment Act, 31
U.S.C. 3901-07. The basis for this proposed provision is that a
contractor's right to prompt payment does not have priority over
legitimate claims--such as withholding--arising from the contractor's
failure to fully satisfy its obligations under the contract. See, e.g.,
31 U.S.C. 3905(a) (requiring that payments to prime contractors be for
performance by such contractor that conforms to the specifications,
terms, and conditions of its contract).
The Department welcomed comments on whether the listed priorities
should be effectuated by different language in the contract clause,
such as an agreement between the parties that a contractor forfeits any
legal or equitable interest in withheld payments once it commits
violations, subject to procedural requirements that allow the
contractor to contest the violations.
The Department received multiple comments generally supporting the
proposed language explicitly stating that the Department has priority
to funds withheld for violations of Davis-Bacon prevailing wage
requirements and CWHSSA overtime requirements over other competing
claims. These commenters noted that the Department's priority over
other competing claims is necessary to ensure that funds are available
to pay workers the prevailing wages that they are due. NCDCL and FFC
additionally noted that these provisions are particularly important as
contractors who underpay their workers frequently have other
significant debts. The Department did not receive any suggestions as to
alternative language in the contract clause to effectuate these
priorities, nor did the Department receive any comments opposing the
proposed language prioritizing DBRA withholding over other competing
claims. Accordingly, the final rule adopts the changes as proposed.
xxiv. Subpart C--Severability
The Department proposed to add a new subpart C, titled
``Severability,'' which would contain a new Sec. 5.40, also titled
``Severability.'' The proposed severability provision explained that
each provision is capable of operating independently from one another,
and that if any provision of part 5 is held to be invalid or
unenforceable by its terms, or as applied to any person or
circumstance, or stayed pending further agency action, the Department
intended that the remaining provisions remain in effect.
The Department received no comments on this proposal. The final
rule therefore adopts this change as proposed. An expanded discussion
of severability is below in section III.B.5.
4. Non-Substantive Changes
i. Plain Language
The Plain Writing Act of 2010 (Pub. L. 111-274) requires Federal
agencies to write documents in a clear, concise, well-organized manner.
The Department has written this document to be consistent with the
Plain Writing Act as well as the Presidential Memorandum, ``Plain
Language in Government Writing,'' published June 10, 1998 (63 FR
31885). The Department encouraged comment with respect to clarity and
[[Page 57694]]
effectiveness of the language used. Comments addressing plain language
and plain meaning are discussed in their respective sections.
ii. Other Changes
The Department proposed to make non-substantive revisions
throughout the regulations to address typographical and grammatical
errors and to remove or update outdated or incorrect regulatory and
statutory cross-references. The Department also proposed to adopt more
inclusive language, including terminology that is gender-neutral, in
the proposed regulations. These changes are consistent with general
practice for Federal government publications; for example, guidance
from the Office of the Federal Register advises agencies to avoid using
gender-specific job titles (e.g., ``foremen'').\283\ These non-
substantive revisions do not alter the substantive requirements of the
regulations.
---------------------------------------------------------------------------
\283\ See Office of the Federal Register, ``Drafting Legal
Documents: Principles of Clear Writing'' section 18, available at
https://www.archives.gov/Federal-register/write/legal-docs/clear-writing.html.
---------------------------------------------------------------------------
5. Severability
With respect to this final rule, it is the Department's intent that
all provisions and sections be considered separate and severable and
operate independently from one another. In this regard, the Department
intends that: (1) In the event that any provision within a section of
the rule is stayed, enjoined, or invalidated, all remaining provisions
within that section will remain effective and operative; (2) in the
event that any whole section of the rule is stayed, enjoined, or
invalidated, all remaining sections will remain effective and
operative; and (3) in the event that any application of a provision is
stayed, enjoined, or invalidated, the provision will be construed so as
to continue to give the maximum effect to the provision permitted by
law.
It is the Department's position, based on its experience enforcing
and administering the DBRA, that with limited exceptions described
below, the provisions and sections of the rule can function sensibly in
the event that any specific provisions, sections, or applications are
invalidated, enjoined, or stayed. As an initial matter, the Department
notes that this is the first comprehensive update of the DBRA
regulations in four decades, and as such covers a wide range of diverse
topics. Moreover, parts 1, 3, and 5 function independently as a legal
and practical matter. The regulations in part 1 concern the procedures
for predetermination of wage rates and fringe benefits, such as the
definition of the prevailing wage, the Department's wage surveys, and
the circumstances under which state or local wage rates may be adopted.
The regulations in part 5, in contrast, establish rules providing for
the payment of these minimum wages and fringe benefits, coverage
principles and enforcement mechanisms for these obligations, and the
clauses to be included in all covered contracts. The incorporation and
enforcement of wage determinations and fringe benefits contained within
part 5 are functionally independent from the development of those wage
determinations discussed in part 1. Therefore, the Department's intent
is that all the provisions of part 5 remain in effect if a court should
invalidate, stay, or enjoin any provision of part 1, or vice versa. The
same is true with regard to part 3, which concerns the anti-kickback
and other provisions of the Copeland Act.
Similarly, the Department believes that the various provisions
within part 1 and part 5 are generally able to operate independently
from one another and need not rise or fall as a whole. For example, the
three-step process for calculating the prevailing wage in Sec. 1.2
operates independently from Sec. 1.6, which concerns the appropriate
use of general and project wage determinations and when and how wage
determinations should be incorporated into contracts, and the
description of the wage survey process in Sec. 1.3 operates
independently from agencies' obligations to furnish an annual report on
their construction programs to the Administrator. Each provision
addressing various aspects of how wages are determined also stands on
its own as a practical matter, including, for example, the various
definitions within Sec. 1.2, and the scope of consideration at Sec.
1.7. Likewise, the final rule's provisions describing specific
principles applicable to fringe benefits in Sec. Sec. 5.22-5.33 are
wholly separate from the provisions in Sec. 5.6 concerning enforcement
or provisions in Sec. 5.12 concerning debarment proceedings.
Accordingly, as described above in sections III.B.1.ix and
III.B.3.xxiv, the Department has finalized, as proposed, new
severability provisions in Sec. Sec. 1.10 and 5.40.
The Department recognizes that a limited exception to the general
principle of severability will apply where provisions of the final rule
or the regulations are contingent upon other provisions for their
existence and viability. For example, as discussed in section
III.B.3.xx.C above, the Department's proposed revisions to Sec. 3.11
were made to conform this section to the operation-of-law provision in
Sec. 5.5(e). If a court were to stay, invalidate, or enjoin Sec.
5.5(e), the Department would have to consider whether changes to Sec.
3.11 would be necessary. However, the Department intends that this
exception be applied as narrowly as practicable so as to give maximum
effect to the final rule and each regulatory provision within it.
C. Applicability Date
As a part of the Department's general review of potential reliance
interests affected by this final rule, it has considered how the rule
will affect contractors with contracts that were entered into before
the final rule's effective date. With limited exceptions, the final
rule will not affect such contracts. The Department concluded, however,
that it would be helpful to address the timing of implementation in an
``Applicability Date'' subsection within the DATES section of the final
rule.
The Applicability Date section of the final rule states that the
provisions of the rule regarding wage determination methodology and
related part 1 provisions prescribing the content of wage
determinations may be applied only to wage determination revisions
completed by the Department on or after the effective date of the final
rule on October 23, 2023. This means that the Department will apply the
amendments to Sec. Sec. 1.2 (including the definitions of ``prevailing
wage'' and ``area''), 1.3 (discussion of functional equivalence), and
1.7 (scope of consideration) only to wage surveys for which data
collection is completed after the effective date of the final rule.
Similarly, the Department will be able to implement the new provisions
in Sec. Sec. 1.3(f) (frequently conformed rates), 1.3(g)-(j) (adoption
of State/local prevailing rates), 1.5(b) (project wage determinations),
and 1.6(c)(1) (periodic adjustments to non-collectively bargained
rates) only in wage determination revisions and project wage
determinations that are issued and applicable after that date.
The Department's wage determination methodology and related
provisions prescribing the content of wage determinations, as amended
in this final rule, will generally apply only to contracts that are
entered into after the effective date of the final rule. This is
because, as explained in Sec. 1.6 (``Use and effectiveness of wage
determinations''), whenever a new wage determination or wage
determination revision is issued (for example, after the completion of
a new wage survey or through the new periodic adjustment mechanism),
that revision will only apply to contracts that are entered into after
the wage
[[Page 57695]]
determination is issued and will not apply to contracts which have
already been entered into, with three exceptions. These exceptions are
explained in Sec. 1.6(c)(2)(iii). The first exception, discussed in
Sec. 1.6(c)(2)(iii)(A), is where a contract or order is changed to
include substantial covered work that was not within the scope of work
of the original contract. The second exception, discussed in the same
paragraph of the rule, is where an option to extend the term of a
contract is exercised. Each of these situations is effectively
considered to be a new contract for which the most recent wage
determination must be included, even if the wage determination was
issued after the date that the original contract was first entered
into. The third exception is for certain ongoing contracts that are not
tied to the completion of any particular project (such as multiyear
IDIQ contracts) for which new wage determinations must be incorporated
on an annual basis under Sec. 1.6(c)(2)(iii)(B) of the final rule.
Accordingly, only for these limited types of contracts may wage
determinations issued in accordance with the final rule be incorporated
into contracts that were entered into prior to the effective date of
the final rule.
The Applicability Date section provides that contracting agencies
must apply the terms of Sec. 1.6(c)(2)(iii) to existing contracts of
the types referenced in that regulatory provision, without regard to
the date of contract award, ``if practicable and consistent with
applicable law.'' With regard to ongoing contracts covered by Sec.
1.6(c)(2)(iii), such as long-term IDIQ contracts, this language
requires contracting agencies to ensure, to the extent practicable,
that any existing umbrella contract be amended to include the most
updated wage determination on an annual basis, and to do so through the
exercise of any and all authority that may be needed, including, where
necessary, a contracting agency's authority to negotiate or amend, its
authority to pay any necessary additional costs, and its authority
under any contract provision authorizing changes, cancellation, and
termination. This requirement applies to both FAR-covered contracts and
those that are not. Because this requirement only applies where
practicable, it is not necessary for contracting agencies to amend
contracts to retroactively impose recent wage determinations. Rather,
umbrella contracts must be amended only if they are indefinite or if
more than one year remains in their period of performance. In addition,
amendment need not be immediate following the effective date of the
final rule. Rather, contracting agencies only need to amend covered
umbrella contracts within one year of the effective date.
The Department considered whether the applicability of the new wage
determination methodologies in this manner would result in harm to
reliance interests of contractors that have entered into contracts
covered by the exceptions in Sec. 1.6(c)(2)(iii) and determined that
there are no such reliance interests that would outweigh the benefits
of the implementation of the final rule as described above. The final
rule's exceptions for new substantial out-of-scope covered work and for
exercises of options represent regulatory codifications of existing
subregulatory principles, not substantive changes to the Davis-Bacon
program. They are consistent with the Department's guidance, case law,
and historical practice, under which such modifications are considered
new contracts. See discussion above in section III.B.1.vi.(B).
Accordingly, contractors should already expect that in any such covered
circumstance, any new wage determination will be incorporated into the
contract, and contracts therefore should already account for any
resulting changes to prevailing wage rates in a manner that does not
adversely affect contractors. Finally, as noted above in section
III.B.1.vi.(B), many existing umbrella contracts that might be affected
by this requirement may well have mechanisms requiring the contracting
agency to compensate the contractor for increases in labor costs over
time generally. Other contracts may not currently have such mechanisms,
but compensation may be negotiated consistent with applicable law.
With the exception of Sec. 1.6(c)(2)(iii), all of the remaining
provisions of parts 1, 3, and 5 will be applicable only to new
contracts entered into after the effective date of October 23, 2023.
For any contracts entered into before October 23, 2023, the terms of
those contracts and the regulations that were effective at the time
those contracts were entered into (as interpreted by case law and the
Department's guidance) will continue to govern the duties of
contractors and contracting agencies and the enforcement actions of the
Department. Accordingly, with regard to the new operation-of-law
provision at Sec. 5.5(e), if a contract was entered into prior to the
effective date and is missing a required contract clause or wage
determination, the Department will seek to address the omission solely
through the modification provisions in the existing regulation at Sec.
1.6(f) as it has been interpreted prior to this rulemaking. In other
circumstances, where the Department has acted in this final rule only
to clarify or codify existing interpretations and practices, the
question of whether a contract was entered into prior to or after the
applicability date of this final rule may not in practical terms change
contractor duties or the parameters of any enforcement action. For
contracts entered into after the effective date of this final rule, but
before the Federal Acquisition Regulation or the relevant Related Act
program regulations are amended to conform to this rule, agencies must
use the contract clauses set forth in Sec. 5.5(a) and (b) of this rule
to the maximum extent possible under applicable law.
IV. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq.,
and its attendant regulations, 5 CFR part 1320, require the Department
to consider the agency's need for its information collections, their
practical utility, as well as the impact of paperwork and other
information collection burdens imposed on the public, and how to
minimize those burdens. The PRA typically requires an agency to provide
notice and seek public comments on any proposed collection of
information contained in a proposed rule. See 44 U.S.C. 3506(c)(2)(B);
5 CFR 1320.8. The Department invited public comments as part of the
NPRM. 87 FR 15762 (Mar. 18, 2022).
This final rule would affect existing information collection
requirements previously approved under OMB control number 1235-0008
(Davis-Bacon Certified Payroll) and OMB control number 1235-0023
(Requests to Approve Conformed Wage Classifications and Unconventional
Fringe Benefit Plans Under the Davis-Bacon and Related Acts/Contract
Work Hours and Safety Standards Act). As required by the PRA, the
Department submitted proposed information collection revisions as part
of the NPRM to OMB for review to reflect changes that will result from
this rulemaking. OMB issued a Notice of Action related to each
Information Collection Request (ICR) continuing the collection and
asking the Department to address any comments received and resubmit
with the final rule.
Circumstances Necessitating this Collection: The Department
administers enforcement of the Davis-Bacon labor standards that apply
to Federal and federally assisted construction projects. The Copeland
Act requires contractors
[[Page 57696]]
and subcontractors performing work on federally financed or assisted
construction contracts to furnish weekly a statement on the wages paid
each employee during the prior week. See 40 U.S.C. 3145; 29 CFR 3.3(b).
The Copeland Act specifically requires the regulations to ``include a
provision that each contractor and subcontractor each week must furnish
a statement on the wages paid each employee during the prior week.'' 40
U.S.C. 3145(a). This requirement is implemented by 29 CFR 3.3 and 3.4
and the standard Davis-Bacon contract clauses set forth at 29 CFR 5.5.
The provision at 29 CFR 5.5 (a)(3)(ii)(A) requires contractors to
submit weekly a copy of all payrolls to the Federal agency contracting
for or financing the construction project. This information collection
is assigned OMB control number 1235-0008. Regulations at 29 CFR part 5
prescribe labor standards for federally financed and assisted
construction contracts subject to the DBA, 40 U.S.C. 3141 et seq., and
Related Acts, including all contracts subject to the CWHSSA, 40 U.S.C.
3701, et seq. The DBA and DBRA require payment of locally prevailing
wages and fringe benefits, as determined by the Department, to laborers
and mechanics on most federally financed or federally assisted
construction projects. See 40 U.S.C. 3142(a); 29 CFR 5.5(a)(1). CWHSSA
requires the payment of one and one-half times the basic rate of pay
for hours worked over 40 in a week on most Federal contracts involving
the employment of laborers or mechanics. See 40 U.S.C. 3702(c); 29 CFR
5.5(b)(1). The requirements of this information collection consist of
(A) reports of conformed classifications and wage rates, and (B)
requests for approval of unfunded fringe benefit plans. This
information collection is assigned OMB control number 1235-0023.
Summary: This final rule amends regulations issued under the Davis-
Bacon and Related Acts that set forth rules for the administration and
enforcement of the Davis-Bacon labor standards that apply to Federal
and federally assisted construction projects.
In the NPRM, the Department proposed to add a new paragraph to
Sec. 5.5(a)(1), and has recodified the paragraphs as follows:
------------------------------------------------------------------------
Current paragraph New paragraph
------------------------------------------------------------------------
Sec. 5.5(a)(1)(ii)(A)................... Sec. 5.5(a)(1)(iii)(A).
Sec. 5.5(a)(1)(iii)(B)
[paragraph added].
Sec. 5.5(a)(1)(ii)(B)................... Sec. 5.5(a)(1)(iii)(C).
Sec. 5.5(a)(1)(ii)(C)................... Sec. 5.5(a)(1)(iii)(D).
Sec. 5.5(a)(1)(ii)(D)................... Sec. 5.5(a)(1)(iii)(E).
------------------------------------------------------------------------
The final rule adopts the additions and revisions to Sec.
5.5(a)(1) as proposed in the NPRM.
The Department also proposed to make non-substantive revisions to
Sec. 5.5(a)(1)(iii)(C) and (D) to describe the conformance request
process more clearly, including by providing that contracting officers
should submit the required conformance request information to WHD via
email using a specified WHD email address. The Department adopted these
proposals without changes as the changes merely clarified the existing
conformance request process and did not alter the information
collection burden on the public or on the Department.
Additionally, in the NPRM, the Department proposed adding a new
paragraph (b)(5) to Sec. 5.28, explicitly stating that unfunded
benefit plans or programs must be approved by the Secretary in order to
qualify as bona fide fringe benefits, and to replace the text in
current paragraph (c) with language explaining the process contractors
and subcontractors must use to request such approval. To accommodate
these changes, the Department proposed to add a new paragraph (d) that
contains the text currently located in paragraph (c) with non-
substantive edits for clarity and readability. These changes are
summarized as follows:
------------------------------------------------------------------------
Current paragraph New paragraph
------------------------------------------------------------------------
Sec. 5.28(b)(5) [paragraph
added].
Sec. 5.28(c) [paragraph
added].
Sec. 5.28(c)............................ Sec. 5.28(d).
------------------------------------------------------------------------
The final rule adopts the additions and revisions to Sec. 5.28 as
proposed in the NPRM, as these changes merely conformed regulatory
language in Sec. 5.28 to the existing approval process for unfunded
fringe benefit plan under 29 CFR 5.5(a)(1)(iv). These changes did not
alter the information collection burden on the public. The Department
is adding regulatory citations to the collection under 1235-0023,
however there is no change in burden.
The Department is adding two new recordkeeping requirements for
contractors (telephone number and email address) to the collection
under 1235-0008. However, it did not propose that such data be added to
the ``certified payrolls'' submission (often collected on the WH-347
instrument); rather, this information must be provided to DOL and
contracting agencies on request. The Department is adding a new
requirement to 29 CFR 5.5 at renumbered paragraph (a)(3)(iii), which
will require all contractors, subcontractors, and recipients of Federal
assistance to maintain and preserve Davis-Bacon contracts,
subcontracts, and related documents for 3 years after all the work on
the prime contract is completed. These related documents include
contractor and subcontractor bids and proposals, amendments,
modifications, and extensions to contracts, subcontracts, and
agreements. The Department is amending Sec. 5.5(a)(3)(i) to clarify
that regular payrolls and other basic records required by this section
must be preserved for a period of at least 3 years after all the work
on the prime contract is completed. In other words, even if a project
takes more than 3 years to complete, contractors and subcontractors
must keep payroll and basic records for at least 3 years after all the
work on the prime contract has been completed. This revision expressly
states the Department's longstanding interpretation and practice
concerning the period of time that contractors and subcontractors must
keep payroll and basic records required by Sec. 5.5(a)(3). This is not
a change. The Department notes that it is a normal business practice to
keep such documents and previously explained that it does not expect an
increase in burden associated with this requirement.
Purpose and use: This final rule continues the already existing
requirements that contractors and subcontractors must certify their
payrolls by attesting that persons performing work on DBRA covered
contracts have received the proper payment of wages and fringe
benefits. Contracting officials and WHD personnel use the records and
certified payrolls to verify contractors pay the required rates for
work performed.
Additionally, the Department reviews a proposed conformance action
report to determine the appropriateness of a conformance action. Upon
completion of review, the Department approves, modifies, or disapproves
a conformance request and issues a determination. The Department also
reviews requests for approval of unfunded fringe benefit plans to
determine the propriety of the plans.
WHD obtains PRA clearance under control number 1235-0008 for an
information collection covering the Davis-Bacon Certified Payroll. An
ICR Revision will be submitted with this final rule to incorporate the
regulatory citations in this final rule and adjust burden estimates to
reflect a slight increase in burden associated with the new
recordkeeping requirements finalized in this document.
[[Page 57697]]
WHD obtains PRA clearance under OMB control number 1235-0023 for an
information collection related to reporting requirements related to
Conformance Reports and Unfunded Fringe Benefit Plans. An ICR Revision
will be submitted with the final rule that includes the shifting
regulation citations as well as the addition of references to 29 CFR
5.28. The Agencies will notify the public when OMB approves the ICRs.
Information and technology: There is no particular order or form of
records prescribed by the regulations. A respondent may meet the
requirements of this final rule using paper or electronic means.
Public comments: The Department invited public comment on its
analysis that the final rule created a slight increase in paperwork
burden associated with ICR 1235-0008 and no increase in burden to ICR
1235-0023. The Department received some comments related to the PRA
aspect of the NPRM.
The FFC-CT indicated their support for an update to the
Department's recordkeeping requirements, expressing the view that
accurate records are critical to transparency and accountability in the
construction industry. McKanna, Bishop, Joffe, LLP, and WA BCTC also
expressed that they fully support strengthened recordkeeping
requirements. Weinberg, Roger, and Rosenfeld, on behalf of the NCDCL
concurred, stating the recordkeeping requirements in the proposed rule
were ``vast improvements'' that would ``increase transparency and allow
the District Council and other organizations to ensure that contractors
are complying with the law.'' The comment also stated that the proposed
rule's ``clarifications and supplemental requirements modernize the
DBRA's recordkeeping requirements and ensure that contractors maintain
their records for years after projects are completed.'' The UBC
suggested that additional recordkeeping requirements should be enacted,
including requirements to retain timesheets, job site orientation
records, contact information for subcontractors, and records of
payments to subcontractors.
Alternatively, a comment submitted by the group of U.S. Senators
expressed the view that adding to recordkeeping requirements places an
impermissible administrative burden on small to mid-size contractors,
many of whom lack the administrative resources to keep up with
paperwork burdens. The commenters indicated that in addition to the
certified payroll data, contractors are required to maintain all
contracts and subcontracts, as well as bids, proposals, amendments,
modifications, and extensions for those contracts and subcontracts.
This requirement is not novel, and the time period for DBRA record
retention is consistent with other such regulatory requirements for
contractors. For example, the SCA requires that contractors and
subcontractors maintain many pay and time records ``for 3 years from
the completion of the work.'' 29 CFR 4.6(g)(1). The FAR requires
contractors to retain certain records for 3 or 4 years. See, e.g., 48
CFR 4.705-2(a) (contractors must retain certain pay administration
records for 4 years); 48 CFR 4.703(a)(1) (requiring contractor
retention for 3 years after final payment of ``records, which includes
books, documents, accounting procedures and practices, and other data,
regardless of type and regardless of whether such items are in written
form, in the form of computer data, or in any other form, and other
supporting evidence to satisfy contract negotiation, administration,
and audit requirements of the contracting agencies and the Comptroller
General'').
Moreover, maintaining copies of contracts to which you are a party
is a sound business practice to document the parties' obligations under
the contracts, among other reasons. Not only are DBRA-covered
construction contracts needed for reference during performance and
completion about scope of work, specifications, pricing, etc., but if
there is any dispute about the contract provisions, performance, etc.,
contract documents are the starting point for resolving contractual
disputes. In addition, contract payment terms may be supporting
documents for a contractor's business tax filings. The Department is
not requiring that contractors maintain originals or even paper copies
of contracts and related documents; electronic copies are acceptable so
long as they contain a valid electronic signature.
The III-FFC wrote in support of the Department's proposal to add a
recordkeeping requirement to retain telephone number and email address,
noting that ``[t]he proposed requirements, including maintaining
relevant bid and contract information, as well as payroll record
information like contact information and correct classifications, help
further the purpose of the Act.'' III-FFC added that such requirements
are ``particularly necessary where DOL must contact a worker for
investigation or audit purposes and will further reduce the incentive
to misclassify workers and commit wage theft.'' Some individual
commenters supported recordkeeping requirements indicating that it
effectively deters misclassification.
However, ABC opposed this requirement, writing that a requirement
to disclose worker telephone numbers and email addresses ``constitutes
an invasion of employee privacy and exposes employees to the increased
possibility of identity theft.'' At a minimum, ABC stated, ``such
information should be redacted and not publicly disclosed under any
circumstances.''
After consideration of the comments on this topic, the final rule
adopts the changes to Sec. 5.5(a)(3)(i) as proposed. As the various
comments in support indicate, the proposed changes will clarify the
recordkeeping requirements for contractors, discourage
misclassification of workers, and increase the efficiency of the
Department's enforcement. While the Department appreciates ABC's
concerns for workers' privacy and the need to protect workers from the
danger of identity theft, the final rule does not require contractors
to provide workers' telephone numbers or emails on certified payrolls
or post them on a publicly available database, but rather requires
contractors to maintain this, like other worker contact information, in
contractors' internal records, and make this information available to
DOL and contracting agencies upon request for use in the enforcement
and administration of the DBRA.
The Department believes that email and telephone number are minimal
additional recordkeeping requirements and does not require in this
final rule that such data be added to the weekly certified payroll
thereby minimizing burden. The Department is, therefore, finalizing
these additional recordkeeping requirements as proposed.
The Department received some comments on the proposed changes to
Sec. 5.5(a)(1)(iii)(B), which prohibits the use of conformances to
``split, subdivide or otherwise avoid application of classifications
listed in the wage determination.'' Similarly, the Department also
received comments regarding other revisions to part 1 and part 5 of the
DBA regulations. Commenters like the SNBTU supported the Department's
proposed rule, as did SMART and SMACNA, and LIUNA.
The Department also received some comments expressing concern about
scrutiny related to unfunded fringe benefit plans. CC&M, and IUOE
expressed their concerns. The comments appear to be premised on a
misconception that the revisions impose
[[Page 57698]]
new substantive requirements with respect to unfunded plans. Nothing in
these revisions alters the four substantive conditions for unfunded
plans set out in Sec. 5.28(b)(1)-(4) or the overall requirements that
an unfunded plan must be ``bona fide'' and able to ``withstand a test .
. . of actuarial soundness.'' Consistent with Sec. Sec. 5.5(a)(1)(iv)
and 5.29(e), the Department has long required written approval if a
contractor seeks credit for the reasonably anticipated costs of an
unfunded benefit plan towards its Davis-Bacon prevailing wage
obligations, including with respect to vacation and holiday plans. The
revisions to Sec. 5.28 merely clarify this preexisting requirement and
detail the process through which contractors may request such approval
from the Department.
The FTBA expressed the view that the Department's proposal that
contractors and subcontractors must make available ``any other
documents deemed necessary to determine compliance with the labor
standards provisions of any of the statutes referenced by Sec. 5.1''
is too broad and vague, and they expressed concern that such a
requirement would have the effect of subjecting contractors to
``burdensome, varied, unreasonable requests'' left to the discretion of
enforcement staff. Alternatively, LIUNA supported the proposed
recordkeeping requirements as ``clarifying DOL's `longstanding'
approach to requiring contractors to maintain basic records and
certified payrolls, including regular payroll and additional records
relating to fringe benefit and apprenticeship and training.''
Smith, Summerset & Associates, LLC, suggested that the WH-347
collection instrument used to collect data for the Davis-Bacon
Certified Payroll (under OMB control number 1235-0008) is difficult to
understand and indicated that the form needs simplification and
rearrangement. The commenter added that, ``[t]he same changes--
replacing `employee' references with `worker' references--should also
be made asap to the WH-347 payroll reporting form. The WH-347 is the
primary customer-facing document in the DBRA universe. It is used by
thousands of contractors who still submit paper CPRs and, via operation
of the computer programs, by other thousands of contractors who submit
e-CPRs. It is frequently their main source of information about DBRA.
WH-347 page 2, the signature page, still uses the terms `employees' and
`employed by.' Those references need to be changed asap.'' Smith,
Summerset & Associates also suggested additional changes to WH-347 to
expand the universe of authorized persons who may sign the WH-347 and
to simplify the tool for users. As we note below, changes to the WH-347
are beyond the scope of this rulemaking, but the Department will
consider comments submitted as part of the form's revision process.
The MnDOT, commenting on the Department's proposal to require the
Social Security number and last known address in payroll records, added
that this information should also be included in the certified payroll.
They suggested that excluding such data on the certified payroll would
make it more difficult to track workers between contractors. With
respect to comments about the WH-347, the Department reiterates that it
proposed no changes to the form in the NPRM. However, the form is
currently under review and the Department is considering such comments
in the revision process. The Department appreciates this feedback and
invites commenters to provide feedback and suggestions when the notice
for revision is published in the Federal Register.
A copy of these ICRs may be obtained at https://www.reginfo.gov or
by contacting the Wage and Hour Division as shown in the FOR FURTHER
INFORMATION CONTACT section of this preamble.
Total burden for the subject information collections, including the
burdens that will be unaffected by this final rule and any changes are
summarized as follows:
Type of review: Revision to currently approved information
collections.
Agency: Wage and Hour Division, Department of Labor.
Title: Davis-Bacon Certified Payroll.
OMB Control Number: 1235-0008.
Affected public: Private sector, businesses or other for-profits
and Individuals or Households.
Estimated number of respondents: 152,900 (0 from this rulemaking).
Estimated number of responses: 9,194,616 (1,200,000 from this
rulemaking).
Frequency of response: On occasion.
Estimated annual burden hours: 7,464,975 (3,333 burden hours due to
this rulemaking).
Capital/Start-up costs: $1,143,229 ($0 from this rulemaking).
Type of review: Revision to currently approved information
collections.
Agency: Wage and Hour Division, Department of Labor.
Title: Requests to Approve Conformed Wage Classifications and
Unconventional Fringe Benefit Plans Under the Davis-Bacon and Related
Acts and Contract Work Hours and Safety Standards Act.
OMB Control Number: 1235-0023.
Affected public: Private sector, businesses or other for-profits
and Individuals or Households.
Estimated number of respondents: 8,518 (0 from this rulemaking).
Estimated number of responses: 8,518 (0 from this rulemaking).
Frequency of response: on occasion.
Estimated annual burden hours: 2,143 (0 from this rulemaking).
Estimated annual burden costs: 0.
Capital/Start-up costs: $5,366 ($0 from this rulemaking).
V. Executive Order 12866, Regulatory Planning and Review; Executive
Order 13563, Improved Regulation and Regulatory Review
Under Executive Order 12866, OMB's Office of Information and
Regulatory Affairs (OIRA) determines whether a regulatory action is
significant and, therefore, subject to the requirements of the
Executive Order and OMB review.\284\ Section 3(f) of Executive Order
12866 defines a ``significant regulatory action'' as a regulatory
action that is likely to result in a rule that may: (1) have an annual
effect on the economy of $100 million or more, or adversely affect in a
material way a sector of the economy, productivity, competition, jobs,
the environment, public health or safety, or State, local, or Tribal
governments or communities (also referred to as economically
significant); (2) create serious inconsistency or otherwise interfere
with an action taken or planned by another agency; (3) materially alter
the budgetary impact of entitlements, grants, user fees or loan
programs or the rights and obligations of recipients thereof; or (4)
raise novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in the Executive
Order. OIRA has determined that this final rule is a ``significant
regulatory action'' within the scope of section 3(f)(1) of Executive
Order 12866. OIRA has also designated this rule as a major rule under
Subtitle E of the Small Business Regulatory and Enforcement Fairness
Act of 1996. Although the Department has only quantified costs of $39.3
million in Year 1, there are multiple components of the rule that could
not be quantified due to data limitations, so it is possible that the
aggregate effect of the rule is larger.
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\284\ See 58 FR 51735, 51741 (Oct. 4, 1993).
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Executive Order 13563 directs agencies to, among other things,
propose or adopt a regulation only upon a reasoned determination that
its benefits
[[Page 57699]]
justify its costs; that it is tailored to impose the least burden on
society, consistent with obtaining the regulatory objectives; and that,
in choosing among alternative regulatory approaches, the agency has
selected those approaches that maximize net benefits. Executive Order
13563 recognizes that some costs and benefits are difficult to quantify
and provides that, when appropriate and permitted by law, agencies may
consider and discuss qualitatively values that are difficult or
impossible to quantify, including equity, human dignity, fairness, and
distributive impacts. The analysis below outlines the impacts that the
Department anticipates may result from this rule and was prepared
pursuant to the above-mentioned executive orders.
A. Introduction
1. Background and Need for Rulemaking
In order to provide greater clarity and enhance their usefulness in
the modern economy, the Department is updating and modernizing the
regulations that implement the Davis-Bacon and Related Acts. The DBA,
enacted in 1931, requires the payment of locally prevailing wages and
fringe benefits on Federal contracts for construction. See 40 U.S.C.
3142. The law applies to workers on contracts awarded directly by
Federal agencies and the District of Columbia that are in excess of
$2,000 and for the construction, alteration, or repair of public
buildings or public works. Congress subsequently incorporated DBA
prevailing wage requirements into numerous statutes (referred to as
Related Acts) under which Federal agencies assist construction projects
through grants, loans, guarantees, insurance, and other methods.
The Department seeks to address a number of outstanding challenges
in the program while also providing greater clarity in the DBRA
regulations and enhancing their usefulness in the modern economy. In
this rulemaking, the Department is updating and modernizing the
regulations implementing the DBRA at 29 CFR parts 1, 3, and 5. Among
other updates, as discussed more fully earlier in this preamble, under
this rule the Department will:
Return to the definition of ``prevailing wage'' in Sec.
1.2 that it used from 1935 to 1983.\285\ Currently, a wage rate may be
identified as prevailing in the area only if it is paid to a majority
of workers in a classification on the wage survey; otherwise, a
weighted average is used. The Department will return instead to the
``three-step'' method in effect before 1983. Under that method, in the
absence of a wage rate paid to a majority of workers in a particular
classification, a wage rate will be considered prevailing if it is paid
to at least 30 percent of such workers. Only if no wage rate is paid to
at least 30 percent of workers in a classification will an average rate
be used.
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\285\ The 1981-1982 rulemaking went into effect Apr. 29, 1983.
48 FR 19532.
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Revise Sec. 1.6(c)(1) to provide a mechanism to regularly
update certain non-collectively bargained prevailing wage rates based
on the ECI. The mechanism is intended to keep such rates more current
between surveys so that they do not become out-of-date and fall behind
prevailing wage rates in the area.
Expressly give the Administrator authority and discretion
to adopt State or local wage determinations as the Davis-Bacon
prevailing wage where certain specified criteria are satisfied.
Return to a prior policy made during the 1981-1982
rulemaking related to the delineation of wage survey data submitted for
``metropolitan'' or ``rural'' counties in Sec. 1.7(b). Through this
change, the Department seeks to more accurately reflect modern labor
force realities, to allow more wage rates to be determined at smaller
levels of geographical aggregation, and to increase the sufficiency of
data at the statewide level.
Include provisions to reduce the need for the use of
``conformances'' where the Department has received insufficient data to
publish a prevailing wage for a classification of worker--a process
that currently is burdensome for contracting agencies, contractors, and
the Department.
Strengthen enforcement, including by making effective, by
operation of law, any contract clauses or wage determinations that were
wrongly omitted from contracts, and by codifying the principle of
annualization used to calculate the amount of Davis-Bacon credit that a
contractor may receive for contributions to a fringe benefit plan when
the contractor's workers also work on private projects.
Clarify and strengthen the scope of coverage under the
DBRA, including by revising the definition of ``site of the work'' to
further encompass certain construction of significant portions of a
building or work at secondary worksites, to better clarify when
demolition and similar activities are covered by the Davis-Bacon labor
standards, and to clarify that the regulatory definitions of ``building
or work'' and ``public building or public work'' can be met even when
the construction activity involves only a portion of an overall
building, structure, or improvement.
2. Summary of Affected Contractors, Workers, Costs, Transfers, and
Benefits
The Department evaluates the impacts of two components of this rule
in this regulatory impact analysis:
The return to the ``three-step'' method for determining
the prevailing wage, and
The provision of a mechanism to regularly update certain
non-collectively bargained prevailing wage rates based on ECI data.
The numbers presented in this final rule are generally very similar
to the numbers in the proposed rule. Differences are due to the use of
more recent data and a larger time estimate for regulatory
familiarization costs in response to comments. This rule predominantly
affects firms that hold federally funded or assisted construction
contracts, with the primary impact resulting from the rule's changes
affecting prevailing wage and fringe benefit rate determinations. The
Department identified a range of potentially affected firms. The more
narrowly defined population (those actively holding DBRA-covered
contracts) includes 152,900 firms. The broader population (including
those bidding on contracts but without active contracts, or those
considering bidding in the future) includes 184,500 firms. Only a
subset of potentially affected firms will be substantively affected and
fewer may experience a change in payroll costs because some firms
already pay above the prevailing wage rates that may result from this
proposal.
The Department estimated there are 1.2 million workers on DBRA-
covered contracts and who therefore may be potentially affected by this
final rule. Some of these workers will not be affected because they
work in occupations not covered by DBRA or, if they are covered by
DBRA, workers may not be affected by the prevailing wage updates of
this final rule because they may already earn above the updated
prevailing wage and fringe benefit rates.
The Department estimated both regulatory familiarization costs and
implementation costs for affected firms. Year 1 costs are estimated to
total $39.3 million. Average annualized costs across the first 10 years
are estimated to be $7.3 million (using a 7 percent discount rate). The
transfer analysis discussed in section V.D. (``Transfer Payments'')
draws on two illustrative analyses conducted by the Department.
However, the Department does not definitively quantify annual transfer
[[Page 57700]]
payments due to data limitations and uncertainty. Similarly, benefits
are discussed qualitatively due to data limitations and uncertainty.
See Table 1 for a summary of affected contractor firms, workers, and
costs.
Table 1--Summary of Affected Contractor Firms, Workers, and Costs
[2021 Dollars]
----------------------------------------------------------------------------------------------------------------
Future years Average annualized value
Year 1 -----------------------------------------------------
Year 2 Year 10 3% Real rate 7% Real rate
----------------------------------------------------------------------------------------------------------------
Firms: Narrow definition \a\................... 152,900 152,900 152,900 .............. ..............
Firms: Broad definition \b\.................... 184,500 184,500 184,500 .............. ..............
Potentially affected workers (millions)........ 1.2 1.2 1.2 .............. ..............
Direct employer costs (million)................ $39.3 $2.4 $2.4 $7.5 $7.3
Regulatory familiarization................. $36.9 $0.0 $0.0 $5.1 $4.9
Implementation............................. $2.4 $2.4 $2.4 $2.4 $2.4
----------------------------------------------------------------------------------------------------------------
\a\ Firms actively holding DBRA-covered contracts.
\b\ Firms actively holding DBRA-covered contracts or who may be bidding on DBRA contracts or considering bidding
in the future.
B. Number of Potentially Affected Contractor Firms and Workers
1. Number of Potentially Affected Contractor Firms
The Department identified a range of potentially affected firms.
The more narrowly defined population (firms actively holding DBRA-
covered contracts) includes 152,900 firms: 61,200 impacted by DBA and
91,700 impacted by the Related Acts (Table 2). The broader population
(including those bidding on DBA contracts but without active contracts,
or those considering bidding in the future) includes 184,500 firms:
92,800 impacted by DBA and 91,700 impacted by the Related Acts. The
Department explains how the three components of affected contractor
firms were derived separately: (1) firms currently holding DBA
contracts, (2) all potentially affected DBA contractors, and (3) firms
holding DBRA contracts.
The Department notes that only a subset of these firms will
experience a change in payroll costs. Those firms that already pay
above the new wage determination rates will not be substantively
affected. Because there are no readily usable data on the earnings of
workers of these affected firms, the Department cannot definitively
identify the number of firms that will experience changes in payroll
costs due to changes in prevailing wage rates.
i. Firms Currently Holding DBA Contracts
USASpending.gov--the official source for spending data for the U.S.
Government--contains Government award data from the Federal Procurement
Data System Next Generation (FPDS-NG), which is the system of record
for Federal procurement data. The Department used these data to
identify the number of firms that currently hold DBA contracts.
Although more recent data are available, the Department used data from
2019 to avoid any shifts in the data associated with the COVID-19
pandemic that began in 2020. Additionally, for the final rule, the
Department considered updating to 2021 data, but ultimately decided
against it because of the reasoning above as well as variable
differences between the 2019 and 2021 data. Any long-run impacts of
COVID-19 are speculative because this is an unprecedented situation, so
using data from 2019 may be the best approximation the Department has
for future impacts. However, the pandemic could cause structural
changes to the economy, resulting in shifts in industry employment and
wages.
The Department identified firms working on DBA contracts as
contracts with either an assigned NAICS code of 23 or if the
``Construction Wage Rate Requirements'' element is ``Y,'' meaning that
the contracting agency flagged that the contract is covered by
DBA.286 287 The Department excluded (1) contracts for
financial assistance such as direct payments, loans, and insurance; and
(2) contracts performed outside the U.S. because DBA coverage is
limited to the 50 states, the District of Columbia, and the U.S.
territories.\288\
---------------------------------------------------------------------------
\286\ The North American Industry Classification System (NAICS)
is a method by which Federal statistical agencies classify business
establishments in order to collect, analyze, and publish data about
certain industries. Each industry is categorized by a sequence of
codes ranging from two digits (most aggregated level) to six digits
(most granular level). https://www.census.gov/naics/.
\287\ The Department acknowledges that there may be affected
firms that fall under other NAICS codes and for which the
contracting agency did not flag in the FPDS-NG system that the
contract is covered by DBA. Including these additional NAICS codes
could result in an overestimate because they would only be affected
by this rule if DBA-covered construction occurs. The data does not
allow the Department to determine this.
\288\ The DBA only applies in the 50 States and the District of
Columbia and does not apply in the territories. However, some
Related Acts provide Federal funding of construction in the
territories that, by virtue of the Related Act, is subject to DBA
prevailing wage requirements. For example, the DBA does not apply in
Guam, but a Related Act provides that base realignment construction
in Guam is subject to DBA requirements.
---------------------------------------------------------------------------
In 2019, there were 14,000 unique prime contractors with active
construction contracts in USASpending. However, subcontractors are also
impacted by this final rule. The Department examined 5 years of
USASpending data (2015 through 2019) and identified 47,200 unique
subcontractors who did not hold contracts as primes in 2019. The
Department used 5 years of data for the count of subcontractors to
compensate for lower-tier subcontractors that may not be included in
USASpending.gov. In total, the Department estimates 61,200 firms
currently hold DBA contracts and are potentially affected by this
rulemaking under the narrow definition; however, to the extent that any
of these firms already pay above the prevailing wage rates as
determined under this final rule they will not actually be impacted by
the rule.
ii. Potentially Affected Contractors Under the DBA
The Department also cast a wider net to identify other potentially
affected contractors, both those directly affected (i.e., holding
contracts) and those that plan to bid on DBA-covered contracts in the
future. To determine the number of these firms, the Department
identified construction firms registered in the GSA's System for Award
Management (SAM) since all entities bidding on Federal procurement
contracts or grants must register in SAM. The Department believes that
firms registered in SAM include those that may be affected if the
rulemaking impacts their decision to bid on contracts or their
competitiveness in the bidding process. However, it is possible that
some firms that are not already registered in SAM could decide
[[Page 57701]]
to bid on DBA-covered contracts after this rulemaking; these firms are
not included in the Department's estimate. The rule could also impact
them if they are awarded a future contract.
Using August 2022 SAM data, the Department identified 45,600
registered firms with construction listed as the primary NAICS
code.\289\ The Department excluded firms with expired registrations,
firms only applying for grants,\290\ government entities (such as city
or county governments),\291\ foreign organizations, and companies that
only sell products and do not provide services. SAM includes all prime
contractors and some subcontractors (those who are also prime
contractors or who have otherwise registered in SAM). However, the
Department is unable to determine the number of subcontractors that are
not in the SAM database. Therefore, the Department added the
subcontractors identified in USASpending to this estimate. Adding these
47,200 firms identified in USASpending to the number of firms in SAM,
results in 92,800 potentially affected firms.
---------------------------------------------------------------------------
\289\ Data released in monthly files. Available at: https://www.sam.gov/SAM/pages/public/extracts/samPublicAccessData.jsf.
\290\ Entities registering in SAM are asked if they wish to bid
on contracts. If the firm answers ``yes,'' then they are included as
``All Awards'' in the ``Purpose of Registration'' column in the SAM
data. The Department included only firms with a value of ``Z2,''
which denotes ``All Awards.''
\291\ The Department believes that there may be certain limited
circumstances in which State and local governments may be
contractors but believes that this number would be minimal and
including government entities would result in an inappropriate
overestimation.
---------------------------------------------------------------------------
iii. Firms Impacted by the Related Acts
USASpending does not adequately capture all work performed under
the Related Acts. Additionally, there is not a central database, such
as SAM, where contractors working on Related Acts contracts must
register. Therefore, the Department used a different methodology to
estimate the number of firms impacted by the Related Acts. The
Department estimated 883,900 workers work on Related Acts contracts
(see section V.B.2.iii.), then divided that number by the average
number of workers per firm (9.6) in the construction industry.\292\
This results in 91,700 firms. Some of these firms likely also perform
work on DBA contracts. However, because the Department has no
information on the size of this overlap, the Department has assumed all
are unique firms.
---------------------------------------------------------------------------
\292\ 2019 Statistics of U.S. Businesses (SUSB). U.S., NAICS
sectors, larger employment sizes up to 20,000+. https://www.census.gov/data/tables/2019/econ/susb/2019-susb-annual.html.
Table 2--Range of Number of Potentially Affected Firms
------------------------------------------------------------------------
Source Number
------------------------------------------------------------------------
Total Count (Davis-Bacon and Related Acts)
------------------------------------------------------------------------
Narrow definition \a\......................................... 152,900
Broad definition \b\.......................................... 184,500
------------------------------------------------------------------------
DBA (Narrow Definition)
------------------------------------------------------------------------
Total......................................................... 61,200
Prime contractors from USASpending........................ 14,000
Subcontractors from USASpending........................... 47,200
------------------------------------------------------------------------
DBA (Broad Definition)
------------------------------------------------------------------------
Total......................................................... 92,800
SAM....................................................... 45,600
Subcontractors from USASpending........................... 47,200
------------------------------------------------------------------------
Related Acts
------------------------------------------------------------------------
Total......................................................... 91,700
Related Acts workers...................................... 883,900
Employees per firm (SUSB)................................. 9.6
------------------------------------------------------------------------
\a\ Firms actively holding DBRA-covered contracts
\b\ Firms actively holding DBRA-covered contracts or who may be bidding
on DBRA contracts or considering bidding in the future.
2. Number of Potentially Affected Workers
There are no readily available government data on the number of
workers working on DBA contracts; therefore, to estimate the number of
these workers, the Department employed the approach used in the 2021
final rule, ``Increasing the Minimum Wage for Federal Contractors,''
which implemented Executive Order 14026.\293\ That methodology is based
on the 2016 rulemaking implementing Executive Order 13706's paid sick
leave requirements, which contained an updated version of the
methodology used in the 2014 rulemaking for Executive Order 13658.\294\
Using this methodology, the Department estimated the number of workers
who work on DBRA contracts, representing the number of ``potentially
affected workers,'' is 1.2 million potentially affected workers. Some
of these workers will not be affected because while they work on DBRA-
covered contracts, they are not in occupations covered by the DBRA
prevailing wage requirements.
---------------------------------------------------------------------------
\293\ See 86 FR 38816, 38816-38898.
\294\ See 81 FR 9591, 9591-9671 and 79 FR 60634-60733.
---------------------------------------------------------------------------
The Department estimated the number of potentially affected workers
in three parts. First, the Department estimated employees and self-
employed workers working on DBA contracts in the 50 States and the
District of Columbia. Second, the Department estimated the number of
potentially affected workers working on contracts covered by the
Related Acts in the 50 States and the District of Columbia. Third, the
Department estimated the number of potentially affected workers working
on contracts covered by the Related Acts in the territories.
i. Workers on DBA Contracts in the 50 States and the District of
Columbia
First, the Department calculated the share of construction activity
that is covered by DBA by taking the ratio of Federal contracting
expenditures \295\ to gross output in NAICS 23: Construction.\296\ This
results in an estimated 3.27 percent of output in the construction
industry covered by Federal Government contracts (Table 3).
---------------------------------------------------------------------------
\295\ The Department used 2019 Federal contracting expenditures
from USASpending.gov data excluding (1) financial assistance such as
direct payments, loans, and insurance; and (2) contracts performed
outside the U.S.
\296\ Bureau of Economic Analysis. (2020). Table 8. Gross Output
by Industry Group. https://www.bea.gov/news/2020/gross-domestic-product-industry-fourth-quarter-and-year-2019. ``Gross output of an
industry is the market value of the goods and services produced by
an industry, including commodity taxes. The components of gross
output include sales or receipts and other operating income,
commodity taxes, plus inventory change. Gross output differs from
value added, which measures the contribution of the industry's labor
and capital to its gross output.''
---------------------------------------------------------------------------
The Department then multiplied the ratio of covered-to-gross output
by private sector employment in the construction industry (9.1 million)
to estimate the share of employees working on covered contracts. The
Department's private sector employment number is primarily comprised of
construction industry employment from the May 2019 OEWS, formerly the
Occupational Employment Statistics.\297\ However, the OEWS excludes
unincorporated self-employed workers, so the Department supplemented
OEWS data with data from the 2019 Current Population Survey Merged
Outgoing Rotation Group (CPS MORG) to include the unincorporated self-
employed.
---------------------------------------------------------------------------
\297\ BLS. OEWS. May 2019. Available at: https://www.bls.gov/oes/.
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[[Page 57702]]
[GRAPHIC] [TIFF OMITTED] TR23AU23.000
According to this methodology, the Department estimated there are
297,900 workers on DBA covered contracts in the 50 States and the
District of Columbia. However, this estimate is imprecise for two
reasons; one of which results in an overestimate and one that results
in an underestimate. First, these laws only apply to wages for
mechanics and laborers, so some of these workers would not be affected
by these changes to DBA. Second, this methodology represents the number
of year-round-equivalent potentially affected workers who work
exclusively on DBA contracts. Thus, when the Department refers to
potentially affected employees in this analysis, the Department is
referring to this conceptual number of people working exclusively on
covered contracts. Because workers often work on a combination of
covered and non-covered contracts, this bias underestimates the number
of unique workers.
ii. Workers on Related Acts Contracts in the 50 States and the District
of Columbia
This rulemaking will also impact workers on Related Acts contracts
in the 50 States and the District of Columbia. Data are not available
on the number of workers covered by the Related Acts. Additionally,
neither USASpending nor any other database fully captures this
population.\298\ Therefore, the Department used a different approach to
estimate the number of potentially affected workers for Related Acts
contracts.
---------------------------------------------------------------------------
\298\ USASpending includes information on grants, assistance,
and loans provided by the Federal government. However, this does not
include all covered projects, it does not capture the full value of
the project because it is just the Federal share (i.e., excludes
spending by State and local governments or private institutions that
are also subject to DBRA labor standards because of the Federal
share on the project), and it cannot easily be restricted to
construction projects because there is no NAICS or product service
code (PSC) variable.
---------------------------------------------------------------------------
The Census Bureau reports total State and local government
construction spending was $318 billion in 2019.\299\ The Department
then applied an adjustment factor to account for the share of State and
local expenditures that are covered by the Related Acts. The Department
assumed half of the total State and local government construction
expenditures are subject to a DBRA, resulting in estimated expenditures
of $158 billion. To this, the Department added $3 billion to represent
HUD backed mortgage insurance for private construction projects.\300\
---------------------------------------------------------------------------
\299\ Census Bureau. ``Annual Value of Public Construction Put
in Place 2009-2020.'' Available at: https://www.census.gov/construction/c30/historical_data.html.
\300\ Estimate based on personal communications with the Office
of Labor Standards Enforcement and Economic Opportunity at HUD.
---------------------------------------------------------------------------
As was done for DBA, the Department divided contracting
expenditures ($161 billion) by gross output ($1.7 billion) and
multiplied that ratio by the estimate of private sector employment used
above (9.1 million) to estimate the share of workers working on Related
Acts-covered contracts (883,900).
iii. Workers on Related Acts Contracts in the U.S. Territories
The methodology to estimate potentially affected workers in the
U.S. territories is similar to the methodology above for the 50 States
and the District of Columbia. The primary difference is that data on
gross output in the territories are not available, and so the
Department had to make some additional assumptions. The Department
approximated gross output in the territories by calculating the ratio
of gross output to Gross Domestic Product (GDP) for the U.S. (1.8),
then multiplying that ratio by GDP in each territory to estimate total
gross output.\301\ To limit gross output to the construction industry,
the Department multiplied it by the share of the territory's payroll in
NAICS 23. For example, the Department estimated that Puerto Rico's
gross output in the construction industry totaled $3.6 billion.\302\
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\301\ GDP limited to personal consumption expenditures and gross
private domestic investment.
\302\ In Puerto Rico, personal consumption expenditures plus
gross private domestic investment equaled $71.2 billion. Therefore,
Puerto Rico gross output was calculated as $71.2 billion x 1.8 x 2.7
percent.
[GRAPHIC] [TIFF OMITTED] TR23AU23.001
---------------------------------------------------------------------------
where
i = territory
The rest of the methodology follows the methodology for the 50
States and the District of Columbia. To determine the share of all
output associated with Government contracts, the Department divided
contract expenditures by gross output. Federal contracting expenditures
from USASpending.gov data show that the Government spent $993.3 million
on construction contracts in 2019 in American Samoa, the Commonwealth
of the Northern Mariana Islands, Guam, Puerto Rico, and the U.S. Virgin
Islands. The Department then multiplied the ratio of covered contract
spending to gross output by private sector employment to estimate the
number of workers working on covered contracts (6,100).\303\
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\303\ For the U.S. territories, the unincorporated self-employed
are excluded because CPS data are not available on the number of
unincorporated self-employed workers in U.S. territories.
Table 3--Number of Potentially Affected Workers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Share output from Private-sector Workers on covered
Private output Contracting output covered workers (1,000s) contracts (1,000s)
(billions) \a\ (millions) \b\ contracting (%) \c\ \d\
--------------------------------------------------------------------------------------------------------------------------------------------------------
DBA, excl. territories................................ $1,662 $54,400 3.27 9,100 297.9
Related Acts, territories............................. 5 993 (e) 35 6.1
-------------------------------------------------------------------------------------------------
[[Page 57703]]
Related Acts, excl. territories....................... .................. 161,297 9.68 9,135 883.9
Total............................................. 1,667 216,700 .................. ................ 1,188.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Bureau of Economic Analysis, NIPA Tables, Gross output. 2019. For territories, gross output estimated by multiplying (1) total GDP for the territory
by the ratio of total gross output to total GDP for the U.S. and (2) the share of national gross output in the construction industry.
\b\ For DBA, and Related Acts in the territories, data from USASpending.gov for contracting expenditures for covered contracts in 2019. For Related
Acts, data from Census Bureau on value of State and local government construction put in place, adjusted for coverage ratios. The Census data includes
some data for territories but may be underestimated.
\c\ OEWS May 2019. For non-territories, also includes unincorporated self-employed workers from the 2019 CPS MORG.
\d\ Assumes share of expenditures on contracting is same as share of employment. Assumes workers work exclusively, year-round on DBRA covered contracts.
\e\ Varies by U.S. Territory.
3. Demographics of the Construction Industry
To provide information on the types of workers that may be affected
by this rule, the Department presents demographic characteristics of
production workers in the construction industry. For purposes of this
demographic analysis only, the Department is defining the construction
industry as workers in the following occupations:
Construction and extraction occupations
Installation, maintenance, and repair occupations
Production occupations
Transportation and material moving occupations
The Department notes that the demographic characteristics of
workers on DBRA projects may differ from the general construction
industry; however, data on the demographics of workers on DBRA projects
is unavailable. Demographics of the general workforce are also
presented for comparison. Tabulated numbers are based on 2019 CPS data
for consistency with the rest of the analysis and to avoid potential
impacts of COVID-19. Additional information on the demographics of
workers in the construction industry can be found in ``The Construction
Chart Book: The U.S. Construction Industry and Its Workers.'' \304\
---------------------------------------------------------------------------
\304\ Dong, Xiuwen, Xuanwen Wang, Rebecca Katz, Gavin West, and
Bruce Lippy, ``The Construction Chart Book: The U.S. Construction
Industry and Its Workers,'' (6th ed. Silver Spring: CPWR--The Center
for Construction Research and Training, 2018) at 18. https://www.cpwr.com/wp-content/uploads/publications/The_6th_Edition_Construction_eChart_Book.pdf.
---------------------------------------------------------------------------
The vast majority of workers in the construction industry are men,
97 percent (Table 4), which is significantly higher than the general
workforce where 53 percent are men. Workers in construction are also
significantly more likely to be Hispanic than the general workforce; 38
percent of construction workers are Hispanic, compared with 18 percent
of the workforce.
Lastly, while many construction workers may have completed
registered apprenticeship programs, 84 percent of workers in the
construction industry have a high school diploma or less, compared with
54 percent of the general workforce. The Department also looked at data
on disability status in the construction industry and found that 6.4
percent of workers with a disability work in the construction industry,
compared to 7.2 percent of workers with no disability.\305\
---------------------------------------------------------------------------
\305\ Persons with a Disability: Labor Force Characteristics--
2019. Table 4. https://www.bls.gov/news.release/archives/disabl_02262020.pdf.
Table 4--Demographics of Workers in the Construction Industry
------------------------------------------------------------------------
Production
workers in Total
construction workforce (%)
(%)
------------------------------------------------------------------------
By Region
------------------------------------------------------------------------
Northeast............................... 16.4 17.9
Midwest................................. 16.4 21.9
South................................... 41.7 36.9
West.................................... 25.5 23.3
------------------------------------------------------------------------
By Sex
------------------------------------------------------------------------
Male.................................... 97.1 53.4
Female.................................. 2.9 46.6
------------------------------------------------------------------------
By Race
------------------------------------------------------------------------
White only.............................. 87.1 77.2
Black only.............................. 7.5 12.4
All others.............................. 5.4 10.4
------------------------------------------------------------------------
By Ethnicity
------------------------------------------------------------------------
Hispanic................................ 38.0 18.1
[[Page 57704]]
Not Hispanic............................ 62.0 81.9
------------------------------------------------------------------------
By Race and Ethnicity
------------------------------------------------------------------------
White only, not Hispanic................ 52.2 61.1
Black only, not Hispanic................ 6.2 11.6
------------------------------------------------------------------------
By Age
------------------------------------------------------------------------
16-25................................... 15.2 16.7
26-55................................... 71.6 64.2
56+..................................... 13.3 19.1
------------------------------------------------------------------------
By Education
------------------------------------------------------------------------
No degree............................... 23.0 8.9
High school diploma..................... 60.6 45.3
Associate's degree...................... 9.3 10.7
Bachelor's degree or advanced........... 7.2 35.1
------------------------------------------------------------------------
Note: CPS data for 2019.
The Department has also presented some demographic data on
Registered Apprentices, as they are the pipeline for future
construction workers. These demographics come from Federal Workload
data, which covers the 25 states administered by the Department's OA
and national registered apprenticeship programs.\306\ Note that this
data includes apprenticeships for other industries beyond construction,
but 68 percent of the active apprentices are in the construction
industry, so the Department believes this data could be representative
of that industry. Of the active apprentices in this data set, 9.1
percent are female, and 90.9 percent are male. The data show that 78.7
percent of active apprentices are White, 14.1 percent are Black or
African American, 3.2 percent are American Indian or Alaska Native, 2.1
percent are Asian, and 1.1 percent are Native Hawaiian or Other Pacific
Islander.\307\ The data also show that 23.6 percent of active
apprentices are Hispanic.
---------------------------------------------------------------------------
\306\ U.S. Department of Labor, Office of Apprenticeship.
``FY2019 Data and Statistics.'' https://www.dol.gov/agencies/eta/apprenticeship/about/statistics/2019.
\307\ This excludes apprentices who did not wish to answer or
for whom race was not provided.
---------------------------------------------------------------------------
C. Costs of the Final Rule
This section quantifies direct employer costs associated with the
final rule. The Department estimated both (1) regulatory
familiarization costs and (2) implementation costs associated with more
frequently updated rates. Year 1 costs are estimated to total $39.3
million. Average annualized costs across the first 10 years of
implementation are estimated to be $7.3 million (using a 7 percent
discount rate). These cost estimates are higher than presented in the
proposed rule due a larger estimate of the time required to review the
regulation. Non-quantified costs are discussed in sections V.C.3 and
V.C.4. Transfers resulting from these provisions are discussed in
section V.D.
1. Regulatory Familiarization Costs
This rule's direct costs on some covered contractors who will
review the regulations to understand how the prevailing wage
determination methodology will change and how certain non-collectively
bargained rates will be periodically updated will likely be small
because not all of these firms will choose to familiarize themselves
with the methodologies used to develop those prevailing wage rates, or
any periodic adjustments to them. Regulatory familiarization time for
other components of this final rule, such as the provisions clarifying
regulatory language and coverage, are likely to take time when reviewed
but will only be reviewed by a subset of firms. For example, a roofing
company does not need to understand how the rule relates to
prefabrication or truckers. Costs associated with ensuring compliance
are included as implementation costs.
For this analysis, the Department has included all firms that
either hold DBA or Related Acts contracts or are considering bidding on
work (184,500 firms). However, this may be an overestimate, because
firms that are registered in SAM might not bid on a DBRA contract, and
therefore may not review these regulations. ABC asserted that this rule
extends coverage to new types of construction, industries, and
occupations and the associated firms are not covered by the
Department's estimate. The Department believes most of these firms are
already included in the estimate because the methodology covers all
firms bidding, or considering bidding, on Federal construction
contracts, not just DBA contracts. Furthermore, as explained below in
section V.C.4.v, while some covered firms engaged in construction at
secondary worksites may not be classified in the construction industry
under NAICS and consequently may not be captured by this methodology,
the Department believes that the number of such firms is small given
the limited scope of this change to ``site of the work'' in the final
rule.
The Department assumes that, on average, 4 hours of a human
resources staff member's time will be spent reviewing the rulemaking.
This time estimate is the average time per firm; some firms will spend
more time reviewing the rule, but others will spend less or no time
reviewing the rule. In the proposed rule, the Department used a time
estimate of 1 hour. In response to commenters asserting that it would
take more time, the Department increased this estimate to 4 hours.
Commenters emphasized that the length of the rule and the need to have
several employees review necessitate a longer review time estimate. For
example, ABC noted,
[[Page 57705]]
``reading the 432-page NPRM-clocking in at a robust 118,450 words--
would actually take 8.3 hours per person at an average silent reading
rate.'' The Department acknowledges that it may take some reviewers at
least this long to read the entire rule but, because some of the firms
in the cost calculation will not bid on a Davis-Bacon contract and
therefore will not spend any time reviewing this rule, an average time
estimate of 4 hours is more appropriate.
The cost of this time is the median loaded wage for a Compensation,
Benefits, and Job Analysis Specialist of $49.94 per hour.\308\
Therefore, the Department has estimated regulatory familiarization
costs to be $36.9 million ($49.94 per hour x 4.0 hours x 184,500
contractors) (Table 5). The Department has included all regulatory
familiarization costs in Year 1. New entrants who would have been
covered by previous DBA regulations will not incur any additional
regulatory familiarization costs attributable to this rule; had this
rule not been proposed, they still would have incurred the costs of
regulatory familiarization with existing provisions. In addition, while
the provision regarding periodic adjustments is new and could involve
additional review time, the Department believes that any increased
costs associated with that familiarization will be offset by a decrease
in time needed to review some of the simplified or harmonized
provisions, such as debarment. ABC disagreed with this approach to new
entrants and claimed that this rule constitutes an added regulation and
cost. The Department acknowledges that for the subset of firms that
would not have been covered by Davis-Bacon prior to the implementation
of this rule and who may enter Davis-Bacon covered contracting in
future years, they may incur future rule familiarization costs.
However, the Department does not have data to determine how many firms
would be newly-covered in future years. Given these considerations, the
Department believes it is appropriate to assume that new entrants in
future years would not spend significantly more time reviewing this
rule than they would the existing regulations.
---------------------------------------------------------------------------
\308\ This includes the median base wage of $30.83 from the 2021
OEWS plus benefits paid at a rate of 45 percent of the base wage, as
estimated from the BLS's Employer Costs for Employee Compensation
(ECEC) data, and overhead costs of 17 percent. OEWS data available
at: https://www.bls.gov/oes/current/oes131141.htm.
---------------------------------------------------------------------------
Average annualized regulatory familiarization costs over 10 years,
using a 7 percent discount rate, are $4.9 million.
2. Implementation Costs for More Frequently Updated Rates
Firms will incur costs associated with implementing updated
prevailing wage rates. When preparing a bid on a DBRA-covered contract,
the contractor must review the wage determination identified by the
contracting agency as appropriate for the work and determine the wage
rates applicable for each occupation or classification to perform work
on the contract. Once that contract is signed, the specified prevailing
wages generally remain in effect through the life of that
contract.\309\ This section considers only the additional time
necessary to update pay rates that change more frequently over time due
to the provision to periodically adjust out-of-date prevailing wage and
fringe rates. Implementation costs associated with other provisions,
such as the provision to clarify and strengthen the scope of coverage
under the DBRA, are discussed in section V.C.4.
---------------------------------------------------------------------------
\309\ With the exception of certain significant changes; see
section III.B.1.vi.(B).
---------------------------------------------------------------------------
The periodic adjustment rule will generally affect the frequency
with which prevailing wage rates are updated on wage determinations,
through both the anticipated initial updates to old, outmoded rates,
and moving forward, the periodic updates to certain rates that have not
been published through the survey process for the past 3 or more years
(see section V.D.). Affected firms may incur implementation costs if
they need to update compensation rates in their payroll systems.
Currently, only a fraction of non-collectively bargained prevailing
wages can be expected to change each year. Firms may spend more time
than they have in the past updating payroll systems to account for new
prevailing wage rates that the firms must pay as a result of being
awarded a DBRA contract that calls for such new rates. This change is
because the Department will update older non-collectively bargained
rates--as it currently does with collectively bargained prevailing
rates--to better represent current wages and benefits being paid in the
construction industry. In addition, moving forward, WHD expects to
publish wage rates more frequently than in the past.
To estimate the additional cost attributable updated non-
collectively bargained rates, it is necessary to estimate the number of
firms with DBRA contracts that will need to pay updated rates, the
subset of such firms that do not already pay updated prevailing wage
rates regularly, and the additional time these firms will spend
implementing the new wage and fringe benefit rates. To do so, the
Department estimated the number of firms with DBRA contracts that
already pay updated prevailing wage rates regularly and will not incur
additional implementation costs attributable to the periodic update
provision.
First, the Department estimates that new wage rates are published
from on average 7.8 wage surveys per year.\310\ These surveys may cover
an entire State or a subset of counties, and multiple construction
types or a single type of construction. For simplicity, the Department
assumed that each survey impacts all contractors in the State, all
construction types, and all classes of laborers and mechanics covered
by DBRA. Under these assumptions, the Department assumed that each year
15.6 percent of firms with DBRA contracts, roughly 23,900 firms (0.156
x 152,900 firms), might already be affected by changes in prevailing
wage rates in any given year and thus will not incur additional
implementation costs attributable to the rule.\311\
---------------------------------------------------------------------------
\310\ The Department used the number of surveys started between
2002 (first year with data readily available) and 2019 (last year
prior to COVID-19) to estimate that 7.8 surveys are started
annually. This is a proxy for the number of surveys published on
average in a year.
\311\ The Department divided 7.8 surveys per year by 50 States
to arrive at the 15.6 percent of firms assumption. The District of
Columbia and the territories were excluded from the denominator
because these tend to be surveyed less often (with the exception of
Guam which is surveyed regularly due to Related Act funding).
---------------------------------------------------------------------------
Additionally, there may be some firms that already update
prevailing wage rates periodically to reflect CBA increases. These
firms generally will not incur any additional implementation costs
because of this rule. The Department lacks specific data on how many
firms fall into this category but used information on the share of
rates that are collectively bargained under the current method to help
refine the estimate of firms with implementation costs. According to
section V.D., 24 percent of rates are CBA rates under the current
method, meaning 31,000 firms (0.24 x (152,900-23,900)) might already be
affected by changes in prevailing wages in any given year. Combining
this number with the 23,900 firms calculated above, 54,800 firms in
total would not incur additional implementation costs with this rule.
Therefore, 98,100 firms (152,900 firms-54,800 firms) are assumed to
not update prevailing wage information in any given year, absent this
rule, because prevailing wage rates were unchanged in their areas of
operation and would therefore incur implementation costs. The
Department intends to first update
[[Page 57706]]
certain outdated non-collectively bargained rates \312\ (currently
designated as ``SU'' rates) up to their current value to better track
wages and benefits being paid in the construction industry, as soon as
reasonably possible. Then, in the future, the Department intends to
update non-collectively bargained rates afterward as needed, and not
more frequently than every 3 years. The Department assumes that 98,100
firms may be expected to incur additional costs updating rates each
year. The Department acknowledges that this estimate of firms may be an
overestimate because this rule states that rates will be updated no
more frequently than every 3 years. In each year, only a fraction of
firms will have to update their prevailing wage rates, but the
Department has included all firms in the estimate to not underestimate
costs.
---------------------------------------------------------------------------
\312\ The ``SU'' designation currently is used on general wage
determinations when the prevailing wage is set through the weighted
average method based on non-collectively bargained rates or a mix of
collectively bargained rates and non-collectively bargained rates,
or when a non-collectively bargained rate prevails.
---------------------------------------------------------------------------
The Department estimated it will take a half hour on average for
firms to adjust their wage rates each year for purposes of bidding on
DBRA contracts. The Department believes that this average estimated
time is appropriate because only a subset of firms will experience a
change in costs associated with adjusting payroll systems. Firms that
already pay above the new wage determination rates will not need to
incur any implementation costs.
Several commenters criticized the Department's implementation time
estimate as too low. For example, ABC noted that according to their
2022 survey of member contractors, the proposed rule would take more
than 30 minutes to implement. ABC states that a more accurate
implementation cost is more likely closer to 10-15 hours per impacted
company but does not provide specifics as to how that estimate was
derived. The Department clarifies here that the time estimate used in
the implementation cost calculation is strictly for the marginal time
to identify updated rates and insert those rates into the contractor's
bid and/or payroll system. Costs associated with other provisions are
discussed in section V.C.4. The Department also notes that the estimate
of 30 minutes represents an average, because although some firms may
spend more time adjusting payroll systems, firms that already pay above
the new wage determination rates will not need to spend any time
adjusting payroll.
Implementation time will be incurred by human resource workers (or
a similarly compensated employee) who will implement the changes. As
with previous costs, these workers earn a loaded hourly wage of $49.94.
Therefore, total Year 1 implementation costs were estimated to equal
$2.4 million ($49.94 x 0.5 hour x 98,100 firms). The average annualized
implementation cost over 10 years, using a 7 percent discount rate, is
$2.4 million.
Table 5--Summary of Costs
[2021 Dollars]
----------------------------------------------------------------------------------------------------------------
Implementation
Regulatory costs for more
Variable Total costs familiarization frequently
costs updated rates
----------------------------------------------------------------------------------------------------------------
Year 1 Costs
----------------------------------------------------------------------------------------------------------------
Potentially affected firms................................... ............ 184,500 98,100
Hours per firm............................................... ............ 4 0.5
Loaded wage rate \a\......................................... ............ $49.94 $49.94
Cost ($1,000s)............................................... $39,300 $36,900 $2,400
----------------------------------------------------------------------------------------------------------------
Years 2-10 ($1,000s)
----------------------------------------------------------------------------------------------------------------
Annual cost.................................................. $2,400 $0 $2,400
----------------------------------------------------------------------------------------------------------------
Average Annualized Costs ($1,000s)
----------------------------------------------------------------------------------------------------------------
3% discount rate............................................. $7,500 $5,100 $2,400
7% discount rate............................................. $7,300 $4,900 $2,400
----------------------------------------------------------------------------------------------------------------
\a\ 2021 OEWS median wage for Compensation, Benefits, and Job Analysis Specialists (SOC 13-1141) of $30.83
multiplied by 1.62: the ratio of loaded wage to unloaded wage from the 2021 ECEC (45 percent) plus 17 percent
for overhead.
3. Construction Costs and Inflation
Several commenters asserted that this rule will increase wages and
construction costs, thereby increase government expenditures, and
contribute to inflation. The Department believes both the impact on
wages will be marginal, as demonstrated in the conceptual transfers
analyses (see section V.D.) and the direct employer costs will be
manageable. Additionally, the estimated 1.2 million potentially
affected workers represent less than 1 percent of the total national
workforce. Therefore, any impact on government budgets or inflation
should be small. The III-FFC reviewed the relevant literature and
reached the same conclusion. They assert that ``[t]he economic
consensus is that prevailing wages have no impact on total construction
costs.'' \313\ This conclusion is drawn based on ``19 studies on the
impact of prevailing wages on the cost of school construction, highway
construction, and municipal building projects that have been published
in peer-reviewed academic journals since 2000.''
---------------------------------------------------------------------------
\313\ Kevin Duncan & Russell Ormiston, ``What Does the Research
Tell Us about Prevailing Wage Laws,'' 44 Lab. Stud. J., 139 (2018).
---------------------------------------------------------------------------
4. Other Provisions Not Analyzed
The Department provides a qualitative discussion of other
provisions of the rule in this section.
i. Adopting of State and Local Governments Prevailing Wage Rates
Under the final rule, prevailing wage rates set by State and local
governments may be adopted as Davis-Bacon
[[Page 57707]]
prevailing wage rates under specified conditions. Specifically, the
Department proposes that the Administrator may adopt such a rate if the
Administrator determines that: (1) the State or local government sets
wage rates, and collects relevant data, using a survey or other process
that is open to full participation by all interested parties; (2) the
wage rate reflects both a basic hourly rate of pay as well as any
prevailing fringe benefits, each of which can be calculated separately;
(3) the State or local government classifies laborers and mechanics in
a manner that is recognized within the field of construction; and (4)
the State or local government's criteria for setting prevailing wage
rates are substantially similar to those the Administrator uses in
making wage determinations. These conditions are intended to provide
WHD with the flexibility to adopt State and local rates where
appropriate while also ensuring that adoption of such rates is
consistent with the statutory requirements of the Davis-Bacon Act.
These conditions are also intended to ensure that arbitrary
distinctions are not created between jurisdictions where WHD makes wage
determinations using its own surveys and jurisdictions where WHD adopts
State or local prevailing wage rates.
The Department does not currently possess sufficient data to
conduct an analysis comparing all prevailing wage rates set by State
and local governments nationwide to those established by the
Department. However, by definition, any adopted State or local
prevailing wage must be set using criteria that are substantially
similar to those used by the Administrator, so the resulting wage rates
are likely to be similar to those which would have been established by
the Administrator. This change will also allow WHD to have more current
rates in places where wage surveys are out-of-date, and to avoid WHD
duplicating wage survey work that States and localities are already
doing. The Department believes that this could result in cost savings,
which are discussed further in section V.E.
ii. Combining Rural and Metropolitan County Data
This final rule also eliminates the across-the-board restriction on
combining rural and metropolitan county data to allow for a more
flexible case-by-case approach to using such data. If sufficient data
are not available to determine a prevailing wage in a county, the
Department is permitted to use data from surrounding counties,
regardless of whether those counties are designated as rural or
metropolitan. While sufficient data for analyzing the impact of this
provision are not available, the Department believes this provision
will improve the quality and accuracy of wage determinations by
including data from counties that likely share and reflect the same
labor market conditions when appropriate.
iii. Publishing Prevailing Wages When Receiving Insufficient Data
The provision to expressly authorize WHD to list classifications
and corresponding wage and fringe benefit rates on wage determinations
even when WHD has received insufficient data through its wage survey
process is expected to ease the burden on contracting entities, both
public and private, by improving the timeliness of information about
conformed wage rates. For classifications for which conformance
requests are regularly submitted, the Administrator would be authorized
to list the classification on the wage determination along with wage
and fringe benefit rates that bear a ``reasonable relationship'' to the
wage and fringe benefit rates contained in the wage determination, in
the same manner that such classifications and rates are currently
conformed by WHD pursuant to current Sec. 5.5(a)(1)(ii)(A)(3). In
other words, for a classification for which conformance requests are
regularly submitted, WHD would be expressly authorized to essentially
``pre-approve'' certain conformed classifications and wage rates,
thereby providing contracting agencies, contractors, and workers with
advance notice of the minimum wage and fringe benefits required to be
paid for work within those classifications, reducing uncertainty and
delays in determining wage rates for the classifications.
For example, suppose the Department was not able to publish a
prevailing wage rate for carpenters on a building wage determination
for a county due to insufficient data. Currently, every contractor in
that county working on a Davis-Bacon building project that needed a
carpenter would have to submit a conformance request for each of their
building projects in that county. Moreover, because conformances cannot
be submitted until after contract award, those same contractors would
have a certain degree of uncertainty in their bidding procedure, as
they would not know the exact rate that they would have to pay to their
carpenters. This proposal would eliminate that requirement for
classifications where conformance requests are common. While the
Department does not have information on how much administrative time
and money is spent on these tasks, for the commonly requested
classifications, this provision could make the process more streamlined
and efficient for the contractors.
iv. Clarification of Existing Policies
The final rule adds language in a few places to clarify existing
policies. For example, the Department added language to the definitions
of ``building or work'' and ``public building or public work'' to
clarify that these definitions can be met even when the construction
activity involves only a portion of an overall building, structure, or
improvement. Also, the Department added or revised language regarding
the ``material suppliers'' exemption, application of the ``site of the
work'' principle to flaggers, when crew members are laborers or
mechanics, and coverage requirements for truck drivers. Although, for
the most part, this language is just a clarification of existing
guidelines and not a change in policy, the Department understands that
contracting agencies may have differed in their implementation of
Davis-Bacon labor standards. In these cases, there may be firms that
are newly applying Davis-Bacon labor standards because of the
clarifications in this rule. This could result in additional rule
familiarization, implementation, and administrative costs for these
firms, and transfers to workers in the form of higher wages and
benefits if the contractors are currently paying below the prevailing
wage. Commenters asserted that these provisions would result in
additional firms being covered and consequently incurring
familiarization, implementation, and administration costs. The
Department continues to believe that these provisions are generally
clarifications rather than an expansion of scope and, therefore, has
not estimated the number of potentially affected small businesses.
v. Modification of Site of the Work Definition To Include Certain
Secondary Worksites
In this final rule, the Department revises the definition of ``site
of the work'' to further encompass certain construction of significant
portions of a building or work at secondary worksites that are
dedicated exclusively or nearly so to a project covered by the DBRA.
Under this provision, some additional companies may be covered by the
DBRA. Specifically, some firms that engage in construction at secondary
worksites, such as modular construction firms, may potentially engage
in work that was not previously covered by the DBRA regulations, but is
now covered.
[[Page 57708]]
These firms could incur larger familiarization and implementation costs
than currently covered firms (whose costs are discussed above).
However, the Department does not have data to determine how many firms
would be newly covered by DBRA requirements as a result of this
provision and is unable to provide a quantitative estimate of these
costs.
Although some commenters asserted that the increased costs under
this aspect of the proposed rule would be substantial, no commenters
provided applicable data that the Department could use to quantify the
costs. The Department does not anticipate that any increased costs
associated with this aspect of the final rule will be substantial.
Whereas the proposed rule would have revised Davis-Bacon coverage of
off-site construction to include sites at which ``significant
portions'' of covered buildings or works were constructed for specific
use in a designated building or work, the final rule significantly
limits the scope of this expansion to sites dedicated exclusively or
nearly so to the covered contract or project. Thus, while the
Department does not have data to determine how many firms and workers
will be newly covered by DBRA requirements as a result of this
provision, these significant limitations will ensure that any
associated costs will similarly be extremely limited.\314\ Cf. 65 FR
80277 (projecting that the prevailing wage implications associated with
a similar expansion of coverage of off-site construction in the 2000
final rule would not be substantial).
---------------------------------------------------------------------------
\314\ A theoretical upper bound of newly-covered firms would
likely be the 1,364 total firms in NAICS codes 321991, Manufactured
Home (Mobile Home) Manufacturing, 321992, Prefabricated Wood
Building Manufacturing, and 332311 Prefabricated Metal Building and
Component Manufacturing. See U.S. Census Bureau, 2019 Survey of U.S.
Businesses data, https://www2.census.gov/programs-surveys/susb/datasets/2019/us_state_naics_detailedsizes_2019.txt. However, as a
result of the limits in the final rule, Davis-Bacon coverage will
apply only when such firms (1) are working on DBRA-covered projects,
(2) are constructing ``significant portions'' of such projects, as
defined in the final rule, as opposed to prefabricated components,
(3) are building such significant portions for specific use in a
designated building or work, and (4) are doing so at a site either
established for a particular covered contract or project or
dedicated exclusively or nearly so to a single covered contract or
project. While the Department does not have the data to estimate how
many firms not already covered by the DBRA would meet all of these
criteria, the Department believes that the number be small,
particularly given the numerous comments from stakeholders
indicating that modular construction facilities typically work on
multiple projects at a time and therefore will not be covered under
the final rule. See supra section III.B.3.ii.G.2.a.
---------------------------------------------------------------------------
Commenters also noted other potential costs associated with this
provision. The CHC stated this provision will ``limit the use of this
technology which is currently facilitating construction of affordable
housing developments in rural areas where labor is scarcer and costs
can be higher.'' Several commenters asserted that this will increase
the price of modular construction.
The Department believes any potential cost increases related to
this issue will be minimal and will not materially impact the use of
modular construction technology. As explained above, based on the
comments received, the Department believes that most modular
construction facilities are engaged in more than one project at a time
and therefore will not be considered ``sites of the work'' under this
rule. Conversely, at secondary worksites that are dedicated exclusively
or nearly so to a single DBRA-covered project for a period of time,
application of the appropriate wage determination to workers at the
site during that period of time should not be appreciably more
difficult or burdensome than the application of a wage determination at
such a site established specifically for contract performance, which is
required under current regulations. Additionally, as noted above, the
Department intends to work with contractors, agencies, and other
stakeholders to resolve any questions associated with the application
of wage determinations and classifications at secondary sites as early
as possible. Finally, the Department notes that at least two state
prevailing wage laws--Washington's and New Jersey's--cover custom
components of public buildings or works to a greater degree than this
final rule, and the Department is unaware of such laws having had
significant detrimental impacts to modular construction in those
states. See N.J.S.A. section 34:11-56.26(5), (12) (applying state
prevailing wage requirements to components and structures ``pre-
fabricated to specifications for a particular project of public
work''); Wash. Admin. Code section 296-127-010(7)(a)(vi) (applying
prevailing wage regulations to ``[t]he fabrication and/or manufacture
of nonstandard items produced by contract specifically for a public
works project''). The revisions regarding offsite construction are
significantly less expansive than those proposed in the NPRM. The final
rule only expands coverage to sites dedicated exclusively or nearly so
to a single covered contract or project, and therefore will not
encompass offsite facilities engaged in modular construction for more
than one project or area.
vi. Post-Award Determinations and Operation-of-Law
This final rule also updates and codifies the procedures through
which the Department enforces DBRA requirements when contract clauses
and appropriate wage determinations are wrongly omitted from a
contract. The final rule includes a provision that requires contract
clauses and applicable wage determinations to be effective by operation
of law in covered contracts, a requirement that will affect those cases
in which the clauses and/or wage determinations have not been either
properly included in a covered contract when awarded or otherwise
retroactively incorporated at a later date by contract modification.
These changes are intended to improve efficiency, reduce delays in
investigations, and remedy enforcement challenges WHD has encountered
under current regulations.
The Department does not have sufficient data to estimate how many
firms would be affected by this provision, because any calculation
would require information on the number of contracts that do not
already include contract clauses and appropriate wage determinations,
and those that would not include these requirements in absence of this
rule. However, the Department believes that any impacts associated with
this rule change will be minimal, because the Department already
interprets the post-award modification provision at 29 CFR 1.6(f) to
require agencies to incorporate missing contract clauses and wage
determinations with retroactive effect in appropriate circumstances,
and the new operation-of-law provision will therefore affect only a
limited subset of matters in which the current regulations would not
have resulted in timely compliance.
Some commenters expressed concerns that this provision would lead
to increased costs, because firms would need to spend more time
familiarizing themselves with the regulations in order to ensure that
they are in compliance even if the contract clauses are not included in
a contract. The Department notes that many such compliance costs are
already borne by contractors as a best practice because under the
current regulations contracts may be modified post-award to incorporate
missing clauses retroactively--which has a similar effect as the
operation-of-law provision. In addition, the Department's cost
estimates already account for rule familiarization.
To the extent that there are any workers who, in the absence of
this final
[[Page 57709]]
rule, would not have received timely compensation required under the
DBRA, this provision could lead to limited transfers to workers in the
form of increased wages. Because the operation-of-law provision
requires contractors to be compensated for any increases in wages that
result from a determination of missing clauses or wage determinations,
any transfers associated with the rule change would ultimately come
from the government in the way of reimbursement to contractors. The
Department has not estimated these limited transfers because there is
not sufficient data on the prevalence of missing contract clauses or
wage determinations, or the extent to which the inclusion of these
items by operation-of-law would lead to increases in wages for contract
workers.
vii. Other Provisions
Some contracts call for construction, alteration, and/or repair
work over a period of time that is not tied to the completion of any
particular project. The requirement for the contracting agency to
incorporate into the contract the most recent revision(s) of any
applicable wage determination(s) on each anniversary date of the
contract's award could result in some minimal increased burden for
contracting agencies. The contracting officer would need to locate the
wage determinations that are currently incorporated in the master
contract and incorporate the applicable wage determinations into their
task or purchase order. As noted in the preamble, however, in the
Department's experience contracting agencies' procedures for updating
wage determinations for these types of contracts vary widely. Some
contracting agencies incorporate the most recent wage determination
modification in effect at the time each task order is issued, a process
that would generally take more time than merely flowing down wage
determination modifications that have already been incorporated into
the master contract, as those contracting officers must identify the
correct wage determination modification on sam.gov before incorporating
it for each of the multiple task orders issued each year. Other
agencies are already updating these orders annually and incorporating
the updated wage determination, while others do not update wage
determinations at all for at least some of these contracts. The
Department does not have data to determine how many additional
contracts would have to be updated annually following this rule or how
many contracts currently require wage determinations to be flowed down
to or updated for each task order. As a result, the Department cannot
determine the extent to which this revision would result in an
increased or reduced administrative burden across agencies. However,
the Department anticipates that to the extent that additional time
would be needed to update these contracts and task orders, the total
amount of time involved would not be significant.
Other provisions are also likely to have no significant economic
impact, such as the provision regarding the applicable apprenticeship
ratios and wage rates when work is performed by apprentices in a
different State than the State in which the apprenticeship program was
originally registered. Recordkeeping revisions are also expected to
have a negligible cost and to generate benefits from enhanced
compliance, enforcement, and clarity for the regulated community that
outweigh such costs. The Department expanded on this topic and
addressed public comments in section III.B.3.iii.B.
D. Transfer Payments
The Department conducted demonstrations to provide an indication of
the possible transfers attributable to the provision revising the
definition of ``prevailing wage,'' and the provision to update out-of-
date SU rates using the ECI. Both provisions may cause some prevailing
wage rates to increase (relative to the existing method), while the
former may cause other prevailing wage rates to decrease (relative to
the existing method). However, due to many uncertainties in calculating
a transfer estimate, the Department instead only presents this
demonstration characterizing how wage and fringe rates may change.
1. The Return to the ``Three-Step'' Method for Determining the
Prevailing Wage
i. Overview
The revision to the definition of prevailing wage (i.e., the return
to the ``three-step process'') may lead to income transfers to or from
workers. Under the ``three-step process'' when a wage rate is not paid
to a majority of workers in a particular classification, a wage rate
will be considered prevailing if it is paid to at least 30 percent of
such workers. Thus, fewer future wage determinations will be
established based on a weighted average. The Department is not able to
quantify the impact of this change because it will apply to surveys yet
to be conducted, covering classifications and projects in locations not
yet determined. Nonetheless, in an effort to illustrate the potential
impact, the Department conducted a retrospective analysis that
considers the impact of the 30-percent threshold had it been used to
set the wage determinations for several occupations in recent years.
Specifically, to demonstrate the impact of this provision, the
Department compiled data for 7 key classifications from 19 surveys
across 17 states from 2015 to 2018 (see Appendix A).\315\ This sample
covers all four construction types, and includes metro and rural
counties, and a variety of geographic regions. The seven select key
classifications considered are as follows:
---------------------------------------------------------------------------
\315\ Data were obtained from the Automated Survey Data System
(ASDS), the data system used by the Department to compile and
process WD-10 submissions. Out of the 21 surveys that occurred
during this time period and met sufficiency standards, these 19
surveys are all of the ones with usable data for this analysis; the
other two had anomalies that could not be reconciled.
---------------------------------------------------------------------------
Building and residential construction: Bricklayers, common
laborers, plumbers, and roofers.
Heavy and highway construction: Common laborers, cement
masons, and electricians.
In total, the sample is comprised of 3,097 county-classification
observations. Because this sample only covers seven out of the many
occupations covered by DBRA and all classification-county observations
are weighted equally in the analysis, the Department believes the
results need to be interpreted with care and cannot be extrapolated to
definitively quantify the overall impact of the 30-percent threshold.
Instead, these results should be viewed as an informative illustration
of the potential direction and magnitude of transfers that will be
attributed to this provision.
The Department began its retrospective analysis by applying the
current prevailing wage setting protocols (see Appendix B) to this
sample of wage data to calculate the current prevailing wage and fringe
benefit rates.\316\ The Department then applied the 30-percent
threshold to the same sample of wage data.\317\ Then the Department
compared the wage rates determined under the two methods. Results are
reported at the county level
[[Page 57710]]
(i.e., one observation represents one classification in one county).
---------------------------------------------------------------------------
\316\ The calculated current rates generally match the published
wage and the fringe benefit rates within a few cents. However, there
are a few instances that do not match, but the Department does not
believe these differences bias the comparisons to the calculated 30
percent prevailing definition.
\317\ This model, while useful for this illustrative analysis,
may not be relevant for future surveys. The methodology assumes that
the level of participation by firms in WHD's wage survey process
would be the same if the standard were 30 percent and is mostly
reflective of states with lower union densities.
---------------------------------------------------------------------------
The results differ depending on how heavily unionized the
construction industry is in the states analyzed (and thus how many
union rates are submitted in response to surveys). In Connecticut, for
example, the Department found that estimated rates were little changed
because the construction industry in Connecticut is highly unionized
and union rates prevail under both the 30 percent and the 50 percent
threshold. Conversely, in Florida, which is less unionized, there is
more variation in how wage rates would change. For the rates that
changed in Florida, calculated prevailing wage rates generally changed
from an average rate (e.g., insufficient identical rates to determine a
modal prevailing rate under the current protocol) to a non-collectively
bargained modal prevailing rate. Depending on the classification and
county, the prevailing hourly wage rate may have increased or decreased
because of the change in methodology.
Results may also differ by construction type. In particular,
changes to highway prevailing wages may differ from changes in other
construction types because they frequently rely on certified payroll.
Thus, many of the wages used to calculate the prevailing wage reflect
prevailing wages at the time of the survey.
ii. Results
Tables 6 and 7 compare the share of counties with calculated wage
determinations by ``publication rule'' (i.e., the rule under which the
wage rate was or would be published): (1) an average rate, (2) a
collectively bargained single (modal) prevailing rate, and (3) a non-
collectively bargained single (modal) prevailing rate. Fringe benefit
rate results also include the number of counties where the majority of
workers received zero fringe benefits. The tables also show the change
in the number of rates in each publication rule category.
For the surveys analyzed, the majority of current county wage rates
were based on averages (1,954 / 3,097 = 63 percent), about 25 percent
were a single (modal) prevailing collectively bargained rate, and 12
percent were a modal prevailing non-collectively bargained rate. Using
the 30 percent requirement for a modal prevailing rate, the number of
county wage rates that would be based on averages decreased to 31
percent (948 / 3,097). The percentage of rates that would be based on a
modal wage rate increased for both non-collectively bargained and
collectively bargained rates, although more wage rates would be based
on non-collectively bargained rates than collectively bargained rates.
For fringe benefit rates, fringe benefits do not prevail for a
similar percent in both scenarios, (i.e., ``no fringes''): 50 percent
of current rates, 48 percent of ``three-step process'' rates. The share
determined as average rates decreased from 22 percent to 10 percent.
The prevalence of modal prevailing fringe benefit rates increased for
both non-collectively bargained and collectively bargained rates, with
slightly more becoming collectively bargained rates than non-
collectively bargained rates.
The total number of counties will differ by classification based on
the State, applicable survey area (e.g., statewide, metro only), and
whether the data submitted for the classification met sufficiency
requirements.
Table 6--Prevalence of Calculated Prevailing Wages in Analyzed Subset, by Publication Rule, by Classification
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cement
Laborers Plumbers Roofers Bricklayers masons Electricians Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Count............................................................ 949 504 545 379 360 360 3,097
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current Hourly Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average.......................................................... 82% 57% 55% 42% 68% 53% 63%
Modal Prevailing--Union.......................................... 12% 40% 23% 39% 4% 44% 25%
Modal Prevailing--Non-Union...................................... 6% 3% 22% 19% 28% 4% 12%
--------------------------------------------------------------------------------------------------------------------------------------------------------
``Three-Step Process'' Hourly Rate a
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average.......................................................... 47% 22% 26% 18% 40% 11% 31%
Modal Prevailing-Union........................................... 21% 46% 25% 45% 7% 80% 34%
Modal Prevailing-Non-Union....................................... 32% 31% 49% 37% 53% 9% 36%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Change for Hourly Rate (Percentage Points)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average.......................................................... -35 -35 -29 -23 -28 -42 -32
Modal Prevailing-Union........................................... 9 7 2 5 3 36 9
Modal Prevailing-Non-Union....................................... 26 28 27 18 25 5 23
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current Fringe Benefit Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average.......................................................... 23% 27% 12% 13% 9% 48% 22%
Modal Prevailing-Union........................................... 14% 41% 23% 39% 4% 44% 25%
Modal Prevailing-Non-Union....................................... 4% 5% 3% 2% 2% 0% 3%
No fringes....................................................... 59% 27% 62% 46% 85% 8% 50%
--------------------------------------------------------------------------------------------------------------------------------------------------------
``Three-Step Process'' Fringe Benefit Rate a
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average.......................................................... 13% 13% 9% 6% 5% 13% 10%
Modal Prevailing-Union........................................... 21% 47% 25% 46% 7% 80% 34%
Modal Prevailing-Non-Union....................................... 9% 13% 4% 2% 3% 7% 7%
No fringes....................................................... 57% 27% 62% 46% 85% 0% 48%
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 57711]]
Change for Fringe Benefit Rate (Percentage Points)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average.......................................................... -11 -14 -3 -7 -4 -35 -11
Modal Prevailing-Union........................................... 7 6 2 7 3 36 9
Modal Prevailing-Non-Union....................................... 6 8 1 0 1 7 4
No fringes....................................................... -2 0 0 0 0 -8 -2
--------------------------------------------------------------------------------------------------------------------------------------------------------
a Using a threshold of 30 percent of employees' wage or fringe benefit rates being identical.
Table 7--Prevalence of Calculated Prevailing Wages in Analyzed Subset, by Publication Rule, By Construction Type
----------------------------------------------------------------------------------------------------------------
Residential Building Heavy Highway Total
----------------------------------------------------------------------------------------------------------------
Count........................... 563 1,436 810 288 3,097
----------------------------------------------------------------------------------------------------------------
Current Hourly Rate
----------------------------------------------------------------------------------------------------------------
Average......................... 423 769 573 189 1,954
Majority--Union................. 99 456 143 64 762
Majority--Non-Union............. 41 211 94 35 381
----------------------------------------------------------------------------------------------------------------
Proposed ``Three-Step Process'' Hourly Rate a
----------------------------------------------------------------------------------------------------------------
Average......................... 197 313 331 107 948
Modal Prevailing--Union......... 118 570 257 104 1,049
Modal Prevailing--Non-Union..... 248 553 222 77 1,100
----------------------------------------------------------------------------------------------------------------
Change for Hourly Rate
----------------------------------------------------------------------------------------------------------------
Average......................... -226 -456 -242 -82 -1006
Modal Prevailing--Union......... 19 114 114 40 287
Modal Prevailing--Non-Union..... 207 342 128 42 719
----------------------------------------------------------------------------------------------------------------
Current Fringe Benefit Rate
----------------------------------------------------------------------------------------------------------------
Average......................... 26 347 235 65 673
Modal Prevailing--Union......... 99 470 154 64 787
Modal Prevailing--Non-Union..... 0 76 19 1 96
No fringes...................... 438 543 402 158 1,541
----------------------------------------------------------------------------------------------------------------
Proposed ``Three-Step Process'' Fringe Benefit Rate a
----------------------------------------------------------------------------------------------------------------
Average......................... 0 185 115 23 323
Modal Prevailing--Union......... 118 578 259 105 1,060
Modal Prevailing--Non-Union..... 7 150 51 14 222
No fringes...................... 438 523 385 146 1,492
----------------------------------------------------------------------------------------------------------------
Change for Fringe Benefit Rate
----------------------------------------------------------------------------------------------------------------
Average......................... -26 -162 -120 -42 -350
Modal Prevailing-Union.......... 19 108 105 41 273
Modal Prevailing--Non-Union..... 7 74 32 13 126
No fringes...................... 0 -20 -17 -12 -49
----------------------------------------------------------------------------------------------------------------
a Using a threshold of 30 percent of employees' wage or fringe benefit rates being identical.
Table 8 and Table 9 summarize the difference in calculated
prevailing wage rates using the three-step process compared to the
current process. Table 8 disaggregates results by craft and Table 9
disaggregated results by construction type. The first row entitled
``Total'' refers to the number of rates for the classification in the
subset of surveys that the Department analyzed. The results show both
average changes across all observations and average changes when
limited to those classification-county observations where rates are
different (about 32 percent of all observations in the sample).
Notably, all classification-county observations are weighted equally in
the calculations. On average:
Across all observations, the average hourly rate increases
by only one cent, or 0.1 percent of the average hourly wage rate.
Across affected classification-counties only, the calculated hourly
rate increases by 4 cents on average, or 0.2 percent of the average
hourly wage rate. However, there is significant variation. The
calculated hourly rate increased by as much as $7.80 and decreased by
as much as $5.78.
Across all observations, the average hourly fringe benefit
rate increases by 19 cents, or 3.7 percent of the average
[[Page 57712]]
hourly fringe rate. Across affected classification-counties only, the
calculated hourly fringe benefit rate increases by $1.42 on average, or
26.8 percent of the average hourly fringe rate. As a percent of the
average fringe rate, this percent change is large because many of these
prevailing wage rates previously did not have prevailing fringes. The
change ranges from -$6.17 to $11.16.
Some crafts and construction types have larger changes
than others. However, it should be noted that when considering only one
craft or construction type, the results are based on smaller samples
and consequently less precise.
Based on this demonstration of the impact of changing from the
current to the new definition of ``prevailing,'' some published wage
rates and fringe benefit rates may increase and others may decrease. In
the sample considered, wage rates changed very little on average, but
fringe benefit rates increased on average. As discussed above, the
Department believes that these results need to be interpreted with care
and cannot be extrapolated to definitively quantify the overall impact
of the 30-percent threshold. Instead, these results should be viewed as
an informative illustration of the potential direction and magnitude of
transfers that will be attributed to this provision.
Table 8--Change in Rates Attributable to Change in Definition of ``Prevailing''
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cement
Laborers Plumbers Roofers Bricklayers masons Electricians Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hourly Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total............................................................ 949 504 545 379 360 360 3,097
Number changed................................................... 330 175 160 89 101 150 1,005
Increased.................................................... 121 130 36 66 17 106 476
Decreased.................................................... 209 45 124 23 84 44 529
Percent changed.................................................. 35% 35% 29% 23% 28% 42% 32%
Increased.................................................... 13% 26% 7% 17% 5% 29% 15%
Decreased.................................................... 22% 9% 23% 6% 23% 12% 17%
Average (non-zero)............................................... $0.37 $1.10 -$1.06 $0.44 -$1.35 $0.94 $0.04
Average (all).................................................... $0.13 $0.38 -$0.31 $0.10 -$0.38 $0.39 $0.01
Maximum.......................................................... $7.80 $7.07 $4.40 $1.02 $2.54 $4.14 $7.80
Minimum.......................................................... -$3.93 -$4.23 -$2.51 -$0.95 -$5.78 -$4.74 -$5.78
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fringe Benefit Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total............................................................ 949 504 545 379 360 360 3,097
Number changed................................................... 137 69 17 26 14 184 447
Increased.................................................... 109 59 9 19 11 174 381
Decreased.................................................... 28 10 8 7 3 10 66
Percent changed.................................................. 14% 14% 3% 7% 4% 51% 14%
Increased.................................................... 11% 12% 2% 5% 3% 48% 12%
Decreased.................................................... 3% 2% 1% 2% 1% 3% 2%
Average (non-zero)............................................... $2.10 $2.14 -$1.67 $1.21 $0.74 $2.11 $1.42
Average (all).................................................... $0.30 $0.29 -$0.05 $0.08 $0.03 $1.08 $0.19
Max.............................................................. $9.42 $11.16 $1.42 $2.19 $6.00 $4.61 $11.16
Min.............................................................. -$4.82 -$1.35 -$4.61 -$0.17 -$6.17 -$0.86 -$6.17
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 9--Change in Rates Attributable to Change in Definition of ``Prevailing,'' by Construction Type
----------------------------------------------------------------------------------------------------------------
Residential Building Heavy Highway Total
----------------------------------------------------------------------------------------------------------------
Hourly Rate
----------------------------------------------------------------------------------------------------------------
Total........................... 563 1,436 810 288 3,097
Number changed.................. 226 455 242 82 1,005
Increased................... 102 215 118 41 476
Decreased................... 124 240 124 41 529
Percent changed................. 40% 32% 30% 28% 32%
Increased................... 18% 15% 15% 14% 15%
Decreased................... 22% 17% 15% 14% 17%
Average (non-zero).............. $0.45 $0.04 -$0.09 $1.10 $0.04
Average (all)................... $0.18 $0.01 -$0.03 $0.31 $0.01
Maximum......................... $6.57 $7.07 $7.80 $4.14 $7.80
Minimum......................... -$1.73 -$4.23 -$5.78 -$4.74 -$5.78
----------------------------------------------------------------------------------------------------------------
Fringe Benefit Rate
----------------------------------------------------------------------------------------------------------------
Total........................... 563 1,436 810 288 3,097
Number changed.................. 26 201 154 66 447
Increased................... 26 163 139 53 381
Decreased................... 0 38 15 13 66
Percent changed................. 5% 14% 19% 23% 14%
Increased................... 5% 11% 17% 18% 12%
Decreased................... 0% 3% 2% 5% 2%
[[Page 57713]]
Average (non-zero).............. $6.89 $1.27 $1.34 $2.95 $1.42
Average (all)................... $0.32 $0.18 $0.26 $0.68 $0.19
Max............................. $9.42 $11.16 $4.61 $6.19 $11.16
Min............................. $0.01 -$4.82 -$6.17 -$2.21 -$6.17
----------------------------------------------------------------------------------------------------------------
2. Adjusting Out-of-Date Prevailing Wage and Fringe Benefit Rates
Updating older Davis-Bacon prevailing wage and fringe benefit rates
will increase the minimum required hourly compensation paid to workers
on Davis-Bacon projects. This would result in transfers of income to
workers on Davis-Bacon projects who are currently being paid only the
required minimum hourly rate and fringe benefits. To the extent that
the Federal Government pays for increases to the prevailing wage
through higher contract bids, an increase in the prevailing wage will
transfer income from the Federal Government to the worker. This
transfer will be reflected in increased costs paid by the Federal
Government for construction.
However, to estimate transfers, many assumptions need to be made.
For example, the Department would need to determine if workers really
are being paid the prevailing wage rate; some published rates are so
outdated that it is highly likely effective labor market rates exceed
the published rates, and the published prevailing wage rates are
functionally irrelevant. In addition, the Department would need to
predict which Davis-Bacon projects would occur each year, in which
counties these projects will occur, and the number of hours of work
required from each class of laborer and mechanic. Because of many
uncertainties, the Department instead characterizes the number and size
of the changes in published Davis-Bacon hourly rates and fringe
benefits rather than formally estimating the income change to those
potentially affected by the proposal to update rates.
To provide an illustrative analysis, the Department used the entire
set of wage and fringe benefit rates published on wage determinations
as of May 2019 to demonstrate the potential changes in Davis-Bacon wage
and fringe benefit rates resulting from updating certain out-of-date
non-collectively bargained rates to 2021 values using the BLS ECI. For
this demonstration, the Department considered the impact of updating
rates for key classifications published prior to 2019 that were based
on weighted averages, which comprises 172,112 wage and fringe benefit
rates lines in 3,999 wage determinations.\318\ The Department has
focused on wage and fringe benefit rates prior to 2019 because these
are the universe of key classification rates that are likely to be more
than 3 years old at the time of this final rule, and the rule calls for
updating non-collectively-bargained wage rates that are 3 or more years
old.
---------------------------------------------------------------------------
\318\ In each type of construction covered by the DBRA, some
classifications are called ``key'' because most projects require
these workers. Building construction has 16 key classifications,
residential construction has 12 key classifications and heavy and
highway construction each have the same eight key classifications. A
line reflects a key classification by construction type in a
specific geographic area. For example, a line could reflect a
plumber in building construction in Fulton County, GA.
---------------------------------------------------------------------------
After dropping hourly wages greater than $100 and wage rates that
were less than $7.25 when originally published but were updated to the
minimum wage of $7.25 in 2009, 159,562 wage rates were updated for this
analysis.\319\ To update these wage rates, the Department used the BLS
ECI, which measures the change over time in the cost of labor total
compensation.\320\ The Department believes that the ECI for private
industry workers, total compensation, ``construction, and extraction,
farming, fishing, and forestry'' occupations, not seasonally adjusted,
is the most appropriate index. However, the index for this group is
only available starting in 2001. Thus, for updating wages and fringe
benefits from 1979 through 2000, the Department determined the ECI for
private industry workers, total compensation, in the goods-producing
industries was the most appropriate series to use that was available
back to 1979.\321\
---------------------------------------------------------------------------
\319\ The 54 wage rates greater than $100 were day or shift
rates. The remaining 12,496 rates excluded were less than $7.25
prior to July 24, 2009, but were published from surveys conducted
before the establishment of the Department's ASDS in 2002. The
Department no longer has records of the original published wage
rates in these cases.
\320\ Available at: https://www.bls.gov/ect/.
\321\ Continuous Occupational and Industry Series, Table 5.
https://www.bls.gov/web/eci/eci-continuous-dollar.txt.
---------------------------------------------------------------------------
To consider potential transfers to workers due to changes in wages,
the full increase in the hourly rate would only occur if workers on
DBRA projects are currently paid the exact prevailing rates.\322\
However, due to market conditions in some areas, workers already may be
receiving more than the published rate. While completely comparable
data on wages paid to workers on DBRA projects in specific
classifications and counties are not readily available and usable for
this analysis, the BLS OEWS data provide a general estimate of wages
paid to certain categories of workers performing construction and
construction-related duties. Although the OEWS data can be informative
for this illustrative analysis, it is not a representative data set of
professional construction workers performing work on DBRA projects and
it does not include benefits.
---------------------------------------------------------------------------
\322\ The hourly wage rate increase would only occur when the
next contract goes into effect and a new wage determination with an
updated wage rate is incorporated into the contract.
---------------------------------------------------------------------------
To provide an example of transfers, the Department compared the
ECI-updated Davis-Bacon wage rates to the applicable median hourly rate
in the OEWS data.\323\ To estimate the approximate median 2021 wage
rates, the Department used the median hourly wage rate for each key
classification in the construction industry in the May 2021 State OEWS
data. Using the OEWS as a general measure of the market conditions for
construction worker wages in a given State, the Department assumed that
an updated Davis-Bacon wage rate below the median OEWS rates would
likely not lead to sizable income transfers to construction workers
because most workers are likely already paid more than the updated
Davis-Bacon rate. After removing the 99,337 updated Davis-Bacon wage
rates that were less than the corresponding OEWS median rates, there
remained 60,225 updated Davis-Bacon wage rates that may result in
transfers to workers. However, the Department notes that some of the
updated Davis-Bacon rates may be lower than the median because they are
a wage rate for a rural county, and the OEWS data represents the
statewide median.
---------------------------------------------------------------------------
\323\ The Department used OEWS data for certain occupations
matching key classifications in the construction industry by State.
---------------------------------------------------------------------------
[[Page 57714]]
Further investigating the ECI-updated Davis-Bacon wage rates in
this example that were substantially above the OEWS median wage rate,
the Department found that 23,200 of the originally published Davis-
Bacon wage rates were already higher than the OEWS median. For at least
some of these wage rates, the comparison to the OEWS median may not be
appropriate because such Davis-Bacon wage rates are for work in
specialty construction. For example, most of the prevailing wage rates
published specifically for a 2014 wage determination for Iowa Heavy
Construction River Work exceed the 2021 OEWS median rates for the same
classifications in Iowa.\324\ This may be an indication that comparing
Davis-Bacon rates for this type of construction to a more general
measure of wages may not be appropriate because workers are generally
paid more for this type of specialty construction than for other types
of construction work measured by the OEWS data.
---------------------------------------------------------------------------
\324\ WD IA20190002.
---------------------------------------------------------------------------
Therefore, to measure possible transfers per hour to workers on
Davis-Bacon projects due to the periodic updating of certain non-
collectively bargained wage rates, the Department began by taking the
lesser of:
The difference between the updated wage rate and the OEWS
median wage rate.
The difference between the updated and currently published
wage rates.
The second difference accounts for the 23,200 Davis-Bacon wage
rates that were higher than the 2021 OEWS median rate even before they
were updated, because otherwise the Department would overestimate the
potential hourly wage transfer.
The Department also examined an additional adjustment for DBA wage
rates because they are also subject to Executive Order 13658:
Establishing a Minimum Wage for Contractors, which sets the minimum
wage paid to workers on Federal contracts at $11.25 in 2022.\325\ Thus,
the Department analyzed an additional restriction that the maximum
possible hourly transfer to workers on Davis-Bacon projects cannot
exceed the difference between the updated wage rate and $11.25.
---------------------------------------------------------------------------
\325\ The Department also ran an analysis using the minimum wage
of $15.00 as proposed by Executive Order 14026, ``Increasing the
Minimum Wage for Federal Contractors.'' The results were similar.
---------------------------------------------------------------------------
However, the added restriction has no impact on estimated transfers
because any updated wage rates that were less than $11.25 were also
less than the OEWS median wage rate. Thus, the potential possible
hourly transfers attributable to updated Davis-Bacon wage rates are
identical for construction projects covered by the Davis-Bacon Act and
by the Related Acts.
Table 10 provides the summary statistics of the per hour transfers
to workers that may occur due to updating out-of-date non-collectively
bargained Davis-Bacon wage rates. Among the wage rates considered in
this demonstration, there are 60,225 wage rate updates that may result
in transfers to workers. On average, the potential hourly transfer is
$4.11.
Table 10--Distribution of Potential per Hour Transfers Due to Updated Rates
----------------------------------------------------------------------------------------------------------------
Number of Standard
rates Mean Median deviation
----------------------------------------------------------------------------------------------------------------
Wage rates...................................... 60,225 $4.11 $3.29 $3.93
Fringe benefits................................. 75,480 1.50 1.06 1.62
Total compensation.............................. 94,050 3.83 2.32 4.70
----------------------------------------------------------------------------------------------------------------
Of the 172,112 pre-2019 non-collectively bargained key
classification fringe benefit rates, 75,480 were non-zero, and thus
would be updated, possibly resulting in some transfers to workers
(Table 10). On average, these non-zero fringe benefits would increase
by $1.50 per hour.
Adding the required Davis-Bacon wage and fringe benefit rates
together measures the required total compensation rate on DBRA
projects. Due to updating old rates, 94,050 Davis-Bacon total
compensation hourly rates would increase by $3.83 on average.\326\
---------------------------------------------------------------------------
\326\ The average increase in total compensation is less than
the average wage increase because more wage and fringe benefit lines
are included for total compensation.
---------------------------------------------------------------------------
The two demonstrations provide an indication of the possible
changes to Davis-Bacon wage rates and fringe benefit rates attributable
to the proposed provision revising the definition of ``prevailing,''
and the provision to update out-of-date SU rates using the ECI (only
one of which would affect a location-occupation pair at a particular
time). Both provisions may lead to higher hourly payments, while the
former also has the potential to lead to lower hourly payments.
Because accurate data to measure the current county-level labor
conditions for specific construction classifications are not available,
it is unclear if an increase or decrease in Davis-Bacon minimum
required rates will impact what workers earn on DBRA projects.
Furthermore, even if some of these rate changes do lead to different
rates paid to workers on DBRA projects, data are not available to
estimate how large transfers might be. To do so would require detailed
information on what federally funded construction contracts will be
issued, the types of projects funded, where the projects will occur
(specific county or counties), the value of the projects, and the labor
mix needed to complete the project.
E. Cost Savings
This final rule could lead to cost savings for both contractors and
the Federal Government because the rule would reduce ambiguity and
increase efficiency, which could reduce the amount of time necessary to
comply with the rule. For example, as discussed in section V.C.4,
expressly authorizing WHD to list classifications and corresponding
wage and fringe benefit rates on wage determinations when WHD has
received insufficient data through its wage survey process will
increase certainty and reduce administrative burden for contracting
entities. It would reduce the number of conformance requests needed,
which could save time for the contractors, contracting agencies, and
the Department. Additionally, permitting the Administrator to adopt
prevailing wage rates set by State and local governments could result
in cost savings for the Department, because it avoids WHD duplicating
wage survey work that states and localities are already doing. It could
also result in cost savings in the form of time savings for
contractors, as they will only have one wage determination that they
will have to reference.
[[Page 57715]]
Additionally, the Department is providing clarifications throughout
the rule, which will make clear which contract workers are covered by
DBRA. For example, the Department is clarifying provisions related to
the site of work, demolition and removal workers, and truck drivers and
their assistants, among others. These clarifications will make it clear
to both contractors and contract workers who is covered, and therefore
could help reduce legal disputes between the two, resulting in cost
savings.
Because the Department does not have information on how much
additional time contractors and the Federal Government currently spend
complying with this rule due to lack of clarity, these cost savings are
discussed qualitatively.
F. Benefits
Among the multiple provisions discussed above, the Department
recognizes that the provision to update the definition of prevailing
wage using the ``30 percent rule'' could have various impacts on wage
rates. The effect of this proposal on actual wages paid is uncertain
for the reasons discussed in section V.D.1. However, the Department's
proposal to update out-of-date wage rates using the ECI would result in
higher prevailing wage rates due to the increases in employer costs
over time. Any DBRA-covered workers that were not already being paid
above these higher wage rates would receive a raise when these updated
rates were implemented. These higher wages could lead to benefits such
as improved government services, increased productivity, and reduced
turnover, which are all discussed here qualitatively. The magnitude of
these wage increases could influence the magnitude of these benefits.
The Department notes that the literature cited in this section
sometimes does not directly consider changes in the DBRA prevailing
wages. Additionally, much of the literature is based on voluntary
changes made by firms. However, the Department has presented the
information here because the general findings may still be applicable
in this context.
1. Improved Government Services
For workers who are paid higher wage rates as a result of this
rulemaking, the Department expects that the quality of construction
could improve. Higher wages can be associated with a higher number of
bidders for Government contracts, which can be expected to generate
greater competition and an improved pool of contractors. Multiple
studies have shown that the bidding for municipal contracts remained
competitive or even improved when living wage ordinances were
implemented (Thompson and Chapman, 2006).\327\ In a study on the impact
of bid competition on final outcomes of State department of
transportation construction projects, Delaney (2018) demonstrated that
each additional bidder reduces final project cost overruns by 2.2
percent and increases the likelihood of achieving a high-quality bid by
4.9 times.\328\
---------------------------------------------------------------------------
\327\ Thompson, J. and J. Chapman. (2006). ``The Economic Impact
of Local Living Wages,'' EPI, Briefing Paper #170, 2006.
\328\ Delaney, J. (2018). ``The Effect of Competition on Bid
Quality and Final Results on State DOT Projects.'' https://www.proquest.com/openview/33655a0e4c7b8a6d25d30775d350b8ad/1?pq-origsite=gscholar&cbl=18750.
---------------------------------------------------------------------------
A comment submitted by two individuals agreed with the Department's
assertion that the number of bidders would not decrease. They pointed
to a paper that found no difference in the number of bidders on
federally funded projects and state-funded projects.\329\ Conversely,
the NAHB asserted that DBRA requirements can be a deterrent to small
businesses considering bidding and that this rule could further
discourage these contractors from participating. The Department
believes this final rule clarifies the requirements and thus would not
deter small businesses from participating.
---------------------------------------------------------------------------
\329\ Duncan, K. (2015). ``The Effect of Federal Davis-Bacon and
Disadvantaged Business Enterprise Regulations on Highway Maintenance
Costs.'' ILR Review, 68(1), pp. 212-237. https://doi.org/10.1177/0019793914546304.
---------------------------------------------------------------------------
2. Increased Productivity
For workers whose wages increase as a result of the Department's
provision to update out-of-date wage rates, these increases could
result in increased productivity. Increased productivity could occur
through numerous channels, such as employee morale, level of effort,
and reduced absenteeism. A strand of economic research, commonly
referred to as ``efficiency wage'' theory, considers how an increase in
compensation may be met with greater productivity.\330\ Efficiency
wages may elicit greater effort on the part of workers, making them
more effective on the job.\331\ A comment submitted by two individuals
affirmed the likely relationship between this final rule and increased
productivity.
---------------------------------------------------------------------------
\330\ Akerlof, G.A. (1982). ``Labor Contracts as Partial Gift
Exchange.'' The Quarterly Journal of Economics, 97(4), 543-569.
\331\ Another model of efficiency wages, which is less
applicable here, is the adverse selection model in which higher
wages raise the quality of the pool of applicants.
---------------------------------------------------------------------------
Allen (1984) estimates the ratio of the marginal product of union
and non-union labor.\332\ He finds that union workers are 17 to 22
percent more productive than non-union members. Although it is unclear
whether this entire productivity difference is attributable to higher
wages, it is likely a large contributing factor. The Construction Labor
Research Council (2004) compared the costs to build a mile of highway
in higher wage and lower wage states using data reported to the FHWA
from 1994 to 2002.\333\ They found that in higher wage states, 32
percent fewer labor hours are needed to complete a mile of highway than
in lower wage states, despite hourly wage rates being 69 percent higher
in those states. While this increased worker productivity could be due
in part to other factors such as greater worker experience or more
investment in capital equipment in higher wage states, the higher wages
likely contribute.
---------------------------------------------------------------------------
\332\ Allen, S.G. (1984). ``Unionized Construction Workers are
More Productive.'' The Quarterly Journal of Economics, 251-174.
\333\ The Construction Labor Research Council (2004). ``The
Impact of Wages on Highway Construction Costs.'' https://niabuild.org/WageStudybooklet.pdf.
---------------------------------------------------------------------------
Conversely, Vedder (1999) compared output per worker across states
with and without prevailing wage laws.\334\ Data on construction
workers is from the Department of Labor and data on construction
contracts is from the Department of Commerce. A worker in a prevailing
wage law State produced $63,116 of value in 1997 while a worker from a
non-prevailing wage law State produced $65,754. Based on this simple
comparison, workers are more productive without prevailing wage laws.
However, this is a somewhat basic comparison in that it does not
control for other differences between states that may influence
productivity (for example, the amount of capital used or other State
regulations) and it is unclear whether this difference is statistically
significant.
---------------------------------------------------------------------------
\334\ Vedder, R. (1999). ``Michigan's Prevailing Wage Law and
Its Effects on Government Spending and Construction Employment.
Midland, Michigan: Mackinac Center for Public Policy,'' https://www.mackinac.org/archives/1999/s1999-07.pdf.
---------------------------------------------------------------------------
Studies on absenteeism have demonstrated that there is a negative
effect on firm productivity as absentee rates increase.\335\ Zhang et
al., in their study of linked employer-employee data in Canada, found
that a 1 percent
[[Page 57716]]
decline in the attendance rate reduces productivity by 0.44
percent.\336\ Allen (1983) similarly noted that a 10-percentage point
increase in absenteeism corresponds to a decrease of 1.6 percent in
productivity.\337\ Hanna et al. (2005) find that while absenteeism
rates of between 0 and 5 percent among contractors on electrical
construction projects lead to no loss of productivity, absenteeism
rates of between 6 and 10 percent can spark a 24.4 percent drop in
productivity.\338\
---------------------------------------------------------------------------
\335\ Allen, S.G. (1983). ``How Much Does Absenteeism Cost?,''
Journal of Human Resources, 18(3), 379-393. https://www.jstor.org/stable/145207?seq=1.
\336\ Zhang, W., Sun, H., Woodcock, S., & Anis, A. (2013).
``Valuing Productivity Loss Due to Absenteeism: Firm-level Evidence
from a Canadian Linked Employer-Employee Data.'' Health Economics
Review, 7(3). https://healtheconomicsreview.biomedcentral.com/articles/10.1186/s13561-016-0138-y.
\337\ Allen, S.G. (1983). ``How Much Does Absenteeism Cost?,''
Journal of Human Resources, 18(3), 379-393. https://www.jstor.org/stable/145207?seq=1.
\338\ Hanna, A., Menches, C., Sullivan, K., & Sargent, J. (2005)
``Factors Affecting Absenteeism in Electrical Construction.''
Journal of Construction Engineering and Management 131(11). https://ascelibrary.org/doi/abs/10.1061/(ASCE)0733-9364(2005)131:11(1212).
---------------------------------------------------------------------------
Fairris et al. (2005) demonstrated that as a worker's wage
increases there is a reduction in unscheduled absenteeism.\339\ They
attribute this effect to workers standing to lose more if forced to
look for new employment and an increase in pay paralleling an increase
in access to paid time off. Pfeifer's (2010) study of German companies
provides similar results, indicating a reduction in absenteeism if
workers experience an overall increase in pay.\340\ Conversely, Dionne
and Dostie (2007) attribute a decrease in absenteeism to mechanisms
other than an increase in worker pay, specifically scheduling that
provides both the option to work-at-home and for fewer compressed work
weeks.\341\ However, the relevance of such policies in the context of
construction is unclear. The Department believes both the connection
between prevailing wages and absenteeism, and the connection between
absenteeism and productivity are well enough established that this is a
feasible benefit of this final rule.
---------------------------------------------------------------------------
\339\ Fairris, D., Runstein, D., Briones, C., & Goodheart, J.
(2005). ``Examining the Evidence: The Impact of the Los Angeles
Living Wage Ordinance on Workers and Businesses.'' LAANE. https://laane.org/downloads/Examinig_the_Evidence.pdf.
\340\ Pfeifer, C. (2010). ``Impact of Wages and Job Levels on
Worker Absenteeism.'' International Journal of Manpower 31(1), 59-
72. https://doi.org/10.1108/01437721011031694.
\341\ Dionne, G., & Dostie, B. (2007). ``New Evidence on the
Determinants of Absenteeism Using Linked Employer-Employee Data.''
Industrial and Labor Relations Review 61(1), 108-120. https://journals.sagepub.com/doi/abs/10.1177/001979390706100106.
---------------------------------------------------------------------------
3. Reduced Turnover
Little evidence is available on the impact of prevailing wage laws
and turnover, but an increase in the minimum wage has been shown to
decrease both turnover rates and the rate of worker separation (Dube,
Lester and Reich, 2011; Liu, Hyclak and Regmi, 2015; Jardim et al.,
2018).\342\ This decrease in turnover and worker separation can lead to
an increase in the profits of firms, as the hiring process can be both
expensive and time consuming. A review of 27 case studies found that
the median cost of replacing an employee was 21 percent of the
employee's annual salary.\343\ Fairris et al. (2005) \344\ found the
cost reduction due to lower turnover rates ranges from $137 to $638 for
each worker.
---------------------------------------------------------------------------
\342\ Dube, A., Lester, T.W., & Reich, M. (2011). ``Do Frictions
Matter in the Labor Market? Accessions, Separations, and Minimum
Wage Effects.'' (Discussion Paper No. 5811). IZA. https://www.iza.org/publications/dp/5811/do-frictions-matter-in-the-labor-market-accessions-separations-and-minimum-wage-effects.
Liu, S., Hyclak, T.J., & Regmi, K. (2015). ``Impact of the
Minimum Wage on Youth Labor Markets.'' Labour 29(4). https://doi.org/10.1111/labr.12071.
Jardim, E., Long, M.C., Plotnick, R., van Inwegen, E., Vigdor,
J., & Wething, H. (Oct. 2018). ``Minimum Wage Increases and
Individual Employment Trajectories'' (Working paper No. 25182).
NBER. https://doi.org/10.3386/w25182.
\343\ Boushey, H. and Glynn, S. (2012). ``There are Significant
Business Costs to Replacing Employees. Center for American
Progress.'' Available at: https://www.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf.
\344\ Fairris, D., Runstein, D., Briones, C., & Goodheart, J.
(2005). ``Examining the Evidence: The Impact of the Los Angeles
Living Wage Ordinance on Workers and Businesses.'' LAANE. https://laane.org/downloads/Examinig_the_Evidence.pdf.
---------------------------------------------------------------------------
Although the impacts cited here are not limited to government
construction contracting, because data specific to government
contracting and turnover are not available, the Department believes
that a reduction in turnover could be observed among those workers on
DBRA contracts whose wages increase following this final rule. The
potential reduction in turnover is a function of several variables: the
current wage, the change in the wage rate, hours worked on covered
contracts, and the turnover rate. Therefore, the Department has not
quantified the impacts of potential reduction in turnover.
4. Additional Benefits
A comment submitted by two individuals mentioned several other
potential benefits. First, they noted that research has shown a
positive correlation between state prevailing wage laws and
apprenticeship enrollment. Second, they pointed to literature
demonstrating that states with prevailing wage laws have lower injury
and disability rates. Depending on the channel through which these
correlations occur, this final rule could result in more
apprenticeships and reduced workplace injuries, disabilities and
fatalities. The extent to which these impacts occur would likely depend
on the extent of coverage expansion and wage rate changes.
VI. Final Regulatory Flexibility Act (FRFA) Analysis
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq.,
as amended by the Small Business Regulatory Enforcement Fairness Act of
1996, Public Law 104-121 (Mar. 29, 1996), requires Federal agencies
engaged in rulemaking to consider the impact of their proposals on
small entities, consider alternatives to minimize that impact, and
solicit public comment on their analyses. The RFA requires the
assessment of the impact of a regulation on a wide range of small
entities, including small businesses, not-for profit organizations, and
small governmental jurisdictions. Agencies must perform a review to
determine whether a proposed or final rule would have a significant
economic impact on a substantial number of small entities. 5 U.S.C.
603, 604.
Response to comments from small businesses and SBA's Office of
Advocacy are incorporated throughout the FRFA where applicable.
A. Need for Rulemaking and Objectives of the Final Rule
In order to provide greater clarity and enhance their usefulness in
the modern economy, this final rule updates and modernizes the
regulations at 29 CFR parts 1, 3, and 5, which implement the DBRA. The
Department has not undertaken a comprehensive revision of the DBRA
regulations since 1982. Since that time, Congress has expanded the
reach of the DBRA regulations significantly, adding numerous new
Related Act statutes to which they apply. The DBA and now more than 70
active Related Acts collectively apply to an estimated tens of billions
of dollars in Federal and federally assisted construction spending per
year and provide minimum wage rates for hundreds of thousands of U.S.
construction workers. The Department expects these numbers to continue
to grow as Congress seeks to address the significant infrastructure
needs in the country, including, in particular, energy and
transportation infrastructure necessary to address climate change.
These regulations will provide additional clarity that will be helpful
given the increased number of
[[Page 57717]]
construction projects subject to Davis-Bacon labor standards
requirements, due to the substantial increases in federally funded
construction provided for in legislation such as the IIJA.
Additionally, the Federal contracting system itself has undergone
significant changes since 1982. Federal agencies have increased
spending through the use of interagency Federal schedules. Contractors
have increased their use of single-purpose entities such as joint
ventures and teaming agreements. Offsite construction of significant
components of public buildings and works has also increased. The
regulations need to be updated to ensure their continued effectiveness
in the face of changes such as these.
In this final rule, the Department seeks to address a number of
outstanding challenges in the program while also providing greater
clarity in the DBRA regulations and enhancing their usefulness in the
modern economy. Specifically, the Department returns to the definition
of ``prevailing wage'' that was used from 1935 to 1983 to address the
overuse of average rates and ensure that prevailing wages reflect
actual wages paid to workers in the local community. The Department
will also periodically update non-collectively bargained prevailing
wage rates to address out-of-date wage rates. The final rule will allow
WHD to adopt State or local wage determinations as the Federal
prevailing wage where certain specified criteria are satisfied, to
issue supplemental rates for key classifications where there is
insufficient survey data, to modernize the scope of work to include
energy infrastructure and the site of work to include certain secondary
worksites, to ensure that DBRA requirements protect workers by
operation of law, and to strengthen enforcement, including through
debarment and anti-retaliation protections. See section III.B. for a
full discussion of the Department's changes to these regulations.
B. Significant Issues Raised by Public Comment, Including Those Filed
by the Chief Counsel for Advocacy of the Small Business Administration
SBA Advocacy commented that DOL's Initial Regulatory Flexibility
Analysis did not properly inform the public about the impact of this
rule on small entities. They asserted that DOL should have estimated
the compliance costs of expanding DBRA coverage to new industries and
state that the proposed rule expands coverage to prefabrication
companies, material suppliers, and truck drivers, professional
surveyors, and additional small businesses.
As explained above, neither the proposed nor the final rule
expanded coverage to prefabrication companies, which remain generally
outside the scope of the DBRA. While the proposed rule would have
broadened coverage to include secondary construction sites at which
``significant portions'' of buildings or works (as opposed to
prefabricated components) are constructed, the final rule limits such
coverage to facilities dedicated exclusively or nearly so to a
particular covered contract or project. While the Department cannot
estimate the precise number of small entities that will be impacted by
this change, as explained above in Section V.C.4.v, the Department
expects that number to be small since, based on the comments received,
most modular construction companies' facilities are engaged in more
than one project at a time and therefore will be outside the scope of
the ``site of the work'' under the final rule. Additionally, as
explained above, the final rule does not expand coverage to material
suppliers or truck drivers but rather codifies existing policy with
minor changes. Likewise, the preamble's guidance on coverage of survey
crews is consistent with the Department's current interpretation and
emphasizes that coverage of survey crews is highly fact-dependent. As
such, the Department does not anticipate that it will substantially
broaden coverage to entities not previously covered.
Small business commenters also noted that DOL underestimated rule
familiarization costs. As discussed further in Section V.C.1, the
Department reconsidered the time it would take for the regulated
community to read this Final Rule and has increased the time estimate
to an average of 4 hours. The Department believes that this average
estimate is appropriate, because while some firms will spend more time
reading the rule, other firms in our estimate will not bid on a DBA
contract and will spend zero time reading the rule.
They also claimed that the changes to the methodology for
calculating prevailing wages will increase wages for covered Federal
contractors, which will add costs for covered contractors. As explained
in Section V.D., the Department does not have data on the current wages
of DBRA-covered workers, so it is not possible to definitively
calculate how wages will change following this proposed rule. Although
the Department performed an illustrative analysis of example changes in
wage rates, without data on actual wages paid this analysis cannot be
used to estimate the total impact of this rule on wages. Furthermore,
if businesses do see a significant increase in the wage that they must
pay for a classification of worker because of an increase prevailing
wage rate for that classification (beyond the rate the business is
already paying its workers in that classification), the business will
be able to account for this cost by incorporating the increased cost
into their bid or price negotiation and will be in effect reimbursed by
the Federal government.
Overall, the Department believes that the data analysis it has
provided is sufficient given the lack of available data on covered
workers.
C. Estimating the Number of Small Businesses Affected by the Rulemaking
As discussed in section V.B., the Department identified a range of
firms potentially affected by this rulemaking. This includes both firms
impacted by the Davis-Bacon Act and firms impacted by the Related Acts.
The more narrowly defined population includes firms actively holding
Davis-Bacon contracts and firms affected by the Related Acts. The
broader population includes those bidding on Davis-Bacon and Related
Acts contracts but without active contracts, or those considering
bidding in the future. As described in section V.B., the total number
of potentially affected firms ranges from 152,900 to 184,500. This
includes firms that pay at or above the new wage determination rates
and thus will not be substantially affected. The Department does not
have data to identify the number of firms that will experience changes
in payroll costs.
To identify the number of small firms, the Department began with
the total population of firms and identified some of these firms as
small based on several methods.
For prime contractors in USASpending, the Department used
the variable ``Contracting Officer's Determination of Business Size.''
\345\
---------------------------------------------------------------------------
\345\ The description of this variable in the USAspending.gov
Data Dictionary is: ``The Contracting Officer's determination of
whether the selected contractor meets the small business size
standard for award to a small business for the NAICS code that is
applicable to the contract.'' The Data Dictionary is available at:
https://www.usaspending.gov/data-dictionary.
---------------------------------------------------------------------------
For subcontractors from USASpending, the Department
identified those with ``small'' or ``SBA'' in the ``Subawardee Business
Types'' variable.\346\
---------------------------------------------------------------------------
\346\ The description of this variable in the USAspending.gov
Data Dictionary is: ``Comma separated list representing sub-
contractor business types pulled from FPDS-NG or the System for
Award Management (SAM).''
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[[Page 57718]]
For SAM data, the Department used the small business
determination in the data, in variable ``NAICS Code String.'' This is
flagged separately for each NAICS reported for the firm; therefore, the
Department classified a company as a small business if SAM identified
it as a small business in any 6-digit NAICS beginning with 23.
This results in an estimated number of potentially affected small
businesses ranging from 101,700 to 127,800 (Table 11).
Table 11--Range of Number of Potentially Affected Small Firms
------------------------------------------------------------------------
Source Small firms
------------------------------------------------------------------------
Total Count (Davis-Bacon and Related Acts)
------------------------------------------------------------------------
Narrow definition....................................... 101,700
Broad definition........................................ 127,800
------------------------------------------------------------------------
DBA (Narrow Definition)
------------------------------------------------------------------------
Total................................................... 26,700
Prime contractors from USASpending.................. 11,200
Subcontractors from USASpending [\a\]............... 15,500
------------------------------------------------------------------------
DBA (Broad Definition)
------------------------------------------------------------------------
Total................................................... 52,800
SAM................................................. 37,300
Subcontractors from USASpending [\a\]............... 15,500
------------------------------------------------------------------------
Related Acts
------------------------------------------------------------------------
Total................................................... 75,000
------------------------------------------------------------------------
[\a\] Determination based on inclusion of ``small'' or ``SBA'' in the
business types.
Several commenters believe the number of small businesses is
underestimated. ABC and SBA's Office of Advocacy assert that the
methodology excludes newly covered firms. The Department believes most
of these firms are included in the estimate because the methodology
covers all firms bidding, or considering bidding, on Federal
construction contracts, not just those currently holding DBA contracts.
However, the Department notes that there may be limited cases in which
some firms covered by the final rule's modification of the ``site of
the work'' to include certain secondary worksites may not be classified
in the construction industry and consequently may not be captured by
this methodology. As noted in the Executive Order 12866 analysis, the
Department believes the extent to which these firms are not captured is
small, given that the final rule significantly limits the circumstances
under which such secondary worksites are covered.\347\ The Department
estimated in section V.B. that 1.2 million employees are potentially
affected by the rulemaking. That methodology does not include a
variation to identify only workers employed by small firms. The
Department therefore assumed that the share of contracting expenditures
attributed to small businesses is the best approximation of the share
of employment in small businesses. In USASpending, expenditures are
available by firm size. In 2019, $55.4 billion was spent on DBA covered
contracts (see section V.B.2.) and of that, $19.8 billion (36 percent)
was awarded to small business prime contractors.\348\ For territories,
the share of expenditures allocated to small businesses is 38 percent.
---------------------------------------------------------------------------
\347\ See section V.C.4.v and supra note 314.
\348\ If subcontractors are more likely to be small businesses
than prime contractors, then this methodology may underestimate the
number of workers who are employed by small businesses.
---------------------------------------------------------------------------
Data on expenditures by firm size are unavailable for the Related
Acts (Table 12). Therefore, the Department assumed the same percentage
applies to such expenditures as for Davis-Bacon contracts. In total, an
estimated 424,800 workers are employed by potentially affected small
businesses.
Table 12--Number of Potentially Affected Workers in Small Covered Contracting Firms
----------------------------------------------------------------------------------------------------------------
Percent of
expenditures in Workers in small
Total workers small businesses
(thousands) contracting (thousands)
firms [\a\]
----------------------------------------------------------------------------------------------------------------
DBA, excl. territories.................................... 297.9 35.7 106.4
DBA, territories.......................................... 6.1 38.2 2.3
Related Acts [\b\]........................................ 883.9 35.8 316.0
-----------------------------------------------------
Total................................................. 1,188.0 ................ 424.8
----------------------------------------------------------------------------------------------------------------
[\a\] Source: USASpending.gov. Percentage of contracting expenditures for covered contracts in small businesses
in 2019.
[\b\] Because data on expenditures by firm size are unavailable for Related Acts. The Department assumed the
same percentage applied as for Davis-Bacon.
[[Page 57719]]
In several places, the final rule adds or revises language to
clarify existing policies rather than substantively changes them. For
example, the final rule adds language to the definitions of ``building
or work'' and ``public building or public work'' to clarify that these
definitions can be met even when the construction activity involves
only a portion of an overall building, structure, or improvement. Also,
the Department added language clarifying the applicability of the
``material supplier'' exemption, the applicability of the DBRA to truck
drivers and flaggers, and the extent to which demolition activities are
covered by the DBRA. However, the Department acknowledges that some
contracting agencies may not have been applying Davis-Bacon in
accordance with those policies. Where this was the case, the clarity
provided by this rule could lead to expanded application of the Davis-
Bacon labor standards, which could lead to more small firms being
required to comply with Davis-Bacon labor standards. Additionally, the
Department's provision to revise the definition of ``site of the work''
to further encompass certain construction of significant portions of a
building or work at secondary worksites, which could clarify and
strengthen the scope of coverage under DBA and would also lead to more
small firms being required to comply with Davis-Bacon labor standards.
The Department does not have data to determine how many of these small
firms exist.
D. Compliance Requirements, Including Reporting and Recordkeeping
Many of the provisions in this rule only affect how the prevailing
wage rate is calculated. For these provisions there will be no new
compliance requirements for small firms, as they will still need to pay
the published prevailing wage. The Department is also making a number
of revisions to existing recordkeeping requirements to better
effectuate compliance and enforcement, including revisions to clarify
the record retention period and add requirements to maintain worker
telephone numbers and email addresses. The Department is clarifying
language used to better distinguish the records that contractors must
make and maintain (regular payrolls and other basic records) from the
payroll documents that contractors must submit weekly to contracting
agencies (certified payrolls). The Department is also clarifying that
electronic signatures and certified payroll submission methods may be
used.
E. Calculating the Impact of the Final Rule on Small Business Firms
The Department considered employer costs associated with both (a)
the change in determining the prevailing wage based on a 30 percent
threshold instead of a 50 percent threshold and (b) the incorporation
of using the change in the ECI to update certain non-collectively
bargained prevailing wage rates. The Department estimated both
regulatory familiarization costs and implementation costs associated
with these two provisions. An overview of these costs is explained here
but additional details can be found in section V.C. Non-quantified
direct employer costs are explained in section V.C.4.
The Department acknowledges that if some wage rates increase due to
either of the provisions listed above, there could be an increase in
payroll costs for some small firms. Due to data limitations and
uncertainty, the Department did not quantify payroll costs (i.e.,
transfers). The change in the definition of prevailing wage will only
be applied to wage data received through surveys finalized after the
effective date of this rule, for geographic areas and classifications
that have not yet been identified. Both this provision and the updating
of out-of-date rates will not have any impact if firms are already
paying at or above the new prevailing wage rate because of labor market
forces. Please see section V.D. for a more thorough discussion of these
potential payroll costs, including an illustrative example of the
potential impact of the rule on prevailing wage rates.
Year 1 direct employer costs for small businesses are estimated to
total $39.3 million. Average annualized costs across the first 10 years
are estimated to be $7.3 million (using a 7 percent discount rate). On
a per firm basis, direct employer costs are estimated to be $224.73 in
Year 1. These costs are somewhat higher than the costs presented in the
NPRM because the Department increased the time for regulatory
familiarization in response to comments.
The rule will impose direct costs on some covered contractors who
will review the regulations to understand how the prevailing wage
setting methodology will change. However, the Department believes these
regulatory familiarization costs will be small because firms are not
required to understand how the prevailing wage rates are set in order
to comply with DBRA requirements, they are just required to pay the
prevailing wage rates. The Department included all small potentially
affected firms (127,800 firms). The Department assumed that on average,
4 hours of a human resources staff member's time will be spent
reviewing the rulemaking. This was increased from 1 hour in the NPRM
per comments.
The cost of this time is the median loaded wage for a Compensation,
Benefits, and Job Analysis Specialist of $49.94 per hour.\349\
Therefore, the Department has estimated regulatory familiarization
costs to be $25.5 million ($49.94 per hour x 4.0 hour x 127,800
contractors) (Table 13). The Department has included all regulatory
familiarization costs in Year 1. New entrants will not incur any
additional regulatory familiarization costs attributable to this rule.
Average annualized regulatory familiarization costs over 10 years,
using a 7 percent discount rate, are $3.4 million.
---------------------------------------------------------------------------
\349\ This includes the median base wage of $30.83 from the May
2020 OEWS estimates plus benefits paid at a rate of 45 percent of
the base wage, as estimated from the BLS's ECEC data, and overhead
costs of 17 percent. OEWS data available at: https://www.bls.gov/oes/current/oes131141.htm.
Table 13--Direct Employer Costs to Small Businesses
(2021 Dollars)
----------------------------------------------------------------------------------------------------------------
Regulatory
Variable Total familiarization Implementation
costs costs
----------------------------------------------------------------------------------------------------------------
Year 1 Costs
----------------------------------------------------------------------------------------------------------------
Potentially affected firms................................ .............. 127,800 65,200
Hours per firm............................................ .............. 4 0.5
Loaded wage rate.......................................... .............. $49.94 $49.94
[[Page 57720]]
Cost ($1,000s)............................................ $27,157 $25,529 $1,628
----------------------------------------------------------------------------------------------------------------
Years 2-10 ($1,000s)
----------------------------------------------------------------------------------------------------------------
Annual cost............................................... $1,628 $0 $1,628
Average Annualized Costs ($1,000s):
3% discount rate...................................... $5,156 $3,528 $1,628
7% discount rate...................................... $2,025 $3,397 $1,628
----------------------------------------------------------------------------------------------------------------
When firms update prevailing wage rates, they can incur costs
associated with adjusting payrolls, adjusting contracts, and
communicating this information to employees (if applicable). This rule
will generally affect the frequency with which prevailing wage rates
are updated through the anticipated update of old, outmoded rates to
their present value, and moving forward, to periodically update rates
when that does not occur through the survey process. Currently, only a
fraction of non-collectively bargained prevailing wages can be expected
to change each year. Firms may spend more time than they have in the
past updating payroll systems to account for new prevailing wage rates
that the firms must pay as a result of being awarded a DBRA contract
that calls for such new rates. This change is because the Department
will update older non-collectively bargained rates--as it currently
does with collectively bargained prevailing rates--to better represent
current wages and benefits being paid in the construction industry. In
addition, moving forward, WHD expects to publish wage rates more
frequently than in the past.
The Department does not believe that there will be additional
implementation costs associated with the proposal to update the
definition of the prevailing wage (30 percent threshold). This change
will only apply to new surveys, for which employers would have already
had to update wage rates.
To estimate the size of the implementation cost associated with the
periodic updates, the Department assumed that each year a share of
potentially affected firms are already checking rates due to newly
published surveys (section V.C.2.).\350\ Multiplying the remaining 64.1
percent by the 101,700 small firms holding DBRA contracts results in
65,200 firms impacted annually (Table 13). The change to update current
non-collectively bargained rates will have a one-time implementation
cost to firms. The change to update non-collectively bargained rates
moving forward will result in ongoing implementation costs. Each time a
non-collectively bargained weighted average rate is updated on a wage
determination applicable to a newly awarded DBRA contract, firms will
incur some costs to adjust payroll (if applicable) and communicate the
new rates to employees. The Department assumed that this provision
would impact all small firms currently holding DBRA contracts (65,200
firms). For the initial increase, the Department estimated this will
take approximately 0.5 hours for firms to adjust their rates. As with
previous costs, implementation time costs are based on a loaded hourly
wage of $49.94. Therefore, total Year 1 implementation costs were
estimated to equal $1.6 million ($49.94 x 0.5 hour x 65,200 firms). The
average annualized implementation cost over 10 years, using a 7 percent
discount rate, is $1.6 million.
---------------------------------------------------------------------------
\350\ 15.6 percent update rates due to newly published survey
data and 24 percent of the remainder update rates due to CBA
escalators. Therefore, 64.1 percent are impacted [(1-0.156) x (1-
0.24)].
---------------------------------------------------------------------------
To determine direct employer costs on a per firm basis, the
Department considers only those firms who are fully affected. These are
firms who actively hold DBRA contracts, and who have new wage rates to
incorporate into their bids and, as needed, into their payroll systems.
For these firms, the Year 1 costs are estimated as four and a half
hours of time (4 hour for regulatory familiarization and 0.5 hours for
implementation) valued at $49.94 per hour. This totals $224.73 in Year
1 costs per firm.
Several commenters believed the costs presented here are too low.
Some commenters noted that regulatory familiarization time will be much
longer than the one hour estimated. The Department agrees and has
consequently increased this time to 4 hours. Many commenters focus on
implementation and administration costs for newly covered firms. As
noted above, the Department only quantified implementation costs for
impacts of the provision to update out-of-date SU rates using the ECI.
Costs associated with provisions that clarify coverage are not
quantified because they are merely clarifications, and thus are not an
expansion of scope. Additionally, data are not available to estimate
the number of newly covered firms.
Commenters asserted that compliance costs for newly covered small
firms will be prohibitive. MBI wrote that ``[m]any small and
disadvantaged businesses in the modular sector will not have the budget
to cover the costs of DBA prevailing wages.'' ABC similarly noted that
this rule will discourage small businesses participation. They also
presented findings from a survey of members demonstrating that many
small businesses believe the DBA increases administrative costs and
labor costs. The Department disagrees that costs are prohibitive and
points to the many contractors, both large and small, who already work
on DBRA covered projects. Additionally, the added clarity from this
rule may increase small business participation.
Commenters noted a range of costs for newly covered small entities.
These commenters asserted that small businesses do not employ staff
familiar with regulatory or legal affairs, and consequently this rule
will entail hiring outside consultants. The Department provides
compliance assistance resources to assist small businesses comply but
acknowledges that sometimes businesses will want to engage their own
counsel. The SBA noted that any potential scope expansion could also
deter small businesses from participating due to the associated risks,
such as citations and back wages. They also stated that newly covered
small businesses will incur paperwork costs, such as submitting
[[Page 57721]]
certified payroll and evaluating prevailing wages, and administrative
burdens. As discussed above, the Department believes that the number of
newly covered entities will be small. The final rule does not
significantly expand the scope of Davis-Bacon coverage, as most of the
coverage-related regulatory provisions primarily represent
clarifications of existing coverage principles, not expansions of
coverage.
Furthermore, the Department does not believe that this rule would
deter small businesses from participating. For example, a study that
looked at the highway construction industry found no difference in bids
between Federal projects with Davis-Bacon prevailing wage
determinations and less-regulated state projects.\351\ Also, as
discussed above, the Department estimated that 101,700 small firms
currently hold Davis-Bacon contracts, representing 67 percent of all
firms holding Davis-Bacon contracts. Given the prevalence of small
businesses in performing DBRA-covered construction, it seems reasonable
to conclude that existing Davis-Bacon requirements do not impose a
substantial barrier to entry for small businesses. To the extent that
any firms would see a significant increase in wages paid to covered
contract workers, the firms could incorporate any increased labor costs
into their bids or contract price negotiations with the contacting
agency.
---------------------------------------------------------------------------
\351\ Duncan, K. ``Do Federal Davis-Bacon and Disadvantaged
Business Enterprise Regulations Affect Aggressive Bidding? Evidence
from Highway Resurfacing Procurement Actions,'' Journal of Public
Procurement 15(3), 291-316. 2015.
---------------------------------------------------------------------------
F. Alternatives to the Final Rule and Steps Taken To Minimize
Significant Economic Impact on Small Entities
The RFA directs agencies to assess the impacts that various
regulatory alternatives would have on small entities and to consider
ways to minimize those impacts. Regarding the alternatives considered
by the Department in the NPRM, the NFIB commented that the Department
should ``tailor its Davis-Bacon regulations to meet the needs of small
and independent businesses.'' SBA's Office of Advocacy also suggested
the Department develop less-costly alternatives for small businesses.
ABC noted that the Department should discuss the impact of the proposed
rule and describe the steps the agency took to minimize the significant
economic impact of the rule on small entities. Accordingly, the
Department has revised its discussion of alternatives, but believes the
approach taken in this final rule is the best way to provide greater
clarity in the DBRA regulations and enhance their usefulness in the
modern economy.
One potential alternative to this rule would be to relax the
requirements regarding recordkeeping. Currently the regulations require
contractors and subcontractors to keep payrolls and basic records
(including the name, address, and social security number of each
worker, their correct classification, hourly rates of wages paid, daily
and weekly number of hours worked, deductions made and actual wages
paid) and records related to apprentices. It would be within the
Department's discretion to not require some of these records, but the
Department has decided that continuing to require these documents would
promote substantially more effective compliance and enforcement.
Furthermore, it is likely that many contractors already keep these
records of their workers, so the requirement does not represent too
large of a burden.
Another alternative would be for the Department not to finalize the
proposed rule, which would therefore result in no rule familiarization
or implementation costs to small businesses. However, as discussed
throughout the rule, the Department believes that the changes in this
regulation will lead to improved government services, increased
productivity, and reduced turnover. Clarifications made in this rule
will also help businesses comply with the Davis-Bacon regulations and
improve enforcement efforts for the Department.
The Department notes that in other places in this final rule, the
Department has chosen alternatives that minimize the impact of the rule
on small businesses. For example, in their comments on the proposed
rule, small businesses stated that the potential administrative costs
associated with the proposed expansion to the site of the work would
deter them from participating, because tracking time and wage rates at
facilities engaged in work on multiple projects at once would be
infeasible. In the final rule, the Department has chosen to narrow the
scope of coverage at secondary construction sites to locations where
specific portions of a building or work are constructed and were either
established specifically for contract performance or are dedicated
exclusively or nearly so to the contract or project. This narrower
scope will help alleviate the cost concerns of small businesses.
VII. Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532, requires
agencies to prepare a written statement, which includes an assessment
of anticipated costs and benefits, before proposing any unfunded
Federal mandate that may result in excess of $100 million (adjusted
annually for inflation) in expenditures in any one year by State,
local, and Tribal governments in the aggregate, or by the private
sector. This rulemaking is not expected exceed that threshold. See
section V. for an assessment of anticipated costs, transfers, and
benefits.
VIII. Executive Order 13132, Federalism
The Department has (1) reviewed this rule in accordance with
Executive Order 13132 regarding federalism and (2) determined that it
does not have federalism implications. The rule would not have
substantial direct effects on the States, on the relationship between
the National Government and the States, or on the distribution of power
and responsibilities among the various levels of government.
IX. Executive Order 13175, Indian Tribal Governments
This rule would not have Tribal implications under Executive Order
13175 that would require a Tribal summary impact statement. The rule
would not have substantial direct effects on one or more Indian Tribes,
on the relationship between the Federal Government and Indian Tribes,
or on the distribution of power and responsibilities between the
Federal Government and Indian Tribes.
Appendix A: Surveys Included in the Prevailing Wage Demonstration
----------------------------------------------------------------------------------------------------------------
Publication
Survey year date State Metro/rural Construction type(s)
----------------------------------------------------------------------------------------------------------------
Surveys Included
----------------------------------------------------------------------------------------------------------------
2018.......................... 12/25/2020 Utah............. Metro........... Heavy.
[[Page 57722]]
2017.......................... 12/14/2018 Nevada........... Both............ Highway.
2017.......................... 12/25/2020 New York......... Rural........... Building.
2017.......................... 12/25/2020 North Dakota..... Both............ Heavy.
2017.......................... 2/7/2020 Oklahoma......... Metro........... Residential.
2017.......................... 2/7/2020 Pennsylvania..... East Metro...... Residential.
2017.......................... 1/24/2020 Vermont.......... Both............ Heavy, highway.\a\
2016.......................... 12/14/2018 Connecticut...... Metro \b\....... Building.
2016.......................... 12/14/2018 New Mexico....... Metro........... Building and heavy.
2016.......................... 9/29/2017 New York......... 4 metro counties Building.
2016.......................... 2/7/2020 North Carolina... Both............ Residential.
2016.......................... 12/8/2017 South Carolina... Metro \c\....... Residential.
2015.......................... 10/6/2017 Alabama.......... Both \d\........ Building and heavy.
2016.......................... 2/7/2020 Alabama.......... Both............ Highway.
2015.......................... 4/21/2017 Arkansas......... Both............ Building and heavy.
2015.......................... 9/28/2018 Minnesota........ Both............ Building.
2015.......................... 7/28/2017 Mississippi...... Both............ Building and heavy.
2015.......................... 9/29/2017 New Hampshire.... Both............ Building and heavy.
2014.......................... 12/16/2016 Florida.......... Metro \c\....... Building.
----------------------------------------------------------------------------------------------------------------
\a\ Building component not sufficient.
\b\ Only one rural county so excluded.
\c\ Rural component of survey was not sufficient.
\d\ Excludes heavy rural which were not sufficient.
This includes most surveys with published rates that began in
2015 or later. They include all four construction types, metro and
rural counties, and a variety of geographic regions. Two surveys
were excluded because they did not meet sufficiency standards (2016
Alaska residential and 2015 Maryland highway). A few surveys were
excluded due to anomalies that could not be reconciled. These
include:
2016 Kansas highway
2016 Virginia highway
Appendix B: Current DOL Wage Determination Protocols
Sufficiency requirement: For a classification to have sufficient
responses there generally must be data on at least six workers from
at least three contractors. Additionally, if data is received for
either exactly six workers or exactly three contractors, then no
more than 60 percent of the total can be employed by any one
contractor. Exceptions to these criteria are allowed under limited
circumstances. Examples include surveys conducted in rural counties,
or residential and heavy surveys with limited construction activity,
or for highly specialized classifications. In these circumstances,
the rule can be three workers and two contractors.
Aggregation: If the classification is not sufficient at the
county level, data are aggregated to the surrounding-counties group
level, an intermediate grouping level, and a Statewide level (metro
or rural), respectively. For building and residential construction,
at each level of aggregation (as well as at the county level) WHD
first attempts to calculate a prevailing rate using data only for
projects not subject to Davis-Bacon labor standards; if such data
are insufficient to calculate a prevailing rate, then data for
projects subject to Davis-Bacon labor standards is also included.
Majority rate: If more than 50 percent of workers are paid the
exact same hourly rate, then that rate prevails. If not, the
Department calculates a weighted average. If a majority of workers
are not paid the same wage rate, but all of the data reflects the
payment of collectively bargained rates, then a union weighted
average rate is calculated.
Prevailing fringe benefits: Before a fringe benefit is
applicable, it must prevail. The first step is to determine if more
than 50 percent of the workers in the reported classification
receive a fringe benefit. If more than 50 percent of the workers in
a single classification are paid any fringe benefits, then fringe
benefits prevail. If fringe benefits prevail in a classification
and:
more than 50 percent of the workers receiving fringe
benefits are paid the same total fringe benefit rate, then that
total fringe benefit rate prevails.
more than 50 percent of the workers receiving benefits
are not paid at the same total rate, then the average rate of fringe
benefits weighted by the number of workers who received fringe
benefits prevails. If more than 50 percent are not paid the same
total rate, but 100 percent of the data are union, then a union
weighted average is calculated.
However, if 50 percent or less of the workers in a single
classification are paid a fringe benefit, then fringe benefits will
not prevail, and a fringe benefit rate of $0.00 will be published
for that classification.
List of Subjects
29 CFR Part 1
Administrative practice and procedure, Construction industry,
Government contracts, Government procurement, Law enforcement,
Reporting and recordkeeping requirements, Wages.
29 CFR Part 3
Administrative practice and procedure, Construction industry,
Government contracts, Government procurement, Law enforcement,
Penalties, Reporting and recordkeeping requirements, Wages.
29 CFR Part 5
Administrative practice and procedure, Construction industry,
Government contracts, Government procurement, Law enforcement,
Penalties, Reporting and recordkeeping requirements, Wages.
For reasons stated in the preamble, the Wage and Hour Division,
Department of Labor, amends 29 CFR subtitle A as follows:
PART 1--PROCEDURES FOR PREDETERMINATION OF WAGE RATES
0
1. The authority citation for part 1 is revised to read as follows:
Authority: 5 U.S.C. 301; Reorganization Plan No. 14 of 1950, 5
U.S.C. appendix; 40 U.S.C. 3141 et seq.; 40 U.S.C. 3145; 40 U.S.C.
3148; Secretary of Labor's Order 01-2014, 79 FR 77527; and the laws
referenced by 29 CFR 5.1.
0
2. Amend Sec. 1.1 by revising paragraphs (a) and (b) to read as
follows:
Sec. 1.1 Purpose and scope.
(a) The procedural rules in this part apply under the Davis-Bacon
Act (46 Stat. 1494, as amended; 40 U.S.C. 3141 et seq.), and any laws
now existing or subsequently enacted, which require the payment of
minimum wages, including fringe benefits, to laborers and mechanics
engaged in construction activity under contracts entered into or
financed by or with the assistance of agencies of the United States or
the District of Columbia, based on
[[Page 57723]]
determinations by the Secretary of Labor of the wage rates and fringe
benefits prevailing for the corresponding classes of laborers and
mechanics employed on projects similar to the contract work in the
local areas where such work is to be performed.
(1) A listing of laws requiring the payment of wages at rates
predetermined by the Secretary of Labor under the Davis-Bacon Act can
be found at www.dol.gov/agencies/whd/government-contracts or its
successor website.
(2) Functions of the Secretary of Labor under these statutes and
under Reorganization Plan No. 14 of 1950 (15 FR 3176, effective May 24,
1950, reprinted as amended in 5 U.S.C. app. 1 and in 64 Stat. 1267),
except for functions assigned to the Office of Administrative Law
Judges (see part 6 of this subtitle) and appellate functions assigned
to the Administrative Review Board (see part 7 of this subtitle) or
reserved by the Secretary of Labor (see Secretary's Order 01-2020 (Feb.
21, 2020)), have been delegated to the Administrator of the Wage and
Hour Division and authorized representatives.
(b) The regulations in this part set forth the procedures for
making and applying such determinations of prevailing wage rates and
fringe benefits pursuant to the Davis-Bacon Act and any laws now
existing or subsequently enacted providing for determinations of such
wages by the Secretary of Labor in accordance with the provisions of
the Davis-Bacon Act.
* * * * *
0
3. Revise Sec. 1.2 to read as follows:
Sec. 1.2 Definitions.
Administrator. The term ``Administrator'' means the Administrator
of the Wage and Hour Division, U.S. Department of Labor, or authorized
representative.
Agency. The term ``agency'' means any Federal, State, or local
agency or instrumentality, or other similar entity, that enters into a
contract or provides assistance through loan, grant, loan guarantee or
insurance, or otherwise, to a project subject to the Davis-Bacon labor
standards, as defined in Sec. 5.2 of this subtitle.
(1) Federal agency. The term ``Federal agency'' means an agency or
instrumentality of the United States or the District of Columbia, as
defined in this section, that enters into a contract or provides
assistance through loan, grant, loan guarantee or insurance, or
otherwise, to a project subject to the Davis-Bacon labor standards.
(2) [Reserved]
Area. The term ``area'' means the city, town, village, county or
other civil subdivision of the State in which the work is to be
performed.
(1) For highway projects, the area may be State department of
transportation highway districts or other similar State geographic
subdivisions.
(2) Where a project requires work in multiple counties, the area
may include all counties in which the work will be performed.
Department of Labor-approved website for wage determinations (DOL-
approved website). The term ``Department of Labor-approved website for
wage determinations'' means the government website for both Davis-Bacon
Act and Service Contract Act wage determinations. In addition, the DOL-
approved website provides compliance assistance information. The term
will also apply to any other website or electronic means that the
Department of Labor may approve for these purposes.
Employed. Every person performing the duties of a laborer or
mechanic in the construction, prosecution, completion, or repair of a
public building or public work, or building or work financed in whole
or in part by assistance from the United States through loan, grant,
loan guarantee or insurance, or otherwise, is employed regardless of
any contractual relationship alleged to exist between the contractor
and such person.
Prevailing wage. The term ``prevailing wage'' means:
(1) The wage paid to the majority (more than 50 percent) of the
laborers or mechanics in the classification on similar projects in the
area during the period in question;
(2) If the same wage is not paid to a majority of those employed in
the classification, the prevailing wage will be the wage paid to the
greatest number, provided that such greatest number constitutes at
least 30 percent of those employed; or
(3) If no wage rate is paid to 30 percent or more of those so
employed, the prevailing wage will be the average of the wages paid to
those employed in the classification, weighted by the total employed in
the classification.
Type of construction (or construction type). The term ``type of
construction (or construction type)'' means the general category of
construction, as established by the Administrator, for the publication
of general wage determinations. Types of construction may include, but
are not limited to, building, residential, heavy, and highway. As used
in this part, the terms ``type of construction'' and ``construction
type'' are synonymous and interchangeable.
United States or the District of Columbia. The term ``United States
or the District of Columbia'' means the United States, the District of
Columbia, and all executive departments, independent establishments,
administrative agencies, and instrumentalities of the United States and
of the District of Columbia, and any corporation for which all or
substantially all of the stock of which is beneficially owned by the
United States, by the District of Columbia, or any of the foregoing
departments, establishments, agencies, and instrumentalities.
0
4. Revise Sec. 1.3 to read as follows:
Sec. 1.3 Obtaining and compiling wage rate information.
For the purpose of making wage determinations, the Administrator
will conduct a continuing program for the obtaining and compiling of
wage rate information. In determining the prevailing wages at the time
of issuance of a wage determination, the Administrator will be guided
by the definition of prevailing wage in Sec. 1.2 and will consider the
types of information listed in this section.
(a) The Administrator will encourage the voluntary submission of
wage rate data by contractors, contractors' associations, labor
organizations, public officials and other interested parties,
reflecting wage rates paid to laborers and mechanics on various types
of construction in the area. The Administrator may also obtain data
from agencies on wage rates paid on construction projects under their
jurisdiction. The information submitted should reflect the wage rates
paid to workers employed in a particular classification in an area, the
type or types of construction on which such rate or rates are paid, and
whether or not such wage rates were paid on Federal or federally
assisted projects subject to Davis-Bacon prevailing wage requirements.
(b) The following types of information may be considered in making
wage rate determinations:
(1) Statements showing wage rates paid on projects, including the
names and addresses of contractors, including subcontractors; the
locations, approximate costs, dates of construction and types of
projects, as well as whether or not the projects are Federal or
federally assisted projects subject to Davis-Bacon prevailing wage
requirements; and the number of workers employed in each classification
[[Page 57724]]
on each project and the respective wage rates paid such workers.
(2) Signed collective bargaining agreements, for which the
Administrator may request that the parties to such agreements submit
statements certifying to their scope and application.
(3) Wage rates determined for public construction by State and
local officials pursuant to State and local prevailing wage
legislation.
(4) Wage rate data submitted to the Department of Labor by
contracting agencies pursuant to Sec. 5.5(a)(1)(iii) of this subtitle.
(5) For Federal-aid highway projects under 23 U.S.C. 113,
information obtained from the highway department(s) of the State(s) in
which the project is to be performed. For such projects, the
Administrator must consult the relevant State highway department and
give due regard to the information thus obtained.
(6) Any other information pertinent to the determination of
prevailing wage rates.
(c) The Administrator may initially obtain or supplement such
information obtained on a voluntary basis by such means, including the
holding of hearings, and from any sources determined to be necessary.
All information of the types described in paragraph (b) of this
section, pertinent to the determination of the wages prevailing at the
time of issuance of the wage determination, will be evaluated in light
of the definition of prevailing wage in Sec. 1.2.
(d) In compiling wage rate data for building and residential wage
determinations, the Administrator will not use data from Federal or
federally assisted projects subject to Davis-Bacon prevailing wage
requirements unless it is determined that there is insufficient wage
data to determine the prevailing wages in the absence of such data.
Data from Federal or federally assisted projects will be used in
compiling wage rate data for heavy and highway wage determinations.
(e) In determining the prevailing wage, the Administrator may treat
variable wage rates paid by a contractor or contractors to workers
within the same classification as the same wage where the pay rates are
functionally equivalent, as explained by one or more collective
bargaining agreements or written policies otherwise maintained by a
contractor or contractors.
(f) If the Administrator determines that there is insufficient wage
survey data to determine the prevailing wage for a classification for
which conformance requests are regularly submitted pursuant to Sec.
5.5(a)(1)(iii) of this subtitle, the Administrator may list the
classification and wage and fringe benefit rates for the classification
on the wage determination, provided that:
(1) The work performed by the classification is not performed by a
classification in the wage determination;
(2) The classification is used in the area by the construction
industry; and
(3) The wage rate for the classification bears a reasonable
relationship to the wage rates contained in the wage determination.
(g) Under the circumstances described in paragraph (h) of this
section, the Administrator may make a wage determination by adopting,
with or without modification, one or more prevailing wage rates
determined for public construction by State and/or local officials.
Provided that the conditions in paragraph (h) are met, the
Administrator may do so even if the methods and criteria used by State
or local officials differ in some respects from those that the
Administrator would otherwise use under the Davis-Bacon Act and the
regulations in this part. Such differences may include, but are not
limited to, a definition of prevailing wage under a State or local
prevailing wage law or regulation that differs from the definition in
Sec. 1.2, a geographic area or scope that differs from the standards
in Sec. 1.7, and/or the restrictions on data use in paragraph (d) of
this section.
(h) The Administrator may adopt a State or local wage rate as
described in paragraph (g) of this section if the Administrator, after
reviewing the rate and the processes used to derive the rate,
determines that:
(1) The State or local government sets wage rates, and collects
relevant data, using a survey or other process that is open to full
participation by all interested parties;
(2) The wage rate reflects both a basic hourly rate of pay as well
as any prevailing fringe benefits, each of which can be calculated
separately;
(3) The State or local government classifies laborers and mechanics
in a manner that is recognized within the field of construction; and
(4) The State or local government's criteria for setting prevailing
wage rates are substantially similar to those the Administrator uses in
making wage determinations under this part. This determination will be
based on the totality of the circumstances, including, but not limited
to, the State or local government's definition of prevailing wage; the
types of fringe benefits it accepts; the information it solicits from
interested parties; its classification of construction projects,
laborers, and mechanics; and its method for determining the appropriate
geographic area(s).
(i) In order to adopt wage rates of a State or local government
entity pursuant to paragraphs (g) and (h) of this section, the
Administrator must obtain the wage rates and any relevant supporting
documentation and data from the State or local government entity. Such
information may be submitted via email to
[email protected], via mail to U.S. Department of Labor,
Wage and Hour Division, Branch of Wage Surveys, 200 Constitution Avenue
NW, Washington, DC 20210, or through other means directed by the
Administrator.
(j) Nothing in paragraphs (g), (h), and (i) of this section
precludes the Administrator from otherwise considering State or local
prevailing wage rates, consistent with paragraph (b)(3) of this
section, or from giving due regard to information obtained from State
highway departments, consistent with paragraph (b)(4) of this section,
as part of the Administrator's process of making prevailing wage
determinations under this part.
0
5. Revise Sec. 1.4 to read as follows:
Sec. 1.4 Report of agency construction programs.
On an annual basis, each Federal agency using wage determinations
under the Davis-Bacon Act or any of the laws referenced by Sec. 5.1 of
this subtitle, must furnish the Administrator with a report that
contains a general outline of its proposed construction programs for
the upcoming 3 fiscal years based on information in the Federal
agency's possession at the time it furnishes its report. This report
must include a list of proposed projects (including those for which
options to extend the contract term of an existing construction
contract are expected during the period covered by the report); the
estimated start date of construction; the anticipated type or types of
construction; the estimated cost of construction; the location or
locations of construction; and any other project-specific information
that the Administrator requests. The report must also include
notification of any significant changes to previously reported
construction programs, such as the delay or cancellation of previously
reported projects. Reports must be submitted no later than April 10 of
each year by email to [email protected], and must include the
name, telephone number, and email address of the official responsible
for coordinating the submission.
0
6. Revise Sec. 1.5 to read as follows:
[[Page 57725]]
Sec. 1.5 Publication of general wage determinations and procedure for
requesting project wage determinations.
(a) General wage determinations. A ``general wage determination''
contains, among other information, a list of wage and fringe benefit
rates determined to be prevailing for various classifications of
laborers or mechanics for specified type(s) of construction in a given
area. The Department of Labor publishes ``general wage determinations''
under the Davis-Bacon Act on the DOL-approved website.
(b) Project wage determinations. (1) A ``project wage
determination'' is specific to a particular project. An agency may
request a ``project wage determination'' for an individual project
under any of the following circumstances:
(i) The project involves work in more than one county and will
employ workers who may work in more than one county;
(ii) There is no general wage determination in effect for the
relevant area and type(s) of construction for an upcoming project, or
(iii) All or virtually all of the work on a contract will be
performed by a classification that is not listed in the general wage
determination that would otherwise apply, and contract award (or bid
opening, in contracts entered into using sealed bidding procedures) has
not yet taken place.
(2) To request a project wage determination, the agency must submit
Standard Form (SF) 308, Request for Wage Determination and Response to
Request, to the Department of Labor, either by mailing the form to U.S.
Department of Labor, Wage and Hour Division, Branch of Construction
Wage Determinations, Washington, DC 20210, or by submitting the form
through other means directed by the Administrator.
(3) In completing Form SF-308, the agency must include the
following information:
(i) A sufficiently detailed description of the work to indicate the
type(s) of construction involved, as well as any additional description
or separate attachment, if necessary, for identification of the type(s)
of work to be performed. If the project involves multiple types of
construction, the requesting agency must attach information indicating
the expected cost breakdown by type of construction.
(ii) The location (city, county, state, zip code) or locations in
which the proposed project is located.
(iii) The classifications needed for the project. The agency must
identify only those classifications that will be needed in the
performance of the work. Inserting a note such as ``entire schedule''
or ``all applicable classifications'' is not sufficient. Additional
classifications needed that are not on the form may be typed in the
blank spaces or on a separate list and attached to the form.
(iv) Any other information requested in Form SF-308.
(4) A request for a project wage determination must be accompanied
by any pertinent wage information that may be available. When the
requesting agency is a State highway department under the Federal-Aid
Highway Acts as codified in 23 U.S.C. 113, such agency must also
include its recommendations as to the wages which are prevailing for
each classification of laborers and mechanics on similar construction
in the area.
(5) The time required for processing requests for project wage
determinations varies according to the facts and circumstances in each
case. An agency should anticipate that such processing by the
Department of Labor will take at least 30 days.
0
7. Revise Sec. 1.6 to read as follows:
Sec. 1.6 Use and effectiveness of wage determinations.
(a) Application, validity, and expiration of wage determinations--
(1) Application of incorporated wage determinations. Once a wage
determination is incorporated into a contract (or once construction has
started when there is no contract award), the wage determination
generally applies for the duration of the contract or project, except
as specified in this section.
(2) General wage determinations. (i) ``General wage
determinations'' published on the DOL-approved website contain no
expiration date. Once issued, a general wage determination remains
valid until revised, superseded, or canceled.
(ii) If there is a current general wage determination applicable to
a project, an agency may use it without notifying the Administrator,
Provided that questions concerning its use are referred to the
Administrator in accordance with paragraph (b) of this section.
(iii) When a wage determination is revised, superseded, or
canceled, it becomes inactive. Inactive wage determinations may be
accessed on the DOL-approved website for informational purposes only.
Contracting officers may not use such an inactive wage determination in
a contract action unless the inactive wage determination is the
appropriate wage determination that must be incorporated to give
retroactive effect to the post-award incorporation of a contract clause
under Sec. 5.6(a)(1)(ii) of this subtitle or a wage determination
under paragraph (f) of this section. Under such circumstances, the
agency must provide prior notice to the Administrator of its intent to
incorporate an inactive wage determination and may not incorporate it
if the Administrator instructs otherwise.
(3) Project wage determinations. (i) ``Project wage
determinations'' initially issued will be effective for 180 calendar
days from the date of such determinations. If a project wage
determination is not incorporated into a contract (or, if there is no
contract award, if construction has not started) in the period of its
effectiveness it is void.
(ii) Accordingly, if it appears that a project wage determination
may expire between bid opening and contract award (or between initial
endorsement under the National Housing Act or the execution of an
agreement to enter into a housing assistance payments contract under
section 8 of the U.S. Housing Act of 1937, and the start of
construction) the agency must request a new project wage determination
sufficiently in advance of the bid opening to assure receipt prior
thereto.
(iii) However, when due to unavoidable circumstances a project wage
determination expires before award but after bid opening (or before the
start of construction, but after initial endorsement under the National
Housing Act, or before the start of construction but after the
execution of an agreement to enter into a housing assistance payments
contract under section 8 of the U.S. Housing Act of 1937), the head of
the agency or the agency head's designee may request the Administrator
to extend the expiration date of the project wage determination in the
bid specifications instead of issuing a new project wage determination.
Such request must be supported by a written finding, which must include
a brief statement of factual support, that the extension of the
expiration date of the project wage determination is necessary and
proper in the public interest to prevent injustice or undue hardship or
to avoid serious impairment in the conduct of Government business. The
Administrator will either grant or deny the request for an extension
after consideration of all of the circumstances, including an
examination to determine if the previously issued rates remain
prevailing. If the request for extension is denied, the Administrator
will proceed to issue a new wage determination for the project.
[[Page 57726]]
(b) Identifying and incorporating appropriate wage determinations.
(1) Contracting agencies are responsible for making the initial
determination of the appropriate wage determination(s) for a project
and for ensuring that the appropriate wage determination(s) are
incorporated in bid solicitations and contract specifications and that
inapplicable wage determinations are not incorporated. When a contract
involves construction in more than one area, and no multi-county
project wage determination has been obtained, the solicitation and
contract must incorporate the applicable wage determination for each
area. When a contract involves more than one type of construction, the
solicitation and contract must incorporate the applicable wage
determination for each type of construction involved that is
anticipated to be substantial. The contracting agency is responsible
for designating the specific work to which each incorporated wage
determination applies.
(2) The contractor or subcontractor has an affirmative obligation
to ensure that its pay practices are in compliance with the Davis-Bacon
Act labor standards.
(3) Any question regarding application of wage rate schedules or
wage determinations must be referred to the Administrator for
resolution. The Administrator should consider any relevant factors when
resolving such questions, including, but not limited to, relevant area
practice information.
(c) Revisions to wage determinations. (1) General and project wage
determinations may be revised from time to time to keep them current. A
revised wage determination replaces the previous wage determination.
``Revisions,'' as used in this section, refers both to modifications of
some or all of the rates in a wage determination, such as periodic
updates to reflect current rates, and to instances where a wage
determination is re-issued entirely, such as after a new wage survey is
conducted. Revisions include adjustments to non-collectively bargained
prevailing wage and fringe benefit rates on general wage
determinations, with the adjustments based on U.S. Bureau of Labor
Statistics Employment Cost Index (ECI) data or its successor data. Such
rates may be adjusted based on ECI data no more frequently than once
every 3 years, and no sooner than 3 years after the date of the rate's
publication. Such periodic revisions to wage determinations are
distinguished from the circumstances described in paragraphs (d), (e),
and (f) of this section.
(2)(i) Whether a revised wage determination is effective with
respect to a particular contract or project generally depends on the
date on which the revised wage determination is issued. The date on
which a revised wage determination is ``issued,'' as used in this
section, means the date that a revised general wage determination is
published on the DOL-approved website or the date that the contracting
agency receives actual written notice of a revised project wage
determination.
(ii) If a revised wage determination is issued before contract
award (or the start of construction when there is no award), it is
effective with respect to the project, except as follows:
(A) For contracts entered into pursuant to sealed bidding
procedures, a revised wage determination issued at least 10 calendar
days before the opening of bids is effective with respect to the
solicitation and contract. If a revised wage determination is issued
less than 10 calendar days before the opening of bids, it is effective
with respect to the solicitation and contract unless the agency finds
that there is not a reasonable time still available before bid opening
to notify bidders of the revision and a report of the finding is
inserted in the contract file. A copy of such report must be made
available to the Administrator upon request. No such report is required
if the revision is issued after bid opening.
(B) In the case of projects assisted under the National Housing
Act, a revised wage determination is effective with respect to the
project if it is issued prior to the beginning of construction or the
date the mortgage is initially endorsed, whichever occurs first.
(C) In the case of projects to receive housing assistance payments
under section 8 of the U.S. Housing Act of 1937, a revised wage
determination is effective with respect to the project if it is issued
prior to the beginning of construction or the date the agreement to
enter into a housing assistance payments contract is signed, whichever
occurs first.
(D) If, in the case of a contract entered into pursuant to sealed
bidding procedures under paragraph (c)(2)(ii)(A) of this section the
contract has not been awarded within 90 days after bid opening, or if,
in the case of projects assisted under the National Housing Act or
receiving housing assistance payments section 8 of the U.S. Housing Act
of 1937 under paragraph (c)(2)(ii)(B) or (C) of this section,
construction has not begun within 90 days after initial endorsement or
the signing of the agreement to enter into a housing assistance
payments contract, any revised general wage determination issued prior
to award of the contract or the beginning of construction, as
appropriate, is effective with respect to that contract unless the head
of the agency or the agency head's designee requests and obtains an
extension of the 90-day period from the Administrator. Such request
must be supported by a written finding, which includes a brief
statement of the factual support, that the extension is necessary and
proper in the public interest to prevent injustice or undue hardship or
to avoid serious impairment in the conduct of Government business. The
Administrator will either grant or deny the request for an extension
after consideration of all the circumstances.
(iii) If a revised wage determination is issued after contract
award (or after the beginning of construction where there is no
contract award), it is not effective with respect to that project,
except under the following circumstances:
(A) Where a contract or order is changed to include additional,
substantial construction, alteration, and/or repair work not within the
scope of work of the original contract or order, or to require the
contractor to perform work for an additional time period not originally
obligated, including where an option to extend the term of a contract
is exercised, the contracting agency must include the most recent
revision of any wage determination(s) at the time the contract is
changed or the option is exercised. This does not apply where the
contractor is simply given additional time to complete its original
commitment or where the additional construction, alteration, and/or
repair work in the modification is merely incidental.
(B) Some contracts call for construction, alteration, and/or repair
work over a period of time that is not tied to the completion of any
particular project. Examples of such contracts include, but are not
limited to, indefinite-delivery-indefinite-quantity construction
contracts to perform any necessary repairs to a Federal facility over a
period of time; long-term operations-and-maintenance contracts that may
include construction, alteration, and/or repair work covered by Davis-
Bacon labor standards; or schedule contracts or blanket purchase
agreements in which a contractor agrees to provide certain construction
work at agreed-upon prices to Federal agencies. These types of
contracts often involve a general commitment to perform necessary
construction as the need arises, but do not necessarily specify the
exact construction to be performed. For the types of contracts
described here,
[[Page 57727]]
the contracting agency must incorporate into the contract the most
recent revision(s) of any applicable wage determination(s) on each
anniversary date of the contract's award (or each anniversary date of
the beginning of construction when there is no award) unless the agency
has sought and received prior written approval from the Department for
an alternative process. The Department may grant such an exception when
it is necessary and proper in the public interest or to prevent
injustice and undue hardship. Such revised wage determination(s) will
apply to any construction work that begins or is obligated under such a
contract during the 12 months following that anniversary date until
such construction work is completed, even if the completion of that
work extends beyond the twelve-month period. Where such contracts have
task orders, purchase orders, or other similar contract instruments
awarded under the master contract, the master contract must specify
that the applicable updated wage determination must be included in such
task orders, purchase orders, or other similar contract instrument, and
the ordering agency must so incorporate the applicable updated wage
determinations into their orders. Once the applicable updated wage
determination revision has been incorporated into such task orders,
purchase orders, or other similar contract instruments, that wage
determination revision remains applicable for the duration of such
order, unless the order is changed to include additional, substantial
construction, alteration, and/or repair work not within the scope of
work, when the wage determination must be updated as set forth in
paragraph (c)(2)(iii)(A) of this section, or the order itself includes
the exercise of options. Where such orders do include the exercise of
options, updated applicable wage determination revision, as
incorporated into the master contract must be included when an option
is exercised on such an order.
(C) For contracts to which both paragraphs (c)(2)(iii)(A) and (B)
of this section apply, updated wage determinations must be incorporated
pursuant to the requirements of both paragraphs. For example, if a
contract calls for construction, alteration, and/or repair work over a
period of time that is not tied to the completion of any particular
project and also has an option provision to extend the contract's term,
the most recent revision(s) of any applicable wage determination(s)
must be incorporated any time an option is exercised, as described in
paragraph (c)(2)(iii)(A) of this section, and on the contract
anniversary date, as described in paragraph (c)(2)(iii)(B) of this
section. However, when a contract has been changed as described in
paragraph (c)(2)(iii)(A) of this section, including by the exercise of
an option, the date of that modification will be considered the
contract anniversary date for the purpose of annually updating the wage
determination(s) in accordance with paragraph (c)(2)(iii)(B) of this
section for that year and any subsequent years of contract performance.
(d) Corrections for clerical errors. Upon the Administrator's own
initiative or at the request of an agency, the Administrator may
correct any wage determination, without regard to paragraph (a) or (c)
of this section, whenever the Administrator finds that it contains
clerical errors. Such corrections must be included in any
solicitations, bidding documents, or ongoing contracts containing the
wage determination in question, and such inclusion, and application of
the correction(s), must be retroactive to the start of construction if
construction has begun.
(e) Pre-award determinations that a wage determination may not be
used. A wage determination may not be used for a contract, without
regard to whether bid opening (or initial endorsement or the signing of
a housing assistance payments contract) has occurred, if, prior to the
award of a contract (or the start of construction under the National
Housing Act, under section 8 of the U.S. Housing Act of 1937, or where
there is no contract award), the Administrator provides written notice
that:
(1) The wrong wage determination or the wrong schedule was included
in the bidding documents or solicitation; or
(2) A wage determination included in the bidding documents or
solicitation was withdrawn by the Department of Labor as a result of a
decision by the Administrative Review Board.
(f) Post-award determinations and procedures. (1) If a contract
subject to the labor standards provisions of the laws referenced by
Sec. 5.1 of this subtitle is entered into without the correct wage
determination(s), the agency must, upon the request of the
Administrator or upon its own initiative, incorporate the correct wage
determination into the contract or require its incorporation. Where the
agency is not entering directly into such a contract but instead is
providing Federal financial assistance, the agency must ensure that the
recipient or sub-recipient of the Federal assistance similarly
incorporates the correct wage determination(s) into its contracts.
(2) The Administrator may require the agency to incorporate a wage
determination after contract award or after the beginning of
construction if the agency has failed to incorporate a wage
determination in a contract required to contain prevailing wage rates
determined in accordance with the Davis-Bacon Act or has used a wage
determination which by its terms or the provisions of this part clearly
does not apply to the contract. Further, the Administrator may require
the application of the correct wage determination to a contract after
contract award or after the beginning of construction when it is found
that the wrong wage determination has been incorporated in the contract
because of an inaccurate description of the project or its location in
the agency's request for the wage determination.
(3) Under any of the circumstances described in paragraphs (f)(1)
and (2) of this section, the agency must either terminate and resolicit
the contract with the correct wage determination or incorporate the
correct wage determination into the contract (or ensure it is so
incorporated) through supplemental agreement, change order, or any
other authority that may be needed. The method of incorporation of the
correct wage determination, and adjustment in contract price, where
appropriate, should be in accordance with applicable law. Additionally,
the following requirements apply:
(i) Unless the Administrator directs otherwise, the incorporation
of the correct wage determination(s) must be retroactive to the date of
contract award or start of construction if there is no award.
(ii) If incorporation occurs as the result of a request from the
Administrator, the incorporation must take place within 30 days of the
date of that request, unless the agency has obtained an extension from
the Administrator.
(iii) Before the agency requires incorporation upon its own
initiative, it must provide notice to the Administrator of the proposed
action.
(iv) The contractor must be compensated for any increases in wages
resulting from incorporation of a missing wage determination.
(v) If a recipient or sub-recipient of Federal assistance under any
of the applicable laws referenced by Sec. 5.1 of this subtitle refuses
to incorporate the wage determination as required, the agency must make
no further payment, advance, grant, loan, or guarantee of funds in
connection with the contract
[[Page 57728]]
until the recipient incorporates the required wage determination into
its contract, and must promptly refer the dispute to the Administrator
for further proceedings under Sec. 5.13 of this subtitle.
(vi) Before terminating a contract pursuant to this section, the
agency must withhold or cross-withhold sufficient funds to remedy any
back-wage liability resulting from the failure to incorporate the
correct wage determination or otherwise identify and obligate
sufficient funds through a termination settlement agreement, bond, or
other satisfactory mechanism.
(4) Under any of the above circumstances, notwithstanding the
requirement to incorporate the correct wage determination(s) within 30
days, the correct wage determination(s) will be effective by operation
of law, retroactive to the date of award or the beginning of
construction (under the National Housing Act, under section 8 of the
U.S. Housing Act of 1937, or where there is no contract award), in
accordance with Sec. 5.5(e) of this subtitle.
(g) Approval of Davis-Bacon Related Act Federal funding or
assistance after contract award. If Federal funding or assistance under
a statute requiring payment of wages determined in accordance with the
Davis-Bacon Act is not approved prior to contract award (or the
beginning of construction where there is no contract award), the
applicable wage determination must be incorporated based upon the wages
and fringe benefits found to be prevailing on the date of award or the
beginning of construction (under the National Housing Act, under
section 8 of the U.S. Housing Act of 1937, or where there is no
contract award), as appropriate, and must be incorporated in the
contract specifications retroactively to that date, Provided that upon
the request of the head of the Federal agency providing the Federal
funding or assistance, in individual cases the Administrator may direct
incorporation of the wage determination to be effective on the date of
approval of Federal funds or assistance whenever the Administrator
finds that it is necessary and proper in the public interest to prevent
injustice or undue hardship, Provided further that the Administrator
finds no evidence of intent to apply for Federal funding or assistance
prior to contract award or the start of construction, as appropriate.
0
8. Revise Sec. 1.7 to read as follows:
Sec. 1.7 Scope of consideration.
(a) In making a wage determination, the ``area'' from which wage
data will be drawn will normally be the county unless sufficient
current wage data (data on wages paid on current projects or, where
necessary, projects under construction no more than 1 year prior to the
beginning of the survey or the request for a wage determination, as
appropriate) is unavailable to make a wage determination.
(b) If sufficient current wage data is not available from projects
within the county to make a wage determination, wages paid on similar
construction in surrounding counties may be considered.
(c) If sufficient current wage data is not available in surrounding
counties, the Administrator may consider wage data from similar
construction in comparable counties or groups of counties in the State,
and, if necessary, overall statewide data.
(d) If sufficient current statewide wage data is not available,
wages paid on projects completed more than 1 year prior to the
beginning of the survey or the request for a wage determination, as
appropriate, may be considered.
(e) The use of ``helpers and apprentices'' is permitted in
accordance with part 5 of this subtitle.
0
9. Revise Sec. 1.8 to read as follows:
Sec. 1.8 Reconsideration by the Administrator.
(a) Any interested party may seek reconsideration of a wage
determination issued under this part or of a decision of the
Administrator regarding application of a wage determination.
(b) Such a request for reconsideration must be in writing,
accompanied by a full statement of the interested party's views and any
supporting wage data or other pertinent information. Requests must be
submitted via email to [email protected]; by mail to
Administrator, Wage and Hour Division, U.S. Department of Labor, 200
Constitution Ave., NW, Washington, DC 20210; or through other means
directed by the Administrator. The Administrator will respond within 30
days of receipt thereof, or will notify the requestor within the 30-day
period that additional time is necessary.
(c) If the decision for which reconsideration is sought was made by
an authorized representative of the Administrator of the Wage and Hour
Division, the interested party seeking reconsideration may request
further reconsideration by the Administrator of the Wage and Hour
Division. Such a request must be submitted within 30 days from the date
the decision is issued; this time may be extended for good cause at the
discretion of the Administrator upon a request by the interested party.
The procedures in paragraph (b) of this section apply to any such
reconsideration requests.
0
10. Add Sec. 1.10 to read as follows:
Sec. 1.10 Severability.
The provisions of this part are separate and severable and operate
independently from one another. If any provision of this part is held
to be invalid or unenforceable by its terms, or as applied to any
person or circumstance, or stayed pending further agency action, the
provision is to be construed so as to continue to give the maximum
effect to the provision permitted by law, unless such holding is one of
utter invalidity or unenforceability, in which event the provision is
severable from this part and will not affect the remaining provisions.
Appendix A to Part 1--[Removed]
0
11. Remove appendix A to part 1.
Appendix B to Part 1--[Removed]
0
12. Remove appendix B to part 1.
PART 3--CONTRACTORS AND SUBCONTRACTORS ON PUBLIC BUILDING OR PUBLIC
WORK FINANCED IN WHOLE OR IN PART BY LOANS OR GRANTS FROM THE
UNITED STATES
0
13. The authority citation for part 3 continues to read as follows:
Authority: R.S. 161, 48 Stat. 848, Reorg. Plan No. 14 of 1950,
64 Stat. 1267; 5 U.S.C. 301; 40 U.S.C. 3145; Secretary's Order 01-
2014 (Dec. 19, 2014), 79 FR 77527 (Dec. 24, 2014).
0
14. Revise Sec. 3.1 to read as follows:
Sec. 3.1 Purpose and scope.
This part prescribes ``anti-kickback'' regulations under section 2
of the Act of June 13, 1934, as amended (40 U.S.C. 3145), popularly
known as the Copeland Act. This part applies to any contract which is
subject to Federal wage standards and which is for the construction,
prosecution, completion, or repair of public buildings, public works or
buildings or works financed in whole or in part by loans or grants from
the United States. The part is intended to aid in the enforcement of
the minimum wage provisions of the Davis-Bacon Act and the various
statutes dealing with federally assisted construction that contain
similar minimum wage provisions, including those provisions which are
not subject to Reorganization Plan No. 14 of 1950 (e.g., the College
Housing Act of 1950, the Federal Water Pollution Control Act, and the
Housing Act of 1959), and in the enforcement of the overtime provisions
of the Contract Work Hours and Safety
[[Page 57729]]
Standards Act whenever they are applicable to construction work. The
part details the obligation of contractors and subcontractors relative
to the weekly submission of statements regarding the wages paid on work
covered thereby; sets forth the circumstances and procedures governing
the making of payroll deductions from the wages of those employed on
such work; and delineates the methods of payment permissible on such
work.
0
15. Revise Sec. 3.2 to read as follows:
Sec. 3.2 Definitions.
As used in the regulations in this part:
Affiliated person. The term ``affiliated person'' includes a
spouse, child, parent, or other close relative of the contractor or
subcontractor; a partner or officer of the contractor or subcontractor;
a corporation closely connected with the contractor or subcontractor as
parent, subsidiary, or otherwise, and an officer or agent of such
corporation.
Agency. The term ``agency'' means any Federal, State, or local
government agency or instrumentality, or other similar entity, that
enters into a contract or provides assistance through loan, grant, loan
guarantee or insurance, or otherwise, for a project subject to the
Davis-Bacon labor standards, as defined in Sec. 5.2 of this subtitle.
(1) Federal agency. The term ``Federal agency'' means an agency or
instrumentality of the United States or the District of Columbia, as
defined in this section, that enters into a contract or provides
assistance through loan, grant, loan guarantee or insurance, or
otherwise, to a project subject to the Davis-Bacon labor standards.
(2) [Reserved]
Building or work. The term ``building or work'' generally includes
construction activity of all types, as distinguished from
manufacturing, furnishing of materials, or servicing and maintenance
work. The term includes, without limitation, buildings, structures, and
improvements of all types, such as bridges, dams, solar panels, wind
turbines, broadband installation, installation of electric car
chargers, plants, highways, parkways, streets, subways, tunnels,
sewers, mains, powerlines, pumping stations, heavy generators,
railways, airports, terminals, docks, piers, wharves, ways,
lighthouses, buoys, jetties, breakwaters, levees, and canals; dredging,
shoring, rehabilitation and reactivation of plants, scaffolding,
drilling, blasting, excavating, clearing, and landscaping. The term
``building or work'' also includes a portion of a building or work, or
the installation (where appropriate) of equipment or components into a
building or work.
(1) Building or work financed in whole or in part by loans or
grants from the United States. The term ``building or work financed in
whole or in part by loans or grants from the United States'' includes
any building or work for which construction, prosecution, completion,
or repair, as defined in this section, payment or part payment is made
directly or indirectly from funds provided by loans or grants by a
Federal agency. The term includes any building or work for which the
Federal assistance granted is in the form of loan guarantees or
insurance.
(2) [Reserved]
Construction, prosecution, completion, or repair. The term
``construction, prosecution, completion, or repair'' mean all types of
work done on a particular building or work at the site thereof as
specified in Sec. 5.2 of this subtitle, including, without limitation,
altering, remodeling, painting and decorating, installation on the site
of the work of items fabricated offsite, covered transportation as
reflected in Sec. 5.2, demolition and/or removal as reflected in Sec.
5.2, and the manufacturing or furnishing of materials, articles,
supplies, or equipment on the site of the building or work, performed
by laborers and mechanics at the site.
Employed (and wages). Every person paid by a contractor or
subcontractor in any manner for their labor in the construction,
prosecution, completion, or repair of a public building or public work
or building or work financed in whole or in part by assistance from the
United States through loan, grant, loan guarantee or insurance, or
otherwise, is ``employed'' and receiving ``wages'', regardless of any
contractual relationship alleged to exist between the contractor and
such person.
Public building (or public work). The term ``public building (or
public work)'' includes a building or work the construction,
prosecution, completion, or repair of which, as defined in this
section, is carried on directly by authority of or with funds of a
Federal agency to serve the general public regardless of whether title
thereof is in a Federal agency. The construction, prosecution,
completion, or repair of a portion of a building or work, or the
installation (where appropriate) of equipment or components into a
building or work, may still be considered a public building or work,
even where the entire building or work is not owned, leased by, or to
be used by the Federal agency, as long as the construction,
prosecution, completion, or repair of that portion of the building or
work, or the installation (where appropriate) of equipment or
components into that building or work, is carried on by authority of or
with funds of a Federal agency to serve the interest of the general
public.
United States or the District of Columbia. The term ``United States
or the District of Columbia'' means the United States, the District of
Columbia, and all executive departments, independent establishments,
administrative agencies, and instrumentalities of the United States and
of the District of Columbia, and any corporation for which all or
substantially all of the stock of which is beneficially owned by the
United States, by the District of Columbia, or any of the foregoing
departments, establishments, agencies, and instrumentalities.
0
16. Revise Sec. 3.3 to read as follows:
Sec. 3.3 Certified payrolls.
(a) [Reserved]
(b) Each contractor or subcontractor engaged in the construction,
prosecution, completion, or repair of any public building or public
work, or building or work financed in whole or in part by loans or
grants from the United States, each week must provide a copy of its
weekly payroll for all laborers and mechanics engaged on work covered
by this part and part 5 of this chapter during the preceding weekly
payroll period, accompanied by a statement of compliance certifying the
accuracy of the weekly payroll information. This statement must be
executed by the contractor or subcontractor or by an authorized officer
or employee of the contractor or subcontractor who supervises the
payment of wages, and must be on the back of Form WH-347, ``Payroll
(For Contractors Optional Use)'' or on any form with identical wording.
Copies of WH-347 may be obtained from the contracting or sponsoring
agency or from the Wage and Hour Division website at https://www.dol.gov/agencies/whd/government-contracts/construction/forms or its
successor site. The signature by the contractor, subcontractor, or the
authorized officer or employee must be an original handwritten
signature or a legally valid electronic signature.
(c) The requirements of this section do not apply to any contract
of $2,000 or less.
(d) Upon a written finding by the head of a Federal agency, the
Secretary of Labor may provide reasonable limitations, variations,
tolerances, and exemptions from the requirements of
[[Page 57730]]
this section subject to such conditions as the Secretary of Labor may
specify.
0
17. Revise Sec. 3.4 to read as follows:
Sec. 3.4 Submission of certified payroll and the preservation and
inspection of weekly payroll records.
(a) Certified payroll. Each certified payroll required under Sec.
3.3 must be delivered by the contractor or subcontractor, within 7 days
after the regular payment date of the payroll period, to a
representative at the site of the building or work of the agency
contracting for or financing the work, or, if there is no
representative of the agency at the site of the building or work, the
statement must be delivered by mail or by any other means normally
assuring delivery by the contractor or subcontractor, within that 7 day
time period, to the agency contracting for or financing the building or
work. After the certified payrolls have been reviewed in accordance
with the contracting or sponsoring agency's procedures, such certified
payrolls must be preserved by the agency for a period of 3 years after
all the work on the prime contract is completed and must be produced
for inspection, copying, and transcription by the Department of Labor
upon request. The certified payrolls must also be transmitted together
with a report of any violation, in accordance with applicable
procedures prescribed by the United States Department of Labor.
(b) Recordkeeping. Each contractor or subcontractor must preserve
the regular payroll records for a period of 3 years after all the work
on the prime contract is completed. The regular payroll records must
set out accurately and completely the name; Social Security number;
last known address, telephone number, and email address of each laborer
and mechanic; each worker's correct classification(s) of work actually
performed; hourly rates of wages paid (including rates of contributions
or costs anticipated for bona fide fringe benefits or cash equivalents
thereof); daily and weekly number of hours actually worked in total and
on each covered contract; deductions made; and actual wages paid. The
contractor or subcontractor must make such regular payroll records, as
well as copies of the certified payrolls provided to the contracting or
sponsoring agency, available at all times for inspection, copying, and
transcription by the contracting officer or their authorized
representative, and by authorized representatives of the Department of
Labor.
0
18. Revise Sec. 3.5 to read as follows:
Sec. 3.5 Payroll deductions permissible without application to or
approval of the Secretary of Labor.
Deductions made under the circumstances or in the situations
described in the paragraphs of this section may be made without
application to and approval of the Secretary of Labor:
(a) Any deduction made in compliance with the requirements of
Federal, State, or local law, such as Federal or State withholding
income taxes and Federal social security taxes.
(b) Any deduction of sums previously paid to the laborer or
mechanic as a bona fide prepayment of wages when such prepayment is
made without discount or interest. A bona fide prepayment of wages is
considered to have been made only when cash or its equivalent has been
advanced to the person employed in such manner as to give him complete
freedom of disposition of the advanced funds.
(c) Any deduction of amounts required by court process to be paid
to another, unless the deduction is in favor of the contractor,
subcontractor, or any affiliated person, or when collusion or
collaboration exists.
(d) Any deduction constituting a contribution on behalf of the
laborer or mechanic employed to funds established by the contractor or
representatives of the laborers or mechanics, or both, for the purpose
of providing either from principal or income, or both, medical or
hospital care, pensions or annuities on retirement, death benefits,
compensation for injuries, illness, accidents, sickness, or disability,
or for insurance to provide any of the foregoing, or unemployment
benefits, vacation pay, savings accounts, or similar payments for the
benefit of the laborers or mechanics, their families and dependents:
Provided, however, That the following standards are met:
(1) The deduction is not otherwise prohibited by law;
(2) It is either:
(i) Voluntarily consented to by the laborer or mechanic in writing
and in advance of the period in which the work is to be done and such
consent is not a condition either for the obtaining of or for the
continuation of employment; or
(ii) Provided for in a bona fide collective bargaining agreement
between the contractor or subcontractor and representatives of its
laborers or mechanics;
(3) No profit or other benefit is otherwise obtained, directly or
indirectly, by the contractor or subcontractor or any affiliated person
in the form of commission, dividend, or otherwise; and
(4) The deductions must serve the convenience and interest of the
laborer or mechanic.
(e) Any deduction requested by the laborer or mechanic to enable
him or her to repay loans to or to purchase shares in credit unions
organized and operated in accordance with Federal and State credit
union statutes.
(f) Any deduction voluntarily authorized by the laborer or mechanic
for the making of contributions to governmental or quasi-governmental
agencies, such as the American Red Cross.
(g) Any deduction voluntarily authorized by the laborer or mechanic
for the making of contributions to charitable organizations as defined
by 26 U.S.C. 501(c)(3).
(h) Any deductions to pay regular union initiation fees and
membership dues, not including fines or special assessments: Provided,
however, That a collective bargaining agreement between the contractor
or subcontractor and representatives of its laborers or mechanics
provides for such deductions and the deductions are not otherwise
prohibited by law.
(i) Any deduction not more than for the ``reasonable cost'' of
board, lodging, or other facilities meeting the requirements of section
3(m) of the Fair Labor Standards Act of 1938, as amended, and 29 CFR
part 531. When such a deduction is made the additional records required
under 29 CFR 516.25(a) must be kept.
(j) Any deduction for the cost of safety equipment of nominal value
purchased by the laborer or mechanic as their own property for their
personal protection in their work, such as safety shoes, safety
glasses, safety gloves, and hard hats, if such equipment is not
required by law to be furnished by the contractor, if such deduction
does not violate the Fair Labor Standards Act or any other law, if the
cost on which the deduction is based does not exceed the actual cost to
the contractor where the equipment is purchased from the contractor and
does not include any direct or indirect monetary return to the
contractor where the equipment is purchased from a third person, and if
the deduction is either:
(1) Voluntarily consented to by the laborer or mechanic in writing
and in advance of the period in which the work is to be done and such
consent is not a condition either for the obtaining of employment or
its continuance; or
(2) Provided for in a bona fide collective bargaining agreement
between the contractor or subcontractor and
[[Page 57731]]
representatives of its laborers and mechanics.
0
19. Revise Sec. 3.7 to read as follows:
Sec. 3.7 Applications for the approval of the Secretary of Labor.
Any application for the making of payroll deductions under Sec.
3.6 must comply with the requirements prescribed in the following
paragraphs of this section:
(a) The application must be in writing and addressed to the
Secretary of Labor. The application must be submitted by email to
[email protected], by mail to the United States Department of
Labor, Wage and Hour Division, Director, Division of Government
Contracts Enforcement, 200 Constitution Ave., NW, Room S-3502,
Washington, DC 20210, or by any other means normally assuring delivery.
(b) The application need not identify the contract or contracts
under which the work in question is to be performed. Permission will be
given for deductions on all current and future contracts of the
applicant for a period of 1 year. A renewal of permission to make such
payroll deduction will be granted upon the submission of an application
which makes reference to the original application, recites the date of
the Secretary of Labor's approval of such deductions, states
affirmatively that there is continued compliance with the standards set
forth in the provisions of Sec. 3.6, and specifies any conditions
which have changed in regard to the payroll deductions.
(c) The application must state affirmatively that there is
compliance with the standards set forth in the provisions of Sec. 3.6.
The affirmation must be accompanied by a full statement of the facts
indicating such compliance.
(d) The application must include a description of the proposed
deduction, the purpose of the deduction, and the classes of laborers or
mechanics from whose wages the proposed deduction would be made.
(e) The application must state the name and business of any third
person to whom any funds obtained from the proposed deductions are to
be transmitted and the affiliation of such person, if any, with the
applicant.
0
20. Revise Sec. 3.8 to read as follows:
Sec. 3.8 Action by the Secretary of Labor upon applications.
The Secretary of Labor will decide whether or not the requested
deduction is permissible under provisions of Sec. 3.6; and will notify
the applicant in writing of the decision.
0
21. Revise Sec. 3.11 to read as follows:
Sec. 3.11 Regulations part of contract.
All contracts made with respect to the construction, prosecution,
completion, or repair of any public building or public work or building
or work financed in whole or in part by loans or grants from the United
States covered by the regulations in this part must expressly bind the
contractor or subcontractor to comply with such of the regulations in
this part as may be applicable. In this regard, see Sec. 5.5(a) of
this subtitle. However, these requirements will be considered to be
effective by operation of law, whether or not they are incorporated
into such contracts, as set forth in Sec. 5.5(e) of this subtitle.
PART 5--LABOR STANDARDS PROVISIONS APPLICABLE TO CONTRACTS COVERING
FEDERALLY FINANCED AND ASSISTED CONSTRUCTION (ALSO LABOR STANDARDS
PROVISIONS APPLICABLE TO NONCONSTRUCTION CONTRACTS SUBJECT TO THE
CONTRACT WORK HOURS AND SAFETY STANDARDS ACT)
0
22. The authority citation for part 5 is revised to read as follows:
Authority: 5 U.S.C. 301; Reorganization Plan No. 14 of 1950, 5
U.S.C. appendix; 28 U.S.C. 2461 note; 40 U.S.C. 3141 et seq.; 40
U.S.C. 3145; 40 U.S.C. 3148; 40 U.S.C. 3701 et seq.; Secretary's
Order No. 01-2014, 79 FR 77527; and the laws referenced by Sec.
5.1(a).
0
23. Revise Sec. 5.1 to read as follows:
Sec. 5.1 Purpose and scope.
(a) The regulations contained in this part are promulgated under
the authority conferred upon the Secretary of Labor by Reorganization
Plan No. 14 of 1950 (64 Stat. 1267, as amended, 5 U.S.C. appendix) and
the Copeland Act (48 Stat. 948; 18 U.S.C. 874; 40 U.S.C. 3145) in order
to coordinate the administration and enforcement of labor standards
provisions contained in the Davis-Bacon Act (46 Stat. 1494, as amended;
40 U.S.C. 3141 et seq.) and its related statutes (``Related Acts'').
(1) A listing of laws requiring Davis-Bacon labor standards
provisions can be found at www.dol.gov/agencies/whd/government-contracts or its successor website.
(2) [Reserved]
(b) Part 1 of this subtitle contains the Department's procedural
rules governing requests for wage determinations and the issuance and
use of such wage determinations under the Davis-Bacon Act and its
Related Acts.
0
24. Revise Sec. 5.2 to read as follows:
Sec. 5.2 Definitions.
Administrator. The term ``Administrator'' means the Administrator
of the Wage and Hour Division, U.S. Department of Labor, or authorized
representative.
Agency. The term ``agency'' means any Federal, State, or local
government agency or instrumentality, or other similar entity, that
enters into a contract or provides assistance through loan, grant, loan
guarantee or insurance, or otherwise, to a project subject to the
Davis-Bacon labor standards, as defined in this section.
(1) Federal agency. The term ``Federal agency'' means an agency or
instrumentality of the United States or the District of Columbia, as
defined in this section, that enters into a contract or provides
assistance through loan, grant, loan guarantee or insurance, or
otherwise, to a project subject to the Davis-Bacon labor standards.
(2) [Reserved]
Agency Head. The term ``Agency Head'' means the principal official
of an agency and includes those persons duly authorized to act on
behalf of the Agency Head.
Apprentice and helper. The terms ``apprentice'' and ``helper'' are
defined as follows:
(1) ``Apprentice'' means:
(i) A person employed and individually registered in a bona fide
apprenticeship program registered with the U.S. Department of Labor,
Employment and Training Administration, Office of Apprenticeship, or
with a State Apprenticeship Agency recognized by the Office of
Apprenticeship; or
(ii) A person in the first 90 days of probationary employment as an
apprentice in such an apprenticeship program, who is not individually
registered in the program, but who has been certified by the Office of
Apprenticeship or a State Apprenticeship Agency (where appropriate) to
be eligible for probationary employment as an apprentice;
(2) These provisions do not apply to apprentices and trainees
employed on projects subject to 23 U.S.C. 113 who are enrolled in
programs which have been certified by the Secretary of Transportation
in accordance with 23 U.S.C. 113(c).
(3) A distinct classification of helper will be issued in wage
determinations applicable to work performed on construction projects
covered by the labor standards provisions of the Davis-Bacon and
Related Acts only where:
(i) The duties of the helper are clearly defined and distinct from
those of any
[[Page 57732]]
other classification on the wage determination;
(ii) The use of such helpers is an established prevailing practice
in the area; and
(iii) The helper is not employed as a trainee in an informal
training program. A ``helper'' classification will be added to wage
determinations pursuant to Sec. 5.5(a)(1)(iii)(A) only where, in
addition, the work to be performed by the helper is not performed by a
classification in the wage determination.
Building or work. The term ``building or work'' generally includes
construction activities of all types, as distinguished from
manufacturing, furnishing of materials, or servicing and maintenance
work. The term includes, without limitation, buildings, structures, and
improvements of all types, such as bridges, dams, solar panels, wind
turbines, broadband installation, installation of electric car
chargers, plants, highways, parkways, streets, subways, tunnels,
sewers, mains, power lines, pumping stations, heavy generators,
railways, airports, terminals, docks, piers, wharves, ways,
lighthouses, buoys, jetties, breakwaters, levees, canals, dredging,
shoring, rehabilitation and reactivation of plants, scaffolding,
drilling, blasting, excavating, clearing, and landscaping. The term
``building or work'' also includes a portion of a building or work, or
the installation (where appropriate) of equipment or components into a
building or work.
Construction, prosecution, completion, or repair. The term
``construction, prosecution, completion, or repair'' means the
following:
(1) These terms include all types of work done--
(i) On a particular building or work at the site of the work, as
defined in this section, by laborers and mechanics employed by a
contractor or subcontractor, or
(ii) In the construction or development of a project under a
development statute.
(2) These terms include, without limitation (except as specified in
this definition):
(i) Altering, remodeling, installation (where appropriate) on the
site of the work of items fabricated offsite;
(ii) Painting and decorating;
(iii) Manufacturing or furnishing of materials, articles, supplies
or equipment, but only if such work is done by laborers or mechanics
(A) Employed by a contractor or subcontractor, as defined in this
section, on the site of the work, as defined in this section, or
(B) In the construction or development of a project under a
development statute;
(iv) ``Covered transportation,'' defined as any of the following
activities:
(A) Transportation that takes place entirely within a location
meeting the definition of ``site of the work'' in this section;
(B) Transportation of one or more ``significant portion(s)'' of the
building or work between a ``secondary construction site'' as defined
in this section and a ``primary construction site'' as defined in this
section;
(C) Transportation between an ``adjacent or virtually adjacent
dedicated support site'' as defined in this section and a ``primary
construction site'' or ``secondary construction site'' as defined in
this section;
(D) ``Onsite activities essential or incidental to offsite
transportation,'' defined as activities conducted by a truck driver or
truck driver's assistant on the site of the work that are essential or
incidental to the transportation of materials or supplies to or from
the site of the work, such as loading, unloading, or waiting for
materials to be loaded or unloaded, but only where the driver or
driver's assistant's time spent on the site of the work is not de
minimis; and
(E) Any transportation and related activities, whether on or off
the site of the work, by laborers and mechanics employed in the
construction or development of the project under a development statute.
(v) Demolition and/or removal, under any of the following
circumstances:
(A) Where the demolition and/or removal activities themselves
constitute construction, alteration, and/or repair of an existing
building or work. Examples of such activities include the removal of
asbestos, paint, components, systems, or parts from a facility that
will not be demolished; as well as contracts for hazardous waste
removal, land recycling, or reclamation that involve substantial earth
moving, removal of contaminated soil, re-contouring surfaces, and/or
habitat restoration.
(B) Where subsequent construction covered in whole or in part by
the labor standards in this part is contemplated at the site of the
demolition or removal, either as part of the same contract or as part
of a future contract. In determining whether covered construction is
contemplated within the meaning of this provision, relevant factors
include, but are not limited to, the existence of engineering or
architectural plans or surveys of the site; the allocation of, or an
application for, Federal funds; contract negotiations or bid
solicitations; the stated intent of the relevant government officials;
and the disposition of the site after demolition.
(C) Where otherwise required by statute.
(3) Except for transportation that constitutes ``covered
transportation'' as defined in this section, construction, prosecution,
completion, or repair does not include the transportation of materials
or supplies to or from the site of the work.
Contract. The term ``contract'' means any prime contract which is
subject wholly or in part to the labor standards provisions of any of
the laws referenced by Sec. 5.1 and any subcontract of any tier
thereunder, let under the prime contract. With the exception of work
performed under a development statute, the terms contract and
subcontract do not include agreements with employers that meet the
definition of a material supplier under this section.
Contracting officer. The term ``contracting officer'' means the
individual, a duly appointed successor, or authorized representative
who is designated and authorized to enter into contracts on behalf of
an agency, sponsor, owner, applicant, or other similar entity.
Contractor. The term ``contractor'' means any individual or other
legal entity that enters into or is awarded a contract that is subject
wholly or in part to the labor standards provisions of any of the laws
referenced by Sec. 5.1, including any prime contract or subcontract of
any tier under a covered prime contract. In addition, the term
contractor includes any surety that is completing performance for a
defaulted contractor pursuant to a performance bond. The U.S.
Government, its agencies, and instrumentalities are not contractors,
subcontractors, employers or joint employers for purposes of the labor
standards provisions of any of the laws referenced by Sec. 5.1. A
State or local government is not regarded as a contractor or
subcontractor under statutes providing loans, grants, or other Federal
assistance in situations where construction is performed by its own
employees. However, under development statutes or other statutes
requiring payment of prevailing wages to all laborers and mechanics
employed on the assisted project, such as the U.S. Housing Act of 1937,
State and local recipients of Federal-aid must pay these workers
according to Davis-Bacon labor standards. The term ``contractor'' does
not include an entity that is a material supplier, except if the entity
is performing work under a development statute.
Davis-Bacon labor standards. The term ``Davis-Bacon labor
standards'' as
[[Page 57733]]
used in this part means the requirements of the Davis-Bacon Act, the
Contract Work Hours and Safety Standards Act (other than those relating
to safety and health), the Copeland Act, and the prevailing wage
provisions of the other statutes referenced in Sec. 5.1, and the
regulations in this part and in parts 1 and 3 of this subtitle.
Development statute. The term ``development statute'' includes the
United States Housing Act of 1937; the Housing Act of 1949; and the
Native American Housing Assistance and Self-Determination Act of 1996,
and any other Davis-Bacon Related Act that requires payment of
prevailing wages under the Davis-Bacon labor standards to all laborers
and mechanics employed in the development of a project and for which
the Administrator determines that the statute's language and/or
legislative history reflected clear congressional intent to apply a
coverage standard different from the Davis-Bacon Act itself.
Employed. Every person performing the duties of a laborer or
mechanic in the construction, prosecution, completion, or repair of a
public building or public work, or building or work financed in whole
or in part by assistance from the United States through loan, grant,
loan guarantee or insurance, or otherwise, is ``employed'' regardless
of any contractual relationship alleged to exist between the contractor
and such person.
Laborer or mechanic. The term ``laborer or mechanic'' includes at
least those workers whose duties are manual or physical in nature
(including those workers who use tools or who are performing the work
of a trade), as distinguished from mental or managerial. The term
``laborer'' or ``mechanic'' includes apprentices, helpers, and, in the
case of contracts subject to the Contract Work Hours and Safety
Standards Act, watchpersons or guards. The term does not apply to
workers whose duties are primarily administrative, executive, or
clerical, rather than manual. Persons employed in a bona fide
executive, administrative, or professional capacity as defined in 29
CFR part 541 are not deemed to be laborers or mechanics. Forepersons
who devote more than 20 percent of their time during a workweek to
mechanic or laborer duties, and who do not meet the criteria of part
541, are laborers and mechanics for the time so spent.
Material supplier. The term ``material supplier'' is defined as
follows:
(1) A material supplier is an entity meeting all of the following
criteria:
(i) Its only obligations for work on the contract or project are
the delivery of materials, articles, supplies, or equipment, which may
include pickup of the same in addition to, but not exclusive of,
delivery, and which may also include activities incidental to such
delivery and pickup, such as loading, unloading, or waiting for
materials to be loaded or unloaded; and
(ii) Its facility or facilities that manufactures the materials,
articles, supplies, or equipment used for the contract or project:
(A) Is not located on, or does not itself constitute, the project
or contract's primary construction site or secondary construction site
as defined in this section; and
(B) Either was established before opening of bids on the contract
or project, or is not dedicated exclusively, or nearly so, to the
performance of the contract or project.
(2) If an entity, in addition to being engaged in the activities
specified in paragraph (1)(i) of this definition, also engages in other
construction, prosecution, completion, or repair work at the site of
the work, it is not a material supplier.
Prime contractor. The term ``prime contractor'' means any person or
entity that enters into a contract with an agency. For the purposes of
the labor standards provisions of any of the laws referenced by Sec.
5.1, the term prime contractor also includes the controlling
shareholders or members of any entity holding a prime contract, the
joint venturers or partners in any joint venture or partnership holding
a prime contract, and any contractor (e.g., a general contractor) that
has been delegated the responsibility for overseeing all or
substantially all of the construction anticipated by the prime
contract. For the purposes of the provisions in Sec. Sec. 5.5 and 5.9,
any such related entities holding different prime contracts are
considered to be the same prime contractor.
Public building or public work. The term ``public building or
public work'' includes a building or work, the construction,
prosecution, completion, or repair of which, as defined in this
section, is carried on directly by authority of or with funds of a
Federal agency to serve the interest of the general public regardless
of whether title thereof is in a Federal agency. The construction,
prosecution, completion, or repair of a portion of a building or work,
or the installation (where appropriate) of equipment or components into
a building or work, may still be considered a public building or work,
even where the entire building or work is not owned, leased by, or to
be used by a Federal agency, as long as the construction, prosecution,
completion, or repair of that portion of the building or work, or the
installation (where appropriate) of equipment or components into that
building or work, is carried on by authority of or with funds of a
Federal agency to serve the interest of the general public.
Secretary. The term ``Secretary'' includes the Secretary of Labor,
and their authorized representative.
Site of the work. The term ``site of the work'' is defined as
follows:
(1) ``Site of the work'' includes all of the following:
(i) The primary construction site(s), defined as the physical place
or places where the building or work called for in the contract will
remain.
(ii) Any secondary construction site(s), defined as any other
site(s) where a significant portion of the building or work is
constructed, provided that such construction is for specific use in
that building or work and does not simply reflect the manufacture or
construction of a product made available to the general public, and
provided further that the site is either established specifically for
the performance of the contract or project, or is dedicated
exclusively, or nearly so, to the performance of the contract or
project for a specific period of time. A ``significant portion'' of a
building or work means one or more entire portion(s) or module(s) of
the building or work, such as a completed room or structure, with
minimal construction work remaining other than the installation and/or
final assembly of the portions or modules at the place where the
building or work will remain. A ``significant portion'' does not
include materials or prefabricated component parts such as
prefabricated housing components. A ``specific period of time'' means a
period of weeks, months, or more, and does not include circumstances
where a site at which multiple projects are in progress is shifted
exclusively or nearly so to a single project for a few hours or days in
order to meet a deadline.
(iii) Any adjacent or virtually adjacent dedicated support sites,
defined as:
(A) Job headquarters, tool yards, batch plants, borrow pits, and
similar facilities of a contractor or subcontractor that are dedicated
exclusively, or nearly so, to performance of the contract or project,
and adjacent or virtually adjacent to either a primary construction
site or a secondary construction site, and
(B) Locations adjacent or virtually adjacent to a primary
construction site at which workers perform activities associated with
directing vehicular or
[[Page 57734]]
pedestrian traffic around or away from the primary construction site.
(2) With the exception of locations that are on, or that themselves
constitute, primary or secondary construction sites as defined in
paragraphs (1)(i) and (ii) of this definition, site of the work does
not include:
(i) Permanent home offices, branch plant establishments,
fabrication plants, tool yards, etc., of a contractor or subcontractor
whose location and continuance in operation are determined wholly
without regard to a particular Federal or federally assisted contract
or project; or
(ii) Fabrication plants, batch plants, borrow pits, job
headquarters, tool yards, etc., of a material supplier, which are
established by a material supplier for the project before opening of
bids and not on the primary construction site or a secondary
construction site, even where the operations for a period of time may
be dedicated exclusively, or nearly so, to the performance of a
contract.
Subcontractor. The term ``subcontractor'' means any contractor that
agrees to perform or be responsible for the performance of any part of
a contract that is subject wholly or in part to the labor standards
provisions of any of the laws referenced in Sec. 5.1. The term
subcontractor includes subcontractors of any tier.
United States or the District of Columbia. The term ``United States
or the District of Columbia'' means the United States, the District of
Columbia, and all executive departments, independent establishments,
administrative agencies, and instrumentalities of the United States and
of the District of Columbia, including non-appropriated fund
instrumentalities and any corporation for which all or substantially
all of its stock is beneficially owned by the United States or by the
foregoing departments, establishments, agencies, or instrumentalities.
Wages. The term ``wages'' means the basic hourly rate of pay; any
contribution irrevocably made by a contractor or subcontractor to a
trustee or to a third person pursuant to a bona fide fringe benefit
fund, plan, or program; and the rate of costs to the contractor or
subcontractor which may be reasonably anticipated in providing bona
fide fringe benefits to laborers and mechanics pursuant to an
enforceable commitment to carry out a financially responsible plan or
program, which was communicated in writing to the laborers and
mechanics affected. The fringe benefits enumerated in the Davis-Bacon
Act include medical or hospital care, pensions on retirement or death,
compensation for injuries or illness resulting from occupational
activity, or insurance to provide any of the foregoing; unemployment
benefits; life insurance, disability insurance, sickness insurance, or
accident insurance; vacation or holiday pay; defraying costs of
apprenticeship or other similar programs; or other bona fide fringe
benefits. Fringe benefits do not include benefits required by other
Federal, State, or local law.
Wage determination. The term ``wage determination'' includes the
original decision and any subsequent decisions revising, modifying,
superseding, correcting, or otherwise changing the provisions of the
original decision. The application of the wage determination must be in
accordance with the provisions of Sec. 1.6 of this subtitle.
0
25. Amend Sec. 5.5 by:
0
a. Revising paragraphs (a) introductory text and (a)(1) through (4),
(6), and (10);
0
b. Adding paragraph (a)(11);
0
c. Revising paragraphs (b) introductory text and (b)(2) through (4);
0
d. Adding paragraph (b)(5);
0
e. Revising paragraph (c); and
0
f. Adding paragraphs (d) and (e).
The revisions and additions read as follows:
Sec. 5.5 Contract provisions and related matters.
(a) Required contract clauses. The Agency head will cause or
require the contracting officer to require the contracting officer to
insert in full, or (for contracts covered by the Federal Acquisition
Regulation (48 CFR chapter 1)) by reference, in any contract in excess
of $2,000 which is entered into for the actual construction, alteration
and/or repair, including painting and decorating, of a public building
or public work, or building or work financed in whole or in part from
Federal funds or in accordance with guarantees of a Federal agency or
financed from funds obtained by pledge of any contract of a Federal
agency to make a loan, grant or annual contribution (except where a
different meaning is expressly indicated), and which is subject to the
labor standards provisions of any of the laws referenced by Sec. 5.1,
the following clauses (or any modifications thereof to meet the
particular needs of the agency, Provided, That such modifications are
first approved by the Department of Labor):
(1) Minimum wages--(i) Wage rates and fringe benefits. All laborers
and mechanics employed or working upon the site of the work (or
otherwise working in construction or development of the project under a
development statute), will be paid unconditionally and not less often
than once a week, and without subsequent deduction or rebate on any
account (except such payroll deductions as are permitted by regulations
issued by the Secretary of Labor under the Copeland Act (29 CFR part
3)), the full amount of basic hourly wages and bona fide fringe
benefits (or cash equivalents thereof) due at time of payment computed
at rates not less than those contained in the wage determination of the
Secretary of Labor which is attached hereto and made a part hereof,
regardless of any contractual relationship which may be alleged to
exist between the contractor and such laborers and mechanics. As
provided in paragraphs (d) and (e) of this section, the appropriate
wage determinations are effective by operation of law even if they have
not been attached to the contract. Contributions made or costs
reasonably anticipated for bona fide fringe benefits under the Davis-
Bacon Act (40 U.S.C. 3141(2)(B)) on behalf of laborers or mechanics are
considered wages paid to such laborers or mechanics, subject to the
provisions of paragraph (a)(1)(v) of this section; also, regular
contributions made or costs incurred for more than a weekly period (but
not less often than quarterly) under plans, funds, or programs which
cover the particular weekly period, are deemed to be constructively
made or incurred during such weekly period. Such laborers and mechanics
must be paid the appropriate wage rate and fringe benefits on the wage
determination for the classification(s) of work actually performed,
without regard to skill, except as provided in paragraph (a)(4) of this
section. Laborers or mechanics performing work in more than one
classification may be compensated at the rate specified for each
classification for the time actually worked therein: Provided, That the
employer's payroll records accurately set forth the time spent in each
classification in which work is performed. The wage determination
(including any additional classifications and wage rates conformed
under paragraph (a)(1)(iii) of this section) and the Davis-Bacon poster
(WH-1321) must be posted at all times by the contractor and its
subcontractors at the site of the work in a prominent and accessible
place where it can be easily seen by the workers.
(ii) Frequently recurring classifications. (A) In addition to wage
and fringe benefit rates that have been
[[Page 57735]]
determined to be prevailing under the procedures set forth in 29 CFR
part 1, a wage determination may contain, pursuant to Sec. 1.3(f),
wage and fringe benefit rates for classifications of laborers and
mechanics for which conformance requests are regularly submitted
pursuant to paragraph (a)(1)(iii) of this section, provided that:
(1) The work performed by the classification is not performed by a
classification in the wage determination for which a prevailing wage
rate has been determined;
(2) The classification is used in the area by the construction
industry; and
(3) The wage rate for the classification bears a reasonable
relationship to the prevailing wage rates contained in the wage
determination.
(B) The Administrator will establish wage rates for such
classifications in accordance with paragraph (a)(1)(iii)(A)(3) of this
section. Work performed in such a classification must be paid at no
less than the wage and fringe benefit rate listed on the wage
determination for such classification.
(iii) Conformance. (A) The contracting officer must require that
any class of laborers or mechanics, including helpers, which is not
listed in the wage determination and which is to be employed under the
contract be classified in conformance with the wage determination.
Conformance of an additional classification and wage rate and fringe
benefits is appropriate only when the following criteria have been met:
(1) The work to be performed by the classification requested is not
performed by a classification in the wage determination; and
(2) The classification is used in the area by the construction
industry; and
(3) The proposed wage rate, including any bona fide fringe
benefits, bears a reasonable relationship to the wage rates contained
in the wage determination.
(B) The conformance process may not be used to split, subdivide, or
otherwise avoid application of classifications listed in the wage
determination.
(C) If the contractor and the laborers and mechanics to be employed
in the classification (if known), or their representatives, and the
contracting officer agree on the classification and wage rate
(including the amount designated for fringe benefits where
appropriate), a report of the action taken will be sent by the
contracting officer by email to [email protected]. The
Administrator, or an authorized representative, will approve, modify,
or disapprove every additional classification action within 30 days of
receipt and so advise the contracting officer or will notify the
contracting officer within the 30-day period that additional time is
necessary.
(D) In the event the contractor, the laborers or mechanics to be
employed in the classification or their representatives, and the
contracting officer do not agree on the proposed classification and
wage rate (including the amount designated for fringe benefits, where
appropriate), the contracting officer will, by email to
[email protected], refer the questions, including the views of all
interested parties and the recommendation of the contracting officer,
to the Administrator for determination. The Administrator, or an
authorized representative, will issue a determination within 30 days of
receipt and so advise the contracting officer or will notify the
contracting officer within the 30-day period that additional time is
necessary.
(E) The contracting officer must promptly notify the contractor of
the action taken by the Wage and Hour Division under paragraphs
(a)(1)(iii)(C) and (D) of this section. The contractor must furnish a
written copy of such determination to each affected worker or it must
be posted as a part of the wage determination. The wage rate (including
fringe benefits where appropriate) determined pursuant to paragraph
(a)(1)(iii)(C) or (D) of this section must be paid to all workers
performing work in the classification under this contract from the
first day on which work is performed in the classification.
(iv) Fringe benefits not expressed as an hourly rate. Whenever the
minimum wage rate prescribed in the contract for a class of laborers or
mechanics includes a fringe benefit which is not expressed as an hourly
rate, the contractor may either pay the benefit as stated in the wage
determination or may pay another bona fide fringe benefit or an hourly
cash equivalent thereof.
(v) Unfunded plans. If the contractor does not make payments to a
trustee or other third person, the contractor may consider as part of
the wages of any laborer or mechanic the amount of any costs reasonably
anticipated in providing bona fide fringe benefits under a plan or
program, Provided, That the Secretary of Labor has found, upon the
written request of the contractor, in accordance with the criteria set
forth in Sec. 5.28, that the applicable standards of the Davis-Bacon
Act have been met. The Secretary of Labor may require the contractor to
set aside in a separate account assets for the meeting of obligations
under the plan or program.
(vi) Interest. In the event of a failure to pay all or part of the
wages required by the contract, the contractor will be required to pay
interest on any underpayment of wages.
(2) Withholding--(i) Withholding requirements. The [write in name
of Federal agency or the recipient of Federal assistance] may, upon its
own action, or must, upon written request of an authorized
representative of the Department of Labor, withhold or cause to be
withheld from the contractor so much of the accrued payments or
advances as may be considered necessary to satisfy the liabilities of
the prime contractor or any subcontractor for the full amount of wages
and monetary relief, including interest, required by the clauses set
forth in paragraph (a) of this section for violations of this contract,
or to satisfy any such liabilities required by any other Federal
contract, or federally assisted contract subject to Davis-Bacon labor
standards, that is held by the same prime contractor (as defined in
Sec. 5.2). The necessary funds may be withheld from the contractor
under this contract, any other Federal contract with the same prime
contractor, or any other federally assisted contract that is subject to
Davis-Bacon labor standards requirements and is held by the same prime
contractor, regardless of whether the other contract was awarded or
assisted by the same agency, and such funds may be used to satisfy the
contractor liability for which the funds were withheld. In the event of
a contractor's failure to pay any laborer or mechanic, including any
apprentice or helper working on the site of the work (or otherwise
working in construction or development of the project under a
development statute) all or part of the wages required by the contract,
or upon the contractor's failure to submit the required records as
discussed in paragraph (a)(3)(iv) of this section, the [Agency] may on
its own initiative and after written notice to the contractor, sponsor,
applicant, owner, or other entity, as the case may be, take such action
as may be necessary to cause the suspension of any further payment,
advance, or guarantee of funds until such violations have ceased.
(ii) Priority to withheld funds. The Department has priority to
funds withheld or to be withheld in accordance with paragraph (a)(2)(i)
or (b)(3)(i) of this section, or both, over claims to those funds by:
(A) A contractor's surety(ies), including without limitation
performance bond sureties and payment bond sureties;
(B) A contracting agency for its reprocurement costs;
[[Page 57736]]
(C) A trustee(s) (either a court-appointed trustee or a U.S.
trustee, or both) in bankruptcy of a contractor, or a contractor's
bankruptcy estate;
(D) A contractor's assignee(s);
(E) A contractor's successor(s); or
(F) A claim asserted under the Prompt Payment Act, 31 U.S.C. 3901-
3907.
(3) Records and certified payrolls--(i) Basic record requirements--
(A) Length of record retention. All regular payrolls and other basic
records must be maintained by the contractor and any subcontractor
during the course of the work and preserved for all laborers and
mechanics working at the site of the work (or otherwise working in
construction or development of the project under a development statute)
for a period of at least 3 years after all the work on the prime
contract is completed.
(B) Information required. Such records must contain the name;
Social Security number; last known address, telephone number, and email
address of each such worker; each worker's correct classification(s) of
work actually performed; hourly rates of wages paid (including rates of
contributions or costs anticipated for bona fide fringe benefits or
cash equivalents thereof of the types described in 40 U.S.C. 3141(2)(B)
of the Davis-Bacon Act); daily and weekly number of hours actually
worked in total and on each covered contract; deductions made; and
actual wages paid.
(C) Additional records relating to fringe benefits. Whenever the
Secretary of Labor has found under paragraph (a)(1)(v) of this section
that the wages of any laborer or mechanic include the amount of any
costs reasonably anticipated in providing benefits under a plan or
program described in 40 U.S.C. 3141(2)(B) of the Davis-Bacon Act, the
contractor must maintain records which show that the commitment to
provide such benefits is enforceable, that the plan or program is
financially responsible, and that the plan or program has been
communicated in writing to the laborers or mechanics affected, and
records which show the costs anticipated or the actual cost incurred in
providing such benefits.
(D) Additional records relating to apprenticeship. Contractors with
apprentices working under approved programs must maintain written
evidence of the registration of apprenticeship programs, the
registration of the apprentices, and the ratios and wage rates
prescribed in the applicable programs.
(ii) Certified payroll requirements--(A) Frequency and method of
submission. The contractor or subcontractor must submit weekly, for
each week in which any DBA- or Related Acts-covered work is performed,
certified payrolls to the [write in name of appropriate Federal agency]
if the agency is a party to the contract, but if the agency is not such
a party, the contractor will submit the certified payrolls to the
applicant, sponsor, owner, or other entity, as the case may be, that
maintains such records, for transmission to the [write in name of
agency]. The prime contractor is responsible for the submission of all
certified payrolls by all subcontractors. A contracting agency or prime
contractor may permit or require contractors to submit certified
payrolls through an electronic system, as long as the electronic system
requires a legally valid electronic signature; the system allows the
contractor, the contracting agency, and the Department of Labor to
access the certified payrolls upon request for at least 3 years after
the work on the prime contract has been completed; and the contracting
agency or prime contractor permits other methods of submission in
situations where the contractor is unable or limited in its ability to
use or access the electronic system.
(B) Information required. The certified payrolls submitted must set
out accurately and completely all of the information required to be
maintained under paragraph (a)(3)(i)(B) of this section, except that
full Social Security numbers and last known addresses, telephone
numbers, and email addresses must not be included on weekly
transmittals. Instead, the certified payrolls need only include an
individually identifying number for each worker (e.g., the last four
digits of the worker's Social Security number). The required weekly
certified payroll information may be submitted using Optional Form WH-
347 or in any other format desired. Optional Form WH-347 is available
for this purpose from the Wage and Hour Division website at https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/wh347/.pdf or its
successor website. It is not a violation of this section for a prime
contractor to require a subcontractor to provide full Social Security
numbers and last known addresses, telephone numbers, and email
addresses to the prime contractor for its own records, without weekly
submission by the subcontractor to the sponsoring government agency (or
the applicant, sponsor, owner, or other entity, as the case may be,
that maintains such records).
(C) Statement of Compliance. Each certified payroll submitted must
be accompanied by a ``Statement of Compliance,'' signed by the
contractor or subcontractor, or the contractor's or subcontractor's
agent who pays or supervises the payment of the persons working on the
contract, and must certify the following:
(1) That the certified payroll for the payroll period contains the
information required to be provided under paragraph (a)(3)(ii) of this
section, the appropriate information and basic records are being
maintained under paragraph (a)(3)(i) of this section, and such
information and records are correct and complete;
(2) That each laborer or mechanic (including each helper and
apprentice) working on the contract during the payroll period has been
paid the full weekly wages earned, without rebate, either directly or
indirectly, and that no deductions have been made either directly or
indirectly from the full wages earned, other than permissible
deductions as set forth in 29 CFR part 3; and
(3) That each laborer or mechanic has been paid not less than the
applicable wage rates and fringe benefits or cash equivalents for the
classification(s) of work actually performed, as specified in the
applicable wage determination incorporated into the contract.
(D) Use of Optional Form WH-347. The weekly submission of a
properly executed certification set forth on the reverse side of
Optional Form WH-347 will satisfy the requirement for submission of the
``Statement of Compliance'' required by paragraph (a)(3)(ii)(C) of this
section.
(E) Signature. The signature by the contractor, subcontractor, or
the contractor's or subcontractor's agent must be an original
handwritten signature or a legally valid electronic signature.
(F) Falsification. The falsification of any of the above
certifications may subject the contractor or subcontractor to civil or
criminal prosecution under 18 U.S.C. 1001 and 31 U.S.C. 3729.
(G) Length of certified payroll retention. The contractor or
subcontractor must preserve all certified payrolls during the course of
the work and for a period of 3 years after all the work on the prime
contract is completed.
(iii) Contracts, subcontracts, and related documents. The
contractor or subcontractor must maintain this contract or subcontract
and related documents including, without limitation, bids, proposals,
amendments, modifications, and extensions. The contractor or
subcontractor must preserve these contracts, subcontracts, and related
[[Page 57737]]
documents during the course of the work and for a period of 3 years
after all the work on the prime contract is completed.
(iv) Required disclosures and access--(A) Required record
disclosures and access to workers. The contractor or subcontractor must
make the records required under paragraphs (a)(3)(i) through (iii) of
this section, and any other documents that the [write the name of the
agency] or the Department of Labor deems necessary to determine
compliance with the labor standards provisions of any of the applicable
statutes referenced by Sec. 5.1, available for inspection, copying, or
transcription by authorized representatives of the [write the name of
the agency] or the Department of Labor, and must permit such
representatives to interview workers during working hours on the job.
(B) Sanctions for non-compliance with records and worker access
requirements. If the contractor or subcontractor fails to submit the
required records or to make them available, or refuses to permit worker
interviews during working hours on the job, the Federal agency may,
after written notice to the contractor, sponsor, applicant, owner, or
other entity, as the case may be, that maintains such records or that
employs such workers, take such action as may be necessary to cause the
suspension of any further payment, advance, or guarantee of funds.
Furthermore, failure to submit the required records upon request or to
make such records available, or to permit worker interviews during
working hours on the job, may be grounds for debarment action pursuant
to Sec. 5.12. In addition, any contractor or other person that fails
to submit the required records or make those records available to WHD
within the time WHD requests that the records be produced will be
precluded from introducing as evidence in an administrative proceeding
under 29 CFR part 6 any of the required records that were not provided
or made available to WHD. WHD will take into consideration a reasonable
request from the contractor or person for an extension of the time for
submission of records. WHD will determine the reasonableness of the
request and may consider, among other things, the location of the
records and the volume of production.
(C) Required information disclosures. Contractors and
subcontractors must maintain the full Social Security number and last
known address, telephone number, and email address of each covered
worker, and must provide them upon request to the [write in name of
appropriate Federal agency] if the agency is a party to the contract,
or to the Wage and Hour Division of the Department of Labor. If the
Federal agency is not such a party to the contract, the contractor,
subcontractor, or both, must, upon request, provide the full Social
Security number and last known address, telephone number, and email
address of each covered worker to the applicant, sponsor, owner, or
other entity, as the case may be, that maintains such records, for
transmission to the [write in name of agency], the contractor, or the
Wage and Hour Division of the Department of Labor for purposes of an
investigation or other compliance action.
(4) Apprentices and equal employment opportunity--(i) Apprentices--
(A) Rate of pay. Apprentices will be permitted to work at less than the
predetermined rate for the work they perform when they are employed
pursuant to and individually registered in a bona fide apprenticeship
program registered with the U.S. Department of Labor, Employment and
Training Administration, Office of Apprenticeship (OA), or with a State
Apprenticeship Agency recognized by the OA. A person who is not
individually registered in the program, but who has been certified by
the OA or a State Apprenticeship Agency (where appropriate) to be
eligible for probationary employment as an apprentice, will be
permitted to work at less than the predetermined rate for the work they
perform in the first 90 days of probationary employment as an
apprentice in such a program. In the event the OA or a State
Apprenticeship Agency recognized by the OA withdraws approval of an
apprenticeship program, the contractor will no longer be permitted to
use apprentices at less than the applicable predetermined rate for the
work performed until an acceptable program is approved.
(B) Fringe benefits. Apprentices must be paid fringe benefits in
accordance with the provisions of the apprenticeship program. If the
apprenticeship program does not specify fringe benefits, apprentices
must be paid the full amount of fringe benefits listed on the wage
determination for the applicable classification. If the Administrator
determines that a different practice prevails for the applicable
apprentice classification, fringe benefits must be paid in accordance
with that determination.
(C) Apprenticeship ratio. The allowable ratio of apprentices to
journeyworkers on the job site in any craft classification must not be
greater than the ratio permitted to the contractor as to the entire
work force under the registered program or the ratio applicable to the
locality of the project pursuant to paragraph (a)(4)(i)(D) of this
section. Any worker listed on a payroll at an apprentice wage rate, who
is not registered or otherwise employed as stated in paragraph
(a)(4)(i)(A) of this section, must be paid not less than the applicable
wage rate on the wage determination for the classification of work
actually performed. In addition, any apprentice performing work on the
job site in excess of the ratio permitted under this section must be
paid not less than the applicable wage rate on the wage determination
for the work actually performed.
(D) Reciprocity of ratios and wage rates. Where a contractor is
performing construction on a project in a locality other than the
locality in which its program is registered, the ratios and wage rates
(expressed in percentages of the journeyworker's hourly rate)
applicable within the locality in which the construction is being
performed must be observed. If there is no applicable ratio or wage
rate for the locality of the project, the ratio and wage rate specified
in the contractor's registered program must be observed.
(ii) Equal employment opportunity. The use of apprentices and
journeyworkers under this part must be in conformity with the equal
employment opportunity requirements of Executive Order 11246, as
amended, and 29 CFR part 30.
* * * * *
(6) Subcontracts. The contractor or subcontractor must insert in
any subcontracts the clauses contained in paragraphs (a)(1) through
(11) of this section, along with the applicable wage determination(s)
and such other clauses or contract modifications as the [write in the
name of the Federal agency] may by appropriate instructions require,
and a clause requiring the subcontractors to include these clauses and
wage determination(s) in any lower tier subcontracts. The prime
contractor is responsible for the compliance by any subcontractor or
lower tier subcontractor with all the contract clauses in this section.
In the event of any violations of these clauses, the prime contractor
and any subcontractor(s) responsible will be liable for any unpaid
wages and monetary relief, including interest from the date of the
underpayment or loss, due to any workers of lower-tier
[[Page 57738]]
subcontractors, and may be subject to debarment, as appropriate.
* * * * *
(10) Certification of eligibility. (i) By entering into this
contract, the contractor certifies that neither it nor any person or
firm who has an interest in the contractor's firm is a person or firm
ineligible to be awarded Government contracts by virtue of 40 U.S.C.
3144(b) or Sec. 5.12(a).
(ii) No part of this contract shall be subcontracted to any person
or firm ineligible for award of a Government contract by virtue of 40
U.S.C. 3144(b) or Sec. 5.12(a).
(iii) The penalty for making false statements is prescribed in the
U.S. Code, Title 18 Crimes and Criminal Procedure, 18 U.S.C. 1001.
(11) Anti-retaliation. It is unlawful for any person to discharge,
demote, intimidate, threaten, restrain, coerce, blacklist, harass, or
in any other manner discriminate against, or to cause any person to
discharge, demote, intimidate, threaten, restrain, coerce, blacklist,
harass, or in any other manner discriminate against, any worker or job
applicant for:
(i) Notifying any contractor of any conduct which the worker
reasonably believes constitutes a violation of the DBA, Related Acts,
this part, or 29 CFR part 1 or 3;
(ii) Filing any complaint, initiating or causing to be initiated
any proceeding, or otherwise asserting or seeking to assert on behalf
of themselves or others any right or protection under the DBA, Related
Acts, this part, or 29 CFR part 1 or 3;
(iii) Cooperating in any investigation or other compliance action,
or testifying in any proceeding under the DBA, Related Acts, this part,
or 29 CFR part 1 or 3; or
(iv) Informing any other person about their rights under the DBA,
Related Acts, this part, or 29 CFR part 1 or 3.
(b) Contract Work Hours and Safety Standards Act (CWHSSA). The
Agency Head must cause or require the contracting officer to insert the
following clauses set forth in paragraphs (b)(1) through (5) of this
section in full, or (for contracts covered by the Federal Acquisition
Regulation) by reference, in any contract in an amount in excess of
$100,000 and subject to the overtime provisions of the Contract Work
Hours and Safety Standards Act. These clauses must be inserted in
addition to the clauses required by paragraph (a) of this section or 29
CFR 4.6. As used in this paragraph (b), the terms ``laborers and
mechanics'' include watchpersons and guards.
* * * * *
(2) Violation; liability for unpaid wages; liquidated damages. In
the event of any violation of the clause set forth in paragraph (b)(1)
of this section the contractor and any subcontractor responsible
therefor shall be liable for the unpaid wages and interest from the
date of the underpayment. In addition, such contractor and
subcontractor shall be liable to the United States (in the case of work
done under contract for the District of Columbia or a territory, to
such District or to such territory), for liquidated damages. Such
liquidated damages shall be computed with respect to each individual
laborer or mechanic, including watchpersons and guards, employed in
violation of the clause set forth in paragraph (b)(1) of this section,
in the sum of $31 for each calendar day on which such individual was
required or permitted to work in excess of the standard workweek of
forty hours without payment of the overtime wages required by the
clause set forth in paragraph (b)(1).
(3) Withholding for unpaid wages and liquidated damages--(i)
Withholding process. The [write in the name of the Federal agency or
the recipient of Federal assistance] may, upon its own action, or must,
upon written request of an authorized representative of the Department
of Labor, withhold or cause to be withheld from the contractor so much
of the accrued payments or advances as may be considered necessary to
satisfy the liabilities of the prime contractor or any subcontractor
for any unpaid wages; monetary relief, including interest; and
liquidated damages required by the clauses set forth in this paragraph
(b) on this contract, any other Federal contract with the same prime
contractor, or any other federally assisted contract subject to the
Contract Work Hours and Safety Standards Act that is held by the same
prime contractor (as defined in Sec. 5.2). The necessary funds may be
withheld from the contractor under this contract, any other Federal
contract with the same prime contractor, or any other federally
assisted contract that is subject to the Contract Work Hours and Safety
Standards Act and is held by the same prime contractor, regardless of
whether the other contract was awarded or assisted by the same agency,
and such funds may be used to satisfy the contractor liability for
which the funds were withheld.
(ii) Priority to withheld funds. The Department has priority to
funds withheld or to be withheld in accordance with paragraph (a)(2)(i)
or (b)(3)(i) of this section, or both, over claims to those funds by:
(A) A contractor's surety(ies), including without limitation
performance bond sureties and payment bond sureties;
(B) A contracting agency for its reprocurement costs;
(C) A trustee(s) (either a court-appointed trustee or a U.S.
trustee, or both) in bankruptcy of a contractor, or a contractor's
bankruptcy estate;
(D) A contractor's assignee(s);
(E) A contractor's successor(s); or
(F) A claim asserted under the Prompt Payment Act, 31 U.S.C. 3901-
3907.
(4) Subcontracts. The contractor or subcontractor must insert in
any subcontracts the clauses set forth in paragraphs (b)(1) through (5)
of this section and a clause requiring the subcontractors to include
these clauses in any lower tier subcontracts. The prime contractor is
responsible for compliance by any subcontractor or lower tier
subcontractor with the clauses set forth in paragraphs (b)(1) through
(5). In the event of any violations of these clauses, the prime
contractor and any subcontractor(s) responsible will be liable for any
unpaid wages and monetary relief, including interest from the date of
the underpayment or loss, due to any workers of lower-tier
subcontractors, and associated liquidated damages and may be subject to
debarment, as appropriate.
(5) Anti-retaliation. It is unlawful for any person to discharge,
demote, intimidate, threaten, restrain, coerce, blacklist, harass, or
in any other manner discriminate against, or to cause any person to
discharge, demote, intimidate, threaten, restrain, coerce, blacklist,
harass, or in any other manner discriminate against, any worker or job
applicant for:
(i) Notifying any contractor of any conduct which the worker
reasonably believes constitutes a violation of the Contract Work Hours
and Safety Standards Act (CWHSSA) or its implementing regulations in
this part;
(ii) Filing any complaint, initiating or causing to be initiated
any proceeding, or otherwise asserting or seeking to assert on behalf
of themselves or others any right or protection under CWHSSA or this
part;
(iii) Cooperating in any investigation or other compliance action,
or testifying in any proceeding under CWHSSA or this part; or
(iv) Informing any other person about their rights under CWHSSA or
this part.
(c) CWHSSA required records clause. In addition to the clauses
contained in paragraph (b) of this section, in any contract subject
only to the Contract Work Hours and Safety Standards Act
[[Page 57739]]
and not to any of the other laws referenced by Sec. 5.1, the Agency
Head must cause or require the contracting officer to insert a clause
requiring that the contractor or subcontractor must maintain regular
payrolls and other basic records during the course of the work and must
preserve them for a period of 3 years after all the work on the prime
contract is completed for all laborers and mechanics, including guards
and watchpersons, working on the contract. Such records must contain
the name; last known address, telephone number, and email address; and
social security number of each such worker; each worker's correct
classification(s) of work actually performed; hourly rates of wages
paid; daily and weekly number of hours actually worked; deductions
made; and actual wages paid. Further, the Agency Head must cause or
require the contracting officer to insert in any such contract a clause
providing that the records to be maintained under this paragraph must
be made available by the contractor or subcontractor for inspection,
copying, or transcription by authorized representatives of the (write
the name of agency) and the Department of Labor, and the contractor or
subcontractor will permit such representatives to interview workers
during working hours on the job.
(d) Incorporation of contract clauses and wage determinations by
reference. Although agencies are required to insert the contract
clauses set forth in this section, along with appropriate wage
determinations, in full into covered contracts, and contractors and
subcontractors are required to insert them in any lower-tier
subcontracts, the incorporation by reference of the required contract
clauses and appropriate wage determinations will be given the same
force and effect as if they were inserted in full text.
(e) Incorporation by operation of law. The contract clauses set
forth in this section (or their equivalent under the Federal
Acquisition Regulation), along with the correct wage determinations,
will be considered to be a part of every prime contract required by the
applicable statutes referenced by Sec. 5.1 to include such clauses,
and will be effective by operation of law, whether or not they are
included or incorporated by reference into such contract, unless the
Administrator grants a variance, tolerance, or exemption from the
application of this paragraph. Where the clauses and applicable wage
determinations are effective by operation of law under this paragraph,
the prime contractor must be compensated for any resulting increase in
wages in accordance with applicable law.
0
26. Revise Sec. 5.6 to read as follows:
Sec. 5.6 Enforcement.
(a) Agency responsibilities. (1)(i) The Federal agency has the
initial responsibility to ascertain whether the clauses required by
Sec. 5.5 and the appropriate wage determination(s) have been
incorporated into the contracts subject to the labor standards
provisions of the laws referenced by Sec. 5.1. Additionally, a Federal
agency that provides Federal financial assistance that is subject to
the labor standards provisions of the Act must promulgate the necessary
regulations or procedures to require the recipient or sub-recipient of
the Federal assistance to insert in its contracts the provisions of
Sec. 5.5. No payment, advance, grant, loan, or guarantee of funds will
be approved by the Federal agency unless it ensures that the clauses
required by Sec. 5.5 and the appropriate wage determination(s) are
incorporated into such contracts. Furthermore, no payment, advance,
grant, loan, or guarantee of funds will be approved by the Federal
agency after the beginning of construction unless there is on file with
the Federal agency a certification by the contractor that the
contractor and its subcontractors have complied with the provisions of
Sec. 5.5 or unless there is on file with the Federal agency a
certification by the contractor that there is a substantial dispute
with respect to the required provisions.
(ii) If a contract subject to the labor standards provisions of the
applicable statutes referenced by Sec. 5.1 is entered into without the
incorporation of the clauses required by Sec. 5.5, the agency must,
upon the request of the Administrator or upon its own initiative,
either terminate and resolicit the contract with the required contract
clauses, or incorporate the required clauses into the contract (or
ensure they are so incorporated) through supplemental agreement, change
order, or any and all authority that may be needed. Where an agency has
not entered directly into such a contract but instead has provided
Federal financial assistance, the agency must ensure that the recipient
or sub-recipient of the Federal assistance similarly incorporates the
clauses required into its contracts. The method of incorporation of the
correct wage determination, and adjustment in contract price, where
appropriate, should be in accordance with applicable law. Additionally,
the following requirements apply:
(A) Unless the Administrator directs otherwise, the incorporation
of the clauses required by Sec. 5.5 must be retroactive to the date of
contract award or start of construction if there is no award.
(B) If this incorporation occurs as the result of a request from
the Administrator, the incorporation must take place within 30 days of
the date of that request, unless the agency has obtained an extension
from the Administrator.
(C) The contractor must be compensated for any increases in wages
resulting from incorporation of a missing contract clause.
(D) If the recipient refuses to incorporate the clauses as
required, the agency must make no further payment, advance, grant,
loan, or guarantee of funds in connection with the contract until the
recipient incorporates the required clauses into its contract, and must
promptly refer the dispute to the Administrator for further proceedings
under Sec. 5.13.
(E) Before terminating a contract pursuant to this section, the
agency must withhold or cross-withhold sufficient funds to remedy any
back wage liability resulting from the failure to incorporate the
correct wage determination or otherwise identify and obligate
sufficient funds through a termination settlement agreement, bond, or
other satisfactory mechanism.
(F) Notwithstanding the requirement to incorporate the contract
clauses and correct wage determination within 30 days, the contract
clauses and correct wage determination will be effective by operation
of law, retroactive to the beginning of construction, in accordance
with Sec. 5.5(e).
(2)(i) Certified payrolls submitted pursuant to Sec. 5.5(a)(3)(ii)
must be preserved by the Federal agency for a period of 3 years after
all the work on the prime contract is completed, and must be produced
at the request of the Department of Labor at any time during the 3-year
period, regardless of whether the Department of Labor has initiated an
investigation or other compliance action.
(ii) In situations where the Federal agency does not itself
maintain certified payrolls required to be submitted pursuant to Sec.
5.5(a)(3)(ii), upon the request of the Department of Labor the Federal
agency must ensure that such certified payrolls are provided to the
Department of Labor. Such certified payrolls may be provided by the
applicant, sponsor, owner, or other entity, as the case may be,
directly to the Department of Labor, or to the Federal agency which, in
turn, must provide those records to the Department of Labor.
[[Page 57740]]
(3) The Federal agency will cause such investigations to be made as
may be necessary to assure compliance with the labor standards clauses
required by Sec. 5.5 and the applicable statutes referenced in Sec.
5.1. Investigations will be made of all contracts with such frequency
as may be necessary to assure compliance. Such investigations will
include interviews with workers, which must be taken in confidence, and
examinations of certified payrolls, regular payrolls, and other basic
records required to be maintained under Sec. 5.5(a)(3). In making such
examinations, particular care must be taken to determine the
correctness of classification(s) of work actually performed, and to
determine whether there is a disproportionate amount of work by
laborers and of apprentices registered in approved programs. Such
investigations must also include evidence of fringe benefit plans and
payments thereunder. Federal agencies must give priority to complaints
of alleged violations.
(4) In accordance with normal operating procedures, the contracting
agency may be furnished various investigatory material from the
investigation files of the Department of Labor. None of the material,
other than computations of back wages, liquidated damages, and monetary
relief for violations of Sec. 5.5(a)(11) or (b)(5), and the summary of
back wages due, may be disclosed in any manner to anyone other than
Federal officials charged with administering the contract or program
providing Federal assistance to the contract, without requesting the
permission and views of the Department of Labor.
(b) Department of Labor investigations and other compliance
actions. (1) The Administrator will investigate and conduct other
compliance actions as deemed necessary in order to obtain compliance
with the labor standards provisions of the applicable statutes
referenced by Sec. 5.1, or to affirm or reject the recommendations by
the Agency Head with respect to labor standards matters arising under
the statutes referenced by Sec. 5.1.
(2) Federal agencies, contractors, subcontractors, sponsors,
applicants, owners, or other entities, as the case may be, must
cooperate with any authorized representative of the Department of Labor
in the inspection of records, in interviews with workers, and in all
other aspects of the investigations or other compliance actions.
(3) The findings of such an investigation or other compliance
action, including amounts found due, may not be altered or reduced
without the approval of the Department of Labor.
(4) Where the underpayments disclosed by such an investigation or
other compliance action total $1,000 or more, where there is reason to
believe that the contractor or subcontractor has disregarded its
obligations to workers or subcontractors, or where liquidated damages
may be assessed under CWHSSA, the Department of Labor will furnish the
Federal agency an enforcement report detailing the labor standards
violations disclosed by the investigation or other compliance action
and any action taken by the contractor or subcontractor to correct the
violations, including any payment of back wages or any other relief
provided workers or remedial actions taken for violations of Sec.
5.5(a)(11) or (b)(5). In other circumstances, the Department of Labor
will furnish the Federal agency a notification summarizing the findings
of the investigation or other compliance action.
(c) Confidentiality requirements. It is the policy of the
Department of Labor to protect from disclosure the identity of its
confidential sources and to prevent an unwarranted invasion of personal
privacy. Accordingly, the identity of a worker or other informant who
makes a written or oral statement as a complaint or in the course of an
investigation or other compliance action, as well as portions of the
statement which would tend to reveal the identity of the informant,
will not be disclosed in any manner to anyone other than Federal
officials without the prior consent of the informant. Disclosure of
such statements is also governed by the provisions of the ``Freedom of
Information Act'' (5 U.S.C. 552, see part 70 of this subtitle) and the
``Privacy Act of 1974'' (5 U.S.C. 552a, see part 71 of this subtitle).
0
27. Amend Sec. 5.7 by revising paragraph (a) to read as follows:
Sec. 5.7 Reports to the Secretary of Labor.
(a) Enforcement reports. (1) Where underpayments by a contractor or
subcontractor total less than $1,000, where there is no reason to
believe that the contractor or subcontractor has disregarded its
obligations to workers or subcontractors, and where restitution has
been effected and future compliance assured, the Federal agency need
not submit its investigative findings and recommendations to the
Administrator, unless the investigation or other compliance action was
made at the request of the Department of Labor. In the latter case, the
Federal agency will submit a factual summary report detailing any
violations including any data on the amount of restitution paid, the
number of workers who received restitution, liquidated damages assessed
under the Contract Work Hours and Safety Standards Act, corrective
measures taken (such as ``letters of notice'' or remedial action taken
for violations of Sec. 5.5(a)(11) or (b)(5)), and any information that
may be necessary to review any recommendations for an appropriate
adjustment in liquidated damages under Sec. 5.8.
(2) Where underpayments by a contractor or subcontractor total
$1,000 or more, or where there is reason to believe that the contractor
or subcontractor has disregarded its obligations to workers or
subcontractors, the Federal agency will furnish within 60 days after
completion of its investigation, a detailed enforcement report to the
Administrator.
* * * * *
0
28. Revise Sec. 5.9 to read as follows:
Sec. 5.9 Suspension of funds.
(a) Suspension and withholding. In the event of failure or refusal
of the contractor or any subcontractor to comply with the applicable
statutes referenced by Sec. 5.1 and the labor standards clauses
contained in Sec. 5.5, whether incorporated into the contract
physically, by reference, or by operation of law, the Federal agency
(and any other agency), may, upon its own action, or must, upon written
request of an authorized representative of the Department of Labor,
take such action as may be necessary to cause the suspension of the
payment, advance, or guarantee of funds until such time as the
violations are discontinued and/or until sufficient funds are withheld
as may be considered necessary to compensate workers for the full
amount of wages and monetary relief to which they are entitled, and to
cover any liquidated damages and pre-judgment or post-judgment interest
which may be due.
(b) Cross-withholding. To satisfy a contractor's liability for back
wages on a contract, in addition to the suspension and withholding of
funds from the contract(s) under which the violation(s) occurred, the
necessary funds also may be withheld under any other Federal contract
with the same prime contractor, or any other federally assisted
contract that is subject to Davis-Bacon labor standards and/or the
Contract Work Hours and Safety Standards Act and is held by the same
prime contractor, regardless of whether the other contract was awarded
or assisted by the same agency.
(c) Cross-withholding from different legal entities. Cross-
withholding of
[[Page 57741]]
funds may be requested from contracts held by other entities that may
be considered to be the same prime contractor as that term is defined
in Sec. 5.2. Such cross-withholding is appropriate where the separate
legal entities have independently consented to it by entering into
contracts containing the withholding provisions at Sec. 5.5(a)(2) and
(b)(3). Cross-withholding from a contract held by a different legal
entity is not appropriate unless the withholding provisions were
incorporated in full or by reference in that different legal entity's
contract. Absent exceptional circumstances, cross-withholding is not
permitted from a contract held by a different legal entity where the
Davis-Bacon labor standards were incorporated only by operation of law
into that contract.
0
29. Revise Sec. 5.10 to read as follows:
Sec. 5.10 Restitution, criminal action.
(a) In cases other than those forwarded to the Attorney General of
the United States under paragraph (b) of this section where violations
of the labor standards clauses contained in Sec. 5.5 and the
applicable statutes referenced by Sec. 5.1 result in underpayment of
wages to workers or monetary damages caused by violations of Sec.
5.5(a)(11) or (b)(5), the Federal agency or an authorized
representative of the Department of Labor will request that restitution
be made to such workers or on their behalf to plans, funds, or programs
for any type of bona fide fringe benefits within the meaning of 40
U.S.C. 3141(2)(B), including interest from the date of the underpayment
or loss. Interest on any back wages or monetary relief provided for in
this part will be calculated using the percentage established for the
underpayment of taxes under 26 U.S.C. 6621 and will be compounded
daily.
(b) In cases where the Agency Head or the Administrator finds
substantial evidence that such violations are willful and in violation
of a criminal statute, the matter will be forwarded to the Attorney
General of the United States for prosecution if the facts warrant. In
all such cases the Administrator will be informed simultaneously of the
action taken.
0
30. Revise Sec. 5.11 to read as follows:
Sec. 5.11 Disputes concerning payment of wages.
(a) This section sets forth the procedure for resolution of
disputes of fact or law concerning payment of prevailing wage rates,
overtime pay, proper classification, or monetary relief for violations
of Sec. 5.5(a)(11) or (b)(5). The procedures in this section may be
initiated upon the Administrator's own motion, upon referral of the
dispute by a Federal agency pursuant to Sec. 5.5(a)(9), or upon
request of the contractor or subcontractor.
(b)(1) In the event of a dispute described in paragraph (a) of this
section in which it appears that relevant facts are at issue, the
Administrator will notify the affected contractor and subcontractor, if
any, by registered or certified mail to the last known address or by
any other means normally assuring delivery, of the investigation
findings. If the Administrator determines that there is reasonable
cause to believe that either the contractor, the subcontractor, or
both, should also be subject to debarment under the Davis-Bacon Act or
any of the other applicable statutes referenced by Sec. 5.1, the
notification will so indicate.
(2) A contractor or subcontractor desiring a hearing concerning the
Administrator's investigation findings must request such a hearing by
letter or by any other means normally assuring delivery, sent within 30
days of the date of the Administrator's notification. The request must
set forth those findings which are in dispute and the reasons therefor,
including any affirmative defenses.
(3) Upon receipt of a timely request for a hearing, the
Administrator will refer the case to the Chief Administrative Law Judge
by Order of Reference, with an attached copy of the notification from
the Administrator and the response of the contractor or subcontractor,
for designation of an Administrative Law Judge to conduct such hearings
as may be necessary to resolve the disputed matters. The hearings will
be conducted in accordance with the procedures set forth in part 6 of
this subtitle.
(c)(1) In the event of a dispute described in paragraph (a) of this
section in which it appears that there are no relevant facts at issue,
and where there is not at that time reasonable cause to institute
debarment proceedings under Sec. 5.12, the Administrator will notify
the contractor and subcontractor, if any, by registered or certified
mail to the last known address or by any other means normally assuring
delivery, of the investigation findings, and will issue a ruling on any
issues of law known to be in dispute.
(2)(i) If the contractor or subcontractor disagrees with the
factual findings of the Administrator or believes that there are
relevant facts in dispute, the contractor or subcontractor must advise
the Administrator by letter or by any other means normally assuring
delivery, sent within 30 days of the date of the Administrator's
notification. In the response, the contractor or subcontractor must
explain in detail the facts alleged to be in dispute and attach any
supporting documentation.
(ii) Upon receipt of a response under paragraph (c)(2)(i) of this
section alleging the existence of a factual dispute, the Administrator
will examine the information submitted. If the Administrator determines
that there is a relevant issue of fact, the Administrator will refer
the case to the Chief Administrative Law Judge in accordance with
paragraph (b)(3) of this section. If the Administrator determines that
there is no relevant issue of fact, the Administrator will so rule and
advise the contractor and subcontractor, if any, accordingly.
(3) If the contractor or subcontractor desires review of the ruling
issued by the Administrator under paragraph (c)(1) or (2) of this
section, the contractor or subcontractor must file a petition for
review thereof with the Administrative Review Board within 30 days of
the date of the ruling, with a copy thereof to the Administrator. The
petition for review must be filed in accordance with part 7 of this
subtitle.
(d) If a timely response to the Administrator's findings or ruling
is not made or a timely petition for review is not filed, the
Administrator's findings or ruling will be final, except that with
respect to debarment under the Davis-Bacon Act, the Administrator will
advise the Comptroller General of the Administrator's recommendation in
accordance with Sec. 5.12(a)(2). If a timely response or petition for
review is filed, the findings or ruling of the Administrator will be
inoperative unless and until the decision is upheld by the
Administrative Law Judge or the Administrative Review Board.
0
31. Revise Sec. 5.12 to read as follows:
Sec. 5.12 Debarment proceedings.
(a) Debarment standard and ineligible list. (1) Whenever any
contractor or subcontractor is found by the Secretary of Labor to have
disregarded their obligations to workers or subcontractors under the
Davis-Bacon Act, any of the other applicable statutes referenced by
Sec. 5.1, this part, or part 3 of this subtitle, such contractor or
subcontractor and their responsible officers, if any, and any firm,
corporation, partnership, or association in which such contractor,
subcontractor, or responsible officer has an interest will be
ineligible for a period of 3 years to be awarded any contract or
subcontract of the United States or the District of Columbia and any
contract or subcontract subject to the labor
[[Page 57742]]
standards provisions of any of the statutes referenced by Sec. 5.1.
(2) In cases arising under contracts covered by the Davis-Bacon
Act, the Administrator will transmit to the Comptroller General the
name(s) of the contractors or subcontractors and their responsible
officers, if any, and any firms, corporations, partnerships, or
associations in which the contractors, subcontractors, or responsible
officers are known to have an interest, who have been found to have
disregarded their obligations to workers or subcontractors, and the
recommendation of the Secretary of Labor or authorized representative
regarding debarment. In cases arising under contracts covered by any of
the applicable statutes referenced by Sec. 5.1 other than the Davis-
Bacon Act, the Administrator determines the name(s) of the contractors
or subcontractors and their responsible officers, if any, and any
firms, corporations, partnerships, or associations in which the
contractors, subcontractors, or responsible officers are known to have
an interest, to be debarred. The names of such ineligible persons or
firms will be published on SAM or its successor website, and an
ineligible person or firm will be ineligible for a period of 3 years
from the date of publication of their name on the ineligible list, to
be awarded any contract or subcontract of the United States or the
District of Columbia and any contract or subcontract subject to the
labor standards provisions of any of the statutes referenced by Sec.
5.1.
(b) Procedure. (1) In addition to cases under which debarment
action is initiated pursuant to Sec. 5.11, whenever as a result of an
investigation conducted by the Federal agency or the Department of
Labor, and where the Administrator finds reasonable cause to believe
that a contractor or subcontractor has committed violations which
constitute a disregard of its obligations to workers or subcontractors
under the Davis-Bacon Act, the labor standards provisions of any of the
other applicable statutes referenced by Sec. 5.1, this part, or part 3
of this subtitle, the Administrator will notify by registered or
certified mail to the last known address or by any other means normally
assuring delivery, the contractor or subcontractor and responsible
officers, if any, and any firms, corporations, partnerships, or
associations in which the contractors, subcontractors, or responsible
officers are known to have an interest of the finding.
(i) The Administrator will afford such contractor, subcontractor,
responsible officer, and any other parties notified an opportunity for
a hearing as to whether debarment action should be taken under
paragraph (a) of this section. The Administrator will furnish to those
notified a summary of the investigative findings.
(ii) If the contractor, subcontractor, responsible officer, or any
other parties notified wish to request a hearing as to whether
debarment action should be taken, such a request must be made by letter
or by any other means normally assuring delivery, sent within 30 days
of the date of the notification from the Administrator, and must set
forth any findings which are in dispute and the basis for such disputed
findings, including any affirmative defenses to be raised.
(iii) Upon timely receipt of such request for a hearing, the
Administrator will refer the case to the Chief Administrative Law Judge
by Order of Reference, with an attached copy of the notification from
the Administrator and the responses of the contractor, subcontractor,
responsible officers, or any other parties notified, for designation of
an Administrative Law Judge to conduct such hearings as may be
necessary to determine the matters in dispute.
(iv) In considering debarment under any of the statutes referenced
by Sec. 5.1 other than the Davis-Bacon Act, the Administrative Law
Judge will issue an order concerning whether the contractor,
subcontractor, responsible officer, or any other party notified is to
be debarred in accordance with paragraph (a) of this section. In
considering debarment under the Davis-Bacon Act, the Administrative Law
Judge will issue a recommendation as to whether the contractor,
subcontractor, responsible officers, or any other party notified should
be debarred under 40 U.S.C. 3144(b).
(2) Hearings under this section will be conducted in accordance
with part 6 of this subtitle. If no hearing is requested within 30 days
of the date of the notification from the Administrator, the
Administrator's findings will be final, except with respect to
recommendations regarding debarment under the Davis-Bacon Act, as set
forth in paragraph (a)(2) of this section.
(c) Interests of debarred parties. (1) A finding as to whether
persons or firms whose names appear on the ineligible list have an
interest under 40 U.S.C. 3144(b) or paragraph (a) of this section in
any other firm, corporation, partnership, or association, may be made
through investigation, hearing, or otherwise.
(2)(i) The Administrator, on their own motion or after receipt of a
request for a determination pursuant to paragraph (c)(3) of this
section, may make a finding on the issue of interest.
(ii) If the Administrator determines that there may be an interest
but finds that there is insufficient evidence to render a final ruling
thereon, the Administrator may refer the issue to the Chief
Administrative Law Judge in accordance with paragraph (c)(4) of this
section.
(iii) If the Administrator finds that no interest exists, or that
there is not sufficient information to warrant the initiation of an
investigation, the requesting party, if any, will be so notified and no
further action taken.
(iv)(A) If the Administrator finds that an interest exists, the
person or firm affected will be notified of the Administrator's finding
(by certified mail to the last known address or by any other means
normally assuring delivery), which will include the reasons therefore,
and such person or firm will be afforded an opportunity to request that
a hearing be held to decide the issue.
(B) Such person or firm will have 20 days from the date of the
Administrator's ruling to request a hearing. A person or firm desiring
a hearing must request it by letter or by any other means normally
assuring delivery, sent within 20 days of the date of the
Administrator's notification. A detailed statement of the reasons why
the Administrator's ruling is in error, including facts alleged to be
in dispute, if any, must be submitted with the request for a hearing.
(C) If no hearing is requested within the time mentioned in
paragraph (c)(2)(iv)(B) of this section, the Administrator's finding
will be final and the Administrator will notify the Comptroller General
in cases arising under the DBA. If a hearing is requested, the ruling
of the Administrator will be inoperative unless and until the
Administrative Law Judge or the Administrative Review Board issues an
order that there is an interest.
(3)(i) A request for a determination of interest may be made by any
interested party, including contractors or prospective contractors and
associations of contractors, representatives of workers, and interested
agencies. Such a request must be submitted in writing to the
Administrator, Wage and Hour Division, U.S. Department of Labor, 200
Constitution Avenue NW, Washington, DC 20210.
(ii) The request must include a statement setting forth in detail
why the petitioner believes that a person or firm whose name appears on
the ineligible list has an interest in any firm, corporation,
partnership, or association
[[Page 57743]]
that is seeking or has been awarded a contract or subcontract of the
United States or the District of Columbia, or a contract or subcontract
that is subject to the labor standards provisions of any of the
statutes referenced by Sec. 5.1. No particular form is prescribed for
the submission of a request under this section.
(4) The Administrator, on their own motion under paragraph
(c)(2)(ii) of this section or upon a request for hearing where the
Administrator determines that relevant facts are in dispute, will by
order refer the issue to the Chief Administrative Law Judge, for
designation of an Administrative Law Judge who will conduct such
hearings as may be necessary to render a decision solely on the issue
of interest. Such proceedings must be conducted in accordance with the
procedures set forth in part 6 of this subtitle.
(5) If the person or firm affected requests a hearing and the
Administrator determines that relevant facts are not in dispute, the
Administrator will refer the issue and the record compiled thereon to
the Administrative Review Board to render a decision solely on the
issue of interest. Such proceeding must be conducted in accordance with
the procedures set forth in part 7 of this subtitle.
0
32. Revise Sec. 5.13 to read as follows:
Sec. 5.13 Rulings and interpretations.
(a) All questions relating to the application and interpretation of
wage determinations (including the classifications therein) issued
pursuant to part 1 of this subtitle, of the rules contained in this
part and in parts 1 and 3 of this subtitle, and of the labor standards
provisions of any of the laws referenced in Sec. 5.1 must be referred
to the Administrator for appropriate ruling or interpretation. These
rulings and interpretations are authoritative and those under the
Davis-Bacon Act may be relied upon as provided for in section 10 of the
Portal-to-Portal Act of 1947 (29 U.S.C. 259). Requests for such rulings
and interpretations should be submitted via email to
[email protected]; by mail to Administrator, Wage and Hour
Division, U.S. Department of Labor, 200 Constitution Ave., NW,
Washington, DC 20210; or through other means directed by the
Administrator.
(b) If any such ruling or interpretation is made by an authorized
representative of the Administrator of the Wage and Hour Division, any
interested party may seek reconsideration of the ruling or
interpretation by the Administrator of the Wage and Hour Division. The
procedures and time limits set out in Sec. 1.8 of this subtitle apply
to any such request for reconsideration.
0
33. Amend Sec. 5.15 by revising paragraphs (c)(4) and (d)(1) to read
as follows:
Sec. 5.15 Limitations, variations, tolerances, and exemptions under
the Contract Work Hours and Safety Standards Act.
* * * * *
(c) * * *
(4)(i) Time spent in an organized program of related, supplemental
instruction by laborers or mechanics employed under bona fide
apprenticeship programs may be excluded from working time if the
criteria prescribed in paragraphs (c)(4)(ii) and (iii) of this section
are met.
(ii) The apprentice comes within the definition contained in Sec.
5.2.
(iii) The time in question does not involve productive work or
performance of the apprentice's regular duties.
(d) * * *
(1) In the event of failure or refusal of the contractor or any
subcontractor to comply with overtime pay requirements of the Contract
Work Hours and Safety Standards Act, if the funds withheld by Federal
agencies for the violations are not sufficient to pay fully the unpaid
wages and any back pay or other monetary relief due laborers and
mechanics, with interest, and the liquidated damages due the United
States, the available funds will be used first to compensate the
laborers and mechanics for the wages to which they are entitled (or an
equitable portion thereof when the funds are not adequate for this
purpose); and the balance, if any, will be used for the payment of
liquidated damages.
* * * * *
Sec. 5.16 [Removed and Reserved]
0
34. Remove and reserve Sec. 5.16.
Sec. 5.17 [Removed and Reserved]
0
35. Remove and reserve Sec. 5.17.
0
36. Add Sec. 5.18 to subpart A to read as follows:
Sec. 5.18 Remedies for retaliation.
(a) Administrator request to remedy violation. When the
Administrator finds that any person has discriminated in any way
against any worker or job applicant in violation of Sec. 5.5(a)(11) or
(b)(5), or caused any person to discriminate in any way against any
worker or job applicant in violation of Sec. 5.5(a)(11) or (b)(5), the
Administrator will notify the person, any contractors for whom the
person worked or on whose behalf the person acted, and any upper tier
contractors, as well as the relevant contracting agency(ies) of the
discrimination and request that the person and any contractors for whom
the person worked or on whose behalf the person acted remedy the
violation.
(b) Administrator directive to remedy violation and provide make-
whole relief. If the person and any contractors for whom the person
worked or on whose behalf the person acted do not remedy the violation,
the Administrator in the notification of violation findings issued
under Sec. 5.11 or Sec. 5.12 will direct the person and any
contractors for whom the person worked or on whose behalf the person
acted to provide appropriate make-whole relief to affected worker(s)
and job applicant(s) or take appropriate remedial action, or both, to
correct the violation, and will specify the particular relief and
remedial actions to be taken.
(c) Examples of available make-whole relief and remedial actions.
Such relief and remedial actions may include, but are not limited to,
employment, reinstatement, front pay in lieu of reinstatement, and
promotion, together with back pay and interest; compensatory damages;
restoration of the terms, conditions, and privileges of the worker's
employment or former employment; the expungement of warnings,
reprimands, or derogatory references; the provision of a neutral
employment reference; and the posting of a notice to workers that the
contractor or subcontractor agrees to comply with the Davis-Bacon Act
and Related Acts anti-retaliation requirements.
0
37. Revise Sec. 5.20 to read as follows:
Sec. 5.20 Scope and significance of this subpart.
The 1964 amendments (Pub. L. 88-349) to the Davis-Bacon Act
require, among other things, that the prevailing wage determined for
Federal and federally assisted construction include the basic hourly
rate of pay and the amount contributed by the contractor or
subcontractor for certain fringe benefits (or the cost to them of such
benefits). The purpose of this subpart is to explain the provisions of
these amendments and make available in one place official
interpretations of the fringe benefits provisions of the Davis-Bacon
Act. These interpretations will guide the Department of Labor in
carrying out its responsibilities under these provisions. These
interpretations are intended also to provide guidance to contractors
and their associations; laborers and mechanics and their organizations;
and local, State, and Federal agencies. The interpretations contained
in this subpart are authoritative and may be relied upon as provided
for in section 10 of the Portal-to-Portal Act of 1947 (29 U.S.C.
[[Page 57744]]
259). The omission to discuss a particular problem in this subpart or
in interpretations supplementing it should not be taken to indicate the
adoption of any position by the Secretary of Labor with respect to such
problem or to constitute an administrative interpretation, practice, or
enforcement policy. Questions on matters not fully covered by this
subpart may be referred to the Secretary for interpretation as provided
in Sec. 5.13.
0
38. Revise Sec. 5.22 to read as follows:
Sec. 5.22 Effect of the Davis-Bacon fringe benefits provisions.
The Davis-Bacon Act and the prevailing wage provisions of the
statutes referenced in Sec. 1.1 of this subtitle confer upon the
Secretary of Labor the authority to predetermine, as minimum wages,
those wage rates found to be prevailing for corresponding classes of
laborers and mechanics employed on projects of a character similar to
the contract work in the area in which the work is to be performed. See
the definitions of the terms ``prevailing wage'' and ``area'' in Sec.
1.2 of this subtitle. The fringe benefits amendments enlarge the scope
of this authority by including certain bona fide fringe benefits within
the meaning of the terms ``wages'', ``scale of wages'', ``wage rates'',
``minimum wages'', and ``prevailing wages'', as used in the Davis-Bacon
Act.
0
39. Revise Sec. 5.23 to read as follows:
Sec. 5.23 The statutory provisions.
Pursuant to the Davis-Bacon Act, as amended and codified at 40
U.S.C. 3141(2), the term ``prevailing wages'' and similar terms include
the basic hourly rate of pay and, for the listed fringe benefits and
other bona fide fringe benefits not required by other law, the
contributions irrevocably made by a contractor or subcontractor to a
trustee or third party pursuant to a bona fide fringe benefit fund,
plan, or program, and the costs to the contractor or subcontractor that
may be reasonably anticipated in providing bona fide fringe benefits
pursuant to an enforceable commitment to carry out a financially
responsible plan or program, which was communicated in writing to the
affected laborers and mechanics. Section 5.29 discusses specific fringe
benefits that may be considered to be bona fide.
0
40. Amend Sec. 5.25 by adding paragraph (c) to read as follows:
Sec. 5.25 Rate of contribution or cost for fringe benefits.
* * * * *
(c) Except as provided in this section, contractors must
``annualize'' all contributions to fringe benefit plans (or the
reasonably anticipated costs of an unfunded benefit plan) to determine
the hourly equivalent for which they may take credit against their
fringe benefit obligation. The ``annualization'' principle reflects
that DBRA credit for contributions made to bona fide fringe benefit
plans (or the reasonably anticipated costs of an unfunded benefit plan)
is allowed based on the effective rate of contributions or costs
incurred for total hours worked during the year (or a shorter time
period) by a laborer or mechanic.
(1) Method of computation. To annualize the cost of providing a
fringe benefit, a contractor must divide the total cost of the fringe
benefit contribution (or the reasonably anticipated costs of an
unfunded benefit plan) by the total number of hours worked on both
private (non-DBRA) work and work covered by the Davis-Bacon Act and/or
Davis-Bacon Related Acts (DBRA-covered work) during the time period to
which the cost is attributable to determine the rate of contribution
per hour. If the amount of contribution varies per worker, credit must
be determined separately for the amount contributed on behalf of each
worker.
(2) Exception requests. Contractors, plans, and other interested
parties may request an exception from the annualization requirement by
submitting a request to the WHD Administrator. A request for an
exception may be granted only if each of the requirements of paragraph
(c)(3) of this section is satisfied. Contributions to defined
contribution pension plans (DCPPs) are excepted from the annualization
requirement, and exception requests therefore are not required in
connection with DCPPs, provided that each of the requirements of
paragraph (c)(3) is satisfied and the DCPP provides for immediate
participation and essentially immediate vesting (i.e., the benefit
vests within the first 500 hours worked). Requests must be submitted in
writing to the Division of Government Contracts Enforcement by email to
[email protected] or by mail to Director, Division of Government
Contracts Enforcement, Wage and Hour Division, U.S. Department of
Labor, 200 Constitution Ave. NW, Room S-3502, Washington, DC 20210.
(3) Exception requirements. Contributions to a bona fide fringe
benefit plan (or the reasonably anticipated costs of an unfunded
benefit plan) are excepted from the annualization requirement if all of
the following criteria are satisfied:
(i) The benefit provided is not continuous in nature. A benefit is
not continuous in nature when it is not available to a participant
without penalty throughout the year or other time period to which the
cost of the benefit is attributable; and
(ii) The benefit does not compensate both private work and DBRA-
covered work. A benefit does not compensate both private and DBRA-
covered work if any benefits attributable to periods of private work
are wholly paid for by compensation for private work.
0
41. Revise Sec. 5.26 to read as follows:
Sec. 5.26 ``* * * contribution irrevocably made * * * to a trustee or
to a third person''.
(a) Requirements. The following requirements apply to any fringe
benefit contributions made to a trustee or to a third person pursuant
to a fund, plan, or program:
(1) Such contributions must be made irrevocably;
(2) The trustee or third person may not be affiliated with the
contractor or subcontractor;
(3) A trustee must adhere to any fiduciary responsibilities
applicable under law; and
(4) The trust or fund must not permit the contractor or
subcontractor to recapture any of the contributions paid in or any way
divert the funds to its own use or benefit.
(b) Excess payments. Notwithstanding the above, a contractor or
subcontractor may recover sums which it had paid to a trustee or third
person in excess of the contributions actually called for by the plan,
such as excess payments made in error or in order to cover the
estimated cost of contributions at a time when the exact amount of the
necessary contributions is not yet known. For example, a benefit plan
may provide for definite insurance benefits for employees in the event
of contingencies such as death, sickness, or accident, with the cost of
such definite benefits borne by the contractor or subcontractor. In
such a case, if the insurance company returns the amount that the
contractor or subcontractor paid in excess of the amount required to
provide the benefits, this will not be deemed a recapture or diversion
by the employer of contributions made pursuant to the plan. (See Report
of the Senate Committee on Labor and Public Welfare, S. Rep. No. 963,
88th Cong., 2d Sess., p. 5.)
0
42. Revise Sec. 5.28 to read as follows:
Sec. 5.28 Unfunded plans.
(a) The costs to a contractor or subcontractor which may be
reasonably
[[Page 57745]]
anticipated in providing benefits of the types described in the Act,
pursuant to an enforceable commitment to carry out a financially
responsible plan or program, are considered fringe benefits within the
meaning of the Act (see 40 U.S.C. 3141(2)(B)(ii)). The legislative
history suggests that these provisions were intended to permit the
consideration of fringe benefits meeting these requirements, among
others, and which are provided from the general assets of a contractor
or subcontractor. (Report of the House Committee on Education and
Labor, H. Rep. No. 308, 88th Cong., 1st Sess., p. 4; see also S. Rep.
No. 963, p. 6.)
(b) Such a benefit plan or program, commonly referred to as an
unfunded plan, may not constitute a fringe benefit within the meaning
of the Act unless:
(1) It could be reasonably anticipated to provide the benefits
described in the Act;
(2) It represents a commitment that can be legally enforced;
(3) It is carried out under a financially responsible plan or
program;
(4) The plan or program providing the benefits has been
communicated in writing to the laborers and mechanics affected; and
(5) The contractor or subcontractor requests and receives approval
of the plan or program from the Secretary, as described in paragraph
(c) of this section.
(c) To receive approval of an unfunded plan or program, a
contractor or subcontractor must demonstrate in its request to the
Secretary that the unfunded plan or program, and the benefits provided
under such plan or program, are ``bona fide,'' meet the requirements
set forth in paragraphs (b)(1) through (4) of this section, and are
otherwise consistent with the Act. The request must include sufficient
documentation to enable the Secretary to evaluate these criteria.
Contractors and subcontractors may request approval of an unfunded plan
or program by submitting a written request in one of the following
manners:
(1) By mail to the United States Department of Labor, Wage and Hour
Division, Director, Division of Government Contracts Enforcement, 200
Constitution Ave. NW, Room S-3502, Washington, DC 20210;
(2) By email to [email protected] (or its successor email address);
or
(3) By any other means directed by the Administrator.
(d) Unfunded plans or programs may not be used as a means of
avoiding the Act's requirements. The words ``reasonably anticipated''
require that any unfunded plan or program be able to withstand a test
of actuarial soundness. Moreover, as in the case of other fringe
benefits payable under the Act, an unfunded plan or program must be
``bona fide'' and not a mere simulation or sham for avoiding compliance
with the Act. To prevent these provisions from being used to avoid
compliance with the Act, the Secretary may direct a contractor or
subcontractor to set aside in an account assets which, under sound
actuarial principles, will be sufficient to meet future obligations
under the plan. Such an account must be preserved for the purpose
intended. (S. Rep. No. 963, p. 6.)
0
43. Amend Sec. 5.29 by revising paragraph (e) and adding paragraph (g)
to read as follows:
Sec. 5.29 Specific fringe benefits.
* * * * *
(e) Where the plan is not of the conventional type described in
paragraph (d) of this section, the Secretary must examine the facts and
circumstances to determine whether fringe benefits under the plan are
``bona fide'' in accordance with requirements of the Act. This is
particularly true with respect to unfunded plans discussed in Sec.
5.28. Contractors or subcontractors seeking credit under the Act for
costs incurred for such plans must request specific approval from the
Secretary under Sec. 5.5(a)(1)(iv).
* * * * *
(g) For a contractor or subcontractor to take credit for the costs
of an apprenticeship program, the following requirements must be met:
(1) The program, in addition to meeting all other relevant
requirements for fringe benefits in this subpart, must be registered
with the Department of Labor's Employment and Training Administration,
Office of Apprenticeship (``OA''), or with a State Apprenticeship
Agency recognized by the OA.
(2) The contractor or subcontractor may only take credit for
amounts reasonably related to the costs of the apprenticeship benefits
actually provided to the contractor's employees, such as instruction,
books, and tools or materials. It may not take credit for voluntary
contributions beyond such costs. Amounts the employer is required to
contribute by a collective bargaining agreement or by a bona fide
apprenticeship plan will be presumed to be reasonably related to such
costs in the absence of evidence to the contrary.
(3) Costs incurred for the apprenticeship for one classification of
laborer or mechanic may not be used to offset costs incurred for
another classification.
(4) In applying the annualization principle to compute the
allowable fringe benefit credit pursuant to Sec. 5.25, the total
number of working hours of employees to which the cost of an
apprenticeship program is attributable is limited to the total number
of hours worked by laborers and mechanics in the apprentice's
classification. For example, if a contractor enrolls an employee in an
apprenticeship program for carpenters, the permissible hourly Davis-
Bacon credit is determined by dividing the cost of the program by the
total number of hours worked by the contractor's carpenters and
carpenters' apprentices on covered and non-covered projects during the
time period to which the cost is attributable, and such credit may only
be applied against the contractor's prevailing wage obligations for all
carpenters and carpenters' apprentices for each hour worked on the
covered project.
0
44. Revise Sec. 5.30 to read as follows:
Sec. 5.30 Types of wage determinations.
(a) When fringe benefits are prevailing for various classes of
laborers and mechanics in the area of proposed construction, such
benefits are includable in any Davis-Bacon wage determination. The
examples contained in paragraph (c) of this section demonstrate how
fringe benefits may be listed on wage determinations in such cases.
(b) Wage determinations do not include fringe benefits for various
classes of laborers and mechanics whenever such benefits do not prevail
in the area of proposed construction. When this occurs, the wage
determination will contain only the basic hourly rates of pay which are
prevailing for the various classes of laborers and mechanics. An
illustration of this situation is contained in paragraph (c) of this
section.
(c) The following illustrates examples of the situations discussed
in paragraph (a) and (b) of this section:
BILLING CODE 4510-27-P
Figure 1 to Paragraph (c)
[[Page 57746]]
[GRAPHIC] [TIFF OMITTED] TR23AU23.002
BILLING CODE 4510-27-C
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45. Revise Sec. 5.31 to read as follows:
Sec. 5.31 Meeting wage determination obligations.
(a) A contractor or subcontractor performing work subject to a
Davis-Bacon wage determination may discharge their minimum wage
obligations for the payment of both straight time wages and fringe
benefits by paying in cash, making payments or incurring costs for
``bona fide'' fringe benefits of the types listed in the applicable
wage determination or otherwise found prevailing by the Secretary of
Labor, or by a combination thereof.
(b) A contractor or subcontractor may discharge their obligations
for the payment of the basic hourly rates and the fringe benefits where
both are contained in a wage determination applicable to their laborers
or mechanics in the following ways:
(1) By paying not less than the basic hourly rate to the laborers
or mechanics and by making contributions for ``bona fide'' fringe
benefits in a total amount not less than the total of the fringe
benefits required by the wage determination. For example, the
obligations for ``Laborer: common or general'' in Sec. 5.30, figure 1
to paragraph (c), will be met by the payment of a straight time hourly
rate of not less than $21.93 and by contributions of not less than a
total of $6.27 an hour for ``bona fide'' fringe benefits; or
(2) By paying in cash directly to laborers or mechanics for the
basic hourly rate and by making an additional cash payment in lieu of
the required benefits. For example, where an employer does not make
payments or incur costs for fringe benefits, they would meet their
obligations for ``Laborer: common or general'' in Sec. 5.30,
[[Page 57747]]
figure 1 to paragraph (c), by paying directly to the laborers a
straight time hourly rate of not less than $28.60 ($21.93 basic hourly
rate plus $6.27 for fringe benefits); or
(3) As stated in paragraph (a) of this section, the contractor or
subcontractor may discharge their minimum wage obligations for the
payment of straight time wages and fringe benefits by a combination of
the methods illustrated in paragraphs (b)(1) and (2) of this section.
Thus, for example, their obligations for ``Laborer: common or general''
may be met by an hourly rate, partly in cash and partly in payments or
costs for fringe benefits which total not less than $28.60 ($21.93
basic hourly rate plus $6.27 for fringe benefits).
0
46. Add Sec. 5.33 to read as follows:
Sec. 5.33 Administrative expenses of a contractor or subcontractor.
(a) Creditable costs. The costs incurred by a contractor's
insurance carrier, third-party trust fund, or other third-party
administrator that are directly related to the administration and
delivery of bona fide fringe benefits to the contractor's laborers and
mechanics can be credited towards the contractor's obligations under a
Davis-Bacon wage determination. Thus, for example, a contractor may
take credit for the premiums it pays to an insurance carrier or the
contributions it makes to a third-party trust fund that both
administers and delivers bona fide fringe benefits under a plan, where
the insurance carrier or third-party trust fund uses those monies to
pay for bona fide fringe benefits and for the administration and
delivery of such benefits, including evaluating benefit claims,
deciding whether they should be paid, approving referrals to
specialists, and other reasonable costs of administering the plan.
Similarly, a contractor may also take credit for monies paid to a
third-party administrator to perform tasks that are directly related to
the administration and delivery of bona fide fringe benefits, including
under an unfunded plan.
(b) Noncreditable costs. A contractor's own administrative expenses
incurred in connection with the provision of fringe benefits are
considered business expenses of the firm and are therefore not
creditable towards the contractor's prevailing wage obligations,
including when the contractor pays a third party to perform such tasks
in whole or in part. For example, a contractor may not take credit for
the costs of office employees who perform tasks such as filling out
medical insurance claim forms for submission to an insurance carrier,
paying and tracking invoices from insurance carriers or plan
administrators, updating the contractor's personnel records when
workers are hired or separate from employment, sending lists of new
hires and separations to insurance carriers or plan administrators, or
sending out tax documents to the contractor's workers, nor can the
contractor take credit for the cost of paying a third-party entity to
perform these tasks. Additionally, recordkeeping costs associated with
ensuring the contractor's compliance with the Davis-Bacon fringe
benefit requirements, such as the cost of tracking the amount of a
contractor's fringe benefit contributions or making sure contributions
cover the fringe benefit amount claimed, are considered a contractor's
own administrative expenses and are not considered directly related to
the administration and delivery of bona fide fringe benefits. Thus,
such costs are not creditable whether the contractor performs those
tasks itself or whether it pays a third party a fee to perform those
tasks.
(c) Questions regarding administrative expenses. Any questions
regarding whether a particular cost or expense is creditable towards a
contractor's prevailing wage obligations should be referred to the
Administrator for resolution prior to any such credit being claimed.
0
47. Add subpart C, consisting of Sec. 5.40, to read as follows:
Subpart C--Severability
Sec. 5.40 Severability.
The provisions of this part are separate and severable and operate
independently from one another. If any provision of this part is held
to be invalid or unenforceable by its terms, or as applied to any
person or circumstance, or stayed pending further agency action, the
provision is to be construed so as to continue to give the maximum
effect to the provision permitted by law, unless such holding is one of
utter invalidity or unenforceability, in which event the provision is
severable from this part and will not affect the remaining provisions.
Julie A. Su,
Acting Secretary, Department of Labor.
[FR Doc. 2023-17221 Filed 8-10-23; 4:15 pm]
BILLING CODE 4510-27-P
