Many contractors are familiar with the Davis-Bacon Act (“DBA”), the statute that requires government contractors to pay prevailing wages to workers employed in the construction, alteration, or repair of buildings or other public works. The DBA is enforced by the Department of Labor, which is responsible for issuing the “wage determinations” that list the prevailing wages for different labor categories within a geographical area and for promulgating regulations used to implement the DBA’s requirements.
On March 18, 2022, the Department issued a notice of proposed rulemaking (“NPRM”), announcing that it intends to make a number of revisions to the DBA regulations. In the Department’s view, these revisions represent the largest change to the DBA regulations since the last major rewrite in 1981.
The most significant changes announced in the NPRM are:
- Incorporation by Operation of Law: The DBA currently applies via the incorporation of contract clauses and relevant wage determination(s) into the subject contract. The proposed rule, however, would designate the DBA contract clauses and applicable wage determination(s) as effective by “operation of law,” regardless of whether they are expressly included in the covered contract. It further provides that the Department may “grant a variance, tolerance, or exemption” from the automatic-incorporation provision, and further provides that “the prime contractor must be compensated for any resulting increase in wages” that accompanies the DBA becoming effective by operation of law.
- Changes to Prevailing Wage Methodology: The NPRM includes proposed changes to the wage survey methodology used by the Department to prepare wage determinations. This includes a change to how the Department determines the “prevailing” wage rate when there is no single rate that is paid to the majority of workers within a geographical area. The current regulations provide that the Department is required to use a weighted average rate in such situations, but under the proposed rule the Department will instead treat a rate as prevailing if it is paid to at least 30 percent of the workers within the area. (If there is no rate that is paid to at least 30 percent of workers, then the Department will still use an average rate). Moreover, the NPRM will also permit the Department to adopt wage determinations promulgated by state-and-local authorities, which could potentially speed up the issuance of new wage determinations and ensure that consistent wages are paid across different types of projects.
- Conformance Changes: When a wage determination does not include a prevailing wage rate for a class of workers that will be employed under the contract, the contractor may be required to use the Department’s “conformance” process to receive a new, “conformed” rate for that classification. The proposed rule includes new language that is intended to reduce the need for such conformances: it allows the Department to add a new classification to the wage determination if it is “regularly” the subject of conformance requests. (This would be in addition to the current process for identifying new classifications via wage surveys).
- Enforcement Changes: The proposed rule includes anti-retaliation provisions designed to protect employees that identify potential DBA violations from termination or other adverse employment actions. It also makes changes intended to strengthen the government’s ability to withhold contract payments from contractors that fail to pay the prevailing wage to their employees: under the proposed language, a DBA violation under one contract may result in cross-withholding under a different contract with a different agency.
In our view, the first of these changes is potentially the most significant: under the proposed rule, the clauses that incorporate the DBA “will be considered to be a part of every prime contract” within the statutory coverage of the DBA, regardless of “whether or not they are included or incorporated by reference into such contract.”
This change may create potential complications for some contractors. As a general matter, the DBA’s statutory coverage is very broad — it applies to all contracts above $2000 that concern the construction, alteration, or repair of a “public building” or “public work.” This language has been interpreted to encompass a wide variety of project types — ranging from the construction of new bridges to landscaping projects or even the painting of mailboxes and in some instances the Department can read the DBA as applicable even beyond its intended broad reach. For example, in one case, it argued (unsuccessfully) that the DBA applied to the CityCenter development in Washington, DC, despite the facts that (a) the project was privately funded; and (b) neither the federal government nor the District government were a party to the construction contract. Moreover, the DBA does not apply only to contracts with the federal government — it also may be applied, under the so-called “Related Acts,” to federally-financed construction, including, for example, state or local construction contracts that are funded with federal grant money.
The broad reach of the DBA, when combined with potential applicability to contracts that do not mention it, creates a risk that contractors may be inadvertently out of compliance with potentially serious consequences. Failure to comply with the DBA can result in withheld contract payments, and mandatory debarment for contractors “found to have disregarded their obligations to employees and subcontractors.”
That said, the rule also provides that the Department may grant an exception to this requirement, and further provides that the prime contractor “must” be compensated for any increases in wages that occur if the DBA is incorporated into the contract by operation of law.
Nevertheless, if the proposed rule becomes final in its current form, contractors should be prepared to conduct an analysis to determine whether new contracts could potentially be DBA-covered — even if the relevant clauses are not included in the solicitation — or risk serious financial and other consequences. We therefore expect this change — as well as the other changes discussed above — to be the subject of input from industry. To that end the NPRM solicits comments from interested parties, which are due on May 17, 2022.