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While the Davis-Bacon Act applies only to construction purchased directly by the Government, some 60 other statutes make wage rates determined by the Secretary of Labor in accordance with the Davis-Bacon Act applicable to various construction programs affected by Federal grants, loans, insurance, and leases. The Department of Labor estimated that for fiscal 1971, about 59,000 direct Federal and Federally assisted contract awards totaling about $30.1 billion were covered by wage determinations.6

Background

The Davis-Bacon Act was aimed at the practices of construction contractors who were paying substandard wages to migrant construction workers. It was enacted during a time of economic depression when competition for limited markets forced employers to cut labor costs and both wages and prices were declining sharply. The original act applied only to contracts in excess of $5,000 and determinations as to prevailing wages were made by the contractors.

The need for strengthening the act was de veloped in a number of House and Senate Hearings in 1932, and again in 1934. The hearings resulted in extensive amendments to the act in 1935,” lowering the threshold to $2,000 and requiring that prevailing wages be determined by the Secretary of Labor rather than by the contractor. The Comptroller General was directed to pay, from accrued payments withheld under the contract, any wages found to be due laborers or mechanics.

The most recent amendment to the act in 1964,8 extended the coverage of wage determinations to fringe benefits.

The need for consistent policy among the various agencies involved in administering the act resulted in the issuance of Reorganization Plan No. 14 of 1950.9 Under the plan, the enforcement and compliance responsibility remained in the contracting agencies. However,

the Secretary of Labor was directed to publish regulations and undertake investigations or other actions to bring about consistent administration and enforcement of the labor standards prescribed by the act.

The history of the Davis-Bacon Act has been one of considerable controversy. After the depression of the 1930's subsided and gave way to the inflationary pressures of the post-World War II period, opponents claimed that the act had outlived its usefulness and ought to be repealed. They claimed that the act contributed to inflation by the breadth and strength of its impact, by its essential denial to the Government of available competition, and by the manner in which it was administered. It was contended that the Fair Labor Standards Act of 1938 afforded sufficient minimum wage protection. There is a strong belief today among construction contractors and Government contracting agency personnel that the deterrent effects of the act outweigh its recognized social value.

Organized labor, on the other hand, maintains that, in the absence of prevailing wage protection afforded by the act, the practice of the Government to award contracts to the lowest responsible bidder would encourage nonunion firms to compete by paying wages lower than prevailing wage scales.

President Nixon, observing that the problem of excessive and inflationary wage settlements in the construction industry constituted an emergency situation, temporarily suspended the act on February 25, 1971.10

Problem Areas

POTENTIAL CONFLICTS BETWEEN THE DAVIS-BACON ACT AND THE NATIONAL LABOR RELATIONS ACT

The Davis-Bacon Act was enacted four years before the National Labor Relations Act.11

* U.S. Comptroller General, Report B-146842, Need for Improved Administration of the Davis-Bacon Act Noted Over a Decade of General Accounting Office Reviews, July 14, 1971, p. 8.

? 49 Stat. 1011, c. 825, Aug. 30, 1935.
& Public Law 88-349, July 2, 1964.
95 U.S.C. Appendix.

10 U.S. President, Proclamation 4031, “Proclaiming the Suspension of the Davis-Bacon Act of March 3, 1931," 36 Fed. Reg. 3457, Feb. 25, 1971. Executive Order 11588, Mar. 29, 1971, reinstating the act, provided for a Construction Industry Stabilization Committee and directed the Secretary of Labor not to take into consideration, for wage determination purposes, any wage or salary increase in excess of that found acceptable by the Committee.

11 29 U.S.C. 158.

Under the National Labor Relations Act an employer has a legal obligation to bargain with the authorized representative of employees regarding terms and conditions of their employment. Once agreement has been reached, the employer cannot unilaterally modify it. If the Secretary of Labor prescribes wage rates pursuant to the Davis-Bacon Act higher than those agreed to in collective bargaining, the employer must obtain approval to depart from the collective bargaining agreement; otherwise he would breach the collective bargaining agreement and violate the National Labor Relations Act. Although there is little likelihood that a union would sue an employer for paying employees wage rates higher than the union had negotiated, the existence of separate legal obligations under the Davis-Bacon Act and the National Labor Relations Act can pose a dilemma for potential contractors for Government construction work.

Possible conflicts between the Davis-Bacon Act and the Railway Labor Act 12 were recognized by the Department of Labor in the case of construction work performed by employees of railroad companies covered by collective bargaining agreements. By administrative decision in 1942, the Secretary of Labor held he was precluded from applying the Davis-Bacon Act to construction work performed by such employees because they were subject to the Railway Labor Act which “contains a comprehensive system for the establishment and maintenance of wage rates for the employees of railroad common carriers.” However, a similar rationale has not been extended to construction work performed by employees of contractors covered by collective bargaining agreements subject to the National Labor Relations Act.

$10,200 to buy as much construction as $2,000 bought in 1935.13

The present $2,000 threshold of the act practically eliminates the possibility of any construction being exempted. As a result, there are increased administrative costs for both the contracting agencies and the Department of Labor. The increased number of wage determinations required of the Department of Labor also hampers the effective collection of data.14 The number of wage decisions issued has increased from 3,884 in 1945 to about 26,000 in each of fiscal years 1970 and 1971.15 The Department of the Interior has proposed legislation which would raise the minimum dollar amount of contracts subject to the Davis-Bacon Act from $2,000 to $25,000.16

Most other Federal agencies either support the Department of the Interior proposal or at least the proposition that the $2,000 threshold ought to be increased. The General Services Administration (GSA) agrees with the proposed $25,000 limitation. Of the agencies surveyed during our study, the majority supported a dollar limit of $25,000; however, suggestions ranged from $5,000 to $100,000. After $25,000, the next most common recommendation was $10,000. The reasons given are essentially the same as those advanced by the Department of the Interior.

The Assistant Administrator, Office of Government Contracts and Special Wage Standards, Wage and Hour Division of the Department of Labor, stated to our Study Group that the proposed legislation would ease the Department's workload, although the full amount of the administrative savings to the contracting agencies and to the Department of Labor is not quantifiable.

The General Accounting Office (GAO) has

THRESHOLD FOR APPLICATION OF THE ACT

The requirement for applying the DavisBacon Act to contracts in excess of $2,000 was established in 1935, thirty-eight years ago. Numerous small contracts exempted by that threshold in 1935 are now covered by the act because of inflation. In today's market it takes

13 Calculated by the Commission from data in 1935 U.S. Department of Commerce Composite Cost Index for Construction converted to 1967 – 100 base from data on page 385, Historical Statistics, Colonial Times to 1957, series N 85-103 (1947-49 - 100) ; also see table 1094, “Price and Cost Indexes for Construction and Selected Components of Construction: 1950 to 1970,” p. 664, Statistical Abstract of the United States, 1971 (1957–59 = 100) and U.S. Department of Commerce Bureau of Census Construction Reports, Value of New Construction Put in Place, Report C30-72–7, Sept. 1972, table 18, p. 22 (July 1972 index), 1967 – 100.

14 Letter from Leo R. Werts, Assistant Secretary for Administration, U.S. Department of Labor to Hon. Elmer B. Staats, Comptroller General of the United States, Oct. 9, 1970. 15 Note 6, supra.

14 Memorandum from the Department of the Interior to OMB, Dec. 3, 1971, transmitting the Department's proposed legislative program for the 92d Cong., 2d sess.

13 45 U.S.C. 151.

proposed an increase in the present $2,000 limit to an amount between $25,000 and $100,000.17 It stated that a reduction in the number of wage determinations required would permit the Department's wage determination staff to (1) make more thorough investigations, (2) conduct more frequent detailed onsite surveys, and (3) more adequately resolve protests or problems that may arise in arriving at factual determinations.

The Legislative Research Department of the AFL-CIO has stated that the unions would strongly oppose any legislation calling for an increase in the $2,000 threshold. This opposition is based on the argument that an increase would result in significant reduction of DavisBacon Act protection for workers on small dollar value repair and painting contracts, the type of workers who most need protection.

the headquarters level and throughout their various field activities who coordinate and guide contracting personnel in enforcement matters.

With few exceptions, the interviewed agencies declared that contracting personnel at the project site need to enforce all contract provisions, to ensure performance in accordance with contract requirements.

On the other hand, the Department of Labor stated that, while many of the major procurement agencies do have established staffs which carry out enforcement, many, particularly the newer ones, do not have this capability. These latter agencies are usually those involved with Federally assisted programs rather than direct Federal construction, and it is on such contracts that the Department of Labor's Wage and Hour Division is focusing its own enforcement effort.

An Assistant Administrator in the Department of Labor's Wage and Hour Division also stated that the enforcement of Davis-Bacon labor provisions would be more efficient if centralized in the Department because of the Department of Labor's general responsibility for and experience in enforcing other labor laws.20 He said the current level of effectiveness could not be maintained without additional staffing. The Department's San Francisco Regional Director, Employment Standards Administration, made a similar observation. He estimated that a 30 percent 21 increase in staff in that region would be necessary to achieve an acceptable level of compliance.

RESPONSIBILITY FOR ENFORCEMENT

The Davis-Bacon Act does not expressly state who has responsibility for determining the act's applicability to a particular contract, although under Reorganization Plan No. 14 of 1950 18 the Secretary of Labor is authorized to prescribe standards and regulations to ensure coordination of administration and consistency of enforcement of the act. While the Reorganization Plan also authorizes the Secretary to conduct investigations to ensure consistent enforcement, the basic responsibility for enforcement apparently remains with the contracting agencies. 19 The lack of clear guidance, and differences in views about enforcement responsibilities, continue to generate problems in the administration of the act.

Our review of contracting agencies disclosed that the day-to-day enforcement activities such as payroll inspections, employee interviews, and full-scale investigations are usually performed by persons responsible for the administration of contract provisions. Certain agencies—Department of Defense, AEC, and NASA-have labor relations specialists at

AUTHORITIES OF THE COMPTROLLER GENERAL AND THE DEPARTMENT OF LABOR UNDER THE ACT

Under Section 3 of the act,22 the Comptroller General is authorized to determine violations, impose debarment, and make wage adjustments. As he interprets the law, these provi

17 Note 6, supra, p. 37.

18 5 U.S.C. Appendix. The Department of Labor has issued regulations (29 CFR, Subtitle A, part 5) and an Investigative and Enforcement Manual setting forth procedures to be followed in enforcing the Davis-Bacon Act.

19 Ibid. ; see also Comptroller General Decisions B-144901, Apr. 10, 1961; B-147602, Jan. 23, 1963 : B-148076, July 26, 1963.

20 Memorandum from Warren D. Landis, Assistant Administrator, U.S. Department of Labor, to Horace E. Menasco, Administrator, U.S. Department of Labor, subject: "Proposal for Decentralization of Wage Determination Functions," Sept. 3, 1971.

21 Memorandum for the record, Study Group 2 visit to U.S. Department of Labor, Employment Standards Administration, San Francisco, California, July 13, 1971.

22 40 U.S.C. 276a-2.

sions place the authority and responsibility for such actions in his office. 23

The Comptroller General has repeatedly held that the authority given the Secretary of Labor, under Reorganization Plan No. 14, does not include the power to make individual enforcement determinations or authoritative interpretative decisions. According to the Comptroller General, the actual administration and enforcement of the acts affected by the plan is the responsibility of the individual contracting agencies, and interpretative decisions of the Secretary of Labor have "advisory force only." 24 The Secretary of Labor, on the other hand, views his decisions as authoritative based on Reorganization Plan No. 14 and the “obvious intent of Congress” as reflected in section 10 of the Portal to Portal Act.25 The Solicitor of Labor testified in 1962 before the House Special Subcommittee on Labor 26 that “the result of this situation is to frustrate effective administration and enforcement of the contract labor standards laws.”

In view of the difficulties created by the current situation, the Comptroller General has suggested that this Commission consider recommending legislation which would divest GAO of its administrative responsibilities in the Davis-Bacon Act and place those responsibilities in the procurement agencies and the Department of Labor. Essentially, his proposal would give the procurement agencies such responsibilities but would provide for appeal to the Department of Labor in certain limited instances.27

Labor, for example, has taken the position that contracts for the manufacture or furnishing of elevators and generators which also call for certain installation work (like foundation preparation or pouring) may be subject to both the Public Contracts Act and the DavisBacon Act if the contract involves more than an "incidental” amount of erection or installation. Thus, under the Department of Labor interpretation, the Davis-Bacon Act would be applicable to the installation portion of a combination supply and installation contract, and the Walsh-Healey Act to the other work, depending upon the amount of required construction activities. 28

The Comptroller General, on the other hand, holds that the Davis-Bacon Act applies on the basis of the contract as a whole; that the act is not applicable to any part of the work to be performed under a contract if the contract is not "essentially" or "substantially" for construction.29

Contracting agencies having a volume of contracts involving both supply and installation work indicated that when the installation work exceeded $2,000, they were inclined to insert the Davis-Bacon Act stipulations for lack of guidelines from the Department of Labor on what constituted more than an “incidental” amount of such work. Where the agencies follow this practice, the supply contractor must either segregate his work force and pay Davis-Bacon wage rates to those workers performing the construction-type work or subcontract out that phase.

The absence of statutory definitions of critical words or phrases used in the act also has produced controversies which are unresolved. The act provides that every covered contract shall stipulate that the contractor or his subcontractor shall pay mechanics and laborers employed directly upon the “site of the work” at wage rates not less than those stated in the advertised specifications; but the act contains no definition of "site of the work.” The Solicitor of Labor's opinions have given that term a broad interpretation to include the sites of job headquarters, storage yards, prefabrication or assembly yards, quarries or borrow pits,

UNCERTAINTY AS TO COVERAGE OF THE ACT

The Comptroller General and the Secretary of Labor also disagree as to the application of the act in important areas. The Secretary of

22 U.S. Comptroller General, Decision B-161858, and Letter to the Secretary of Labor, Jan. 22, 1968, subject: Decision B-161858, October 11, 1967, Concerning LOFT and the Role of the General Accounting Office Under the Davis-Bacon Act. The Comptroller General does not assert this position with respect to the Service Contract Act and the Walsh-Healey Public Contracts Act, which direct the Comptroller General only to publish a debarred list pursuant to the recommendation of the procurement agency or the Secretary of Labor-a ministerial function; or the so-called Davis-Bacon "Related Acts."

24 U.S. Comptroller General, Decision B-144901, Apr. 10, 1961. 23 U.S. Solicitor of Labor, Opinion No. DB-1, Apr. 3, 1961.

> Hearings on the Administration of the Davis-Bacon Act, 87th Cong., 2d sess., pp. 831-832.

37 Comptroller General letter of Dec. 27, 1971 (attached as Appendix B).

28 See section 6(b), Rulings and Interpretations No. 8 under the Walsh-Healey Public Contracts Act and Solicitor of Labor's Opinion No. DB-20, Jan. 31, 1962.

20 U.S. Comptroller General, Opinion, B-150818(1), June 6, 1963. 30 U.S. Comptroller General, Opinion B-148076, July 26, 1963. 31 U.S. Solicitor of Labor, Opinion DB-52, Oct. 14, 1966.

and batch plants, which are set up for and serve exclusively the particular construction operation and are reasonably near the construction site. When the Comptroller General has had opportunity to consider the term, he has construed it to refer to the “exact confines of the place of performance of the construction work” and not to "work off the site .... even though performed in the immediate community.” 30

Whether particular contract work constitutes “construction of a public work” covered by the Davis-Bacon Act can have significant impacts on agency costs and programs and has been the source of disagreement between the contracting agencies and the Department of Labor. In keeping with the Department's general approach, its Solicitor has in the past construed the act broadly to cover the assembly of a mobile nuclear reactor experimental system ; 31 the assembly of 40-foot waveguide modules for subsequent installation into a linear accelerator; 32 and the assembly of the crawler-transporter used at the Kennedy Space Center for lifting and transporting a launch vehicle and spacecraft to its launchsite 33— notwithstanding the contracting agencies' determinations that the contracts involved were not subject to the act.34

The Davis-Bacon Act, by its terms, applies to contracts for construction, alteration, and/ or repair work, but not to operating or maintenance work. The broad interpretations given to “construction," "alteration," and "repair" in Department of Labor regulations and the absence of criteria distinguishing operating and repair work have necessitated extensive administrative reviews for classifying work under contracts for the management and operation of Government-owned facilities. Employees of such contractors usually are covered by collective bargaining agreements providing for wage rates and benefits in accordance with in

dustrial rate structures rather than construction trade rates. To avoid the complications engendered by having two rate structures for the same employees, careful reviews of work projects are made to screen out Davis-Bacon work; items of work which are considered "covered” work are subcontracted out. Both cause added costs to the Government. The lack of adequate criteria for distinguishing noncovered work in these situations also results in labor unrest—when work is contracted out to satisfy Davis-Bacon requirements, employees of the operating contractor are unhappy; when a determination is made that a particular job can be classified as operating or maintenance, there is often concern by union representatives that the Davis-Bacon Act is being undercut.

The use of operating or management contractors for conducting Government programs largely developed during and after World War II. While cooperative efforts of organized labor, contracting agencies, and the Department of Labor have resulted in some alleviation of the problems generated by the scope of this type of work, no action has been initiated to examine the overall problem.

BASIS FOR DETERMINING PREVAILING WAGES

The act provides that employees will be paid at not less than the prevailing wage rates as determined by the Secretary of Labor. The Department has defined the term "prevailing" wage rate in 29 CFR, part 1, section 1.2(a) (1) through (3), to mean:

The rate of wages paid in the area in which the work is to be performed to the majority of those employed in that classification in construction in the area similar to the proposed undertaking. In the event that there is not a majority paid at the same rate, then the rate paid to the greater number: provided such greater number constitutes 30 percent of those so employed. In the event that less than 30 percent of those so employed receive the same rate, the average rate.

32 U.S. Solicitor of Labor, Unnumbered Opinion letter to AEC, Jan. 13, 1965.

33 U.S. Solicitor of Labor, Opinion letter to the General President of the International Association of Bridge, Structural and Ornamental Iron Workers, AFL-CIO, dated Aug. 14, 1964.

34 In all of these situations, the agencies' positions were upheld eventually. U.S. Comptroller General, Opinion B-161858, Oct. 11, 1967; U.S. Comptroller General, Opinion B-150828, Feb. 18, 1965. In the third case, the agency appealed the Solicitor's ruling to the Department of Labor Wage Appeals Board, which reversed the Solicitor's Opinion.

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