Construction & Claims: August 2023 – Construction & Planning

Welcome toConstruction & Claims, a periodic digest
of the headlines, statutory and regulatory changes and court cases
involving construction news, claims, bid protests, contract
administration and payment-related disputes.

Final Rule Updating the Davis-Bacon and Related Acts Imposes
Significant Changes to Federal Construction Contracting

On August 8, 2023, the U.S. Department of Labor (DOL) issued a
Final Rule updating the Davis-Bacon and Davis-Bacon Related Acts
(DBRA) for the first time in nearly 40 years. The Final Rule stands
to affect the minimum wage rate for roughly 1.2 million
construction workers across the country and imposes a range of new
requirements, including recordkeeping and anti-retaliation
provisions and heightened enforcement provisions for new contracts
entered after the Final Rule becomes effective. According to the
DOL, the Final Rule is a response to the increasing number of
federally funded construction projects and significant changes to
the federal contracting system.

The DBRA requires contractors to pay prevailing wages and fringe
benefits to laborers and mechanics working on federal or federally
assisted contracts for construction, alteration, or repair of
public buildings or public works. Specifically, DBRA contractors
must pay their laborers and mechanics no less than the local
prevailing wages and fringe benefits for corresponding work on
similar projects in the area. Its 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).)

Currently, the DOL determines the required, prevailing wage rate
for workers under a DBRA-covered contract as the rate paid to at
least 50 percent of workers in the project county. If no such
majority rate exists, the prevailing rate is determined by
calculating a “weighted average,” which considers both
the total wages paid to workers and the number of workers. However,
under the Final Rule, the pre-1983 “3-step process” for
determining prevailing wages has been reinstated. If a majority 50
percent wage rate does not exist, the prevailing rate is the rate
paid to at least 30 percent of workers in the project county. It is
expected that this change will lead to an increase in wages and
thereby labor costs for federal contractors.

The county of construction will still be used as the basic
geographic unit for measuring prevailing wages. However, the Final
Rule no longer prohibits the mixing of metropolitan and rural
county data. When there is insufficient data to determine the
prevailing rate for a given county, the Final Rule permits the use
of data from a nearby county, even if one is characterized as
“rural” and the other as “metropolitan.” The
Rule also permits multi-county project wage determinations with a
single wage rate, based upon data from each of the relevant
counties in which a project will be performed.

The Final Rule makes clear that energy infrastructure projects
may be encompassed by the DBRA, assuming they are built as a part
of a contract with a federal agency or otherwise covered by a
Related Act. Solar panels, wind turbines, broadband installation,
and installation of electric car chargers are expressly included in
a “non-exhaustive list” of covered construction
activities.

Notably, the Final Rule also heightens enforcement provisions.
Contractors can be held responsible (including possible debarment)
for a lower-tiered subcontractor’s DBRA violations. The DOL is
permitted to enforce DBRA obligations regardless of whether they
are expressly included in the contract.

The Final Rule is currently set for publication in the Federal
Registrar on August 23, 2023, and will become effective 60 days
thereafter on October 22, 2023 (though these dates are still
subject to change until official publication). You can obtain
additional DOL guidance and read more about the Final Rule
here.

Originally published 08.01.2023.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.