Construction & Claims: August 2023

Nossaman eAlert

Welcome to Construction & 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. 

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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.

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