On August 23, 2023, the United States Department of Labor (“DOL”) issued a final rule updating regulations issued under the Davis-Bacon Act. This is the DOL’s first comprehensive update to the Davis-Bacon Act regulations in forty years, and understanding and applying these new regulations will be critical to contractors engaged in federal construction projects.

In this series, we will deliver regular updates on the final rule of the regulatory changes made to the Davis-Bacon Act. Our full summary can be found here.

The DOL revised its regulations to address when wage determinations are incorporated into a contract and, if a wage determination is wrongly omitted, to require the contractor to provide back pay to affected workers and the contracting agency to reimburse the contractor for having to do so.

Adding Wage Determinations Prior to Contract Award

In 29 C.F.R. § 1.6(e), the DOL adopted language clarifying 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documents or solicitation included the wrong wage determination or schedule, or that an included wage determination was withdrawn by the DOL as a result of an ARB decision, the wage determination may not be used for the contract, regardless of whether bid opening (or initial endorsement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.

In 29 C.F.R. § 1.6(g), the DOL adopted several additional clarifying revisions. For instance, it clarified that 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 retroactively to the date of the contract award or the beginning of construction. The revisions also clarify that the head of the applicable Federal agency—not simply, as previously written, the “agency”—must request a 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 DOL also deleted language indicating that a wage determination must be “requested,” explaining that such language appears to contemplate a project wage determination, which in most situations will not be necessary as a general wage determination will apply.

Incorporating the Most Recent Wage Determinations into Certain Ongoing Contracts

The DOL revised 29 C.F.R. § 1.6(a) to affirmatively state that a wage determination is generally applicable for the duration of a contract once incorporated:

29 C.F.R. § 1.6(a)(1): 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.

The DOL also added new language, 29 C.F.R. § 1.6(c)(2)(iii), explaining two situations in which a new wage determination will be added to an existing contract:

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 extend the term of a contract unilaterally.

The DOL explained that this change is consistent with the DOL’s “guidance, case law, and historical practice, under which such modifications are considered new contracts.” The new wage determination would have to 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. The requirement to add a new wage determination would 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.

The DOL also addressed the use of schedule contracts, BPAs, and IDIQ contracts, i.e. contracts 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. For these types of contracts, contracting agencies must 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 DOL for the alternative date.

The new regulation states:

29 C.F.R. § 1.6(c)(2)(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, 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.

Periodic Adjustments to Update Prevailing Wage Rates

The DOL added a provision to 29 CFR 1.6(c)(1) that expressly provides a mechanism to regularly update certain non-collectively bargained prevailing wage rates.

As context for that revision, the DOL explained:

Based on the data that it receives through its prevailing wage survey program, Wage and Hour Department (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.

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 revision to 29 CFR 1.6(c)(1) expands the DOL’s current practice of updating collectively bargained prevailing wage rates between surveys to include updating non-collectively bargained prevailing wage rates. Such periodic updates will better protect workers’ wages and reflect construction industry compensation in communities where federally funded construction is occurring. Additionally, “[r]egularly increasing non-collectively bargained prevailing wage rates that are more than 3 years old [is] consistent with the Davis-Bacon Act’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 revisions also expressly permit adjustments to non-collectively bargained prevailing rates on general wage determinations based on BLS ECI data or its successor data.

The DOL 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.

Because updating non-collectively bargained prevailing wage rates will be resource-intensive, the DOL does not anticipate making all initial adjustments to such rates that are 3 or more years old simultaneously but instead expects that such adjustments will be made over a period of time (though as quickly as is reasonably possible). Due to the effort involved, the process of adjusting non-collectively bargained rates that are three or more years old is unlikely to begin until approximately 6–12 months after a final rule implementing the proposal becomes effective.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.