[Federal Register Volume 63, Number 224 (Friday, November 20, 1998)]
[Notices]
[Page 64542]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31083]



[[Page 64541]]

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Part II





Department of Labor





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Employment Standards Administration



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Wage and Hour Division



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Guidance to All Government Contracting Agencies of the Federal 
Government and the District of Columbia Concerning Application of 
Davis-Bacon Wage Determinations to Contracts With Option Clauses; 
Notice

  Federal Register / Vol. 63, No. 224 / Friday, November 20, 1998 / 
Notices  

[[Page 64542]]



DEPARTMENT OF LABOR

Employment Standards Administration
Wage and Hour Division


Guidance to All Government Contracting Agencies of the Federal 
Government and the District of Columbia Concerning Application of 
Davis-Bacon Wage Determinations to Contracts With Option Clauses

AGENCY: Wage and Hour Division, Employment Standards Administration, 
Labor.

ACTION: Notice.

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SUMMARY: The Wage and Hour Division is publishing its guidelines 
concerning the circumstances in which the exercise of a contract option 
requires a new wage determination under the Davis-Bacon and related 
Acts.

FOR FURTHER INFORMATION CONTACT: Timothy Helm, Office of Enforcement 
Policy, Government Contracts Team, Wage and Hour Division, Employment 
Standards Administration, U.S. Department of Labor, Room S-3018, 200 
Constitution Avenue, NW, Washington, DC 20210. Telephone (202) 693-
0064. (This is not a toll free number.)

SUPPLEMENTARY INFORMATION: In order to provide consistent enforcement 
and administration with respect to the Davis-Bacon and related Acts, 
Reorganization Plan No. 14 of 1950, 5 U.S.C. appendix, gives the 
Secretary of Labor the authority to prescribe regulations, standards, 
and procedures which are required to be observed by the contracting 
agencies. The Secretary has delegated such authority to the Wage and 
Hour Division. This includes the authority to interpret the Davis-Bacon 
and related Acts and the inherent authority to issue interpretive 
guidelines embodied in All Agency Memoranda informing the public of the 
standards the Wage and Hour Division intends to apply in the 
administration of the Davis-Bacon and related Acts.
    Pursuant to this authority, the Wage and Hour Division issued on 
November 9, 1992, All Agency Memorandum No. 157 (AAM 157), which 
clarifies the application of Davis-Bacon wage determinations to 
federally-funded and assisted construction contracts that contain 
option clauses. The Wage and Hour Division, pursuant to its normal, 
customary practice, endeavored to send AAM 157 to all known government 
contracting agencies of the federal government and the District of 
Columbia.
    By decision in ARB Case No. 96-133, dated July 17, 1997, the 
Administrative Review Board (ARB), which speaks finally on behalf of 
the Secretary concerning matters arising under the Davis-Bacon and 
related Acts, directed the Wage and Hour Division to publish AAM 157 in 
the Federal Register. AAM 157 is hereby published in the Federal 
Register in order to inform the public of the circumstances in which 
the exercise of an option provided in a contract governed by the Davis-
Bacon and related Acts requires a new wage determination.
    In addition, the ARB directed the Wage and Hour Division to provide 
clarification to AAM 157 in accordance with the discussion that was 
contained in the Administrator's ruling of May 2, 1996, that was the 
basis for the ARB decision.
    In issuing AAM 157, the Department of Labor does not assert that 
the exercise of an option constitutes a new contract in all cases, 
without consideration of the specific contract requirements. For 
example, the Department does not consider that a new contract has been 
created in situations where a contractor is simply given additional 
time to complete its original contractual obligations. This situation 
is distinguishable, however, from a situation where an option is 
exercised obligating a contractor to perform work for a period of time 
for which it was not obligated under the terms of the original 
contract. In such an event, the Department considers that a new 
contract has been created for purposes of issuing a new wage 
determination.

Document Preparation

    This document was prepared under the direction and control of John 
R. Fraser, Acting Administrator, Wage and Hour Division, Employment 
Standards Administration, U.S. Department of Labor.

    Signed at Washington, DC, this 13th day of November 1998.
John R. Fraser,
Acting Administrator, Wage and Hour Division.

U.S. Department of Labor

Employment Standards Administration, Wage and Hour Division, 
Washington, DC 20210

DEC. 9, 1992

MEMORANDUM NO. 157

TO:  All Government Contracting Agencies of the Federal Government 
and the District of Columbia
FROM:  Karen R. Keesling, Acting Administrator
SUBJECT:  Application of Davis-Bacon Wage Determinations to 
Contracts with Option Clauses

    This memorandum clarifies the application of Davis-Bacon wage 
determination to federally-funded and assisted construction 
contracts that contain option clauses, and to federal service 
contracts which have a substantial and segregable amount of 
construction work that require the application of the Davis-Bacon 
Act and which also contain option clauses. Some contracting agencies 
have not been incorporating a new or current Davis-Bacon wage 
determination in these contracts at the time an option is exercised. 
To ensure consistency, we are providing the following guidance on 
this subject.
    The Davis-Bacon Act applies to ``every contract in excess of 
$2,000, to which the United States or the District of Columbia is a 
party, for the construction, alteration, and/or repair, including 
painting and decorating, of public buildings or public works.'' 
(Emphasis added.)
    Multi-year construction contracts that contain option provisions 
by which a contracting agency may unilaterally extend the term of 
the contract require inclusion of a current wage determination at 
the time the option is exercised. This requirement is consistent 
with the purpose of the Davis-Bacon Act to ensure that employees be 
paid prevailing wages, and the McNamara-O'Hara Service Contract Act 
(SCA) regulations governing option periods under that statute. As 
explained in section 4.145(a) of Regulations, 29 CFR Part 4, the 
exercise of such an option requires a contractor to perform work for 
a period of time for which it would not have been obligated--and for 
which the government would not have been required to pay--under the 
terms of the original contract if the option had not been exercised. 
Thus, once the option on a contract is exercised, the additional 
period of performance becomes a new contract.
    Accordingly, every federally-funded or assisted multi-year 
construction contract in excess of $2,000 that contains a provision 
to extend an existing contract--pursuant to an option clause or 
otherwise--so that the construction is performed over an extended 
period of time (as opposed to situations where a contractor is given 
additional time to complete its original contract commitment), must 
include a current Davis-Bacon wage determination. Similarly, just as 
a current SCA wage determination must be incorporated at the 
exercise of an option in an SCA contract, if an option in the SCA 
contract calls for substantial and segregable construction work, 
then a current Davis-Bacon wage determination must also be 
incorporated at the exercise of the option.
[FR Doc. 98-31083 Filed 11-19-98; 8:45 am]
BILLING CODE 4510-27-P