[Federal Register Volume 65, Number 245 (Wednesday, December 20, 2000)]
[Rules and Regulations]
[Pages 80268-80278]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32436]
[[Page 80267]]
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Part V
Department of Labor
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Office of the Secretary
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29 CFR Part 5
Labor Standards Provisions Applicable to Contracts Covering Federally
Financed and Assisted Construction (Also Labor Standards Provisions
Applicable to Nonconstruction Contracts Subject to the Contract Work
Hours and Safety Standards Act); Final Rule
Federal Register / Vol. 65, No. 245 / Wednesday, December 20, 2000 /
Rules and Regulations
[[Page 80268]]
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DEPARTMENT OF LABOR
Office of the Secretary
29 CFR Part 5
RIN 1215-AB21
Labor Standards Provisions Applicable to Contracts Covering
Federally Financed and Assisted Construction (Also Labor Standards
Provisions Applicable to Nonconstruction Contracts Subject to the
Contract Work Hours and Safety Standards Act)
AGENCY: Wage and Hour Division, Employment Standards Administration,
Labor.
ACTION: Final rule.
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SUMMARY: The Department of Labor adopts as a final rule an amendment to
the regulations, 29 CFR Part 5, which define the Davis-Bacon Act
language construction, prosecution, completion, or repair at 29 CFR
5.2(j), and site of the work at 29 CFR 5.2(l). Specifically, this
document revises the site of the work definition to include material or
supply sources, tool yards, job headquarters, etc., in the site of the
work only where they are dedicated to the covered construction project
and are adjacent or virtually adjacent to the location where the
building or work is being constructed. Also changed is the regulatory
definition of construction to provide that the off-site transportation
of materials, supplies, tools, etc., is not covered unless such
transportation occurs between the construction work site and a
dedicated facility located ``adjacent or virtually adjacent'' to the
construction site.
This document also revises section 5.2(l)(1) to include within the
site of the work, secondary sites, other than the project's final
resting place, which have been established specifically for the
performance of the Davis-Bacon covered contract and at which a
significant portion of the public building or work called for by the
contract is constructed. In conjunction with this change, section
5.2(j) has been amended to provide that transportation of portion(s) of
the building or work between a secondary covered construction site and
the site where the building or work will remain when it is completed is
subject to Davis-Bacon requirements.
EFFECTIVE DATE: January 19, 2001.
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, D.C. 20210. Telephone (202) 693-
0574. This is not a toll-free number.
SUPPLEMENTARY INFORMATION:
I. Paperwork Reduction Act
This regulation does not contain any new information collection
requirements and does not modify any existing requirements. Thus, this
regulation is not subject to the Paperwork Reduction Act.
II. Background
A. Statutory and Regulatory Framework
Section 1 of the Davis-Bacon Act (DBA or Act) requires that ``the
advertised specifications for contracts * * * for construction,
alteration and/or repair, including painting and decorating, of public
buildings or public works * * * shall contain a provision stating the
minimum wages to be paid to various classes of laborers and mechanics *
* * and every contract based upon these specifications shall contain a
stipulation that the contractor or his subcontractor shall pay all
mechanics and laborers employed directly upon the site of the work * *
* the full amounts accrued at time of payment, computed at wage rates
not less than those stated in the advertised specifications, * * * and
that the scale of wages to be paid shall be posted by the contractor in
a prominent and easily accessible place at the site of the work * * *
.'' 40 U.S.C. 276a (emphasis added).
Section 2 of the Act requires that every covered contract provide
that in the event the contracting officer finds that ``any laborer or
mechanic employed by the contractor or any subcontractor directly on
the site of the work covered by the contract has been or is being paid
less than required wages, the government ``may terminate the
contractor's right to proceed with the work or such part of the work as
to which there has been a failure to pay the required wages'' and to
hold the contractor liable for the costs for completion of the work. 40
U.S.C. 276a-1 (emphasis added).
The Congress directed the Department of Labor, through
Reorganization Plan No. 14 of 1950 (5 U.S.C. App., effective May 24,
1950, 15 FR 3176, 64 Stat. 1267), to ``prescribe appropriate standards,
regulations and procedures'' to be observed by federal agencies
responsible for the administration of the Davis-Bacon and related Acts
``[i]n order to assure coordination of administration and consistency
of enforcement.'' 64 Stat. 1267.
On April 29, 1983, the Department promulgated a regulation (29 CFR
5.2(l)) defining the term site of the work within the meaning of the
Davis-Bacon Act (see 48 FR 19540). This regulation reflected the
Department's longstanding, consistent interpretation of the Act's site
of the work requirement. See, e.g., United Construction Company, Wage
Appeals Board (WAB) Case No. 82-10 (January 14, 1983); Sweet Home
Stone, WAB Case Nos. 75-1 & 75-2 (August 14, 1975); Big Six, Inc., WAB
Case No. 75-3 (July 21, 1975); T.L. James & Co., WAB Case No. 69-2
(August 13, 1969); CCH Wage-Hour Rulings para. 26,901.382, Solicitor of
Labor letter (July 29, 1942).
The Department's regulations provide a three-part definition of
site of the work. The first part at 29 CFR 5.2(l)(1) provides that
``the site of the work is the physical place or places where the
construction called for in the contract will remain when work on it has
been completed and, as discussed in paragraph (l)(2) of this section,
other adjacent or nearby property used by the contractor or
subcontractor in such construction which can reasonably be said to be
included in the site.''
The second part at 29 CFR 5.2(l)(2) provides that ``fabrication
plants, mobile factories, batch plants, borrow pits, job headquarters,
tool yards, etc.'' are part of the site of the work provided they meet
two tests--a geographic test of being ``so located in proximity to the
actual construction location that it would be reasonable to include
them,'' and a functional test of being ``dedicated exclusively, or
nearly so, to performance of the contract or project.''
The third part at 29 CFR 5.2(l)(3) states that fabrication plants,
batch plants, borrow pits, tool yards, job headquarters, etc., ``of a
commercial supplier or materialman which are established by a supplier
of materials for the project before the opening of bids and not on the
project site, are not included in the site of the work.'' In other
words, facilities such as batch plants and borrow pits are not covered
if they are ongoing businesses apart from the federal contract work.
The regulatory definition of the statutory terms construction,
prosecution, completion, or repair in section 5.2(j)(1) applies the
site of the work concept. It defines these statutory terms as including
the following:
[a]ll types of work done on a particular building or work at the site
thereof, including work at a facility which is dedicated to and deemed
a part of the site of the work within the meaning of Sec. 5.2(l)--
including without limitation (i) [a]lteration, remodeling, installation
[[Page 80269]]
(where appropriate) on the site of the work of items fabricated off-
site; (ii) [p]ainting and decorating; (iii) [m]anufacturing or
furnishing of materials, articles, supplies or equipment on the site of
the building or work * * *; and (iv) [t]ransportation between the
actual construction location and a facility which is dedicated to such
construction and deemed a part of the site of the work within the
meaning of Sec. 5.2(l). (Emphasis added.)
B. The Department of Labor's Longstanding Interpretation of the
Regulatory Site of the Work Definition
Prior to the recent appellate court rulings, the Department's
longstanding, consistent application of the regulatory definition of
site of the work--the area where laborers and mechanics are to be paid
at least the prevailing wage rates, as determined by the Secretary of
Labor--included both the location where a public building or work would
remain after work on it had been completed, and nearby locations used
for activities directly related to the covered construction project,
provided such locations were dedicated exclusively (or nearly so) to
meeting the needs of the covered project.
The Wage Appeals Board, which acted with full and final authority
for the Secretary of Labor on matters concerning the labor standards
provisions of the Davis-Bacon and related Acts (see 29 CFR 5.1 and 7.1
(c)),\1\ consistently interpreted 29 CFR 5.2(l) to include as part of
the site of the work, for purposes of Davis-Bacon prevailing wage
coverage, support facilities dedicated exclusively to the covered
project and located within a reasonable distance from the actual
construction site. Consistent with the regulations, the Board also
treated the transportation of materials and supplies between the
covered locations and transportation of materials or supplies to or
from a covered location by employees of the construction contractor or
subcontractor as covered Davis-Bacon work. See, e.g., Patton-Tully
Transportation Co., WAB No. 90-27 (March 12, 1993) (distances of 5.4 to
14 miles, and 16 to 60 miles); Winzler Excavating Co., WAB No. 88-10
(October 30 1992) (12\1/2\ miles); ABC Paving Co., WAB Case No. 85-14
(September 27, 1985) (3 miles).
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\1\ On April 17, 1996, the Secretary redelegated jurisdiction to
issue final agency decisions under, inter alia, the Davis-Bacon and
related Acts and their implementing regulations, to the newly
created Administrative Review Board (ARB or the Board). Secretary's
Order 2-96 (Apr. 17, 1996), 61 FR 19978, May 3, 1996.
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C. Federal Appellate Decisions and Subsequent Decision of the
Administrative Review Board (ARB)
The D.C. Circuit first discussed the Department's site of the work
definition in Building and Construction Trades Department, AFL-CIO v.
United States Department of Labor Wage Appeals Board, 932 F.2d 985
(D.C. Cir. 1991) (Midway). That case involved truck driver employees of
the prime contractor's wholly owned subsidiary, who were delivering
materials from a commercial supplier to the construction site. The
material delivery truck drivers spent ninety percent of their workday
on the highway driving to and from the commercial supply sources,
ranging up to 50 miles round trip and stayed on the site of the work
only long enough to drop off their loads, usually for not more than ten
minutes at a time.
At issue before the D.C. Circuit was whether the ``material
delivery truckdrivers'' were within the scope of construction as
defined by the regulatory provision then in effect at section 5.2(j),
which defined the statutory terms construction, prosecution,
completion, or repair to include, among other things, ``the
transporting of materials and supplies to or from the building or work
by the employees of the construction contractor or construction
subcontractor.'' The court held that ``the phrase `mechanics and
laborers employed directly upon the site of the work' restricts
coverage of the Act to employees who are working directly on the
physical site of the public building or public work being
constructed.'' 932 F.2d at 992. The court further stated that
``[m]aterial delivery truckdrivers who come onto the site of the work
merely to drop off construction materials are not covered by the Act
even if they are employed by the government contractor,'' and
consequently held that ``29 CFR Sec. 5.2(j), insofar as it includes
off-site material delivery truck drivers in the Act's coverage, is
invalid.'' Id.
The court expressly declined to rule on the validity of the
regulation defining the site of the work at 29 CFR 5.2(l). 932 F.2d at
989 n.6, 991 n.12. However, it expressed the view that Congress
intended to limit Davis-Bacon coverage to ``employees working directly
on the physical site of the public building or public work under
construction.'' 932 F.2d at 990 n.9, 991.
On May 4, 1992, the Department promulgated a revised section 5.2(j)
to accommodate the holding in Midway. 57 FR 19204. The revised
regulation limits coverage of offsite transportation to
``[t]ransportation between the actual construction location and a
facility which is dedicated to such construction and deemed a part of
the site of the work within the meaning of Sec. 5.2(l).'' 29 CFR
5.2(j)(1)(iv) (1993).
In the two more recent rulings, Ball, Ball and Brosamer v. Reich,
24 F. 3d 1447 (D.C. Cir. 1994) (Ball) and L.P. Cavett Company v. U.S.
Department of Labor, 101 F.3d 1111 (6th Cir. 1996) (Cavett), the D.C.
Circuit and Sixth Circuit, respectively, focused on the proper
geographic scope of the statutory phrase site of the work in relation
to borrow pits and batch plants established specifically to serve the
needs of covered construction projects. In Ball, the D.C. Circuit ruled
that the Department's application of section 5.2(l)(2) was inconsistent
with the Act to the extent it covers sites that are at a distance from
the actual construction location. The case involved workers at the
borrow pit and batch plant of a subcontractor who obtained raw
materials from a local sand and gravel pit and set up a portable batch
plant for mixing concrete. The pit and batch plant were dedicated
exclusively to supplying material for the completion of the 13-mile
stretch of aqueduct that the prime contractor had contracted to
construct. As described by the court, ``the borrow pit and batch plant
were located about two miles from the construction site at its nearest
point.'' 24 F.3d at 1449.
In holding that the Davis-Bacon prevailing wage requirements did
not apply to the borrow pit and batch plant workers, the court cited
Midway, in which it had found ``no ambiguity in the text [of the Davis-
Bacon Act]'' and thought it clear that ``the ordinary meaning of the
statutory language is that the Act applies only to employees working
directly on the physical site of the public building or public work
under construction.'' 24 F.3d at 1452. The court added that ``the
reasoning in Midway obviously bears on the validity of Sec. 5.2(l)(2)
to the extent that the regulation purports to extend the coverage of
the Davis-Bacon Act beyond the actual physical site of the public
building or public work under construction,'' (id.), and accordingly
ruled that ``the Secretary's regulations under which Ball was held
liable are inconsistent with the Davis-Bacon Act. See 29 CFR
Sec. 5.2(l)(1).'' 24 F.3d at 1453. The court nevertheless indicated
that the regulations at section 5.2(l)(2) might satisfy the geographic
limiting principle of the Davis-Bacon Act and Midway if the regulatory
phrase in section 5.2(l)(2) ``so located in proximity to the actual
construction location that it would be reasonable to include them''
were
[[Page 80270]]
applied ``only to cover batch plants and gravel pits located in actual
or virtual adjacency to the construction site.'' 24 F.3d at 1452.
In Cavett (arising under the Federal-Aid Highway Act, a Davis-Bacon
related Act), the Sixth Circuit held that truck drivers hauling asphalt
from a temporary batch plant to the highway under construction three
miles away were not entitled to Davis-Bacon prevailing wages. The
contract involved resurfacing of an Indiana state road, and as
characterized by the court, ``the Department of Labor included in the
site of the work both a batch plant located at a quarry more than three
miles away from the highway construction project and the Indiana
highway system that was used to transport materials from the batch
plant to the construction project.'' 101 F.3d at 1113-1114.
Relying on the D.C. Circuit's reasoning in Midway and Ball, the
Sixth Circuit disagreed with the views of the lower court that the
statutory language was ambiguous and that the Ball decision recognized
ambiguity in the statutory text when it declined to decide whether
coverage could extend to batch plants adjacent to or virtually adjacent
to the boundaries of the completed project. The Sixth Circuit reasoned
that it was not inconsistent for the Ball court to ``conclude that
while a facility in virtual adjacency to a public work site might be
considered part of that site, a facility located two (or in this case
three) miles away from the site would not.'' 101 F.3d at 1115. Thus,
agreeing with Ball, the Sixth Circuit concluded that the statutory
language means that ``only employees working directly on the physical
site of the work of the public work under construction have to be paid
prevailing wage rates.'' Id.
Subsequent to the rulings in Midway, Ball, and Cavett, the
Department's Administrative Review Board (ARB) addressed the Davis-
Bacon Act's site of the work provision in Bechtel Contractors
Corporation (Prime Contractor), Rogers Construction Company (Prime
Contractor), Ball, Ball and Brosamer, Inc., (Prime Contractor), and the
Tanner Companies, Subcontractor, ARB Case No. 97-149, March 25, 1998,
reaffirming ARB Case No. 95-045A, July 15, 1996.
This case involved a dispute over whether the Davis-Bacon
provisions applied to work performed at three batch plants established
and operated in connection with construction work on the Central
Arizona Project (CAP), a massive Bureau of Reclamation construction
project consisting of 330 miles of aqueduct and pumping plants. The
batch plants were located less than one-half mile from various pumping
stations that were being constructed as part of the project. The Board
initially ruled on the case on July 15, 1996 (Bechtel I) and later
reaffirmed that decision on March 25, 1998 (Bechtel II).
The Board observed that the D.C. Circuit's recent decision in Ball
had ``created a good deal of confusion with respect to the coverage of
the DBA.'' Bechtel I, slip op. at 6. The Board declined to read Ball or
Cavett to mean that the statutory phrase ``directly upon the site of
the work'' limits the wage standards of the DBA to ``the physical space
defined by contours of the permanent structures that will remain at the
close of work.'' Id. Rather, the Board read Ball and Cavett as only
precluding the Secretary from enforcing section 5.2(l)(2) of the
regulations in a manner that did not respect the geographic limiting
principle of the statute, while reserving ruling on section
Sec. 5.2(l)(1), since that provision was not at issue in those cases.
Bechtel II, slip op. at 5; Bechtel I, slip op. at 6. The Board stated
that interpretation of Sec. 5.2(l)(1) requires examination of the
question of whether the temporary facilities are so ``located in
virtual adjacency'' to the site of the work that it would be reasonable
to include them. Id.
The Board found that the work performed at the plants satisfied the
test set out in Sec. 5.2(l)(1), since aerial photographs of the
construction sites showed the temporary batch plants to be located on
land integrated into the work area adjacent to the pumping stations.
The Board believed there was no principled basis for excluding the
batch plant workers since they were employed on sites of the work to
the same extent as the workers who cleared the land and the workers who
inventoried, assembled, transported or operated tools, equipment or
materials on nearby or adjacent property. The Board also observed that
it is the nature of such construction, e.g., highway, airport and
aqueduct construction, that the work may be long, narrow and stretch
over many miles. Where to locate a storage area or a batch plant
along such a project is a matter of the contractor's convenience and
is not a basis for excluding the work from the DBA. The map of the
project introduced at hearing * * * abundantly illustrates that the
project consisted of miles of narrow aqueduct connected by pumping
stations. The only feasible way to meet the needs of the aqueduct
construction was to have the concrete prepared at a convenient site
and transported to the precise area of need. This equally holds true
for the storage and distribution of other materials and equipment.
Faced with such a project, the Board finds that work performed in
actual or virtual adjacency to one portion of the long continuous
project is to be considered adjacent to the entire project.
Bechtel I, slip op. at 6.
D. The Proposed Rule
The Department, by Notice of Proposed Rulemaking (NPRM) published
in the Federal Register on September 21, 2000 (65 FR 57270), proposed
for public comment an amendment to the regulations that define the
Davis-Bacon Act language construction, prosecution, completion, or
repair at 29 CFR 5.2(j), and site of the work at 29 CFR 5.2(l). The
Department explained that revisions to these definitions are needed (1)
to clarify the regulatory requirements in view of the three appellate
court decisions, which concluded that the Department's application of
these regulatory definitions was at odds with the language of the
Davis-Bacon Act that limits coverage to workers employed ``directly
upon the site of the work,'' and (2) to address situations that were
not contemplated when the current regulations were promulgated.
Specifically, the Department proposed to revise the site of the
work definition to include material or supply sources, tool yards, job
headquarters, etc., only where they are dedicated to the covered
construction project and are adjacent or virtually adjacent to a
location where the building or work is being constructed. The
Department also proposed to revise the regulatory definition of
construction to provide that the off-site transportation of materials,
supplies, tools, etc., is not covered, except where such transportation
occurs between the construction work site and a dedicated facility
located ``adjacent or virtually adjacent'' to the construction site.
However, the proposal did not alter the Department's view that truck
drivers employed by construction contractors and subcontractors must be
paid Davis-Bacon wage rates for any time spent on-site which is more
than de minimis. Moreover, the Department did not propose to define the
terminology ``adjacent or virtually adjacent,'' leaving this question
to be determined on a case-by-case basis, given that the actual
distances will vary depending upon the size and nature of the project
in question.
The Department also proposed to revise the site of the work
definition so that it will address certain construction situations that
the Department believes warrant coverage, which were not contemplated
by the current regulations. The Department explained, by way of
example, that new construction
[[Page 80271]]
technologies have been developed that make it practical and
economically advantageous to build major segments of complex public
works, such as lock and dam projects and bridges, at locations some
distance up-river from the locations where the permanent structures
will remain when their construction is completed. The Department noted
that, in such situations, much of the construction of the public work
is performed at a secondary site other than where it will remain after
construction is completed, and therefore, believed that it is
reasonable and consistent with the language and intent of the statute
to cover such a location where it has been established specifically for
the purpose of constructing a significant portion of a ``public
building or public work''. The Department further stated that, to the
best of its knowledge, projects built in such a manner are currently
rare, and that it did not anticipate that the proposed rule would
create a major exception to the normal rule limiting the site of the
work to the place where the building or work will remain when the
construction is completed. The Department, therefore, proposed to
revise Sec. 5.2(l)(1) to include within the site of the work, secondary
sites, other than the project's final resting place, which have been
established specifically for the performance of the Davis-Bacon covered
contract and at which a significant portion of the public building or
work called for by the contract is actually constructed.
In conjunction with this change, the Department also proposed to
amend Sec. 5.2(j) to provide that transportation of portion(s) of the
building or work between a secondary covered construction site and the
site where the building or work will remain when it is completed is
subject to Davis-Bacon requirements. The Department stated that the
site of the work, under these circumstances, would be literally moving
between the two work sites, and therefore the laborers or mechanics who
transport these portions or segments of the project should be
reasonably viewed as ``employed directly upon the site of the work.''
The Department received 50 responses to the NPRM during the public
comment period: two from federal agencies: the U.S. Army Corps of
Engineers and the Department of the Air Force; four from state
Departments of Transportation (DOT's) in Utah, Oregon, Iowa and West
Virginia; thirteen contractor associations: the Associated General
Contractors of America, Inc. (AGC) and the California AGC, AGC of
Washington, the New York State AGC Chapter, the General Contractors
Association of New York (which represents the heavy construction
industry active in New York City), Associated Builders and Contractors,
Inc. (ABC), the American Road & Transportation Builders Association
(ARTBA), the National Asphalt Pavement Association (NAPA), the National
Ready Mixed Concrete Association (NRMCA), an attorney for the
California Dump Truck Owners Association, the Wisconsin Transportation
Builders Association (WTBA), and the Contractors Association of Western
Pennsylvania; the American Society of Civil Engineers (ASCE); an
engineering firm--Johansen & Tuttle Engineering, Inc.; seventeen
construction companies, ten reflecting AGC views; and the Pinal Gila
Community Child Services, Inc.
Also submitting comments were ten union and union-supported
organizations: the Building and Construction Trades Department, AFL-CIO
(Building Trades), the International Union of Operating Engineers
(IUOE), the Laborers International Union of North America (LIUNA), and
the International Brotherhood of Teamsters, AFL-CIO; the National
Alliance for Fair Contracting, and the Illinois Foundation for Fair
Contracting (FFC), the Indiana-Illinois FFC, and the Midwest FFC; and
the International Brotherhood of Electrical Workers, Local Unions Nos.
193 and No. 146 (Springfield and Decatur, Illinois, respectively). An
individual who has been involved in wage regulation for twelve years
also provided comments.
III. Comments and Analysis
The following is an analysis of all the principal comments
received. Each submission has been thoroughly reviewed, and each
criticism and suggestion has been given careful consideration. For each
proposed revision, the analysis contains a description of the major
comments and the Department's conclusions regarding those comments.
A. Site of the Work--Sec. 5.2(l)
1. Limiting Coverage of Dedicated Facilities to Those That Are
``Adjacent or Virtually Adjacent'' to the Construction Location
The Building Trades, LIUNA, the Teamsters and the Operating
Engineers oppose this change, urging the Department to adopt a rule
that would extend prevailing wage coverage to locations that are
dedicated exclusively, or nearly so, to the performance of the covered
project without regard to their geographic proximity to the actual
construction site. The General Contractors Association of New York,
Inc. also opposes this change, urging the Department to retain its
previous interpretation of the law, i.e., covering facilities that are
located ``within a reasonable distance'' from the actual construction
site. Johansen & Tuttle Engineering, Inc. expressed concern that
disputes would arise if everyone working on a Davis-Bacon contract were
not paid on the same basis.
The Building Trades, based on its reading of the legislative
history of the Davis-Bacon Act, stated that the term ``site of the
work'' was intended to refer to any location where tasks relating to
construction of the public building or public work are performed by
laborers and mechanics employed by contractors and subcontractors
otherwise covered by the Davis-Bacon or related Acts. The Building
Trades stated that the merits of this legislative history argument have
never been considered by the courts, and therefore, the Secretary is
not precluded from adopting a site of the work definition that extends
coverage beyond the physical site of the public building or public work
under construction. The Operating Engineers commented that the
statutory language ``directly upon the site of the work'' is ambiguous,
and can fairly be construed to mean any location where work in
furtherance of the contract occurs.
The Department believes that both the D.C. Circuit and the Sixth
Circuit have spoken clearly on these issues and that the Department is
constrained by these courts' decisions in Ball and Cavett,
respectively, to limit prevailing wage coverage of off-site, dedicated
support facilities to those that are either adjacent or virtually
adjacent to the construction location.
The Building Trades and LIUNA both stated that the same
justification for including locations established specifically for the
purpose of constructing a significant portion of a building or work in
the definition of ``site of the work'' for Davis-Bacon purposes applies
with equal force to locations used for activities such as temporary
batch plants, fabrication facilities, borrow pits and tool yards that
are directly related to the covered construction project, provided
those locations are dedicated exclusively or nearly so to supporting
that project. In the Department's view, the underlying justification
for covering secondary construction sites where significant portions of
the building or work are being constructed has no application to
dedicated support facilities, such as those mentioned in the
regulation. The
[[Page 80272]]
basis for the Department's proposed change (discussed below), to
include secondary construction sites where a significant portion of the
public building or work called for by the contract is constructed, is
that the Department views such locations as the actual physical site of
the public building or work being constructed. On the other hand, the
Department does not view the location of dedicated support facilities,
which typically involve the furnishing of materials or supplies, as an
actual physical location of the public building or public work. Rather,
such dedicated support facilities are viewed as ``included'' within the
``site of the work'' only where they are located on, adjacent, or
virtually adjacent to the site of the public building or public work.
In its comments, the AGC questioned whether a facility located two
miles away from a Davis-Bacon construction site is ``adjacent or
virtually adjacent'' to it, and expressed concern that the Department's
proposal provides inadequate guidance as to the geographical range for
covering support facilities. The AGC of Texas urged the Department to
define ``site of the work'' precisely and to exempt facilities not
located directly upon the physical site of the work. The ABC, on the
other hand, sees no purpose to engaging in rulemaking to define
``adjacent,'' because it means ``next to; adjoining,'' and any attempts
to expand the Davis-Bacon Act's coverage to non-adjacent locations
violates the holdings in Ball and Cavett. The Air Force stated that it
took no exception to this proposed change, based on its assumption that
the Department would ``not attempt to expand the term into something
more closely resembling its previous `in proximity' test.''
The state DOT's of Oregon, Utah, Iowa, and West Virginia, and the
National Ready Mixed Concrete Association stated that the Department
should clarify the meaning of ``adjacent or virtually adjacent'' in
terms of the distance from the actual construction site within which
dedicated support facilities will be deemed covered. The West Virginia
DOT recommended that facilities located one-fourth of a mile from the
construction site be considered ``virtually adjacent''; the Iowa DOT
suggested that ``virtually adjacent'' should be defined as a specific
distance, such as ``1,500 meters from the limits of the work site or
from the project right of way, etc.''; and the Utah DOT recommended
setting the distance at ``approximately one-half mile, with the
qualifier that if the facility is set up more than a half-mile away
just to avoid paying Davis-Bacon, [the contractor] must pay Davis-Bacon
anyway.''
The Operating Engineers, on the other hand, commented that, if the
Department continues to include a geographic test in its site of the
work definition, it should not define the terminology ``adjacent or
virtually adjacent'' because a strict limitation in a definition of
those terms would have the potential to create results contrary to the
intent of the Act. The Operating Engineers agreed with the Department's
observation in its NPRM that ``actual distance may vary depending upon
the size and nature of the project,'' and commented that ``[t]he Wage
and Hour Division must have the latitude to reach results that make
sense given the parameters of the particular project under
construction.''
The U.S. Army Corps of Engineers commented that ``[c]ase by case
referral to the Department for resolution of `actual or virtual
adjacency' would disrupt both contract administration and effective
management of project appropriations.'' However, the Corps' discussion
of this concern related primarily to the Department's proposal to
expressly cover secondary sites where substantial portions of the
project are constructed, which does not contain an ``actual or
virtually adjacent'' limitation. In this same vein, the Nicholas Grant
Corporation commented that if the question of whether a support
facility is ``adjacent or virtually adjacent'' is to be determined on a
case-by-case basis, such determination ``must be made prior to bid time
so the contractor can bid the project with reasonable knowledge that
their construction costs are covered.''
After review of the relevant comments, the Department continues to
be of the view that it should not include a precise definition of the
terms ``adjacent or virtually adjacent'' in its regulations. The
Department believes that by using the term ``virtual'' the courts
intended the Department to apply the ``site of the work'' requirement
narrowly, but with common sense and some flexibility. As the Board
observed in Bechtel II, ``[i]t is not uncommon or atypical for
construction work related to a project to be performed outside the
boundaries defined by the structure that remains upon completion of the
work.'' The Board cited as an example construction cranes that are
typically positioned outside the permanent site of the construction
because it would not be possible to place the crane where the building
is to stand. Another common example would be work at a temporary batch
plant constructed for the exclusive purpose of supplying asphalt for
the construction of a highway project. It would certainly appear
unlikely for practical reasons that the contractor would install the
batch plant directly on the site of the highway because it would stand
in the way of the paving process. Rather, the batch plant would more
likely be located somewhere off to the side of the highway, i.e.,
nearby, but not directly upon the site of where the highway will remain
upon completion. Thus, while the Department clearly recognizes that the
courts have narrowed the geographic limitation for covering temporary
support facilities as previously applied under the regulations, we also
believe that the courts allowed the Department some leeway to determine
whether such facilities are in ``virtual adjacency'' to the permanent
construction site.
Since it is apparent that in certain circumstances dedicated
support facilities not located directly on the site where the permanent
construction will remain should be covered, the question arises of just
how far such a facility can be from the actual construction site and
still be considered part of the ``site of the work.'' The Department is
of the opinion that establishing a specific maximum distance would be
ill-advised because it would create an arbitrary, artificial benchmark
for determining Davis-Bacon coverage that ignores the differing nature
of various construction processes. This would enable contractors to
locate dedicated support facilities immediately beyond any such
boundary solely for the purpose of avoiding Davis-Bacon coverage,
thereby defeating the purposes of the Act.
The Department has concluded that the only fair and practical
method for determining whether a temporary facility is virtually
adjacent to the ``site of the work'' is on a case-by-case basis. The
Department believes that the Board's analysis in the two Bechtel
decisions, following close on the heels of the issuance of the court
opinions in Ball and Cavett, provides an excellent example of such a
determination and, as such, provides considerable guidance on how the
amended definition will be applied by the Department. In the Bechtel
matter, the record was unclear as to the exact measurement of distance
between the location of the temporary batch plants and the permanent
location of the pumping stations, which were constructed as part of the
330-mile aqueduct project. The distances were estimated at somewhere
between several hundred feet and one-half mile. Because of the narrow,
linear nature of the project, concrete from the batch plants was
delivered to construction locations up to 15 miles from the batch
plants.
[[Page 80273]]
Based in part on its examination of aerial photographs, the Board
determined that the batch plants were located ``on land integrated into
the work area adjacent to the pumping plants,'' and that ``[w]orkers at
the batch plants were employed on the sites of work equally as much as
the workers who cleared the land and the workers who inventoried,
assembled, transported or operated tools, equipment or materials on
nearby or adjacent property.'' Bechtel I, slip op. at 6. The Board
concluded that ``in examining a project like the [Arizona aqueduct
project]--a huge project stretching over approximately 330 miles--`it
is not unreasonable' to consider the three batch plants in `virtual
adjacency' to the project, given their proximity to the pumping
stations as clearly shown by the photographs in evidence.'' Bechtel II,
slip op. at 6.
The Department believes that the Bechtel matter illustrates the
difficulties inherent in establishing a specific distance for defining
the terms, ``virtually adjacent.'' As demonstrated in Bechtel, it can
be almost impossible to determine the exact outer boundaries of large
public works projects, such as the aqueduct project in Bechtel or a
major highway construction project. Thus, a numerical figure
representing the maximum distance a dedicated facility can be located
from the construction site would be arbitrary and impractical to apply.
In addition, the Department does not believe that a single linear
measurement of distance could be fairly applied to determine the
coverage of all off-site facilities, given that Davis-Bacon projects
vary to such a wide degree in size and nature. See, e.g., Bechtel II,
slip op. at 6. For example, it was reasonable, given the magnitude and
the nature of the aqueduct project in Bechtel, for the Board to
conclude that the batch plants located somewhere up to one-half mile
from the actual construction sites (the pumping stations) were located
``virtually adjacent'' to the project. In contrast, the ``site of the
work'' limits applicable to a project for the construction of a single
building in an urban location would likely be more constricted. In such
a case, a dedicated facility located only a few city blocks away from
the building project would most likely not be considered ``virtually
adjacent'' for Davis-Bacon purposes.
The Department believes that in practice the determination of the
site of the work will not be difficult. In fact, the Bechtel case is
the only case we are aware of in which the issue has arisen since the
Ball and Cavett decisions. The Department would expect contracting
agencies and contractors to perform a practical analysis similar to
that employed by the Board in the Bechtel decisions to determine
whether temporary facilities established nearby to serve the federal or
federally-assisted project are covered by the Davis-Bacon provisions,
just as they do with respect to other issues as a regular matter.
2. Inclusion of Secondary Sites Established Specifically for the
Performance of the Davis-Bacon Covered Contract and at Which a
Significant Portion of the Public Building or Work Called for by the
Contract Is Constructed
In support of this proposed change, LIUNA, the Building Trades, and
the Operating Engineers have each, to a varying degree, provided
detailed descriptions of the innovative construction techniques
developed and currently in use, which allow significant portions of
public buildings and public works to be constructed at locations other
than the final resting place of the building or work. The Building
Trades stated that the amount of so-called ``off-site'' work
specifically related to many construction projects has steadily
expanded in ways never contemplated when the Davis-Bacon Act was
amended in 1935 to include the language ``directly upon the site of the
work.'' The Operating Engineers stated that Congress clearly intended
to cover actual construction sites, but could never have envisioned
that ``significant portions'' of public works could be constructed
other than at the final resting place of the public work. The General
Contractors Association of New York similarly commented that new
construction technologies have made it practical for ``major segments
of complex public works'' to be built off-site and then transported by
barge or rail to be put into place at the final location, and that such
projects were not contemplated by the Department's current rules
because such technology did not exist at the time of their
promulgation.
LIUNA, the Building Trades, and the Operating Engineers each cite
the Braddock Locks and Dam project on the Monongahela River in
Allegheny County, Pennsylvania as an example that illustrates the
compelling need for modification of the current site of the work
regulation. The Braddock project involves the construction of two
massive floating structures, each about the length of a football field,
which would comprise the vast bulk of the new gated dam. The actual
construction of these floating structures is at an upriver location on
or near the water. They are then floated down the river to the point
where they are submerged into the dam and gate piers. According to
these commenters, the Army Corps of Engineers, which is contracting for
this work, views the construction of these 300-foot structures as
``off-site'' work, and thus, has taken the position that the workers
who build the structures are not entitled to Davis-Bacon coverage.
Citing language in the Cavett decision, LIUNA stated that there is ``no
doubt'' that the place where the floating structures will be
constructed is ``the actual physical site of the public work under
construction.'' 101 F.3d at 1115.
The Operating Engineers also cited two Wage Appeals Board cases as
demonstrating the need for this regulatory change--ATCO Construction,
Inc., WAB Case No. 86-1 (August 22, 1986), and Titan IV Mobile Service
Tower, WAB Case No. 89-14 (May 10, 1991). The Operating Engineers
suggested that the absence of a regulation allowing coverage of a
construction site other than the place where the building or work will
remain resulted in the Board inappropriately applying the geographic
test set forth in section 5.2(l)(2) in reaching inconsistent
conclusions regarding coverage of the remote construction locations
that were at issue in those two cases.
In ATCO, the Board found that Davis-Bacon coverage applied to
workers at a temporary dedicated facility in Portland, Oregon that was
established exclusively for the construction of about 405 military
housing units, which were then shipped 3,000 miles for final placement
at Adak Naval Air Station in the Aleutian Islands, Alaska. The
Operating Engineers stated that the Board reached the right result for
the wrong reason, and by finding the construction facility in Portland
to meet the regulatory geographic test of reasonable proximity to the
Naval Air Station 3,000 miles away, left the Department vulnerable to
criticism from the courts. In Titan, the Board reached an opposite
result with respect to workers who constructed several ``modular
units'' that were to be transported to a distant location where they
would be assembled into a 300-foot mobile service tower for building
and servicing Titan missiles. According to the Operating Engineers, the
largest of the modular units was equivalent in size to a three-story
building. The units were originally constructed at a dedicated facility
in Tongue Point, Oregon, and then transported by barge to Vandenberg
AFB, which was located approximately 1,000 miles away, where the units
were finally assembled. The Board found that the Tongue Point location
did not
[[Page 80274]]
satisfy the geographic prong of the two-part site of work test for
covering off-site facilities, and thus, denied Davis-Bacon coverage to
nearly 400 construction workers, notwithstanding that they performed
40% of the total amount of work called for by the contract.
The Operating Engineers stated that there is no rational basis for
the selection of one site of work over another where substantial
construction work occurs at more than one site, and that the proposed
change to section 5.2(l)(1) will ensure that Davis-Bacon coverage
applies to projects such as the Braddock Lock and Dam, the Titan
missile service tower, and the ATCO housing unit project, where
significant portions of a public work are constructed at dedicated
sites other than where the public work will remain.
The ABC, AGC, several other contractor associations, individual
contractors, the Oregon Department of Transportation, the Air Force and
the Army Corps of Engineers opposed this proposed change to the
definition of ``site of the work,'' stating it amounts to an expansion
of statutory coverage and would result in vague standards for coverage
without objective criteria for determining what constitutes a
``significant portion'' of the project. The ABC also commented that the
Department has not provided any credible basis for its assertion that
this proposed change will not create a ``major'' exception to the
normal rule limiting the site of the work to the place where the
building or work will remain. The ABC also expressed concern that the
new rule would threaten to expand the Act's coverage to ``many existing
off-site pre-fabrication specialty contractors.''
The Air Force and the Army Corps of Engineers expressed concern
that this proposed change would present significant procurement and
administrative problems. The Air Force states that agencies would be
compelled in some instances ``to solicit and award contracts without
knowing where all of the various possible sites of `significant work'
may be located after award, and that some solicitations would require
``numerous wage determinations to cover all the possible `areas' where
some construction might occur, depending upon which bidder might be
awarded the contract. The Corps similarly commented that ``[a]ny effort
on the part of the contracting agency to `guess' the location of
potential secondary sites planned by potential bidders can not be
fairly administered.''
After review of these comments, the Department continues to be of
the view that the current site of the work definition does not
adequately address certain rare situations that warrant coverage. As
many of the comments have demonstrated, new construction technologies
currently exist that make it practical and economically advantageous to
build major segments of complex public works, such as lock and dam
projects and bridges, at locations some distance up-river from the
locations where the permanent structures will remain when their
construction is completed. Several commenters have provided actual
examples of current, ongoing projects where payment of Davis-Bacon
wages for work performed at the secondary locations is in dispute.
These comments have also shown that, in such situations, much of the
actual construction of the public work itself is performed at a
secondary site other than where it will remain after construction is
completed.
The existing regulatory definition in Sec. 5.2(l)(1) states that
coverage is ``limited to the physical place or places where
construction called for in the contract will remain * * * and other
adjacent or nearby property.'' As the Operating Engineers demonstrated
with reference to past Wage Appeals Board cases, literal application of
the current regulatory language can result in the exclusion from
coverage construction at a location some distance from the final
resting place of a project, even if a significant portion of the
project is actually constructed at that location. The Department does
not believe such a result to be consistent with either the language or
intent of the Davis-Bacon Act.
The Department does not believe that this change constitutes an
expansion of statutory coverage beyond the geographical requirement
``directly upon the site of the work,'' as several commenters have
alleged. As the court in Cavett stated, ``The statutory phrase
`employed directly on the site of the work' means that only employees
working directly on the physical site of the public work under
construction have to be paid prevailing wages.'' 101 F.3d at 1115. The
Department believes that when a significant portion of a project, like
the 300-foot floating structures that comprise the Braddock Lock and
Dam, the three-story Titan missile service tower modules, or the 405
Adak housing units, is constructed at a secondary location, such
location is, in actuality, the physical site of the public work being
constructed. Or, as the Operating Engineers succinctly stated, ``it is
the covered construction project.'' Therefore, the Department concludes
that a location established specifically for the purpose of
constructing a significant portion of a ``public building or public
work'' is reasonably viewed as an independent ``site of the work''
within the meaning of the Davis-Bacon Act and that employees performing
construction work at such a location should receive prevailing wages,
regardless of the distance between the location of their construction
site and the final resting place of the project.
The Department emphasizes that it does not intend that this change
to the definition of the site of the work will create a major exception
to the normal rule limiting the site of the work to the place where the
building or work will remain when the construction is completed.
Ordinary commercial fabrication plants, such as plants that manufacture
prefabricated housing components, would not be covered by this
amendment because they are not ``established specifically for the
performance of the contract or project.'' Furthermore, ordinary
material supply sites, even if dedicated to the project, would not
involve the construction of a ``significant portion'' of the building
or work being constructed pursuant to the government contract. This
definitional change is designed to apply Davis-Bacon coverage only to
locations where such a large amount of construction is taking place
that it is fair and reasonable to view such location as a site where
the public building or work is being constructed. In the past, the Wage
Appeals Board has termed such a situation an ``anomaly,'' but the
Department has treated such anomalous situations with inconsistent
results under the current regulations (ATCO and Titan). It is the
Department's intention in this rulemaking to require in the future that
workers who construct significant portions of a federal or federally-
assisted project at a location other than where the project will
finally remain, will receive prevailing wages as Congress intended when
it enacted the Davis-Bacon and related Acts.
Following review of the comments, the Department continues to be of
the view that it is rare for projects to be built in this manner. While
LIUNA in particular has described various types of structures that can
be built at one location and then transported to another, the
commenters, as a whole, have identified only two ongoing lock and dam
projects (Braddock and Olmsted) as examples of projects that could fall
within the criteria of this amendment. Additionally, the Department is
aware of only two administrative cases considered by the Department's
Wage Appeals Board or Administrative Review Board where a
[[Page 80275]]
significant portion of a project was constructed at a location
established specifically for the project before being transported to
another location for installation (ATCO and Titan).
With respect to the comments urging the Department to specifically
define the terms ``significant portion,'' we believe that it is both
unnecessary and unwise to do so. We think that a precise definition
would be unwise because the size and nature of the project will dictate
what constitutes a ``significant portion'' under this provision. We
believe such a definition to be unnecessary because, in those rare
situations where projects are constructed in this manner, application
of this provision should normally be obvious. However, if the agency is
unable to determine whether this provision should apply, we anticipate
that any question would typically arise early in the procurement
process so that advice could be obtained from the Department of Labor
in a timely manner.
We appreciate the concerns raised by the contracting agencies since
some changes in their procedures may be necessary. However, since these
projects will likely be rare, the Department does not anticipate that
this amendment will place any significant additional burden on the
contracting agencies with respect to their procurement practices. The
Department recognizes that contracting agencies will need a mechanism
to ascertain in advance the locations where potential bidders would
build the project so that wage determinations may be obtained for each
location. The Department believes these mechanisms are best developed
through the agencies' procurement regulations. The Department points
out that most wage determinations are published and widely available.
The Department is of the view that, in most instances where a
significant portion of a major project is to be constructed at a
secondary site, the possible locations of the construction sites would
be limited as a practical matter, and therefore, it would not be
onerous for the contracting agency to include a wage determination
covering the possible construction locations when soliciting bids for
the project. One option may be the two-step process utilized under the
McNamara-O'Hara Service Contract Act. See 29 CFR 4.54(b).
B. Coverage of Transportation--Sec. 5.2(j)
1. Limiting Coverage of Off-Site Transportation of Materials, Supplies,
Tools, etc., to Transportation Between the Construction Work Site and a
Dedicated Facility Located ``Adjacent or Virtually Adjacent'' to the
Construction Site
The Building Trades, LIUNA and the Teamsters oppose this amendment,
urging the Department to reinstate or repromulgate the definition of
``construction, prosecution, completion, or repair'' that was withdrawn
in 1992, which included transportation of materials and supplies by
laborers and mechanics employed by contractors and subcontractors
covered by the Davis-Bacon and related Acts. These commenters
maintained that the Department's revision of section 5.2(j) in response
to Midway to limit coverage of off-site transportation to that
occurring between the actual construction site and dedicated, nearby
facilities was unnecessary. In their view, Midway did not address the
question of whether the regulatory definition of ``construction,'' in
effect at that time, could validly be applied to truck drivers hauling
off-site to and from projects covered by the so-called ``related
Acts,'' which require the payment of Davis-Bacon prevailing wages on
federally-assisted projects. They note that the related Acts generally
do not contain the ``site of the work'' language relied upon by the
court in Midway. They believe that the Department should in each case
look to the particular statute applicable to the project to determine
whether it contains a site-of-work limitation that would preclude
coverage of off-site truck driving activities.
This request in effect asks the Department to apply different
standards for prevailing wage coverage to projects subject to the
Davis-Bacon Act from those applicable to the related Acts. The
Department believes that such a result would run contrary to the spirit
and intent of Reorganization Plan No. 14 of 1950, which authorizes the
Secretary of Labor to ``prescribe appropriate standards, regulations,
and procedures'' in order to ``assure consistent and effective
enforcement'' of the labor standards provisions of the Davis-Bacon Act
and the related Acts. Coverage standards that would differ for the same
type of work depending upon the applicable statute would likely result
in confusion in the construction industry among both contractors and
contracting agencies and likely would lead to labor dissatisfaction and
disputes. Furthermore, the Sixth Circuit rejected the notion that
different coverage standards might be applied to related Act projects,
when it concluded that the Federal-Aid Highways Act, a Davis-Bacon
related Act, ``incorporates from the Davis-Bacon Act not only its
method of determining prevailing wage rates but also its method of
determining prevailing wage coverage. In other words, if 29 CFR 5.2(l)
is inconsistent with the Davis-Bacon Act it must also be inconsistent
with the Federal-Aid Highways Act.'' Cavett, 101 F.3d at 1116. An
exception would of course exist if the language and/or clear
legislative history of a particular Davis-Bacon related Act reflected
clear congressional intent that a different coverage standard be
applied. See, e.g., the United States Housing Act of 1937; the Housing
Act of 1949; and the Native American Housing Assistance and Self-
Determination Act of 1996.
The AGC and the ABC oppose the proposed amendment to section
5.2(j), contending that the regulation should instead be amended to
``exempt'' delivery truck drivers from Davis-Bacon coverage while
engaged in hauling activities, regardless of who employs them and how
much time they spend on-site. The AGC, the ABC, the Wisconsin
Transportation Builders Association and the American Road &
Transportation Builders Association also object to the Department's
statement in the NPRM that ``truck drivers employed by construction
contractors and subcontractors must be paid at least the rate required
by the Davis-Bacon Act for any time spent on-site which is more than de
minimis.'' 65 FR 57272. The AGC states that the ``de minimis''
threshold is ``subjective, vague and ambiguous,'' but assuming such a
threshold is appropriate, 50 percent would be the proper standard,
i.e., only where the employee spends more than 50 percent of his or her
total time in a workweek performing work as a laborer or mechanic on-
site should the worker be compensated at prevailing wage rates.
The Department disagrees that Midway exempts all material delivery
truck drivers regardless of how much time they spend on the site of the
work. Clearly, truck drivers who haul materials or supplies from one
location on the site of the work to another location on the site of the
work are ``mechanics and laborers employed directly upon the site of
the work,'' and therefore, entitled to prevailing wages. Likewise,
truck drivers who haul materials or supplies from a dedicated facility
that is adjacent or virtually adjacent to the site of the work pursuant
to amended section 5.2(l) are employed on the site of the work within
the
[[Page 80276]]
meaning of the Davis-Bacon Act and are entitled to prevailing wages for
all of their time spent performing such activities.
It is also the Department's position, as stated in the NPRM, that
truck drivers employed by construction contractors and subcontractors
must be paid at least Davis-Bacon rates for any time spent on-site
which is more than de minimis. It must be noted that this is not a
regulatory change, nor is it a subject of this rulemaking. However, the
Department will provide some discussion on this issue in order to
provide some clarification as to its position.
In the wake of Midway and the corresponding change to our
regulations, the Department no longer asserts coverage for time spent
off-site by material delivery truck drivers. Midway determined that
material delivery truck drivers are not covered because their work is
not performed on the site of the work, not because of the type of work
they perform. The court held ``that the Act covers only mechanics and
laborers who work on the site of the federally-funded public building
or public work, not mechanics and laborers employed off-site, such as
suppliers, materialmen, and material delivery truckdrivers, regardless
of their employer.'' 932 F.2d 992 (emphasis added). Thus, Midway
provided material delivery truck drivers no blanket exception to Davis-
Bacon coverage, as some commenters seem to suggest.
Giving the Act a literal reading, as the courts have done in
Midway, Ball, and Cavett, all laborers and mechanics, including
material delivery truck drivers, are entitled to prevailing wages for
any time spent ``directly upon the site of the work.'' The Midway court
noted that the Midway truck drivers came on-site for only ten minutes
at a time to drop off their deliveries and that the time spent
``directly upon the site of the work'' constituted only ten percent of
their workday, but that no one had argued in the case that the
truckdrivers were covered only during that brief time. Our reading of
Midway does not preclude coverage for time spent on the site of the
work no matter how brief. However, as a practical matter, since
generally the great bulk of the time spent by material truck drivers is
off-site beyond the scope of Davis-Bacon coverage, while the time spent
on-site is relatively brief, the Department chooses to use a rule of
reason and will not apply the Act's prevailing wage requirements with
respect to the amount of time spent on-site, unless it is more than
``de minimis.'' Pursuant to this policy, the Department does not assert
coverage for material delivery truckdrivers who come onto the site of
the work for only a few minutes at a time merely to drop off
construction materials.
2. Covering Transportation of Portions of the Building or Work Between
a Secondary Covered Construction Site and the Site Where the Building
or Work Will Remain When It Is Completed
The Department received only a few comments in connection with this
proposed change. The ABC stated that ``the Department has no authority
to extend the Act's coverage to the nation's highways or rivers for the
action of transporting items of any kind to or from a construction
site, or between sites of any kind.'' The ABC further stated that the
Department's explanation that the site of the work is ``literally
moving'' between the two work sites is ``completely unsupported and
contrary to law.'' The American Road & Transportation Builders
Association objected to this provision on the grounds that it will
increase transportation costs. The Army Corps of Engineers stated that
``moving sites of work'' is an impractical concept because multiple
wage determinations might have to be issued in cases where the project
was transported across more than one wage determination area. The
Foundations for Fair Contracting favored this proposal.
The Department does not anticipate that this proposed change will
have a substantial impact since the Department believes that the
instances where substantial amounts of construction are performed at
one location and then transported to another location for final
installation are rare. Thus, the Department believes that this type of
transportation activity will occur rarely. The Department nonetheless
continues to believe that workers who are engaged in transporting a
significant portion of the building or work between covered sites, as
contemplated in Sec. 5.2(l)(1), are ``employed directly upon the site
of the work,'' and therefore, are entitled to prevailing wages,
provided they are ``laborers and mechanics'' under the Act. However,
not included in such coverage would be the separate transportation of
materials and supplies between the two covered ``sites of the work.''
With respect to the Corps' concern that multiple wage determinations
might apply in some instances, the Department has made an
administrative determination that when faced with the prospect that
transportation will take place in more than one wage determination
area, the applicable wage determination will be the wage determination
for the area in which the construction will remain when completed and
will apply to all bidders, regardless of where they propose to
construct significant portions of the project.
IV. Executive Order 12866; Small Business Regulatory Enforcement
Fairness Act; Unfunded Mandates Reform Act
No comments were received on the Department's initial
determinations under this section that the proposed rule was neither a
``significant regulatory action'' within the meaning of section 3(f) of
Executive Order 12866, nor a ``major rule'' under the Small Business
Regulatory Enforcement Fairness Act of 1996, and that this rulemaking
is not subject to the Unfunded Mandates Reform Act of 1995. Because of
the interests expressed by some of the contracting agencies, the final
rule is nonetheless being treated as a significant rule. However, the
rule is not economically significant and does not require preparation
of a full regulatory impact analysis. The rule is not expected to have
an annual effect on the economy of $100 million or more or adversely
affect in a material way the economy, a section of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or tribal governments or communities. The
modifications to regulatory language in this final rule limit coverage
of off-site material and supply work from Davis-Bacon prevailing wage
requirements as a result of appellate court rulings. In addition, the
final rule makes only a limited amendment to the site of the work
definition to address an issue not contemplated under the current
regulatory language--those instances where significant portions of
buildings or works may be constructed at secondary sites which are not
in the vicinity of the project's final resting place. It is believed
that such instances will be rare, and that any increased costs which
may arise on such projects would be offset by the savings resulting
from the other changes that limit coverage.
The Department also concludes that the rule is not a ``major rule''
requiring approval by the Congress under the Small Business Regulatory
Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.). The Department
continues to be of the view that the rule will not likely result in (1)
an annual effect on the economy of $100 million or more; (2) a major
increase in costs or prices for
[[Page 80277]]
consumers, individual industries, Federal, State or local government
agencies, or geographic regions; or (3) significant adverse effects on
competition, employment, investment, productivity, innovation, or on
the ability of U.S.-based enterprises to compete with foreign-based
enterprises in domestic or export markets.
For purposes of the Unfunded Mandates Reform Act of 1995, this rule
does not include any federal mandate that may result in excess of $100
million in expenditures by state, local and tribal governments in the
aggregate, or by the private sector. Furthermore, the requirements of
the Unfunded Mandates Reform Act, 2 U.S.C. 1532, do not apply here
because the rule does not include a Federal mandate. The term Federal
mandate is defined to include either a Federal intergovernmental
mandate or a Federal private sector mandate. 2 U.S.C. 658(6). Except in
limited circumstances not applicable here, those terms do not include
an enforceable duty which is a duty arising from participation in a
voluntary program. 2 U.S.C. 658(7)(A). A decision by a contractor to
bid on federal and federally assisted construction contracts is purely
voluntary in nature, and the contractor's duty to meet Davis-Bacon Act
requirements arises from participation in a voluntary federal program.
V. Executive Order 13132 (Federalism)
The Department has reviewed this rule in accordance with Executive
Order 13132 regarding federalism, and has determined that it does not
have federalism implications. The rule does not have substantial direct
effects on the states, on the relationship between the national
government and the states, or on the distribution of power and
responsibilities among the various levels of government.
VI. Regulatory Flexibility Analysis
The Department has determined that this regulation will not have a
significant economic impact on a substantial number of small entities
within the meaning of the Regulatory Flexibility Act. This rule will
primarily implement modifications resulting from court decisions
interpreting statutory language, which would reduce the coverage of
Davis-Bacon prevailing wage requirements as applied to construction
contractors and subcontractors, both large and small, on DBRA covered
contracts. In addition, the rule will make a limited amendment to the
site of the work definition to address an issue not contemplated under
the current regulatory language--those instances where significant
portions of buildings or works may be constructed at secondary sites
which are not in the vicinity of the project's final resting place. The
Department believes that such instances will be rare, and that any
increased costs which may arise on such projects would be offset by the
savings due to the other limitations on coverage provided by the rule.
The Department of Labor has certified to this effect to the Chief
Counsel for Advocacy of the Small Business Administration.
Notwithstanding the above, the Department prepared and published a
Regulatory Flexibility Analysis in the NPRM. After reviewing comments
on the proposed rule, the Department has prepared the following final
regulatory flexibility analysis regarding this rule:
(1) The Need for and Objectives of the Rule
The Department is promulgating this new rule to clarify the
regulatory requirements concerning the Davis-Bacon Act's site of the
work language in view of three appellate court decisions. These
decisions concluded that the Department's application of its
regulations to cover certain activities related to off-site facilities
dedicated to the project was at odds with the Davis-Bacon Act language
that limits coverage to workers employed ``directly upon the site of
the work.'' This amendment to the Department's regulations is therefore
necessary to bring the Department's regulatory definitions of the
statutory terms construction, prosecution, completion, and repair at 29
CFR 5.2(j), and site of the work at 29 CFR 5.2(l) into conformity with
these court decisions.
The Department is also issuing this new rule in order to address
situations that were not contemplated when the current regulations
concerning site of the work were promulgated. The revised regulations
make clear that the Davis-Bacon Act's scope of coverage includes work
performed at locations established specifically for the purpose of
constructing a significant portion of a building or work, as well as
transportation of portions of the building or work to and from the
project's final resting place. These regulatory changes are
necessitated by the development of new construction technologies,
whereby major segments of a project can be constructed at locations
some distance from where the permanent structure(s) will remain after
construction is completed.
(2) Summary of Significant Issues Raised by the Public Comments in
Response to the Initial Regulatory Flexibility Analysis
None of the commenters raised any issues specifically related to
the Department's Initial Regulatory Flexibility Analysis. Some
commenters expressed concerns that the Department's proposal to cover
work performed at locations established specifically for the purpose of
constructing a significant portion of a building or work, as well as
transportation of portions of the building or work to and from the
project's final resting place, would result in an expansion of Davis-
Bacon coverage and an increase in costs. The Department has responded
to these concerns by explaining that the number of projects affected by
this change would be very limited and that the prevailing wage
implications would not be substantial, especially with regard to the
transportation activities attendant to these types of projects.
(3) Number of Small Entities Covered Under the Rule
Size standards for the construction industry are established by the
Small Business Administration (SBA), and are expressed in millions of
dollars of annual receipts for affected entities, i.e., Major Group 15,
Building Construction--General Contractors and Operative Builders, $17
million; Major Group 16, Heavy Construction (non-building), $17
million; and Major Group 17, Special Trade Contractors, $7 million. The
overwhelming majority of construction establishments would have annual
receipts under these levels. According to the Census, 98.7 percent of
these establishments have annual receipts under $10 million. Therefore,
for the purpose of this analysis, it is assumed that virtually all
establishments potentially affected by this rule would meet the
applicable criteria used by the SBA to define small businesses in the
construction industry.
(4) Reporting, Recordkeeping, and Other Compliance Requirements of the
Rule
There are no additional reporting or recording requirements for
contractors under this rule. There may be rare instances where,
pursuant to the new rule, contractors, including small entities,
engaged in the construction of a significant portion of a Davis-Bacon
project at a secondary site specifically established for such purpose,
would be required to comply with Davis-Bacon wage and recordkeeping
requirements with respect to certain laborers and
[[Page 80278]]
mechanics in circumstances not required under the current regulations.
(5) Description of the Steps Taken To Minimize the Significant Economic
Impact on Small Entities Consistent With the Objective of the Davis-
Bacon and Related Acts
As stated above, the Department has determined that this rule will
not have a significant economic impact on a substantial number of small
entities within the meaning of the Regulatory Flexibility Act.
Furthermore, an alternative standard for small entities would not be
feasible.
VII. Document Preparation
This document was prepared under the direction of John R. Fraser,
Deputy Administrator, Wage and Hour Division, Employment Standards
Administration, U.S. Department of Labor.
List of Subjects in 29 CFR Part 5
Administrative practice and procedure, Government contracts,
Investigations, Labor, Minimum wages, Penalties, Recordkeeping
requirements, Reporting requirements, Wages.
For the reasons set out in the preamble, Title 29, Part 5, is
amended as follows:
PART 5--LABOR STANDARDS PROVISIONS APPLICABLE TO CONTRACTS COVERING
FEDERALLY FINANCED AND ASSISTED CONSTRUCTION (ALSO LABOR STANDARDS
PROVISIONS APPLICABLE TO NONCONSTRUCTION CONTRACTS SUBJECT TO THE
CONTRACT WORK HOURS AND SAFETY STANDARDS ACT)
1. The authority citation for part 5 is revised to read as follows:
Authority: 40 U.S.C. 276a-276a-7; 40 U.S.C. 276c; 40 U.S.C. 327-
332; Reorganization Plan No. 14 of 1950, 5 U.S.C. Appendix; 5 U.S.C.
301; 29 U.S.C. 259; and the statutes listed in Sec. 5.1(a) of this
part.
2. Section 5.2 is amended by revising paragraphs (j) and (l) to
read as follows:
Sec. 5.2 Definitions.
* * * * *
(j) The terms construction, prosecution, completion, or repair mean
the following:
(1) All types of work done on a particular building or work at the
site thereof, including work at a facility which is deemed a part of
the site of the work within the meaning of (paragraph (l) of this
section by laborers and mechanics employed by a construction contractor
or construction subcontractor (or, under the United States Housing Act
of 1937; the Housing Act of 1949; and the Native American Housing
Assistance and Self-Determination Act of 1996, all work done in the
construction or development of the project), including without
limitation--
(i) Altering, remodeling, installation (where appropriate) on the
site of the work of items fabricated off-site;
(ii) Painting and decorating;
(iii) Manufacturing or furnishing of materials, articles, supplies
or equipment on the site of the building or work (or, under the United
States Housing Act of 1937; the Housing Act of 1949; and the Native
American Housing Assistance and Self-Determination Act of 1996 in the
construction or development of the project);
(iv)(A) Transportation between the site of the work within the
meaning of paragraph (l)(1) of this section and a facility which is
dedicated to the construction of the building or work and deemed a part
of the site of the work within the meaning of paragraph (l)(2) of this
section; and
(B) Transportation of portion(s) of the building or work between a
site where a significant portion of such building or work is
constructed, which is a part of the site of the work within the meaning
of paragraph (l)(1) of this section, and the physical place or places
where the building or work will remain.
(2) Except for laborers and mechanics employed in the construction
or development of the project under the United States Housing Act of
1937; the Housing Act of 1949; and the Native American Housing
Assistance and Self-Determination Act of 1996, and except as provided
in paragraph (j)(1)(iv)(A) of this section, the transportation of
materials or supplies to or from the site of the work by employees of
the construction contractor or a construction subcontractor is not
``construction, prosecution, completion, or repair'' (see Building and
Construction Trades Department, AFL-CIO v. United States Department of
Labor Wage Appeals Board (Midway Excavators, Inc.), 932 F.2d 985 (D.C.
Cir. 1991)).
* * * * *
(l) The term site of the work is defined as follows:
(1) The site of the work is the physical place or places where the
building or work called for in the contract will remain; and any other
site where a significant portion of the building or work is
constructed, provided that such site is established specifically for
the performance of the contract or project;
(2) Except as provided in paragraph (l)(3) of this section, job
headquarters, tool yards, batch plants, borrow pits, etc., are part of
the site of the work, provided they are dedicated exclusively, or
nearly so, to performance of the contract or project, and provided they
are adjacent or virtually adjacent to the site of the work as defined
in paragraph (l)(1) of this section;
(3) Not included in the site of the work are permanent home
offices, branch plant establishments, fabrication plants, tool yards,
etc., of a contractor or subcontractor whose location and continuance
in operation are determined wholly without regard to a particular
Federal or federally assisted contract or project. In addition,
fabrication plants, batch plants, borrow pits, job headquarters, tool
yards, etc., of a commercial or material supplier, which are
established by a supplier of materials for the project before opening
of bids and not on the site of the work as stated in paragraph (l)(1)
of this section, are not included in the site of the work. Such
permanent, previously established facilities are not part of the site
of the work, even where the operations for a period of time may be
dedicated exclusively, or nearly so, to the performance of a contract.
* * * * *
Signed in Washington, DC, on this 14th day of December, 2000.
T. Michael Kerr,
Administrator, Wage and Hour Division.
[FR Doc. 00-32436 Filed 12-19-00; 8:45 am]
BILLING CODE 4510-27-P