[Federal Register Volume 65, Number 245 (Wednesday, December 20, 2000)]
[Rules and Regulations]
[Pages 80267-80278]
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